GLOBAL 

MANUFACTURING

Foreign Government 

Programs Differ in 

Some Key Respects 

From Those in the 

United States 

Report to the Chairman, Committee on 

Commerce, Science, and 

Transportation, U.S. Senate

July 2013

GAO-13-365

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-365, a report to the 

Chairman, Committee on Commerce, Science, 

and Transportation, U.S. Senate

July 2013

GLOBAL MANUFACTURING

Foreign Government Programs Differ in Some Key 

Respects from Those in the United States

Why GAO Did This Study

Over the last decade, the United 

States lost about one-third of its 

manufacturing jobs, raising concerns

about U.S. manufacturing 

competitiveness. There may be 

insights to glean from government 

policies of similarly-situated countries,

which are facing some of the same 

challenges of increased competition in 

manufacturing from developing 

countries. 

GAO was asked to identify innovative 

foreign programs that support 

manufacturing that may help inform 

U.S. policy. Specifically, GAO 

examined (1) government strategies 

and programs other advanced 

economies have implemented to 

approach issues similar to those facing 

U.S. manufacturing, and (2) the key 

distinctions between government 

approaches to support manufacturing 

in other advanced economies and 

those in the United States. Based on 

input from experts and federal officials,

and an analysis of manufacturing 

programs in other advanced countries, 

GAO selected Canada, Germany, 

Japan, and South Korea for study. In 

each country, GAO interviewed 

program officials and reviewed 

documents describing their programs. 

To identify distinctions between foreign 

and U.S. approaches to supporting 

manufacturing, GAO researched 

comparable programs in the United 

States, and interviewed staff 

administering those programs.

GAO is not making any 

recommendations in this report. GAO 

received only technical comments on 

this report from federal agencies.

What GAO Found

The four countries GAO analyzed—Canada, Germany, Japan, and South 

Korea—offer a varied mix of programs to support their manufacturing sectors. 

For example, Canada is shifting emphasis from its primary research and 

development (R&D) tax credit toward direct support to manufacturers to 

encourage innovation, particularly small- and medium-sized enterprises (SMEs). 

Germany has established applied institutes and clusters of researchers and 

manufacturers to conduct R&D in priority areas, as well as a national dual 

training system that combines classroom study with workplace training, and 

develops national vocational skills standards and credentials in 350 occupations. 

Japan has implemented science and technology programs—with a major focus 

on alternative energy projects—as part of a comprehensive manufacturing 

strategy. South Korea has substantially expanded investments in R&D, including 

the development of a network of technoparks—regional innovation centers that 

provide R&D facilities, business incubation, and education and production 

assistance to industry. 

When compared to the United States, the countries in GAO’s study offer some 

key distinctions in government programs to support the manufacturing sector in 

the areas of innovation, trade, and training.

• While the United States and the other four countries all provide support for 

innovation and R&D, the foreign programs place greater emphasis on 

commercialization to help manufacturers bridge the gap between innovative 

ideas and sales. These include programs that support infrastructure as well 

as hands-on technical and product development services to firms, and that 

foster collaboration between manufacturers and researchers. In contrast, the 

United States relies heavily on competitive funding for R&D projects with 

commercial potential. 

• Within trade policy, the United States and the four countries in GAO’s study 

provide similar services, but there are several differences in how they are 

delivered. For example, the United States is an acknowledged leader in 

intellectual property protection, but the U.S. government plays a less

prominent role than the Japanese government in developing technological 

standards on industrial products. 

• A key difference related to training programs pertains to the sustained role of 

government in coordinating stakeholder input into a national system of 

vocational skills training and credentialing, which helps provide a supply of 

skilled workers for manufacturers. This was particularly evident in Germany. 

In contrast, the United States largely devolves vocational training to states 

and localities and does not have a national system to issue industryrecognized credentials. However, the U.S. manufacturing industry, with 

participation from the federal government, has recently launched an effort to 

establish nationally portable, industry-recognized credentials for the 

manufacturing sector. 

Overall, GAO’s analysis shows the broad extent to which four countries who are 

U.S. competitors are leveraging the public sector to help their manufacturing 

industries maintain competitiveness in a rapidly changing global economy.

