Strategic competition over the world’s next generation of foundational technologies is underway, and U.S. advantages in artificial intelligence, quantum, and biotechnology are increasingly contested. The United States must address vulnerabilities and mobilize the investment needed to prevail.

Executive Summary

The following recommendations would advance American leadership in tomorrow’s technologies and reduce the leverage that other countries, especially China, could exploit during a conflict if tensions were to escalate: 

These targeted government actions, and others detailed in the report, are intended to unleash the U.S. innovation ecosystem, allowing the private sector to scale and diffuse technology globally and responsibly. Given the rapid pace of technological change, the institutional improvements recommended above would also position the United States to better respond to future changes and technologies that have yet to emerge. Looking beyond today’s immediate challenges, the Task Force report concludes by offering principles to help U.S. policymakers decide whether and how to intervene in markets in the name of national security.

The Rise of Economic Security

Economic power has long been an important foundation for national security and an enabler of U.S. military and diplomatic power.¹ In recent years, however, a series of global shocks have pushed economic power further to the front lines of national security policy. The COVID-19 pandemic disrupted global supply chains and exposed the downsides of concentrated economic interdependence. Russia’s invasion of Ukraine shook global energy and food markets and exposed Europe’s dangerous dependency on Russian energy supplies. China’s actions—especially its massive subsidies aimed at dominating the commanding heights of technology and attempts to dominate critical supply chains—directly threaten U.S. economic growth and technological leadership, as well as the interests of U.S. partners and allies.²

Increasingly, economics and national security have converged, if not collided.³ Around the world, policymakers are directly confronting a range of national security risks by turning to industrial policy, investment and export restrictions, and other economic tools (see figure below). As policymakers embrace what many are calling economic security, they are increasingly grappling with the costs and trade-offs required in pursuing growth and competitiveness on one hand and resilience and national security on the other.⁴

In its broadest sense, economic security is anything related to the economy that affects national security. That includes, for example, research and development (R&D), the defense industrial base, and essentially any government policy that significantly shapes the contribution of the economy to national security. Since the U.S. economy underpins diplomatic and military power, an overly broad approach to economic security can quickly become impractical, as most economic activities touch on national security in some way.⁵

Government intervention in the economy in the name of national security is most clearly warranted in cases of market failure.Today, the market failures that loom largest for U.S. national security are shortfalls of private capital in strategically important areas and overconcentration of critical supply chains in unfriendly countries. The U.S. government also has an essential role to play in limiting the unintended spread of dual-use technologies and mitigating the risk of adversaries using such technologies. When the government is compelled to intervene, clearly communicating the national security risk and objectives of the intervention can help markets adjust accordingly.

To be sure, those developments are not entirely new, nor do they represent a break with traditional economics. Economists have long cautioned that markets can struggle to solve collective action and common goods problems, including the provision of national security. When national security needs to come first, there will naturally be costs to bear. The question then becomes one of timing. Should the United States bear the costs to mitigate risks now, or be prepared to pay a higher cost later if tensions escalate and it has less flexibility? Acting decisively in a targeted manner, as this report recommends in several areas, can strengthen security and ultimately reduce costs.

The Race for Tomorrow’s Technologies

For the purposes of this report, the primary objective of U.S. economic security is to ensure American leadership in foundational technologies. Specifically, to generate actionable recommendations, the Task Force focused on how to ensure U.S. advantages in artificial intelligence (AI), quantum (sensing, communication, and computation), and biotechnology. This report’s primary contributions are twofold: first, providing a bird’s-eye view of vulnerabilities—which can sometimes be difficult for the U.S. government to spot, given siloing and bureaucratic challenges—and second, offering practical recommendations for mobilizing the investment needed to prevail.

Winning in these three areas of technology would contribute substantially to U.S. economic and national security, allowing the United States to take first and full advantage of the commercial, military, and other related benefits, such as shaping global rules and standards. Falling behind—especially to China—would allow others to gain those advantages and shape the international system to reflect their own interests.⁶ Technological leadership can also help ensure that democracies remain resilient and free, safeguarding them from dangerous dependencies that authoritarian regimes could weaponize. 

Each of these foundational technologies has vast dual-use potential (see figure below). AI can expand access to information, accelerate scientific breakthroughs, and boost productivity, but it can also sharpen weapons for surveillance, misinformation, cyberattacks, and autonomous warfare. Quantum technology could both secure and jeopardize cryptography that protects data, cryptocurrency, and communications. Biotechnology could cure diseases and simultaneously create deadly viruses.

Certainly, additional technologies deserve attention from policymakers for their own merits, as well as their linkages to AI, quantum, and biotech. Nuclear fusion could power data centers. Robotics could give agency to AI systems. But focusing on AI, quantum, and biotech has the potential to offer broader lessons for the practice of economic security, given that these technologies are at different stages of development. Even more important, it is increasingly necessary to consider them in tandem.

The convergence and combined power of these technologies will become even more important to U.S. national security in the coming years. Tomorrow’s systems for detecting and defending against biological threats, for example, could leverage AI to interpret massive amounts of data from air and water sensors, quantum imaging and sensing to detect small changes, and portable CRISPR-based diagnostic tools to test pathogens on site. Tomorrow’s drones could harness AI, quantum sensors, and living organisms to enable operations in places where vision and GPS fail. On tomorrow’s battlefield, U.S. and allied military personnel could gain advantages in everything from intelligence and targeting to logistics and lifesaving medicines.

Leading in these areas would benefit American workers and companies and unlock shared prosperity in markets around the world. Collectively, AI, quantum, and biotech could create up to $29 trillion in annual economic value by 2040, according to estimates from McKinsey & Company.⁷ American manufacturing stands to benefit from the investments that will be needed to produce more semiconductors, printed circuit boards (PCBs), and other components essential to U.S. leadership in AI and quantum, and even more fundamentally, to manufacture new drugs and materials that biotechnology will make possible in the coming years. If U.S. companies become the world’s preferred providers for these technologies, they will export more, supporting more jobs at home while helping set global standards (see figure below).

The next decade will prove decisive, and speed is critical because fundamental breakthroughs could effectively end one era and begin the next. Cybersecurity researchers, for example, warn of “Q-Day,” the moment when someone builds a quantum computer that can crack the most widely used forms of encryption. Being even months behind an adversary with this advantage could result in significant damage as financial and communication systems are compromised along with intelligence and military movements. Other game-changing capabilities have already arrived, such as AI models that can drive cyberattacks and overwhelm current defenses. First movers in technology do not always become dominant, but history suggests they are more likely to establish enduring advantages if they are also fast scalers.

Innovation and geopolitical competition are redefining the relationship between the government and private sector. In stark contrast to the Cold War, many of the most critical new technologies are now being developed in the private sector with private financing and not by government-sponsored programs and projects. That alters the historical model of managing the dual use of new technologies, as the U.S. government is much more likely to be an adopter rather than an inventor of breakthrough technologies. In other respects, the U.S. government is becoming more active and intervening in the market in new ways, such as taking equity stakes in private companies and sharing revenue from the export of strategically important goods.

There are certain risks to U.S. technological leadership that only the government can address, especially given that U.S. competitors are using nonmarket practices to their advantage. Competitors will not easily cede their control of critical minerals, ingredients for drugs, and other chokepoints—central nodes in the global economy where a dominant actor controls access and few substitutes exist.⁸ Investment shortfalls also call for targeted government action, particularly for biotech and quantum technologies, which struggle to attract sufficient support from the private sector, given long time horizons, high technical risks, and significant capital requirements for development (see figure below). Likewise, as the Trump administration’s America’s Talent Strategy recognizes, the government has an indispensable role to play in cultivating the human capital to compete in these areas by supporting education and training.

