Advanced Manufacturing –
The tools and techniques of the Fourth Industrial Revolution, or Industry 4.0, create strategic opportunities for the nations and firms best able to leverage the incredible increase in systems connectivity and data. This paper summarizes five months of research and discussions with Industry, Government, and Academia on the advanced manufacturing technologies made possible by Industry 4.0. We compare and assess competing for national industrial systems and policies and evaluate divergent firm and market strategies. Our team paid attention to the manufacturing ecosystems in the United States, the People’s Republic of China (PRC), and the Russian Federation, using the Porter’s Diamond Model of National Advantage to identify each nation’s unique strengths, weaknesses, opportunities, and threats. This analysis proposed policy recommendations to strengthen the U.S. manufacturing base and expand and diversify the nation’s supply chain for Great Power Competition.
Strategic competition among the “Great Powers” finds the U.S. and PRC, the world’s two largest economies and manufacturers, in a contested rivalry for global diplomatic, military, and economic influence. In the early months of 2021, both nations released a financial plan that explicitly emphasizes digital transformation and the tenets of Industry 4.0. Each country promises government funding and other support for its industries. The methods differ only in the size of the government subsidies and mechanisms of reinforcement between the countries. In contrast to the U.S. and PRC, Russia, while it remains a military power, lacks the economic clout to sustainably project power at great distances beyond its borders. The effects of long-running economic sanctions have resulted in limited foreign investment and slow economic growth. Russia’s modest plan for digital transformation is underfunded and behind schedule and is not likely to be realized soon. For this reason, the analytical effort focused primarily on the contest between the U.S. and PRC.
Assessing the U.S. industrial system, we found signs of a robust innovation sector with first-rate academic research institutions, easy access to capital, and strong intellectual property laws. However, the U.S. lacks a consistent and coordinated industrial policy, has grown dependent on foreign resources and suppliers, has scaled-back support for research and development, and has found signs of weakness in the primary and secondary education systems. The PRC has some similarities and differences from the U.S. The PRC industrial system benefits from a well-executed central plan, abundant domestic suppliers, loose regulation, abundant labor, and large government subsidies to support innovation and manufacturing. However, after decades of rapid growth, there are signs of a slowdown. The PRC system could benefit from market liberalization to increase the number of domestic competitors. Also, the authoritarian government’s pattern of aggression, debt-trap diplomacy, and human rights abuses has left some nations reluctant to expand their partnerships with the PRC, perhaps limiting their market penetration in these countries. The U.S. can assert policies to address China’s aggression.
Our team developed policy recommendations to advance U.S. interests and minimize the threat of PRC hegemony in advanced manufacturing and high-value industries after considering the differences in capabilities between these competing industrial systems. The U.S. must execute the following five critical policies that support a manufacturing renaissance in high-value industries:
- Promote U.S. International Standards for Advanced Manufacturing
- Develop and Strengthen International Advanced Manufacturing Partnerships
- Provide High-Performance Computing Resources to Enable Data-Driven Manufacturing
- Subsidize U.S. Research and Development and Capital Investment through Tax Policy
- Provide Career and Technical Education for a 21st Century Workforce
These recommendations form the foundation of an integrated economic and industrial strategy that balances technological innovation with high-value production output. While there are substantial risks to consider when applying these policies, America’s national security is at greater risk if it does not outpace its rivals’ production capacities.
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