View GAO-13-365. For more information, 

contact Andrew Sherrill at (202) 512-7215 or 

SherrillA@gao.gov or Lawrance Evans at 

(202) 512-4802 or EvansL@gao.gov. 
Page i GAO-13-365 Global Manufacturing

Letter 1

Background 3

Other Economically Advanced Countries Have Instituted a Varied 

Mix of Programs to Address Key Manufacturing Issues in Their 

Countries 11

Foreign Manufacturing Programs Offer Some Key Contrasts to 

Those in the United States 26

Concluding Observations 40

Agency and Third-Party Comments and Our Evaluation 41

Appendix I Objectives, Scope, and Methodology 43

Appendix II Examples of Recent U.S. Manufacturing Policy Initiatives 46

Appendix III Examples of Government Programs that Support 

Manufacturing in Canada, Germany, Japan, and South Korea 49

Appendix IV GAO Contacts and Staff Acknowledgments 71

Related GAO Products 72

Tables

Table 1: Canadian Programs That Support Manufacturing 13

Table 2: German Programs That Support Manufacturing 17

Table 3: Japanese Programs That Support Manufacturing 22

Table 4: Overall Expenditure on Research and Development, for 

Five Selected Countries, 1999 and 2009 23

Table 5: South Korean Programs That Support Manufacturing 25

Table 6: Comparison of National Technical Support and Product 

Development Programs 28

Table 7: Comparison of Cluster Programs 30

Table 8: Comparison of Funding for R&D Grant Programs 31

Contents
Page ii GAO-13-365 Global Manufacturing

Table 9: Number of Export Promotion Personnel and Number of 

Countries where Export Promotion Activities Are 

Conducted by Five Countries 33

Table 10: Export Promotion Budgets of Five Countries Relative to 

GDP and Export Volumea

34

Figures

Figure 1: Percentage of U.S. Nonfarm Workers in Manufacturing, 

1945-2012 4

Figure 2: U.S. Manufacturing Value-Added as a Percentage of Gross 

Domestic Product, 1947-2012 5

Figure 3: Manufacturing Value Added for Selected Countries, 1998-

2010 6

Figure 4: Types of Potential Government Policies to Support 

Innovation, Trade and Training 10

Figure 5: Foreign and U.S. Manufacturing Statistics 12

Figure 6: TIRI voltage testing room 65
Page iii GAO-13-365 Global Manufacturing

Abbreviations

BLS Bureau of Labor Statistics

CICP Canadian Innovation Commercialization Program 

Commerce U.S. Department of Commerce

Daedeok Daedeok Innopolis

Daejeon Daejeon Technopark

ETRI Electronics and Telecommunications Research Institute

GDP Gross Domestic Product

IRAP Industrial Research Assistance Program 

JIAC Jobs and Innovation Accelerator Challenge

KOTRA Korea Trade-Investment Promotion Agency

Labor U.S. Department of Labor

MEP Hollings Manufacturing Extension Partnership

METI Ministry of Economy, Trade, and Industry

NAMII National Additive Manufacturing Innovation Institute

NEDO New Energy and Industrial Technology Development

Organization

NGV Next Generation Vehicle

NIST National Institute of Standards and Technology

NNMI National Network for Manufacturing Innovation

OECD Organisation for Economic Co-operation and Development

PCAST President’s Council of Advisors on Science & Technology 

Perkins Act Carl D. Perkins Career and Technical Education

Improvement Act of 2006 

R&D Research and Development

SME Small- and medium-sized enterprises

SR&ED Scientific Research and Experimental Development

State U.S. Department of State

TAMA Technology Advanced Metropolitan Area 

TIRI Tokyo Metropolitan Industrial Technology Research

Institute

TPP Trans-Pacific Partnership

TPCC Trade Promotion Coordinating Committee

USD U. S. Dollars

WIA Workforce Investment Act of 1998

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-13-365 Global Manufacturing

441 G St. N.W.

Washington, DC 20548

July 25, 2013

The Honorable John D. Rockefeller IV

Chairman

Committee on Commerce, Science, & Transportation

United States Senate

Dear Mr. Chairman:

Even though certain measures show that the manufacturing sector in the 

United States remains competitive worldwide, over the last decade it has 

lost over one-third of its workforce. There are concerns that this decline in 

employment indicates a loss of international competitiveness as well as 

shrinking job opportunities for middle-class workers. Other developed 

economies have also faced manufacturing job losses and have had 

concerns about manufacturing competitiveness, particularly as China has 

claimed a rapidly increasing share of global manufacturing production. 

There may be important insights for the United States to glean from the 

manufacturing policies and strategies of similarly-situated countries, 

which are facing some of the same challenges of increased competition in 

manufacturing from developing countries. We were asked to identify 

innovative manufacturing programs from other countries that may help 

inform U.S. policy. Specifically, we examined the following questions:

1. What government strategies and programs have other advanced 

economies implemented to approach issues similar to those facing 

manufacturing in the United States?

2. What key distinctions exist between policy approaches to support 

manufacturing in other advanced economies and those in the United 

States?

To identify foreign countries and innovative manufacturing programs that 

may help inform U.S. manufacturing policy, we interviewed a range of 

manufacturing experts about key manufacturing issues and obtained their 

views about which foreign countries had innovative manufacturing 

programs. We selected four comparison countries to study—Canada, 

Germany, Japan, and South Korea—based on recommendations from 

experts, including U.S. officials from the Departments of Commerce 

(Commerce) and Labor (Labor), consideration of the countries’ economic 

and political similarities to the United States, and information from our 

own research of foreign programs that support manufacturing. We then 

worked with officials from the U.S. Department of State (State) stationed 
Page 2 GAO-13-365 Global Manufacturing

in the selected four countries and foreign embassy officials to select 

specific programs for our review. We did not attempt to perform a 

comprehensive review of manufacturing programs in the four selected 

foreign countries, nor did we seek information in all countries about 

programs in each of our three key policy categories—innovation, trade, 

and training. To learn about our selected foreign programs, we met with 

foreign officials administering these programs and reviewed documents 

they provided.1

This report uses data obtained from large U.S. and international agencies 

and from foreign manufacturing agencies. We assessed the reliability of 

data from the Bureau of Labor Statistics (BLS), the Bureau of Economic 

Analysis, the World Bank, and the Organisation for Economic Cooperation and Development (OECD) by reviewing literature provided by 

the organizations regarding their methodology for compiling data, 

including measures to ensure data quality and comparability across 

countries. We determined that these data were sufficiently reliable for the 

purposes of our report. We did not independently attempt to confirm the 

reliability of data provided by foreign manufacturing agencies except 

where documentary evidence provided by those agencies allowed us to; 

we did confirm the accuracy of the figures and our use of them by having 

foreign officials review relevant excerpts of the report. We found these 

data to be sufficiently reliable for our purposes. For data on export 

promotion, we assessed the reliability of data from the World Trade 

Organization by reviewing literature provided by that organization 

regarding its methodology for compiling data, reviewed the methodology 

of an International Trade Administration study that compared and 

analyzed foreign countries’ export promotion budget levels, and accessed 

the websites of Canadian, German, Japanese, and South Korean export 

promotion agencies to obtain the number of countries in which those 

To identify key distinctions between foreign and U.S. 

