The Inflation Reduction Act’s subsidies for American firms run the risk of “fragmenting the West,” according to French President Emmanuel Macron. Is he just being French? Should we reconsider those trade-distorting supports for U.S. firms’ clean energy measures? Should we re-shape our entire approach to trade issues? If so, how and why?
First, any French president will complain about US subsidies (just as ours complain about theirs), and claim to speak for the West or Europe or humanity while touting narrow French interests. But, second, exclusive subsidies for a nation’s domestic firms do distort markets to reward less-efficient producers. Third, even as we reduce our dependence on rivals for vital products, we do not want to hurt friendly nations’ economies.
The idea of “friend-shoring,” or “ally-shoring,” offers an easy synthesis of rationales to meet these problems. We boost production of vital goods among reliable friends, we do not damage their economies to make economic rivals of political allies, and we still support clean energy.
There is another and much more fundamental rationale for America to take this tack. Following its guidance will answer the specific questions of how to do it.
America conceived itself by a creed of unalienable rights and government by consent of the governed. Our purpose is to further that ethos, in our own national life and in the world – our legitimacy rests on the validation of those premises. We need to show that a free people has the capacity and self-discipline to maintain, nurture, and promote their own values.
Under this ethos, yes, protecting our society from dependence on non-democratic rivals is important. Yes, fostering global growth will likely promote freedom’s growth over time. And impeding the economies of other free nations, particularly of allies who share liberal and democratic outlooks, is detrimental to this purpose. But again, our purpose has little to do with anyone’s economic welfare. It is not to outcompete China or Russia. And contradictory paths, such as deals with Venezuela or Saudi Arabia for oil, must be undertaken only after rigorous analysis of their implications for our overriding purpose.
How do we define the friends whose shores we consider safe for economic inter-dependency? Of course we want truly free countries to be included, but how do we determine who is and isn’t? Would we exclude any from this circle and why? Should we include a country from outside the circle? And how do we define the circle to being with?
We have a good sense of 20 or 30 nations we consider fundamentally free. Most are military allies. All have decades – some have centuries – of history of peacefully contested transitions of government power. All have strong traditions of rule of law. Most afford their citizens great latitude and capacity to choose their lifestyles.
One question arises, as these nations are almost all wealthy. Would we favor already wealthy economies over the development that fully-open trade can foster? How do we show that our friendship is not defined by wealth?
A second question arises in that a number of nations that fit our criteria may pose security risks – or could evolve to pose them, like Hungary, as a prime example. Must we accept these risks, or would a prospect of technology leakages to (say) Russia negate our rationale?
The first answer to such questions comes by taking them seriously, and committing ourselves to find solutions that follow our principle. Brushing the issues away only justifies charges that the principle is sham and cover for our vested interests, of mercantile economics and realpolitik. Sighing that hard vital interests trump our ideals – e.g. that oil prices necessitate friendship with dictators — undermines our founding premise, and our own national legitimacy. The search for solutions that square conflicting needs may prove futile, but the commitment matters.
The second answer comes in the details of policy and diplomacy. If we open cash spigots to Venezuela to get that dictatorship to open oil spigots for us, we need to support their dissidents, limit our support for the generals and keep pressure on their friends, and even admit that we make this move under duress. If our list of friends for friend-shoring comprises only wealthy nations, we need to form a close second ring of relations, with nations that perhaps have flaws in their democratic practice, or are still building a tradition of rule of law. We must not let Brazil, India, Malaysia, Ghana, and others see us as adversaries by dint of their lesser wealth. Any number of measures along these lines will be needed. All will require deft relationship management, focused on our primal national purpose.
Last and crucially, our policy and diplomacy must ensure that any measures to manage our relations are clearly organized to support and validate our founding tenets, not for an ideal nor for those countries’ sake, but as our deepest national interest. If it helps others fine, but we do it first to ensure our own moral legitimacy, in the very terms on which we declared our nationhood. Our ways and means of carrying out this diplomacy and policy must revolve around that purpose, clearly in the eyes of all Americans, the French, and indeed the world.