The Future of Manufacturing and Innovation in Germany and the United States

Manufacturing in the United States and Germany face several innovation-related challenges: the structural impact of the green and digital transformations on key industries such as car manufacturing, skills and capabilities in the labor market for innovation, and vulnerabilities in the globalized value chains. For decades, the policy consensus may have been that these were not problems to be solved, but the logical, and indeed desirable, conclusion of large, industrialized economies operating in an open, globalized market. Offshoring the production of a certain component was not an issue so long as that component was readily available; an undiversified supply of energy was not a threat so long as the supply of gas did not pose challenges; the lack of domestic skills and capacities was not so much a concern so long as the movement of people across borders was relatively unobstructed.

This event brings together several leading thinkers on STI from the United States and Europe to discuss some of the key innovation challenges for manufacturing now and in the years ahead, and to explore what types of policies are necessary for innovation to meet these challenges.

Join ITIF and OECD to explore policy questions that arose in the context of the OECD Reviews of Innovation Policy: Germany 2022, but which have relevance to both the United States and Germany.

Welcome and Introduction (10:00–10:30 AM)

This session will provide the context of the event and introduce to the strengths and weaknesses of the U.S. innovation system.

• Robert Atkinson, President, ITIF
• Andrew Wyckoff, Director, OECD Directorate for Science, Technology and Innovation

Session 1 (10:30–11:00 AM): Strengths and Weaknesses of the German Innovation System

The COVID-19 pandemic and the Ukraine war have revealed vulnerabilities in Germany’s economic model: undiversified energy supply, an over-reliance on fossil fuels, delayed digitalization, and disreputable supply chains. Digital technologies may significantly disrupt manufacturing industries Germany has dominated for decades, threatening future competitiveness. The green transition also requires significant industrial transformations. Germany can call upon one of the world’s most advanced innovation systems in dealing with these challenges, but a new more agile, and experimental approach to innovation policy is needed. Based on the recent OECD Review of Innovation Policy: Germany, this session will introduce the current challenges of the German innovation system and elaborate on recommendations for the future.

What are the strengths and weaknesses of the German innovation system? How serious are these challenges and what should policymakers in do to address them?

• Caroline Paunov, Head of the Working Party for Technology and Innovation Policy & Luke Mackle, Policy Analyst, OECD
• Ulrich Romer, Head of Division for General Issues of National and International Innovation and Technology Policy, Federal Ministry for Economic Affairs and Climate Action of Germany

Session 2 (11:00–11:40 AM): Innovating for the Future of Manufacturing—Competitiveness and Key Enabling Technologies

What are the main changes needed in U.S. and German manufacturing to succeed in the future? There is a growing consensus in the United States and Germany that the manufacturing sector requires additional technological capabilities in order to improve the resilience of its supply chains and production, particularly in key enabling technologies such as semiconductors, batteries, and hydrogen. But how should priorities be identified, and by whom? In the United States the CHIPS and Science Act was a watershed movement where the government targeted particular industries for support. Is this likely to be a one-time event, or portend a new era of government support for advanced industries? Should industries or technologies be the focus, or, in fact, is it the application of technology, that is of critical, even strategic, importance? Are weaknesses in manufacturing supply chains really a question of innovation, or simply investment (incentives)?

Panelists are invited to provide a short intervention on one or more of these themes, before opening the floor to a Q&A.

• Robert Atkinson, President, ITIF (moderator)
• Gil Kaplan, Senior Fellow, Manufacturing Policy Initiative, Indiana University
• Sridhar Kota, University of Michigan
• Sicco Lehmann-Brauns, Senior Director, Research and Innovation Policy, Siemens

Session 3 (11:40 AM–12:20 PM): Changing Course in Innovation: Guiding Transitions—Digital Transformation and Environmental Sustainability

The competitiveness of manufacturing in the United States and Germany has been supported by a mature, well-functioning STI system. But can the institutional and policy mix for STI respond to challenges of resilience? How can the transition to cleaner manufacturing be supported without significantly harming national competitiveness? What role is there for digital technologies in transforming industries, given the different regulatory framework for tech companies in Germany and the U.S. and the U.S.’ lead in digital services?

One key difference in contemporary policymaking discussions is a growing sense of directionality, that is, the idea that policymakers should set the direction of STI development, rather than leaving the market to set the course. But what role should government really play in setting that direction, and how, can ‘directional’ policy decisions be pursued in the highly federal political systems of countries such as the United States and Germany?

Panelists are invited to provide a short intervention on one or more of these themes, before opening the floor to a Q&A.

• William B. Bonvillian, Former Director, MIT Washington Office
• Uwe Cantner, Professor, Friedrich-Schiller-University Jena; Chairman, Commission of Experts for Research and Innovation
• David M. Hart, Senior Fellow, ITIF; Professor, George Mason University
• Sylvia Schwaag Serger, Professor at the Department of Economic History, Lund University (moderator)

Final Remarks and Outlook (12:20-12:30 PM)

• Robert Atkinson, President, ITIF
• Andrew Wyckoff, Director, OECD Directorate for Science, Technology, and Innovation
• Caroline Paunov, Head of the Working Party for Technology and Innovation Policy, OECD
• Luke Mackle, Policy Analyst, OECD

Questions for the speakers? Ask via Slido.