approaches to manufacturing, we researched comparable programs in 

the United States, selected in part based on suggestions from Commerce 

and Labor, and interviewed staff administering those programs. We did 

not attempt to do a comprehensive review of U.S. manufacturing 

programs, nor attempt to assess the effectiveness of any country’s 

programs.

 1 We did not analyze or review foreign laws or regulations, and relied on program 

information, including budget information, from sources provided by foreign agency 

officials and other sources. Moreover, we did not evaluate the effectiveness of any foreign 

programs.
Page 3 GAO-13-365 Global Manufacturing

countries offered export promotion services; we found the data sufficiently 

reliable for our purposes. Appendix I contains additional information about 

our scope and methodology.

We conducted this performance audit from March 2012 to July 2013 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

The U.S. manufacturing sector comprises businesses that are engaged in 

the mechanical, physical, or chemical transformation of materials, 

substances, or components into new products, including sectors such as 

machinery, textiles, apparel, food production, and chemicals. However, 

U.S. policy makers have become focused on competing in high-end, or 

“advanced manufacturing.” While no consensus definition of advanced 

manufacturing exists, it refers generally to the production of scientificallyand technologically-intensive products, in which the economic value 

derives from inputs of knowledge and design more than it reflects 

traditional inputs such as labor and materials.2

Statistics present a mixed picture about the health of U.S. manufacturing, 

both relative to the rest of the U.S. economy and to other countries’ 

manufacturing sectors. According to data from BLS, manufacturing 

employment has fallen from 17.6 million workers in 1998 to 11.5 million in 

early 2010, a decline of over one-third over a period in which total U.S. 

employment grew somewhat. However, the decline in U.S. manufacturing 

employment is not a new phenomenon, and a longer-term view shows a 

steady decline of manufacturing’s share of all American jobs. As figure 1 

Robotics, 

nanomanufacturing, and electric vehicles are examples of advanced 

manufacturing sub-industries.

 2 The President’s Council of Advisers on Science and Technology describes it as “a family 

of activities that (a) depend on the use and coordination of information, automation, 

computation, software, sensing, and networking, and/or (b) make use of cutting edge 

materials and emerging capabilities enabled by the physical and biological sciences.” See 

Executive Office of the President, President’s Council of Advisers on Science and 

Technology, Report to the President on Ensuring American Leadership in Advanced 

Manufacturing (Washington, D.C.: June 2011).

Background

U.S. Manufacturing 

Performance Statistics
Page 4 GAO-13-365 Global Manufacturing

shows, the percentage of U.S. nonfarm workers in manufacturing has 

dropped steadily since the end of World War II, from about 35 percent in 

1945 to about 9 percent in 2012. Since bottoming out in 2010, 

manufacturing employment rebounded slowly up to about 12 million 

workers at the end of 2012. Also, other advanced economies, such as 

Canada, Germany, Japan, and the United Kingdom, suffered large 

manufacturing job losses from 1998 to 2011, suggesting that global 

economic forces have affected manufacturing employment in addition to 

any factors that may be unique to the United States.

Figure 1: Percentage of U.S. Nonfarm Workers in Manufacturing, 1945-2012

Similar to the employment trend, manufacturing has accounted for a 

decreasing share of U.S. economic output over the last several decades, 

from about 28 percent of U.S. gross domestic product (GDP) in the early 

1950’s to a recent low of 11 percent in 2009 (see fig. 2).
Page 5 GAO-13-365 Global Manufacturing

Figure 2: U.S. Manufacturing Value-Added as a Percentage of Gross Domestic Product, 1947-2012

Moreover, the decrease in manufacturing’s share of employment and 

GDP could reflect increasing worker productivity in manufacturing and the 

emergence and growth of other U.S. industries. According to data from 

BLS, U.S. manufacturing productivity, measured as output per hour, rose 

55.7 percent from 2002 to 2011, exceeded only by the Czech Republic, 

South Korea, Singapore, and Taiwan among 19 measured countries. 

Furthermore, after contracting in 2008 and 2009, manufacturing 

contributed more to the percent change in U.S. GDP than any other 

industry group in 2010 and 2012, as well as playing a leading role in 

somewhat weaker GDP growth in 2011.

When compared to the manufacturing sectors in other countries, some 

statistics show that the United States performs well. Figure 3 shows the 

change in manufacturing value-added for Canada, China, Germany, 

Japan, South Korea, and the United States from 1998 to 2010, in 

constant year 2000 U.S. dollars.3

 3 Value-added is a measure of output after accounting for intermediate inputs used in 

production.

