Factories and Manufacturing

More stories

  • 150 Shares179 Views

    in Economy

    How AI and DNA Are Unlocking the Mysteries of Global Supply Chains

    by

    At a cotton gin in the San Joaquin Valley, in California, a boxy machine helps to spray a fine mist containing billions of molecules of DNA onto freshly cleaned Pima cotton.That DNA will act as a kind of minuscule bar code, nestling amid the puffy fibers as they are shuttled to factories in India. There, the cotton will be spun into yarn and woven into bedsheets, before landing on the shelves of Costco stores in the United States. At any time, Costco can test for the DNA’s presence to ensure that its American-grown cotton hasn’t been replaced with cheaper materials — like cotton from the Xinjiang region of China, which is banned in the United States because of its ties to forced labor.Amid growing concern about opacity and abuses in global supply chains, companies and government officials are increasingly turning to technologies like DNA tracking, artificial intelligence and blockchains to try to trace raw materials from the source to the store.Companies in the United States are now subject to new rules that require firms to prove their goods are made without forced labor, or face having them seized at the border. U.S. customs officials said in March that they had already detained nearly a billion dollars’ worth of shipments coming into the United States that were suspected of having some ties to Xinjiang. Products from the region have been banned since last June.Customers are also demanding proof that expensive, high-end products — like conflict-free diamonds, organic cotton, sushi-grade tuna or Manuka honey — are genuine, and produced in ethically and environmentally sustainable ways.That has forced a new reality on companies that have long relied on a tangle of global factories to source their goods. More than ever before, companies must be able to explain where their products really come from.A technician at Applied DNA Sciences testing samples to trace the raw materials.Johnny Milano for The New York TimesCotton samples that are being processed at the lab.Johnny Milano for The New York TimesThe task may seem straightforward, but it can be surprisingly tricky. That’s because the international supply chains that companies have built in recent decades to cut costs and diversify their product offerings have grown astonishingly complex. Since 2000, the value of intermediate goods used to make products that are traded internationally has tripled, driven partly by China’s booming factories.A large, multinational company may buy parts, materials or services from thousands of suppliers around the world. One of the largest such companies, Procter & Gamble, which owns brands like Tide, Crest and Pampers, has nearly 50,000 direct suppliers. Each of those suppliers may, in turn, rely on hundreds of other companies for the parts used to make its product — and so on, for many levels up the supply chain.To make a pair of jeans, for example, various companies must farm and clean cotton, spin it into thread, dye it, weave it into fabric, cut the fabric into patterns and stitch the jeans together. Other webs of companies mine, smelt or process the brass, nickel or aluminum that is crafted into the zipper, or make the chemicals that are used to manufacture synthetic indigo dye.“Supply chains are like a bowl of spaghetti,” said James McGregor, the chairman of the greater China region for APCO Worldwide, an advisory firm. “They get mixed all over. You don’t know where that stuff comes from.”Harvesting cotton in Xinjiang. Cotton from the region in China is banned in the United States because of its ties to forced labor.Getty ImagesGiven these challenges, some companies are turning to alternative methods, not all proven, to try to inspect their supply chains.Some companies — like the one that sprays the DNA mist onto cotton, Applied DNA Sciences — are using scientific processes to tag or test a physical attribute of the good itself, to figure out where it has traveled on its path from factories to consumer.Applied DNA has used its synthetic DNA tags, each just a billionth of the size of a grain of sugar, to track microcircuits produced for the Department of Defense, trace cannabis supply chains to ensure the product’s purity and even to mist robbers in Sweden who attempted to steal cash from A.T.M.s, leading to multiple arrests.MeiLin Wan, the vice president for textiles at Applied DNA, said the new regulations were creating a “tipping point for real transparency.”“There definitely is a lot more interest,” she added.The cotton industry was one of the earliest adopters of tracing technologies, in part because of previous transgressions. In the mid-2010s, Target, Walmart and Bed Bath & Beyond faced expensive product recalls or lawsuits after the “Egyptian cotton” sheets they sold turned out to have been made with cotton from elsewhere. A New York Times investigation last year documented that the “organic cotton” industry was also rife with fraud.In addition to the DNA mist it applies as a marker, Applied DNA can figure out where cotton comes from by sequencing the DNA of the cotton itself, or analyzing its isotopes, which are variations in the carbon, oxygen and hydrogen atoms in the cotton. Differences in rainfall, latitude, temperature and soil conditions mean these atoms vary slightly across regions of the world, allowing researchers to map where the cotton in a pair of socks or bath towel has come from.Other companies are turning to digital technology to map supply chains, by creating and analyzing complex databases of corporate ownership and trade.Farmers in India auction their cotton.Saumya Khandelwal for The New York TimesSome firms, for example, are using blockchain technology to create a digital token for every product that a factory produces. As that product — a can of caviar, say, or a batch of coffee — moves through the supply chain, its digital twin gets encoded with information about how it has been transported and processed, providing a transparent log for companies and consumers.Other companies are using databases or artificial intelligence to comb through vast supplier networks for distant links to banned entities, or to detect unusual trade patterns that indicate fraud — investigations that could take years to carry out without computing power.Sayari, a corporate risk intelligence provider that has developed a platform combining data from billions of public records issued globally, is one of those companies. The service is now used by U.S. customs agents as well as private companies. On a recent Tuesday, Jessica Abell, the vice president of solutions at Sayari, ran the supplier list of a major U.S. retailer through the platform and watched as dozens of tiny red flags appeared next to the names of distant companies.“We’re flagging not only the Chinese companies that are in Xinjiang, but then we’re also automatically exploring their commercial networks and flagging the companies that are directly connected to it,” Ms. Abell said. It is up to the companies to decide what, if anything, to do about their exposure.Studies have found that most companies have surprisingly little visibility into the upper reaches of their supply chains, because they lack either the resources or the incentives to investigate. In a 2022 survey by McKinsey & Company, 45 percent of respondents said they had no visibility at all into their supply chain beyond their immediate suppliers.But staying in the dark is no longer feasible for companies, particularly those in the United States, after the congressionally imposed ban on importing products from Xinjiang — where 100,000 ethnic minorities are presumed by the U.S. government to be working in conditions of forced labor — went into effect last year.Uyghur workers at a garment factory in the Xinjiang region of China in 2019.Gilles Sabrie for The New York TimesXinjiang’s links to certain products are already well known. Experts have estimated that roughly one in five cotton garments sold globally contains cotton or yarn from Xinjiang. The region is also responsible for more than 40 percent of the world’s polysilicon, which is used in solar panels, and a quarter of its tomato paste.But other industries, like cars, vinyl flooring and aluminum, also appear to have connections to suppliers in the region and are coming under more scrutiny from regulators.Having a full picture of their supply chains can offer companies other benefits, like helping them recall faulty products or reduce costs. The information is increasingly needed to estimate how much carbon dioxide is actually emitted in the production of a good, or to satisfy other government rules that require products to be sourced from particular places — such as the Biden administration’s new rules on electric vehicle tax credits.Executives at these technology companies say they envision a future, perhaps within the next decade, in which most supply chains are fully traceable, an outgrowth of both tougher government regulations and the wider adoption of technologies.“It’s eminently doable,” said Leonardo Bonanni, the chief executive of Sourcemap, which has helped companies like the chocolate maker Mars map out their supply chains. “If you want access to the U.S. market for your goods, it’s a small price to pay, frankly.”Others express skepticism about the limitations of these technologies, including their cost. While Applied DNA’s technology, for example, adds only 5 to 7 cents to the price of a finished piece of apparel, that may be significant for retailers competing on thin margins.And some express concerns about accuracy, including, for example, databases that may flag companies incorrectly. Investigators still need to be on the ground locally, they say, speaking with workers and remaining alert for signs of forced or child labor that may not show up in digital records.Justin Dillon, the chief executive of FRDM, a nonprofit organization dedicated to ending forced labor, said there was “a lot of angst, a lot of confusion” among companies trying to satisfy the government’s new requirements.Importers are “looking for boxes to check,” he said. “And transparency in supply chains is as much an art as it is a science. It’s kind of never done.” More