Smart government policy can contribute to the United States establishing a definitive lead in three technologies that will be essential to the future. Recognizing that the U.S. innovation ecosystem is multifaceted, this report aims to make a practical contribution by focusing on how economic security tools can address shortfalls in investment, de-risk supply chains, and design and enforce effective controls that could otherwise jeopardize or undermine U.S. technology leadership.

China’s Visible Hand

The greatest challenge to U.S. technological leadership comes from the Chinese government, which provides much greater support to strategic industries and has a higher tolerance for accepting failures alongside its successful bets. Over the past ten years, the Chinese government has spent an estimated $900 billion on AI, quantum, and biotech—more than three times U.S. government support for those technologies during the same period.⁹ At home, Beijing favors Chinese firms and squeezes out U.S. and other foreign competition. China is not merely trying to tilt the playing field in its favor. It is playing a different game altogether.¹⁰

Chinese leader Xi Jinping’s signature initiatives are designed to seize the commanding heights of technology and dominate foreign markets. Officials in Beijing are considering drafting a successor to their Made in China 2025 initiative, a plan launched in 2015 that aimed to dominate strategic sectors in a decade. Assessing the plan’s performance, researchers at Bloomberg identified thirteen technology areas and concluded that Beijing has largely succeeded in five of them—including unmanned aerial vehicles, liquid natural gas carriers, and batteries—and has made significant progress in nearly all the others.¹¹ Chinese tech firms are active in over 165 markets globally and, over the past decade, have benefited from China’s Digital Silk Road initiative.¹²

Xi understands the stakes, as he told an audience of China’s top scientists and engineers last year:

Cutting-edge technologies such as artificial intelligence, quantum technology, and biotechnology have emerged. . . . At the same time, the world is experiencing accelerated changes unseen in a century, with the technological revolution intertwined with great power competition. Increasingly, high-tech fields have become the forefront and main battleground of international competition. . . . There is an urgent need to further enhance the sense of urgency, intensify efforts in scientific and technological innovation, and seize the strategic heights of technological competition.¹³

China’s playbook is producing results in these three industries of the future.¹⁴ Chinese researchers lead globally in the quantity of AI publications and patents, and in 2024 alone, Chinese AI models reduced the gap with U.S. models in four key performance benchmarks by an average of 80 percent.¹⁵ China has surpassed the United States in deploying quantum communications systems—it has launched the world’s only quantum communication satellites and has established a national quantum communication network spanning over ten thousand kilometers.¹⁶ China dominates the production of drug inputs—including those needed for antibiotics, fever reducers, and blood pressure medications—and accounts for nearly a quarter of all innovative drug development.In March, the Chinese government announced a new national venture fund that aims to invest an additional $138 billion over two decades into AI, quantum, and biotechnology.¹⁷

If China dominates these foundational technologies, the future will look very different. With $29 trillion at stake through 2040, Chinese companies stand to capture a windfall that would be measured in terms of economic growth, jobs, and additional support for R&D, which could ultimately cement China’s advantages in technology for decades beyond. U.S. businesses, meanwhile, could find themselves caught in a vicious cycle, as they struggle to compete in foreign markets with less advanced products and services and struggle to innovate at home with less revenue to invest in R&D.

Chinese leaders have already previewed the perils of this scenario by demonstrating a willingness to weaponize China’s near monopoly on critical minerals extraction and refining.¹⁸ They first cut off access to rare earths in 2010 in an attempt to coerce Japan, which was suddenly unable to obtain minerals essential for electronics and defense systems, among other technologies. Earlier this year, Chinese controls on rare-earth exports temporarily halted foreign manufacturing lines and threatened U.S. companies and workers in the automotive, technology, and defense sectors, before China lifted the restrictions as part of trade negotiations. If China controls the supply chains underpinning tomorrow’s foundational technologies, from raw materials to advanced manufacturing, it will gain even more chokepoints that could be weaponized.¹⁹

In this scenario, the world would be more perilous for individuals and any government unwilling to bend to Beijing and safer for many authoritarian regimes. State censorship and mass surveillance could spread with Chinese products and standards. The proliferation of Chinese AI into more of the world’s devices, essential services, and critical infrastructure would increase the risks of mass espionage and sabotage, with potential damage magnitudes worse than recent cyber operations like the Salt Typhoon hacks.²⁰

Decisive military advantages hang in the balance. If the People’s Liberation Army (PLA) gains superior AI, its forces could anticipate enemy movements, optimize logistics, and dominate the battlefield by deploying drones and other autonomous systems with unmatched speed and efficiency. Quantum superiority could enable the PLA to decode U.S. and allied communications and intelligence, while making its own communications impenetrable. The PLA could harness biotechnology to field lethal weapons that target individuals or populations based on genetic characteristics.

With these stakes in mind, the next section considers how to use economic security tools to advance U.S. leadership in AI, quantum, and biotech (see figure below). The report concludes by recommending ways to upgrade U.S. economic security tools and offering principles to guide their use.

This section considers how to use economic security tools to advance U.S. leadership inAI, quantum, and biotech over the next five years. For each foundational technology, it summarizes the current state of play, identifies key challenges related to investment, supply chains, and controls, and recommends targeted government interventions. To be sure, leading in these areas will require using an even broader array of supporting government policies and progress in dimensions beyond the scope of this study. But economic security tools have a major role to play (see figure below).

Artificial Intelligence

As the Trump administration’s AI Action Plan observes, “The AI race is America’s to win.”²¹ Winning in AI over the next five years means leading across the AI tech stack, capturing a dominant share of the global market for AI, and slowing the diffusion of advanced capabilities to adversaries (see figure below). Thanks to strong private investment, the United States leads globally in AI innovation and the buildout of AI data centers. But China is closing the performance gap, is taking a greater share of key data center components, and has a near monopoly on rare earths extraction and refining. To stay ahead, the U.S. government will need to make targeted investments that build manufacturing capacity and adopt security measures that strengthen export control enforcement and protect AI data centers.

Investment: U.S. Private Sector Driving AI Innovation 

While the United States still develops the most advanced AI models, its lead is shrinking as others, mainly China, make headway. Last year, U.S.-based institutions produced forty notable AI models, according to the Stanford AI Index, as compared to China’s fifteen. China’s models are advancing, however, with major benchmarks approaching parity in performance, and the country has greater access to data and human capital that could provide an edge in the years ahead.²² As commercial adoption grows globally, the private sector is increasingly driving AI innovation, producing 90 percent of notable AI models in 2024, up from 60 percent the year prior.²³

The private sector has also made the United States the world’s top source of investment for AI. Last year, U.S. investment in AI totaled $114 billion, driven overwhelmingly by private investment ($109.1 billion).²⁴ In comparison, China’s investment totaled an estimated $98 billion, with public investment making up a much greater share ($56 billion).²⁵ By 2030, companies will invest almost $7 trillion on data center infrastructure globally, with more than 40 percent of that spending expected in the United States.²⁶

Keeping the AI buildout on track will also require navigating bottlenecks in energy and permitting. Training frontier models and running large data centers require access to reliable, abundant, and affordable power. AI data centers are completed six to sixteen months faster in China than in the United States, due in large part to streamlined permitting and faster connections to the grid—pressing challenges that the Trump administration’s AI Action Plan aims to address.²⁷

Despite the massive private investment flowing into AI, talent remains a key constraint to the advancement of models, infrastructure, and adoption. There was an estimated 50 percent hiring gap for AI positions in 2024, and around 70 percent of workers now need a skills upgrade to compete in the workforce.²⁸ Those gaps extend to academia as well, with growth in computer science enrollments outstripping growth in computer science faculty over the past decade.²⁹ The gap between demand and supply of qualified AI talent is expected only to widen in the future. In semiconductors, for example, the industry could face a global shortfall of approximately four hundred thousand engineers by 2030, with North America alone projected to be short one hundred thousand semiconductor professionals.

