Speaking of US Subsidies

When talking about competitive advantage, I mentioned that the US subsidies industries through its defense spending. Today there is an AP article AP article with a good example of this.

In the US Army Cold Regions Test Center in Alaska, they are testing new vehicle headlights that use LEDs instead of light bulbs. The new headlights will last the life of the vehicle, draw less electricity, penetrate snow better and are easier on the eyes of oncoming cars. The army may equip all its vehicles with them.

So how is this a subsidy? The company that makes them will recoup all its R&D costs from the US and will get its production up an running. It will have a major advantage when bringing the product on to the market. If they are lucky, the product will catch on (like the HUmmer did) and their civilian production will balloon. If they aren't lucky, they at least make moiney off the contract with the Army.

By the way, the Test Center itself is used by American companies (ironically like Daimeler Chrysler) to test cars. It's a smaller subsidy, but access to the center saves them from investing in their own and gives them an advantage over foreign car makers.