  • 138 Shares139 Views

    in Economy

    In Ohio, Electric Cars Are Starting to Reshape Jobs and Companies

    by

    Erick Belmer has seen how tough the car business can be. He was working at a General Motors plant in Lordstown, Ohio, when it shut down in 2019, devastating the community.Mr. Belmer, an industrial mechanic, got another job at a G.M. transmission factory in Toledo, but his commute is now 140 miles each way. His schedule gives him just a few hours with his family and a few hours of sleep.Yet far from being bitter, Mr. Belmer says he is excited. G.M. is converting his factory to produce electric motors, part of an industrial transformation that will redefine manufacturing regions and jobs around the world.G.M., Ford Motor and other carmakers announced investments of more than $50 billion in new factories in the United States last year, according to the Center for Automotive Research in Ann Arbor, Mich. All but a small fraction of that money was to build and retool plants for electric vehicles and batteries.Mr. Belmer is one of thousands of people who will also have to pick up new skills. “It’s going to be a little bit of a learning curve,” he said at the Toledo factory. “But our guys are well equipped to handle this.”Mr. Belmer and Ohio are bellwethers of how the transition to electric vehicles will play out. G.M., Jeep, Honda Motor and parts makers employ many thousands of people across this state.Gas transmissions at G.M.’s plant in Toledo. G.M. has committed to retraining the workers there to make electric motors, and to investing $760 million to convert the plant’s assembly lines.Ohio’s experience may signal how the transition to electric vehicles will play out for workers.An electric drive unit on display at the G.M. plant.Ohio produces more internal combustion engines than any other state, making an adjustment to electric cars particularly urgent. Nearly 90,000 people work in Ohio for carmakers or parts suppliers, and several times that many are employed by businesses that serve those autoworkers and their families.The changes are putting Ohio at the forefront of a new technology that is critical to fighting climate change. But some jobs will become obsolete, and some companies will go bankrupt. It’s an open question whether the winners will outnumber the losers.“This is the largest transition in our industry since its inception,” said Tony Totty, the president of a United Auto Workers local that represents G.M. workers in Toledo.Mr. Totty is optimistic about the members of his local. But he is worried about other colleagues whose jobs are tied to gasoline engines, he said.There is “an expiration date on those facilities and those communities,” Mr. Totty said.Warren, in eastern Ohio, knows what happens when a carmaker leaves town. The city lost one-third of its population, about 20,000 people, after G.M. closed the factory in nearby Lordstown, which produced Chevrolet Cruze sedans, in 2019. Sales of that car had been fading as more Americans chose sport utility vehicles.Even before that shutdown, auto production jobs had been declining. U.S. automakers and their parts suppliers employed about one million people at the end of 2018, down from more than 1.3 million in 2000. In the years before G.M. closed the Lordstown plant, it had reduced shifts and pared its work force.“Our biggest export for the last 20 years has been talented young people,” said Rick Stockburger, the president of Brite Energy Innovators, an organization in Warren that offers work space, advice and funding to start-ups.Today, things are looking somewhat better. Ultium Cells, a joint venture of G.M. and LG Energy Solution, is ramping up production of batteries near the defunct factory.Tony Totty, the president of the United Auto Workers local that represents G.M.’s workers in Toledo, said the current moment represented “the largest transition in our industry since its inception.”Foxconn, a Taiwanese manufacturer, has taken over the old G.M. plant and plans to produce electric vehicles and tractors there. The complex will also house an “electric vehicle academy” established by Foxconn and Youngstown State University to train workers.That surge in investment is helping to revive Warren’s tidy but sleepy downtown. Doug Franklin, the mayor, who worked for G.M. in Lordstown, said he was pleased recently to step into a local restaurant where “nobody knew me, because we had so many new people.”Mr. Franklin represents the optimistic view — that an industrial renaissance is underway. The pandemic and the supply chain chaos that it caused have made companies leery of components produced far away. That experience, plus billions in federal subsidies approved by Democrats last year, motivated manufacturers to build vehicles, batteries and other components in the United States.“We’re seeing a new level of hope that I haven’t seen in decades,” Mr. Franklin said.But community leaders in Warren are also aware that the transition comes with risks.Hopes that the old plant will become a buzzing electric vehicle factory have not panned out, so far. G.M. sold the factory to Lordstown Motors, a fledgling electric pickup truck company that ran into trouble and resold the plant to Foxconn.Executives at Foxconn, which has long assembled electronic devices but has little experience making cars, declined interview requests. It’s not clear when the company will mass-produce electric vehicles in Lordstown, if ever.The Rev. Todd Johnson, the pastor of the Second Baptist Church in Warren and a member of the City Council, worries that his mostly African American parishioners won’t benefit from the new jobs.Mr. Johnson, whose parents worked for G.M., encourages young people to study subjects like robotics and coding, and has led after-church trips to a science and technology center in nearby Youngstown.“There are going to be opportunities coming,” he said, “and I desperately don’t want to see the next generation of our children miss out.”One pressing question is what will happen to people whose skills are no longer needed.Eric Gonzales, the executive director of G.M.’s Toledo factory, says the plant will need at least as many workers as it has today, as it replaces its gasoline models with electric ones.G.M. is dealing with that issue at the Toledo factory, Toledo Propulsion Systems, which makes transmissions that electric cars won’t need. The automaker has committed to retraining the Toledo workers to make electric motors, and to investing $760 million to convert assembly lines at the plant.If anything, G.M. will need more workers, said Eric Gonzales, the executive director of the factory, as it replaces gasoline models with electric cars. “We’re taking the employees with us.”The G.M. factory in Toledo will show whether established automakers can compete with Tesla, the fast-growing automaker that can focus all of its resources on electric vehicles because that’s all it makes. Established carmakers need to keep earning money from internal combustion vehicles while ramping up a new technology that is not yet profitable.G.M. has an advantage, Mr. Gonzales said, because it has factories equipped with sprinkler systems, high-voltage power and other essentials. “We already have the four walls here with the infrastructure,” he said, speaking above the din of clanking machinery. “Somebody new, they have very expensive capital costs.”Other auto executives prefer to start fresh. Volkswagen’s new Scout Motors unit looked at sites in Ohio and other states to produce electric pickup trucks and S.U.V.s, but chose to build a $2 billion factory in South Carolina.It’s cheaper and easier to build from scratch, said Scott Keogh, the chief executive of Scout. “You’re not juggling this classic dynamic of a legacy internal combustion engine plant where you need to inject a new electric vehicle,” he said.Workers placing batteries in hybrid vehicles at the Honda plant in Marysville, Ohio.Ohio is in intense competition with other states to attract investment. But Midwestern states, including Michigan, Indiana and Illinois, have been less successful than states in the South where Republican political leaders have courted investment aggressively — even as they denounce the Democratic policies that helped create the boom.Since 2020, automakers have announced investments of $51 billion in electric vehicle and battery production in the South, compared with $31 billion in states in the Great Lakes region, according to the Center for Automotive Research.Southern states tend to have lower labor costs, in part because most auto plants there are not unionized. This could pose a problem for the United Auto Workers and President Biden, who want the switch to electric vehicles to create more high-paying union jobs. It could well be that most of the new electric car and battery jobs will end up in the South, where unions face political opposition, and not in the Midwest, where unions have political clout — and where most of the jobs lost in combustion engine vehicles once were.Ohio has some things going for it. In March, Honda Motor said it would convert one of two assembly lines at its decades-old plant in Marysville, near Columbus, to build electric vehicles. Honda, a Japanese company, is also building a battery factory about an hour away, in Jeffersonville, with LG Energy Solution.In Ohio, Honda employs more than 14,000 people making cars and motors, and the company’s plans will show whether electric vehicles, which require fewer parts than gasoline cars, will create or destroy jobs.Honda’s assembly line of electric-car batteries at its Marysville plant.For the next several years, the transition will probably create jobs as carmakers make both gasoline and electric vehicles. Bob Nelson, the executive vice president of American Honda Motor, noted that, at the moment, there was a shortage of skilled labor. “We’re going to need everybody,” he said in Marysville, where Honda makes Accord sedans.What happens later is less certain. “When you don’t have the complexity that we’re used to, with engines and transmissions and mufflers and radiators and exhaust systems and all those components that aren’t going to be there anymore,” said Bruce Baumhower, the president of a United Auto Workers local that represents employees of auto suppliers in Ohio, “it makes me wonder what’s left.”Dana Incorporated, based in Maumee, near Toledo, is also grappling with that question. Dana’s employees — more than 40,000 of them — make axles, drive shafts and other parts. Electric vehicles need axles but typically do not need long drive shafts because the motors can be placed close to the wheels.James Kamsickas, Dana’s chief executive, has spent time in China and has been struck by the proliferation of electric vehicles there. Recognizing the threat to some of Dana’s products, Mr. Kamsickas acquired several firms with expertise in electric motors and other technology.James Kamsickas, right, Dana’s chief executive, has acquired several firms with expertise in electric motors and other technology.Dana now offers axles with electric motors built in, saving weight and energy, and it has deployed its expertise in gaskets to make equipment for cooling electric-car batteries that G.M. plans to use. Most of Dana’s orders are for products related to electric vehicles.Ohio’s economic future hinges on whether other companies make similar leaps. “You don’t have a choice,” Mr. Kamsickas said. “Sooner or later, you’d be a melting iceberg.” More

