An important element of innovation is research and development (R&D),  the testing and application of new ideas. These  disincentives may be particularly difficult to overcome for small- and  medium-sized enterprises (SME). Other  U.S. agencies support manufacturing as part of their program activities,  including the Department of Defense, the Department of Energy, National  Aeronautics and Space Administration, and the National Science  Foundation. Other Economically Advanced Countries Have Instituted a Varied Mix of Programs to Address Key Manufacturing Issues in Their Countries

The four countries we analyzed—Canada, Germany, Japan, and South  Korea—take varied approaches to government support for manufacturing,  with each providing a different mix of programs to support their  manufacturing sectors. South Korea has  substantially expanded investments in R&D to strengthen its  manufacturing sector. South Korea has also emphasized the development of a network of  technoparks—regional innovation centers that provide manufacturing  assets, R&D facilities, business incubation, and education and production  assistance to industry—to encourage growth and development  throughout the country. Foreign Manufacturing Programs Offer Some Key Contrasts to Those in the United States

When compared to the United States, the countries in our study offer  some key distinctions in government programs to support the  manufacturing sector. Based on our comparison of selected U.S.  programs, the foreign countries place a stronger emphasis on innovation  programs that support commercialization, especially through programs  that provide technical support and product development and support for  infrastructure and clusters. In contrast, the United States spends a  relatively high amount on competitive funding for R&D projects with  commercial potential. Within trade policy, countries in our study all  provide similar services but there are several differences in how they are  delivered. For example, the United States is an acknowledged leader in  intellectual property protection, but the United States government plays a  less prominent role than Japan in developing technological standards. Commercialization Is a Key Goal of Foreign Innovation Programs

While the United States and the four countries we studied all provide  support for innovation and R&D, Canada, Germany, Japan, and South  Korea have made commercialization a central goal of their innovation  programs. Innovation programs abroad incorporate three  broad strategies: (1) providing technical support and product development  for client firms, especially SMEs; (2) fostering collaboration between  manufacturers and researchers, as well as between small and large  manufacturers; and (3) providing competitive grants for private-sector  R&D efforts with commercial potential. Germany’s Sustained Commitment to Vocational Training Helps Provide a Supply of Skilled Manufacturing Workers

Germany’s national government has maintained a substantial  commitment to a dual training system, which helps provide a supply of  skilled workers for the manufacturing sector. While the United States does not have a national system  to issue industry-recognized credentials, the manufacturing industry, with  participation from the federal government, has recently started moving in  this direction. The  national government enforces the dual training system’s regulations and  has coordinated with industry, union, and state government stakeholders  to develop skill standards in 350 occupations. In contrast, the United States and Canada have a more decentralized  system of skills training programs, with management of these programs  largely devolved to states and localities. This was particularly evident in Germany. More generally, our analysis of the manufacturing programs in the four  selected countries shows the broad extent to which U.S. competitors are  leveraging the public sector to help their manufacturing industries  maintain competitiveness in a rapidly changing global economy. What government strategies and programs have other advanced  economies implemented to approach issues similar to those facing  manufacturing in the United States? What key distinctions exist between policy approaches to support  manufacturing in other advanced economies and those in the United  States? For example, in some countries, we did not examine  training or trade programs because through expert opinion, input from  U.S. officials, and our literature review, we did not identify programs in  these areas as being particularly informative for U.S. policy. Applied Research and Commercialization Initiative. Nationally recognized credential. According  to officials from the Federal Institute for Vocational Education and  Training.
Why GAO Did This Study

Over the last decade, the United States lost about one-third of its manufacturing jobs, raising concerns about U.S. manufacturing competitiveness. There may be insights to glean from government policies of similarly-situated countries, which are facing some of the same challenges of increased competition in manufacturing from developing countries.
GAO was asked to identify innovative foreign programs that support manufacturing that may help inform U.S. policy. Specifically, GAO examined (1) government strategies and programs other advanced economies have implemented to approach issues similar to those facing U.S. manufacturing, and (2) the key distinctions between government approaches to support manufacturing in other advanced economies and those in the United States. Based on input from experts and federal officials, and an analysis of manufacturing programs in other advanced countries, GAO selected Canada, Germany, Japan, and South Korea for study. In each country, GAO interviewed program officials and reviewed documents describing their programs. To identify distinctions between foreign and U.S. approaches to supporting manufacturing, GAO researched comparable programs in the United States, and interviewed staff administering those programs.
GAO is not making any recommendations in this report. GAO received only technical comments on this report from federal agencies.

What GAO Found

The four countries GAO analyzed--Canada, Germany, Japan, and South Korea--offer a varied mix of programs to support their manufacturing sectors. For example, Canada is shifting emphasis from its primary research and development (R&D) tax credit toward direct support to manufacturers to encourage innovation, particularly small- and medium-sized enterprises (SMEs). Germany has established applied institutes and clusters of researchers and manufacturers to conduct R&D in priority areas, as well as a national dual training system that combines classroom study with workplace training, and develops national vocational skills standards and credentials in 350 occupations. Japan has implemented science and technology programs--with a major focus on alternative energy projects--as part of a comprehensive manufacturing strategy. South Korea has substantially expanded investments in R&D, including the development of a network of technoparks--regional innovation centers that provide R&D facilities, business incubation, and education and production assistance to industry.
When compared to the United States, the countries in GAO's study offer some key distinctions in government programs to support the manufacturing sector in the areas of innovation, trade, and training.
While the United States and the other four countries all provide support for innovation and R&D, the foreign programs place greater emphasis on commercialization to help manufacturers bridge the gap between innovative ideas and sales. These include programs that support infrastructure as well as hands-on technical and product development services to firms, and that foster collaboration between manufacturers and researchers. In contrast, the United States relies heavily on competitive funding for R&D projects with commercial potential.
Within trade policy, the United States and the four countries in GAO's study provide similar services, but there are several differences in how they are delivered. For example, the United States is an acknowledged leader in intellectual property protection, but the U.S. government plays a less prominent role than the Japanese government in developing technological standards on industrial products.
A key difference related to training programs pertains to the sustained role of government in coordinating stakeholder input into a national system of vocational skills training and credentialing, which helps provide a supply of skilled workers for manufacturers. This was particularly evident in Germany. In contrast, the United States largely devolves vocational training to states and localities and does not have a national system to issue industry-recognized credentials. However, the U.S. manufacturing industry, with participation from the federal government, has recently launched an effort to establish nationally portable, industry-recognized credentials for the manufacturing sector.
Overall, GAO's analysis shows the broad extent to which four countries who are U.S. competitors are leveraging the public sector to help their manufacturing industries maintain competitiveness in a rapidly changing global economy.