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Race to Innovate

Competitiveness, Manufacturing, and Trade Policy Analysis

Russian Trade Policy: Veering Off the Rules of the Road

When Russia joined the World Trade Organization in 2012, observers hoped it signaled the start of a process that would bring Russia closer into the rules-based trading system that the WTO oversees and the market-based economic principles that underpin it. But four years on, it has become increasingly clear this has not happened. In fact, Russian President Vladimir Putin has turned away from the WTO to pursue mercantilist and protectionist policies as part of misguided and costly industrial development strategies.

Two clear examples from the past year were a compulsory data localization policy that forces digital service providers to store data on Russian citizens inside the country’s borders and a discriminatory industrial policy that favored domestic pharmaceutical and medical device producers over imports. These two policies earned Russia the dubious distinction of being one of the few countries with more than one listing on the Information Technology and Innovation Foundation’s list of the top 10 worst innovation mercantilist policies of 2015.

Russia’s new Data Localization Law acts as a barrier to cross-border data flows as it prevents many data-intensive firms—whether in social media, financial, medical, or other service sectors—from

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Transatlantic Digital Cooperation Will Require Hard Debates

As the global Internet economy evolves and becomes more interconnected, cross-border policy tensions are rising, as is the need to resolve these tensions and conflicts in ways that continue to spur growth and innovation. To that end, I was honored to be a member of the Atlantic Council’s Task Force on Advancing a Transatlantic Digital Agenda. However, I was one of five members who, at the end of the day, could not have my name listed as endorsing the Task Force report.

First, it’s important to recognize the hard work of the commission members and staff and the significant parts of the report that will make a real contribution to better resolving transatlantic digital tensions. The report comes up with a number of creative and useful proposals, such as creating a new US-EU Digital Council, increasing cooperation with regulators on both sides of the Atlantic, lifting foreign investment caps in the telecom sector, and others. And its broad based support for transatlantic data flows and multi-stakeholderism for Internet governance is needed and welcome.

But there were other proposals and language I cannot support. The report’s discussion of net neutrality

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University Startups Conference Showcases Latest ITIF Tech Transfer and Commercialization Policy Proposals

ITIF Vice President for Global Innovation Policy Stephen Ezell spoke at the National Council of Entrepreneurial Tech Transfer’s University Startups and Global 1,000 Conference in Washington, DC, on April 5, 2016. The following excerpts his remarks.

With innovation being the lifeblood of the American economy, I’d like to offer several policy recommendations that could bolster America’s broader innovation, tech transfer, and commercialization ecosystem.

First, as a society, we’re simply not investing enough in scientific research. We’re not investing as much in research and development (R&D) compared to our own history. In fact, if our own federal government invested as much in scientific research as a share of gross domestic product (GDP) that we did in 1983, we’d invest at least $60 billion more a year in R&D than we do now. So closer to $200 billion a year than $138 billion a year. Moreover, we’re not investing as much as a share of R&D compared to competitor nations. Preliminary data for the forthcoming 2016 OECD Science, Technology, and Industry Scoreboard shows the United States falling to 10th of the 39 OECD countries in national R&D intensity (national R&D investment in

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5 Myths About Life Science Innovation in the United States

There has long been a de facto consensus among U.S. policymakers that America’s system for discovering and developing new drugs is the world’s best, and that there are two reasons for that success: First, the federal government provides robust funding for scientific research, mostly through the National Institutes of Health (NIH). Second, the U.S. system encourages vigorous innovation in the private sector by providing strong intellectual property protections and a drug reimbursement system that allow companies to earn enough to reinvest in risky research and development.

But this consensus is now under intense pressure from critics across the political spectrum, especially on the populist left, as left-leaning think tanks and presidential candidate Sen. Bernie Sanders (I-VT) question the legitimacy of both the public-private policy framework and the results it produces. The critics’ various indictments revolve around a number of misconceptions about how the U.S. system functions. Here are five of the most common myths:

1. The U.S. private sector does a poor job of discovering and developing new drugs.

The reality is that America’s biopharmaceutical sector is by far the world’s most innovative and productive. The industry today has

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The Demography of Innovation in the United States: Who Innovates and How Do They Succeed?

Behind every technological innovation is an individual or a team of individuals responsible for the hard scientific or engineering work. And behind each of them is an education and a set of experiences that impart the requisite knowledge, expertise, and opportunity. These scientists and engineers drive technological progress by creating innovative new products and services that raise incomes and improve quality of life for everyone.

But who are these individuals? How old are they? Were they born in the United States or abroad? Are they male or female? What are their races and ethnicities? What kind of education do they have?

To find out, ITIF surveyed more than 900 people who have made meaningful, marketable contributions to technology-intensive industries as award-winning innovators and international patent applicants. We learned that the demographics of U.S. innovation are different from the demographics of the country as a whole, and also from the demographics of college-educated Americans—even those with Ph.Ds. in science or engineering.

