
Contents
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1 No Groundhog Day: Industrial Policy, One Generation Later 1 No Groundhog Day: Industrial Policy, One Generation Later
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2 The Case for and Against Industrial Policy 2 The Case for and Against Industrial Policy
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2.1 The Economic Case for the State to Intervene 2.1 The Economic Case for the State to Intervene
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2.1.1 The Mill-Bastable Test 2.1.1 The Mill-Bastable Test
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2.1.2 Industrial Policy and Imperfect Competition 2.1.2 Industrial Policy and Imperfect Competition
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2.1.3 Industrial Policy to Address Other Market Failures 2.1.3 Industrial Policy to Address Other Market Failures
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2.1.4 The Counterarguments 2.1.4 The Counterarguments
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2.1.5 Empirical Assessment 2.1.5 Empirical Assessment
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2.1.6 An Industrial Policy for the Semiconductor Sector? 2.1.6 An Industrial Policy for the Semiconductor Sector?
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2.2 Enter Political Economy 2.2 Enter Political Economy
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2.3 Subsidizing to Achieve a Noneconomic Objective 2.3 Subsidizing to Achieve a Noneconomic Objective
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3 Subsidies and Subsidy Wars 3 Subsidies and Subsidy Wars
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3.1 US: Chips for Keeps 3.1 US: Chips for Keeps
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3.1.1 Profiling the US Semiconductor Industry 3.1.1 Profiling the US Semiconductor Industry
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3.1.2 Intel Dislocates, Others Follow 3.1.2 Intel Dislocates, Others Follow
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3.1.3 US Wants to Bring It All Back Home 3.1.3 US Wants to Bring It All Back Home
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3.1.4 Derisking, Decoupling 3.1.4 Derisking, Decoupling
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3.2 Everyone Subsidizes Semiconductors 3.2 Everyone Subsidizes Semiconductors
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3.2.1 China 3.2.1 China
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3.2.2 The EU 3.2.2 The EU
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3.2.3 Japan 3.2.3 Japan
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3.2.4 Korea 3.2.4 Korea
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3.2.5 Taiwan 3.2.5 Taiwan
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3.3 The World Semiconductor Council 3.3 The World Semiconductor Council
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4 Export Controls 4 Export Controls
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4.1 Do Export Restrictions Work? 4.1 Do Export Restrictions Work?
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4.2 Peddling Effectiveness 4.2 Peddling Effectiveness
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4.2.1 Collective Measures to Avoid Transfer of Technology 4.2.1 Collective Measures to Avoid Transfer of Technology
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4.2.2 US Efforts to Build a Coalition Against China 4.2.2 US Efforts to Build a Coalition Against China
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5 The Rise and Fold of GVCs 5 The Rise and Fold of GVCs
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5.1 What Is the Semiconductor GVC, and What Is the Role of China in It? 5.1 What Is the Semiconductor GVC, and What Is the Role of China in It?
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5.2 Why Is the Semiconductor GVC an Issue? 5.2 Why Is the Semiconductor GVC an Issue?
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5.3 How to Build the Resilience of the Semiconductor GVC? 5.3 How to Build the Resilience of the Semiconductor GVC?
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5.4 GVCs in WTO Law 5.4 GVCs in WTO Law
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2 Industrial Policy Today in the Name of National Security in a World of GVCs
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Published:November 2024
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Abstract
In today’s world, the semiconductor trade has changed a lot. It is conducted through GVCs (global value chains), and the new key players are not “allies.” China has now entered this market. As semiconductors are a dual-use good, continued participation in this market contains a national security element. China, in the eyes of some key WTO incumbents, did not espouse free-market economics like Japan did, and its trade relations with the West (especially the US) have been strained as a result. This (along with political economy) explains the large subsidies that we observe. While industrial policy is making a comeback, its critique has not abated. Nonetheless, (some) critics tone down their voices when industrial policy is justified on national security grounds, especially when industrial policy is response to Chinese subsidies.
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