Retaining the lead in AI also hinges on clearing several obstacles to domestic adoption. The United States leads the world in AI users, but China is gaining ground.³⁰ Small businesses and the federal government, for example, have yet to fully adopt AI at the scale of larger firms.³¹ Barriers to adoption include cost, lack of training, and questions about return on investment. The federal government faces the challenge of integrating AI with legacy information technology (IT) systems, concerns about data privacy and security, and procurement processes. The Trump administration’s AI Action Plan aims to improve national adoption, including by deploying advanced AI capabilities, use cases, and AI talent across federal agencies and improving interagency coordination on AI procurement by the federal government. For the private sector, it seeks to establish regulatory sandboxes and convene stakeholders in specific sectors, such as health care, energy, and agriculture.³²

China is rapidly deploying AI with initiatives reaching into every corner of society. China’s Ministry of Education has issued guidelines requiring AI to be woven into the national curriculum from elementary school through university. Beijing, Shenzhen, and other cities have launched “AI+” action plans through which the government promotes AI adoption, builds computing centers, and integrates AI into government services. Chinese state-owned banks have developed lending programs specifically for AI-related industries. Government directives have also accelerated the integration of AI with public services and industrial applications, with guidelines aiming for a 90 percent AI adoption rate across the entire Chinese economy by 2030.³³ The Chinese government’s strong support and focus on practical applications, rather than artificial general intelligence, could provide an edge in producing low-cost solutions to sell globally.

Supply Chain: Dependencies in Semiconductors, Data Centers, and Critical Minerals

With substantial capital supporting AI development and deployment in the United States, the primary near-term risks to U.S. leadership stem from supply chains. The U.S. semiconductor industry is expected to produce 23 percent of the world’s leading-edge chips by 2030, up from 15 percent in 2024, following $450 billion in private investment sparked by recent manufacturing incentives.³⁴ But as Table I illustrates (see Appendix), the United States still faces several chokepoints for AI in semiconductors, data center components, and critical minerals.³⁵ To be sure, components sourced from allies and partners present a lower level of geopolitical risk than those sourced from adversaries. However, this analysis also identifies components that are highly concentrated in small numbers of friendly countries. As the COVID pandemic demonstrated, supply chains risks are not limited to foes.

Several semiconductor supply chain risks stand out. Chip fabrication requires wet chemicals and dry etchants that are essential for cleaning and etching patterns on silicon wafers. China is a key source of those inputs, while Japan produces silicon wafers and photoresists that transfer circuit patterns onto wafers. Physical dependencies include integrated circuit (IC) substrates, used to connect chips toPCBs, from Taiwan, South Korea, and Japan and advanced manufacturing equipment sourced from the Netherlands and Japan. Taiwan plays an outsized role by hosting much of the world’s leading-edge research and design capabilities; advanced packaging capacity, which stacks and integrates chips after fabrication; and upstream inputs for packaging and insulation, such as polyethylene and polypropylene resins.

Chinese government subsidies have undercut the ability of the United States and partner countries to compete in the market for legacy and power semiconductors. Legacy chips are less advanced but remain important, given their use in cars, consumer electronics, and defense products. Power chips are used for managing high voltages and currents. Thus far, U.S. policymakers have responded with tariff investigations into semiconductors, manufacturing equipment, and legacy nodes. Congress has also considered a range of restrictions to prevent U.S. government agencies from procuring semiconductor products and services from China.³⁶ But these measures still leave a range of risks related to other parts of the AI supply chain, particularly for data centers (see figure below).

For data centers, supply chain risks include key power equipment and components—such as gas turbines, transformers, and uninterruptible power supplies—that are produced domestically but whose inputs are imported and have long lead times due to high demand. The production of battery energy storage systems (BESS), which can stabilize power grids and facilitate data center deployment in rural areas, relies heavily on imports.³⁷ Additionally, PCB design and manufacturing and PCB assembly (PCBA) manufacturing take place primarily in China and Taiwan, and the cost differential remains too high for companies to justify moving to the United States. The United States must also remain vigilant in areas where it has a lead, such as next-generation cooling and advanced optical transceivers, the latter of which is critical for transferring information within data centers. From 2017 to 2023, Chinese government incentives helped Chinese firms gain market share of advanced optical receivers largely at the expense of U.S. providers, whose market share fell from 67 percent to 43 percent.³⁸

China’s near monopoly on critical minerals extraction and refining is another significant risk, given the importance of those inputs for semiconductor manufacturing and data center components. The United States relies on China for 70 percent of its rare earths and nearly 100 percent of its heavy rare earths, which together are used for polishing semiconductor wafers and as insulation for advanced chips, among other applications.³⁹ The United States is completely dependent on China for all of its arsenic and holmium copper, which are critical for producing silicon chips and quantum cryocoolers, respectively. Though other countries, including the United States, boast significant critical mineral reserves, they do not have scaled infrastructure to refine mineral concentrates into usable compounds. China’s vast refining and processing capacity, therefore, poses an additional challenge to de-risking efforts, as minerals mined elsewhere often pass through China.

Controls: Reach Exceeds Grasp

The United States has struggled to enforce export controls on advanced semiconductors. Since 2022, the primary goal of these controls has been to maintain as large a lead as possible over competitors. In practice, however, advanced semiconductors have continued flowing to prohibited countries, underscoring the basic challenge of controlling goods in a global economy and the importance of persuading other nations to adopt and enforce the same controls.⁴⁰ China remains one to two generations behind in semiconductor production but has made progress in deep ultraviolet lithography and advanced packaging technologies. As these trends highlight, controls can at best slow an adversary, but only temporarily. That is why they must form part of a longer-term strategy that keeps U.S. technology ahead in performance and adoption.

Recent experience also highlights challenges in the U.S. government’s export control regime. The Commerce Department’s Bureau of Industry and Security (BIS) struggles to attract technical expertise on par with industry to design controls and relies on antiquated data systems to monitor them. BIS’s staff capacity has not kept pace with the growth in controls. In 2021, there were more than 32 million U.S. exports of dual-use items, and BIS had only 190 enforcement agents and analysts, including only three agents in China and Hong Kong.⁴¹ Finally, the penalties for violating export controls have remained relatively mild, and, because they rarely approach the value of the illegal transactions, they do not sufficiently deter violators. The largest export control fine to date, $300 million, was more than twice the estimated profit of the illicit transaction but significantly less than its revenue.⁴²

Recommendations

The Trump administration’s AI Action Plan includes recommendations to accelerate innovation, build infrastructure, and lead internationally.⁴³ Building on those actions, the following recommendations focus on addressing supply chain vulnerabilities and strengthening controls. Recommendations for developing the U.S. workforce and improving access to critical minerals are included near the end of the “Winning the Race” section, given their broader relevance. To that end, the U.S. government should consider the following actions:

Support American manufacturing and trusted sourcing from partners and allies by offering incentives to shift supply chains away from unfriendly countries.Without targeted incentives, supply chains will remain overly concentrated. Analysis of recent investments by McKinsey & Company suggests that leveraging $4.5 billion in public incentives and foreign investment could catalyze an additional $20 billion in private investment and directly support up to 37,000 jobs in the priority areas below. Building and operating these manufacturing facilities will also depend on ensuring adequate access to supporting infrastructure, such as water and water treatment, grid connectivity and power generation, and transport and logistics—requirements that present opportunities for additional growth and jobs. 

