TOWARD A U.S.
COMPETITIVENESS
STRATEGY
ANDREW REAMER
The 2016 U.S. presidential election turned in part on the fact that people who
live in areas of the United States that have suffered job losses due to global trade
tended to vote for Donald Trump.1. President Trump bested a number of big-
name contenders in both the Republican and Democratic parties largely
because he was the only candidate who focused continually on the impact
international competition has had on the domestic economy.
Once upon a time—from the nation’s
founding up to the Great Depression—
the ability of U.S.-based businesses to
compete in global markets was central to
American economic policy and political
platforms. However, that has not been the
case since Franklin Roosevelt was presi-
dent. The reasons include the primacy of
geopolitical concerns; the lack of industri-
al competitors in the aftermath of World
War II; the development of Keynesian
economics, which focuses on the eco-
nomic cycle rather than on structure;
consistent positive trade balances up to
the early 1970s; and political conserva-
tives’ general antipathy, from the 1980s
forward, toward activist policies designed
to advance national competitiveness—
think Reagan’s disparagement of “indus-
trial policy”.
In this essay I propose a U.S. competitive-
ness strategy comprised of elements—
information, analysis, collaboration, and
strategy—drawn from America’s 19th-
century economic playbook—a time
when the nation cared about competitive-
ness—and repurposed for the 21st centu-
ry. I begin this article by describing my
rationale for a competitiveness strategy,
then set out principles of approach, and
end by suggesting three activities on
which to construct a strategy.
RATIONALE
The nation’s economic well-being is
determined by the ability of U.S.-based
business establishments to sell goods and
services in increasingly competitive inter-
national markets. These establishments’
competitiveness depends on their capaci-
ty to innovate—to provide customers
with goods and services that have unique
characteristics, at an attractive cost, and
with superior service.
Market mechanisms alone cannot give
businesses adequate access to a number of
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Toward a U.S. Competitiveness Strategy
the resources important to competitive-
ness. Historically, examples of such
resources include new general-purpose
technologies, transportation and com-
munications infrastructure, skilled and
educated workers, financial capital, basic
and applied research, product standards,
collaborative networks, socioeconomic
data for decision-making, reliable market
operations, frameworks for dispute reso-
lution, and macroeconomic stability.
The federal government has long played
an important role in facilitating business
access to important resources that are not
adequately provided through market
mechanisms—that is, in helping markets
work better. Between 1789 and 1932,
Congress regularly sought to develop an
integrated, organized approach to com-
petitiveness policy. After the loss of U.S.
economic hegemony
the 1970s,
Congress and multiple presidential
administrations have put forth a stream
of competitiveness-related policies and
programs. Regrettably, these have not
been designed, managed, and monitored
in an integrated fashion. Moreover,
although the America COMPETES Act of
2010 required the U.S. commerce secre-
tary to produce an international compet-
itiveness strategy, this has not been done.
in
Meanwhile, other industrialized and
industrializing nations, such as China,
India, Singapore, Taiwan, Germany, and
Finland, are actively developing and
implementing comprehensive national
competitiveness and innovation strate-
gies. In America’s early years, when the
country was competing against the
world’s industrial giant, Great Britain, the
government took a similar approach. For
instance, Congress directed the treasury
secretary on four occasions (1790, 1809,
1815, and 1832) to prepare a plan to pro-
mote U.S. manufacturing competitive-
ness.
It is in the nation’s economic interest for
the federal government to once again sys-
tematically and strategically assess the
competitiveness of U.S.-based industry
and its capacity to innovate, and to
encourage improvements based on these
assessments. Furthermore, such actions
will help the American public understand
the importance of investing in building
the nation’s base of assets, including its
people. A set of evidence-based competi-
tiveness policies could lead the nation to
have a much broader sense of “we” and a
reduced sense of “them.”
PRINCIPLES OF APPROACH
Because global markets change quickly,
successful business leaders must be
knowledgeable, entrepreneurial, innova-
tive, strategic, and collaborative. To pro-
mote economic growth effectively, the
federal government must have these qual-
ities as well. A White House competitive-
ness and innovation strategy should rely
on the following principles of approach.
