Brookings Institution
Washington, D.C.

Good morning, everyone.  And thank you so much, David, for that introduction and for having me here today.  It’s great to be back at Brookings.

As many of you know, I was here last year to lay out President Biden’s vision for renewing American economic leadership, a vision that responded to several converging challenges our country faced: the return of intense geopolitical competition; a rise in inequality and a squeeze on the middle class; a less vibrant American industrial base; an accelerating climate crisis; vulnerable supply chains; and rapid technological change.

For the preceding three decades, the U.S. economy had enjoyed stronger topline aggregate growth than other advanced democracies, and had generated genuine innovation and technological progress, but our economic policies had not been adapted to deal effectively with these challenges.  That’s why President Biden implemented a modern industrial strategy, one premised on investing at home in ourselves and our national strength, and on shifting the energies of U.S. foreign policy to help our partners around the world do the same.

In practice, that’s meant mobilizing public investment to unlock private sector investment to deliver on big challenges like the clean energy transition and artificial intelligence, revitalizing our capacity to innovate and to build, creating diversified and resilient global supply chains, setting high standards for everything from labor to the environment to technology.  Because on that level playing field, our logic goes, America can compete and win.  Preserving open markets and also protecting our national security and doing all of these things together with allies and partners.

Since I laid this vision out in my speech at Brookings last year, I’ve listened with great interest to many thoughtful responses, because these are early days.  Meaningful shifts in policy require constant iteration and reflection.  That’s what will make our policy stronger and more sustainable. 

So, today, I’m glad to be back here at Brookings to reengage in this conversation, because I really believe that the ideas I’m here to discuss and the policies that flow from them are among the most consequential elements of the administration’s foreign as well as domestic policy, and I believe they will constitute an important legacy of Joe Biden’s presidency. 

I want to start by reflecting on some of the questions I’ve heard and then propose a few ways to consolidate our progress.

One overarching question is at the core of many others: Does our new approach mean that we’re walking away from a positive-sum view of the world, that America is just in it for itself at the expense of everyone else? 

In a word, no, it doesn’t.  In fact, we’re returning to a tradition that made American international leadership such a durable force, what Alexis de Tocqueville called “interest rightly understood.”  The notion that it’s in our own self-interest to strengthen our partners and sustain a fair economic system that helps all of us prosper.

After World War Two, we built an international economic order in the context of a divided world, an order that helped free nations recover and avoid a return to the protectionist and nationalist mistakes of the 1930s, an order that also advanced American economic and geopolitical power.

In the 1990s, after the collapse of the Soviet Union, we took that order global, embracing the old Eastern bloc, China, India, and many developing countries.  Suddenly, the major powers were no longer adversaries or competitors.  Capital flowed freely across borders.  Global supply chains became “just in time,” without anyone contemplating potential strategic risk.

Each of these approaches was positive-sum, and each reflected the world as it was.

Now, the world of the 1990s is over, and it’s not coming back, and it’s not a coherent plan or critique just to wish it so.

We’re seeing the return of great power competition.  But unlike the Cold War era, our economies are closely intertwined.  We’re on the verge of revolutionary technological change with AI, with economic and geopolitical implications.  The pandemic laid bare the fragilities in global supply chains that have been growing for decades.  The climate crisis grows more urgent with every hurricane and heat wave. 

So we need to articulate, once again, de Tocqueville’s notion of interest rightly understood.  To us, that means pursuing a strategy that is fundamentally positive-sum, calibrated to the geopolitical realities of today and rooted in what is good for America — for American workers, American communities, American businesses, and American national security and economic strength.

We continue to believe deeply in the mutual benefits of international trade and investment, enhanced and enabled by bold public investment in key sectors; bounded in rare but essential cases by principled controls on key national security technologies; protected against harmful non-market practices, labor and environment abuses, and economic coercion; and critically coordinated with a broad range of partners. 

The challenges we face are not uniquely our own and nor can we solve them alone.  We want and need our partners to join us.  And given the demand signal we hear back from them, we think that in the next decade, American leadership will be measured by our ability to help our partners pull off similar approaches and build alignment and complementarity across our policies and our investments. 

If we get that right, we can show that international economic integration is compatible with democracy and national sovereignty.  And that is how we get out of Dani Rodrik’s trilemma.