Strengthen controls and enforcement.Priorities for action include the following efforts:

Quantum Technologies

Quantum technologies—including computing, communications, and sensing—are more nascent than AI. Quantum computing uses quantum bits, or qubits, to enable faster processing of complex calculations. Quantum communications use the principles of quantum mechanics to drastically improve the security of communications. Quantum sensing uses similar principles to allow for extremely precise measurements at the atomic level.

Winning in quantum over the next five years means leading inR&D and being the first to reach utility-scale quantum computing. Of particular importance are “gates-based” approaches, which are the most general purpose and theoretically powerful, as they can, in principle, run any quantum algorithm. The United States currently leads in quantum computing and sensing technologies, but China leads in certain aspects of quantum communications and is investing heavily in general quantum research and development. Given that there are several competing approaches to delivering the underlying technology, any one of which could prove viable, the U.S. government should focus on providing targeted support to reduce the cost of pilot facilities for testing equipment and on securing supply chains for the most cost-effective, scalable approaches. Since quantum efforts are already international in nature, the United States will need to adjust export controls to cover new approaches and equipment with allies and partners.

Investment: Public Investment Needed to Accelerate Utility-Scale Computing

Computing represents the biggest economic opportunity of the three quantum technologies and could create $1 trillion to $2 trillion in economic value by 2035.⁴⁴ “Utility-scale” quantum computers that solve real-world problems that are impractical on classical computers are anticipated to arrive around 2030, although more conservative projections put the moment around 2035 to 2040. Regardless of when the breakthrough arrives, achieving it will require major investments in hardware. Estimates vary but often land in the neighborhood of several billion dollars to scale production of specialized components for quantum computers.

The path to scaling quantum computing is especially challenging for companies that lack revenue from other business lines, as well as larger public companies accountable to shareholders, due to high R&D expenses over long periods of time and capital costs for pilot facilities. The direct market for quantum computing is estimated to reach $28 billion to $72 billion by 2035, a wide range that reflects a high degree of uncertainty and risk for private investment.⁴⁵ A long time horizon, a lack of commercial demand, and technical uncertainties make it challenging for quantum-related start-ups and large public companies to secure capital, especially those developing hardware.

Government support for quantum research is growing faster outside of the United States. In 2018, Congress passed the National Quantum Initiative (NQI), which provided a coordinated federal strategy and over $1.2 billion in funding for quantum information science, including research centers, workforce development, and interagency collaboration between the Department of Energy (DOE), the National Institute of Standards and Technology (NIST), and the National Science Foundation (NSF). But it partially lapsed in September 2023, leaving a gap in support that Congress is working to address through reauthorization. An encouraging example of international partnership is the collective investment by the Defense Advanced Research Projects Agency (DARPA), the state of Illinois, and the government of Australia in PsiQuantum, a U.S. start-up that is building quantum computers in Chicago and near Brisbane.⁴⁶ Other countries, including Germany, India, South Korea, and the United Kingdom, have all announced significant new funding streams in recent years, joining Canada, France, Israel, Japan, and the Netherlands, among others, in making quantum technologies a national priority.

Quantum science is a significant national priority for China, where government support extends across R&D, application domains, and deployment. As Xi told a session of the Political Bureau of the Chinese Communist Party in 2020, “Developing quantum science and technology is of great scientific and strategic significance.”⁴⁷ As of 2023, China had provided $15.3 billion in public support for quantum, more than twice the combined U.S. public- and private- sector support.⁴⁸ The lion’s share of that support, $10 billion, has gone toward building a ninety-one-acre National Laboratory for Quantum Information Sciences, which functions both as a research institute and as a national test bed for translating quantum science into military and commercial uses.

China leads the world in quantum communications and is making significant strides in quantum sensing and computing. It has constructed the world’s largest quantum communications network, which spans over 10,000 km and integrates quantum key distribution, a technology that increases security of communications and allows detection of eavesdropping.⁴⁹ China has also launched two quantum satellites, enabling deployment of quantum communications to other countries, such as South Africa, in March 2025.⁵⁰ While China’s sensing capabilities are limited to the laboratory scale, it is making progress and has advantages to leverage in research output and deployment.⁵¹ In 2021, China built a fully domestic superconducting quantum computer that reportedly surpassed some U.S. systems at the time in speed and processing power but has since fallen behind in key performance measures, such as qubit count and error correction.⁵²

Workforce development is an important challenge for the United States in this field, as demand for quantum talent is rapidly outpacing supply, with limited academic pathways, a small pool of trained specialists, and a growing gap between research and commercial skills. Despite being a global leader in quantum technologies, the United States is fourth in quantum talent availability behind the European Union, China, and India. In a poll by the Quantum Economic Development Consortium, a leading global industry group, 92 percent of its members agreed that there is a shortage of U.S. citizens and permanent residents with quantum qualifications.⁵³ With quantum computing projected to generate 250,000 jobs globally by 2030 and 840,000 by 2035, the United States risks watching those opportunities go elsewhere.⁵⁴ 

Supply Chain: Components and Critical Minerals

Table II (see Appendix) summarizes the main vulnerabilities for quantum technologies across four categories: control, components, environment, and critical minerals. Given that there are several plausible approaches to scaling quantum technologies, each with their own set of inputs, this supply chain analysis focuses on the most common components (see figure below).

Reliance on China for precision lasers, holmium-copper 2, and commercial off-the-shelf components, like PCBs, nonlinear crystals, and mirrors, are among the top supply chain risks. Precision lasers are essential for several modalities, as they control qubits and laser-cool atoms, and Chinese lasers dominate the market due to their high quality and low price. Ninety percent of holmium-copper 2, a rare-earth alloy critical for cryocoolers needed for superconducting qubits, is imported from a single producer in China. China is also a major source of components used to control quantum systems, comprising 30 percent of U.S. PCB imports and 42 percent of global nonlinear crystal production.

The supply chains for quantum technologies also highlight the importance of working closely with allies and partners as part of a broader de-risking strategy. Finland is the primary source of specialized laser components (called semiconductor saturable absorber mirrors), as well as dilution refrigerators, which create the ultra-low temperatures needed for qubits to operate. Japan is the sole or primary producer of blue gallium nitride laser diodes and 200 mm sapphire wafers and can produce holmium-copper 2. Germany is a key source of ultra-high vacuum chambers, laser diodes, superconducting nanowire single-photon detectors, rubidium-87, and strontium. Other allies and partners—including Canada, South Korea, Mexico, and the UK—either produce components, such as vacuum chambers and dilution fridges, in smaller quantities or supply minerals, like indium, strontium, and aluminum.

Controls: Nascent Measures Require Monitoring

In September 2024, the United States announced worldwide export controls on key equipment, materials, and software for quantum computers.⁵⁵ Going beyond earlier controls, these measures focus on leading-edge quantum computers and related equipment, preemptively capturing technology that does not yet exist. Importantly, these controls are aligned with key allies, including Australia, Canada, France, Germany, Italy, Japan, Spain, and the UK. Given the nascent state of quantum technologies and the relatively recent expansion of these controls, the near-term priority should be monitoring and assessing their effectiveness. Controlling software could prove challenging, given open-source development and release of these tools.