ABOUT THE AUTHOR
Andrew Reamer is a Research Professor at the George Washington Institute of Public Policy,
George Washington University.
© 2017 Andrew Reamer
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Andrew Reamer
Be Knowledgeable. The White House
must have access to an “economic intelli-
gence network” of federal agencies and
other organizations that provide regularly
updated information on
(cid:2)(cid:1) the size and competitive strengths and
weaknesses of the U.S. trade sectors;
(cid:2)(cid:1)the strengths and weaknesses of the sys-
tems that drive competitiveness and
innovation, including workforce devel-
opment, R&D, and communications
infrastructure;
(cid:2)(cid:1) federal policies, programs, and staff
resources that promote competitive-
ness and innovation; and
(cid:2)(cid:1) the relative efficacy of alternative
approaches to competitiveness and
innovation policies and programs.
Be Innovative and Entrepreneurial. The
White House should encourage responses
to economic intelligence that are creative,
adaptive, and flexible, rather than linear,
formulaic, or prescriptive. The White
House can encourage experiments, par-
ticularly if they are low cost and the
results can be utilized.
Be Strategic. The White House should
encourage the design of competitiveness
and innovations policies and programs
that have a high impact relative to their
cost. In doing so, it should promote infor-
mation- and relationship-based efforts, as
these have the potential to influence a
large number of decisionmakers at a very
low cost.
Be Collaborative. The White House
should encourage and facilitate the devel-
opment of
inter-organizational net-
works—across the federal government
and with outside organizations—as a key
means of intelligence gathering, analysis,
strategy development, and implementa-
tion. Outside organizations include trade
and industry associations, universities,
other research organizations, and busi-
nesses. Public-private collaboration,
which is a bottom-up approach to indus-
try strategy, differentiates this approach
from the top-down efforts favored in
many nations.
THE BUILDING BLOCKS OF
STRATEGY
The White House, through the National
Economic Council, should carry out three
activities that would establish a founda-
tion for a comprehensive, long-term
strategy. These activities are (1) assessing
U.S. competitiveness by industry, (2)
gaining a comprehensive picture of the
federal policies and programs that sup-
port competitiveness and innovation, and
(3) carrying out strategic industry analy-
ses.
Assessing U.S. Competitiveness
and Innovation
An effective national strategy for compet-
itiveness and innovation must be based
on an accurate reading of the nation’s
economic competitiveness. The National
Economic Council should prepare and
regularly update three analyses:
(cid:2)(cid:1)A summary of the characteristics of the
traded portion of the U.S. economy
(the businesses that compete in inter-
national markets), by sector
(cid:2)(cid:1)A working picture of the nature of com-
innovation, their
petitiveness and
importance to the nation’s economic
health, and their sources (drivers)
(cid:2)(cid:1) A detailed series of indicators of U.S.
competitiveness and innovation, and
their drivers, relative to other nations
The value of the nation’s economic intel-
ligence largely depends on the quality of
its
system.
Unfortunately, the current system is
geared toward cyclical policy, not com-
economic
statistical
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Toward a U.S. Competitiveness Strategy
petitiveness; domestic manufacturing,
not services and foreign trade; and sur-
veys, not “Big Data” and administrative
records. As a result, the federal govern-
ment cannot obtain a current, detailed,
accurate picture of U.S. economic activity
and competitiveness.
