[CTC] How Chinese imports may have curbed American ingenuity

[Arthur Stamoulis]

http://www.marketwatch.com/story/how-chinese-imports-may-have-curbed-american-ingenuity-2017-03-22 <http://www.marketwatch.com/story/how-chinese-imports-may-have-curbed-american-ingenuity-2017-03-22>
How Chinese imports may have curbed American ingenuity 

Published: Mar 22, 2017 11:34 a.m. ET

Firms hit by Asian competition produce fewer patents, Autor finds <http://www.marketwatch.com/topics/journalists/jeffry-bartash>
Jeffry Bartash <http://www.marketwatch.com/topics/journalists/jeffry-bartash>
Soaring imports from China are blamed for having taken U.S. manufacturing jobs, but what’s less well known is how they also undercut American ingenuity, according to a prominent labor economist.
Massachusetts Institute of Technology professor David Autor and several of his colleagues found that manufacturers most exposed to Chinese competition were forced to skimp on research and production, leading to a “significant decline” in new patents.

Autor examined all corporate patents filed by U.S.-based firms between 1975 and 2007 and granted as of March 2013.


Patents dropped after China entered the World Trade Organization.
Why is that important? 

“Manufacturing is the locus of U.S. innovation and accounts for more than two thirds of U.S. R&D spending and for a similarly large share of U.S. patents,” Autor writes in a new article. <http://voxeu.org/article/competition-china-reduced-innovation-us>
The U.S. has been running large trade deficits with China for more than two decades. In 2016, the deficit with China totaled $310 billion and accounted for about 62% of the overall U.S. trade gap.

The slowdown in innovation has broad consequences for the U.S. economy. If companies are less able to develop improved processes and technologies, their productivity will suffer. And low productivity is a hallmark of weaker economies.

That’s the situation the U.S. has found itself in. The nation’s productivity has risen about 1% annually since 2007, compared to a post World War Two average of about 2.2%. Productivity is one of two keys to a faster growing economy — the other is an expanding working-age population.

The prolonged soft patch in productivity is evident in the current recovery, the weakest in the postwar era when viewed through the prism of gross domestic product, the official scorecard for the economy.

GDP has averaged about 2% growth since the Great Recession. The last time it topped 3% was in 2005, marking the longest stretch of sub-3% growth in modern times.

“While politicians’ ‘obsession’ with manufacturing is primarily due to the sizable employment losses in the sector during recent decades, an accompanying reduction in innovation may well affect economic growth in the longer term,” Autor wrote.
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