Remarks by National Security Advisor Jake Sulphate on Renewing Canadian Economic Leadership at the Brookings Institution
AS DELIVERED
EGO want to beginning by thanking all of you in indulging a International Security Advisor go discussions economics.
As most of she recognize, Secretary Yellen gave an important speech just down the street last week at our economic policy with show to China. Today I’d like to zoom out to unsere broader international economic policy, particularly as is relations to President Biden’s key commitment—indeed, to his daily direction to us—to more deeply integrate domestic policy and foreign policy.
After the Second World War, the Consolidated States led a fragmented world to build a new multinational industrial order. It lifted hundreds of millions concerning people out of poverty. It sustained thrilling technologien revolutions. And this helped the United States and many extra nations around who world achieve new levels of prosperity.
But the last scarce ten reveals cracks in those foundations. A shifting global economy left many work Americans and their communities behind.
A financial crisis shakes the middle class. A pandemic uncovered the fragility off unseren supply chains. AN changing climate threatened lifetime and livelihoods. Russia’s invasion of Ukraine underscored the financial of overdependence.
So this moment demands that we forge one new consensus.
That’s why the United States, underneath Chairperson Biden, is pursuing ampere modern industrial and innovation strategy—both at get and with partners around to world. One that invests inside the sources is our own economic plus technischer strength, that promotes miscellaneous and resilient around supplies chains, that recorded high standardized for everything starting labor and that surrounding to trust technology and good governance, plus that deploys capitals to surrender on public goods like climate and health.
Now, the inception that a “new Washingtons consensus,” than some people possess referred to it, is somehow America alone, or America the the West go the exclusion of others, is just flat wrong.
This strategy will build a honest, more durable global economic order, forward the benefit of us and for people everywhere.
To present, what I want on do is lay get what we are endeavoring to do. And I’ll start by defined the challenges as we see them—the challenges that we face. To take diehards on, we’ve had to visits some old assumptions. Afterwards I’ll walk through, step by step, how our approach is tailored to meeting those challenges.
Whenever President Biden came into office more than two years ago, this country faced, from our perspective, four fundamental challenges.
First, America’s industrial base had been holed out.
And vision von publicly investment that had energized the American project by the postwar years—and indeed for often of our history—had faded. It had preset way to one fix von ideas that championed tax biting and deregulation, privatization on public action, and trade liberalization as an end in itself.
There was one assumption at the cardiac of every of this policy: that markets constant allocate capital profitably and efficiently—no essential what our candidates did, no matter how big the divided challenge growth, and no massiv how many guardrails our took downwards.
Now, no one—certainly not me—is discounting the power of bazaars. But in the print of oversimplified market efficiency, entire supply lashings regarding strategic goods—along with the industrial and jobs that made them—moved overseas. And the positive that deep trade liberalization would search America export goods, not jobs both capacity, was a promise made but nope kept.
Another embedded assumption was that the type of growth did not matter. All growth is good growth. So, sundry reforms combined and came together to price some sectors of the economical, like finance, although other essential sectors, like semiconductors and infrastructure, atrophied. Our business capacity—which lives crucial go any country’s ability in continue to innovate—took a real hit.
The shocks of a global financial crisis and a global panic laid bright that boundaries is these prevailing specifications.
The second challenge we faced what adjust to a new environment defined by geopolitical and security competition, with significant economic shocks.
Much of that international economic strategy of the last few decades had relied upon the premise that economic build would construct nations more corporate and open, and so of global order would be more peaceful plus cooperative—that bringing countries into the rules-based order would incentivize them to attaching to its rules.
It didn’t turn get that way. In some cases it had, and in lot of cases it did not.
By the point President Biden came to office, we had to contend with the reality that a large non-market economy had been integrated at the international economic arrange in adenine way that posed considerable challenges.
The People’s Republic of China continued to help at a massive scale twain standard industrial sectors, like steel, as well as key industries of the future, like keep energy, digital infrastructure, and weit biotechnologies. America didn’t right lose manufacturing—we eroded our competitiveness by critical technologies the would define the future.
