Revitalizing U.S. Revitalizing U.S. Manufacturing: Manufacturing:

What’s It Going To What’s It Going To Take?Take?

April 9, 2013

Dr. Rob AtkinsonPresident, ITIFratkinson@itif.org

The Information Technology and Innovation Foundation (ITIF) is a Washington, D.C.-based think tank at the cutting edge of designing innovation policies and exploring how innovation will create new opportunities to boost economic growth and improve quality of life. ITIF focuses on:

Innovation “verticals”: energy, life sciences, telecom, manufacturing, and Internet and IT transformation

Innovation “horizontals”: trade, tax, talent, and tech policy

“Innovation economics” as an alternative to mainstream economics

Today’s Presentation

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2 What Should We Do?

Where Are We?1

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How to Get it Done?

Dramatic Manufacturing Job Losses in the 2000s

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Source: Worse Than the Great Depression, ITIF, 2012

Worse Than Most Competitors (1997-2010)

Because U.S. Manufacturing Value Added Fell, 2000-2010

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13 of 19 Manufacturing Industries Producing Less in 2010 Than in 2000

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And Growth in Manufacturing Capital Stock Stalled

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With Manufacturing’s Share of U.S. Profits Declining

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As the U.S. Trade Deficit Exploded

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Source: Innovation Economics, ITIF, 2012

Manufacturing trade balance worsened by 11% between 2010 and 2012.

Foreign capital flowing into U.S. manufacturing increased by 6% between 2010 and 2011 while U.S. capital to foreign manufacturing industries increased by 28%.

Just 10% of U.S. manufacturing job growth from U.S. manufacturing reshoring. (Harry Moser, Reshoring Initiative)

Manufacturing jobs down 3,000 in March.

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What Reshoring Miracle?

Today’s Presentation

3

2 What Should We Do?

Where Are We?1

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How to Get it Done?

1. Do Nothing Since Manufacturing Doesn’t Matter

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Three Major Camps

2. Manufacturing Matters; we just need to get the “Business Climate” right

If we just get our costs low enough, American manufacturing will be fine

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Three Major Camps

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Manufacturing Sector Composition by Technological Intensity

But U.S. Manufacturing Lags in Technological Intensity

And Manufacturing Costs Are Not Higher

Source: Numbers Based on Analysis of Data from on MAPI and Manufacturing Institute 2011 Report on The Structural Cost Of U.S. Manufacturing. October, 2011

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3. Manufacturing Matters; But we need to compete through innovation and productivity

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Three Major Camps

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What To Do: We Need a “RAFTTTT” Regulatory reform

Analysis Financing TechnologTechnolog

yy Tax Tax TalentTalent Trade

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U.S. Lacks an Institutional Framework for Pre-Competitive, Industrially Relevant Applied Research

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Germany invests $2.5 billion/yr in Fraunhofer System 60 Centers and 18,000 staff for 80M Germans

Japan’s New $117B Stimulus Package (1/10/13) $2 billion to promote university-industry

collaboration, including $ to equip universities to conduct industrially relevant research

UK Catapults (January 2013) £1bn investment in technology and innovation

centers The High-Value Manufacturing Catapult will be “a

catalyst that transforms brilliant manufacturing ideas into valuable products and services”

Finland’s SHOKs (Strategic Centers of Science, Tech, and Innovation)

Approach Being Increasingly Adopted Internationally

Today’s Presentation

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2 What Should We Do?

Where Are We?1

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How to Get it Done?

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15 Manufacturing Institutes accelerating innovation by investing in industrially relevant advanced manufacturing sectors and technologies with broad applications.

Mission: Enhance U.S. industrial competitiveness by supporting development of technologies enabling U.S. production facilities to gain global market share.

Pilot Institute

We Need a National Network for Manufacturing Innovation

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Provide a platform for joint pre-competitive applied research;

Develop sector & technology-specific roadmaps that identify technical hurdles and work to solve them;

Provide shared facilities for rapid prototyping and demonstration; libraries & databases; and validation and testing equipment;

Develop and disseminate training technologies/curricula; support credentials, certifications, and skills standards development;

Help restore the industrial commons in key manufacturing product and process technologies.

What NNMIs Would Do

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Advanced Materials/Composites

Additive Manufacturing

Bio Manufacturing and Bioinformatics

Nano-Manufacturing

Flexible Electronics Manufacturing

Industrial Robotics

Advanced Forming/Joining/Welding Technologies

Advanced Sensing, Measurement, & Process Control

Visualization, Informatics and Digital Manufacturing Technologies

Advanced Manufacturing & Testing Equipment

Chemical Processing

NNMIs Could be Established Across a Range of Key Cross-Cutting Technologies

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Technology: Designate 25 Manufacturing Universities Revamp engineering programs to focus on manufacturing engineering and work that is more relevant to industry.

More joint industry-university research projects and student training incorporating manufacturing experiences (co-ops).

Receive annual award of at least $25M from NSF plus priority on universities’ applications for NSF grants.

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Technology: Ramp Up ERC & I/UCRC Programs Get more ERCs & I/UCRCs focused on manufacturing:

Currently only 4 of 17 ERCs and 7 of 56 I/UCRCs are.

Double funding for both programs.

Require all ERCs to have at least a 40% industry match by 2017 or lose their federal funding.

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Technology: Increase Funding for MEP Despite positive returns, U.S. underinvests in MEP compared to peer countries (and historical U.S. levels).Country Investment in Manufacturing Extension Services as Percent GDP

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Talent Policies Increase adoption of industry-

recognized, nationally portable credentials, such as those produced by the MSSC.

Fund more engineering fellowships and co-op programs between universities and industry.

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Tax Policies Accept that Corporate Tax Reform

will cost money, at least when scored statically.

Preserve and enhance key manufacturing tax incentives (e.g., R&D tax credit; accelerated depreciation; domestic production deduction).

Implement a quasi-incremental American Innovation and Investment Tax Credit.

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Trade Policies Get much tougher on foreign

“innovation mercantilists.”

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Conclusion: Smart Policies Matter 30% of all German

companies attribute their innovations “to improved research and innovation policies at the federal level.”

Robert D. Atkinson ratkinson@itif.org

www.itif.org

@RobAtkinsonITIF

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