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How Do We Know NNMI is Working? Because China is Copying It

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China’s new manufacturing policy road map, unveiled in 2015 and called Made in China 2025, includes numerous policy initiatives designed to create an advantage for China in 10 key advanced-technology industries. Several parts of the program imitate the German Industrie 4.0 model, aggressively integrating Internet of Things technology into manufacturing and targeting specific advanced industries in which they hope to succeed. In addition, Made in China 2025 contains provisions for creating 40 Manufacturing Innovation Centers by 2025.

The proposed centers look a lot like a similar program in the United States. America’s National Network for Manufacturing Innovation (NNMI) program seeks to create 45 institutes spread across the country serving both as regional hubs and nodes of a network of institutes designed to support innovation, investment, and cooperation in manufacturing in advanced industries. Created with government funds and industry matches, the NNMI program coordinates workforce initiatives and research efforts, helps vertical supply chains adopt technology standards, and strengthens networks of collaboration and innovation.

Though both systems have roots in the German Fraunhofer innovation network, the Chinese Manufacturing Innovation Centers certainly seem like a direct response to the U.S. manufacturing innovation institutes. The difference? While the United States has only secured mandatory funding for the first 15 institutes, China describes their investment as “enormous.” While it may be too early to assess NNMI’s successes (despite a number of clear early proof points, including the success of the America Makes pilot institute in Youngstown, Ohio), the mere fact that China is copying it is an indication that the institutes are effective.

This is a better way for China to compete against the United States than through avenues such as currency manipulation, skewed consumer and production markets, or intellectual property theft. Public-private partnerships such as the one China is proposing do have valuable spill-over effects and don’t perniciously distort the playing field of global competition. But it does signal that China fully intends to compete with the United States in the advanced manufacturing sector. As Chinese Ministry of Industry and Information Technology Director Li Beiguang stated, “The government will collaborate with the private sector and they will both share the spoils.”

The eight manufacturing innovation institutes that have already been established in the United States, along with seven more that are expected to be complete by the end of President Obama’s second term, are an important step forward. However, the United States should recognize that the nations competing against it are investing far more into industrialization support. The FY 2016 federal budget contains only $155 million in industrial technology services, a category that encompasses both the NNMI program ($25 million) and the Hollings Manufacturing Extension Partnership (MEP) program ($131 million). All told, this is less than $0.50 per American citizen. Levels in competitor nations like Germany and China are substantially higher.

To properly support the U.S. high-tech manufacturing sector, Congress should appropriate the $1.9 billion in the president’s FY 2017 budget proposal to fully fund the network of 45 NNMI institutes. Congress should also increase funding for the MEP network and should also pass the bipartisan Manufacturing Extension Partnership Improvement Act, proposed by Senators Chris Coons (D-DE), Gary Peters (D-MI), and Kelly Ayotte (R-NH). Senator Ayotte said, “We have so much potential for growth, and this bill will allow the [New Hampshire] MEP to create partnerships with local universities to start apprenticeship programs. The bill focuses on all aspects of the manufacturing industry and also provides a mechanism for NH MEP to assist New Hampshire’s smaller manufacturers.”

As ITIF has argued before, the United States needs to take appropriate public policy approaches to help correct for market inefficiencies in R&D, commercialization, and investment in advanced industries. Through these steps, U.S. firms can be competitive with those from China and other nations, across a range of advanced industries. However, the United States must recognize that other countries are making targeted investments in the hopes of succeeding in various emerging technology areas. Spending on industrialization support can help keep the United States the center of global innovation.

 

Photo Credit: Michał Huniewicz

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About the author

Adams Nager is an economic policy analyst at ITIF. He researches and writes on innovation economics, manufacturing policy, and the importance of STEM education and high-skilled immigration. Nager holds an M.A. in political economy and public policy and a B.A. in economics, both from Washington University in St. Louis.