Expert Commentary

Report to the U.S. president on ensuring American leadership in advanced manufacturing

2011 executive advisory board report outlining the structural problems that the nation faces and making recommendations for the future.

The United States has traditionally led the world in the manufacture of advanced technological products, but in recent decades global patterns have shifted. The country recorded a trade surplus in terms of such products as recently as 2001, but by 2010 that trade balance was a deficit of $81 billion. Overall, from 1998 to 2010 the U.S. lost some 6 million general manufacturing jobs and now has only 11.6 million such jobs, representing just 11% of the labor market.

In 2011, the President’s Council of Advisors on Science and Technology issued a policy document, “Report to the President on Ensuring American Leadership in Advanced Manufacturing”, outlining the structural problems that the nation faces and making recommendations. Compiled by leading academics and industrial leaders, the report is intended to be a blueprint for revitalizing domestic high-tech manufacturing.

Key points in the report are:

  • The competitive position of the United States is at serious risk: the country “is losing leadership in manufacturing — not just in low-tech industries and products and not just due to low-wages abroad. We are losing ground in the production of high-tech products, including those resulting from U.S. innovation and inventions, and in manufacturing-associated research and development (R&D).”
  • As this dynamic unfolds, “other nations are investing heavily in advancing their manufacturing leadership, innovation systems, and R&D.” Future research is an area of acute concern: “In terms of R&D investment as a fraction of GDP, the U.S. now ties for 7th in the world behind countries that include Korea, Japan, Switzerland, and Israel. Although the U.S. still accounts for 30% of global R&D, its share is shrinking.”
  • This lack of research competitiveness is particularly glaring in the emerging clean energy sector: “The China Development Bank, for example, agreed to lend $35.4 billion to Chinese wind and solar companies in 2010, compared to the United States’ provision of $4 billion in grants and $16 billion in loan guarantees.… China’s government bank investment was matched by $54.4 billion in state and private investment.”
  • In the past, the U.S. government has funded the development of many technologies that were then brought to scale on the commercial market. Because “individual companies cannot justify the investment required to fully develop many important new technologies or to create the full infrastructure to support advanced manufacturing,” and the report recommended that this continue.
  • Stable incentives must be put in place to help industries and companies: “The effective R&D tax credit of the United States is now ranked 17th among industrialized nations by the OECD, whereas in 1992 it was ranked first. The R&D tax credit has been temporary since its introduction in 1981, requiring periodic renewal by Congress. This creates uncertainty for businesses, which depend on predictable conditions for long-range planning.”
  • The government should launch an “advanced manufacturing initiative,” to be funded at the level of up to $1 billion annually over a four-year period. This initiative would fund joint research efforts among the public sector, private industry and academia.

Tags: economy, employment, technology, campaign issue