Now, what does that mean in practice?  What does this kind of positive-sum approach mean for trade policy?  Are we walking away from trade as a core pillar of international economic policy? 

U.S. exports and imports have recovered from their dip during the pandemic, with the real value of U.S. trade well above 2019 levels in each of the last two years.  We’re also the largest outbound source of FDI in the world. 

So, we are not walking away from international trade and investment.  What we are doing is moving away from specific policies that, frankly, didn’t contemplate the urgent challenges we face: The climate crisis.  Vulnerable, concentrated, critical mineral and semiconductor supply chains.  Persistent attacks on workers’ rights.  And not just more global competition, but more competition with a country that uses pervasive non-market policies and practices to distort and dominate global markets. 

Ignoring or downplaying these realities will not help us chart a viable path forward.  Our approach to trade responds to these challenges. 

Climate is a good example.  American manufacturers are global leaders in clean steel production, yet they’ve had to compete against companies that produce steel more cheaply but with higher emissions intensity.  That’s why, earlier this year, the White House stood up a Climate and Trade Task Force, and the task force has been developing the right tools to promote decarbonization and ensure our workers and businesses engaged in cleaner production aren’t disadvantaged by firms overseas engaged in dirtier, exploitative production.

Critical minerals are another example.  That sector is marked by extreme price volatility, widespread corruption, weak labor and environmental protections, and heavy concentration in the PRC, which artificially drops prices to keep competitors out of the marketplace. 

If we and our partners fail to invest, the PRC’s domination of these and other supply chains will only grow, and that will leave us increasingly dependent on a country that has demonstrated its willingness to weaponize such dependencies.  We can’t accept that, and neither can our partners. 

That’s why we are working with them to create a high-standard, critical minerals marketplace, one that diversifies our supply chains, creates a level playing field for our producers, and promotes strong workers’ rights and environmental protections.  And we’re driving towards tangible progress on that idea in just the next few weeks.

In multiple sectors that are important to our future, not just critical minerals, but solar cells, lithium-ion batteries, electric vehicles, we see a broad pattern emerging.  The PRC is producing far more than domestic demand, dumping excess onto global markets at artificially low prices, driving manufacturers around the world out of business, and creating a chokehold on supply chains.

To prevent a second China shock, we’ve had to act. 

That’s what drove the decisions about our 301 tariffs earlier this year.

Now, we know that indiscriminate, broad-based tariffs will harm workers, consumers, and businesses, both in the United States and our partners.  The evidence on that is clear.  That’s why we chose, instead, to target tariffs at unfair practices in strategic sectors where we and our allies are investing hundreds of billions of dollars to rebuild our manufacturing and our resilience. 

And crucially, we’re seeing partners in both advanced and emerging economies reach similar conclusions regarding overcapacity and take similar steps to ward off damage to their own industries, from the EU to Canada to Brazil to Thailand to Mexico to Türkiye and beyond.  That’s a big deal.

And it brings me back to my earlier point: We’re pursuing this new trade approach in concert with our partners.  They also recognize we need modern trade tools to achieve our objectives.  That means considering sector-specific trade agreements.  It means creating markets based on standards when that’s more effective.  And it also means revitalizing international institutions to address today’s challenges, including genuinely reforming the WTO to deal with the challenges I’ve outlined. 

And it means thinking more comprehensively about our economic partnerships.  That’s why we created the Indo-Pacific Economic Framework and the Americas Partnership for Economic Prosperity.  That’s why we also gave them such catchy names. 

Within IPEF, we finalized three agreements with 13 partners to accelerate the clean energy transition, to promote high labor standards, to fight corruption, and to shore up supply chain vulnerabilities before they become widespread disruptions.  And within APEP, we’re working to make the Western Hemisphere a globally competitive supply chain hub for semiconductors, clean energy, and more. 

And that leads to the next question I’ve often been asked in the last year and a half: Where does domestic investment fit into all of this?  How does our positive-sum approach square with our modern industrial strategy?

The truth is that smart, targeted government investment has always been a crucial part of the American formula.  It’s essential to catalyzing private investment and growth in sectors where market failures or other barriers would lead to under-investment.

Somehow, we forgot that along the way, or at least we stopped talking about it.  But there was no plausible version of answers on decarbonization or supply chain resilience without recovering this tradition.  And so we have.

