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To counter China’s economic influence, rebuild the American Heartland – Brookings Institution

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With the $1.9 trillion American Rescue Plan Act signed into law, the Biden administration’s attention has turned to a massive jobs, infrastructure, and clean energy plan. Meanwhile, some members of Congress want to advance bills on topics such as immigration, voting rights, and gun control.

But that’s not all. On March 10, The Washington Post reported that momentum is building for another priority: a bill aimed at “countering China’s economic influence” with an array of investments to restore U.S. technology leadership, rebuild its supply chains, and improve industrial competitiveness. Although coming at a moment of spiking outcries regarding the treatment of Asian Americans at home, the new legislative discussion—and this commentary—speaks solely to the debate regarding China’s rising economic and geopolitical sway.

On first glance, a China-response bill—with its focus on international geopolitics and a faraway superpower—might seem like a shift away from President Joe Biden’s professed urgency about helping working families here in America. However, the emerging bill is emphatically not a shift of focus. Rather, it represents a serious effort to renew America’s economy by investing in the nation’s high-value, good-paying industrial economy, and so provide better livelihoods in more communities around the country.

China, after all, lies at the center of the U.S. advanced-industry competitiveness challenge, which has influenced so much of the nation’s pre-pandemic economic drift and division.

Between 1990 and 2007, surging Chinese import competition played a large role in “hollowing out” the U.S. economy both nationally and locally, as low-cost imports undercut American producers and drove massive declines in decent-paying U.S. manufacturing jobs, especially in the heartland.

Since then, the initial China “shock” has evolved into an ongoing crisis exacerbated by a broader ebbing of U.S. advanced-industry competitiveness. China, for its part, has positioned itself as America’s main economic rival through an array of tactics, including unfair and illegal trade practices, intellectual property theft, manipulative terms of market access, and lavish subsidies for Chinese enterprises.

At the same time, U.S. industrial slippage has been exacerbated by broader U.S. disinvestment, offshoring, and decline. Federal R&D expenditures—necessary for technology leadership—have slumped to levels lower as a share of the gross domestic product (GDP) than prior to the Soviet Union’s launch of the Sputnik satellite in 1957.

Fig1

In the meantime, the U.S. has been running all-time-high trade deficits. The nation’s trade gap on electronic products hit $212 billion in 2019, while exporting only $18 billion in high-tech manufactured goods to China.

Such trends have been devastating for the nation’s economy and communities. Over the last 15 years, the share of U.S. employment in advanced industries has flatlined, meaning there are now relatively fewer of these good-paying, often accessible jobs.

What’s more, the presence of these critical industries—ranging from aerospace and chemicals to pharmaceuticals, software, and scientific research—has been dwindling in most American regions, contributing to stark regional imbalances. Fifty-eight of the nation’s 100 largest metropolitan areas have seen zero or negative employment growth in their advanced-industry sectors in the last decade, with most of those metro areas in the industrial Midwest and South. Since 1990, 71 of those metro areas have seen their concentration of advanced industries slip.

Map

The result of this has been the slide of whole swaths of country into stagnation, with grave implications for the nation’s economic, social, and political health. At the economic end of the equation, such unhealthy trends are wasting talent, thinning regional supply chains, and depressing communities. In social terms, the current geographic imbalance contributes to inequality because it deprives millions of workers who live in the “wrong” places from quality advanced-sector employment in the “right” places. It also remains likely that the drift of these “left-behind” places has exacerbated the nation’s political divides.

All of which is why a response to China matters so much. Reclaiming shared prosperity—especially in the heartland—will require restoring the nation’s technological advantages in order to reduce U.S. weakness in the global economic competitions that are now harming so many communities.

For that reason, a variety of often bipartisan measures have either already been drafted or are being developed to complement legislation aimed at expanding federal R&D. For example, numerous Republican senators have co-sponsored bills with Democrats on a range of measures related to China, including shoring up U.S. supply chains, expanding production of semiconductors, and asserting U.S. leadership on 5G technology.

Central to the emerging package is a bipartisan bill that Sens. Chuck Schumer (D.-N.Y.) and Todd Young (R-Ind.) have introduced along with Reps. Ro Khanna (D-Calif.) and Mike Gallagher (R-Wis.) entitled the Endless Frontier Act. The bill proposes expanding the National Science Foundation into a renamed National Science and Technology Foundation and giving it $100 billion over five years to invest in technology research and testing. The bill also includes $10 billion to create 10 regional tech hubs that would position regions across the country to become global centers for the research, development, and commercialization of key emerging technologies.

