Time for a New Commission on Industrial Competitiveness

Time for a New Commission on Industrial Competitiveness

The U.S. Chamber of Commerce’s newly released global ranking of patent system strength shows the U.S. patent system has slipped to 12th place in 2018, down from 10th last year. Before 2017, the United States held the top spot. This is new terrain for America, as the U.S. had previously always enjoyed the strongest patent system in the world. 

As President Reagan’s Commission on Industrial Competitiveness reported in 1985, America’s technological innovation is “a mainstay” — the key to our competitiveness. The commission acknowledged, in particular, the central role of patents and IP to America’s maintenance and growth of a vibrant, manufacturing-centered U.S. industrial base. The weakening of our patent system and secure private property rights risks the red, white, and blue goose that lays golden eggs. As the industrial competitiveness commission pointed out, “innovation spurs new industries and revives mature ones.”

Today, we must not underestimate the importance of our nation’s holding a technological edge as a competitive advantage. The Reagan commission, headed by Hewlett-Packard president John Young, understood this, calling innovative leadership “the foundation of our economic prosperity, our national security, and our competitiveness in world markets.”

Ronald Reagan won election in 1980 as America was reeling from a series of economic shocks in the 1970s. The nation was suffering from lost industrial competitiveness and saw factories shuttered, manufacturing jobs lost, the rise of foreign competitors such as Japan, stagnant wages, and widening trade deficits.

Japan’s economic threat to the U.S. in the 1980s is eerily similar to China’s shadow now. And just as in the 1980s, intellectual property remains key today. 

This isn’t theoretical. Last year’s trade deficit of $566 billion is equivalent to erasing 2.9 percent from U.S. GDP growth. Foreign IP theft — e.g., counterfeit imports, pirated software, stolen trade secrets — costs our economy upwards of another $600 billion a year. And patent infringement and expropriation adds approximately another lost $300 billion. In other words, insisting on fairness and reciprocity in trade practice and vigorous IP enforcement would likely more than double our rate of economic growth. 

It is time for a new commission on industrial competitiveness, made up of leaders from IP-centric industrial sectors, to chart a course for property rights in the 21st century and restore U.S. industrial leadership. 

President Trump has sounded a wake-up call. The administration has renewed efforts to protect U.S. firms’ intellectual property from theft and foreign expropriation, insisting on reciprocity in trade and promoting fairness in competitors’ commercial and trade practices. This new direction is consistent with the Young Commission’s findings, which reported:

If the United States is to benefit from its own technology and remain competitive, the U.S. government must improve the protection that U.S. intellectual property laws provide to U.S. technology. The government must also work aggressively in the international community to ensure that intellectual property rights are adequately protected abroad.

The commission also recommended emphasis on rules-based fair trade, job opportunity for all Americans, and industries’ access to capital. 

Recently, a Morning Consult poll found that more than four in five U.S. voters say the United States should enforce and strengthen trade agreements to ensure that our trading partners appropriately value American innovations. That’s not “protectionist;” it’s common sense — and critical. 

As economist David Landes notes in his influential book “The Wealth and Poverty of Nations,” what really counts is economic gain or decline relative to other countries. Weakened industrial competitiveness relative to foreign trade competitors translates into reduced U.S. economic growth, lost jobs, stagnant wages, imbalanced international trade, and heightened national security risks.

All of this may sound somewhat removed to your average American. After all, his wages may have hardly budged over the past 20 years (except perhaps a recent bump from tax reform). Meanwhile, he can buy cheap subsidized foreign products at mega-retailers. But industrial competitiveness founded upon private property rights makes a huge difference for all Americans, and, indeed, all people. From time immemorial around the globe, private property rights coupled with the economic exercise of those rights has fostered human flourishing. 

The reason is that private ownership rights — including secure private rights in one’s invention or creation — undergird the ability to exchange the fruits of one’s intellect or labor for another’s. They allow us to enter legally enforceable contracts for economic transactions and to associate with others to start enterprises, such as manufacturing companies. 

That’s why individuals and families, not just companies in industrial sectors, should urge lawmakers to buttress intellectual property rights and stimulate our nation’s industrial competitiveness. 

James Edwards is executive director of Conservatives for Property Rights. This essay is adapted from a new report, “Property Rights: The Key to National Wealth and National Security.” The views expressed are his own.

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