We’ve made the largest investment ever to diversify and accelerate clean energy deployment through the Inflation Reduction Act.  And investments are generating hundreds of billions of dollars in private investment all across the country; rapid growth in emerging climate technologies like sustainable aviation fuels, carbon management, clean hydrogen, with investments increasing 6- to 15-fold from pre-IRA levels. 

This will help us meet our climate commitments.  This will advance our national security.  And this will ensure that American workers and communities can seize the vast economic opportunities of the clean energy transition and that those opportunities are broadly shared.  And that last part is crucial. 

The fact is that many communities hard hit in decades past still haven’t bounced back, and the two-thirds of American adults who don’t have college degrees have seen unacceptably poor outcomes in terms of real wages, health, and other outcomes over the last four decades.

For many years, people assumed that these distributional issues would be solved after the fact by domestic policies.  That has not worked. 

Advancing fairness, creating high-quality jobs, and revitalizing American communities can’t be an afterthought, which is why we’ve made them central to our approach. 

In fact, as a result of the incentives in the IRA to build in traditional energy communities, investment in those communities has doubled under President Joe Biden.

Now, initially, when we rolled this all out, our foreign partners worried that it was designed to undercut them, that we were attempting to shift all the clean energy investment and production around the world to the United States.

But that wasn’t the case, and it isn’t the case. 

We know that our partners need to invest.  In fact, we want them to invest.  The whole world benefits from the spillover effects of advances in clean energy that these investments bring. 

And we are nowhere near the saturation point of investment required to meet our clean energy deployment goals, nor will markets alone generate the resources necessary either. 

So, we’ve encouraged our partners to invest in their own industrial strength.  We’ve steered U.S. foreign policy towards being a more helpful partner in this endeavor.  And our partners have begun to join us.  Look at Japan’s green transformation policy, India’s production-linked incentives, Canada’s clean energy tax credit, the European Union’s Green Deal.

As more and more countries adopt this approach, we will continue to build out the cooperative mechanisms that we know will be necessary to ensure that we’re acting together to scale up total global investment, not competing with each other over where a fixed set of investments is located.

The same goes for investing in our high-tech manufacturing strength.  We believe that a nation that loses the capacity to build, risks losing the capacity to innovate.  So, we’re building again.

As a result of the CHIPS and Science Act, America is on track to have five leading-edge logic and memory chip manufacturers operating at scale.  No other economy has more than two.  And we’re continuing to nurture American leadership in artificial intelligence, including through actions we’re finalizing, as I speak, to ensure that the physical infrastructure needed to train the next generation of AI models is built right here in the United States. 

But all of this high-tech investment and development hasn’t come at the expense of our partners.  We’ve done it alongside them. 

We’re leveraging CHIPS Act funding to make complementary investments in the full semiconductor supply chain, from Costa Rica to Vietnam. 

We’re building a network of AI safety institutes around the world, from Canada to Singapore to Japan, to harness the power of AI responsibly. 

And we’ve launched a new Quantum Development Group to deepen cooperation in a field that will be pivotal in the decades ahead.

Simply put, we’re thinking about how to manage this in concert with our allies and partners, and that will make all of us more competitive.

Now, all this leads to another question that is frequently asked:  What about your technology protection policies?  How does that fit into a positive-sum approach?

The United States and our allies and partners have long limited the export of dual-use technologies.  This is logical and uncontroversial.  It doesn’t make sense to allow companies to sell advanced technology to countries that could use them to gain military advantage over the United States and our friends. 

Now, it would be a mistake to attempt to return to the Cold War paradigm of almost no trade, including technological trade, among geopolitical rivals.  But as I’ve noted, we’re in a fundamentally different geopolitical context, so we’ve got to meet somewhere in the middle. 

That means being targeted in what we restrict, controlling only the most sensitive technologies that will define national security and strategic competition.  This is part of what we mean when we say: de-risking, not decoupling.

To strike the right balance, to ensure we’re not imposing controls in an arbitrary or reflexive manner, we have a framework that informs our decision-making.  We ask ourselves at least four questions:

One, which sensitive technologies are or will likely become foundational to U.S. national security? 

Two, across those sensitive technologies, where do we have distinct advantages and are likely to see maximal effort by our competitors to close the gap?  Conversely, where are we behind and, therefore, most vulnerable to coercion?

