Afrasianet - Author: David J. Victor - The Trump administration's budget cuts to federal agencies undermine the U.S. ability to innovate, a key driver of its economic growth.
Foreign Affairs publishes an article that examines the decline of the United States' role in innovation against China's rise as a global competitor, and focuses on the internal reasons for this decline in US policies, giving China an opportunity to strengthen its economic and technological dominance.
Below is the text of the article translated into Arabic by Edited:
Over the past few months, a solid plan has been developed to ensure China's dominance of global economic competition. Paradoxically, the main architects of this plan are not China's leaders, but American politicians. Also, the Trump administration's budget cuts to federal agencies undermine the U.S. ability to innovate, a key driver of its economic growth.
Anti-immigration policies also impede U.S. companies, industries, and universities from attracting and leveraging the best talent and ideas from around the world to boost America's prosperity, combined with unbridled threats of tariffs and restrictions on foreign supply chains that terrify investors, who are clinging to their capital and looking for new opportunities away from chaos. Meanwhile, China is becoming increasingly competitive in the same areas and sectors where the United States is hindering its progress.
Washington needs to rediscover the value of innovation. Every area of future economic growth that the United States is poised to lead, such as artificial intelligence software, oil and gas exploration, robotics, and electric vehicle production, all of which are impossible to nurture without reliable and long-term support from the federal government.
In the past, both Republican and Democratic parties viewed investment in education, training, innovation, and science as key to the country's future prosperity. Today, neither side understands or clearly defends these meanings. Instead, the two parties are pursuing well-intentioned but misguided policies aimed at cutting off US dependence on China in order to strike Beijing together, pushing the rest of the world toward greater dependence on China.
Isolation of the Chinese economy from the West will fail. Washington has no choice but to participate in a globalized economy that it can no longer control unilaterally. The United States has spent decades and trillions of dollars to build the world's best innovation ecosystem, the country's main source of economic and military power. Stripping the United States of this advantage, while China seeks to build an innovation apparatus to compete with it, would be suicidal.
One simple trick
The advantage of young economies is that they have a wealth of growth methods. Some mobilize huge numbers of low-wage workers in fields and factories, while others exploit natural resources. Once the economy matures, there is only one reliable recipe for sustainable growth: innovation. As labor and natural resources become scarcer and more expensive, innovation makes it possible to do more with fewer resources. Since World War II, at least a quarter of U.S. economic growth has been driven by innovations that make it possible for the economy to deploy capital and labor more effectively.
The U.S. economy is a prime example of how growth recipes have changed over time. In the 18th and 19th centuries, the country grew by logging, occupying western lands, and mobilizing huge numbers of workers, including immigrants and enslaved people, in agricultural fields and then factories. When land prices, cheap labor, and labor atrophied by the late 19th century, innovation began to fill the void, and then the U.S. economy moved toward industry.
Innovations such as electric power grids, improved through decades of investment, often backed by government funding, have expanded U.S. industrial output. As the economy later shifted to focus on services, which today account for about 80% of U.S. economic output, revolutionary innovations in computing kept the country competitive, to name a few.
The ways of innovating to shape economies are inherently complex. However, it can be said that a successful innovation system always contains 3 main elements, the most important of which is the establishment and nurturing of a set of new ideas. The United States has dominated innovation for decades, due to its massive federal support for research, especially during World War II. Subsidy funds from research universities, national laboratories, and institutes also generate innovations for productive firms, which in turn support economic growth and competitiveness.
Private sector intervention to supplement federal funding for research and development, particularly in industries such as biotechnology and computing, but the most transformative innovations in the United States over the past 80 years have long relied on government funding as the most sustainable, credible, and risk-taking actor for the public good.
The federal finance system has worked well, channeling the government's vast resources with a relatively stable vision. In addition, the government has demonstrated its reasonable commitment in determining the best way to allocate these resources. Even as Republicans and Democrats disagreed on the ideal size and role of government, both saw tremendous value in supporting innovation. For example, when the Reagan administration tried to cut government spending, it kept federal support for R&D largely unchanged. When President Trump proposed budgets during his first administration that would defund research and development, Democratic and Republican lawmakers together returned the money and kept the nation's innovation system intact.