The figure shows that China and South 

Korea have experienced a rapid increase in manufacturing production 
Page 6 GAO-13-365 Global Manufacturing

over this period, while U.S. manufacturing value-added has grown about 

as fast as that in Japan, Germany, and Canada.4

Figure 3: Manufacturing Value Added for Selected Countries, 1998-2010

Some manufacturing experts, however, maintain that official statistics 

misrepresent the state of U.S. manufacturing because productivity and

value-added statistics do not properly account for the value of imported 

inputs in goods manufactured in the United States. As these imports 

become cheaper, or as manufacturers shift to lower-cost imported inputs, 

the value-added of the resulting manufactured good rises, suggesting 

more manufacturing “production,” even though nothing meaningful may 

have changed about manufacturing competitiveness.5

 4 According to the U.S.-China Economic and Security Review Commission, official 

Chinese statistics on national output suffer from deficiencies that detract from their 

reliability, but we believe that the reported data are sufficient for the illustrative purposes 

we intend here. 

The Information 

Technology and Innovation Foundation, an innovation policy think tank, 

5 For more information on how imports potentially affect productivity and value-added, see 

Susan Houseman, Christopher Kurz, Paul Lengermann, and Benjamin Mandel, 

“Offshoring Bias in U.S. Manufacturing,” Journal of Economic Perspectives. Vol. 25, No. 2 

(Spring 2011).
Page 7 GAO-13-365 Global Manufacturing

estimated in a 2012 report that official statistics overstate productivity 

growth from 2000-2010 by 122 percent.6

Not all experts agree on what role, if any, the government should play in 

supporting manufacturing. Economic theory generally suggests that 

government intervention into private sector activity is justified by “market 

failure”—situations in which the private market under- or over-produces a 

good because private interests differ from society’s. Those supportive of 

enhancing productivity in manufacturing suggest that government policy 

should target the sector in order to remedy market failures that may 

hinder innovation—the development and application of new knowledge. 

Innovation underpins improvements in the way capital and labor are 

combined to create new products and increase productivity. This makes it 

critical for the broader economy and particularly important for 

manufacturing.

An important element of innovation is research and development (R&D), 

the testing and application of new ideas. R&D is seen as a key source of 

innovation and its application to new products and technologies. The 

private sector, however, faces disincentives to investing in R&D— it may 

be expensive, it often fails, willing firms may lack sufficient finances, and 

successful R&D may produce benefits that the investing firm cannot 

capture — leading to possible underinvestment in R&D and 

underproduction in innovation without government support. These 

disincentives may be particularly difficult to overcome for small- and 

medium-sized enterprises (SME). Though innovation policy can address 

market failure across all sectors of the economy, advocates of targeted 

innovation policy argue that it may provide particular benefit to 

manufacturing. They note that the sector depends on continually creating 

new ideas for products and ways to make those products. They also 

observe that manufacturing is a significant source of R&D; according to 

the National Science Foundation, the sector accounted for 70 percent of 

private-sector spending on R&D in the United States in 2008.

In practical terms, to support needed innovation, the government may 

intervene through various policies, some of which may have a focus on 

the manufacturing sector.7

 6 Robert D. Atkinson, Luke A. Stewart, Scott M. Andes, and Stephen J. Ezell, “Worse 

Than the Great Depression,” The Information Technology & Innovation Foundation 

(Washington, D.C., March 2012).

These include:

Key Policy Areas Related to 

Manufacturing
Page 8 GAO-13-365 Global Manufacturing

• Public support for “basic” R&D in science and engineering, which, 

while conducted without specific commercial applications in mind, can 

spur private-sector innovation. The public sector may be well-suited to 

conducting basic R&D directly, through government scientific 

agencies, public universities, and other research institutions, because 

it is unlikely that most private firms would conduct this type of general 

research without a potentially profitable application in mind.

• Public support for private-sector “applied” R&D, research that seeks to 

solve practical problems or develop new products and 

commercialization. Applied R&D is seen as a key component in 

helping innovators overcome the so-called “valley of death”, the 

difficult transition between new ideas and commercially viable 

manufacturing products or processes. Support for applied R&D could 

take various forms:

• Subsidies for private investment in R&D, through direct funding or 

tax incentives, and assistance with financing for private R&D 

projects with commercialization potential, which may overcome 

the difficulty some firms may face in obtaining funding from private 

financial markets. However, it may be difficult for the government 

to figure out which firms merit subsidy because of the lack of 

information or foresight into an individual firm’s growth prospects.

• Public infrastructure investment that facilitates R&D and 

knowledge transfer, such as research laboratories, transportation 

investment, and “knowledge” infrastructure such as broadband 

telecommunications, the development of measurement techniques 

and databases, and the dissemination of technical expertise. 

Experts have referred to such widely-accessible infrastructure or 

knowledge as the “industrial commons” that provides a base for 

innovation and production, and see investment in these commons 

as an important source of new ideas for products or processes 

and solutions to existing problems.

• Public support for innovation clusters — regional concentrations of 

large and small companies that develop creative products and 

services, along with specialized suppliers, service providers, 

universities, and associated institutions. Firms in a cluster may be 

able to share knowledge and transact business at lower cost than 

if they were far apart, possibly leading to increased innovation.8

 7 The listed policies are not intended to be exhaustive, nor are we recommending or 

endorsing the adoption of any particular policy option or set of options.

8 See, for example, Michael E. Porter, “Clusters of Innovation: Regional Foundations of 

U.S. Competitiveness,” Council on Competitiveness (Washington, D.C.: October 2001).
Page 9 GAO-13-365 Global Manufacturing

However, the effectiveness of cluster policy has not been 

established; the formation of successful clusters in the United 

States, such as California’s Silicon Valley, suggests that 

government support for clusters may not be necessary.