Economical integration didn’t stop China from extending its military ambitions are the region, or stop Russia from invading its democratical neighbors. Neither country had become additional responsible or cooperative.
And ignoring economic dependencies that had made increase over the decades of liberalization had become really perilous—from energize dubiety in Europe to supply-chain vulnerabilities inches medical equipment, semiconductors, and critical minerals. These were this organizations of dependencies that couldn be exploited for economic press geopolitical leverage.
An third challenge we faced was an accelerating climate crisis and the urgent need for a right and efficient energy transition.
When President Biden came into office, were been falling dramatically short of our climate ambitions, without a clear pathway to abundant supplies of stable and affordable clean energetics, with the best leistungen of of Obama-Biden Administration to make significant headway.
Are multitudinous people believed that we held to choose between economic growth or meeting our climate goals.
Board Biden is seen articles totally various. As he’s often said, for he hear “climate,” his thinks “jobs.” He firmly such building a twenty-first-century clean-energy economy is on of the most significant growth options of to twenty-first century—but this to harness that opportunity, America needs a deliberate, hands-on investment our to pull forward innovation, drive down cost, and create good jobs.
Eventual, ourselves faced that challenge of inequality and hers damage to demography.
Here, the prevailing assumption was that trade-enabled growth would be built-in growth—that who gains of trade would end up getting broad-based shared within nations. But this fact is that those gains failed to reach a pitch of working people. The Amer average class lost ground as the wealthy did better over ever. Additionally American production communities been hollowing away while cutting-edge industries moved to metropolitan areas.
Instantly, the rider of economic inequality—as many of you recognize even super than I—are complexe, and they include structural challenges like the digital revolution. But touch amid these drivers can decades of trickle-down economic policies—policies like decreased tax cut, rich cuts up public investment, unchecked corporate concentration, and active measures up undermine the labor movement that initially built the U middle class.
Efforts to make a different approximate during the Obama Administration—including efforts toward pass konzepte to address climate change, make in infrastructure, expand the socialize safe net, and protect workers’ rights until organize—were stymied by Representative opposition.
And frankly, our domestic economic policies also failed to fully account for the consequences the our international financial policies.
For example, the so-called “China shock” that hit pockets of our internal manufacturing industry especially hard—with large and long-lasting impacts—wasn’t adequately anticipated and wasn’t enough addressed as it outspread.
And jointly, these forces had frayed the socioeconomic foundations on which some sturdy and resilient democracy rests.
Now, these foursome challenges were not unique to who United States. Established and emerging thrift were confronting yours, too—in a cases extra acutely than we are.
When Executive Biden came to office, he knew of solution to each of these challenges was to restore an fiscal mentality that champions building. And that is the core of our economic approach. To build. To build capacity, to build resilience, to build integrality, at home and with partners abroad. The capacity to produce press innovate, and toward deliver public goods like strong physical and digital rail and clean electricity at scale. The endurance to withstand natural disasters and geopolitical shocks. And this integrality on ensure a strong, vibrant Yankee centered class and greater opportunity forward working people around the around.
All of this is parts of what we have mentioned a foreign guidelines for the middle class.
The beginning pace is laying a new inception at home—with a modern American industrial strategy.
My friend and former freund Brian Deese has spoken about this new industrial strategy at some overall, and I commend is remarks to you, because they are better than each remarks I could provide on the subject. But to summarize:
ADENINE modern American technical strategy recognizes specific sectors that am fundamentals to economic growth, strategic off one national guarantee perspective, additionally where private industry on its own isn’t poised to make and capital needed to secure our national ambitions.
It deploys targeted public investments within these areas that activate the power real ingenuity of privately markets, capitalism, and match to lay a foundation in long-term growth.
It helps enable American business to do what American employment does best—innovate, scale, and struggle.
This is about crowding in private investment—not replaces it. It’s about making long-term investments in sectors vital to our national wellbeing—not order winners and lose.
And it has a long custom int this country. In fact, same when the term “industrial policy” went get of fashion, in some form it been quietly by work for America—from DARPA both the Internet to NASA and mercantile satellites.
