Summary of Innovation and Trade Policy in a Globalized World

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One point that most economists agree on is that free trade produces long-term benefits for the global economy. In the current geopolitical environment, however, the United States is locked in trade disputes with China, the European Union and others. Economists Ufuk Akcigit, Sina T. Ates and Giammario Impullitti examine the relative efficacy of using tariffs or strategic incentives to bolster nations’ competitive advantage. Policy experts and executives interested in a thorough analysis of this economic carrot-and-stick approach will find important insights in this report.

About the Authors

Ufuk Akcigit is a professor of economics at the University of Chicago, Sina T. Ates is an economist at the Board of Governors of the Federal Reserve and Giammario Impullitti is a professor at the University of Nottingham.



In the late 1970s and early 1980s, the United States faced growing economic pressure from rival advanced economies, including West Germany, Canada and Japan. Officials noted a disturbing decline in US patents and technology dynamism, as competing nations strengthened their intellectual property portfolios. In 1985, Americans applied for just 55% of patents, down from 70% in 1975. In a strategic policy response, the Reagan administration orchestrated a targeted R&D credit designed to boost competitiveness.

Today, concerns about China’s growing trade dominance and about other...

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