A new report by the Information Technology and Innovation Foundation (ITIF) urges the U.S. government to develop a national industrial strategy to strengthen the competitive position of advanced, traded-sector industries that are “too critical to fail.”

"Even before this pandemic, China posed an unprecedented competitiveness challenge in the advanced industries that are most critical to America’s economic wellbeing and national security. As Congress considers further stimulus in response to the coronavirus crisis, it should include actions that will not only spur short-term recovery, but also ensure long-term competitive and economic resilience,” said ITIF President Robert D. Atkinson, who authored the report. “America needs a robust domestic industrial strategy — and it can’t be limited to generic policies that support ‘factor inputs’ like science, education, and infrastructure. We need to fortify the country’s most invaluable and irreplaceable industries.”

The report calls on Congress to task the administration with creating a national industrial strategy that focuses on bolstering the competitive position of technologically sophisticated, traded-sector industries such as aerospace; semiconductors and computers; transportation equipment; biopharmaceuticals and other chemicals; advanced machinery and automation; software; and instruments.

To enable the development and implementation of a national industrial strategy, ITIF proposes steps to improve the federal government’s institutional capabilities to conduct thorough sectoral economic analysis. To that end, the report recommends creating an advanced, traded-sector analysis and policy unit, possibly within the Commerce Department’s National Institute of Standards and Technology (NIST).

The report then recommends a series of specific policy steps:

  • Significantly expand federal support for research related to key technologies, and target it to spur commercialization of those technologies in the United States.
  • Expand tax incentives for investing in the key building blocks of advanced-technology production.
  • Establish financial vehicles to support domestic investment in advanced-technology industries.
  • Create an industrial retention and recruitment fund — matched by state governments — to provide incentives for investing in production facilities in key industries and technologies in the United States.
  • Incorporate a competitiveness screen in regulatory activities, including antitrust.
  • Establish a joint U.S.-EU-Japan Technology Alliance.

“The only hope for ensuring the United States doesn’t continue to lose its competitive position in advanced technologies is for Congress and the administration to develop and implement a robust industrial strategy focused on those industries,” said Atkinson. “The alternative would be a steady erosion of the country’s competitive position—akin to the path the United Kingdom took in the 1960s and 1970s—and an emboldening of populists who will claim protectionism and anti-corporate policies are the only way to preserve key economic capabilities.”