  • 100 Shares99 Views

    in Economy

    Biden’s Reluctant Approach to Free Trade Draws Backlash

    by

    A law intended to bolster clean energy manufacturing has ignited debate over whether the U.S. should work to break down international trade barriers — or keep them intact to protect American workers.WASHINGTON — Since President Biden came into office two years ago, the United States has declined to pursue new comprehensive free-trade agreements with other countries, arguing that most Americans have turned against the kind of pacts that promote global commerce but that also help to send factory jobs overseas.But in recent months, with the rollout of a sweeping climate bill intended to bolster clean energy manufacturing, the lack of free-trade agreements with some of America’s closest allies has suddenly become a major headache for the administration.The dispute, which centers on which countries can receive benefits under the Inflation Reduction Act, has caused significant rifts with foreign governments and drawn blowback from Congress. And it is helping to reignite a debate over whether the United States should be working to break down trade barriers with other countries — or keep them intact in an attempt to protect American workers.The law as written offers tax credits for electric vehicles that are built in North America or that are made with battery minerals from the United States and countries with which it has a free-trade agreement.Those provisions have angered allies in Europe and elsewhere that, despite close ties with America, do not actually have free-trade agreements with the United States. They have complained that companies in their countries would be put at a disadvantage to U.S. firms that can receive the subsidies. To soothe relations, the Biden administration has developed a complicated workaround, in which it is signing limited new trade deals with Japan and the European Union.But that solution has vexed lawmakers of both parties, who say that these agreements are not valid and that the administration needs to ask Congress to approve the kind of free-trade agreement the law envisions.“It’s a fix,” said Edward Alden, a senior fellow at the Council on Foreign Relations who specializes in trade, adding that they were not free-trade agreements “by any reasonable definition of the term.”The World Trade Organization defines a free-trade agreement as covering “substantially all trade” between countries. In the United States, such broad agreements need the approval of Congress, though the executive branch has the authority to negotiate much narrower agreements.Administration officials argue that because the Inflation Reduction Act does not define the term “free-trade agreement,” these narrower pacts are allowed. But in hearings before the House and the Senate last month, lawmakers criticized the administration for bypassing Congress in making these agreements.Some lawmakers argued for more traditional free-trade deals, while others voiced support for new deals with higher labor and environmental standards, like the North American agreement Congress approved in 2020.In hearings, Katherine Tai, the U.S. trade representative, highlighted efforts to raise global labor standards and decarbonize industries, and said she and her colleagues were “writing a new story on trade.”Mariam Zuhaib/Associated PressIn her opening statement at the hearings, Katherine Tai, the United States trade representative, set out a vision for a trade policy that was different from those of previous administrations, focused more on defending American workers from unfair foreign competition than opening up global markets. Ms. Tai said she and her colleagues were “writing a new story on trade” that would put working families first and reflect the interests of a wider cross section of Americans.Speaking before the Senate on Thursday, Ms. Tai said she remained “open minded” about doing more trade agreements if they would help address the challenges the country has today.The Biden administration has long insisted that past approaches to trade policy — in which other countries gained access to the U.S. market through low or zero tariffs — ended up hurting American workers and enriching multinational companies, which simply moved U.S. jobs and factories overseas. In contrast, Biden officials have pledged to strengthen the economy and to make the country more competitive with China by expanding the country’s infrastructure and manufacturing, rather than negotiating new trade deals.The administration is currently negotiating trade frameworks for the Indo-Pacific region and the Americas, and is engaging in trade talks with Taiwan, Kenya and other governments. But, to the dissatisfaction of some lawmakers in both parties, none of these agreements are expected to involve significantly opening up foreign markets by lowering tariffs, as more traditional trade deals have done..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Representative Adrian Smith, a Nebraska Republican who leads the House Ways and Means trade subcommittee, said in the hearing that he was concerned the United States had “lost momentum on trade” even as China continued to aggressively broaden its own partnerships.“I cannot express strongly enough,” he added, “that the administration cannot just come up with new definitions of what a trade agreement is for some reason, and certainly not to give handouts for electric vehicles.”“You have to appreciate that we live in a very different world,” Ms. Tai responded. She said the Biden administration sought to adapt its policies to respond “to the world we’re living in, and not the world that we want to live in.”Part of the pressure stems from the fact that other countries — including China — are continuing to pursue more traditional trade deals that lower their tariffs with trading partners, giving their companies an advantage over businesses based elsewhere. On Friday, British officials announced that they had reached an agreement to join a Pacific trade pact that, despite being devised by the Obama administration, does not include the United States.Membership in the so-called Comprehensive and Progressive Agreement for Trans-Pacific Partnership will allow Britain to export products tariff-free to 11 other countries. With the inclusion of Britain, the pact will represent 15 percent of the global economy, British officials said.Jake Colvin, the president of the National Foreign Trade Council, a U.S. group that lobbies on behalf of major multinational companies, called the news “a stark reminder that the world isn’t waiting for the United States.”“While we congratulate the U.K. government for being part of this massive agreement, it’s frustrating to see America’s allies writing global rules and creating new market opportunities without the United States,” he said.Politicians of both parties have found support for free-trade agreements to be controversial in the United States in recent years. The Trans-Pacific Partnership — the original deal negotiated by the Obama administration with 11 other nations circling the Pacific Ocean — received criticism from labor unions and other progressive Democrats who said it would ship jobs overseas. Hillary Clinton opposed it as a candidate in the 2016 presidential election.As president, Donald J. Trump also criticized the deal and officially withdrew the United States from it in 2017. He also scrapped a negotiation over a comprehensive trade deal the Obama administration had been carrying out with the European Union.The Biden administration is trying to reach trade frameworks for the Indo-Pacific region and the Americas, but none of these agreements are expected to involve significantly opening up foreign markets by lowering tariffs.Coley Brown for The New York TimesMr. Trump went on to sign a series of limited trade deals with Japan and China without congressional approval. He also oversaw an update to the North American Free Trade Agreement that was ratified by Congress, which he named the U.S.-Mexico-Canada Agreement.Democrats also came to support that deal after adding significant protections for workers and the environment.Some trade experts have speculated that the Biden administration will try to build on the success of the U.S.M.C.A. by adding more nations to the pact, or by applying its terms to negotiations elsewhere. But so far, the Biden administration has not announced any such plans.Two top Democratic lawmakers focused on trade issued a statement last week criticizing the limited agreement the Biden administration had signed with Japan and urging officials to try to replicate the success of the U.S.M.C.A. by working with Congress to draft new deals with enforceable environmental and labor protections.“U.S.M.C.A. is a prime example of what’s possible when the executive and Congress collaborate, and its enforcement mechanisms should be the floor for future agreements,” Representative Richard E. Neal of Massachusetts, the top Democrat on the Ways and Means Committee, and Senator Ron Wyden, a Democrat of Oregon who leads the Finance Committee, said in the statement.Republicans have also been split over how aggressively to pursue new free-trade agreements. More traditional free-traders — like those from agricultural states that depend on exporting goods overseas — have been at odds with a growing populist contingent that favors industrial policy and trade barriers to protect American workers.Still, Kelly Ann Shaw, a partner with Hogan Lovells in Washington and a former economic adviser to the Trump administration, said that “the amount of inaction by the administration is doing a lot to unify Republicans” around pursuing more free-trade deals.“If you would ask me two years ago, I would have thought that Republicans were more split on this issue than they really are,” she said. “But it’s pretty clear that we’re losing out on opportunities by sitting on our hands and doing nothing.” More

