Though it attracted considerably less media attention than his comments on foreign policy, the need to maintain the US’s business competitiveness was a prominent tenet of George Bush’s state-of-the-union address on January 31.

Addressing Congress, the president stressed the urgency of making permanent a temporary R&D tax break for US companies that expired at the end of 2005. The White House-sponsored American Competitiveness Initiative would offer, in fiscal year 2007, $4.6bn to fund the tax credit, $380m to improve mathematics and science instruction in high schools, and $910m to increase funding for government research projects.


Soon after the speech, Mr Bush was on the road and continuing to ram home the point.

“Congress needs to understand that nations like China and India and Japan and Korea and Canada all offer tax incentives that are permanent,” the president told employees at the Minnesota headquarters of industrial group 3M two days later. “We live in a competitive world. We want to be leader in this world.”

For the moment, the US is the clear leader of the knowledge economy – although, with Asia nipping at its heels, it is unclear how much longer that will be the case. The US cannot afford to be complacent about innovation, R&D and competitiveness; it will have to fight to retain its crown.

Congress, which is considering bills that would extend the R&D tax credit for one year, should make it permanent as soon as possible and give budgetary priority to competitiveness-boosting initiatives.

Europe, however, will need to fight even harder to avoid drifting to a distant third place. To date, EU leaders have shown little will to back up their fighting words with hard cash and tangible solutions.

As for which contender has the best chance of knocking the US out of first place, the smart money is on Asia.