Aimed at spreading tech growth into the heartland, these hubs pick up on ideas Robert D. Atkinson, Jacob Whiton, and I (as well as our colleagues Jonathan Gruber and Simon Johnson) have advanced on restoring the dynamism of up-and-coming inland metro areas. In that vein, the Endless Frontier Act, its tech hubs, and related measures represent an important recognition that rebuilding America’s strength abroad requires the nation to rebuild itself at home.

With that said, the emerging response to China isn’t perfect. For one, care needs to be taken to shape the many swirling potential topics—including R&D, 5G security, domestic semiconductor manufacturing, fair trade, and human rights—into a  cohesive “mission.” Otherwise, the sheer number of these topics could turn any potential bill into a grab bag of disconnected reactions. Likewise, some leaders in the heartland worry that the national security framework of the bill could tilt the focus away from creating regional hubs and offsetting the “hollowing out” of the economy. On this front, the goal of speeding up the development of highly sophisticated emergent technologies could make it difficult for many noncoastal metro areas to benefit, since new investment funds could wind up flowing to the same coastal universities that are already dominant. For that reason, it is important for heartland lawmakers to insist on the regional focus of tech hub development.

Finally, it is critical that the any tech hubs program be both intentional and holistic in efforts to foster the emergence of prosperous new advanced-industry centers in America. If the goal is to create such new centers of inclusive growth, it will take more than injecting billions of dollars’ worth of R&D into selected universities. Lawmakers should therefore consider drawing into the Endless Frontier Act additional ideas from last year’s Innovation Centers Acceleration Act—an excellent parallel act sponsored by Sens. Chris Coons (D-Del.) and Dick Durbin (D-Ill.), as well as Reps. Joseph Morelle (D-N.Y.) and Terri Sewell (D-Ala.). Most notably, instigating the takeoff of advanced industries in heartland metro areas would be well served by adding in more provisions for complementing R&D with racial inclusion, workforce development, affordable housing, and high-quality placemaking.

In any event, the need to counter China’s rising global power now stands as an urgent prod to revitalize America’s drifting, uneven economy. Hopefully, the fear of falling behind will provide enough motivation to spur that work even in a hyper-partisan time.

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Arizona mining fight pits economy, EVs against conservation, culture – The Guardian

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By Ernest Scheyder

SUPERIOR, Ariz. (Reuters) – Early last year, Darrin Lewis paid $800,000 for a hardware store in a tiny Arizona town where mining giant Rio Tinto Plc hopes to build one of the world’s largest underground copper mines.

Rio buys materials from Lewis’s Superior Hardware & Lumber for its Resolution mine site, accounting for a third of the store’s sales and helping to keep it afloat during the coronavirus pandemic.

But U.S. President Joe Biden put the mining project on hold last month in response to the concerns of Native Americans who say it will destroy sacred land and of environmentalists who worry it will gobble up water in a drought-stricken state.

That’s fueled anxiety among Lewis and others here in Superior, Arizona, who want to reap the economic benefits of a mine that would harvest more than 40 billion pounds of copper.

“I sunk everything I have into this place,” said Lewis, surrounded by hammer drills, wrenches and other goods in his store. “It would absolutely devastate us if this mine doesn’t open.”

In halting the project, Biden reversed a decision by predecessor Donald Trump that would have given Rio land for the mine. Biden ordered more government analysis of the project.

The ongoing fight pits conservationists and Native Americans against local officials and residents who support its economic benefits. The complex debate is a harbinger of battles to come as the U.S. aims to build more electric vehicles, which use twice as much copper as those with internal combustion engines. The Resolution mine could fill about 25% of the demand for U.S. cooper.

The Arizona dispute centers on Oak Flat Campground, which some Apache consider home to deities known as Ga’an. Religious ceremonies are held at the site, near the San Carlos Apache Reservation, to celebrate teenage girls coming of age. Many Apache have ancestors buried under the volcanic rock.

In 2014, the Obama administration and Congress set in motion a complex process intended to give Rio 3,000 acres of federally-owned land, including the campground, in exchange for 4,500 acres that Rio owns nearby. Biden has paused that transfer.

The White House did not respond to a request for comment.

“If Rio gets this place, then the mine will kill the angels and the deities that live here,” said Wendsler Nosie, a San Carlos Apache tribe member who has led a protest camp for 18 months at the site. A sign there describes the land, known as Chi’chil Bildagoteel in the Western Apache language, as the physical embodiment of the earth’s spirit.

