On an agenda dominated by COVID, climate change and geopolitics, President Biden’s proposal for a global minimum tax is the main economic issue at the annual G20 summit in Rome this week. Many governments are eager to collect more tax revenue without having to worry that the rate hike will drive businesses – or their revenues – into more competitive jurisdictions. But instead of seeking to restrict businesses, Biden and his counterparts would be better off discussing policies that encourage them to innovate and boost productivity, which is essential to economic growth.

In the words of Nobel Prize-winning economist Paul Krugman, “Productivity isn’t everything, but in the long run it is. almost everything. ”Productivity growth measures the increase in output generated from a defined level of inputs, which frees up resources and creates wealth. But to achieve productivity growth, we need of investments.

The value of tomorrow’s production, the quality of our jobs and our standard of living are all functions of today’s investments. The US economy, positioned at the technological frontier, requires a continuous flow of capital investment to research and replenish the high-end machines, software, laboratories and manufacturing facilities that harness our potential, powering new ideas and generate innovations that improve our lives.

These companies and industries, which invest large sums in research and development, are often described as innovative or intensive intellectual property (“IP-intensive”). According to a new report published by ndp | Analytically, the economic performance of these IP-intensive manufacturing industries far exceeds the performance of “non-IP-intensive” manufacturing industries through a variety of relevant economic measures. (IP-intensive industries are defined as those for which the average R&D expenditure (per worker) exceeds the average R&D expenditure of the manufacturing sector. Non-IP intensive industries are those with lower than average manufacturing R&D spending.) Comparing annual averages over a 10-year period (2009-2018), IP-intensive industries generated 40% more output per worker; 60% more GDP per worker; 160% more export value per worker; and they paid wages 40 percent higher than non-IP intensive industries

Beyond these direct economic contributions, IP-intensive industries generate many less easily quantifiable benefits. The full impact includes the effects these companies have on the US economy over time through technological spillovers, evolution and hybridization of ideas, corporate governance policies, environmental stewardship and impacts. positive on social mobility and other labor market considerations. The competition inspired by these intellectual property-intensive companies increases the economic performance of the United States in perpetuity.

For example, during the pandemic, the value to society of our intellectual property intensive industries was demonstrated clearly and repeatedly. The speed with which vaccines against a previously unknown virus have been developed, tested, produced and distributed, as well as the advent and diffusion of new communication and collaboration technologies that have allowed businesses to continue to operate and people to visit their loved ones despite travel bans would have been impossible without the investments in R&D and intellectual capital of our innovative industries.

With the world’s largest consumer market, a productive workforce, a culture of innovation, deep and broad capital markets to commercialize innovation, and laws to protect that innovation, the United States has d ‘huge advantages in the global competition to attract and retain the best intellectual property experts in the world. companies. But we cannot take this investment channel for granted.

Today’s businesses have many options as to where and how they grow and produce. Governments compete for investment, and their policy environments can help or hinder. Consideration of taxes, regulations, trade openness, intellectual property protection, access to skilled workers, infrastructure and dozens of other policy issues are factored into decisions as to whether, where and how much to invest. Clear and consistent rules, political stability, protection against expropriation and theft of intellectual property, as well as the skills of the workforce, the quality of infrastructure and the size of the market are all important determinants of investments. Unduly high taxes, oppressive regulatory regimes, an uncertain business climate and breaches in the rule of law are among the repellents that stifle investment by IP-intensive companies.

To remain the world’s leading innovation economy, the United States must ensure that its fiscal and regulatory policies, its intellectual property protections, its trade and immigration policies, the quality of its infrastructure and of its workforce. work, as well as their business and political climate, serve to encourage investment in research and development. Whether this investment is generated by corporate profits in the United States or by capital inflows from abroad, R&D spending is essential to economic growth in the United States.

But capital investment must be continuous and responsive to technological changes and other emerging developments. The technology and trade war, for example, between the United States, China and others, demands that governments and businesses do more to protect intellectual property. This does not only mean thwarting the efforts of dishonest actors to steal the fruits of innovative companies, but also opposing ill-advised – even well-intentioned – proposals to renounce international commitments to respect intellectual property under the false pretext that this will accelerate the manufacture of COVID vaccines. .

While President Biden may brag about his plan for a global minimum tax in Rome, he and his G20 counterparts should focus their attention on policies that attract innovative companies and motivate them to produce IP-intensive goods and services. that increase the standard of living and our quality. of life.

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