Dr. Phyllis Genther Yoshida is the Senior Fellow for Energy and Technology at Sasakawa USA. In this Commentary, she argues that global competition in trade and investment will increasingly be replaced by competition in innovation. As the world’s first and third largest economies and funders of research, the United States and Japan must fully tap and utilize the knowledge that comes from coordinating and cooperating more strategically bilaterally and multilaterally on the components of innovation. Doing so will help protect the economic and national security positions of not only the United States and Japan, but also our like-minded partners. Dr. Yoshida is the editor of Japan’s Energy Conundrum: A Discussion of Japan’s Energy Circumstances and U.S.-Japan Energy Relations.
Fair and transparent trade and investment can boost economic growth but, by themselves, are insufficient to ensure long-term national security and economic well being. Why? Trade negotiations, like the U.S.-Japan talks on agriculture and automobiles begun in April 2019, address current and past practice, focusing on often long-standing unresolved tensions. They do not directly address the foundation of strong national and economic security: innovation. The components of global innovation leadership—human capital, science, technology, and business climate—are the key to the future. Competition in trade and investment will increasingly be replaced by competition in innovation.
Innovation lies at the core of any solution to the challenges facing our world today. Whether it’s the creation of new technologies that can help us stretch the limits of what is possible, or the development of new business models that make our world more efficient and interconnected, it is our business imperative as leaders to continuously reinvent, rethink, and reimagine.
— The Global Innovation Index 2018: Energizing the World with Innovation
The global economy has seen the rapid emergence of new economic and technological powerhouses in the 21st century, some of which approach the world differently than the United States and Japan. China, for example, ranked 35th globally in innovation in 2013, rose to 17th in 2018.  Its share of global research and development (R&D), a major indicator of the science and technology component of innovation, rose from 14.7 percent in 2013 to 21.6 percent in 2018. For comparison, in 2018, the United States globally ranked 6th and Japan 13th in innovation. The United States accounted for 25.2 percent and Japan 8.5 percent of global R&D in 2018.
Globalization offers opportunities, but also has created risks that could be mitigated by like-minded partners cooperating to enhance their innovation leadership. No country is big enough in terms of knowledge and/or capabilities in today’s world to go it alone.
Today, the United States and Japan together account for 30 percent of the global economy, and just under 35 percent of global R&D expenditures. As the world’s first and third largest economies and funders of research, the United States and Japan must fully tap and utilize the knowledge that comes from coordinating and cooperating more strategically bilaterally and multilaterally on the components of innovation. As front runners, we are in a good position to lead and involve others who share our values such as the United Kingdom, Germany, Canada, Australia, and South Korea.
We will nurture a healthy innovation economy that collaborates with allies and partners, improves STEM education, draws on an advanced technical workforce, and invests in early-stage research and development (R&D).
— The National Security Strategy of the United States
This cooperation becomes more and more imperative as our relative shares of global R&D fall even as total expenditures increase. By 2050, the U.S. share of global R&D is forecast to drop from around 25 percent in 2018 to around 14.4 percent. It stood at 37 percent in 2000.
 Cornell University, INSEAD, and WIPO (2018): The Global Innovation Index 2018: Energizing the World with Innovation. Ithaca, Fontainebleau, and Geneva, pg. IX.
 Op Cit., The Global Innovation Index: 2018.
 2019 Global R&D Funding Forecast, R&D Magazine, Winter 2019, pg. 3.
 Executive Office of the President of the United States, The National Security Strategy of the United States, December 2017, pg. 20.
 Dehmer SP, Pardey PG, Beddow JM, Chai Y (2019) Reshuffling the global R&D deck, 1980-2050. PLoS ONE 14(3): e0213801. https://doi.org/10.1371/journal.pone.0213801.
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