  • 113 Shares129 Views

    in Economy

    Biden Highlights Economic Investments Ahead of Expected 2024 Announcement

    by

    The president has warned that a strong economy could be weakened under Republican leadership, a point he and a host of advisers will make at 20 events across the country in the coming weeks.DURHAM, N.C. — President Biden visited North Carolina on Tuesday and said Republicans would undermine his administration’s gains on American manufacturing, as the president began to sharpen his political message ahead of an expected re-election announcement.Mr. Biden spoke at Wolfspeed, a semiconductor manufacturer that recently announced a $5 billion investment to expand operations in the state, a move that would create about 1,800 jobs, according to the White House. The company, based in North Carolina, has deals to supply the material to General Motors, among other buyers.But Mr. Biden’s visit was less about semiconductors than it was about making an argument that he sees as key to a re-election bid — essentially, that the American economy has recovered since the coronavirus pandemic, his administration has helped keep it strong and Republican policies would undo that progress.“I’ve got news for you and for MAGA Republicans in Congress: Not on my watch,” Mr. Biden said, referring to the far-right wing of the party that is loyal to former President Donald J. Trump.The White House has argued for months that Mr. Biden has presided over a steady economy and strong job growth, but the data presents a more complicated reality: The high pace of job creation is undercut by a continued deceleration in wage increases, and there are growing concerns that the Federal Reserve may move to raise interest rates. The Biden administration has also tried to assuage fears of instability after the collapse of Silicon Valley Bank this month.Mr. Biden’s visit to North Carolina was the start of three weeks of related events to be held across the country by the president and Vice President Kamala Harris, plus their spouses and a host of cabinet officials. The group plans to visit 20 states and will highlight investments in American manufacturing, supply chains and job-creation efforts, according to a summary of efforts sent by the White House.During his trip to Durham, Mr. Biden highlighted legislation passed last year, including the CHIPS and Science Act, which contains $52 billion in subsidies and tax credits for companies that manufacture chips in the United States. More than half of the amount is dedicated to helping companies build facilities for making, assembling and packaging some of the world’s more advanced chips. In his remarks, the president said that over $435 billion had been invested in American companies since he took office.“America’s coming back,” Mr. Biden said, standing beside Gina Raimondo, the commerce secretary, who traveled with him to Durham. “We are determined to lead the world in manufacturing semiconductors.”Ms. Raimondo, who is expected to participate in the tour over the coming weeks, told a crowd gathered at Wolfspeed that the pandemic had “opened all of our eyes” to the importance of maintaining the global supply chain and protecting competitive advantages in technology.“The truth of it is the United States was for a long time a manufacturing powerhouse,” she said. “Still is, but for a long time we took our eye off the ball, and we watched manufacturing leave our shores in search of cheap labor in Asia.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.The president spoke directly to people he said might feel “left behind” by technological changes, but said his administration would focus on programs that could train workers to produce technological projects without a college degree. Mr. Biden said the “vast majority” of jobs created by Wolfspeed would not require college degrees and could pay around $80,000.Events like the one held on Tuesday will provide Mr. Biden and his surrogates with an opportunity to hone his argument against Republicans.At the same time, a collision course looms in Washington over the debt ceiling.On Tuesday, Speaker Kevin McCarthy, Republican of California, wrote a letter urging the president to negotiate on the federal debt limit. “With each passing day,” Mr. McCarthy wrote, “I am incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out-of-control government spending.”Mr. Biden has said he will refuse to negotiate on the debt limit, pointing out that Republicans voted to raise the ceiling several times under his predecessor, Mr. Trump.“It’s time for Republicans to stop playing games, pass a clean debt ceiling bill and quit threatening our economic recovery,” Karine Jean-Pierre said in a statement responding to Mr. McCarthy’s letter.In his own letter sent on Tuesday evening, Mr. Biden urged Mr. McCarthy and congressional Republicans to present a full budget proposal before Congress leaves for Easter recess.The president and his advisers have signaled that the situation would be worse under Republican leadership, a point he underscored in North Carolina. The White House says that companies have made $16 billion in private sector investment commitments since Mr. Biden took office, a development they have attributed to corporations taking advantage of tax breaks and federal funding that bolsters innovation.Mr. Biden has argued that the flow of money would be at stake if Republicans tried to repeal policies passed under his administration, including the Inflation Reduction Act. He has also said that individual Americans are at risk of losing access to lower health care, energy and internet costs that are provided for in the bills that were passed by a Democratic-majority Congress.“We’re not going to let them undo all the progress,” Mr. Biden said. More

