Reindustrialization in USA - Euler Hermes

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Euler HermesEconomic Outlook n° 1187 | Special Report | The Reindustrialization of the United StatesReason #3The commitmentto a conducive business climateAs we have seen from the response to the financialcrisis, policy responses including the stimuluspackage, have been a decisive factor in shapingthe U.S. recovery. Going forward, the questionis how can the policy environment help sustainthe positive first signs of a reindustrialization ofthe U.S.? What hampers the realization of its fullpotential? Is corporate cash hoarding a reality?How did the private sector organize to cope withnew challenges and an uncertain economicenvironment? Confidence and forward visibility arekey as uncertainties, and still cloud the decisionmakingof entrepreneurs. Are there other options?25. GDP Growth VS. R&D Growthaveraged annualized rates 1987-200910%9%8%7%6%5%4%3%U.K. France CanadaU.S.ItalyGermanyJapanKoreaSpainAustraliaChina2%0% 5% 10% 15% 20%Source: Organisation for Economic Co-operation and Development28
Economic Outlook n° 1187 | Special Report | The Reindustrialization of the United StatesEuler HermesObjective: InnovationResearch and Development (R&D)is critical to competitiveness andinnovation, and the U.S. needs to boostefforts in this sector. For example, theU.S. is beginning to fall behind its globalcompetitors in patent generation.Patents represent the end-product ofR&D efforts, which can then be used forcommercial purposes and competitiveadvantage.u The benefits of a strong national R&D programand the resulting growth in the number of patentsgranted are obvious. Figure 25 demonstrates thatfrom 1995 to 2012, nations that had a higher averageannualized growth rate in the number of patentsgranted tended to also have a higher growth rate ofGDP. Clearly the growth rate of patent issuance in theU.S. at under 5% is insufficient to contribute to robustGDP growth. By contrast, China’s R&D programs aregrowing the number of patents issued there by aremarkable 22%, resulting in an equally remarkableGDP growth of 10% annually. U.S. industry needs totake this competitive threat seriously if it expects tocontinue on the path of reindustrialization.u The threat appears in other measures of innovationas well, such as the absolute number of patentsgranted in each country. Note in Figure 26 below thatthe U.S. and Japan lead this measure with about thesame number of patents granted in 2010. But moreimportantly, the chart clearly shows the rise of China’sR&D programs and to a lesser extent those ofSouth Korea. These countries are rapidly closing thegap with the U.S. and eroding its competitive advantage.Even after patent applications are made, the U.S.stumbles. Figure 27 shows the increase or decreasesince 1993 in the length of time required for patentapproval, by country. Here the U.S. is a serious laggardas well. It took more than twice as much time toapprove a patent in the U.S. in 2009 as it did in 1993.By comparison, the approval time in South Korea hasfallen 40%, and in Japan 20%. U.S. manufacturingand the economy in general would be well served byimprovements in the process of approving patents.u The composition of the increase in patents showsthreats and opportunities as well. Table J shows thepercentage contribution of each industry to thegrowth in patents between 1995 and 2008. Thefirst columns show the contribution to total patentsgranted worldwide, and as might be expected, sevenof the top 10 industries are related to electronics,with computers and electrical machinery taking thetop spots. The remaining columns show the industrybreakout by country. The U.S. contribution by industryis the most highly concentrated with a full 19% incomputers. Computer technology is also in the topthree in Japan and South Korea, representing significantcompetition from those countries. The positiveview here is that the U.S. has focused on the highestgrowth industry since 1995, and its lead may make itwell-suited for further competitive gains.• • •26. Patents Granted27. Change in TimeRequired for Patent Approval25000020000015000010000050000080828486889092949698000204060810U.S.JapanKoreaEuropeChinaSource: World Intellectual Property Organization (WIPO)Source: World Intellectual Property Organization (WIPO):29
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Reindustrialization in USA - Euler Hermes

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