Winning the race to innovation

America's manufacturers use innovation in every aspect of their business, to streamline production processes and to create new products that change lives for the better. U.S. manufacturing grew faster than the economy as a whole in 2004. Yet, there is a genuine, longer-term concern that our nation is in danger of losing its leadership position in R&D, innovation and a number of vital indus...

By John Engler, President, National Association of Manufacturers September 1, 2005

America’s manufacturers use innovation in every aspect of their business, to streamline production processes and to create new products that change lives for the better. U.S. manufacturing grew faster than the economy as a whole in 2004. Yet, there is a genuine, longer-term concern that our nation is in danger of losing its leadership position in R&D, innovation and a number of vital industries in the coming years.

Earlier this year, I helped release a sobering report that shows America is in danger of losing its global lead in science and innovation for the first time since World War II. The report was prepared by the Task Force on the Future of American Innovation, a coalition of leaders from industry, science and higher education.

We are still out in front of the world’s innovation curve, but we do not maintain that status by divine right or past achievements. Competing countries are climbing the technology ladder just as quickly as they can. And the only way the United States can continue creating high-wage, value-added jobs is to climb that innovation ladder faster than the rest of the world.

The task force has identified dwindling federal investment in science and research as a root cause of the problem. More robust investment is a necessary part of the solution because federally funded, peer reviewed and patented scientific advances are essential to innovation. Such basic research helped bring us lasers, the World Wide Web, magnetic resonance imaging (MRI) and fiber optics. We shortchange basic research at our peril.

The numbers tell much of the story. Federal research as a share of GDP has declined 37 % over 30 years. The U.S. share of worldwide high-tech exports has been in a 20-year decline, from 31 % in 1980 to 18 % in 2001.

Similarly, graduate science and engineering enrollment is declining in the U.S. while it is on the rise in China, India and elsewhere. Rapidly increasing retirements from science and engineering jobs here at home could lead to a critical shortage of U.S. talent in these fields in the very near future. The Manufacturing Institute — the education and research affiliate of the NAM — is helping to educate young people about the exciting careers that manufacturing will offer them.

An innovation agenda must also include policies that encourage private-sector productivity and capital investment. For example, we are urging Congress to enhance the R&D Tax Credit and make it permanent. Clearly, businesses could plan R&D expenditures more effectively if there was more predictability to the nation’s R&D incentives. Likewise, our nation has fallen behind many countries in deployment of high-speed broadband. We will support legislation in Congress to reform our telecommunications laws.

Encouraging innovation is vitally important, but we must also reduce the costs — many of them imposed by government policies — that make it so expensive to make things in America. An NAM study found that U.S. manufacturers are at a 22.4 % cost disadvantage relative to our major trading partners in costs such as taxes, litigation, regulations and health benefits costs. Manufacturers applaud Congress for passing class-action reform and energy legislation, which begin to address this problem. We must also continue our efforts to level the playing field for U.S. companies.

It’s time for America to remove barriers to investment and to reward innovation and creativity. We are in a race to recruit talented people, increase capital investment, ignite R&D spending, develop new products, open new markets and create high-paying jobs for workers across America. To win this race takes more than good luck. It takes a plan. If we remain the world’s leader in innovation, we will be establishing a plan for continued growth and prosperity.