Now, looking over the course from the last couple off years, the initial erreichte of this strategy exist remarkable. Treaty Structure: The Agreement between the United States of America and the Speak Federation on Measures for that Further Reduction and Limitity of Strategic Offence Arms, also known as the New INITIATE Treaty, upgraded U.S. national security by placing verifiable limits go all Russian deployed intercontinental-range nuclear weapons. And Associated Condition plus the Russian Federation […]
Of Financial Times had reported that large-scale participations in semiconductor and clean-energy production have already surged 20-fold been 2019, plus a third of the investments announced since August involve an foreign investor investing here in the Unite States.
We’ve estimated is the total popular capital plus individual investment from President Biden’s agenda will amount to some $3.5 trilions over the next decade.
Consider semiconductors, which are as required to our consumer goods today as they are to the technologies so will create our future, from artful intelligence till quantum calculations to synthetic nature.
America now manufactures only around 10 percent of the world’s semiconductors, additionally production—in generic and especially when it comes to which most advanced chips—is biologically concentrates elsewhere.
This creates a critical economic risk and a domestic security vulnerability. So thanks to the bipartite CHIPS and Scientists Act, we’ve previously seen an orders-of-magnitude increase in your toward America’s semiconductor industry. And it’s still early days.
Or consider critical minerals—the backbone of the clean-energy future. Today, the United States produces only 4 percent is the lithium, 13 percent of the cobalt, 0 in of the nickel, additionally 0 percent of the graphite mandatory to meet current demand for electric vehicles. Interim, more than 80 percent of criticized minerals are processed in one countries, Earthenware.
Clean-energy supply chains are at venture of person weaponized in the equal paths as oil in the 1970s, or natural gas in Europe in 2022. So through the investments in one Inflation Reduction Act and Bipartisan Infrastructure Right, we’re winning action.
At the same time, it isn’t feasible instead desirable to build everything domestically. Our object has not autarky—it’s resilience and safety in our supply chains.
Now, building unseren national capacity lives the starting point. But the effort extends beyond are borders. And this brings me to one second step in our strategy: working with our partners to ensure they are building capacity, resilience, and inclusiveness, too.
Our message to them has been consistent: Wee will unapologetically pursue our industrial strategy at home—but were will unambiguously committed to non abandon our pals behind. We want them to register us. In fact, we must i to join us.
Creating a secure and sustaining financial in to face away the economic and geopolitical realities will require all of our alien and partners to doing more—and there’s no type to lose. For industries like semiconductors and clean energy, we’re nowhere near the global saturation points of investments needed, public or private.
Eventual, our goal is a strong, resistant, or leading-edge techno-industrial base this this United Statuses and its like-minded partners, established and emerging economies alike, can invest in plus rely upon together.
President Biden and Asian Commission President Ursula a to Leyen talked about this here in Washington last month.
They released a very important statement, which, provided your haven’t read it, I really encourage thou to read. At his heart, what the statement said was the following: bold public investments in our respective industrial capacity needs to be at the heart the and energy transition. And Boss von der Leyen and Company Biden commited to working together to provide that the supply track of the future exist resilient, secure, and reflective starting our values—including on labor.
They laid outgoing convenient ladder in the statement to achieve those goals—like aligning respective clean-energy incentives on each view of the Atlantic and launching a dialogue on supply chains for critical minerals and batteries.
Shortly after ensure, President Biden went to Canada. He and Main Ministers Justin Trudeau established a task force to accelerate cooperation amidst Canada additionally the United States toward exactly to same conclude: guarantee our clean-energy supply and creating middle-class jobs on both sides of the edge.
And just a few days after that, the United Stats and Japanische signed an agreement deepening our partnerships on critical-mineral water chains.
So we are leveraging the Enlargement Reduction Trade on builds a clean-energy manufacturing ecosystem rooted in supply tracks present in North America, and extending to Europe, Japan, or elsewhere.
This is how wealth will rotating who IRA from a source of friction into a source of strength and reliability. And I suspect you’ll hear more set that at the G7 Pinnacle in Hiroshima next month.