Recommendations

Procure two quantumcomputers. Congress should allocate $1.3 billion of initial funding to allow the DOD to procure one utility-scale quantum supercomputer and one hybrid supercomputer. Of the funding, $1 billion would support the first phase of procuring a utility-scale system. The DOD could leverage Other Transaction Authority—a flexible contracting mechanism that allows for engagement with nontraditional defense vendors—to work through established consortia. The contract should use milestones aligned with DARPA’s Quantum Benchmarking Initiative, so that payments are contingent on making progress toward well-defined goals. Additional funding would likely be required as the technological modalities and system architectures for utility-scale quantum computing mature. The $300 million would support procuring a hybrid system that integrates a quantum processor with an AI-accelerated supercomputer, a high-performance system that combines traditional central processing units with AI chips. Those efforts could spur an additional $13 billion in private investment.

Reauthorize the National Quantum Initiativewith an emphasis on deepening international partnerships for research and supply chain security. Since 2018, the NQI has established five Quantum Information Science (QIS) Research Centers (at the Department of Energy) and five Quantum Leap Challenge Institutes (at the National Science Foundation) and supported research into promising quantum approaches, materials, and programming models, among other areas.⁵⁶ It also paved the way for the United States to establish eleven bilateral partnerships for QIS research and supply chain security, including with Australia, Germany, Japan, and South Korea. The proposed NQI Reauthorization Act, which would expand the program’s national infrastructure, extend its duration to December 2034, and authorize $2.7 billion over five years, was not brought for a vote in 2023 or 2024, though it was the subject of a hearing this year. Congress should renew these core provisions and build on the International Quantum Cooperation Strategy, previously proposed by the National Science and Technology Council’s Subcommittee on Quantum Information Science in 2024, by deepening cooperation with allies and jointly assessing research and supply chain barriers.⁵⁷

Increase restrictions on U.S. research institutions acquiring quantum equipment from foreign countries of concern.⁵⁸ The U.S. government should modify the implementation of the UN Educational, Scientific and Cultural Organization (UNESCO) Florence Agreement, a 1950 treaty that waives customs duties on scientific materials, to give preference to U.S.-manufactured research equipment for quantum and waive import duties for items purchased from allies and partner countries, such as quantum-enabling lasers, optics, and photonics components. In cases where there are sufficient alternative and affordable sources of supply, the United States should not grant these preferences to items from foreign countries of concern. Sourcing requirements for research institutions could be added to federal funding, including through reauthorization of the NQI, but should also take into account the availability of substitute equipment and strive to offer resources to offset cost increases. Additionally, the Commerce Department could pursue an ICTS investigation of security risks related to quantum components.

Biotechnology

Biotechnology has the potential to transform the physical world in the coming years by harnessing cellular and biomolecular processes. At stake is control of tomorrow’s production methods for everything from lifesaving medicines to high-efficiency crops and livestock to chemicals and critical minerals. In the future, the military could harness synthetic organisms to protect soldiers, repair equipment, generate fuel, and produce water in challenging environments. As Senator Todd Young and Dr. Michelle Rozo, who lead the National Security Commission on Emerging Biotechnology, have explained, “Emerging biotechnology, coupled with artificial intelligence, will transform everything from the way we defend and build our nation to how we nourish and provide care for Americans.”⁵⁹

Winning in biotechnology means leading in R&D and global market share, limiting access to high-risk biological agents and tools, and securing supply chains for critical medicines and vaccines for the United States. China is closing the gap with the United States and now accounts for nearly a quarter of global clinical trials and early drug development.⁶⁰ U.S. industry has grown increasingly dependent on foreign (largely Chinese) suppliers for key inputs, as well as R&D. The U.S. government must reduce these dependencies while doubling down on innovation.

Innovation: China Gaining Ground

Over the next five years, the global biotechnology market is poised to reach $1.5 trillion to $2.2 trillion, with pharmaceuticals composing the largest share.⁶¹ Home to several top biotech companies and technologies, the United States has historically benefited from a strong and open innovation ecosystem composed of public and private research institutions, funding for foundational R&D, and an established pipeline for drugs to go to market. The United States leads in several important areas of biotechnology—including genetic engineering, vaccine research, and agricultural technology—but China could soon take the lead.⁶²

An emerging constraint to U.S. leadership in biotechnology is human capital. Nearly a fifth of the U.S. workforce in life sciences is aged fifty-five or older, posing risks of significant leadership and expertise loss through retirement in the coming years.⁶³ Replacing these workers and filling new positions will require overcoming bottlenecks in the talent pipeline. Fewer than 30 percent of public high school biology classes cover molecular biology, which is essential for biotech. Meanwhile, graduate programs are not keeping pace with industry needs, particularly in R&D, clinical research, and technical positions. For every experienced clinical research coordinator seeking work in the United States, for example, there are seven jobs posted.⁶⁴

China’s strengths are most evident in its dominant production of active pharmaceutical ingredients (APIs) and key starting materials (KSMs) for drugs, boasting its ability to produce high-quality inputs more cheaply and more quickly than anywhere else. It is the primary outsourcing destination for large U.S. pharma companies, which rely on contract R&D labs for drug discovery and research. Backed by massive state subsidies, favorable regulation, and vast human capital, Chinese firms can advance products quickly and cheaply, often licensing them back to U.S. companies or flooding the global market with low-cost “fast followers.”

China is no longer just a manufacturing hub for biotechnology but is now a leading innovator of drugs, with its own innovation ecosystem accelerating. Its biopharma R&D spending has increased four-hundred-fold over the past decade, and its share of global biotech patents has surged from 1 percent in 2000 to 28 percent in 2019 (surpassing the U.S. share of 27 percent). Those trends are undercutting U.S. biotech investments and licensing activity. Last year, a third of global licensing deals involved Chinese-developed assets. Just this year, Pfizer and Merck struck $8 billion in landmark deals with Chinese biotech companies, demonstrating how U.S. pharma companies are aggressively sourcing high-potential assets in China.⁶⁵ The United States must compete in R&D and patents for the next generation of biotech, even as it works to address supply chain vulnerabilities, or it will be relegated to producing yesterday’s tech as China captures the market for tomorrow’s.

Supply Chain: Drug Inputs and Manufacturing

The United States relies on China for basic inputs to drugs, as well as for R&D and manufacturing services, as summarized in Table III (Appendix).

The numbers speak for themselves:

Trends are troubling as well. Over the past five years, U.S. pharmaceutical companies have gone from not licensing any drugs from China to sourcing one-third of their new drug candidates from Chinese biotech firms.⁷⁰ If access to these inputs and drug candidates were lost, the United States would face shortages in antibiotics, fever reducers, and other important medicines (see figure below). For example, 80 percent of the global supply of PAP, a precursor for acetaminophen (the API in common pain relievers), is sourced from China.⁷¹

At a time when the United States and China are moving apart in several areas of technology—such as semiconductors, cloud computing, and next-generation wireless networks—trends in biotechnology are heading in the opposite direction. U.S. companies are increasingly outsourcing a range of R&D, development, and manufacturing services—from preclinical trials to formulating and producing biologics—to companies in China that offer low costs and high quality due to large talent pools and government support. Despite risks to intellectual property (IP), incentives for outsourcing to these companies, known as contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs), remain powerful. Smaller U.S. firms are especially dependent on outsourcing, as they lack the capital to maintain large R&D teams and manufacturing facilities.⁷²

Nearly 80 percent of U.S. biotech companies have at least one contract or product agreement with Chinese firms.⁷³ U.S. companies began outsourcing API and generic drug production in the late 1970s, and China has rapidly expanded its role in these supply chains since joining the World Trade Organization in 2001. A single Chinese firm, WuXi AppTech, has been involved in developing one-fourth of the drugs used in the United States.⁷⁴ As a result, IP and production know-how is increasingly contained within a single Chinese company that has extensive ties to the Chinese government.⁷⁵ This arrangement creates a one-sided risk: the United States can make very little, and China knows how to make everything.