Government support for manufacturing can also involve other efforts that 

support activities that may suffer from market failures:

• Development of knowledge and workforce skills. Like investment in 

R&D, private firms may lack the incentive to invest in worker training 

because the firms may not recoup a sufficient investment if workers 

take their training to another firm or if skills become obsolete. As 

manufacturing has become more technologically advanced, various 

experts have highlighted the increased importance of skills training in 

advanced manufacturing, as well as the adaptability of workers and 

training resources. Manufacturing in scientifically-intensive fields will 

also require a pipeline of workers with advanced degrees in science, 

technology, engineering, and mathematics. A recent study from the 

Brookings Institution uses the Bureau of Labor Statistics’ data to 

project that nearly half of all job openings in the U.S. economy over 

the next decade will be for “middle-skill” jobs, those requiring more 

than high school but less than a college degree.9

• Promotion of open trade and global competition, through trade 

liberalization, the provision of information, advice, and advocacy for 

exporters (referred to as export promotion), the protection of 

intellectual property rights, development and harmonization of 

international technological standards, and the enforcement of trade 

rules. While free trade agreements have decreased the significance of 

tariffs as a trade barrier, some experts have argued that non-tariff 

barriers have become increasingly problematic. These could include 

restrictive technical standards, packaging, and local content 

requirements, among others.10

 9 Harry J. Holzer, and Robert I. Lerman, “The Future of Middle-Skill Jobs,” CCF Brief #41 

(Washington, D.C.: Brookings Institution, February 2009).

Trade policy may be especially critical 

for manufacturing since the sector may play a key role in restoring a 

healthy balance of trade. In 2012, Commerce reported that in 2010, 

10 For more on nontariff barriers, see GAO, Export-Import Bank, Reaching New Targets 

for Environmentally Beneficial Exports Presents Major Challenges for Bank, GAO-10-682 

(Washington, D.C.: July 14, 2010); and International Trade: Four Free Trade Agreements 

GAO Reviewed Have Resulted in Commercial Benefits, but Challenges on Labor and 

Environment Remain, GAO-09-439 (Washington, D.C.: July 2009).
Page 10 GAO-13-365 Global Manufacturing

manufactured goods represented 86 percent of all U.S. goods 

exported and 60 percent of total U.S. exports.11

Figure 4 provides a summary of some key types of support that 

governments can provide to support innovation, training, and trade, which 

can benefit manufacturing and other sectors.

Figure 4: Types of Potential Government Policies to Support Innovation, Trade and 

Training

Note: The listed policies are not intended to be exhaustive, nor are we recommending or endorsing 

the adoption of any particular policy option or set of options.

In the United States, the federal government has generally taken the lead 

in supporting basic research, providing the economic framework, and 

constructing infrastructure. Commerce administers manufacturing 

programs through sub-agencies such as the National Institute of 

Standards and Technology (NIST), the Economic Development 

Administration (EDA), and the International Trade Administration. Other 

U.S. agencies support manufacturing as part of their program activities, 

including the Department of Defense, the Department of Energy, National 

Aeronautics and Space Administration, and the National Science 

Foundation. Labor administers training programs for job seekers through 

the Employment and Training Administration. In addition, tax breaks such 

as the R&D tax credit further benefit manufacturers (although these 

 11 See U.S. Department of Commerce, The Competitiveness and Innovative Capacity of 

the United States (Washington D.C.: January 2012).

Administration of 

Manufacturing Policy in the 

United States
Page 11 GAO-13-365 Global Manufacturing

provisions do not apply exclusively to manufacturers). States and 

localities have the main responsibility for education and also are most 

active in promoting regional economic development, including measures 

that support innovation. See appendix II for more information on recent 

U.S. manufacturing initiatives.

The four countries we analyzed—Canada, Germany, Japan, and South 

Korea—take varied approaches to government support for manufacturing, 

with each providing a different mix of programs to support their 

manufacturing sectors.12

 12 We did not independently evaluate these programs, or analyze or review any foreign 

laws or regulations. To obtain specific program information, we interviewed foreign 

officials overseeing each program and relied on program information from sources 

provided by these foreign officials and other sources. 

For example, Canada has started directly 

supporting SMEs to encourage innovation. Germany has created 

programs for innovation and maintained long-standing programs to 

support export promotion and skills training. Recently, Japan’s 

manufacturing policies have emphasized alternative energy and the 

production and innovation that come from that sector. Japan also 

prioritizes providing hands-on assistance to SMEs. South Korea has 

substantially expanded investments in R&D to strengthen its 

manufacturing sector. Figure 5 presents key manufacturing statistics for 

each of these countries and the United States.

Other Economically 

Advanced Countries 

Have Instituted a 

Varied Mix of 

Programs to Address 

Key Manufacturing 

Issues in Their 

Countries
Page 12 GAO-13-365 Global Manufacturing

Figure 5: Foreign and U.S. Manufacturing Statistics

Recent trends in the Canadian economy, including the rising value of the 

Canadian dollar to near parity with the U.S. dollar and declining 

productivity growth, have put pressure on Canada’s manufacturing sector. 

