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The buzzword “competitiveness” is back in the air, with President Bush proposing an American Competitiveness Initiative in his State of the Union address this month, and bipartisan legislation on a parallel track in the U.S. Senate. Both proposals would boost funds for basic research at agencies such as the Department of Energy and National Science Foundation.

The Senate legislation was based on a National Innovation Initiative, produced by a Washington think tank called the Council on Competitiveness, which is led by CEOs, university presidents, and labor leaders. Their initiative was chaired by Craig Barrett, chairman of Intel, and Bill Brody, president of Johns Hopkins University.

Deborah Wince-Smith, president of the council, says these federal proposals are a critical step toward responding to foreign competition. She talked with Technology Review about the pressing need to stay competitive through innovation – and how the private sector can partner with government to improve the nation’s “innovation capacity.”

Technology Review: “Competitiveness” covers a lot of ground. What’s the core issue today?

Deborah Wince-Smith: The core point is that today, America finds itself at a unique and delicate tipping point, characterized by two unprecedented shifts. First, the world is becoming dramatically more interconnected and competitive, and second, innovation itself – where it comes from and how it creates value – is changing.

TR: In other words, the United States faces stiff new technology competition?

DWS: We can’t compete on low wages or standardized commodity products or services. The only way we can succeed in the future is through innovation – creating the high-value products and services that people are willing to pay for in global markets. Luckily, America still has the world’s strongest innovation “ecosystem.” We have the building blocks for innovation – talent, investment, and infrastructure – but there are many things we must to do to keep this innovation ecosystem alive and productive. At the same time, countries like China and Korea and Brazil are realizing they also have to invest in this capacity. The rapidity with which other parts of the world are investing in innovation makes this a race that has no beginning and no end.

TR: What should we be worried about?

DWS: Countries around the world are increasing their production of science and engineering students, ramping up R&D spending, building world-class infrastructure, and focusing on niche areas where they can compete. In many respects, this is great – it increases our global capacity to innovate and to meet the challenges we face in areas like health care and energy. But there is a risk that some of the resources that the United States has come to depend on – the best and brightest students in the world, corporate R&D investment, new startup companies – will choose to locate overseas rather than in the United States.

TR: How has the federal government performed?

DWS: Over the past decade or so, we as a nation have tended to under-invest in the physical sciences and engineering – the very disciplines that underpin the innovations and technological advances from which we benefit today. What we have to read into this going forward is very clear: we need an extremely robust R&D portfolio – in the physical sciences and engineering and the health sciences. We must, as a nation, invest in the frontiers of science, technology, and engineering. We’re talking about the imperative of the federal government getting back as a growth investor.

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