December 25, 2022 | The National Interest

Tweaking the Inflation Reduction Act Can Strengthen Democracies’ Hand

“Made in Democracy” is a better label than “Made in America” if the goal is to strengthen our collective Western economies as well as our political alliances.
December 25, 2022 | The National Interest

Tweaking the Inflation Reduction Act Can Strengthen Democracies’ Hand

“Made in Democracy” is a better label than “Made in America” if the goal is to strengthen our collective Western economies as well as our political alliances.

By all appearances, French president Emmanuel Macron’s recent visit to Washington has reknit the relationship between the United States and its oldest ally—strained when the United States and other allies pulled the rug out from under France’s submarine sales to Australia last year.

The one notable remaining fly in the Franco-U.S. ointment—Joe Biden and Congressional Democrats’ Inflation Reduction Act, which boxed France and other European allies out of expanded U.S. electric vehicle and other clean energy products’ development—got a Biden pledge to make a “tweak”. The president made no apologies for actions to create more American manufacturing jobs, but promised not to do so “at the expense of Europe.”

Should the president find a way to follow through on this promise, either through executive action or amended legislation, it would boost ongoing efforts among Western democracies to pull closer together and work in concert to counter the economic and political threats from Russia and China.

As we have written before, a more geopolitically potent path than trying to onshore everything, if democracies are to outcompete authoritarians for economic and political leadership, is an ally-shoring strategy. Ally-shoring means selectively leaning into and rewiring supply chains and increasing co-production arrangements with friends who share our democratic values and global interests. A lot of this is happening organically, as countries and global companies burned by Russia’s attack on Ukraine, and skittish about relying on China for products and components (for both political and supply-chain reliability issues), seek both reliable and politically friendly environments that support economic stability, the rule of law, and intellectual property protections.

Meanwhile, trade between the United States and Europe, which includes a healthy share of intermediate goods (or component parts of finished products) is now booming. The United States is importing more goods from Europe than China this year (a sizeable change from past trends), while becoming a critical supplier of European energy and military hardware. European investment in the United States is also trending upward.

“Made in Democracy” is a better label than “Made in America” if the goal is to strengthen our collective Western economies as well as our political alliances. Working and producing together enhances our economic, political, and military hand in checking the behavior of authoritarians like Russia and China, who clearly are seeking to subvert the West-led economic and political order, and who are more than willing to use critical supply dependencies as political blackmail.

The temptation for any leader to speak only to a domestic audience is strong. The crisis provoked by Russia, with the potential for more given the background challenge of China, demands a united front. President Biden’s openness to President Macron and Europe’s interests will help preserve such a front.

John Austin directs the Michigan Economic Center and is a nonresident senior fellow with the Brookings Institution and the Chicago Council on Global Affairs. Elaine Dezenski is senior director and head of the Center on Economic and Financial Power at the Foundation for Defense of Democracies. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.

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