In 2010, according to the Canadian government, Canada continued to lag 

behind other advanced economies in terms of business innovation 

performance despite a high level of federal support for R&D. In response, 

Canada’s 2010 budget called for a comprehensive review of all federal 

support for R&D. The resulting report—commonly referred to as the 

Jenkins report—catalogued a set of 60 R&D programs worth about $5 

billion Canadian in fiscal year 2010-2011. The Jenkins report found that 

Canada’s support for business innovation was heavily weighted toward 

the Scientific Research and Experimental Development (SR&ED) tax 

credit, but that the calculation of some SR&ED expenses was highly 

complex, which resulted in excessive compliance costs for SMEs in 

particular. The report also found that other countries relied less than 

Canada on indirect tax incentives to stimulate innovation, and that 

Canadian federal policy should provide more effective support to 

innovative firms, particularly SMEs, to help them grow and become 

competitive. To address these findings, the Jenkins report recommended 

simplifying the SR&ED and redeploying the savings from this toward 

more direct support to SMEs in order to encourage innovation. To further 

Canada Is Shifting 

Emphasis from Tax Policy 

to Direct Support for Small 

and Medium Enterprises to 

Encourage Innovation
Page 13 GAO-13-365 Global Manufacturing

expand opportunities for innovation in Canada, the Jenkins report also 

recommended that the government provide innovative firms with more 

access to venture capital, and make better use of government 

procurement by leveraging the government’s substantial purchasing 

power to create demand for leading-edge goods, services, and 

technologies from Canadian enterprises.

Canada’s 2012 national budget, in turn, contained several changes that 

acted on the Jenkins report recommendations. According to Canadian 

budget documents, effective 2014, the SR&ED tax credit will be reduced; 

the budget of the Industrial Research and Assistance Program, which 

employs a national network of technical advisors who work directly with 

SMEs to help them grow through the commercialization of innovative 

products and services, was increased. The 2012 budget also announced 

a new $400 million venture capital fund to support innovative start-up 

firms. To address the report’s recommendation on procurement, the 

Canadian Innovation Commercialization Program was made permanent 

in order to assist SMEs in doing business with the government of 

Canada.

Table 1 highlights examples of manufacturing-related programs in 

Canada. For further information on Canadian programs included in this 

review, see Appendix III.

Table 1: Canadian Programs That Support Manufacturing

Program/initiative Program/initiative description

2012 budget

(in USD millions)

Year founded/

introduced

Innovation

Canadian Innovation Commercialization 

Program 

Provides assistance with the commercialization of 

new goods and services.

95,

over 3 years; 40 

annually thereaftera

2010

Industrial Research Assistance Program A network of expert advisors who assist small- and 

medium-sized enterprises with innovation efforts.

258b 1965

Scientific Research and Experimental 

Development tax incentives

Federal tax incentives to stimulate research and 

development activities.

3,604c 1994d

Venture Capital Action Plan A federally-funded program that aims to increase 

private-sector investment in early-stage risk-capital 

and to support the creation of large-scale venture 

capital funds led by the private sector.

400 2012

Training

Red Seal Program An apprenticeship program that provides a national 

definition of competency in 55 trades.

No information 

availablee 1952 f

Source: GAO analysis of Industry Canada, Finance Canada, the National Research Council, Human Resources and Skills 

Development Canada documents, and Canada’s Economic Action Plan 2012.
Page 14 GAO-13-365 Global Manufacturing

Note: Amounts converted to U.S. dollars from Canadian dollars and rounded to the nearest million.

a

This funding was available starting in 2013.

b

Amount includes additional $90 million in funding provided to Industrial Research Assistance 

Program through the 2012 budget.

c

According to Finance Canada officials, this amount represents an estimate of the tax expenditure 

associated with the Scientific Research and Experimental Development tax incentive program for the 

year 2012.

d

According to Canadian officials, tax credits to encourage research and development were first 

established in 1944 and were subject to several major revisions over the years. The Scientific 

Research and Experimental Development tax incentive program in its current form was implemented 

in 1994.

e

The Red Seal Program has federal, provincial, and territorial sources of support. We were unable to 

obtain information on the total budget for the program.

f

The Red Seal Program was established in the early 1950s following the first national conference on 

Apprenticeship in Trades and Industry in 1952. The 1952 conference produced an agreement to 

develop national standards in the form of National Occupational Analyses, and was followed shortly 

after by an interprovincial examination program for certifying tradespersons, thus initiating Canada’s 

move toward national standards in trades training.

Despite slow economic growth at the turn of the century and contraction 

in 2008-2009, the German economy has grown steadily over recent 

years. According to German officials, this growth has been in part a result 

of the strength of Germany’s manufacturing sector, which accounts for 

about 22 percent of GDP. German officials told us that after the recession 

of 2008-2009, manufacturing recovered relatively quickly in part because 

of an arrangement between unions, employers, and the government 

through which (1) employers reduced their employees’ hours to avoid 

layoffs, and (2) the government subsidized a portion of employees’ lost 

salaries. According to German officials, this arrangement allowed 

businesses to continue to operate through the economic downturn, and 

then expand workers’ hours once the economy recovered. A 2012 OECD 

report estimates that the agreement may have prevented up to 500,000 

layoffs.13

To make the most of existing growth potential and open new prospects 

for German industry, the German government issued its High Tech 

Strategy 2020 in 2006. The strategy guides the specific efforts across 

national government agencies and programs. Specifically, it states that in 

order for Germany to become a leader in solving global challenges, the 

government will need to stimulate R&D in five priority areas: (1) climate 

and energy, (2) health and nutrition, (3) mobility, (4) security, and (5) 

 13 OECD (2012), OECD Economic Surveys: Germany 2012 (OECD Publishing). 

http://dx.doi.org/10.1787/eco_surveys-deu-2012-en. Accessed March 18, 2013.