The study finds that immigrants comprise a large and vital component of U.S. innovation, with more than one-third of U.S. innovators (35.5 percent) born outside the United States. Alarmingly, women

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Yes, the U.S. Really Isn’t Contributing as Much to Global Innovation as Belgium

The American Enterprise Institute’s James Pethokoukis writes about ITIF’s Contributors and Detractors: Ranking Countries’ Impact on Global Innovation report in a new AEIdeas blogpost. We certainly appreciate James bringing attention to the report and calling it out as a “must read.” Yet his post does raise a degree of skepticism about ITIF’s report, questioning in particular the United States’ overall tenth place ranking and asking “If the U.S. is really less innovative than Belgium?”

It’s vital to remember that the intent of ITIF’s report is not to rank the world’s most innovative countries or to rank countries on their aggregate innovation output as measured by indicators such as numbers of new start-ups, numbers of digital economy “unicorns” valued at over $1 billion, or new technologies created—and, indeed, the report acknowledges that the United States leads the world in levels of absolute innovation output. Rather, the report’s objective is to assess which countries’ economic, innovation, and trade policies—on a per-capita basis, crucially—are doing the most to contribute to and the least to detract from global innovation. In other words, to ascertain which countries are producing the most positive global innovation

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New ‘Manufacturing Communities Act’ Would Spur Broad Manufacturing Renewal

While America’s manufacturing sector has rebounded somewhat from Great Recession lows—for example, adding 865,000 manufacturing jobs since February 2010—the recovery languishes, and even those job gains recover less than one-sixth of the U.S. manufacturing jobs lost during the 2000s. Moreover, the U.S. manufacturing sector has seen no growth in real value added since the end of the Recession. In fact, in 2013, U.S. manufacturing value added remained 3.2 percent below 2007 levels.

Put simply, America’s manufacturing sector continues to underperform its potential, meaning that America’s policymakers need to be leveraging every tool and instrument at their disposal to bolster the health of America’s manufacturing economy. And here, a key component of the strategy for accelerating America’s manufacturing recovery should include better empowering regional- and community-based manufacturing ecosystems.

That’s exactly what new, bipartisan legislation in the Made In America Manufacturing Communities Act, unveiled on Tuesday, February 9, 2016, sets out to accomplish. Sponsored by Senators Kirsten Gillibrand (D-NY), Mark Kirk (R-IL), and Jerry Moran (R-KS) along with Representatives David Cicilline (D-NY), Richard Hanna (R-NY), John Katko (R-NY), Tom Reed (R-NY), and Tim Ryan (D-OH), the legislation supports local manufacturing ecosystems

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Innovation Fact of the Week: Commercial Value of Illegally Installed PC Software Totaled Nearly $63B Globally in 2013

(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)

The global market for PC software is huge, but 43 percent of all PC programs that individuals and businesses installed in 2013 were not properly licensed, according to the BSA Global Software Survey. The commercial value of those illegal installations was $62.7 billion that year, up from $47.8 billion in 2007 when the illegal rate was 38 percent.

The United States has the world’s lowest rate of unlicensed software use (18 percent in 2013), but it is such a large market that the commercial value of those illegal installations is the world’s highest at $9.7 billion. In China, by contrast, 77 percent of all PC software installations were illegal in 2013, with a commercial value of $8.9 billion, the world’s second-highest total.

By region, the average rate of unlicensed software use was 59 percent or higher in Latin America, Central and Eastern Europe, the Middle East and Africa, and the Asia-Pacific region. That compared to 19 percent in North America and 29 percent

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Innovation Fact of the Week: US Leads World in Period of Data Exclusivity For Biologic Medicine Innovators

(Editor’s Note: ITIF features an “Innovation Fact of the Week” in each edition of its weekly email newsletter and on Innovation Files.)

In addition to awarding patents to creators of novel biologic medicines, countries also mandate varying periods of intellectual property protection for the clinical test data on the drugs. This “data exclusivity,” as it is commonly known, helps ensure that creators of biologic medicines have sole rights for a certain period to all of the underlying IP necessary to make and market the drugs. Once the patent on the original compound expires, other manufacturers are free to produce similar drugs—and they are free to generate their own clinical trial data in the process—but, until the period of data exclusivity expires, they cannot use the original patent holder’s clinical trial data to prove the safety and efficacy of their new “biosimilar.”

This additional period of data exclusivity is important because it makes the economics of drug development work. It gives the innovator more time to market the drug and recoup the costs of developing it, which today can approach $3 billion for innovative biologics. The United States offers 12 full

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President Obama’s Final State of the Union and the 2016 Presidential Campaign

President Obama’s final State of the Union address serves both as a marker for his last year in office and as a reference point (and foil) for candidates on both sides of the 2016 presidential race. So the State of the Union speech that ITIF would hope to hear the president deliver and the campaign stump speech we would hope to hear his would-be successors deliver are one and the same.

Last June, ITIF sent an open memo to all presidential candidates outlining exactly what we would dearly love to hear someone say. Written in speech form, the memo provides a detailed policy agenda to foster innovation, boost productivity, and make the United States more competitive in the global economy.

In the campaign debates that have ensued, several candidates have touched on issues that ITIF highlighted—from reforming the corporate tax code to bolstering STEM education—but none have yet embraced the fundamental precepts of our agenda, so we continue to hope.

On the eve of the State of the Union address, here again is our policy wish list:

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Read the detailed campaign memo here.

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