  • 138 Shares99 Views

    in Economy

    Why Russia Has Such a Strong Grip on Europe’s Nuclear Power

    by

    New energy sources to replace oil and natural gas have been easier to find than kicking the dependency on Rosatom, the state-owned nuclear superstore.The pinched cylinders of Russian-built nuclear power plants that dot Europe’s landscape are visible reminders of the crucial role that Russia still plays in the continent’s energy supply.Europe moved with startling speed to wean itself off Russian oil and natural gas in the wake of war in Ukraine. But breaking the longstanding dependency on Russia’s vast nuclear industry is a much more complicated undertaking.Russia, through its mammoth state-owned nuclear power company, Rosatom, dominates the global nuclear supply chain. It was Europe’s third-largest supplier of uranium in 2021, accounting for 20 percent of the total. With few ready alternatives, there has been scant support for sanctions against Rosatom — despite urging from the Ukrainian government in Kyiv.For countries with Russian-made reactors, reliance runs deep. In five European Union countries, every reactor — 18 in total — were built by Russia. In addition, two more are scheduled to start operating soon in Slovakia, and two are under construction in Hungary, cementing partnerships with Rosatom far into the future.For years, the operators of these nuclear power plants had little choice. Rosatom, through its subsidiary TVEL, was virtually the only producer of the fabricated fuel assemblies — the last step in the process of turning uranium into the nuclear fuel rods — that power the reactors.Even so, since the invasion of Ukraine in February 2022, some European countries have started to step away from Russia’s nuclear energy superstore.The Czech Republic’s energy company, CEZ, has signed contracts with Pennsylvania-based Westinghouse Electric Company and the French company Framatome to supply fuel assemblies for its plant in Temelin.Finland canceled a troubled project with Rosatom to build a nuclear reactor and hired Westinghouse to design, license and supply a new fuel type for its plant in Loviisa after its current contracts expire.“The purpose is to diversify the supply chain,” said Simon-Erik Ollus, an executive vice president at Fortum, a Finnish energy company.The Leningrad Nuclear Power Plant near St. Petersburg, Russia. Rosatom, a Russian company, dominates the global nuclear supply chain.Sezgin Pancar/Anadolu Agency via Getty ImagesBulgaria signed a new 10-year agreement with Westinghouse to provide fuel for its existing reactors. And last week, it moved ahead with plans for the American company to build new nuclear reactor units. Poland is about to construct its first nuclear power plant, which will feature three Westinghouse reactors.The State of the WarRussian Strikes: Moscow fired an array of weapons, including its newest hypersonic missiles, in its biggest aerial attack on Ukraine in weeks, knocking out power in multiple regions.Bakhmut: Even as Ukrainian and Russian leaders predicted that the fall of the city could open the way for a broader Russian offensive, the U.S. intelligence chief said that the Kremlin’s forces were too depleted to wage such a campaign.Nord Stream Pipelines: The sabotage in September of the pipelines has become one of the central mysteries of the war. A Times investigation offers new insight into who might have been behind it.Slovakia and even Hungary, Russia’s closest ally in the European Union, have also reached out to alternative fuel suppliers.“We see a lot of genuine movement,” said Tarik Choho, president of nuclear fuel unit at Westinghouse, adding that the Ukraine war accelerated Europe’s search for new suppliers. “Even Hungary wants to diversify.”William Freebairn, senior managing editor for nuclear energy at S&P Commodity Insights, said Russia’s march into Ukraine last year in some ways marked “a sea change.”“Within days of the invasion,” he said, “just about every country that operated a Russian reactor started looking for alternate supply.”In Ukraine, serious efforts to chip away at Russian nuclear dominance began in 2014 after President Vladimir V. Putin of Russia sent troops to occupy territory in Crimea and the eastern Donbas region. Ukraine, whose 15 Soviet-era reactors provided half the country’s electricity, signed a deal with Westinghouse to expand its fuel contract.It took roughly five years between the start of the design process and the final delivery of the first fuel assembly, according to the International Energy Agency.Ukraine “blazed a commercial trail,” Mr. Freebairn said. In June, Ukraine signed another contract with Westinghouse to eventually provide all its nuclear fuel. The company will also build nine power plants and establish an engineering center in the country.Technicians in a nuclear plant in Mochovce, Slovakia, last year. Slovakia is among the European countries seeking nuclear fuel suppliers other than Russia.Radovan Stoklasa/ReutersStill, a worldwide turn away from Russia’s nuclear industry would be a slog: The nuclear supply chain is exceptionally complex. Establishing a new one would be expensive and take years.At the same time, Rosatom has proved uniquely successful as both a business enterprise and a vehicle for Russian political influence. Much of its ascendancy is due to what experts have labeled a “one-stop nuclear shop” that can provide countries with an all-inclusive package: materials, training, support, maintenance, disposal of nuclear waste, decommissioning and, perhaps most important, financing on favorable terms.And with a life span of 20 to 40 years, deals to build nuclear reactors compel a long-term marriage.Russia’s tightest grip is on the market for nuclear fuel. It controls 38 percent of the world’s uranium conversion and 46 percent of the uranium enrichment capacity — essential steps in producing usable fuel.“That’s equal to all of OPEC put together in terms of market share and power,” said Paul Dabbar, a visiting fellow at the Center on Global Energy Policy at Columbia University, referring to the oil dominance of the Organization of the Petroleum Exporting Countries.As with oil and natural gas, the cost of nuclear fuel supplies has risen over the past year, putting more than $1 billion from exports into Russia’s treasury, according to a report from the Royal United Services Institute, a security research organization in London.The American nuclear power industry gets up to 20 percent of its enriched uranium from Russia, the maximum allowed by a recent nonproliferation treaty, according to the International Energy Association. France imports 15 percent. Framatome, which is owned by state-backed nuclear power operator, Électricité de France, or EDF, signed a cooperation agreement with Rosatom in December 2021, two months before Russia’s invasion, that is still in effect. Framatome declined to comment.The control room of a nuclear power plant in Paks, Hungary, in 2019. Two Rosatom nuclear plants are under construction in Hungary.Tamas Soki/EPA, via ShutterstockAnd even with the slate of new fuel agreements in Europe with non-Russian sources, deliveries won’t begin for at least a year, and in some cases several years.Around a quarter of the European Union’s electricity supply comes from nuclear power. With pending climate disaster prompting a worldwide push to decrease the overall use of fossil fuels, nuclear energy’s role in the future fuel mix is expected to increase.Still, analysts argue that even without formal sanctions, Russia’s position as a nuclear supplier has been permanently compromised.At the height of the debate in Germany last year over whether to keep its two remaining nuclear power plants online because of the war, their reliance on uranium enriched by Russia for the fuel rods emerged as one of the arguments against extending their lives. The last two reactors are to be shut down next month.And when Poland’s Council of Ministers approved the agreement in November for Westinghouse to build the country’s first nuclear power plant, the resolution cited “the need for permanent independence from energy supplies and energy carriers from Russia.”Mr. Choho at Westinghouse was confident about the company’s ability to compete with Rosatom in Europe, estimating that it eventually could capture 50 to 75 percent of that nuclear market. Westinghouse has also signed an agreement with the Spanish energy company Enusa to cooperate on fabricating fuel for Russian-made reactors.A nuclear power plant in Wattenbacherau, Germany, last year. The country’s last two reactors are to be shut down next month.Laetitia Vancon for The New York TimesBut outside the European Union and United States, in countries where support for Russia’s government has held up, Rosatom’s one-stop shopping and financing remain enticing. Russian-built reactors can be found in China, India and Iran as well as Armenia and Belarus. Construction has begun on Turkey’s first nuclear power plant, and Rosatom has a memorandum of understanding with 13 countries, according to the International Energy Association.As a new report in the journal Nature Energy concluded, while the war “will undermine Rosatom’s position in Europe and damage its reputation as a reliable supplier,” its global standing “may remain strong.”Melissa Eddy More

