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Department of Commerce Releases Competitiveness and Innovation Report

Aline D. McNaull
Number 13 - February 3, 2012  |  Search FYI  |   FYI Archives  |   Subscribe to FYI

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The Department of Commerce recently released a report entitled “The Competitiveness and Innovative Capacity of the United States.”  Section 604 of The America COMPETES Reauthorization Act of 2010, signed into law by President Obama last year, mandated that the Secretary of Commerce complete this study that addresses the economic competitiveness and innovative capacity of the United States. 

Congress directed that this report address a range of topics and policy options, including the effectiveness of research and development policy, tax policy, the general business climate in the US, regional issues such as the role of state and local government in higher education, barriers to new business, trade issues, science and technology education, and the state of the manufacturing sector. 

The COMPETES Act specified that the Secretary of Commerce establish a process for obtaining comments about the report.  One part of this process was the establishment of a 15 member Innovation Advisory Board “for the purposes of obtaining advice with respect to the conduct of the study.”

The need for this report stems from the finding “that the scientific and technological building blocks critical to our economic leadership have been eroding at a time when many other nations are actively laying strong foundations in these same areas.”  Another area of concern is that “some elements of the US economy are losing their competitive edge which may mean that future generations will not enjoy a higher standard of living than is enjoyed in the United States today.”

The report suggests that there are factors which boosted private sector innovation in the past and that the US should continue to invest in these three areas to improve our future innovation capacity.  These factors include federal support for basic research, education, and infrastructure.  Issues within the manufacturing sector are also addressed as crucial to increasing US competitiveness.  The report notes that “Manufacturing’s share of GDP and the number of workers in manufacturing has fallen, while trade balance in manufactured goods has worsened,” and adds that “the current and future health of the manufacturing sector is strongly linked to the investments we make in research, education, and infrastructure.”

The report acknowledges a series of alarms on the subject of American competitiveness.  These alarms are of serious concern and include issues such as the United States’ ability to create jobs has deteriorated during the past decade, the fact that the middle class has struggled as incomes have generally stagnated, the pressures faced by the US manufacturing sector from foreign companies abroad, the struggle to prepare US students in math and science, the failure of traditional infrastructure in the United States to keep up with the fast pace of the growing population, as well as many of the issues raised in the National Academies of Science report “Rising Above the Gathering Storm.”

To address the shortcomings in supporting innovation, the report recommends that federal funding be increased for basic research and that a tax credit be extended for private-sector research and development.  This would give companies incentives to transition from basic research in laboratory environments to commercial production. 

The report states that:

“Federal funding on research cannot drive innovation by itself.  A healthy private sector must act in partnership with university and research labs to fund the transfer of new technologies to the market, creating new businesses built on innovation.  It is also crucial for institutions to encourage research, such as through a strong education system and up-to-date infrastructure.”

The importance of education in the fields of science, technology, engineering and mathematics (STEM) is highlighted as a key factor that affects the ability of the US to succeed in the global economy.  The report recommends ways in which government can encourage students and workers to pursue STEM education, for example addressing the challenges of affordable undergraduate education and expanding the quantity of STEM teachers.

On the issue of education, the report emphasizes:

“Economic growth closely depends on the synergies between new knowledge and human capital, which is why large increases in education and training have accompanied major advances in technological knowledge in all countries that have achieved significant economic growth.  Our nation’s education system underpins the United States’ rise to the position of richest nation on the planet in the last century.  However, we must recognize and address cracks in this building block of American innovation, lest we fall behind countries that have placed a higher priority on developing a skilled workforce.” 

In the fifth chapter, the report discusses the importance of federal government investment in a modern electrical grid that provides Internet access in both urban and rural communities.  The report also emphasizes the current efforts to build the US infrastructure, including projects like the NextGen Air Traffic Control System, improving smart grid standards, and also highlights the administration’s initiatives to increase funding for transportation needs. 

To highlight the importance of infrastructure development, the report mentions:

“Providing and maintaining infrastructure is one of government’s most important roles, and perhaps one of the most underappreciated.  Infrastructure improves the lives of individuals every day, providing electricity and water, the roads and public transportation needed for commuting and shopping, and the telecommunications networks needed for the free flow of information and ideas.”

The report acknowledges that a strong manufacturing sector is uniquely important to the US economy and that “an innovative and secure domestic manufacturing base is critical to national security.”  Manufacturing is the largest contributor to US exports and as such President Obama’s National Export Initiative set the ambitious goal of doubling US exports by the end of 2014. 

The report concludes by summarizing ten key policy proposals: continuing to support government funding for basic research, enhancing and extending the R&D tax credit, speed the movement of ideas from basic science labs to commercial applications, address STEM shortcomings, increase the spectrum for wireless communication, increase access to data to help spur innovation, coordinate federal support for manufacturing, continue and strengthen efforts to foster regional clusters and entrepreneurship, promote America’s efforts and improve access to foreign markets, and ensure that conditions exist in which private enterprise can thrive.  

The President’s Council of Advisors on Science and Technology (PCAST) held a meeting on January 6 during which Secretary of Commerce John Bryson gave a summary of this report.  Following his talk, Members of PCAST discussed federal and state government partnerships and university-industry partnerships as ways to move forward with the goals of increasing the science capacity in the US.  Secretary Bryson also discussed his reaching out the Secretary of Education Arne Duncan to consider the possibility of using funding from the Department of Commerce in programs that would benefit the education community, for example partnerships between businesses and community colleges. 

The full report is available here.

Aline D. McNaull
Government Relations Division
American Institute of Physics