Thought Leader -- Fighting for the Innovation Economy

Can China buy its way to R&D dominance? AAEI's Marianne Rowden says the threat is real.

For a self-described "trade nerd," the headline couldn't be more provocative: "China Drawing High-Tech Research From U.S." The March 17 New York Times article, which discusses why U.S. manufacturers such as Applied Materials Inc. are locating top technology talent and R&D facilities in China, certainly made Marianne Rowden take notice.

Since becoming president and CEO of the American Association of Exporters and Importers (AAEI) in June 2009, Rowden says she has publicly responded to news articles on one or two occasions. But the day after the New York Times article appeared, Rowden fired off a press release urging U.S. lawmakers to "demonstrate the political will to compete with China for providing the best opportunities for researchers to do their work here, especially in the technology sector."

"China is willing to offer companies giant incentives to do their research in China, including cheap land leases and cash," Rowden said. "The U.S. may not be in the position to offer those kinds of incentives. But we can improve our responsiveness to the needs of innovators, and lift cumbersome and needless regulatory strangleholds."

Why does Rowden consider keeping high-tech research on domestic soil such an urgent matter? "If we don't, we're going to increasingly face imports from our technology being manufactured in other places and being re-imported to us," she warns. "And that is a perverse, perverse irony that I find galling."

For example, California is considering buying Chinese technology -- "it's our technology that the Chinese have sort of perfected that they want to sell back to us," Rowden assertsfor the construction of a statewide high-speed rail system.

"This is going to happen over and over again, and it makes me crazy," Rowden says.

Still, Rowden sees some silver lining in the New York Times article and other news stories on trade topics, as they show the "mainstream media now understanding the trade world, which has been under the radar for so long." On a similar note, reaction to defective products imported from China in recent years shows that "the American public now understands how much global trade touches their lives in a very tangible way."

Is this the right kind of climate for AAEI's message to gain traction? Perhaps. Rowden praises the Obama administration for its proposal to simplify the U.S.'s export-control system.

"President Obama has a clear understanding of the connection between national security, innovation and job creation by tackling the technical regulatory impediments to exporting goods from the United States," Rowden said.

Rowden believes there are numerous regulatory obstacles that are contributing to the United States losing ground to China in the fight to keep innovation on domestic soil. In "The Innovation Economy for America," an AAEI white paper sent to Congress in March, Rowden urges lawmakers to remove a number of those obstacles, through proposed legislation such as the Miscellaneous Trade and Technical Corrections Act (which permits duty-free entry of certain component parts or materials that are incorporated into finished product for export) and by enacting pending free-trade agreements with Columbia, Panama and Korea, among other suggested measures.

As worried as Rowden is about China's recent wins in attracting high-tech research (which is part of what she sees as China's desperate quest to develop a "world-class brand"), she wonders if China's bubble someday will burst.

"This idea that somehow a Chinese communist government is going to perform better over the long term than a capitalist democracy is just nonsense," Rowden says. "They're going to make some smart decisions, but they're also going to make some stupid decisions."

Rowden adds that the onus to keep U.S. innovators on domestic soil isn't only on our government. American innovation has been a function of our culture, Rowden says, as our society allows "obsessed" personalities such as Bill Gates "to be who they are without the pressure to conform."

"And to me that's where innovation comes fromfrom people who for whatever reason are slightly different and look at the world differently," Rowden says. "No government program can be a substitute for that."

That's why Rowden asserts that the fight for an innovation economy is "not just an economic issue and a competitiveness issue -- it's sort of a cultural identity issue."

"We still have a culture that values work and places importance on making things," she says. "We need to make things in America, and figuring out how to do that is a critical dialogue that we need to have, and not only with business and political leaders. It needs to be a public dialogue."

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