Why do we need a National Network for Manufacturing Innovation (NNMI), a $1 billion initiative the Obama Administration has proposed to facilitate public-private collaboration to enhance manufacturing competitiveness? Why not just reduce the tax and regulatory burden on companies and let free enterprise work its magic?
That question was the basis of some skepticism of NNMI voiced by members of the House Science, Space and Technology Subcommittee on Technology and Innovation at a public hearing today. As one Member put it, why not do it the “old-fashioned” way?
Well, in a way this is the old-fashioned way. When it came to innovations such as the Internet, “fracking” in the energy sector, advances in biotechnology that have extended our lives, and other breakthroughs, the government played a modest role in undertaking initial costs and risks of R&D or in harnessing the nation’s talent and resources in ways the private sector could not or would not do. This has been true since land grant colleges were created in the 19th century and helped make America the world’s breadbasket. That’s one reason why NNMI makes sense.
That’s not say that investments like NNMI alone lead to commercially successful ideas. At today’s hearing, Dr. Patrick Gallagher, the Undersecretary of Commerce for Standards and Technology, and Director of the National Institute of Standards and Technology affirmed that effective U.S. corporate tax rates is too high, the R&D tax credit is too modest, and trade policies too limited to create a more level playing field for U.S. companies. No argument from ITIF on that.
However, what the NNMI can do is very important. As Gallagher explained, it is designed to bridge the growing gap between basic and early-stage applied R&D that is taking place in universities and national labs and the later-stage R&D and commercialization taking place in the private sector, albeit at a declining place than it has in recent years. NNMI would, “create a vehicle where companies can leverage each other” and share information more efficiently to bring ideas from lab to market as quickly as possible. Notably, this week the Administration announced a $26-million effort to better align federal agencies’ activities to promoting advanced manufacturing job creation. Far from industrial policy, this and NNMI are modest steps to make sure the one hand knows what the other is doing in the innovation ecosystem.
Would NNMI guarantee whatever commercially viable innovations that emerge are manufactured here in the United States? The answer is no. But Gallagher pointed out it would help reverse a trend where the U.S. pioneers advances that too easily spill over only to be commercialized by firms overseas. By bridging the public/private gap, it is possible more of the manufacturing will be done domestically. One thing we do know is that the more we have hallowed out our manufacturing base, the more we have hallowed out our R&D. Companies leave the U.S. for tax and regulatory reasons and for cheaper labor, to be sure. But they also go where the R&D capacity is vibrant and growing. Unfortunately, the U.S. capacity has suffered from lagging domestic investment in comparison with countries in Asia and other places.
Today’s hearing demonstrated there is bipartisan interest in making U.S. manufacturing more competitive. The Administration must seize on this. Rather than waiting for the Hill to put the meat on the bone with the NNMI, Administration officials draft specific legislation and work with lawmakers in earnest to turn concept into reality.