However, continued federal support for innovation seems less likely during Trump's second term. Republicans have chosen to align with the president to cut government spending and cut budgets, including innovation. Democrats reeling from losing the election seem to be more concerned with funding priorities other than science and research. In just the past few months with no congressional oversight, federal funding for innovation has fallen to the bottom down. The Trump administration has also ended nearly a thousand grants from the National Institutes of Health, It is the most important funder of biomedical research in the country, with more expected in the future.
The cuts are so severe that federally funded biological research laboratories euthanize animals used to investigate worthwhile issues such as the safety of new drugs and the effects of contamination on workers. Some of the nation's leading research universities have also seen their federal research funding targeted for reasons unrelated to their work.
How to cut the support line
Not only has the chaos of innovation and research funding been jeopardized, but the second key component of the system – the people. A typical scientist with a bachelor's degree spends another 4 to 6 years training and preparing a doctoral thesis, followed by a few years of low-paying work. Despite the lack of short-term financial incentives, many of the world's best minds They pursue science because their professional training prepares them for advanced research studies that are largely financially covered through grants and universities.
But when grants are depleted, so does the well of talented people seeking innovation. Since late February, universities and government laboratories unsure of their future funding have been forced to lay off workers. Most of this uncertainty has fallen on young scientists, with the catastrophic prospect of a lost generation of scientists looming now in the country.
It is also the government's hostility to foreigners, especially the Chinese, that magnifies the loss, because the success of the U.S. innovation ecosystem depends heavily on imported talent to perform much of the basic fieldwork in modern science. While U.S. high schools and universities do not produce enough budding scientists and engineers to fully power the country's innovation ecosystem, and to maintain U.S. research excellence, the country must attract foreign talent. For example, at the University of California, San Diego, there are about 5% of undergraduates. 25% of engineering master's students and 45% of students enrolled in engineering doctoral programs are not U.S. citizens. Across the United States, about half of STEM graduate students hail from other countries, and in engineering, there are twice as many foreign graduate students as U.S. citizens and permanent residents.
The U.S. innovation system needs the best foreign talent, and until recently, it got it. In 2023, a study by the Organization for Economic Cooperation and Development (OECD) ranked the United States as the most attractive place for foreign university students to study. Of all the international students graduating in the world, 15% come to the United States, the largest share of any country in the world.
China has been the United States' most important supplier of scientific talent. Each year, there were about 400,000 Chinese students in the United States, most of them studying in science, technology, engineering, and mathematics, compared to 12,000 young American scientists and engineers who studied in China each year in the same period.
Although the pandemic reduced these numbers after 2010, 300,000 Chinese students are still currently studying at U.S. universities each year. However, there are already signs that this vital exchange is depleting. For example, joint research in science and engineering between American and Chinese scientists is slowly retreating from its peak since 2020. The United States also needs to reduce its dependence on Chinese talent. As any market, Overly dependent on any one resource is always considered a recipe for insecurity. But it will take two generations to rebalance and compensate for the contribution of Chinese students to American research.
At the same time, harassment of Chinese citizens, including scientists, has abounded at the U.S. border and at universities, leading Chinese families to be more cautious when sending their children to the United States to study. This reluctance would be a disaster for U.S. research universities, and a boon to compete with high-quality English-language universities such as Australia, Canada, the Netherlands and the United Kingdom, where both competitors and partners adopt new policies to attract foreign scientists such as boosting hiring and startup visas. Meanwhile, you strain it The Trump administration to limit the enrollment of international students at U.S. universities.
Demolition of the wall
The third key element of the success of an innovation system is access to large markets. Because innovation seeks to boost production with less spending, it almost continuously benefits from production volumes, as large markets provide greater opportunities for research and innovation that improves products through the accumulation of experience. In clean energy technology, for example, the globalization of markets has been a catalyst for development. Early innovations in solar energy, supported by the United States and Japan in the seventies, helped reduce dependence on oil imported from By making solar energy professionally viable.
