U.S. tech leadership to go way of 2004 Dream Team?

Unless the states focus on maintaining their gold standing, AEA warns, "American losses will not be confined to the basketball court."

Tech Industry
Humbling losses by the U.S. men's basketball team at the Olympics last year could hint at what lies ahead for the nation when it comes to economic and technological leadership, according to a new report from a tech industry trade group.

The study, to be released Tuesday by the American Electronics Association, argues that the next wave of breakthrough technologies could be created abroad if the United States does not act now to maintain its competitive edge.

"U.S. policy-makers and industry leaders need to recognize that as we neglect our technology infrastructure--skilled labor, (research and development), and a business-friendly environment--many countries are adopting economic reforms and are directly competing with the United States for foreign talent, innovation, and technology products and services," the report states. "Unless this realization hits home, American losses will not be confined to the basketball court."

The study comes on top of other calls for the United States to take steps to improve its technological competitiveness vis-a-vis other parts of the world. Technology prowess is seen as critical to a nation's overall economic health, given the way advances can create new industries, high-paying jobs and a higher standard of living.

To be sure, the U.S. system of technological innovation isn't in tatters. Many United States-based computer and Internet companies are doing well, venture capital investment in tech mecca Silicon Valley is rising again, and the country boasts top research universities.

But other nations have been building up their technology industries. India and China, for example, have attracted research operations from technology companies such as Microsoft, IBM and Intel.

And critics have called attention to potential problems in the United States, including relatively safe research projects and a declining presence of women in the computer field.

The new report from AEA calls for more funding for the National Science Foundation, specifically for research in the physical sciences, engineering, math and computer science.

U.S. federal funding of research and development (R&D) has declined over the past two decades, the report states: "It peaked in 1987 at $75 billion and still was below this peak by 2002 at $71 billion, adjusted for inflation to 1996 dollars."

The report also recommends immigration changes. Individuals born in other countries represent one of every five scientists and engineers in the United States, accounting for more than a million workers, according to the study. Among other things, AEA calls for all foreign master's and Ph.D. students in the United States to receive "green cards," or permanent residency status.

Late last year, President Bush signed into law an exemption to the annual cap of H-1B guest worker visas for up to 20,000 foreigners earning graduate degrees at U.S. schools.

AEA also argues for improving the U.S. education system, making the R&D tax credit permanent, and creating a tax credit for training workers. "Companies often lack incentives to invest in educating and retraining workers, as they risk losing that return on investment if the worker subsequently leaves the firm," the report says. "By providing human capital investment tax credits, the U.S. government can encourage companies to retrain workers by reducing or eliminating out-of-pocket costs."

Besides drawing an analogy between the U.S. economy and the U.S. men's Olympic basketball team, AEA suggests that the country is like the "proverbial frog in the pot of water" when it comes to technological leadership, oblivious to a slowly building catastrophe.

"In our report, we analyze a number of competitiveness factors that, when taken in isolation, as they so often are, would not necessarily constitute a crisis," AEA President William Archey said in a statement. "But the interrelationship--the cumulative effect of these trends--makes the more compelling argument that the status quo is unsustainable."

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