Three, to what extent do our competitors have immediate substitutes for U.S.-sensitive technology, either through indigenous development or from third countries, that would undercut the controls?

Four, what is the breadth and depth of the coalition we could plausibly build and sustain around a given control?

When it comes to a narrow set of sensitive technologies, yes, the fence is high, as it should be. 

And in the context of broader commerce, the yard is small, and we’re not looking to expand it needlessly.

Now, beyond the realm of export controls and investment screening, we will also take action to protect sensitive data and our critical infrastructure, such as our recent action on connected vehicles from countries of concern.

I suspect almost no one here would argue that we should build out our telecommunications architecture or our data center infrastructure with Huawei. 

Millions of cars on the road with technology from the PRC, getting daily software updates from the PRC, sending reams of information back to the PRC, similarly doesn’t make sense, especially when we’ve already seen evidence of a PRC cyber threat to our critical infrastructure.

We have to anticipate systemic cyber and data risks in ways that, frankly, we didn’t in the past, including what that means for the future Internet of Things, and we have to take the thoughtful, targeted steps necessary in response.

This leads to a final, kind of fundamental question: Does this approach reflect some kind of pessimism about the United States and our inherent interests? 

Quite the contrary.  It reflects an abiding and ambitious optimism.  We believe deeply that we can act smartly and boldly, that we can compete and win, that we can meet the great challenges of our time, and that we can deliver for all of our people here in the United States. 

And while it’s still very early, we have some evidence of that.  This includes the strongest post-pandemic recovery of any advanced economy in the world.  There’s more work to do, but inflation has come down.  And contrary to the predictions that the PRC would overtake the U.S. in GDP either in this decade or the next, since President Biden took office, the United States has more than doubled our lead.  And last year, the United States attracted more than five times more inbound foreign direct investment than the next highest country. 

We are once again demonstrating our capacity for resilience and reinvention, and others are noticing.  The EU’s Draghi report, published last month, mirrors key aspects of our strategy. 

Now, as we continue to implement this vision, we will need to stay rigorous.  We will need, for example, to be bold enough to make the needed investments without veering into unproductive subsidies that crowd-out the private sector or unduly compete with our partners.

We’re clear-eyed that our policies will involve choices and trade-offs.  That’s the nature of policy.  But to paraphrase Sartre, not to choose is also a choice, and the trade-offs only get worse the longer we leave our challenges unchecked.

Pointing out that it’s challenging to strike the right balance is not an argument to be satisfied with the status quo.

We have tried to start making real a new positive-sum vision, and we have tried to start proving out its value.  But we still have our work cut out for us. 

So I’d actually like to end today with a few questions of my own, where our answers will determine our shared success: 

First, will we sustain the political will here at home to make the investments in our own national strength that will be required of us in the years ahead? 

Strategic investments like these need to be a bipartisan priority, and I have to believe that we’ll rise to the occasion, that we won’t needlessly give up America’s position of economic and technological leadership because we can no longer generate the political consensus to invest in ourselves.

There is more we can do now on a bipartisan basis. 

For example, Congress still hasn’t appropriated the science part of CHIPS and Science, even while the PRC is increasing its science and technology budget by 10 percent year on year.

Now, whether we’re talking about investments in fundamental research, or grants and loans for firms developing critical technologies, we also have to update our approach to risk.  Some research paths are dead ends.  Some startups won’t survive.  Our innovation base and our private sector are the envy of the world because they take risks.  The art of managing risk for the sake of innovation is critical to successful geostrategic competition. 

So, we need to nurture a national comfort with, to paraphrase FDR, bold and persistent experimentation.  And when an investment falls short, as it will, we need to maintain our bipartisan will, dust ourselves off, and keep moving forward.  To put it bluntly, our competitors hope we’re not capable of that.  We need to prove them wrong.  We need to make patient, strategic investments in our capacity to compete, and we need to ensure fiscal sustainability in order to keep making those investments over the long term.

The second question: Will we allocate sufficient resources for investments that are needed globally? 

Last year, here at Brookings, I talked about the need to go from billions to trillions in investment to help emerging and developing countries tackle modern challenges, including massively accelerating the speed and scale of the clean energy transition. 

We need a Marshall Plan-style effort, investing in partners around the world and supporting homegrown U.S. innovation in growing markets like storage, nuclear, and geothermal energy. 

