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TR: High-tech manufacturing-as opposed to design work-has been happening overseas for a while. What are the implications for U.S. competitiveness on this front?

Wince-Smith: I don’t think it’s serious for your basic computer chip and other mass-produced commodities. But we do not want to lose the capability in the United States for the most advanced manufacturing of very complex systems, because that is directly related to the innovation process. In the course of manufacturing, you often create an innovation that takes you to the next generation. I’m concerned about the strategic implications of our very advanced microprocessors-those types of components that really differentiate a product-all being manufactured outside of the U.S.

TR: What should the U.S. do to stay ahead?

Wince-Smith: We want to ensure that we have skilled people at the forefront of design and engineering in the United States. We need to have more of our young people go into math, science, and engineering. We need to ensure that we have strong federal investment in the knowledge enablers of the future-in the mathematical, physical, and material sciences. There’s been an imbalance in that investment, with the life sciences receiving favor for many years. Life sciences are important, but innovation there depends on investments in the physical sciences, too.

We need a regulatory environment, both at the national and state levels, that encourages and rewards entrepreneurial activities and doesn’t impede our ability to create new businesses and see them flourish. One example is our product liability laws. As they stand, they are really anti-innovation. A whole set of requirements puts the burden of damages all the way back onto the first supplier, even if someone further up the chain was responsible. Also, many incentives are given to U.S. companies to relocate their operations to developing countries. That’s good because we want to bring up the standard of living of the world and not have huge disparities in wealth, but at the same time, it almost makes the U.S. outpriced in some ways. So perhaps the U.S. can provide tax incentives to its own companies to stay in the U.S.

TR: In the long run, does it really matter where innovation comes from?

Wince-Smith: The only way the U.S. can maintain its standard of living and quality of life, and then ultimately, our security, is through productivity growth-and that depends on innovation capacity. We can’t compete on low-cost labor, on natural resources, on standardized products. The products and services and capabilities that are going to come out of the research being done today in our universities, in our labs, and in industry are going to be huge wealth generators in the years ahead. We want the U.S. to be in a leadership role in those new industries of the future. And at the same time, we need to be prepared to capitalize on cutting-edge innovation wherever it occurs. That requires a sea change in approach and attitude for the United States, which has traditionally seen itself as the unrivaled leader in virtually every field.

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