Nosie has marshaled widespread support for his cause, helped by rising global attention to the rights of indigenous peoples. Rio itself fueled that cause last year when it blew up culturally significant Aboriginal rock shelters in Australia.

If the land swap is approved, Rio has said it would keep the campground open for the next few decades before the underground mine causes a crater that would swallow the site. The company has also said it would seek tribal consent for the project and study ways to avoid causing the crater.

“The land exchange gives us the opportunity to collect more data, then we can refine our plans and look for ways that we can do further avoidance and minimization” of site damage, said Vicky Peacey, a senior permitting manager for the Rio project.

Rio, which is based in Australia and the United Kingdom, has also promised to preserve other cultural sites including Apache Leap, a rock cliff that overlooks Superior and where Apaches jumped to their deaths to avoid capture by U.S. troops in the late 19th century.

‘AMERICAN COPPER’

Politicians in Superior – a town of 3,000 residents that voted nearly two-to-one for Democrat Biden last November in a majority-Republican county – are now prodding the president to change his mind.

The land swap, if Biden approves, would also let the town of Superior buy more than 600 acres that officials say is crucial to diversifying the local economy by expanding the airport, developing an industrial park and building affordable housing.

“President Biden is going to have to make some courageous decisions,” said Mayor Mila Besich, a Democrat.

Mining is essential to accomplishing Biden’s goal of expanding EV production, she said. “We’re going to need more American copper,” she said.

While the region has long been popular with hikers and campers, it is better known as the “Copper Corridor,” with mines from Freeport-McMoRan Inc and others.

The closure of the Magma copper mine in 1996 devastated Superior’s economy. Officials have pinned their hopes now on Resolution. Since the copper deposit was first discoved in 1995, Rio and minority partner BHP Group Plc have spent more than $2 billion to dig an exploratory mine shaft and dismantle an old Magma smelter. They have yet to produce any copper. BHP declined to comment.

More than half of the buildings in Superior’s downtown sit empty. Several Tesla Inc charging stations hint at the town’s aspirations to be part of the EV boom. Nikola Corp and Lucid Motors are building their own EV plants less than 50 miles (80 km) away.

Rio has promised to hire 1,400 full-time workers at an average annual salary of more than $100,000. That’s nearly half the population in a town whose median income is a third below the national average.

“What’s sacred to my community is that people have a job and have a home,” said Besich, the mayor.

The mine would boost state, local and federal tax coffers by $280 million annually and add $1 billion to the state’s economy, Arizona’s governor said.

Besich pushed back when studies showed Rio would only pay the town $350,000 a year in taxes, far below the $1 million would need annually for increased police, firefighting and road maintenance.

Rio agreed to pay the town more, to guarantee Superior’s water supply and to donate $1.2 million to the school district. Superintendent Steve Estatico said without Rio’s support the district’s schools – where enrollment has dropped 13 percent since 2016 – may close.

“Rio’s had to learn over the last few years that it cannot take host communities for granted,” Besich said.

STALLED NEGOTIATIONS

The San Carlos Apache – one of the first Native American tribes to endorse Biden’s presidential bid – have not negotiated with Rio because its tribal council favors direct talks with the U.S. government, said Chairman Terry Rambler.

Rio’s copper chief, Bold Baatar, said he hopes to negotiate directly with the tribe when he visits Arizona as early as June, once pandemic restrictions allow.

“We are hearing the concerns from everyone,” Baatar told Reuters. “There will not be a mine until we achieve maximum effort to seek consent.”

Not all local Native Americans oppose the mine. Some members of the White Mountain Apache tribe, whose reservation is just north of the San Carlos Apache’s, say they do not consider the campground a sacred site.

“The belief that the site is religious, that’s news to me,” said Alvena Bush, a White Mountain Apache councilwoman who supports the project.

WATER WORRIES

Rio has dug a mine shaft nearly 7,000 feet (2 km) underground on land it owns near the campground. The bottom of the shaft has become a staging ground for future mining operations.

The miner is draining water from the nearby copper deposit to make it easier to extract. More than 600 gallons of water are pumped each minute to treatment plants on the surface for use in local farming.

Rio plans to mine the copper using a technique known as block caving. It involves carving a cave out of a large section of rock, which then collapses under the weight of the rock above, creating a crater 2 miles (3 km) wide and 1,000 (304 m) feet deep.

This method would damage aquifers that feed two local springs, according to an environmental study from the U.S. Forest Service. The entire mine would reduce available groundwater in the area, which has been in a drought since the late 1990s, the report said.