  • 138 Shares169 Views

    in Economy

    Biden’s Semiconductor Plan Bets on Federal Aid to Change Corporate Behavior

    by

    The administration says the conditions it has attached to $40 billion in new subsidies will help U.S. semiconductor makers compete globally. Some economists disagree.WASHINGTON — President Biden’s plan to plow billions of dollars into semiconductor manufacturing represents a sharp turn in American economic policy, one aimed at countering China by building up a single, critical industry. But Mr. Biden is going even further. He is using the money to change how corporations behave.If semiconductor manufacturers want a piece of the nearly $40 billion in aid that Mr. Biden’s administration began the process of handing out on Tuesday, they will need to provide child care for employees, run their plants on low-emission sources of energy, pay union wages for construction workers, shun stock buybacks and potentially share certain profits with the government.That decision is a bet on the power of the federal government to transform private industry. But it is also a distinct break from how the United States has traditionally engaged with corporate America. The president is essentially incorporating disparate policy objectives into a big spending bill that was sold as an effort to shore up a supply of semiconductors critical for the economy and national security.The approach could amplify the effects of the CHIPS Act and other economic bills Mr. Biden has signed into law over the past two years, by accomplishing multiple goals at the same time. Administration officials say the money and the guidelines will drive American industry toward Mr. Biden’s vision of an economy with more U.S. production, better conditions for workers and fewer of the fossil fuel emissions driving climate change.But in testing the limits of a new industrial policy, the strategy may also carry significant risks. Some economists, even some who favor robust federal spending to bolster strategic industries, say Mr. Biden is in danger of drowning his core economic goals.“Everyone acknowledges what we are trying to do here, in trying to make a larger, more globally competitive U.S. semiconductor industry, is a difficult challenge,” said Adam Ozimek, the chief economist for the Economic Innovation Group, a bipartisan think tank in Washington. “We’re making that challenge much harder by trying to accomplish another dozen unrelated things at once.“Advocates of industrial policy should worry that not only is this going to fail, but it’s going to discredit industrial policy for a generation,” Mr. Ozimek said.The Global Race for Computer ChipsU.S. Industrial Policy: In return for vast subsidies, the Biden administration is asking chip manufacturers to make promises about their workers and finances, including providing affordable child care.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: Semiconductor companies, which united to get the sprawling $280 billion bill approved last year, have set off a lobbying frenzy as they argue for more cash than their competitors.A Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.Biden officials say that they are not asking companies to do anything outside their own commercial interests and that the steps they are taking are not meant to be punitive. They are emboldened by the amount of money they have to hand out and confident that companies will accept it with the conditions they have attached. If anything, those officials essentially say, they are not unduly burdening businesses; they are helping them do what is necessary to attract workers and avoid wasting federal dollars.In an interview, Commerce Secretary Gina Raimondo repeatedly cast the lack of access to child care as an economic issue and a key contributor to the labor shortages that American manufacturers frequently complain they are experiencing. Entrenched bias against working women has prevented corporations and the government from addressing that issue, she said, in ways that have hurt companies.Commerce Secretary Gina Raimondo has described the financial rules for companies that take federal funds as a way to ensure that taxpayer dollars are not wasted.Haiyun Jiang/The New York Times“I am kind of requiring them to pay attention to this because I know this is what they need to be successful,” Ms. Raimondo said.Ms. Raimondo has described the financial rules for companies that take federal funds as a way to ensure taxpayer dollars are not wasted. Requiring companies to share some unexpected upside profits with the government will encourage companies to be accurate and honest with their financial projections, so the department can send dollars where they are needed most. The limitations on stock buybacks will prevent taxpayer dollars from going to enrich company shareholders and chief executives, administration officials say.But after reviewing the rules, industry lobbyists and some economists said they worried companies would be forced to siphon money away from the new law’s central objectives. Several complained that administration officials had not coupled the CHIPS funding announcements with efforts to shrink, not expand, environmental regulations and other government rules covering construction projects..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“We should be focused on removing regulatory barriers — particularly in the permitting space — and we have to be careful about adding ancillary new requirements that only increase cost and delay bringing production online,” said Neil Bradley, an executive vice president at the U.S. Chamber of Commerce, a heavyweight business organization in Washington.And some congressional Republicans accused the administration of undermining the intent of the law by trying to force liberal priorities on companies competing for subsidies.Representative Frank D. Lucas of Oklahoma, the chairman of the Science, Space and Technology Committee, said the administration had been “adamant” that the United States needed to incentivize chip production, or else companies would choose to build in other countries that offered more attractive policies.“That’s why it’s troubling that now that the administration has the $52 billion in funds they requested,” Mr. Lucas said, “they’re focusing less on the urgent need for chip production and more on attempting to impose their labor agenda on this critical industry.”For some foreign chip makers, investing in the United States is already provoking concerns about high costs and managerial challenges. And other countries have also continued to subsidize their own chip facilities aggressively, providing a potentially attractive alternative to investing in the United States.Economists largely agree that both the scale and practices of Mr. Biden’s industrial policy are signs of how dramatically the thinking about the government’s role in the economy has changed in Washington.A core reason for that shift is what has happened in East Asia, particularly China, where governments have made frequent use of state subsidies to shore up industries and capture global market share. Since American researchers invented the integrated circuit in the 1950s, Taiwan, South Korea, China, Israel and other locations have invested heavily in chips, helping to push production out of the United States.The U.S. share of global chips manufacturing has now dwindled to just 12 percent. American companies still design many of the world’s most cutting-edge chips; they just manufacture them offshore.Representative Frank D. Lucas of Oklahoma said the administration was “focusing less on the urgent need for chip production and more on attempting to impose their labor agenda on this critical industry.”Kenny Holston/The New York TimesShortages of chips and other critical products in the pandemic helped underscore how reliant the country is on foreign factories. More broadly, U.S. dependence on China for key products like electric vehicles, solar panels, steel and rare earth metals has helped to turn the tide in Washington toward a more interventionist economic policy and dampened concerns about government interference in markets.Both political parties are now broadly aligned behind the use of industrial policy to counter China’s economic dominance. Members of the Trump and Biden administrations, and Democratic and Republican lawmakers, helped create the CHIPS and Science Act, which Congress passed last summer by significant margins.The bill included several strict provisions for companies that receive subsidies, including a ban on using government funding for stock buybacks and dividends and a 10-year restriction on making investments in cutting-edge chip facilities in China. The bill also encouraged companies to offer work force training initiatives and team up with unions and educational institutions.The Biden administration appears confident that the $52 billion carrot it is offering to chip makers, suppliers and research facilities is a big enough incentive for companies to overpower any corporate complaints about the administration’s efforts to influence their behavior. Officials note that some chip makers already comply with some of the requirements in other locations: Taiwan Semiconductor Manufacturing Company, which is building a new facility in Arizona, provides child care at several of its plants in Taiwan. Chip makers operating in other countries, China for example, may have to go to great lengths to support government initiatives or national security objectives.Chief executives have privately grumbled about the restrictions, but most continue to publicly praise the program. Most major semiconductor makers have already broken ground on expensive new U.S. facilities. Since early 2020, companies have pledged nearly $200 billion for U.S. chip manufacturing projects, many in anticipation of the funding.One of those companies, Intel, said in a release on Tuesday that the CHIPS guidelines released by the Commerce Department were “an important step for American semiconductor companies to be globally competitive and will help to restore balance in the global chip making industry.” The Semiconductor Industry Association said it was “carefully reviewing” the rules but welcomed the Commerce Department’s steps to set the program in motion.Clyde V. Prestowitz Jr., a former trade official and labor economist who has advocated industrial policy, said he was sympathetic to the Biden administration’s goals of maximizing the program’s benefit to the public, rather than company shareholders.“The policy is aimed at ensuring the security and increasing the well-being of all Americans,” he said. “It is not meant to be a special gift to the semiconductor companies.” More

