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541. Why the CHIPS Are Down: Stock Buybacks and Subsidies in the U.S. Semiconductor Industry

Author:
William Lazonick and Matt Hopkins
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The Semiconductor Industry Association (SIA) is promoting the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, introduced in Congress in June 2020. An SIA press release describes the bill as “bipartisan legislation that would invest tens of billions of dollars in semiconductor manufacturing incentives and research initiatives over the next 5-10 years to strengthen and sustain American leadership in chip technology, which is essential to our country’s economy and national security.” On June 8, 2021, the Senate approved $52 billion for the CHIPS for America Act, dedicated to supporting the U.S. semiconductor industry over the next decade. This paper highlights a curious paradox: Most of the SIA corporate members now lobbying for the CHIPS for America Act have squandered past support that the U.S. semiconductor industry has received from the U.S. government for decades by using their corporate cash to do buybacks to boost their own companies’ stock prices. Among the SIA corporate signatories of a letter to President Biden in February 2021, the five largest stock repurchasers—Intel, IBM, Qualcomm, Texas Instruments, and Broadcom—did a combined $249 billion in buybacks over the decade 2011-2020, equal to 71 percent of their profits and almost five times the subsidies over the next decade for which the SIA is lobbying. In addition, among the members of the Semiconductors in America Coalition (SIAC), formed specifically in May 2021 to lobby Congress for the passage of the CHIPS for America Act, are Apple, Microsoft, Cisco, and Google. These firms spent a combined $633 billion on buybacks during 2011-2020. That is about 12 times the government subsidies provided under the CHIPS for America Act to support semiconductor fabrication in the United States in the upcoming decade. If the Congress wants to achieve the legislation’s stated purpose of promoting major new investments in semiconductors, it needs to deal with this paradox. It could, for example, require the SIA and SIAC to extract pledges from its member corporations that they will cease doing stock buybacks as open-market repurchases over the next ten years. Such regulation could be a first step in rescinding Securities and Exchange Commission Rule 10b-18, which has since 1982 been a major cause of extreme income inequality and loss of global industrial competitiveness in the United States.
Topic:
Science and Technology, Regulation, Legislation, Strategic Competition, Subsidies, and Lobbying
Political Geography:
United States of America

542. Artificial Intelligence, Globalization, and Strategies for Economic Development

Author:
Anton Korinek and Joseph E. Stiglitz
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Progress in artificial intelligence and related forms of automation technologies threatens to reverse the gains that developing countries and emerging markets have experienced from integrating into the world economy over the past half century, aggravating poverty and inequality. The new technologies have the tendency to be labor-saving, resource-saving, and to give rise to winner-takes-all dynamics that advantage developed countries. We analyze the economic forces behind these developments and describe economic policies that would mitigate the adverse effects on developing and emerging economies while leveraging the potential gains from technological advances. We also describe reforms to our global system of economic governance that would share the benefits of AI more widely with developing countries.
Topic:
Development, Globalization, Science and Technology, Inequality, Artificial Intelligence, and Redistribution
Political Geography:
Global Focus

543. Ukraine’s Half-Hearted Reforms: What Needs to Change in the West’s Approach?

Author:
Arkady Moshes and Ryhor Nizhnikau
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
Comprehensive internal reforms, along with security cooperation, are a key pillar of West-Ukraine interaction. Thus far, however, the Western effort has not sufficed to overcome the resistance of the local elites and make the reforms irreversible. High hopes raised by Volodymyr Zelensky’s election as Ukraine’s president in 2019 were short-lived. In three priority areas – anti-corruption, the judiciary and the economy – reforms have stalled. Instead, Zelensky has started to adapt the same socio-political system that the West aims to transform to his own political purposes. Western support – or even leadership – is once again becoming crucial in keeping Ukraine on the reform track. Ongoing domestic developments seriously challenge Zelensky’s administration, creating a window of opportunity for a more successful application of reform conditionality. In turn, a new US administration may be much more capable of using this emerging opportunity than its predecessor. If they are to promote reforms more efficiently, Western actors should go beyond the technocratic approach and recognize their own “ownership” of the process. Progress with reforms requires direct and high-level political engagement to enforce the implementation of agreements and to empower pro-reform forces inside the country.
Topic:
Security, Science and Technology, Reform, and Leadership
Political Geography:
Europe and Ukraine