Germany Has Established 

New Programs in 

Innovation to Complement 

Long-Standing Trade and 

Training Programs 
Page 15 GAO-13-365 Global Manufacturing

communication. The German government has, in turn, recently 

established several programs to promote innovation in these areas.

The High Tech Strategy 2020 provides a framework for recent programs 

that encourage applied research and innovation, particularly in SMEs, 

and also for a program that supports business clusters that conduct R&D 

in the strategy’s five priority areas. According to German officials, SMEs 

are a significant part of the German economy and have long played a role 

in German manufacturing.14

• The Central Innovation Program for SMEs, which is Germany’s 

largest program to support innovation in SMEs, provides grant funding 

to pursue innovative ideas that show high potential for 

commercialization.

However, the national government has 

identified innovation as a challenge across the SME sector. In response, 

according to German officials and German government documents, the 

German government has in recent years initiated a group of programs 

intended to strengthen innovation in SMEs. These programs—all initiated 

in 2006 or later—include the following:

• The HighTech Grunderfonds program is a public-private venture 

capital fund that invests in innovative start-up companies.

• Signo provides federal assistance to SMEs in securing intellectual 

property for innovative products and helps SMEs file for patents with 

the German Patent and Trademark Office.

According to German officials and German government documents, as 

part of its High Tech Strategy, Germany also established the 

Spitzencluster program to continue the national emphasis on innovation 

by funding business clusters judged through a competitive application 

process to be the best, or “leading edge” clusters in the country.

In addition to these more recent programs, according to representatives 

of Germany’s Fraunhofer Institutes, skilled Fraunhofer researchers 

pursue joint applied R&D projects with businesses that result in 

commercializable processes and products. Germany established the 

Fraunhofer Institutes, a nationwide network of 60 applied research 

facilities with research expert staff, in 1949 as part of efforts to rebuild its 

research infrastructure after World War II, according to Fraunhofer 

 14 According to Germany’s Ministry of Economy and Technology, the German government 

defines SMEs as businesses of 500 or fewer employees and up to €50 million in revenue.
Page 16 GAO-13-365 Global Manufacturing

officials. Fraunhofer’s applied research projects include the following 

categories of specialization: (1) materials and components, (2) 

microelectronics, (3) information and communications technology, (4) 

production, (5) light and surfaces, and (6) life sciences. Fraunhofer 

officials told us that Fraunhofer Institutes are co-located with universities, 

which allows companies access to skilled researchers.

In contrast to Germany’s newer programs to support innovation, 

Germany’s main national system to support the export of manufactured 

goods has a much longer history of providing support to the 

manufacturing sector. According to German officials, Germany is a 

leading exporter of manufactured technology goods. German officials also 

told us that Germany’s long-established export promotion organization, 

the Association of Chambers of Commerce and Industry, brings together 

an agency of the national government and all exporting businesses to 

share export information.15

In addition to programs in innovation and trade, Germany also maintains 

a dual training system, which was established in law in 1970 but has 

existed in practice for centuries, according to German officials. German 

officials explained that the dual training system—through which German 

high school-age students complete apprenticeships in skilled trades—is a 

cooperative effort among business, labor, federal and state government 

representatives, coordinated by the Federal Institute for Vocational 

Education and Training. The Federal Institute for Vocational Education 

and Training, an institute of the national government, is responsible for 

regularly incorporating stakeholder feedback into the process of creating 

and updating skills certification standards. The executive board of the 

Federal Institute for Vocational Education and Training includes 

representatives from German unions, employers’ associations, federal 

agencies, and state governments. Because of this role in bringing 

together stakeholders in the skills education process, the Federal Institute 

for Vocational Education and Training is often referred to as the 

“parliament” of vocational education in Germany.

Germany fosters export activities in two main 

ways: (1) by selectively establishing partnerships abroad, and (2) by 

providing assistance for trade fair attendance and participation in trade 

delegations.

 15 According to the German Association of Chambers of Commerce and Industry, German 

businesses are required to belong to their local chapter of the Chambers of Commerce 

and Industry, resulting in a national network of exporting businesses.
Page 17 GAO-13-365 Global Manufacturing

Table 2 highlights examples of manufacturing-related programs in 

Germany. For further information on German programs included in this 

review, see Appendix III.

Table 2: German Programs That Support Manufacturing

Program/initiative Program/initiative Description

2012 budget

(in USD millions)

Year founded/

introduced

Innovation

Fraunhofer Institutes A network of 60 applied research institutes nationwide; 

each institute specializes in a particular topic (e.g., 

factory automation, transportation and infrastructure 

systems, silicon technology)

2,800a 1949

Spitzencluster A competitive national program that selects the best or 

‘leading edge’ of Germany’s many industrial clusters. 

Clusters selected as part of Spitzencluster receive some 

federal support

Spitzencluster awarded 

up to $51 million each to 

5 clusters, for a total of 

$257 million. The 

awards are provided 

over 5 years 

2007

Central Innovation Program for 

SMEs

Provides grants and low-interest loans to small and 

medium enterprises (SMEs) to help finance research and 

innovation projects. The program connects SMEs with 

technical advisors that guide the process of developing 

innovative projects.