“This land is going to be worthless if there’s no water to go with it,” said Henry Munoz, who leads a group of retired Superior miners opposed to the project.

Biden is expected to decide later this spring on whether to give Rio the land for the mine. Lewis, the hardware store owner, hopes his plight will be considered among all the competing interests.

“If I had one thing to say to President Biden, it would be: ‘Let the mine open,'” he said.

(Reporting by Ernest Scheyder; additional reporting by Caitlin O’Hara, Sandra Stojanovic and Trevor Hunnicutt; editing by Amran Abocar and Brian Thevenot)

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Canada’s budget to include pandemic and childcare supports, luxury tax

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By Steve Scherer

OTTAWA (Reuters) – Canada will present a budget on Monday with billions of dollars for pandemic recovery measures as COVID-19 infections skyrocket, C$2 billion ($1.6 billion) toward national childcare, and new taxes on luxury goods.

Liberal Prime Minister Justin Trudeau’s first budget in two years will also set aside C$12 billion ($9.6 billion) to extend wage and rent subsidy programs to the autumn, the Toronto Star reported on Sunday.

Finance Minister Chrystia Freeland is due to present the budget at about 4 p.m. (2000 GMT).

The document promises in excess of C$2 billion as a “starting point” for a national childcare program, the Canadian Broadcasting Corp said, adding that the 2020-2021 federal deficit had come in under C$400 billion.

In November, the government forecast a deficit of C$381.6 billion, which would be its highest level since World War Two. [https://tmsnrt.rs/3wSJPcm]

The budget will also include a luxury tax effective from 2022 on new cars and private aircraft valued at more than C$100,000 ($79,970), and boats worth over C$250,000, government sources familiar with the document told Reuters.

There will be a sales tax for online platforms and e-commerce warehouses from July, and a digital services tax for Web giants like Alphabet Inc’s Google and Facebook Inc from 2022.

Freeland promised in November up to C$100 billion in stimulus over three years to “jump-start” an economic recovery during what is likely to be an election year, and the government so far not backed away from that commitment.

Environment Minister Jonathan Wilkinson, speaking to the CBC, confirmed that the budget would be “ambitious” and that the government would “invest for jobs and growth to rebuild this economy,” although he added there would be “fiscal guardrails” to put spending on a “sustainable track.”

Amid a spiking third wave of infections, Ontario, Canada‘s most-populous province, announced new public health restrictions on Friday, including closing the province’s borders to non-essential domestic travel.

Canada has been ramping up its vaccination campaign but still has a smaller percentage of its population inoculated than dozens of other countries, including the United States and Britain.

($1 = 1.2514 Canadian dollars)

 

(Reporting by Steve Scherer; Editing by Nick Zieminski and Peter Cooney)

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TSX extends gains as gold prices rise, set to rise for third week

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(Reuters) -Canada’s main stock index extended its rise on Friday after hitting a record high a day earlier as gold prices advanced, and was set to gain for a third straight week.

* At 9:40 a.m. ET (13:38 GMT), the Toronto Stock Exchange‘s S&P/TSX composite index was up 24.24 points, or 0.1%, at 19,326.16.

* The Canadian economy is likely to grow at a slower pace in this quarter and the next than previously expected, but tighter lockdown restrictions from another wave of coronavirus were unlikely to derail the economic recovery, a Reuters poll showed.

* The energy sector climbed 0.6% even as U.S. crude prices slipped 0.1% a barrel. Brent crude added 0.1%. [O/R]

* The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.3% as gold futures rose 0.7% to $1,777.9 an ounce. [GOL/] [MET/L]

* The financials sector gained 0.2%. The industrials sector rose 0.1%.

* On the TSX, 117 issues advanced, while 102 issues declined in a 1.15-to-1 ratio favoring gainers, with 14.26 million shares traded.

* The largest percentage gainers on the TSX were Cascades Inc, which jumped 4.2%, and Ballard Power Systems, which rose 2.9%.

* Lghtspeed POS fell 5.6%, the most on the TSX, while the second biggest decliner was goeasy, down 4.9%.

* The most heavily traded shares by volume were Zenabis Global Inc, Bombardier and Royal Bank of Canada.

* The TSX posted 23 new 52-week highs and no new low.

* Across Canadian issues, there were 160 new 52-week highs and 12 new lows, with total volume of 29.68 million shares.

(Reporting by Shashank Nayar in Bengaluru;Editing by Vinay Dwivedi)

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