  • 150 Shares169 Views

    in Economy

    What’s in the CHIPS Act, Aimed at Childcare Expansion and National Security

    by

    A sprawling new program for the semiconductor industry is foremost about national security, but it will try to advance other priorities as well.The Biden administration unveiled rules Tuesday for its “Chips for America” program to build up semiconductor research and manufacturing in the United States, beginning a new rush toward federal funding in the sector.The Commerce Department has $50 billion to hand out in the form of direct funding, federal loans and loan guarantees. It is one of the largest federal investments in a single industry in decades and highlights deepening concern in Washington about America’s dependence on foreign chips.Given the huge cost of building highly advanced semiconductor facilities, the funding could go fast, and competition for the money has been intense.Here’s a look at the CHIPS and Science Act, what it aims to do and how it will work.Funding chip production and researchThe largest portion of the money— $39 billion — will go to fund the construction of new and expanded manufacturing facilities. Another $11 billion will be distributed later this year to support research into new chip technologies.The bulk of the manufacturing money is likely to go to a few companies that produce the world’s most advanced semiconductors — including Taiwan Semiconductor Manufacturing Company, Samsung Electronics, Micron Technology and, perhaps in the future, Intel — to help them build U.S. facilities.Some will go to makers of older chips that are still essential for cars, appliances and weapons, as well as suppliers of raw materials for the industry and companies that package the chips into their final products.While some critics have questioned the wisdom of giving grants to a profitable industry, semiconductor executives argue that they have little incentive to invest in the United States, given the higher costs of workers and running a factory.The Global Race for Computer ChipsU.S. Industrial Policy: In return for vast subsidies, the Biden administration is asking chip manufacturers to make promises about their workers and finances, including providing affordable child care.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: Semiconductor companies, which united to get the sprawling $280 billion bill approved last year, have set off a lobbying frenzy as they argue for more cash than their competitors.A Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.The administration does not plan to fund entire projects: Biden administration officials say they plan to offer grants of between 5 to 15 percent of a company’s capital expenditures for a project, with funding not expected to exceed 35 percent of the cost. Companies can also apply for a tax credit reimbursing them for 25 percent of project construction.Limiting foreign dependenceGina Raimondo, the secretary of commerce, describes the program as foremost a national security initiative.While the United States is still a leader in designing chips, most manufacturing has been sent offshore. Today, more than 90 percent of the most technologically advanced chips, which are critical for the U.S. military and the economy, are produced in Taiwan. That has prompted concerns about the supply’s vulnerability, given China’s aggression toward Taiwan and the potential for a military invasion of the island.At the same time, China has increased its market share in less advanced chips that are still critical for cars, electronics and other products. The United States manufactures 12 percent of chips, though none of the world’s most advanced.Chip shortages during the pandemic forced factories to halt work and brought home in a tangible way how vulnerable the supply chain is to disruption. Workers at Ford Motor factories in Michigan and Indiana worked a full week just three times last year because of a chips shortage, Ms. Raimondo said in a speech at Georgetown University last week. That helped create a car shortage and raise the price of cars, stoking inflation.The Commerce Department says the program will also provide the Department of Defense and the national security community with a domestic source of the world’s most advanced chips.An Intel factory under construction in Arizona. The Biden administration unveiled the rules for its program to build up U.S. semiconductor research and manufacturing.Philip Cheung for The New York TimesBuilding chip hubsAccording to Ms. Raimondo, the goal is to build at least two U.S. manufacturing clusters to produce the most advanced types of logic chips, as well as facilities for other kinds of chips, and complex supply networks to support them.Commerce officials have declined to speculate where these facilities might be, saying they must review applications. But chip makers have already announced billions of dollars in plans for new investments around the United States.TSMC, which produces most of the world’s leading-edge chips, has been busy expanding in Arizona, while No. 2 Samsung is growing in Texas. Micron, which makes advanced memory chips, has announced big expansion plans in New York. And Intel, a U.S. technology giant that is investing heavily to try to capture a technological edge, has broken ground on a “megasite” in Ohio.Ms. Raimondo has said the vision is to restore the United States to a position of leadership in semiconductor technology, to the point where every major global chip company wants to have both research and manufacturing facilities in the United States.Still, there is skepticism about how much the program can do. One 2020 study, for example, found that a $50 billion investment in the industry would increase U.S. market share only to 14 percent.Protecting taxpayer fundsThe stakes are high for the Biden administration to prove this foray into industrial policy can work. Critics have argued that the federal government may not be the best judge of winners and losers. If the administration gets it wrong, it could face intense criticism.The Commerce Department said it would look closely at companies that applied for funding, to try to ensure that they were not being given more taxpayer dollars than they needed.In a decision that may irk some companies, the department said projects receiving grants would be required to share a portion of any unanticipated profits with the federal government, to ensure that companies gave accurate financial projections and didn’t exaggerate costs to get bigger awards.The Commerce Department also said it would dole out funding over time as companies hit project milestones, and give preference to those that pledged to refrain from stock buybacks, which tend to enrich shareholders and corporate executives by increasing a company’s share price.Companies are also barred from making new, high-tech investments in China or other “countries of concern” for at least a decade, to try to ensure that taxpayer money does not go to fund new operations in China.But analysts said it remained to be seen how difficult it would be to enforce these provisions. Company finances can be opaque, and when a company saves a dollar in the United States, it may then choose to invest it elsewhere.Helping workers by attaching big stringsThe program also includes some ambitious and unusual requirements aimed at benefiting the people who will staff semiconductor facilities.For one, the department will require companies seeking awards of $150 million or more to guarantee affordable, high-quality child care for plant construction workers and operators. This could include building company child care centers near construction sites or new plants, paying local child care providers to add capacity at an affordable cost or directly subsidizing workers’ care costs. Ms. Raimondo has said child care will draw more people into the work force, when many businesses are struggling in a tight labor market.Applicants are also required to detail their engagement with labor unions, schools and work force education programs, with preference given to projects that benefit communities and workers.Other provisions will encourage companies, universities and other parties to offer more training for workers, both in advanced sciences and in skills like welding. The department said it would give preference to projects for which state and local governments were providing incentives with “spillover” benefits for communities, like work force training, education investment or infrastructure construction.This is part of the Biden administration’s “worker-centered” approach to economic policy, which seeks to use the might of the federal government to benefit workers. But some critics say it could put the program’s goal of building the most advanced semiconductor factories at risk, if it adds excessive costs to new projects. More

