The reality is that forced technology transfer is enabling China and other nations to gain global market share. But even if this does not succeed in transforming the Chinese economy into an innovation-based one, forced technology transfer polices do considerable harm to U.S. technology companies and to the U.S. economy, if for no other reason than reducing their profits and ability to reinvest in the next wave of innovation. The United States needs to pursue a two-pronged trade strategy, continuing as best it can to improve conventional trade organizations like the WTO, but also creating alternative “play-by-the-rules” clubs of like-minded countries. Pressured or mandatory technology transfer by other nations has, is, and will continue to negatively impact American R&D and innovation capabilities. It’s time for the federal government to step up its actions to fight this corrosive mercantilist practice.
Science and R&D
Counterpoint: R&D Tax Credit Spurs Innovation
The R&D credit is on the list of “extenders” that Congress should take up in the lame duck session before they adjourn in December. Earlier this year, Michael Rashkin wrote in EE Times that “The R&D credit doesn’t work” and advocated for its elimination. Let’s hope Congress ignores Rashkin’s advice. The R&D credit corrects a serious market failure and spurs U.S. companies to invest in more R&D, creating more jobs, more competitive firms and a stronger U.S. economy.
Winning the Race 2012 Memos: Science and Technology
Innovation powers competitiveness and boosts living standards. Science and technology, in turn, are key enablers of innovation. This premise helped drive robust federal investment in science and technology in the 1960s, 70s, and 80s that fueled our post-war prosperity. It set the stage for the IT revolution, advances in life sciences, and the creation of millions of jobs and thousands of companies in the 1990s. But today we are shortchanging our future. The United States is now just eighth among OECD countries in R&D as a share of GDP. A key reason is that federal R&D investment grew in constant dollars at just 0.3 percent per year from 1987 to 2008. To restore federal support for research as a share of GDP to 1987 levels, we would have to increase federal funding by almost $110 billion per year. Unfortunately, we are moving in the opposite direction. Fiscal hawks want to put “everything on the table” when cutting the budget, even federal support for science. Many policymakers (usually, but not exclusively, Republicans) are wary of government funding for applied research and technology commercialization and prefer to confine public funding to basic science. While most Democrats are more willing to support R&D funding, too often they are willing to trade it off for increased social welfare spending. If we are to once again become a globally competitive innovation economy we will need to do what other nations are doing: boost public investment in research and put in place new efforts to spr commercialization of this research.
Eroding Our Foundation
Reducing the budget deficit is important, but it should not and does not have to come at the expense of growth-inducing investments in areas like federal support for R&D. In fact, undermining growth capability is disruptive of a deficit control policy. Cutting federal support for R&D, a key "fuel" for the U.S. economic growth engine, would not only lead to a relatively smaller U.S. economy and higher unemployment, it would reduce U.S. global competitiveness precisely at a time when the U.S. economy is struggling to stay in the race for global innovation advantage.
R&D Tax Credits: They Work! Will Policy Maker’s Listen to the Evidence?
R&D Tax Credits do increase innovative activity. With no policy currently in place, will the United States become even less competitive by failing to create an environment that properly induces firms to innovate? Policy makers must act by making increasing and making permanent the R&D tax credit, or we will all pay the price.