U.S. domestic biomanufacturing efforts are constrained by long lead times for key materials and equipment and high infrastructure setup costs. Under current quality standards, viral vectors that are used to deliver genetic material into cells for gene therapy or vaccine trials can take twelve to fifteen months to acquire. Bioreactors, which are essential for cultivating cells and producing biological products at scale, are another key bottleneck. New biomanufacturing factories can require up to $2 billion and take two to five years to build and operationalize.⁷⁶ In the absence of sufficient U.S. biomanufacturing capacity, companies will continue looking to Europe and Asia, which collectively account for roughly 80 percent of the global CDMO capacity.

Controls: Outbound Investment Not Covered

The United States and its allies have taken recent steps to strengthen controls on biotechnology. In January 2025, the United States announced new export controls on biotechnology equipment and related technology, including high-parameter flow cytometers and certain mass spectrometry equipment, both of which are used to generate large and detailed biological datasets. Those controls are primarily intended to restrict China’s access to high-quality data for military purposes and are aligned with dual-use controls imposed by Australia, the EU, and the UK. In 2018, Congress expanded the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) to cover noncontrolling foreign investment in biotechnology and life sciences sectors, including licensing and real estate ties to biotech firms managing sensitive genetic data. Biotechnology is not yet included in the U.S. outbound investment screening regime, which could limit the U.S. government’s visibility into foreign transactions of interest.

Recommendations

Develop a nationwide network of advanced biomanufacturing hubsto support innovation and commercialization for advanced biotechnologies. Each hub would provide manufacturing capacity to biotech firms making the transition from proof of concept to producing early commercial amounts. The government would procure or partially cover the cost of biomanufacturing equipment (such as utilities, labs, reagents, and storage), ease regulations for private companies building out larger facilities on the same campus, and colocate federal research programs where practical. The private sector would commit to investing a multiple of federal funding into each hub to support related infrastructure and activities, such as raw material processing, quality control, and workforce training. That network could begin with four to six hubs and scale further as performance, resources, and national security conditions warrant.                                                  

Establish a biotechnology investment fund to support high-priority areas of national security technology that are left unaddressed by current initiatives, along the lines proposed by the National Security Commission on Emerging Biotechnology.⁷⁷ The fund would be professionally managed by a nongovernmental investment partner and could provide equity financing to early-stage biotech start-ups to cover a portion of preclinical costs and target drug developments in areas such as mRNA platforms, genome engineering, and synthetic biology. The fund could also leverage capital from allies, such as the EU, Japan, and South Korea, and gains from investments could be reinvested, thereby reducing the need for future public funding.

Offer advance market commitments to clearly signal demand for biotech applications important to national security.As the success of Operation Warp Speed highlights, guaranteeing government purchases encourages biotechnology and pharmaceutical companies to invest and innovate. Historically, these demand-side programs have focused on addressing public health emergencies, but their scope should be expanded to include national security applications, such as treatments for rare diseases with high potential to be weaponized and systems that can provide rapid response to infectious and viral diseases. The U.S. government would have to state clearly what it wants the private sector to develop, along with sourcing requirements, and commit to buying if certain safety and efficacy thresholds are met.

Shiftcontract development and manufacturing organizations and contract research organizationsservices to trusted markets.The United States should explore deepening partnerships that would encourage CDMO/CRO services to shift from China to more trusted markets. Canada, the Czech Republic, India, Poland, South Korea, and the UK all have capabilities that could enhance U.S. resilience. The United States can work with partners to diversify sourcing, establish joint manufacturing facilities, and create shared regulatory standards for quality and traceability, strengthening shared biotech ecosystems while mitigating overreliance on China. U.S. and like-minded partners could rapidly mobilize jointly owned capabilities abroad in the event of a biothreat or lack of access to critical technology. Those efforts could also increase U.S. government visibility into concentration risks.

Partner with U.S. companies to stockpile KSMs and APIs for essential medicines and support production in trusted markets.Stockpiling is feasible because APIs have a shelf life of one to five years, and KSMs can remain viable for even longer. The Phlow Corporation, a public benefit corporation that is mandated to balance profit and social impact, has received government funding over ten years to establish the first API stockpile, two advanced manufacturing facilities, and a national storage network. Building on these efforts, Congress should dedicate additional funding for the executive branch to incentivize U.S. pharma companies to build a six-month emergency supply of KSMs and APIs for essential medicines and mandate that stockpiled materials come from trusted sources. Most large U.S. pharma companies have storage facilities that could be expanded, so the marginal costs are not high, and the U.S. government could cover the incremental overhead, storage, and working capital needed for companies to hold reserve supply. The national stockpile could be retained and focused to fill any remaining gaps.

Add a reporting requirement for outbound investments to countries of concern in biotechnology. The investments tracked could include, for example, U.S. and multinational biopharmaceutical partnerships, licensing deals, co-development arrangements, and research collaborations that transfer critical IP or support capability building in areas such as genomics, novel biology, and AI or computational biology. That information would help the U.S. government better assess current risks and consider whether controls are needed. It could also reveal opportunities to work with partners and allies, whether in sharing information and limiting investment from undesired destinations or increasing cooperation on R&D.

Critical Minerals

The need for critical minerals cuts across AI, quantum, and, to a lesser extent, biotech. The Trump administration has taken several major steps toward developing domestic sources of critical minerals. On President Donald Trump’s first day back in office, he declared a national energy emergency and identified critical mineral shortages as a direct threat to U.S. economic and national security. Another executive order, Unleashing American Energy, aims to cut red tape and accelerate the permitting, leasing, and development of domestic energy and mineral resources. More recently, the Department of Defense announced an innovative partnership with MP Materials that uses a range of public-private tools, including the U.S. government taking an equity stake and providing a price floor commitment, loans, and offtake guarantees, alongside private financing.

The recommendations below are intended to build on this progress with the ambitious goal of sourcing no more than 65 percent of each critical mineral, at any stage of processing, from a single country by 2035 (see figure below). Many of these recommendations, particularly those related to stockpiling and mining, will require investing in supporting infrastructure to facilitate extraction, transportation, and storage. Deepening cooperation with partners and allies that have significant resources and capabilities can advance these recommendations. For example, the Critical Minerals Action Plan from the Group of Seven (G7) calls for working together and with partners beyond the G7 to build standards-based markets, mobilize capital, and promote innovation.⁷⁸ The EU, Japan, and Norway are promising partners for collaboration in recycling, deep-sea mineral collection capabilities, and material substitution. Others, such as Australia and Canada, have important capabilities for accelerating the development and deployment of advanced recovery methods, processing, and refining. Additionally, joint efforts in emerging markets could support the exploration, processing, and stockpiling of key materials.

Increase Supply and Production

Expand the National Defense Stockpile.Congress should provide $2 billion to scale the National Defense Stockpile (NDS) to secure high-risk materials essential to AI, quantum, and biotech infrastructure. While some materials are already held in limited quantities, others—such as gallium, neodymium, holmium-copper 2, helium-3, niobium, and grain-oriented electric steel—are not stocked or exist only in trace amounts. The NDS is designed to ensure access to key inputs during national emergencies, but it currently lacks the resources and flexibility to meet projected demand across those strategic sectors. Congress should provide new appropriations and modernize stockpile authorities, such as annual purchase caps, to enable timely acquisition of critical materials. It should also explore more creative means of acquiring materials, as China has been using licenses to ensure buyers cannot increase rare earths purchases to stockpile.⁷⁹

Map untapped resources. Congress should provide $1.6 billion to complete the U.S. Geological Survey Earth Mapping Resources Initiative to identify and assess domestic critical mineral reserves across the continental United States. High-resolution geological surveys—augmented with satellite imagery and AI-driven subsurface tomography—could create a “Google Earth” for underground resources. Full mapping would take over fifteen years, while mapping only priority areas would take approximately six years and require up to $650 million.