In the first decade of this century, support from the German government, which was keen to reduce dependence on nuclear and imported energy and build domestic industries while reducing emissions, generated a large solar market. As the German and international markets grew, solar panel innovations became better. The leadership of the solar industry then shifted to China, where massive innovations in manufacturing were able to further reduce costs and helped make solar power more competitive with coal and gas. For decades it has been allowed This universal approach to solar panels, previously a marginal technology, is becoming the cheapest way to generate electricity in many places.
But just as the solar industry has embodied benefits for global markets, it has exposed the damage that national protectionism can inflict on technological innovation. Rising tariffs and supply chain bottlenecks, partly caused by chaotic trade policies, are driving up solar costs in the US. Although inward power transfer policies may eventually contribute to increasing the country's solar production, as of 2023, about 80% of the equipment used in U.S. solar projects was mostly imported. From China.
Investors now fear arbitrary cancellation of their projects. In April, the Trump administration halted the previously approved offshore wind project of the New York energy giant Equinor. A month later, it reversed the decision after pressure exerted on New York state to approve an unrelated natural gas pipeline project. But the credibility of U.S. contracts has already been damaged. Clean energy depends on investment. These risks to investors explain why they postpone or Freeze half of the planned projects to build clean energy technology plants in the United States.
Loss of land
Mounting political and legal opposition may be able to force a rollback of many of the administration's most damaging policies. But the message to the rest of the world is clear in all areas, including research and innovation, that the U.S. government is suddenly far less reliable. This has inspired European governments to deal with this reality with countless political and economic reforms, including increased defense spending, a lower-cost green energy policy, and trade agreements that provide access to new markets, all of which will make the continent more competitive.
While the United States undermines its innovation system, China continues its approach. Starting in the nineties, Beijing adopted an innovation strategy aimed at transforming its economy. Since 2000, its total R&D spending has doubled. Much of this investment flows through state-linked institutions, but the role of the private sector has also increased.
When public and private funding are brought together, the United States remains the world's largest spender on research and development, but China is poised to get ahead of it. This year, China's total R&D spending could surpass that of the United States for the first time. However, in the early nineties, Chinese undergraduate programs did not rank first in any major field of science, technology, engineering, and mathematics. Today, according to U.S. News & World Report rankings, 8 of the top 10 engineering programs in the world are in China.
Chinese scientists are now showing their bias towards the future of their graduate studies at home rather than abroad, as it was two decades ago when nearly 95% of Chinese graduate students who studied at American universities and got their first job in the United States. Today, that percentage has dropped to nearly 80%, and is likely to decline further and perhaps quickly.
The Chinese are returning to a country whose economy has undergone fine-tuning to turn innovation into production. Analysts have long criticized China for focusing on improving processes in finding more efficient ways to use robots in production lines and inventing entirely new concepts. But these process innovations have transformed Chinese automotive and battery factories into global leaders in the industry, just as it happened when China's solar industry began to flourish.
These under-commendable achievements also play a key role in increasing the economy's productivity, which is critical given China's scarcity and high cost of skilled labor. Moreover, these achievements are also the cornerstone of more revolutionary technologies. For example, Chinese nuclear plant manufacturers are global leaders in improving processes that enable the construction of low-cost nuclear reactors, even though the original innovations of most Chinese commercial reactors date back to the United States.
Now China is building more reactors than all the countries in the world combined by applying these innovations on a large scale. It turns out that the economy doesn't care about who comes first, it cares more about where to build technologies and keep going.
China's R&D boom is certainly facing headwinds. For innovation to truly transform the country, the broader economy must be in good shape. Therefore, Beijing is seeking reforms to reduce the Chinese economy's massive debt and surplus production capacity, by stabilizing the national real estate market, whose stumbles have eroded consumer confidence. However, the divergent trajectories of China and the United States are clear.