Department of Commerce Releases Competitiveness and Innovation Report

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Publication date: 
3 February 2012

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.

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