544. Strategic Autonomy and the Transformation of the EU: New Agendas for Security, Diplomacy, Trade and Technology

Author:
Niklas Helwig
Publication Date:
04-2021
Content Type:
Special Report
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
The EU is caught up in a debate over whether to increase its autonomy with regard to the wider world. International developments and crises of recent years have raised the question of whether Europeans should be more capable of managing the risks stemming from their exposure to global trade and possible over-reliance on allies for their security. This report analyses how the pursuit of strategic autonomy transforms EU policies in the field of security, diplomacy, trade, and technology. The report makes recommendations on how the EU can advance strategic autonomy, while striking a balance between protectionist tendencies and the need to stay open to international engagement and cooperation. Instead of focusing on the divisive question of strategic autonomy from others, member states should pay attention to more constructive approaches and concrete actions to strengthen strategic autonomy. In each of the policy fields, the right mix of protection of European assets, provision of the economic and political basis, and the projection of European interests and values abroad will be vital.
Topic:
Security, Diplomacy, International Trade and Finance, Regional Cooperation, Science and Technology, European Union, Regionalism, Autonomy, and Strategic Interests
Political Geography:
Europe

545. Climate of cooperation: How the EU can help deliver a green grand bargain

Author:
Alex Clark, Susi Dennison, and Mats Engström
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
European Council on Foreign Relations (ECFR)
Abstract:
The global transition away from carbon will fundamentally alter the EU’s dependencies on energy, raw materials, and new technologies. The bloc needs to manage these dependencies while maintaining the fragile consensus between member states on the European Green Deal and fulfilling its ambitions for global climate leadership. The EU should help deliver a green grand bargain by making use of all its sources of economic, multilateral, and soft power. The bloc should reframe the international debate on energy security to focus on clean energy resources and efficiency, engaging in the market reforms needed to incentivise this shift. The EU should make every effort to reassure countries in the global south that the green transition will not leave them behind. The Global Gateway provides a strong framework for doing this – as would an EU Co-innovation and Green Tech Diffusion Fund. The EU also needs to place European sovereignty at the centre of its internal narrative on the European Green Deal. This could help win support for the agreement from member states that are concerned about the economic and social effects of the green transition.
Topic:
Climate Change, Development, Diplomacy, International Cooperation, Science and Technology, European Union, Partnerships, Multilateralism, and Trade
Political Geography:
Europe and Global Focus

546. Geo-tech politics: Why technology shapes European power

Author:
Ulrike Franke and José I. Torreblanca
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
European Council on Foreign Relations (ECFR)
Abstract:
New technologies are a major redistributor of power among states and a significant force shaping international relations. The European Union has for too long seen technology primarily through an economic lens, disregarding its implications for its partnerships and for its own geopolitical influence. If the EU wants to be more than a mediator between the two real technological powers, the United States and China, it will need to change its mindset. For the EU and its partners, the vulnerabilities created by battles over technology divide into two types: new dependencies and openness to foreign interference. The EU and its member states need deeper engagement with the geopolitical implications and geopolitical power elements of technology. This engagement has an external element of reaching out to partners and an internal element of ensuring close cooperation between the EU and its member states.
Topic:
Science and Technology, European Union, and Geopolitics
Political Geography:
China, Europe, and United States of America

