TAIPEI (Taiwan News) — Jeff Ferry, the award-winning chief economist of Coalition for a Prosperous America, says his country has a lot to learn from Taiwan’s industrial policy and education system in its quest to rebuild its manufacturing base.
In a podcast episode released by Policy People on Saturday (Aug. 21), Ferry says, “The economics profession has let down the American people” for decades, and the country needs to recenter its economic base on strong manufacturing, as Taiwan has done.
Ferry says though the U.S. has been central to internet innovation for decades, the American public has been cheated out of trillions of dollars of the value that innovation has created.
In 2019, Ferry and his colleagues won the Mennis Award from the National Association for Business Economics for a paper that showed a 25% tariff on all U.S. imports from China would add US$155.9 billion (NT$4.26 trillion) in GDP and create nearly one million jobs by 2024.
Yet he says the tariffs are under threat from lobbyists representing multinational corporations (MNCs) who want President Biden to “re-open to China” to get an “immediate boost to corporate profits.”
Ferry says this kind of short-termism, endemic to Silicon Valley and Washington D.C. alike, is holding back the potential of American industry.
“We need to take these MNCs by the scruff of the neck… and say, ‘No, we don’t want to be dependent on China and India for simple things like Aspirin.’”
Ferry views pursuing low-cost strategies for everything as short-sighted, since things like medicine are needed in wartime, for instance.
“No country got rich by cutting prices,” he says. “Countries get rich by producing the right goods, producing them in volume, and then using technological innovation to improve on those processes.”
Ferry says tariffs should not be a negotiating ploy and should instead be used to incentivize manufacturing back to the U.S. or to third countries, like Vietnam or Mexico.
He adds that the U.S. and China are on different long-term trajectories and considering Beijing’s increasingly totalitarian politics, the more his country can move away from the Chinese economy, the better.
Picking up the fab
Indeed, it was his first-hand experience competing with Huawei that opened Ferry’s eyes to the enormous threat China posed to U.S. industry.
“I saw the challenge of competing with a state-owned Chinese behemoth that uses many unfair practices,” he says, after which he decided to leave Silicon Valley, take up economics again and work on solutions at think tanks in Washington D.C.
Ferry says the biggest problem is most US chip firms only design chips and have outsourced all manufacturing to Asia. He says the U.S. must double or triple its chip output through fabs and recommends placing minimal holding periods for startup equity so board members are encouraged to seek long-term growth.
“You need to think about building a company that will last decades, not just a couple of quarters before selling it to Google,” he says.
Asked whether moving Taiwanese chip production to the U.S. would diminish the need for Washington to defend Taiwan from a Chinese invasion, Ferry says the U.S. will stand by its commitment to the country regardless of changes in the semiconductor industry.
“We understand that Chinese expansionism is a threat to many countries, and ultimately to the U.S.” he says, adding Washington would defend the Philippines from China too, despite it not being as essential an economic partner as Taiwan.
Ferry refutes the idea that moving chip manufacturing to the U.S. will hollow out Taiwan’s industry, saying investment is flowing both ways.
“I’m reading this morning that Intel is now contracting with TSMC (Taiwan Semiconductor Manufacturing Company) to make several products using a 2 or 3nm processor in Taiwan for sale worldwide,” he says, citing recent reports.
Rooted in STEM
Ferry does not see how Taiwan’s critical node in the industry could be replaced anytime soon, thanks in part to its education system.
“It requires a strong concentration of engineers and you guys do a better job of that in Taiwan than we do in the U.S.,” he says.
“It’s a scandal that right now, the fastest-growing subjects in the U.S. are gender studies and sociology,” he adds, calling for financial incentives to encourage young people to take up STEM subjects instead.
Ferry says his compatriots need to be more humble and learn from other countries like Taiwan, with its “semiconductor miracle.”
“I’d like to see us be more open-minded, free ourselves from this two-party dialogue of death… and become more pro-new ideas,” he concludes.