Much has been written about the erosion of the US industrial base, the loss of engineering skills and the lack of manufacturing know-how as more and more production was shifted to Asia. The direct consequences include long supply chains, empty shelves, and sky-high shipping costs in almost every industry you will name, creating real difficulties for Americans. It’s easy to blame American corporations for putting profits ahead of national interests, and it’s easy to proclaim that this time will be different. But the reality is that business knows this crisis will pass and the cost benefits of offshore production will be as strong as ever, with short-term gains taking precedence over national interests.
An effective national policy could change this calculation. Industrial policy has been the “third rail” of American politics for 40 years. Washington agrees in a bipartisan consensus that free trade and free markets best determine economic progress, vehemently avoiding any explicit national planning to promote (or even identify) US economic priorities.
But consensus is crumbling faster and more widely than anyone could have predicted, Sen said. Marco RubioMarco Antonio RubioRubio, Manchin offers bill to stop Feds buying ‘crack pipes’ Fifth journalist killed in Mexico this year. Why Mike Pence Should Run for President MORE (R-Fla.) has called for pursuing national economic goals with all the power of the state to counteract a burgeoning China, and Sen. Elizabeth WarenElizabeth WarrenEquilibrium/Sustainability – Public PR workers protest for better pay Senators introduce resolution honoring Tom Brady’s career The Hill’s Morning Report – Presented by Facebook – More blue states are phasing out mask mandates MORE (D-Mass.) has called for a new “economic patriotism.” The Senate has passed the United States Innovation and Competition Act (USICA), which will be discussed with the House of Representatives‘ America Competes Act. The Infrastructure Investment and Employment Act, enacted by President BidenJoe Biden US cyberdefense agency warns of possible Russian cyberattacks amid tensions Afghans protest US order to release $0.5 billion in frozen Afghanistan funds to compensate victims of 9/11 Sunday shows preview: White House says Russia can invade “every day”; RNC Censorship Resolution Gets Backlash MORE in November also has a slew of provisions that could boost domestic production if the government refrains from rushing to cheap imports.
This legislative effort should be good news for revitalizing American manufacturing, but any positive impact will depend on effective implementation. We cannot just throw more money into old programs that have failed to sustain, let alone grow, the nation’s industrial base.
One important area that has received too little attention is new thinking about government-funded research and development (R&D). The federal government currently spends over $160 billion annually on research and development – and more than $3 trillion since 2000 – but with little strategic intent. Most federal R&D spending is based on momentum: Federal departments receive increases (or cuts) in R&D budgets based on last year’s budget without analyzing what that money can buy. Congress does not require a calculation of a real return on investment and does not require metrics for measuring return, whether scientific, social, economic, or strategic.
(To be fair, Congress calls it spending, not investment.)
Patents and licenses resulting from R&D spending are necessary first steps to generate revenue, but they are at best a poor indicator of impact, as by themselves they do not create national wealth, jobs or national security. We need to mass-produce our inventions, just as other countries have scaled our inventions — cell phones, flat screens, solar cells, and lithium-ion batteries, for example — to create tens of millions of jobs.
Put simply, we must do what we invent. Scientific discoveries and inventions can yield bragging rights – most patents, most citations or Nobel prizes – but invention is not the same as innovation. Innovation requires turning promising inventions into products that are manufactured on a large scale. By that definition, we haven’t done much innovation in hardware in one generation. Without innovation, we don’t create much national wealth from the billions spent on taxpayer-funded research and development. Just as tax cuts for the rich don’t benefit the masses, spending on science alone and relying on the magic hand of the free market to do the rest hasn’t trickled down to creating private sector jobs or improving national security. We urgently need a national manufacturing strategy that includes a strategic assessment of R&D priorities and effective policies and programs to ensure promising R&D results can be manufactured here.
The Bayh-Dole Act 1980 provides the legal basis for recipients of federal research funds to obtain licenses and receive revenue from resulting patents. It requires licensed inventions to be made substantially in the United States unless the funding agency grants an exemption. In practice, waivers are easy to obtain and rarely denied. Tweaking this act can bring some satisfaction, but it doesn’t change the trajectory.
Congress should require that for any product or process that results from federally funded research and development, at least 75 percent of the value added must be produced in the United States. This is the same standard set in the agreement between the United States, Mexico and Canada for automobile production. The only exception to this requirement would be a temporary waiver for up to one year due to a proven ongoing national emergency. One such waiver, an Emergency Manufacturing Authorization (EMA), is issued by the White House or Congress during an emergency (like the Emergency Use Authorizations issued by the FDA during the COVID-19 pandemic).
This is the only way to ensure a real return on investment for the American taxpayers who funded this research in the first place. If for some reason US manufacturing capability is lacking, at least those gaps would be identified and steps could be taken to fill them. This could include programs such as loans and grants for startups to build and test prototypes, early government procurement to accelerate pilot production, and public-private financial support to scale manufacturing. Despite likely complaints from researchers and their institutions, this policy will not affect the effectiveness of our R&D business; it only affects the results – strengthening the industrial commons, jobs and national security. Remember that no one is required or entitled to take taxpayer money for research and development. In addition, any privately funded research and development can still be manufactured anywhere in the world.
Before we spend taxpayers’ money to import high-value products or components to build our physical infrastructure, or to fund new and existing programs under USICA, Congress and the administration should legislate with a meaningful “invent here, make here” policy . That would be the first step in rebuilding our manufacturing innovation ecosystem to revitalize American ingenuity, create jobs and strengthen military readiness. Otherwise, we will continue to watch other countries pick our winners while they subsidize wealth creation in other countries with American taxpayers’ money.
Sridhar Kota is Herrick Professor Engineer Emeritus from the University of Michigan and entrepreneur in the manufacturing industry for over 30 years. He is a former associate director for advanced manufacturing (2009 to 2012) in the White House Office of Science and Technology. He is founding executive director of MForesight: Alliance for Manufacturing Foresight, a national think-and-do tank focused on accelerating technological innovation to improve the competitiveness of US manufacturing. He is the founder and CEO of FlexSys Inc. and Inspire Rx LLC.
Thomas Mahoney is Associate Director of MForesight. He has over 30 years of experience addressing manufacturing competitiveness issues in the US and New Zealand, working directly with manufacturers to improve factory operations. He has served as executive director of the Manufacturing Studies Board of the National Academies, president of WVMEP, CEO of tech startup Plasma Igniter and chief economist at the New Zealand Department of Research, Science and Technology.