Accelerate permitting. Reform federal permitting to shorten the process of bringing mines online, as the United States currently has the second-longest lead time—an average of twenty-nine years. Recent efforts to accelerate permitting include President Trump’s Executive Order 14241, which in March 2025 added critical minerals infrastructure projects to the FAST-41 program, a process for improving federal agency coordination and timeliness of environmental reviews for infrastructure projects. Additional complementary reforms could include working with Congress to consolidate overlapping permitting requirements across regulatory bodies, increasing resources for permitting agencies (Bureau of Land Management, Forest Service), and clarifying provisions of the General Mining Law to reduce litigation-related delays.

Innovate Beyond Mining

Establish robust recyclinginfrastructure for end-of-life batteries, electronics, and permanent magnets, especially high-value materials like lithium, cobalt, and rare earths, by increasing financial incentives for R&D and recycling and supporting collection logistics through public-private partnerships. The DOE’s ReCell program has made progress by partnering with industry to develop cost-competitive methods for recycling advanced batteries.

Pursue advanced recovery methods by investing in next-generation separation techniques, such as synthetic biology and bioleaching, which use microorganisms to extract valuable metals from waste. Funding should be increased for initiatives with proven success, like the DOE’s Fossil Energy and Carbon Management program, theMINER program of the Advanced Research Projects Agency-Energy (ARPA-E), and DARPA’sEMBER program. Additional funding to universities and NSF programs conducting research into emerging extraction techniques could also speed up development of such methods.

Invest in substitution technologies by supporting research into engineered alternatives, such as metamaterials and quantum alloys that could reduce or eliminate the need for rare earths in key applications. ARPA-E’sREACT program is developing cost-effective alternatives to rare earths and could be further scaled and expanded in scope to include alternatives beyond magnet materials. Once these alternatives are identified, additional investment will be needed to create the manufacturing capacity to produce meaningful volumes.

Workforce

The Trump administration’s America’s Talent Strategy recognizes that a skilled workforce is essential to leading in key technologies and achieving U.S. economic security and calls for action across five pillars: industry-driven strategies, worker mobility, integrated systems, accountability, and flexibility and innovation.⁸⁰ As these efforts are operationalized, a natural next step is to strengthen education and training pathways for AI, quantum, and biotechnology.

When people think about AI, biotech, and quantum, they might picture PhD-trained coders sitting at their keyboards or scientists wearing lab coats. Without question, the United States needs to ensure it is training the world’s topSTEM talent. Equally essential are the technical trades workers who can build, run, and maintain the physical infrastructure that makes these industries possible. Building and running AI data centers, for example, will require training more electricians to manage power needs, machinists to fabricate key components and equipment, and technicians to install and maintain cooling systems.

Solutions will require collaboration across the U.S. innovation ecosystem: federal, state, and local government, early to graduate education, vocational and research programs, and private businesses of all sizes. Progress is already underway at the state and local levels, in places such as Montana’s Photonics and Quantum Alliance, North Carolina’s Biotechnology Center Landing Pad, the University of Florida’s Sid Martin Biotechnology incubator, and Illinois’s Quantum and Microelectronics Park. While each example is unique, all are harnessing partnerships between universities, the private sector, and government.

Given the importance of this topic, which extends far beyond the focus of this report, the Task Force recommends that it be the subject of a dedicated study that builds upon the administration’s America’s Talent Strategy and recent work. In 2018, CFR’s Task Force on workforce development,The Work Ahead: Machines, Skills, and U.S. Leadership in the Twenty-First Century,made a range of recommendations for the federal government, state and local governments, and the private sector to rebuild the links among work, opportunity, and prosperity for all Americans. Many of these recommendations remain relevant today, while others should be updated in light of rapid technological change and intensified geopolitical competition.⁸¹

The age of economic warfare has arrived, yet the United States is still wielding last century’s weapons. Many U.S. economic tools were designed during a period of intense geopolitical competition, but innovation and China’s rise pose new challenges that extend beyond the emerging technologies examined in previous sections. The U.S. government needs better coordination across agencies, deeper technical expertise, and a more proactive approach to partnering with the private sector to successfully shape and execute economic security policies. Strikingly, unlike in the realm of military power, there is no “doctrine” for using economic security tools, no guiding principles, and few coordinated drills and trainings. To fill these gaps, the Task Force recommends establishing an Economic Security Center, upgrading economic security tools, and adopting principles to strengthen the practice of economic security.

Establish an Economic Security Center

The U.S. government needs a central hub for economic security. Capabilities for economic security are spread across several departments and agencies, and consequently, U.S. economic security policy has suffered from fragmented decision-making and a lack of institutional capacity. Effective economic security policy also depends on clear, sustained communication between government and the private sector, which historically has been too ad hoc. To address these challenges, the executive branch and Congress should work together to create an Economic Security Center at the Department of Commerce to serve three roles:

A U.S. government coordinatorthat leads

A technical advisorwho provides

A private-sector partnerthat offers

Upgrade Economic Security Tools

U.S. economic security tools need to be modernized. Export controls and industrial policy require the most immediate attention, given their importance to ensuring U.S. technological leadership and the challenges identified in previous sections. To be sure, other tools require improvement as well but have been the focus of more recent reforms.⁸³ Upgrading export controls and industrial policy as recommended below would enhance the defensive and offensive aspects of U.S. economic security, respectively.  

On the defensive side of the U.S. economic tool kit, expansion of export controls has outpaced the ability of the U.S. government to effectively enforce them, as highlighted by U.S. semiconductor controls. Complying with an increasingly complex control regime can disadvantage U.S. companies, especially smaller firms, and delay the delivery of important capabilities to partners and allies. Overall, the U.S. government should move to a more selective, powerful posture of fewer controls with higher penalties for violations.

To make export controls more effective, the Task Force recommends the following actions:

On the offensive side of the U.S. economic tool kit, upgrading several aspects of U.S. industrial policy would help mobilize larger pools of private capital. The United States benefits from the world’s deepest capital markets, but as highlighted in the quantum and biotechnology sections, private investment flows toward areas with the highest perceived returns. In strategically important areas where risks are higher, or potential returns are lower, the U.S. government has an important role to play in mobilizing private capital.

To catalyze capital toward underinvested areas, the Task Force recommends the following actions:

Guide Economic Security Actions With Principles

The economic security needs of the United States are continuously evolving, and much remains to be done to establish trust in supply chains. Looking beyond today’s immediate challenges, the following principles are intended to help U.S. policymakers decide when and how to intervene in markets in the name of national security. Answering the questions below in the affirmative should increase one’s confidence in the success of an economic intervention for national security purposes. Answering in the negative should give one pause and encourage additional consideration. To further assist decision-making, each principle also includes advice from former senior U.S. officials.