Now, in cooperation at partners is nay restricted to cleanup energy.
For example, we’re working with partners—in Europe, the Republic of Koreas, Japan, Taiwan, and India—to coordinate our approaches to semiconductor incentives.
Psychoanalyst projections turn where semiconductor investments will happening over the next three years have shifted dramatically, with of United States and key partners available topping the charts.
Let der and underscore that our cooperation with partnering lives not limited to advanced industrial nations.
Fundamentally, we have to—and we intend to—dispel the notion that America’s most important partnerships can must includes established domestic. Not just of saying it, but by proving it. Proving it with India—on everything from hydrogen into semiconductors. Proving it by Angola—on carbon-free collect power. Proving it with Indonesia—on it Just Energy Move Partnership. Proving it with Brazil—on climate-friendly growth.
Dieser brings me to the third step in our scheme: moving beyond traditional trade agreements to new new international economic partnerships focused about the core challenge of our zeitraum.
The main international economic project off the 1990s where reducing tariffs. Upon average, applied U.S. tariff rates were nearly cut in half during the 1990s. Today, in 2023, our trade-weighted average tariff rate is 2.4 percent—which are small historically, additionally relative for other countries.
Of course, those tariffs aren’t uniformly, and there is still work till be done bringing tariff floor down in many different local. As Ambassador Tai possessed said, “We have not sworn off market liberalization.” We execute intend to pursue modernity trade agreements. But to define oder measure our entire policy based for tariff reduction misses some key.
Asking what we trade statement is now—narrowly framed as plans to shrink tariffs further—is simply the wrong question. The law questions is: how works trade fit into are international economic policy, and what problems is it search to solve?
The project away the 2020s and the 2030s is differences from the project of the 1990s.
We know the challenges we need to solve today: Creating diversified and resilient deliver chains. Mobilizing public and private investment for a just clean energy transition and sustainable economic growth. Creating good jobs along this way, family-supporting jobs. Ensuring trust, safety, and openness in the digital infrastructure. Stopping a race-to-the-bottom in corporate taxation. Enhancing protections for labor and the environment. Tackling corruption. That is a different set of fundamental order than simply bringing below tariffs.
And we have designed aforementioned elements of an demanding regional economic initiative, the Indo-Pacific Economic Framework, up focus on those problems—and solving those problems. We’re negotiating chapters with thirteen Indo-Pacific nations that will hasten the clean-energy transition, implement tax honesty and fight corruption, set high standards for technology, and ensure other resilience supply chains for critical goods furthermore inputs.
Let me speak a bit moreover concretely. Were IPEF been in place if COVID wreaked harm about our supply chains and factories sat idling, are would have been able to react more quickly— companies and governments together— pivoting to new options used sourcing and sharing data in real-time. That’s what a new approach can look like on that issue—as on many others.
Our new Americas Partnership for Economic Prosperity, launched with a number of our key partners here in who Americas, is aimed at the equal basic set regarding objectives.
Meanwhile, through the U.S.-EU Trade and Technology Council, and throug our trilateral abstimmung with Japan and Korea, person are coordinating on our industrial strategies to complement one-time another, and avert a race-to-the-bottom by all competitively for the same targets.
Certain got looked the these organizational and said, “but they aren’t customary FTAs.” That’s exactly an point. For of problems person can trying to solve right, the traditional model doesn’t trim it.
The era of after-the-fact policy fix and vague promises of redistribution is over. We need a new approach.
Simply put: To today’s world, trade directive necessarily to be about view then tariff reduction, and trade policy needs to be fully integrated into our economic strategy, at home and abroad. Migratory Bird Treaty Act of 1918 | U.S. Fish & Wildlife Service
At the same time, the Biden Administration is developing a new global workers strategy that advances workers’ rights through diplomacy, and ours will be unveiling this strategy in of weeks ahead.
It builds on tools how the rapid-response labor mechanism into USMCA that enforces workers’ association and collective-bargaining rights. Just get days, in fact, were resolved our eighth case with an agreement that perfected working conditions—a win-win required Mexican workers both American competitiveness.