To address this problem, the White
House should ask Congress to establish
federal economic statistical agencies that
have the authority and the resources to
carry out a series of improvements that
together would cost about $40 million annually (see Text Box 1, below). Comprehending the Breadth of Competitiveness and Innovation Policies and Programs To design and implement an effective competitiveness and innovation strategy, the White House must have knowledge of current relevant policies, programs, and resources operated by the federal govern- ment, at the state and local level, and by national nonprofit organizations, and those developed by foreign nations. Competitiveness and innovation policies are crafted in the context of a complicat- ed, idiosyncratic collection of relevant federal laws, programs, and resources. New policies are more likely to be effec- tive if decision-makers are fully aware, and take advantage, of this context. Therefore, the White House should pre- pare a comprehensive set of reference materials on federal competitiveness poli- cies, programs, and resources. The mate- rials would include the U.S. Code, execu- tive orders, programs, interagency work- ing groups, advisory committees, experts, and congressional caucuses.2. The White House also should prepare reference materials on non-federal competitiveness and innovation policies, programs, and resources. These materials should include efforts by U.S. states, regions, and nonprofit organizations, along with foreign national strategies. Knowledge of non-federal domestic efforts could spark useful ideas and help identify how the government can complement these activities without duplicating them. Knowledge of foreign efforts would aid similarly in designing national strategy. The White House should support efforts by the Commission on Evidence-based Policymaking and the Census Bureau to create a federal data clearinghouse that enables an assessment of the impact fed- eral programs and regulations have on competitiveness and innovation. This would allow the creation of competitive- ness strategies based on knowing what works, what doesn’t work, and why. The commission is scheduled to release its report in September 2017. Conducting Strategic Industry Analyses The federal government organized numerous systematic strategic analyses of industry sectors in the first third of the 20th century. Similar studies have been conducted at the state and regional levels and in foreign nations for decades. Some of the studies were conducted periodically in recent decades by the U.S. commerce and energy departments. A strategic industry analysis measures a sector’s economic contributions, assesses its competitive strengths and weaknesses, and provides a basis for addressing those findings. A good analysis is informative, accurately reflects market conditions, includes the input of a wide range of industry-related actors, and catalyzes public and private action. (Typical ele- ments of a strategic industry analysis are presented in Text Box 2, below.) In the near term, the National Economic Council should sponsor the first round of innovations / volume 11, number 3/4 129 Downloaded from http://direct.mit.edu/itgg/article-pdf/11/3-4/126/705248/inov_a_00261.pdf by guest on 08 September 2023 Andrew Reamer TEXT BOX 1. ECONOMIC STATISTICAL AGENCIES THAT COULD IMPROVE U.S. ECONOMIC STATISTICS Innovation Accounting under the Bureau of Economic Analysis: Provide $2 million
annually to accurately ascertain the role innovation plays in U.S. economic growth.
Longitudinal Enterprise Database under the Census Bureau: Provide $1 million annually to construct and regularly update a database of U.S. enterprises to provide a richer picture of the economic activities of firms that operate in the U.S. A longitudinal enterprise database would enable industry analysts to examine, for instance, the impact firm characteristics have on firm and industry outcomes, by industry. Bulk Download Tool under the Securities and Exchange Commission: A web tool funded by user fees would enable the bulk download and analysis of SEC filings, which are a rich source of information on the structure, relationships, activities, and locations of U.S. corporations. Analyses of these data would enhance understanding of the char- acteristics of firms and the impact they have on competitiveness. International Trade Data: Analysts currently have significant difficulty measuring and assessing the full nature of economic relations between the U.S. and other nations. This could be improved by establishing the following: (cid:2)(cid:1) Services Trade Data under the Bureau of Economic Analysis: provide $3 million
annually to provide more detailed information on U.S. trade in services, by industry.
The Bureau’s data on trade in services do not have the same quality and detail as do
data on trade in goods.
(cid:2)(cid:1)International Price Indices under the Bureau of Labor Statistics: provide $20 million annually to develop an input price index, import and export price indices for services, and a foreign currency price index. This would allow the government to accurately measure foreign trade trends by adjusting for price differences over time and between nations. (cid:2)(cid:1) Global Value Chains and Trade in Value-Added under the Bureau of Economic Analysis, Census Bureau, and U.S. International Trade Commission: provide $15
million annually to develop the capacity to map global value chains and measure
trade in value-added. This would allow us to understand the role U.S. businesses play
in the world economy, their strengths and weaknesses, and the implications for poli-
cy.
(cid:2)(cid:1) Data Synchronization: authorize the Census Bureau to share IRS-derived data with
the Bureau of Labor Statistics (BLS). One-third of businesses have been classified by
Census in one industry and by BLS in another. Because Census is authorized to see
IRS tax records and BLS is not, the two agencies cannot compare their records to be
consistent. As a result, the government published two very different pictures of the
distribution of jobs and earning by industry, which confuses economic policy.
