Dean C. Garfield photo

Trade Group Lobbies For 'Innovation' Laws

As head of the Information Technology Industry Council, Dean Garfield represents tech leaders that include Microsoft, Google, Cisco Systems, Oracle, eBay and Hewlett-Packard.

The council's focus is the intersection between public policy and U.S. competitiveness, areas that include education, immigration, trade and taxes. Garfield has worked with Congress and the Obama administration to spur employment, entrepreneurship, innovation, capital investments and manufacturing productivity.

Garfield recently spoke with IBD about these efforts.

IBD: What is your core mission?

Garfield: More than anything it is to persuade policy makers of the power of technology to transform lives and drive economic growth in the U.S. and other parts of the world. We're always looking at policies that lead to broader global competitiveness, like policies that lead our companies and others to invest and hire people. There are a whole suite of polices that we advance with that goal in mind.

IBD: What's the Obama administration's policy on technology?

Garfield: In general, the technology sector views the administration in three dimensions. There are things they have done well, certainly on education policy. On trade issues they certainly have been pushing a free trade agenda. On the second dimension they are not doing as well, certainly on some of the regulatory issues. There are still a number of regulations that are an impediment to companies investing in the U.S. And then the third dimension is an area in which we are seeking his leadership, tax reform. It's one of those areas where, if the president jumps in earnestly, there is opportunity for progress to be made.

IBD: What is your organization doing to change tax policies?

Garfield: We're working to make sure we a have a tax system that gives businesses the best opportunity to be successful globally and creates incentive for an inflow of capital. We want U.S. businesses to be successful, but we also want to encourage foreign businesses to invest in the U.S.

Our current tax code does neither well. In fact, it does both very poorly. We have a really high tax rate, soon the highest in the world now that Japan just revived their code. The U.S. tax code was last revised in 1986. Google (GOOG) did not exist then. Neither  did LinkedIn (LNKD) or any of the major companies that are driving the market today. These tax polices were developed before the kind of collaborative economy that you see today. So we need policies that reflect today's economy and innovation.

IBD: What will spur tech innovation?

Garfield: The essential ingredients for innovation to occur in America are there, and in many respects uniquely exist in this country. I have traveled all over the world and the entrepreneurial energy in the U.S. is unparalleled. That's also true of our universities.

The key is to create a policy framework so that we help rather than hinder those essential ingredients in place already. We are looking at ways of feeding capital to new businesses and making sure that our tax code lends self to companies competing effectively across the globe. This includes making sure that our trade polices are such that we create new market opportunities in emerging markets, and making sure that our talent policies are consistent with today's reality. We have students from all over world that come to the U.S. and once they graduate we close them out to our borders. That does not make sense.

IBD: What's your view on the patent reform bill that Congress is close to finalizing, which represents the first major overhaul of U.S. patent rules in more than 50 years?

Garfield: It's an issue that's been around for almost a decade. The patent reform bill made it out of the Senate by a vote of 95-5 and made it out of the House Judiciary Committee with a similar overwhelming margin. That is highly encouraging and we support the efforts to reconcile the two bills. The reform will reduce the time lag between innovation to commercialization, which we want to encourage.

IBD: Many independent and small-company inventors say the bill would hurt them.

Garfield: I don't see it that way. The evidence that this is not the case is the margin by which the bill made it out of the Senate. It would be highly unusual to have a bill that moved out of the Senate by 95-5 disadvantage a particular sector.

IBD: How is U.S. competitiveness vs. the rest of the world?

Garfield: We're doing OK, but we're missing opportunities to do significantly better. When you look at many of the rankings on a global competitiveness scale, especially as it relates to innovation and technology, the U.S. is still in the top six. But on a relative basis we are declining. You have other markets, especially emerging markets like China, India and Brazil, that are competing aggressively for investments in jobs and are putting policies in place to attract those investments. The U.S. is not being as aggressive in competing as it needs to be.

IBD: How so?

Garfield: Many of our companies share anecdotes of the evaluation process they engage in to build a new factory or facility. They hear from foreign governments every day, but rarely, if ever, do they hear from the U.S. government as to why they need your business to be here. We have a group of our chief financial officers that have been looking at this issue and collaborating on it. They have put together a report and will publish that in the next month or so, as to what the U.S. needs to do to encourage more investment here.

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