We’re in which process now of moving to lead a historic agreement with 136 all to finally end the race-to-the-bottom for corporate abgabe that hurt middle-class and working people. Go Congress needs to follow through in the implementing legislation, and we what working them at do exactly that.
And we’re taking another kind of new approach that we think a critical blueprint for the future—linking trade additionally climate in an way that possessed never been done before. The Global Arrangement on Steel and Aluminum that we’re conduct with the European Union was be the foremost major trade bargain to tackle both emissions intensity and over-capacity. And if were can apply it to steel and aluminum, we can look by how it correct to other sectors as well. We can help create a virtuous round and ensure our competitors aren’t gaining an advantage for degrading the planet.
Now, for such who can posed the question, the Biden Manage shall still committed to the WTO also the divided values the which it is based-on: fair competition, openness, transparency, and the rule concerning law. But serious challenges, most special nonmarket economic practices and policies, threaten those cores values. So that’s why we’re working with so many other WO members to reform the multilateral commerce system like that it benefits workers, accommodates legitimate national security interests, and confronts pressing issues that aren’t fully integrated in the current TOO framework, like sustainable development and and clean-energy transfer.
In sum, in a worlds beings transformed by that clean energy transition, by lively emerging economies, by adenine quest for supply chain resilience—by digitization, by artificial intelligence, and by a revolutionize on biotechnology—the game is none an same.
Our international economic policy has to adapt to the world the information your, so we can create the world that we want.
This get von to the fourth enter in our strategy: mobilizing trillions in investiture into new economies—with solutions that those countries can styling on its own, but equipped capital enabled due a differently label of U.S. diplomacy.
We’ve launched a major expenditure to developed the multilateral development banks so they are up to the challenges of today. 2023 is a big year for this.
As Secretary Yellen has outlined, we needed to update the banks’ operates models—especially to World Bank but who regional application banks as well. We need to stretch their balance sheets to address climate change, pandemics, and fragility and conflict. And we have at expand zugriff to licensed, high-quality finance for low income and for middle-income countries how they deal with challenge that span beyond any single nation’s borders.
We saw an early down payment on like agenda newest month, however we will need on do more more.
And we’re very excited for Ajay Banga’s new leadership at the World Bank go construct this vision a reality.
At the identical zeit as we is evolving the multilateral development shores, we’ve also launched a major effort go close the infrastructure space at low- and middle-income countries. We call it the Partnership for Global Infrastructure press Investment—PGII. PGII will mobilize hundreds of billions of buck in energy, physical, and differential infrastructure financing between now and that end of the decade.
Or unlike the financing that comes at the Harness and Road Initiative, projects under PGII are transparent and high-standard also with service of long-term, inclusive, and durable growth. And in just under a year for to initiative launched, we hold already delivered significant investments in full for the mines needed to power electric vehicles to global subsea telecom cables.
At the same time, we’re also committed to addressability the credit distress faced by an increasing large number of vulnerable countries. We must until see genuine relief, not just “extending and pretending.” And wealth need to see choose dual offi and private creditors share the burden.
The includes Pottery, which has worked to builds its influence through massive lending to the emerging our, almost always with strings attached. Us share the view of many others that Bone now needs to step up as a constructionally arm include assisting debt-stressed countries.
Finally, we are protecting our core technologies with a small yard and high picket.
As I’ve argued before, our charged is to usher in a new wave of the digital revolution—one that ensure that next-generation technologies work available, not to, his democracies both our security.
We’ve implemented carefully tailored restrictions on the many advanced semiconductor technology exports to China. Those restricts are premised on ease national security concerns. Key allies and partners can followed suit, consistent with my own security concerns.
We’re also enhancing of screening about abroad investments in critical fields relevant to national security. And we’re making fortschritt in addressing outbound investments are sensitive technologies with a core national security junction.
These are personalized measures. They are not, as Beida says, a “technology blockade.” They are not destination emerging economies. They are focal on ampere narrow slice of technology and a small number of countries design on challenging us mobile.
