Chips, subsidies, security, and great power competition

Since 2008, government subsidies to industry have sharply increased in the European Union, China, and the United States, with particularly generous subsidies directed to the semiconductor industry. Rising subsidies in the big world economies and the entanglement of national security and commercial motives pose difficult policy issues for countries such as Australia, which cannot match the subsidies provided by the great powers. USChina competition over advanced semiconductors is an awkward instance of such entanglement of national security and commerce, of subsidies and export denials. Australia needs to find its own path between adhering to US views on controlling the sale of strictly military products and technologies, while resisting the inevitable pressure from the United States to extend controls on new commercial products and technologies. Introduction: industry policy and national security There was a time when government spending to support particular industries was widely deplored as a wasteful interference in free markets. No longer. China, the United States, and the European Union have in recent years vastly increased government subsidies to industry, frequently supporting the development of advanced technologies important in peace and war. Subsidies are now sometimes complemented by policies designed to deny technological innovations to competitor economies.