All posts by Stephen Ezell

Paul Krugman

Krugman Wrong on the Trans-Pacific Partnership, Again

A Paul Krugman op-ed in The New York Times today, “No Big Deal,” incorrectly argues that completing a trans-pacific trade pact would be of little consequence to the U.S. economy. Rather, successfully concluding The Trans-Pacific Partnership (TPP), which includes 12 Asia-Pacific region countries—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States—is vitally important to the U.S. economy and to future global economic integration, as ITIF argues in Concluding a High-Standard, Innovation-Maximizing TPP Agreement.

Krugman argues that the “glory days” of trade deals are over, in part because previous trade pacts significantly reduced many countries’ tariff levels, such that “there just isn’t much more protectionism to eliminate.”

Unfortunately this line of thinking fails to acknowledge the pernicious and growing impact of NON-TARIFF barriers (NTBs) on innovation industries. These barriers include a range of unfair and distortionary practices, such as inadequate intellectual protections on foreign intellectual property (IP), restrictions on trade in services, barriers to digital trade and cross-border data flows, currency and standards manipulation, and localization barriers to trade—policies that mandate local production or the transfer of technology or intellectual property … Read the rest

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New Research Confirms Evidence of Faltering U.S. Investment in Biomedical Research

In 2012, ITIF’s report Leadership in Decline: Assessing U.S. International Competitiveness in Biomedical Research—which National Institutes of Health Director Francis Collins told the New York Times last July was the one publication he’d most recommend President Barack Obama read—warned that the United States has not been sustaining the historically strong investments in biomedical research that previously propelled it to global life sciences leadership. The report noted that an increasing number of countries are investing more in biomedical research as a share of their economy than the United States. For example, in terms of government funding for pharmaceutical industry-performed research, Korea’s government provides seven times more funding as a share of GDP than does the U.S., while Singapore and Taiwan provide five and three times as much, respectively.

Now comes a new report, Asia’s Ascent—Global Trends in Biomedical R&D Expenditures, from The New England Journal of Medicine confirming these findings. As summarized by a recent Economist article, Biomedical research budgets: The party’s over, the report finds that, from 2007 to 2012, average annual investment in biomedical R&D increased by 33 percent in China, 12 percent in South Korea, … Read the rest

number-2

America to Become # 2 Global Economy—And That’s Not Great News

In an op-ed for the Washington Post this past Sunday, Charles Kenny writes that America is No. 2! And that’s great news, referring to the day soon to come when China’s GDP surpasses that of the United States. Kenny writes that this is an eventuality that should not distress Americans, because “losing the title of largest economy doesn’t really matter much to Americans’ quality of life,” particularly because it is America’s superior per-capita GDP that matters more than aggregate GDP, and so “living in an America that ranks second in GDP to China will still be far, far better than living in China.” While certainly Kenny is correct that average per-capita GDP is the proper measuring stick, there are actually a number of compelling reasons why China’s impending eclipse of U.S. GDP will not be the sanguine moment Kenny characterizes it as.

First, the United States has held its position as the world’s largest economy since surpassing Britain for that distinction in 1871; that the United States should be losing that position in 2016 or 2017 is not preordained. Many argue that China’s immense population of 1.36 billion people, … Read the rest

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Government Support Actually Integral to Silicon Valley’s Development

In an otherwise quite nice report from the Government Accounting Office (GAO) called Global Manufacturing: Foreign Government Programs Differ in Some Key Respects from those in the United States, the authors discuss the efforts of countries including Canada, Germany, Japan, South Korea, and the United States to support manufacturing, in part through the development of regional high-tech clusters. Yet the report’s authors argue that “the effectiveness of cluster policy has not been established; the formation of successful clusters in the United States, such as California’s Silicon Valley, suggests that government support for clusters may not be necessary.”

Unfortunately, here the GAO authors are echoing the point of view of individuals such as Michael Arrington, who believes that the Best Way to Fix Silicon Valley is to Leave it Alone. But as Robert Atkinson convincingly argues in Divorce Washington at Your Peril, Silicon Valley—as will a forthcoming MIT-ITIF report, Federally Supported Innovations: 22 Examples of Major Technology Advances that Stem from Federal Research Support (February 2014)—government support has actually played a fundamental underlying role in the development of Silicon Valley (as it has in the development of other … Read the rest

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Digital Trade Act of 2013 Instrumental to Protecting and Empowering the Global Digital Economy

On Tuesday, December 10, Senators John Thune (R-SD) and Ron Wyden (D-OR) introduced The Digital Trade Act of 2013, legislation that would protect the Internet from restrictive measures that obstruct the free flow of data in the global economy. The Act establishes negotiating principles designed to guide U.S. negotiators in addressing key digital trade issues in future bilateral and multilateral agreements and in multi-stakeholder settings. Key principles include: preventing or eliminating restrictions on cross-border data flows, prohibiting localization requirements for data and computing infrastructure, ensuring that provisions affecting platform Internet sites are consistent with U.S. law, and recommitting to a multi-stakeholder model of Internet governance.

