Claim: “There’s no reason the blades for wind turbines can’t be built in Pittsburgh instead of Beijing,” Biden said in his joint address to Congress on Wednesday night. “No reason why American workers can’t lead the world in the production of electric vehicles and batteries.”
Verdict: Misleading.
In making this claim, Joe Biden joined the long parade of U.S. politicians who have claimed their policies would result in U.S. leadership in high-tech innovation while ignoring the actual policies that has led China to be, for instance, a world leader in telecommunications equipment, 5G technology, and the production of rare earth minerals.
Trade theory has recognized for decades that a predatory mercantilist country that can credibly promise to protect its domestic industry from competition and subsidize its exports can depress investment in would-be competitor nations, lowering the ability of those nations to make the products targeted by the predator. In other words, countries can obtain global monopolies for nation champion firms by using import restrictions and export subsidies. In fact, countries can enrich themselves at the expense of others not only by imposing the restrictions and implementing the subsidies but by credibly threatening that they would do so.
This has been China’s trade strategy for two decades. Nothing Biden has proposed credibly will shake China from this strategy. So unless Biden is planning countervailing mercantilist measures — such as high tariffs on imported wind turbines — there is every reason to think wind turbines, electric vehicles, and batteries will not be built in Pittsburgh or any other American city.
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