Allowing the agencies to compare notes would make it possible to develop one offi-
cial statistical profile of U.S. economic structure, by industry.
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Toward a U.S. Competitiveness Strategy
TEXT BOX 2. ELEMENTS OF A STRATEGIC INDUSTRY
ANALYSIS
(cid:2)(cid:1)Narrative description of the nature of the industry (e.g., nature of goods or services,
uses, trends in technology development)
(cid:2)(cid:1)Statistical description of the characteristics of the U.S. industry (e.g., jobs, revenues,
number and characteristics of firms and establishments, geographic location, trade
and markets, foreign affiliations)
(cid:2)(cid:1) Listing of the major actors in the U.S. and global industries, including firms, key
establishments, trade and professional associations, university research centers, fed-
eral government agencies (e.g., regulatory, R&D)
(cid:2)(cid:1)Statistical description of the global industry, trade dynamics, and the U.S. position in
global activity (e.g., global value chains, trade in value-added, location quotients)
(cid:2)(cid:1) Assessment of the key drivers of competitiveness (e.g., product qualities, transit
speeds, labor costs, customer service)
(cid:2)(cid:1)Identification of the competitive strengths and weaknesses of the U.S. industry—now
and looking ahead
(cid:2)(cid:1)Implications of the competitiveness analysis for the future of U.S. industry
(cid:2)(cid:1)Elements of a U.S. strategy going forward, with identification of the roles of the vari-
ous public, private, and nonprofit organizations
three strategic industry analyses to test
various collaborative approaches, assess
the value of the analyses, and gain experi-
ence in the implementation process. Each
industry analysis would be expected to
lead to the creation of a public-private
entity to support implementation. The
group analysis would create the founda-
tion for a second round that would cover
a larger number of industries. Through
this industry-by-industry process, the
public and private sectors would create a
set of strategic efforts spanning the
breadth of U.S. traded sectors.
To begin, the Council would identify the
essential characteristics of industry strate-
gic analyses concerning, for example the
processes, timeframe (18 months), prod-
ucts, and outcomes, as a guide for the
teams it would commission. Efforts
should include government and industry
participation.
Second, the Council would identify three
traded industries of immediate interest.
The choices should be informed by an
overview of the traded economic struc-
ture suggested earlier.
Third, the Council would issue a public
request for proposals for three strategic
industry analyses to be carried out
through public-private partnerships; a
description of the desired substance,
process, and outcomes of the industry
review (including the need for industry
involvement and plans for implementa-
tion); and the criteria by which each pro-
posal would be judged. Proposals might
come from federal agency teams, academ-
ic institutions, trade associations, consult-
ing firms, and nonprofit research organi-
zations.
Fourth, the Council would select three
winning proposals, and those teams
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Andrew Reamer
would get to work. Council staff would
monitor the efforts regularly and provide
feedback. After 18 months, the federal
government would have a strategic assess-
ment of three key industries and the basis
for public-private collaborations to act on
those assessments. It also would have a
greater understanding of the efficacy of
collaborative
various public-private
approaches and knowledge of how to
design a second round of industry assess-
ments.
CONCLUSION
For almost a century, elected federal poli-
cymakers have neglected the fact that the
health of the nation’s economy depends
on how well U.S. businesses compete in
global markets. The consequences of that
neglect can be seen across America’s
communities. Efforts to boost U.S. com-
petitiveness were once central to federal
policy, and they can be so again. The
potential benefits to economic growth,
jobs, earnings, profits, and public health
far outweigh the modest costs of investing
in data, information, and indicators, and
collaboratively assessing and addressing
competitive strengths and weaknesses,
industry-by-industry.
1. Eduardo Porter, “Where Were Trump’s
Votes? Where the Jobs Weren’t,” New York
Times, December 13, 2016.
2. The U.S. Code is the official compilation
and codification of the general and
permanent federal statutes of the United
States.
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