547. The evolution of US strategic priorities

Author:
Carl Bildt
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
European Council on Foreign Relations (ECFR)
Abstract:
The Biden administration’s Interim National Security Strategic Guidance reflects an evolution in US strategic thinking and policy priorities. The document shows how the administration intends to shift away from America Alone and towards America and its Allies. But the optimism and confidence the US expressed in 2015 has been replaced by deep concern over a range of strategic trends. The US will now prioritise strategic competition with China, a new approach to trade, the rise of technology, the defence of democracy, the urgent climate and health crises, and efforts to avoid ‘forever wars’ in the Middle East.
Topic:
Climate Change, Health, Science and Technology, Democracy, and Trade
Political Geography:
China, Middle East, North America, and United States of America

548. Innovating through knowledge: European Institute of Innovation and Technology 2027 – and why it matters

Author:
Katarína Svitková
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Europeum Institute for European Policy
Abstract:
Our Associate Research Fellow Katarína Svitková has written the second article of the new publication series EUROPEUM: 2021–2027 Horizon Europe. In her policy brief, Katarína presents the European Institute of Innovation and Technology (EIT) as one of the main components of the Horizon Europe Innovation Pillar and describes its program and objectives. Innovation through research and development has been a long-term objective throughout the European funding frameworks. With the start of the 2021 –2027 cycle of Horizon Europe, EU’s innovation institutions are continuing, but also setting more ambitious priorities and launching new components and programs. Continuing EUROPEUM’s series on EU innovation momentum, this article presents the European Institute of Innovation and Technology (EIT) as one of the major components of the Horizon Europe Innovation pillar.
Topic:
Science and Technology, European Union, and Innovation
Political Geography:
Europe

549. How 2400 Pages of Tech Industrial Policy will change Transatlantic Relations

Author:
Tobias Gehrke
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
The currently 2400-page long ‘US Innovation and Competition Act’ making its way through Congress is about one thing only: China. But it also signals a much broader shift in American geoeconomic strategy towards tech industrial policy which matters just as much for Europe. To avoid major rifts, tech industrial diplomacy will need to become a staple of transatlantic affairs.
Topic:
Industrial Policy, Science and Technology, Transatlantic Relations, Industry, and Strategic Interests
Political Geography:
China, Europe, Asia, North America, and United States of America

550. The EU-US Trade and technology Council: Mapping the Challenges and Opportunities for Transatlantic Cooperation on Trade, Climate, and Digital

Author:
Guillaume Van der Loo, Thijs Vandenbussche, and Andreas Aktoudianakis
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
The EU-US Summit on 15 June 2021 marked the beginning of a renewed transatlantic partner- ship and set an ambitious joint agenda for EU-US cooperation post-COVID-19. The new Biden administration offers the EU the opportunity to re-establish transatlantic relations, which reached their lowest point since World War II under the turbulent Trump administration, and to address the bilateral disputes and tensions that have emerged, partly as a result of Trump’s ‘America First’ policies. One of the key deliverables of the Summit was the establishment of the EU-US Trade and Technology Council (TTC). The TTC aims to deepen EU-US relations on trade and investment and to avoid new technical barriers to trade by cooperating on key poli- cies such as technology, digital policy issues and supply chains. Despite the optimism in Brussels and Washington about renewing and strengthening transat- lantic cooperation, there are several challenges for EU-US cooperation. In the areas of trade, digital and climate in particular several differing views or outstanding disputes (most of them inherited by the Trump administration) will need to be addressed by the new TTC (the first meeting is scheduled on 29-30 September 2021) or other joint bodies. Only then will the EU and the US be able to deliver on the new ambitious transatlantic agenda. This paper will there- fore discuss the key challenges and opportunities for EU-US cooperation in the three inter- related areas of trade, digital and climate. For each of these areas, the outcome of the June 2021 EU-US Summit will be discussed and the challenges and opportunities for delivering on the renewed transatlantic agenda will be analysed. Moreover, this paper will present several policy recommendations, for the TTC or on EU-US cooperation in general, on how to advance the transatlantic partnership.
Topic:
Climate Change, Diplomacy, International Cooperation, International Trade and Finance, Science and Technology, European Union, Digitalization, and Summit
Political Geography:
Europe, North America, and United States of America