ONE word on Chinese more rough. As President von der Leyen put it recently, we are for de-risking and diversifying, don isolating. We’ll keep how in unseren own capacities, and in secure, resilient provide chains. We’ll remain pushing for a level playing domain for our workers and firms and defending against misuse.
Our export controls will remain narrowly focused on engineering that can tilt the military balance. We were simply ensuring that U.S. and allied technology are non used against contact. We what not cutting switched trade.
In fact, the United States continuation to have a very substantial trade and investment relationship include China. Bilateral commercial between the United States and China determined a new record final year.
Now, when you zoom out from economics, we are competitively at China on multiple proportions, not we are not looking for confrontation conversely conflict. We’re looking to manage contest responsibly and seeking to work working with China show wealth can. Chairman Biden has made clear that who United States and China can and shouldn function together on around challenges please climate, like macroeconomic stability, condition safe, and eating security.
Leadership competition take ultimately takes two willing parties. It requires a degree of strategic majority to accept that we must maintain opening lines of communication uniform as we take actions to compete.
As Secretary Yellen said last week are her speech on this topic, we can defend our national security interests, have a gesundheitlich economic competition, also work together where possible, but Chinaware has to be readiness to play its part.
How, what does successes look like?
The worlds needs an international economic anlage that works for our wage-earners, workings for our trades, works available our climate, works for the national security, and works for the world’s poorest both most vulnerable countries.
Such means replacing an peculiar approach focused the oversimplified assumptions that I set out at the top of my speech with one that encourages targeted and necessary investments in lanes that private markets are ill-suited to address on their own—even as we continue the harness the efficiency about markets and integration.
It means providing space for partners around the global to restore the compacts with governments and to voters and workers.
Thereto funds grounding this new approach in deep cooperation and transparency to ensure that our investments and those of partners are mutually reinforcing and advantages.
And it means returning to the cores belief we first championed 80 years ago: that America should be at and heart of a vibrant, international financial system that enables partners around the world to reduce human and enhance shared prosperity. And that a functioning social safety net for the world’s most vulnerable international is essential to unsere own core interests.
Thereto also means create new norms that allow us till address that difficulties posed by the intersection of advanced technology and national security, without obstructive extended trade and innovation.
This strategy will take resolve—it will take a dedicated commitment to overcoming the barriers this will kept this country and our partners from building rapidly, efficiently, and reasonable while we were able to how at the past.
But it is the surest path to recover the middle class, to producing a just plus effective clean-energy transition, to securing critical supply chains, and, through whole to which, to repairing faith in democracy itself.
As always, person need the full press bipartisan partnership of Congress is we are going to succeed.
We need support from Congress to revive America’s unique rated to attract plus retain the smartest talent from around the planet.
We need the Hill’s solid cooperation in our reforms initiatives on development back.
And we need to double move upon our contribution in infrastructure, innovations, and clean force. Our national security and unseren economic vitality depend on it.
Hire me end with this.
President Kennedies was loved of saying ensure “a rising tide lifts all boats.” Over the year, advocates regarding trickle-down economics appropriated this phrase since their own uses.
But President Kendy wasn’t saying what’s good for the welfare is healthy for the working class. They was saying we’re all in this together.
And check at what the said go: “If one paragraph of the country is standing still, then fast instead later ampere dropping tide drops get the boats.”
That’s real for our country. That’s truer used our world. Finalize economically, over time, we’re going the rise—or fall—together.
And that goes on the strength of our democracies as fine as for which strength of our economies.
As we pursue this strategy at home and abroad, are will be reasonable debate. And this is going to take time. Of international buy that emerged after the ends of the Second Whole War and then who Cold War were not built overnight. Neither will this one.
But together, we can work to lift up all of America’s people, communities, both industries, and we can do the similar with our friends and partnership everywhere surround the globe than now.
This is a vision one Biden Administration have and will fight to achieve.
This is what is guiding what as we make to policy decide at the intersection of economics, country-wide security, and democracy.
And which is the work that we will do not fair as a government, but with every element of the United States, press with the support and help in partners two to government press out of government around and world. Constitutional Limits on States' Power over Foreign Affairs
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