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Opinion

The U.S. doesn’t have to spend billions to boost industry. Just allow more immigration

A low-cost and effective way to increase America’s edge over China is to allow access to the world’s most talented people.

In light of China’s intense efforts to protect and grow its key industries, what National Economic Council Director Brian Deese recently referred to as a “wake-up call,” the Biden administration wants to take a similar approach to reviving U.S. industrial policy. This national strategy would unleash public investment to support specific industries to spur innovation.

With this plan in mind, the Senate recently passed legislation that would allocate $250 billion primarily for research and development and to expand semiconductor production. Yet a massive financial giveaway may not be the best approach.

A cheaper and more effective way to increase America’s edge over China is to maintain a key ingredient in innovation’s melting pot: letting America access the world’s most talented people.

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New research shows that embracing immigration empowers industry, particularly the tech sector, to grow the next unicorn startup, find the latest biotech breakthrough, encourage private R&D investment, and meet the evolving needs of entrepreneurs. The same open approach that let Levi Strauss, Nikola Tesla, Sergey Brin and countless others bring prosperity to our shores will still work today.

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Consider recent developments with COVID-19 vaccines. The underlying research on mRNA has been attributed in large part to biochemist Katalin Kariko, who emigrated from Hungary to the United States in 1985. The diverse backgrounds of Moderna’s founders are also illustrative: Noubar Afeyan is an Armenian American entrepreneur born in Lebanon; Derrick Rossi is a Canadian stem cell biologist; and Kenneth Chien is an Asian American cardiovascular scientist. Pfizer also developed a vaccine by working with BioNTech, which was co-founded by two Turkish immigrants in Germany.

Until recently, America has been an active recruiter in global talent, recognizing that when the best and brightest minds blend their ideas and talents, innovation follows.

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An influential study by economists William Kerr and William Lincoln highlights the ways in which immigration plays a key role in innovation. They found that greater high-skilled U.S. visa admissions increase U.S. patenting and inventing through direct contributions by immigrants. At the same time, these higher visa admissions did not displace American workers, which should reassure those who fear that skilled immigrants might be taking American jobs.

Part of the reason immigrants and foreign workers contribute so much to science and emerging technologies is because they tend to have strong educations in science, technology, engineering and mathematics fields. While immigrants in the United States have accounted for 17% to 18% of college graduates, they are overrepresented as science and engineering college graduates (29%) and doctorates (52%). Immigrant graduates with science and engineering degrees have historically had a patent rate double the average American rate.

Supporters of greater R&D spending and industrial policy should be troubled by two new research papers, which found that companies reduced R&D spending and capital investments following greater U.S. restrictions on high-skilled visas.

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Senior executives at high-tech companies also acknowledge access to global talent as a top priority for competitiveness with China. A Brookings Institution survey asked executives: “What should the United States do to increase its competitiveness in technology?” The No. 1 answer was: “Encourage global companies to invest in the United States and global technical talent to live and work in the United States.” By contrast, less than 10% of respondents recommended an increase of federal funding for research or for industrial support of the tech sector.

My research team also had a similar discovery when we interviewed and surveyed executives of early-stage technology startups across the U.S. As part of our fieldwork interviews, the final question to respondents was what public policies, if any, would they change to better help their startups grow and succeed. The most common answer to this open-ended question was to loosen restrictions on their ability to hire foreign talent.

A fairly recent National Bureau of Economic Research study also complements our fieldwork and survey findings. It showed that the U.S. technology startups that win the H-1B visa lottery and are allowed to hire more foreign skilled workers are more likely to have greater patent filings and to have a successful exit via an IPO or acquisition, as compared to those companies with lower win rates for their workers’ visa applications.

Combining the diverse talents of individuals, many of whom come from beyond our nation’s border, is overwhelmingly recognized by researchers as a crucial factor for spurring cutting-edge technologies. Yet this simple concept is often ignored in Washington.

By continuing to pursue greater immigration restrictions, the United States is inadvertently harming its own national strategy. A 2020 study found that when U.S. multinational companies faced high-skilled visa restrictions at home, they increased employment overseas instead, and one of the top three locations was— you guessed it — China.

Policymakers should pursue a more effective and welcoming industrial policy, one that transcends borders. When it comes to innovation, the people and their ideas matter the most.

Liya Palagashvili is a senior research fellow with the Mercatus Center at George Mason University, co-author of “Unintended Consequences of Restrictions on H-1B Visas,” and author of a new research study on “Exploring How Regulations Shape Technology Startups.” She wrote this column for The Dallas Morning News.

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