  • 125 Shares169 Views

    in Economy

    Biden’s Semiconductor Plan Flexes the Power of the Federal Government

    by

    In return for vast subsidies, the Biden administration is asking the chip industry to make promises about its workers and finances.WASHINGTON — Semiconductor manufacturers seeking a slice of nearly $40 billion in new federal subsidies will need to ensure affordable child care for their workers, limit stock buybacks and share certain excess profits with the government, the Biden administration will announce on Tuesday.The new requirements represent an aggressive attempt by the federal government to bend the behavior of corporate America to accomplish its economic and national security objectives. As the Biden administration makes the nation’s first big foray into industrial policy in decades, officials are also using the opportunity to advance policies championed by liberals that seek to empower workers.While the moves would advance some of the left-behind portions of the president’s agenda, they could also set a fraught precedent for attaching policy strings to federal funding.Last year, a bipartisan group of lawmakers passed the CHIPS Act, which devoted $52 billion to expanding U.S. semiconductor manufacturing and research, in hopes of making the nation less reliant on foreign suppliers for critical chips that power computers, household appliances, cars and more. The prospect of accessing those funds has already enticed domestic and foreign-owned chip makers to announce plans for or begin construction on new projects in Arizona, Texas, Ohio, New York and other states.On Tuesday, the Commerce Department will release its application for manufacturers seeking funds under the law. It will include a variety of requirements that go far beyond simply encouraging semiconductor production.For example, the department will tell companies seeking awards of $150 million or more to guarantee affordable, high-quality child care for workers who build or operate a plant.Those projects will also be required to share a portion of any unanticipated profits with the federal government. Companies applying for awards will be required to submit detailed financial projections, with the federal government entitled to share in any “upside” profits. The Commerce Department depicted that requirement as a way to encourage companies to make their projections as accurate as possible, and not exaggerate any losses to try to secure more funding.Preference will also be given to applicants that promise to refrain from stock buybacks, which tend to enrich shareholders and corporate executives by increasing a company’s share price. The law already prohibits companies from directly using federal money to finance stock buybacks or pay dividends.Gina Raimondo, the Commerce secretary, said in an interview that the financial rules would encourage companies to ask only for funding they really need and prevent them from diverting taxpayer dollars to pad the pockets of their shareholders.“We don’t want to spend a dollar more than necessary to make these projects happen,” she said.The requirements will join a growing list of administration efforts to expand the reach of President Biden’s economic policies beyond their primary intent. For instance, administration officials have attached stringent labor standards and “Buy American” provisions to money from a bipartisan infrastructure law.The Global Race for Computer ChipsA Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.Crackdown on China: The United States has been aiming to prevent China from becoming an advanced power in chips, issuing sweeping restrictions on the country’s access to advanced technology.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: Semiconductor companies, which united to get the sprawling $280 billion bill approved last year, have set off a lobbying frenzy as they argue for more cash than their competitors.Companies that receive chip subsidies to build new plants will be able to use some of the funding to meet the new child care requirement. That could include building company child care centers near construction sites or new plants, paying local child care providers to add capacity at an affordable cost for workers, directly subsidizing workers’ care costs or other, similar steps that would ensure workers have access to care for their children.Other provisions of the program will encourage companies, universities and other parties to offer more training for American workers, in advanced sciences but also in fields like welding. The program will encourage colleges and universities to triple their graduation of new engineers over the next decade, Ms. Raimondo said in a speech last week, while also offering high-paying jobs to tens of thousands of American workers without four-year college degrees.Ms. Raimondo outlined an ambitious vision for investing in the United States to build “a self-propelling engine of innovation and production.” The goal of the program, she said, was to create at least two manufacturing clusters for the most cutting-edge chips, as well as factories for older chips. The ultimate aim would be to spur a vibrant semiconductor ecosystem in which every leading global chip company would feel the need to have both research and manufacturing in the United States, she said.In interviews, Ms. Raimondo said the CHIPS requirements would help companies attract women to fill open jobs at a moment when many companies are struggling with a labor shortage.Chip makers, Ms. Raimondo said, “will not be successful unless you find a way to attract, train, put to work and retain women, and you won’t do that without child care.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.The rules for chip makers come on top of other requirements written into the law, including a ban on certain new investments in China. Under that restriction, chip manufacturers that take U.S. funding cannot make new, high-tech investments in China or other “countries of concern” for at least a decade, a prohibition designed to ensure that U.S. taxpayer money does not go toward building operations in China.But analysts have argued that some of these restrictions may be difficult to uphold, given that money is fungible and can pass from one part of a company to another outside of public sight. Some Republican and Democratic lawmakers have also questioned the wisdom of giving any taxpayer money to the chip industry, which is generally profitable. Executives have countered that the high cost of operating in the United States — and subsidies offered by foreign governments — make it cheaper for semiconductor companies to manufacture their products offshore.The next few months will provide the first test of how the Commerce Department balances those concerns. Ms. Raimondo said companies would have to open their books to her team, and that the goal would be to try to “crowd in” private investment, rather than canceling it out.According to the funding application, companies that have secured other sources of private capital will receive “strong preference” for government aid, and applicants will need to have secured some kind of incentive from a state or local government to be eligible for the funding.Commerce officials will prioritize projects linked to state and local incentive programs that create “spillover benefits” for communities, like investments in work force, education or infrastructure, rather than policies like direct tax abatements that benefit lone companies, it said.The rules also seek to address rising concerns among American employers, including manufacturers, that a lack of access to affordable child care is blocking millions of Americans from looking for work, particularly women.Mr. Biden pushed Congress to address those concerns over the past two years, proposing hundreds of billions of dollars for new child care programs, but he was unable to corral support from even a majority of Senate Democrats.But Mr. Biden did persuade lawmakers to approve an assortment of new spending programs seeking to bolster American manufacturing. Now, the Commerce Department is trying to utilize a centerpiece of those efforts, which aims to expand American semiconductor manufacturing, to make at least a small dent in his large goals for the so-called care economy.When it became clear last year that sweeping plans to expand and subsidize child care would not make it into the climate, health and tax bill, the culmination of Mr. Biden’s economic efforts in Congress, Ms. Raimondo gathered aides around a conference table. She told them, she said, that “if Congress wasn’t going to do what they should have done, we’re going to do it in implementation” of the bills that did pass.America’s child care industry has not fully rebounded from the pandemic recession. It is still about 58,000 workers, or five percentage points, short of its prepandemic peak, according to an analysis of Labor Department data by the Center for the Study of Child Care Employment at the University of California, Berkeley.Shortly before the pandemic, the Bipartisan Policy Center in Washington surveyed 35 states and found more than 11 million children had a potential need for child care — yet fewer than eight million slots were available.That shortage is particularly acute in some of the areas where manufacturers are set to begin building new chip plants spurred by the new legislation. Commerce Department officials calculate that in the Syracuse, N.Y., area, where Micron announced a $100 billion chip making investment last year after Mr. Biden signed the new law, the need for slots in child care facilities is nearly three times the size of the actual care capacity in the region.In Phoenix, where semiconductor manufacturing is booming, child care costs consume about 18 percent of a typical construction or manufacturing worker’s salary. That share is higher than the national average.Commerce Secretary Gina Raimondo, center, with Gov. Kathy Hochul of New York, said that the child care requirements should help companies hire mothers, easing a labor shortage.Sarah Silbiger for The New York TimesIn a speech last week, Ms. Raimondo called efforts to attract more women to the work force “a simple question of math” for industries complaining of labor shortages. “We need chip manufacturers, construction companies and unions to work with us toward the national goal of hiring and training another million women in construction over the next decade to meet the demand not just in chips, but other industries and infrastructure projects as well,” she said.Only about three in 10 U.S. manufacturing workers are women. Ms. Raimondo said the CHIPS Act would fail if the administration did not help companies change those numbers, by bringing in women who have children.Some American manufacturers have already turned to on-site care facilities to help meet workers’ needs. The automaker Toyota has provided 24-hour care at a factory in Kentucky since 1993 and one in Indiana since 2004.Chad Moutray, the director of the Center for Manufacturing Research at the Manufacturing Institute, which is affiliated with the National Association of Manufacturers, wrote in a report late last year that child care availability is part of the reason women do not seek more jobs in manufacturing.“Women represent a sizable talent pool that manufacturers cannot ignore,” he wrote. More