Affirming these principles protecting digital trade is vitally important because information and communications technologies have become the modern global economy’s principal driver of growth. For example, a March 2013 study by Finland’s Ministry of Employment and Economy estimates that, by 2025, half of all value in the global economy will be created digitally. Similarly, the McKinsey Global Institute estimates that the Internet alone accounted for 21 percent of aggregate GDP growth between 2007 and 2011 across 13 of the world’s largest economies. Digitally enabled … Read the rest

federal investment

Robust Federal Investment in Scientific Research Critical to Sustaining Moore’s Law

On Thursday, November 21, ITIF held an event on Capitol Hill asking Are Advancements in Computing Over? The Future of Moore’s Law. Gordon Moore’s revolutionary observation/prediction in 1965 that the number of transistors on a chip would double every 12-18 months (and thus roughly so would computer processing speeds), has proven prescient. Indeed, over the past forty years, processing speeds have increased over 1 million-fold, unleashing a wave of innovation across industries ranging from ICT and life sciences to energy, aerospace, and services, thus playing a transformational role in driving the global economy and improving quality of life for citizens around the world. Semiconductors (i.e., integrated circuits) constitute the bedrock technology for the entire ICT industry, and annually support an ancillary $1 trillion in electronics-based products—everything from mobile phones and automobiles to medical devices.

Yet—possibly as soon as 2020—the dominant silicon-based CMOS semiconductor architecture will likely hit physical limits (particularly pertaining to heat dissipation) that threaten to compromise Moore’s Law unless a leap can be made to radically new semiconductor chip architectures. This is one of the most critical technology issues the world faces today, because without significant investment … Read the rest

currency picture

Top Competitors Continue to Outinvest the United States in Export Credit Financing

Global competition in export credit financing remains increasingly formidable, with foreign competitors enjoying substantial support from their countries’ export credit agencies, as ITIF originally wrote in Understanding the Importance of Export Credit Financing to U.S. Competitiveness. The United States’ Export-Import Bank (Ex-Im Bank) fills an important role in leveling the playing field for U.S. exporters by matching credit support that other nations provide to their exporters, thus preventing foreign exporters from enjoying undue advantage. This ensures that U.S. exporters are able to compete against foreign competitors based on the quality and price of their products and services, and not loose sales because a foreign government has helped a foreign competitor by providing superior financing terms to a potential buyer.

Unfortunately, the 2012 Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United States underscores just how much more other countries—and principally America’s top economic competitors in Europe and Asia—are investing in export credit financing, both as a share of GDP and—in China’s and Korea’s case—even current dollars.

In fact, in 2012, Korea, India, China, France, Germany, and Italy all invested more in new … Read the rest

Nordic countries

Effective Innovation Policies and Institutions Continue to Help Drive Success of Nordic Economies

On Wednesday, October 16, ITIF hosted representatives from innovation and government agencies from Denmark, Finland, and Sweden to discuss Nordic Innovation: What Can America Learn from the Scandinavian Innovation Ecosystem. (Video and audio from the event are available here.) The speakers credited the recent success of the Nordic economies to several factors, including: a strong bipartisan consensus regarding the importance of federal investment in education, scientific research, and innovation; well-organized national innovation systems that benefit from formally articulated national innovation strategies (Finland’s, Sweden’s, Denmark’s) and well-funded national innovation agencies; and fundamental reforms undertaken in these economies over the past two decades that have made their tax structures more globally competitive, markets more competition-based, federal budgets better balanced, and workers greater skilled.

Indeed, across a range of indicators, it’s clear that Denmark, Finland, and Sweden represent some of the world’s most innovative and globally competitive economies. For instance, Finland, Sweden, and Denmark rank second, third, and eighth, respectively, in ITIF’s Atlantic Century II report, which benchmarks 44 nations and regions on 16 key indicators of innovation and competitiveness. In terms of national R&D intensity—how much … Read the rest

Floor Of Manufacturing Facility

Legislation to Revitalize American Manufacturing on Congress’s Docket this Fall

With the summer recess winding down and Congress returning to session next week, legislators will have their plates full with budget, tax, immigration, and trade issues. But also commanding legislators’ attention this Fall should be several proposed bills designed to revitalize America’s manufacturing competitiveness. In particular, the bi-partisan Revitalize American Manufacturing and Innovation Act of 2013 introduced in August as S. 1468 in the Senate by Senators Sherrod Brown (D-OH) and Roy Blunt (R-MO) and as H. R. 2966 in the House by Representatives Joe Kennedy (D-MA) and Tom Reed (R-NY) would authorize and appropriate $600 million in funding for the establishment of a National Network for Manufacturing Innovation (NNMI). The Act authorizes the establishment of up to 45 Institutes of Manufacturing Innovation (IMIs), each to be proposed by industry and initially co-funded jointly by industry and government.

As ITIF writes in A National Network for Manufacturing Innovation: Why America Needs It and How It Should Work, NNMI is poised to play a pivotal role in spurring U.S. industrial competitiveness and revitalizing American manufacturing by bringing together industry, small and medium-sized manufacturers, research institutions, businesses, universities, and the states … Read the rest

TTP Ship Sailing

Getting the TPP Done Right More Important than Getting it Done Right Away

With the 19th round of negotiations toward completing the Trans-Pacific Partnership (TPP) free trade agreement underway in Brunei, time is rapidly running out to finalize a deal before the member countries’ self-imposed deadline of the end of this year. But with the recent entry of the world’s third largest market, Japan, into the TPP and key sticking points like intellectual property (IP) protections and enforcement provisions remaining to be negotiated, one is forced to ask: What’s the rush?

It shouldn’t be all that surprising that the TPP has not progressed as fast as many would have hoped this year. We had an acting U.S. Trade Representative for several months before Michael Froman was confirmed by the Senate. And a 12-nation agreement that comprises approximately 40 percent of global trade was always going to be an ambitious lift, with each country having its own priorities. But as negotiators scramble to finish an historic free trade agreement that has been years in the making and could reshape global trade rules, perhaps they should take a step back and revisit the reason behind that deadline. At this late stage, it will be … Read the rest