Senate Commerce, Science and Transportation Committee Examines Manufacturing Hubs

The Senate Commerce, Science, and Transportation Committee held a November 13 hearing to discuss the role that manufacturing hubs play in strengthening the innovation economy. Dialogue during the hearing focused on government and industry collaborations and mechanisms to bridge the “valley of death,” the stage between scientific research and product production prior to entering an economic market. Manufacturing programs and investments in U.S.-based innovation and research were discussed by this committee in a recent hearing on the reauthorization of the America COMPETES Act.

Chairman John (Jay) D. Rockefeller IV (D-WV) opened the hearing by drawing parallels between the protection of the U.S. lead in science and research and maintaining its global competitiveness. “The flow of federal funding isn’t certain right now,” he noted as he expressed worry about the outlook for the manufacturing sector and the “skilled workers, infrastructure, and knowledge to manufacture” that are no longer based in the United States. Regarding the “valley of death” he described proposals that would “establish a public-private network of manufacturing hubs, each dedicated to a particular technology that holds promise to help America stay ahead of our global competitors.” The hubs, he described, “would help our economy by lending a hand where the free market doesn’t work well – the risky and uncertain period that stands in the way between great inventions and great commercial products.”

Ranking Member John R. Thune (R-SD) presented the role that manufacturing has played in the national economy and that of South Dakota. He was interested in examining what should be the role of the federal government in promoting U.S. manufacturing and whether the Obama Administration’s proposal to create a network of manufacturing hubs would maximize value for taxpayers while avoiding duplication of existing federal programs. He noted that the Administration’s proposal is largely aligned with legislation introduced by Senators Sherrod Brown (D-OH) and Roy Blunt (R-MO). Also of importance to U.S. manufacturing competitiveness, Thune noted, are regulatory reforms that address competitiveness challenges as he highlighted the bipartisan Manufacturing Competitiveness Initiative aimed at addressing impacts of “unnecessarily burdensome regulations on U.S. manufacturers.”

Senator Brown, spoke of the economic effects of the manufacturing sector emphasizing that “location of manufacturing matters” as he highlighted the proposed Network for Manufacturing Innovation. The network would “expand on our recent successes to create public-private partnerships focused on bridging the commercialization gap for technologies identified by industry. These regional, industry-led institutes will leverage local expertise and provide stable, high-wage employment for millions of next-generation workers.”

Five witnesses testified. Penny Pritzker, U.S. Secretary of Commerce outlined the proposed National Network for Manufacturing Innovation program stating that “innovation occurs not only at the point of invention, but at every stage of product development and delivery.” She cautioned “when a company’s inventors and design engineers are separated from the production process, that company may be hindered in its abilities to improve products or develop new goods and services.” She stressed the importance of the middle stages of product development and provided details about how the proposed innovation institutes would support technology transfer. Noting the success of institutes at the Departments of Defense and Energy, she stated “at present we have no federal program exclusively focused on identifying emerging technologies with broad potential impact and bringing together companies in associated industries to improve technology transitions.”

Eric Spiegel, President and CEO of Siemens Corporation began his testimony by listing elements which Siemens considers as it decides the locations of manufacturing facilities. He discussed the argument that because labor is cheaper in other countries, American manufacturing is negatively affected. He disagreed with this notion stating that cheaper labor does not necessarily translate into lower production costs and that success of high-technology products relies more heavily on access to innovators than on cheap labor. “If we cannot improve the products we build [in America] through each new generation, we will not succeed,” he said. Innovation institutes foster a competitive advantage, he stated, as he mentioned the success of the German Fraunhofer Institutes, innovation hubs which partner businesses, university departments and targeted government funding. He was very supportive of the Revitalize American Manufacturing and Innovation Act, currently under discussion in the Senate and indicated that the innovation institutes established in the bill would help maintain the edge in U.S. manufacturing.

Martin Schmidt, Acting Provost of the Massachusetts Institute of Technology (MIT) discussed the recent MIT Production in the Innovation Economy (PIE) study and the Advanced Manufacturing Partnership project. The study found that in manufacturing, separation of design from the process of manufacturing can work in certain sectors where the production and design process have been standardized. “But in most sectors – particularly where we are producing complex, high value goods – the study found that there were very close, critical links between innovation and initial production stages,” slowing the innovation process if production shifts abroad. He also discussed the scale-up problem as it relates to the need to integrate innovation and production. The key findings in MIT’s PIE study link closely with the Advanced Manufacturing Partnership project, discussed by Pritzker.

Michael Garvey, President and CEO of M-7 Technologies described problems entrepreneurs encounter during the commercialization process. Because it is time consuming, expensive, and investors need assurance that there will be a return on their investments, “tremendous amounts of technology never make it to market,” stated Garvey. “If M-7 were to duplicate the capabilities and equipment available at [the National Additive Manufacturing Innovation Institute pilot project] America Makes, it would have to invest sustainably more to have similar assets in house.”

Terry Brewer, President of Brewer Science, discussed the influence that public-private partnerships have on technological developments. In his testimony, he sought to answer how the federal government can “continue to foster great U.S. technology business development? How can we sustain and grow out global technology leadership?” To surmount these challenges, he advocated for tax reform, and specifically for making the research and development tax credit permanent. He also supported “broad-based federal regulatory relief; long-term authorization and continued oversight of the SBIR program; enforcement of the existing intellectual property laws and international trade agreements; continued support of STEM education programs; and establishment of a select number of advanced manufacturing centers that support diverse innovations and locations throughout the United States.”

Questions from senators focused on job creation and the role that manufacturing plays in the local and national economy. U.S. exports and the manufacturing workforce were also discussed, as were pubic-private partnerships and the role of the federal government in technology transfer. There was no discussion about the next steps of the committee in the process to reauthorize the America COMPETES Act.