By Colin Grabow, Cato Institute
This week the Biden administration kicked off its “Invest in America” tour aimed at highlighting White House‐backed initiatives such as the CHIPS and Science Act and Bipartisan Infrastructure Law. While meant to showcase the White House’s legislative achievements, the public relations blitz serves as a reminder of how the administration’s stated goals are being undermined by protectionist measures that it supports. Here’s a closer look at some of those visits and the protectionist lessons that can be learned from each.
President Biden’s visit to a North Carolina‐based semiconductor manufacturer. In his visit to semiconductor manufacturer Wolfspeed on Tuesday President Biden spotlighted the company’s construction of a new manufacturing facility, which the president credited to his economic agenda. Biden’s time might have been better spent, however, learning about the company’s perspective on the ongoing trade war with China. As Wolfspeed notes in its most recent quarterly report, a key risk currently facing the company is the “economic and political uncertainty caused by the tariffs imposed by the United States on Chinese goods, and corresponding Chinese tariffs and currency devaluation in response.” Such uncertainties and possible retaliatory moves, the company added, could negatively impact demand for Wolfspeed’s products.
It remains unclear exactly what punitive U.S. tariffs on Chinese goods are accomplishing, but Wolfspeed is yet another example of the threats they pose to U.S. firms’ ability to compete in the global marketplace.
Mitch Landrieu’s stop in Nashville, Tennessee. Landrieu, a White House advisor tasked with coordinating the implementation of the Bipartisan Infrastructure Law, will visit the Volunteer State to explain how administration‐backed legislation is “creating safer, smarter transportation and expanding electric vehicle charging manufacturing.” Unmentioned by the White House is that protectionist Buy America requirements—championed by President Biden—that electric vehicle chargers be domestically produced are slowing the deployment of charging stations. As a Reuters story from last week points out:
Requirements to immediately start assembling the chargers at U.S. factories and to use U.S.-made iron or steel enclosures have caught many in the EV charging industry off guard, according to company executives and industry experts.
…Companies and some state officials who will manage the federal funds are warning that the country currently lacks the domestic production capacity—particularly on high‐speed chargers—and that strict enforcement will slow the rollout, drive up costs and possibly hurt the industry Biden seeks to nurture.
“Everyone was hoping that there would be a waiver on the Buy America and Made in America,” said Aatish Patel, co‐founder of XCharge North America, which imports chargers from its manufacturing plant in Beijing. “That throws a wrench in a lot of people’s plans.”
If the administration wants to encourage the development of a charging network for electric vehicles—something it claims to support—its stance on these protectionist requirements should be urgently rethought.
Secretary of Commerce Gina Raimondo’s visit to North Carolina. Traveling with President Biden this week, Secretary Raimondo was slated to visit fiber optic cable manufacturers and used her trip to highlight the inability of some citizens to access broadband internet. One prominent obstacle to broadband’s expansion, however, is protectionist restrictions supported by President Biden. As a new Bloomberg report notes, many of the key components that make broadband internet function are imported and thus run afoul of measures mandating the use of American equipment.
Cable providers, chip makers and wireless carriers are pleading for relief from the requirement to “buy American,” saying they can’t build new networks without foreign electronics. Otherwise the broadband buildup that Biden has set as a priority will be delayed by years as domestic sources are developed.
…Companies need to be assured they will get permission to buy foreign electronics before they’ll break ground to lay new broadband lines, said Dave Stehlin, chief executive officer of the Telecommunications Industry Association. Members of the trade group include chipmakers Cisco Systems Inc. and Qualcomm Inc., Nokia Oyj and Ericsson AB.
“A waiver has to be in place by then,” Stehlin said in an interview. “No service provider is going to dig a hole, lay a fiber cable, and hope and pray as they wait for the electronics. They’re going to wait until they have everything lined up. So the longer we wait, the longer it is before these unserved and underserved people actually have broadband.”
As with the deployment of infrastructure to support electric vehicles, administration‐backed protectionism is very much at odds with its stated goals.
Secretary of Energy Jennifer Granholm’s trip to Puerto Rico. Arriving in the U.S. territory earlier this week, Secretary Granholm will use her visit to—among other items—emphasize administration‐backed efforts to modernize Puerto Rico’s electrical grid, provide reliable power, and strengthen its resilience during severe weather events. However, the advancement of these goals (as well as Puerto Rico’s general prosperity) is directly at odds with President Biden’s support of the Jones Act.
Passed in 1920, the Jones Act restricts waterborne transportation within the United States—including the U.S. mainland and Puerto Rico—to vessels that are U.S.-flagged, U.S.-built and mostly U.S. crewed and owned. At best, such vessels are considerably more expensive than those under foreign flags. But in some cases they aren’t available at any price—they simply don’t exist. Of the world’s more than 600 tankers capable of transporting liquefied natural gas (LNG), none comply with the 1920 law. As a result, U.S. LNG is exported to dozens of other countries but cannot be transported to Puerto Rico. Instead, the island must turn to foreign sources including distant Nigeria, Oman, and Brazil (itself the 9th‐largest consumer of U.S. LNG since 2016) rather than much closer U.S. LNG export terminals.
That’s not just a geopolitical embarrassment but economically nonsensical, particularly given that the neighboring Dominican Republic—unconstrained by the Jones Act—chooses to purchase most of its LNG from the U.S. mainland. All of this means wasted money that could instead be used to shore up Puerto Rico’s electrical grid (among other possible productive uses).
Jones Act prohibitions also harm Puerto Rico’s energy reliability. In fact, last October a Jones Act waiver had to be issued to ensure sufficient supplies at one of the island’s power plants. The law also interrupted the flow of diesel fuel to the island in the wake of Hurricane Fiona. Any efforts to improve the island’s ability to withstand and recover from such severe weather events should place Jones Act reform as a logical starting point.
Summing up: On issue after issue, the Biden administration’s support for protectionist policies comes in direct conflict with stated policy priorities ranging from improved infrastructure to expanded broadband access to bolstering Puerto Rico’s energy reliability. Unfortunately, it’s a tension that the Biden administration has yet to acknowledge, much less grapple with. Until that happens, expect protectionism‐induced dysfunction and inefficiency to continue undermining the goals of White House initiatives.
Colin Grabow is a research fellow at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies where his research focuses on domestic forms of trade protectionism.