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January 2, 2014
4 Min Read
Innovation-based industries such as IT, aerospace, digital content, and life sciences are the engines of US economic prosperity, increasing productivity, improving competitiveness, and creating good jobs. The federal government needs to do everything it can to ensure that US policies maximize growth of those industries, but Washington is failing on that front.
Federal funding for scientific research and STEM (science, technology, engineering, math) education has been cut. High-skill immigration is limited. The US R&D tax credit is temporary and miserly when compared to other nations. US innovation industries face higher taxes compared to their major competitors. Other nations steal US intellectual property with impunity. The list goes on.
One reason for this policy failure is that US innovation industries don't speak with one voice. As such, their individual innovation policy messages get drowned out by other political imperatives. To be sure, these industries all have their own alphabet soup of trade associations, including AIA, BIO, BSA, CTIA, CompTIA, ESA, ITI, MPAA, NCTA, PhRMA, SIA, and USTA. Their raison d'etre is to advance the interests of most urgency for their members: drug pricing for PhRMA, defense budgets for AIA, telecom regulations for USTA and NCTA, the fallout from NSA revelations for ITI.
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But these industries also have much in common. They depend on a skilled workforce, particularly workers with STEM skills, so they all want liberalization of high-skill immigration as well as increased support for domestic STEM education. They also depend on R&D-based technological innovation, so they support increased funding of research, particularly at our nation's universities, and a permanent and more robust R&D tax credit.
They're all global and depend on fair rules governing market access and intellectual property protection. They require not just a more open trade regime, but also trade agreements that place a special focus on innovation and intellectual property protection, as well as much more support for US trade enforcement. And most would benefit from more robust federal innovation policies, such as those supporting "data innovation," intelligent transportation systems, and expanded use of health IT.
While every US innovation industry cares about these issues, they're often not the No. 1 or even No. 2 priorities for their associations. When push comes to shove, they spend their political capital on the issues that no one else is fighting for. The result is that there's no strong, unified voice pressing Congress and the administration to make innovation policy a top priority.
Some may argue that the "peak" industry associations, such as the Business Roundtable, the Chamber of Commerce, and the National Association of Manufacturers, should be the main advocates for robust innovation policies. On some issues they are. The Chamber of Commerce is increasingly active in ensuring that trade policies protect intellectual property, while the BRT has advocated for a federal role in supporting "hybrid digital infrastructures." But for the most part, innovation policy is nowhere near the top of these broader associations' agendas. They're focused mainly on reducing the cost and regulatory burden on their members, not on ensuring that the government provides the inputs to enable innovation.
One reason for this focus stems from the key difference between innovation industries and other industries. By definition, innovation industries compete predominantly on innovation. However, members of small-business associations, such as the National Federation of Independent Business, as well as commodity-based manufacturers see themselves competing on cost, not innovation. As such, they advocate for reducing regulations, taxes, and their social obligations.
In contrast, companies in America's innovation industries generally provide health insurance and pay well above the minimum wage. They pay corporate taxes, so higher marginal tax rates on individuals and broader estate taxes are irrelevant to their success. They have a stake in being good corporate citizens, and so they often exceed regulatory requirements.
It's time that this engine of American economic prosperity has its own voice and own trade association: the American Innovation Industries Association. Ideally, AIIA would be its own organization, comprising individual innovation-based companies. An alternative is to create a virtual innovation association, an alliance of all the relevant industry trade associations, speaking with one voice.
The stakes couldn't be higher for the US economy as we move into a post-recession global economy where virtually every nation wants to advance its innovation industries. The US must play this game to win, but its innovation industries can't win without much more robust and sustained national policies to support them. Creating an AIIA is a first step.
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