April 9, 2013
Revitalizing U.S.
Manufacturing:
What’s It Going To
Take?
Dr. Rob Atkinson
President, ITIF
ratkinson@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
1
Where are we?
2
What should we do?
3
How to get it done?
3
Dramatic Manufacturing Job Losses in the 2000s
30%
20%
10%
0%
Total Jobs
1990s
-10%
1980s
Manufacturing
Jobs
-20%
-30%
2000-2011
-40%
4
:
Worse Than Most Competitors (1997-2010)
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
-45%
-50%
Source: Worse Than the Great Depression, ITIF, 2012
5
Because US Manufacturing Value Added Fell, 2000-2010
Taiwan
99.7%
Korea
84.5%
Singapore
73.6%
Czech Republic
73.4%
Sweden
26.2%
Finland
24.6%
Norway
18.1%
Australia
12.3%
Netherlands
11.2%
Japan
9.5%
Germany
3.2%
Belgium
-0.7%
France
-1.0%
Denmark
-2.9%
Spain
United Kingdom
United States
-7.5%
-10.0%
-11.0%
Italy
-14.8%
Canada
-15.7%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
6
13 of 19 Manufacturing Industries Producing Less in 2010 Than in 2000
7
And Growth in Manufacturing Capital Stock Stalled
8
With Manufacturing’s Share of U.S. Profits Declining
9
As the U.S. Trade Deficit Exploded
$0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-$100
-$200
-$300
-$400
-$500
-$600
-$700
-$800
Source: Innovation Economics, ITIF, 2012
10
What Reshoring Miracle?
Manuf trade balance worsened by 11% between 2010 and 2012.
3) 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 US manuf reshoring.
(Harry Moser, Reshoring Initiative)
Manuf jobs down 3,000 in March.
11
Today’s Presentation
1
Where are we?
2
What should we do?
3
How to get it done?
12
Three Major Camps
1. Do Nothing Since Manufacturing
Doesn’t Matter
13
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
14
But U.S. Manufacturing Lags in Technological
Intensity
Manufacturing Sector Composition by Technological Intensity
100
90
80
70
60
50
40
30
20
10
0
Australia
Canada
Low-technology
Germany
Medium-low technology
Japan
Korea
Medium-high technology
United
Kingdom
United States
High-technology
15
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
Three Major Camps
3. Manufacturing Matters; But We Need
to Compete through innovation and
productivity
17
What To Do: We Need a “RAFTTTT”
 Regulatory reform
 Analysis
 Financing
 Technology
 Tax
 Talent
 Trade
18
U.S. Lacks an Institutional Framework for Precompetitive, Industrially Relevant Applied Research
19
Approach Being Increasingly Adopted Internationally

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)
20
We Need a National Network for Manufacturing Innovation
 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
21
What NNMIs Would Do
 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.
22
NNMIs Could be Established Across a Range of Key
Cross-Cutting Technologies
 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
23
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.
24
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.
25
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
0.0350%
0.0300%
0.0250%
0.0200%
0.0150%
0.0100%
0.0050%
0.0000%
Japan
Germany
Canada
United States
England
26
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.
27
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.
28
Trade Policies
 Get much tougher on foreign “innovation mercantilists.”
29

Conclusion: Smart Policies Matter
30% of all German companies
attribute their innovations “to
improved research and innovation
policies at the federal level.”
30
Thank you
Robert Atkinson
ratkinson@itif.org
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