Now, trillions may sound lofty and unachievable, but there is a very clear path to get there without requiring anywhere near that level of taxpayer dollars, and that path is renewed American leadership and investment in international institutions. 

For example, at the G20 this fall, we’re spearheading an effort that calls for the international financial institutions, the major creditors in the private sector, to step up their relief for countries facing high debt service burdens so they too can invest in their future. 

Or consider the World Bank and the IMF.  We’ve been leading the charge to make these institutions bigger and more effective, to fully utilize their balance sheets and be more responsive to the developing and emerging economies they serve.  That has already unlocked hundreds of billions of dollars in new lending capacity, at no cost to the United States.  And we can generate further investment on the scale required with very modest U.S. public investments and legislative fixes.  That depends on Congress taking action. 

For example, our administration requested $750 million — million — from Congress to boost the World Bank’s lending capacity by over $36 billion, which, if matched by our partners, could generate over $100 billion in new resources.  This would allow the World Bank to deploy $200 for every $1 the taxpayers provide.

We’ve asked Congress to approve investments in a new trust fund at the IMF to help developing countries build resilience and sustainability.  Through a U.S. investment in the tens of millions, we could enable tens of billions in new IMF lending.

And outside the World Bank and the IMF, we’re asking Congress to increase funding for the Partnership for Global Infrastructure and Investment, which we launched at the G7 a couple of years ago. 

This partnership catalyzes and concentrates investment in key corridors, including Africa and Asia, to close the infrastructure gap in developing countries.  It strengthens countries’ economic growth.  It strengthens America’s supply chains and global trusted technology vendors.  And it strengthens our partnerships in critical regions. 

The private sector has been enthusiastic.  Together with them and our G7 partners, we’ve already mobilized tens of billions of dollars, and we can lever that up and scale that up in the years ahead with help on a bipartisan basis from the Congress.

We need to focus on the big picture.  Holding back small sums of money has the effect of pulling back large sums from the developing world — which also, by the way, effectively cedes the field to other countries like the PRC.  There are low-cost, commonsense solutions on the table, steps that should not be the ceiling of our ambitions, but the floor.  And we need Congress to provide us the authorities and the seed funding to take those steps now.

Finally, will we empower our agencies and develop new muscle to meet this moment? 

Simply put, we need to ensure that we have the resources and the capabilities in the U.S. government to implement this economic vision over the long haul.  This starts by significantly strengthening our bilateral tools, answering a critique that China has a checkbook and the U.S. has a checklist. 

Next year, the United States is going to face a critical test of whether our country is up to the task.  The DFC, the Ex-Im Bank, and AGOA, the African Growth and Opportunity Act, are all up for renewal by Congress.  This provides a once-in-a-decade chance for America to strengthen some of its most important tools of economic statecraft. 

And think about how they can work better with the high-leverage multilateral institutions I just mentioned.  The DFC, for example, is one of our most effective instruments to mobilize private sector investments in developing countries.

But the DFC is too small compared to the scope of investment needed, and it lacks tools our partners want, like the ability to deploy more equity as well as debt, and it’s often unable to capitalize on fast-moving investment opportunities.  So, we put forward a proposal to expand the DFC’s toolkit and make it bigger, faster, nimbler. 

Another gap we need to bridge is to make sure we attract, retain, and empower top-tier talent with expertise in priority areas.

We’re asking Congress to approve the resources we’ve requested for the Commerce’s Bureau of Industry Security, Treasury’s Office of Investment Security, the Department of Justice’s National Security Division. 

If Congress is serious about America competing and winning, we need to be able to draw on America’s very best.

Let me close with this:

Since the end of World War Two, the United States has stood for a fair and open international economy; for the power of global connection to fuel innovation; for the power of trade and investment done right to create good jobs; for the power, as Tocqueville put it, of interest rightly understood.

Our task ahead is to harness that power to take on the realities of today’s geopolitical moment in a way that will not only preserve America’s enduring strengths, but extend them for generations to come.  It will take more conversations like this one and iteration after iteration to forge a new consensus and perfect a new set of policies and capabilities to match the moment. 

I hope it’s a project we can all work on together.  We can’t afford not to. 

So, thank you.  And I look forward to continuing the conversation, including hearing some of your questions this morning.