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FYI Number 67: May 27, 2004

Recommendations for Strengthening the U.S. Innovation Infrastructure

"Unfortunately, the U.S.'s ability to adapt, compete and innovate alongside emerging workforces in countries such as China and India is threatened by a systematically weak education system, a dearth of R&D funding, visa policy that discourages the brightest foreign minds and a business climate heavy with regulatory and tax burdens." This is the conclusion of a new report by the Electronic Industries Alliance (EIA), an alliance of approximately 2,500 electronic and high-tech companies and associations. "The best hope for the U.S. to maintain its edge against rising global competition is by fostering and expanding our most prized intellectual asset: innovation," the report says. "If we want to ensure that successive waves of innovation begin in the U.S., and that U.S. workers are first to benefit from ‘the next big things,' we have to have the necessary innovation infrastructure in place."

"Our biggest concern," according to top EIA officials, "is not offshore outsourcing, but that demagoguery and political overreaction to this business practice...will lead to protectionist policies." Calling for "positive policy solutions, rather than isolationist or protectionist measures," the EIA report offers a series of recommendations to strengthen the nation's policies in six major areas: the trading environment; visas and immigration; the business, tax and regulatory environment; worker education and training; the K-12 education system; and R&D funding. The report, entitled "The Technology Industry at an Innovation Crossroads," is available on the EIA website at www.eia.org/docs/innovation_playbook.pdf.

Ensuring adequate federal funding for basic research is one of the report's key recommendations. An entire chapter is devoted to the importance of basic and applied R&D. "The U.S.'s leadership in facilitating and capturing the economic benefits of innovation has two cornerstones: fostering broad R&D activity and creating an environment that facilitates commercial innovation of R&D results," the report says. "Structural changes in the U.S. and world economies are raising challenges to the robustness and sustainability of the American system to foster the R&D and related commercial innovation...[and] federal policies and funding have been slow to adapt." The report warns that "Japan, the European Union (EU) and, more recently, China have made considerable progress in successfully adapting features of the U.S. innovation model in an attempt to gain parity with or even challenge the U.S. competitive edge in innovation."

The EIA report includes the following recommendations:

INTERNATIONAL BUSINESS AND TRADE ENVIRONMENT: Use the WTO legal system more aggressively; encourage trading partners to more aggressively enforce intellectual property protections; support policies for voluntary, open standards, including international standards on product design; and bring cases of improper trade practices to the attention of high-ranking government officials.

VISA AND IMMIGRATION POLICY: Provide adequate funding and resources to the relevant departments to streamline the visa processes and maintain appropriate statistics; strengthen enforcement of existing visa regulations; and tighten restrictions on the L-1 visa category for foreign workers with "specialized knowledge."

WORKFORCE ASSISTANCE AND TRAINING: Implement a "human capital investment tax credit" to encourage worker training by industry; revise the Trade Adjustment Assistance program to provide workforce assistance for all displaced workers regardless of business sector; subsidize high-tech workers who choose to work in K-12 science and math education; and establish industry-community college partnerships to train workers for technology careers.

BUSINESS ENVIRONMENT: Seek greater congressional review and oversight of new regulations; develop a national broadband policy with tax credits for upgrading networks; simplify U.S. tax policy; implement a tax credit for new full-time hires of U.S. workers; and eliminate state environmental design requirements and piecemeal state-by-state recycling regulations.

K-12 MATH AND SCIENCE EDUCATION: Require industry involvement in the Education Department's Math and Science Partnerships and industry input to relevant school district policies; encourage students to pursue teaching careers in math and science through tax credit, loan forgiveness, and professional development programs; support school choice policies; and revise the "No Child Left Behind" Act to ensure testing requirements do not lead to a "race to the bottom."

RESEARCH AND DEVELOPMENT: Strengthen and make permanent the R&D tax credit; increase funding and speed the award process for the Small Business Innovation Research (SBIR) program; enhance industries' ability to collaborate with and commercialize federally funded research; improve technology transfer practices; and support longer-term funding of a more balanced federal portfolio of basic research. For the 2005 fiscal year, this would include funding DOD S&T at three percent of the total defense budget; increasing the NSF budget by 15 percent over FY 2004 levels; increasing DOE Office of Science funding to levels consistent with the House-passed energy bill (H.R. 6); supporting NASA's FY 2005 budget request and the national vision for space exploration; and restoring funding levels for NIST's laboratory and extramural programs.

Audrey T. Leath
Media and Government Relations Division
American Institute of Physics
fyi@aip.org
301-209-3094

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