India thinks big while America thinks small

Two articles with diametrically different messages caught my attention yesterday. The New York Times reported that the government of India wants to replicate the country’s success in software by also creating a homegrown industry for computer hardware, and especially for the computer chips that are the brains of the information age. At the same time, ...

Manjunath Kiran/AFP/Getty Images
Manjunath Kiran/AFP/Getty Images
Manjunath Kiran/AFP/Getty Images

Two articles with diametrically different messages caught my attention yesterday.

The New York Times reported that the government of India wants to replicate the country's success in software by also creating a homegrown industry for computer hardware, and especially for the computer chips that are the brains of the information age.

Two articles with diametrically different messages caught my attention yesterday.

The New York Times reported that the government of India wants to replicate the country’s success in software by also creating a homegrown industry for computer hardware, and especially for the computer chips that are the brains of the information age.

At the same time, Reuters reported that the high-powered, richly financed Club for Growth business lobby is stepping up its effort to shut down the U.S. Import/Export Bank only a year after the bank’s charter was renewed.

As the I in the BRICS, India has three main reasons for wanting to have computer chips made in India. First, the country is a high tech powerhouse that has the potential to be a competitive producer and that feels the power of the logic of expanding its knowledge based industries. Second, it is clear that for India to stay on the high growth path and create jobs for the millions of new workers coming into the work force, it must expand its manufacturing industries. As Gaurav Verma of the U.S.-India Business Council says, "nobody disputes India’s need to build up manufacturing. Not to do so would be fiscally irresponsible." Third, India is running a large trade deficit and electronic goods imports are growing so fast that they are expected to be greater than oil imports by 20202. For computer chips alone, last year’s bill was $8.2 billion. For all electronics the bill is expected to grow from last year’s $70 billion to about $300 billion by 2020. This is becoming unsustainable says Dr. Ajay Kumar of the Department of Electronics and Information Technology.

In the United States, the Export/Import Bank (ExIm) has long been an important supporter of U.S. high tech and capital goods exports. It is especially important in responding to and matching the favorable export financing made available by many export oriented governments around the world. For instance, it is unlikely that Boeing would control about half the world market for commercial aircraft in the face of competition from the European Airbus without the help of the ExIm Bank. Nor is it likely that Caterpillar would be the major player it is in the world market for heavy equipment without the ExIm Bank. And let’s not forget that the United States has a chronic trade deficit of more than $500 billion.

Yet, despite this, and despite the fact that the bank is profitable and delivers $1.1 billion annually to the U.S. Treasury and that it supported 225,000 American jobs last year, and that 88 percent of its transactions last year benefited small business, and that it is quite small with a lending cap of only $150 billion, and that foreign ExIm banks are far larger and unlikely to disappear in the wake of any demise of the U.S. ExIm Bank, the Club for Growth is bent on getting rid of what it calls "a slush fund for market distorting subsidies that pick winners and losers in the private sector."   

The Club for Growth’s strategy is to block the re-nomination of Fred Hochberg to be President of the Bank. It calculates that without Hochberg the Bank’s board will have no quorum and thus not be able to proceed with any projects. So the Club has called on Senate Minority Leader, Republican Mitch McConnell to block the appointment. In short, this is a de facto attempt to block growth of U.S. exports.

For its part, India is mandating that at least half of all laptops, computers, tablets, and printers procured by government sources be supplied by domestic sources. It is also offering as much as $2.75 billion in incentives for chip makers to establish a semiconductor manufacturing plant in India. Because the government accounts for about 40 percent of the country’s electronics purchases, officials hope to use that purchasing power as leverage to jump start wide scale manufacturing activity.

So there you have it in a nutshell. India has a trade deficit along with industrial and technological potential and its government and businesses work together to see how they can develop the domestic production capability to extend technological leadership while cutting the trade deficit. America has a trade deficit along with industrial and technological potential and many of its richest people and top executives strive to prevent government from doing anything to promote the potential or to reduce the deficit.

I guess that’s what makes a horse race.

Clyde Prestowitz is the founder and president of the Economic Strategy Institute, a former counselor to the secretary of commerce in the Reagan administration, and the author of The World Turned Upside Down: America, China, and the Struggle for Global Leadership. Twitter: @clydeprestowitz

Tag: India

More from Foreign Policy

An illustration shows George Kennan, the father of Cold War containment strategy.
An illustration shows George Kennan, the father of Cold War containment strategy.

Is Cold War Inevitable?

A new biography of George Kennan, the father of containment, raises questions about whether the old Cold War—and the emerging one with China—could have been avoided.

U.S. President Joe Biden speaks on the DISCLOSE Act.
U.S. President Joe Biden speaks on the DISCLOSE Act.

So You Want to Buy an Ambassadorship

The United States is the only Western government that routinely rewards mega-donors with top diplomatic posts.

Chinese President Xi jinping  toasts the guests during a banquet marking the 70th anniversary of the founding of the People's Republic of China on September 30, 2019 in Beijing, China.
Chinese President Xi jinping toasts the guests during a banquet marking the 70th anniversary of the founding of the People's Republic of China on September 30, 2019 in Beijing, China.

Can China Pull Off Its Charm Offensive?

Why Beijing’s foreign-policy reset will—or won’t—work out.

Turkish Defense Minister Hulusi Akar chairs a meeting in Ankara, Turkey on Nov. 21, 2022.
Turkish Defense Minister Hulusi Akar chairs a meeting in Ankara, Turkey on Nov. 21, 2022.

Turkey’s Problem Isn’t Sweden. It’s the United States.

Erdogan has focused on Stockholm’s stance toward Kurdish exile groups, but Ankara’s real demand is the end of U.S. support for Kurds in Syria.