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A Plea for Support of Innovation

Business Group Urges R&D Tax Breaks, Immigration Law Reforms

By Greg Schneider
Washington Post Staff Writer
Wednesday, December 15, 2004; Page E03

America risks losing its leadership of the global economy if government and industry fail to make changes that encourage innovation, a panel of leading executives and university presidents say in a study to be released today.

A host of problems is eating away at the nation's economic strength even as countries such as China and India work to lift their international status, according to the Council on Competitiveness, a bipartisan group of some 400 top executives and leaders of universities.

Business and academic leaders say the United States is losing manufacturing edge to emerging powers such as China. Above, imports await offloading at Long Beach, Calif. (Reed Saxon -- AP)

Nations such as Israel, Japan and South Korea spend a bigger percentage of gross domestic product on research and development than the United States, and China passed the United States last year as the top recipient of foreign direct investment.

"While we remain the world's leader, the capacity for innovation is going global -- and we must pick up the pace," the council says in its "National Innovation Initiative" report. Prepared over the past 15 months by top business and academic leaders -- including the chief executives of International Business Machines Corp., General Motors Corp., American Airlines and PepsiCo Inc. and presidents of universities such as Stanford, Columbia and the Massachusetts Institute of Technology -- the report offers a prescription for shoring up the nation's economic vitality.

The formula includes tax breaks for business research and development, overhauling immigration laws to encourage educated foreigners to work here and tort reform to help companies take more risks with less threat of lawsuits for failures.

Council members will outline their recommendations today at the Ronald Reagan Building while President Bush convenes his own two-day economic summit across town. While the White House conference focuses on a few politically charged issues such as Social Security reform, "our agenda is a much broader one," council President Deborah L. Wince-Smith said. "Everything we looked at is in terms of how this can increase productivity and standard of living growth for all Americans."

The council tried to address the problems of individual workers struggling to compete in the global economy. "There is tremendous anxiety in the country because for the first time we're seeing the emergence in the developing countries of smart, talented people who can do our highly skilled jobs for a fraction of the hourly wage," Wince-Smith said.

Solutions include a variety of education grants, such as privately funded scholarships for college students majoring in science and engineering and federally funded fellowships for graduate students, as well as reforms to health care and pension programs. The council suggests making such benefits portable, so they can be retained by workers from job to job, and outlines plans to create centralized databases of individual health care records.

The group also proposes a National Innovation Workforce Act to establish low-tax savings accounts to pay for "lifelong learning" for employees.

Tort reform is a major cause for the business leaders on the council, who call for cutting nationwide litigation costs by half. They also want the Department of Defense to devote 20 percent of its science and technology budget to long-term research, and the Patent Office to refocus on quality and to use its database of patents to help foster innovation.

The council also calls for a rebirth of American manufacturing technology, urging companies to work together to share best practices and even to establish joint manufacturing centers.

"The United States must create the conditions that will stimulate individuals and enterprises to innovate and take the lead in the next generation of knowledge creation, technologies, business models and dynamic management systems," the council says in its report.

Technology is changing global markets so quickly that old economic goals such as efficiency and quality are no longer enough to remain competitive, the council says. Business must also focus on "creating new markets, increasing choice and value to customers and innovating continuously on a global basis," the report concludes.

© 2004 The Washington Post Company