Market impediments:Is there a market impediment that could harm U.S. national security? Market impediments that affect national security include the following:

Advice from practitioners:

Focus:Are the objectives for the intervention clearly defined and clearly related to national security, and do the tools directly target the risk?Past practice suggests that U.S. economic tools, used appropriately under certain conditions, have successfully advanced a range of objectives, including

Advice from practitioners:

Feasibility:Are key conditions favorable for the U.S. government intervention to succeed?Important factors include the following:

Advice from practitioners:

Trade-offs:Do the benefits of the intervention outweigh the costs, and is the intervention proportionate to the threat? Relevant costs include the following:

Advice from practitioners:

Those principles are a starting point for moving toward a more systematic approach to the practice of economic security. Using them will help ensure that U.S. government interventions are more likely to achieve their objectives. It will remain essential for the U.S. government to assess the impact of its interventions, both to adjust when needed to achieve the objective at hand and to inform the improvement of U.S. economic security institutions, tools, and practices.

The race for tomorrow’s foundational technologies is underway, and China is gaining ground. The difference between leading and following in AI, biotech, and quantum will be measured in trillions of dollars in economic opportunity, as well as control over critical supply chains and defense capabilities. The United States must marshal its economic power to stay ahead.

This section provides additional information on this report’s top recommendations, as well as granular supply chain dependencies for each tech area.

Table I: Supply Chain Risks for AI

Table II: Supply Chain Risks for Quantum Technologies

Table III: Biotech Supply Chain Risks

Although the report lays out the stakes and vulnerabilities related to economic security, the importance of federal funding for basic research in technological leadership should be emphasized.

A pipeline of technological breakthroughs in the United States has been federal funding for basic research, including through agencies such as the National Science Foundation, the National Institutes of Health, the Centers for Disease Control and Prevention, the Environmental Protection Agency,DARPA, and the Departments of Energy and Agriculture. Because of the unpredictability of its results, its long time horizons, and the open-source sharing of its ideas, most basic research is funded by the public sector around the world. In the United States, the federal government has long been the largest source of funding for basic research, and most of this research has been done at the nation’s research universities. Basic research has played a major role in technological breakthroughs in semiconductors, artificial intelligence, quantum, and biotechnology.

Federal funding for basic research at independent research universities is an economic security lever that supports U.S. national security. The deep cuts in federal funding for basic research in the current federal budget, along with attacks on the independence of those universities, are impairing this lever.

—Laura D’Andrea Tyson

In the post–World War II period, the United States designed and championed an international economic system optimized for growth and efficiency through greater trade liberalization and global integration. That rules-based system, and the benign international economic environment it fostered, is currently subject to stress. Some of the stress is due to traditional protectionism, but it also reflects a major new development—the emergence of economic security as an increasingly central organizing principle for international economic policy. 

Economic security, the convergence of national security and economics, is the new mantra. Over the past decade, the United States has increasingly intervened in the economy by deploying a range of offensive and defensive tools— chief among them tariffs, as well as export controls, restrictions on inward and outbound foreign investment, and industrial policy—to protect foundational technologies and resources deemed critical to the country’s security. At the same time, the tenets of neoliberal economics have given way to harsh geopolitical realities, and power politics are rewiring the global economy. The contours of the new economic security paradigm remain to be fully defined. 

Any administration—current or future—will be called on to determine under what circumstances the government should intervene in the market, how and when the government should deploy various tools at its disposal, and what limiting principles and guardrails should guide the instances and extent of intervention. Even as those issues are addressed, the United States is engaged in an unprecedented competition with China across military, political, economic, and technological domains. It is therefore imperative that we address the most immediate challenges facing U.S. economic security. 

To help policymakers address those challenges, the Council on Foreign Relations convened a bipartisan Task Force on Economic Security under the auspices of its RealEcon: Reimagining American Economic Leadership initiative. 

From the quantity and quality of artificial intelligence publications and patents to the production of drug inputs, China is well on its way to compete in, if not lead, the development of foundational technologies, including artificial intelligence, quantum (sensing, communication, and computation), and biotechnology. China has also discovered where it has leverage over the U.S. economy, including its near monopoly on critical minerals extraction and refining. Given the size and reach of the U.S. economy, export controls, investment restrictions, and industrial policy play an essential role in ensuring the United States maintains the technology edge over China, whether it is to correct for market failures at home or to reduce overdependencies on certain markets for critical inputs, such as advanced semiconductor chips. 

Recognizing crucial challenges to investment, supply chains, and controls, the Task Force supports continued U.S. government leadership on the following specific recommendations: onshoring the manufacturing of critical inputs and components for semiconductors; accelerating U.S. progress on the world’s first utility-scale quantum computer; creating a network of advanced biomanufacturing hubs with co-investment from the private sector; expanding the National Defense Stockpile to include critical minerals; developing the U.S. workforce by supporting the machinists, electricians, and other trades workers needed to advance those technologies; and establishing an Economic Security Center at the Department of Commerce. 

At the end of the Cold War in the 1990s, the Council helped develop the concept of geoeconomics, the convergence of geopolitics and international economic policy. The current moment reflects an inflection point in the ongoing evolution of the U.S. role in the international economic environment not unlike thirty years ago. Thus, I commend the Task Force for providing policymakers with a pragmatic way to inform the United States’ approach to economic security, grounded in deep knowledge and real-world experience. 

I thank the cochairs, former Secretary of Commerce Gina M. Raimondo, former Deputy Secretary of the Treasury Justin G. Muzinich, and Chairman, President, and CEO of Lockheed Martin James D. Taiclet, for their leadership. I also thank CFR’s Jonathan E. Hillman, who directed the Task Force and authored the report, and Anya Schmemann, who guided the process.

Michael Froman

This report reflects the dedication of the members and observers of the Task Force on Economic Security, an accomplished group who devoted months to grappling with these complex challenges. I am especially grateful to our distinguished cochairs, Gina Raimondo, Justin Muzinich, and James Taiclet, for their steady leadership and focus on delivering practical recommendations.

We benefited from many candid, off-the-record conversations with leaders in government and business. Former officials helped shape our principles for practicing economic security, and business leaders shared their frontline views of today’s competition for foundational technologies. The staff of the Senate National Security Commission on Emerging Biotechnology sharpened our recommendations on biotech. A talented McKinsey team—including Jon Spaner, Ziad Haider, Bill Wiseman, Henning Soler, Alex Singla, Sara O’Rourke, Mary Parker Aldecoa, Caitlyn Mason, James Sorensen, Andrew Kennedy, and Charlotte Rediker—offered insights into supply chain risks and private capital mobilization. We also drew on thoughtful contributions from CFR members who joined discussions in New York, Washington, DC, and beyond. I would also like to thank the Amy Falls and Hartley Rogers Foundation for its generous support of the RealEcon Initiative.

This project would not have been possible without the extraordinary support of my CFR colleagues. I would like to thank Shannon O’Neil, Matt Goodman, Tom Bollyky, Heidi Crebo-Rediker, Rush Doshi, Kat Duffy, Jessica Harrington, William Henagan, Mike Horowitz, Rebecca Patterson, Stuart Reid, Adam Segal, Chris Tuttle, and Laura Taylor-Kale. My research associate Ishaan Thakker and intern Liam Hurtt provided critical research support and creative solutions as we moved from idea to outline and from draft to draft. The Product, Design, and Publications teams, steered by Maria Teresa Alzuru, expertly produced this report, including graphics by Will Merrow that help clarify complex issues. The Task Force team, led by Anya Schmemann, and assisted by Chelie Setzer and Katerina Viyella, embraced new approaches and kept this project moving forward at every step. Finally, I am grateful to CFR President Mike Froman for being one of the first practitioners and thought leaders to recognize how economic power was taking on a more central role in U.S. national security, and for the opportunity to direct this Task Force.

Jonathan E. Hillman

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