Editor’s note: In February, The National Interest organized a symposium on the U.S.-China technology race amidst the emergence of DeepSeek and ongoing legal battles over TikTok. We asked a variety of experts the following question: “What are the three most important technology policies that the U.S. should pursue or avoid to compete adequately with China?“ The following article is one of their responses.
U.S., and more broadly allied, techno-economic competition with China is the most important challenge facing the West. As ITIF has pointed out, China is rapidly gaining on innovation and in some areas is already ahead. Given the magnitude of the challenge and the weaknesses across so much of the U.S. policy and institutional landscape, the more appropriate question is: what are the 30 most important technology policies…? But I will stick with three.
Supercharging Innovation: Strengthening R&D Incentives
First, Congress should restore first-year expensing for research and development and double the R&D tax credit. The R&D credit is a proven policy tool that not only boosts business R&D it also affects its global location. Unfortunately, the U.S. credit is anemic. As such, Congress should double the regular R&D tax credit to 40 percent and the Alternative Simplified Credit to 28 percent.
Defending Market Share: Combatting China’s Predatory Trade Practices
Second, the United States will lose the innovation war with China if it does not preserve global market share in key industries. China’s predatory innovation mercantilist actions give it the edge to catch up or exceed our lead in many of these industries. As such, Congress should reform Section 337 of the 1930 Tariff Act to make it easier for the U.S. International Trade Commission to issue ten-year exclusion orders on Chinese goods and services made with unfair practices such as IP theft, closed markets, or massive subsidies. Importantly, this includes eliminating the antiquated requirement to show damage to U.S. firms.
Coordinating National Strategy: The Case for a National Competitiveness Council
Third, the Trump administration should establish a National Competitiveness Council (NCC) to formulate and coordinate advanced-industry competitiveness policy across the federal enterprise. There is no one in the White House specifically focusing on America’s innovation, productivity, and competitiveness challenges. OSTP is focused on science. The DPC is focused on domestic economic issues. And the NSC concentrates on military and intelligence matters. As such, the administration should establish an NCC focused on formulating and coordinating advanced-industry competitiveness policies across the federal enterprise. The NCC would oversee the analysis of U.S. advanced industry capabilities, focusing on challenges from China. Staffing the NCC with analysts with a deep understanding of firm, industry, and technology dynamics will help this council inform the next administration on policies designed to compete and ultimately beat China in the race for command of key industries.
All three can be done with minimal budget impact. As ITIF has shown, the expanded R&D credit pays for itself in higher tax revenues within 15 years. Section 337 is largely an administrative fix. And an NCC in the White House entails relatively little money.
About the Author: Robert Atkinson
Dr. Robert D. Atkinson is the President of the Information Technology and Innovation Foundation
Image: Shutterstock
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