Investigating the Salience of Liberalism in US Economic Foreign Policy: An analysis of the CHIPS Act of 2022

Abstract

This paper examines the extent to which liberalism has become less salient in US economic foreign policy post-2017. The direction of US foreign policy has been a topic of extensive debate among scholars and analysts through history, particularly through the lens of international relations theories. Historically, US economic foreign policy has promoted market principles, free trade, multilateralism, and economic interdependence, which are reflected in liberal values from the Clinton Administration through Obama’s tenure. The foreign policy strategies under Trump and Biden appear to adopt a more realist approach, prioritizing national security and immediate economic gains over free market principles. A key policy initiative is the CHIPS and Science Act, which aims to reshore semiconductor manufacturing, which have been a critical industry for the US economy since the 1950s and that is a focal point in the great power competition between the US and China.

This thesis employs a qualitative single case-study to investigate the goals of the first part of the law, the CHIPS Act, against liberalism in international relations theory. In addition to the law’s text, the case study relies on government documents and president speeches. The analysis shows that the Act’s market-distorting funding and incentives contradict liberal principles, while tariffs and export controls reflect a protectionist stance. Additionally, the US’ tariffs and export control measures might be deemed as unfair by the WTO, thereby undermining the US’ commitment to a rule-based global order. However, the analysis also shows that the CHIPS Act can be seen as a pragmatic measure necessary for the specific context. I conclude that liberalism is less salient in US economic foreign policy post-2017 than in previous administrations. However, the context of great power competition makes a pragmatic approach reasonable. The Biden Administration’s focus on diplomacy with China shows that liberalism is not completely gone. Overall, while less salient in the CHIPS Act, the US is not abandoning their role as a champion of liberal principles. It is important to note that this study is limited as it only focuses on the US economic foreign policies in the semiconductor industry.