The U.S. Small Business Administration should focus more on traded-sector firms through its financing programs, including its 7(a) loan guarantee program. However, the SBA does not appear to give any special priority to traded sector firms, treating all industries alike in its funding priorities, in large part because this is SBA’s charge from Congress. But there are significant differences for U.S. job creation and prosperity between a small manufacturer and a small retail firm, for example. The former plays a significantly more important role in driving economic growth and—through the multiplier effect—jobs. Moreover, the United States will anyway have all the retail firms it needs (e.g., that the market demands), since the sector is not traded. As such, Congress should require the SBA to develop a report for Congress within six months on two items: an analysis of all SBA financing by sector (e.g., how much financing went to manufacturing, retail trade, personal services, information, etc.) and a plan for how SBA can significantly increase the share of SBA financing going to firms in traded sectors. Congress should then require that a significant share of SBA lending—both guarantee and direct lending—go to fund scale-up activities for SMEs in traded sectors.

Manufacturing is vital to U.S. national security, but as the U.S. industrial base has moved offshore, so too has the defense industrial base. In response to the country’s inability to reliably manufacture key defense components and to the proliferation of foreign counterfeit parts in the defense supply chain, Congress should double funding for the Department of Defense’s Manufacturing Technology (ManTech) program to approximately $450 million annually. Congress should further encourage federal agencies such as the Department of Defense and Department of Energy to make broader use of Title III of the Defense Production Act, which would help expand U.S. production capabilities to promote national defense while addressing industrial production shortfall issues.

The current federal system for funding research pays too little attention to the commercialization of technology. Accordingly, Congress should establish an automatic set-aside program that takes a modest percentage of federal research budgets and allocate this to a technology commercialization fund. Specifically, Congress should allocate 0.3 percent of agency research budgets—about $250 million per year—to fund university, federal laboratory, and state government technology commercialization and innovation efforts. Half the funds would go to universities and federal laboratories that could use the funds to create a variety of initiatives, including mentoring programs for researcher entrepreneurs, student entrepreneurship clubs and entrepreneurship curriculum, industry outreach programs, seed grants for researchers to develop commercialization plans, etc. and the other half would go to match state technology-based economic development (TBED) programs.

Congress should double the National Science Foundation’s funding for ERCs from the current base of $55 million up to $110 million over a three year period and increase funding for the IUCRC program from $7.1 million to $50 million over that time-frame. This would support the creation of additional I/UCRC centers and expand NSF engineering support provided to each center. Further, to ensure that ERCs represent a true joint university-industry research partnership, funding for all ERCs should have at least a 40 percent industry match by 2017.

To help SME manufacturers bootstrap themselves, Congress should establish a 401(k)-like “deferred investment” program for SME manufacturers allowing them to make tax-deferred investments into manufacturing reinvestment accounts, where the funds can be subsequently withdrawn tax-free if used for research and development, workforce training, or capital equipment investments. In 2011, Connecticut put such a program in place for its SME manufacturers.

One step Congress could take to bolster U.S. traded sector competitiveness would be to create a 13-member United States Economic Competitiveness Commission, which would release a report every other year providing an independent assessment of the competitiveness of the U.S. economy (particularly its traded sectors, including but not limited to manufacturing) in the global marketplace. The report would offer targeted recommendations to improve U.S. competitiveness across key economic sectors. Senate and House Republican and Democrat leaders would each appoint three members and the Administration one member.

There is no entity in the federal government tasked with performing competitiveness analysis. The statistical agencies see their job as accumulating facts; not analyzing them. To remedy this, Congress should task the National Institute of Standards and Technology with the creation of a new traded sector analysis unit which prioritizes interpretation and analysis over collection and aggregation. This new entity should have two core functions. The first would be to regularly assess important aspects of overall U.S. traded sector competitiveness (e.g., trends in FDI, growth of traded sector jobs and output, changes in global market share of U.S. traded sectors, etc.). The second would be to focus on select traded sectors that are critical to the United States’ economic future (sectors where the United States has some competitive edge and where value added and wages are higher than average) and develop strategic road maps (by coordinating with DoD, DoE, NSF, and industry leaders) of how the federal government can promote the competitiveness of these sectors.

BLS’s International Labor Comparisons program adjusts foreign data to a common framework, allowing one to compare the traded sector health and competitiveness of the United States against that of other countries. The ILC data provides complete and comparable time series for extremely useful indicators including manufacturing output, hours, compensation, and productivity, as well as labor force, employment, price, and industry statistics. Funding for the ILC program was terminated by the 2013 sequestration, yet this data is critical to understanding U.S. economic competitiveness, and should be restored by Congress immediately.

The length of time and amount of money businesses must spend navigating the complex regulatory permitting process is a serious disincentive to invest in traded sector industries in the United States. The Department of Commerce should establish a one-stop shop to help companies navigate the complex U.S. regulatory framework and expedite the permitting process. It should also develop an online “Turbo Regulation” application that allows companies to complete the required “paperwork” in an easy to fill out Web form over the Internet.

Business regulatory compliance costs U.S. businesses tens of billions of dollars annually. To help address this, the Administration should increase industry’s participation in the federal rule-making process, which would likely help reduce the complexity of regulatory compliance, emphasize cost/benefit analysis, and restrict the executive branch’s impulse to “legislate by regulation.” Moreover, Congress should consider passing the “Regulations from the Executive in Need of Scrutiny” (REINS) Act, which would require both houses of Congress to affirmatively approve, and the President to sign, any “economically significant regulation,” defined as any administrative rule with a projected impact to the U.S. economy exceeding $100 million, before it becomes law.