While America Sleeps Other Nations Bolster Manufacturing Sector

While America Sleeps Other Nations Bolster Manufacturing Sector

April 22, 2014
Germany has a network of 67 technology centers focuses on industrially relevant R&D activities.   Japan announced a $2 billion investment to promote university-industry collaboration in applied research.    

The Senate Commerce Committee took an important step toward revitalizing American manufacturing competitiveness on April 9 when it completed mark-up of the Revitalize American Manufacturing and Innovation Act (RAMI).

The bipartisan legislation, cosponsored by Senators Sherrod Brown (D-OH) and Roy Blunt (R-MO), would create a National Network for Manufacturing Innovation (NNMI).

This network of 15 public-private institutes is designed to accelerate manufacturing innovation in key technologies and industries, while also bridging the gap between basic research performed at U.S. universities and research laboratories, product development by U.S. manufacturers, and manufacturing these products at scale in the United States.

While this is a positive and important step, it also highlights how far behind we are as a nation at promoting manufacturing innovation and competitiveness. In fact, many don’t even recognize we have a problem.

A host of pundits, and even some policymakers, have argued that American manufacturing is rebounding and therefore new policies are not necessary, while others have contended that manufacturing doesn’t matter anymore so we needn’t focus on it at all.

This is despite the fact that the United States lost 5.7 million manufacturing jobs during the 2000s, has accumulated a $360 billion trade deficit in advanced technology products since 2010, and now ranks forty-third out of forty-four nations in the rate of progress in improving its innovation-based competitiveness.

It’s a little like Nero fiddling while Rome burned.

Many Countries Have Strategic Action Plans

In contrast, numerous other countries have long-standing, strategic, and well-funded advanced manufacturing support systems that have proven central to expanding technology creation, improving productivity, and bettering trade performance.

These nations realized decades ago that they were competing in an increasingly high-tech and global manufacturing environment where businesses could choose to invest resources and build facilities in the most attractive locations regardless of geography.

In response they have created strategies and infrastructures specifically designed to attract and grow production and the jobs that come with it. These involve more friendly tax policies, better policies for training and infrastructure, and also technology support systems.

A strong example of a successful technology support system is illustrated by Germany’s Fraunhofer Institutes. This network of 67 technology centers focuses on industrially relevant R&D activities that translate emerging innovations into commercializable products across a wide variety of targeted sectors and technology platforms that are important to the German economy, including advanced machining, optics, robotics, and wireless technologies.

The German government created the centers in 1973 and joint public-private investment in the centers now reaches almost $3 billion annually. Notable Fraunhofer successes include the development of the MP3 compression algorithm and triple-junction solar cells.

In 2011 alone, the Fraunhofers produced 673 invention disclosures and 494 patent applications. This focus on innovation and productivity is one reason why Germany has been able to maintain strong performance in medium-and high-tech manufacturing despite having business costs that are significantly higher than those of the United States.

Other nations—from China and Denmark to Sweden and Taiwan—have followed Germany’s lead and supported the creation of comprehensive manufacturing innovation ecosystems, backed by significant government investment, that have spurred manufacturing innovation and productivity.

And more nations are joining the fold every day. In 2013, Japan announced a $2 billion investment to promote university-industry collaboration in applied research with a goal of expanding advanced manufacturing industries.

Similarly, Great Britain created a $1.5 billion network of seven “Catapult Centers” designed to promote industries in which the United Kingdom has a competitive advantage, such as aerospace and life sciences.

The United States risks falling further behind in the race for high-growth, high-paying industries if we do not “read the writing on the wall” and develop similar federally supported “innovation generation engines.”

To accomplish this goal, Congress should enact and fully fund the National Network for Manufacturing Innovation while also looking to develop a comprehensive manufacturing innovation strategy that can harness the resources and assets the nation possesses and promote global competitiveness and growth moving forward.

Failure to do so will result in continued economic stagnation.

About the Author

Robert Atkinson | President, ITIF

The Information Technology and Innovation Foundation (ITIF) is a non-partisan research and educational institute – a think tank – whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues.

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