All posts by Stephen Ezell

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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

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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

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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

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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

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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

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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

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Scientific Researchers at Asian Universities Attracting More Industry Funding than American Counterparts

A report released last week by Times Higher Education, the World Academic Summit Innovation Index, finds that university scientific researchers from many Asian nations—including Korea, Singapore, Taiwan, and China—are attracting substantially more industry funding per researcher than their American counterparts. For example, the report finds that on average Korean researchers receive four times as much industry funding as their American peers, with the average value of industry funding per researcher in Korea totaling a world-leading $97,900, compared to just $25,800 for American researchers, which placed the United States 14th in the thirty-nation study. What makes this all the more striking is that American researchers tend to cost more than their Korean counterparts, and yet the latter still receive more funding.

Unfortunately, this report merely continues to present evidence from a long and troubling trend of faltering industry investment in university research in the United States. As ITIF found in its 2011 report University Research: The United States is Behind and Falling, from 2000 to 2008 the United States ranked just 23rd among 30 leading economies in percent change in business-funded research performed in the higher … Read the rest

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Why Is China Scaling Back ITA Expansion Ambitions When It So Clearly Benefits?

Last week, China precipitated a suspension in global negotiations to expand the Information Technology Agreement (ITA) by asking for the removal of about 100 products from ITA expansion negotiations. Originally signed in 1996, 75 nations now participate in the agreement, which completely removes tariffs on eight categories of information and communications technology (ICT) goods covering hundreds of products. But as the agreement has not been updated since it took effect in 1996, negotiators have been working over the past year to add coverage to the myriad products invented since then—such as multi-component (MCO) semiconductors, GPS systems, and video game consoles—or ones that were not originally included in the agreement—such as flat screen TVs, DVD players, audio speakers, and video recording equipment.

In fact, negotiators have identified 256 ICT product lines for possible ITA inclusion. But when countries began identifying “sensitive” items they either wanted to exclude from the agreement or reserve for tariff phase-outs over several years, China identified 148 products, including 106 it wanted to remove outright. In contrast, the European Union identified ten sensitive products, the United States one, and Canada zero. The next biggest “sensitivities” list was … Read the rest