In the dusty cornfields of West Kentucky, an area which had long ago been abandoned as an industrial site is once again coming to life.
US manufacturer Ascend Elements has chosen the site to build a factory for electric car batteries made from recycled ones – an industry previously almost entirely based in China.
It has been drawn here by US incentives. The country is spending billions in new subsidies via loans and tax breaks targeted at green energy and vehicles.
Half of Ascend’s initial $1bn build costs were covered by the US government under this new scheme, known as the Inflation Reduction Act (IRA).
The move is part of tectonic shifts emerging in where the world makes everything. It could spark a global trade war between Western allies, as the EU responds to the US plans in kind.
It is about those in the West refusing to bow to what was thought to be the inevitable ascent of China to being the world’s biggest economy.
And it is about the livelihoods of those hoping to find employment in the industries of the future.
In Britain, it means there are choices to be made. A government preoccupied with Brexit and domestic political turmoil may have missed the start of a carve-up of future industries between giant trading blocs coming out of the pandemic.
The presumption that has dominated British politics for nearly half a century that governments do not “pick winners” in industry, is being severely tested by the fact that most G7 allies are doing just that, because of the push to reduce carbon emissions to net zero, post pandemic supply chain concerns and a wish to decouple from China.
‘Standing on the sidelines’
John Neil, the boss of major UK manufacturing firm Unipart, says the combination of incentives offered by the US and similar government and regional plans could amount to $10 trillion – five times the size of the entire UK economy.
“The risk is that we’re standing on the side lines while these big blocks compete… playing the game. I’m not sure that anybody [in UK politics] has calibrated the scale of change that that IRA and the Chips Act and the rest of it is going to have.”
Mr Neil’s publicly stated view reflects the private view of many in the UK car industry and beyond.
The blueprint for the US plan was written during the pandemic. On the side lines of an IMF finance ministers meeting at the G7 in late 2021 the US Treasury Secretary Janet Yellen invented an entirely new word: “friendshoring”.
It was a play on the efforts to “reshore” domestic production in critical industries, but including allies or “friends” in these rebuilt supply chains.
The French were cock-a-hoop when President Biden expanded upon the plan.
Tellingly, French finance minister Bruno Le Maire, back then talked about reducing dependence, not just on China, but on East Asian allies too.
The year before, Le Maire had been privately shocked when his officials reported that the supply chain for European electric car batteries was 85% dependent on China. For solar panels it was 95%.
Indeed that week, Biden had promised “never again” to be dependent on another nation in critical industries.
‘America to lead the world?’
At a rally to promote his push in January President Biden told car workers: “You see I’m getting criticised internationally for focussing too much on America. To Hell with that. Where is it written that America can’t lead the world in manufacturing again?”
Insiders say that although the focus is on green industries, the strategy is about supporting middle income jobs and wages in left behind areas – the regions where US presidential elections are decided.
Former US President Donald Trump took Kentucky by some margin in 2016, and promised to deregulate the industry, abandon climate change efforts and allow the mines to reopen. It did not happen.