The nexus between the chips act and international relations

By way of background, the Chips Act has directed $53 billion of federal dollars towards research, development, and manufacturing of semiconductors in the U.S. The funds take the form of outright grants, loan guarantees, and tax credits, many of which are directed to private companies that have committed to using these subsidies in connection with their own investment spending plans.  The table below offers a listing of the major recipients of these benefits:

The reality is that all of these companies are private companies, and the federal subsidies accrue directly to the companies’ shareholders.  While cloaked under the mantle of being essential to our national security – and that description may very well have merit -- this legislation happens to be an example of a massive program of corporate welfare.

The New York Times reported that the largest recipient of Chips Act funds so far, Intel, may be in trouble, where concerns appear to be growing that Intel may not be able to deliver the expected production capacity that it had promised.  According to reporting by Ana Swanson and Tripp Mickel, Intel plans to lay off 15,000 workers and is postponing the opening of new production facilities in Ohio. According to the report, the quality of Intel’s chips falls short of those being produced in Taiwan.  Intel simply may not be up to the task of what’s required.  It also seems that Intel isn’t the only program beneficiary experiencing problems.  Both Samsung and Micron, two other companies on the list above, are also intending to delay construction of the facilities that they’ve committed to building.

All this makes me wonder if, perhaps, we should have pursued a different route.  That is, rather than endeavoring to reinvent the supply chain to provide for greater domestic sourcing, maybe the better approach would be to enhance the security of our existing supply chain partners. Given the vital nature of our relationship with chip makers in Taiwan, it might be preferable to strengthen commitments to these suppliers as a means of protecting our access to these critical inputs.  The threat we face, in this instance, is an aggressive move by China toward Taiwan – one that would potentially allow for the cutoff of chips coming from our current Taiwanese suppliers.

Unfortunately, our resolve to come to the aid of our allies and critical trading partners is suspect – as is our commitment to protecting the world order.  It’s not hard to see that the Russian incursion into Ukraine in 2014 may have been a tipping point. Russia took over Crimea at that time, and the rest of the world acquiesced.  The lack of a response to this aggression undoubtedly emboldened Russia to undertake a more fulsome invasion of Ukraine with even larger ambitions in 2022.  And while the US and our NATO allies have provided considerable military and financial support to Ukraine, it hasn’t been enough to send a clear signal to Russia that such incursions into the territorial integrity of its neighbors will not be tolerated.  We seem to be offering enough help to Ukraine to allow them to hang on, without offering enough to allow them to actually win.  Failure to stop Russia here would be taken as an act of appeasement that opens the door to additional adventurism – not just by Russia, but by China, as well, with Taiwan being their most immediate target.

It's clear to me that an isolationist orientation on the part of the U.S. – i.e., one that purportedly seeks to put American interest ahead of those of the broader interests of NATO and other democratic allies -- is a short-sighted approach that will ultimately prove to be more costly to the US and its allies than that which we would face were we to show an unflinching commitment to the principle that the US will commit to protecting the sovereignty of democratic nations from the prospect of external, state-sponsored military attacks.

The same goes for Iran and its proxies. Whether it’s the Houthis in Yemen who have attacked international shipping lanes or Hezbollah in Lebonon lobbing missiles and rockets into Israel, the lack of a forceful response to these violations of the world order serve only to encourage their continuance.

Despite his tough guy talk, Trump’s isolationist tendencies send a clear signal to our adversaries that their adventurism will go unchallenged.  Trump famously said to Russia that they could “do what they want.” No doubt that Putin believes him – and our other adversaries learn from our passivity in this context and will expect the same.  Harris, on the other hand, is marginally better, but still deficient.  She has yet to articulate much, if any, of a course correction from that which Biden has charted, and a course correction is needed.  Biden has done some, but not enough. The time calls for a foreign policy that promises a more forceful response when the world order is threatened by state-sponsored military actions. 

We should make clear to our adversaries that their military aggressions outside of their own territorial boundaries will be met in kind, and the cost will be prohibitive. Thus far, we have not done that. Critically, however, this posture is one that must be shared by our allies such that the US will not be acting alone but would be acting with backing and support of the rest of the free world – a coalition that is at least possible with a Harris administration, but one that is unimaginable under Trump.