About a century ago, when Henry Ford revolutionized modern automobile production, engineers from France, Japan, Germany and the Soviet Union flocked to Detroit to learn how to copy his miraculous methods. Ford’s River Rouge plant, then the world’s largest factory, eventually inspired facilities from Renault, Volkswagen, Toyota and the Russian automaker Gaz. It also led to the nightmarish wartime economies of World War II, when tanks, planes and toxic chemicals rolled off assembly lines worldwide.
Those engineers weren’t just in Detroit out of curiosity. They knew they had to catch up with American methods. As one Weimar conservative said, Germany had to “study the means and mechanisms of the Americans” or become “the prey of the United States.”
Now America is in its own game of economic recovery – in the clean energy boom zone. This year, China is the world’s largest car exporter — thanks to an increase electric vehicle industry – and it commands at least 74 percent market share in every step of the solar panel supply chain. China learned to master the solar, battery and electric vehicle industries through the 2010s, while the United States debated whether to pass a clean energy policy — and even whether climate change existed at all. With the Inflation Reduction Act, the United States now has an opportunity to become more competitive, and nothing gets lawmakers from across the political spectrum up in arms faster than the prospect of crushing China.
But America cannot build a competitive renewable or electric car industry from scratch. The history of innovation—and of the modern world, frankly—shows that American engineers will advance in these industries only when they can work with their Chinese counterparts.
Look no further than the mess Ford is in right now. By 2026, Ford wants to start selling electric vehicles equipped with batteries made from a chemical cocktail known as LFP – lithium, iron and phosphate – to the US market. LFP batteries can be charged faster and more often than the cobalt and nickel batteries Ford uses today; they are also cheaper and stronger and the minerals are easier to obtain.
The only problem: Ford doesn’t know how to make LFP batteries on a large scale. No American company does. Although Americans first invented and developed LFP technology, back in the 1990s, Chinese companies were the ones who figured out how to produce it at scale. Today, Chinese companies basically have a monopoly.
But Ford has a solution. In February, it announced plans to open a new $3.5 billion LFP battery plant in Michigan. It would license the technology from a Chinese manufacturer of batteries, whose engineers – in the words of Bill Ford, the president of the car manufacturer – “would help us get up to speed so that we can build these batteries ourselves.” It seemed like a win-win: The Chinese company, CATL, would get cash and prestige; Ford would learn how to make these batteries; and America would gain 2,500 new manufacturing jobs. This was, apparently, exactly the kind of situation that Biden’s climate law was intended to set up.
However, Senator Joe Manchin, the West Virginia Democrat who helped shape the law, exploded at the news. “I’ll be damned if I’m going to give them $900 out of $7,500 to let it go to China for basically a product that we started,” he told an energy conference in Houston. (He was referring to the subsidy the law gives to buyers of new electric cars, although Ford says none of that federal money would go to the Chinese company.)
“You’re telling me we don’t have the smart people and the technology, and we can’t move fast?” he asked. “That doesn’t make sense.”
Republicans also balked at the partnership. Governor Glenn Youngkin of Virginia, who had once angled to win the factory for his state, suddenly withdrew his proposal and criticized the project as “a Trojan horse relationship with the Chinese Communist Party.” Senator Marco Rubio of Florida demanded that the Treasury Department assess the deal as a national-security risk.
But for all the overheated rhetoric, the truth is that free-flowing, in-person collaboration has been the fundamental way technology moves across borders. With few exceptions, you either let yourself learn from your competitors, or you fail to compete with them at all.
Other countries understand this. It is America that has had to learn this lesson again and again.
We learned it first in the 1910s, when Germany had the largest chemical industry in the world. American chemical companies had to wait until after World War I to bring German scientists to the United States so that Dupont and Dow could learn to make chemicals as good as their German competitors.
We learned this lesson again in the 1980s when the Reagan administration pushed Japanese automakers to open factories with their American counterparts—which allowed American engineers to better understand the superior manufacturing model the Japanese had developed. Those initial factories were such a success – in one, labor input dropped to 19 hours per vehicle from 36 hours – that the model has been adopted throughout the industry and the world.
As American engineers began working with their Japanese counterparts, they were amazed at how certain ideas and approaches had eluded them until they could see the Japanese doing it themselves. “Toyota teaches implicitly,” a business school professor observed. “They can’t tell you in words what they’re doing, not even in Japanese.”
In industry after industry, it’s a similar story. To describe the crucial information that cannot be written down in a book or described in a patent, social scientists use the term “tacit knowledge.” We can use a simpler term: know-how.
Knowledge is what makes our modern, technical society work. Performing surgery, refining a dangerous chemical or manufacturing a lithium-ion battery – they all require know-how.
Anyone can buy a machine tool on the global market, but only with know-how can you use it well and deploy it on an assembly line efficiently.
And know-how is why Ford ultimately sought out the Chinese company. Sure, Ford engineers can study the chemistry of these more advanced batteries, but that won’t help make them, more than memorizing the NFL rulebook would make you Tom Brady. China is, at present, the number one manufacturer of electric vehicles in the world of batteries. Only its engineers can show Ford’s engineers how to produce them in a fast, reliable way — and at a globally competitive price. This also applies in all other green industries.
Mr. Manchin and Mr. Rubio may find ways to discourage such a partnership. Under the Inflation Reduction Act, electric vehicle batteries manufactured by a “foreign entity of concern” are ineligible for the $7,500 tax credit. Although the meaning of that phrase remains unclear, one possible interpretation suggests that virtually any a company subject to Chinese law might be banned — meaning that even if Ford produced every part of a car in the United States, the Chinese company’s involvement might still disqualify the car’s buyer from receiving the $7,500 tax credit.
But rejecting Chinese know-how would make us, ironically, more dependent on China in any future security breach — because we will simply have to import from China what we never learned to do for ourselves.
This is the kind of dilemma that Treasury Secretary Janet Yellen had to navigate on her recent trip to China — and that federal officials must negotiate for years to come. If American firms cannot open factories with Chinese firms in the United States, then the country’s workers will lose jobs, its consumers will not get new technology and its engineers will fall behind the world’s best. Competing with China is a good idea. Being so suspicious of it that you trip over your own feet is not.