643 2007

HighTech Grunderfonds HighTech Grunderfonds provides support for high-tech 

start-up businesses.

411 2007

Signo Provides federal assistance to small- and medium-sized 

enterprises to help with filing patent applications.

22 2006 

Trade

Association of Chambers of 

Commerce and Industry 

A national network of 80 local chambers of commerce 

that coordinates Germany’s export promotion activities 

and plays a role in the dual training system.

219 1872

Training

Federal Institute for Vocational 

Education and Training:

Dual training system 

(apprenticeships)

The dual training system combines classroom instruction 

with on-the-job training to provide apprenticeships for 

secondary school-age students who wish to pursue a 

skilled trade instead of university education. A variety of 

national, state, and private sector actors participate in the 

funding and management of the system.

50b 1970c

Source: GAO analysis of Fraunhofer Network, Federal Ministry of Education and Research, Federal Ministry of Economy and 

Technology, Association of Chambers of Commerce and Industry, Federal Institute for Vocational Education and Training documents.

Note: Amounts have been converted to U.S. dollars from euros and rounded to the nearest million.

a

Officials from Germany’s Federal Ministry of Education and Research told us their agency 

contributes about $595 million to the Fraunhofer budget annually. Fraunhofer Institutes also receive 

funding from other public sources, and generate revenue through research contracts with private 

companies.

b

Other costs of the dual training system are covered by the Federal Ministry for Labor and Social 

Affairs, private businesses, and state governments. 
Page 18 GAO-13-365 Global Manufacturing

c

According to German officials, though the apprenticeship system has existed in German culture for 

centuries, the Federal Institute for Vocational Education and Training was established in 1970.

After two decades of economic stagnation and fallout from the 2011 

Fukushima earthquake and nuclear disaster, Japan has made efforts to 

strengthen its economy—including its manufacturing sector—and improve 

its global competitiveness. Japan’s manufacturing sector has been 

recognized in the past for its ability to make incremental improvements to 

manufactured products—for example, small just-in-time improvements 

made specifically for a subsequent phase of the manufacturing process—

illustrated by the often-copied lean manufacturing practices that a wellknown automobile manufacturer developed over several decades.16

Officials from Ministry of Economy, Trade, and Industry (METI), the 

country’s main ministry for manufacturing policy, identified genbaryoku—

capabilities to find and solve problems in the field—as a unique source of 

strength in Japan’s manufacturing industry. According to these officials, 

this capability helped Japan to restore its economy quickly after damage 

from the earthquake. In the wake of the 2011 Fukushima crisis, many 

SMEs went out of business, and global companies, including automobile 

manufacturers, faced delays in delivery of inputs and in production, 

according to Japanese officials. As a result, METI officials said that the 

Japanese government and automobile industry started working to 

establish more diverse and reliable supply networks.17

 16 Lean manufacturing is a management philosophy derived mostly from the Toyota 

Production System. A lean organization understands customer value and focuses its key 

processes to continuously increase it. The ultimate goal is to provide perfect value to the 

customer through a perfect value creation process that has zero waste.

17 Going forward, the Trans-Pacific Partnership (TPP) agreement will influence the ways 

in which the United States and other countries structure trade policies to support 

manufacturing. The TPP will provide a regulatory framework intended to increase regional 

trade integration by establishing agreements in areas such as regulatory coherence, 

customs, financial services, labor, intellectual property, and market access. Round 18 of 

negotiations is currently set to take place in July 2013. Japan has announced its intent to 

join the ongoing TPP talks. With respect to trade in manufactured goods in the region, the 

TPP agreement will potentially affect the Japanese, U.S., and Canadian auto sectors by 

providing ways to harmonize standards and manage the region’s integrated auto supply 

chains. Japanese officials told us that the automotive sector is an important part of its 

manufacturing sector and accounts for significant portions of its manufacturing-related 

employment and production.

Japan Has Used Energy 

Issues to Reshape its 

Manufacturing Policy
Page 19 GAO-13-365 Global Manufacturing

In 2007, the Japanese government published a comprehensive 

innovation plan: the “Innovation 25” initiative, a long-term strategy for 

innovation in engineering, information technology, and other fields by the 

year 2025. This initiative established a cabinet-level minister for 

innovation and called for several new policies, including: 1) reviewing 

regulations to establish an environment that supports innovation, (2) 

promoting the use of new technologies in the public sector, and (3) 

strengthening activities for international standardization. According to the 

Center for Strategic and International Studies, this plan introduced the 

concept of an innovation “ecosystem” in Japan, which emphasizes 

collaboration among universities, research institutes, the private sector, 

and government—similar to clusters—rather than the private sector acting 

alone to develop and commercialize innovations.

Japan developed its most recent 5-year Science and Technology Basic 

Plan in 2011.18

 18 According to Japanese government documents, Japan developed the first of these 

plans in 1996 to set guidelines for the comprehensive and systematic implementation of 

Japan’s overall science and technology promotion policy. One goal of this first basic plan 

was to double government spending on R&D. The second Basic Plan aimed to double the 

competitive funding through the end of 2005. The third Basic Plan, developed in 2006, 

focused on advancing innovation by promoting R&D in the private sector and the 

formation of regional clusters, and—similar to the Innovation 25 initiative—by promoting 

the use of new technologies in the public sector.

This plan is aimed at reconstruction and revival from the 

Fukushima disaster and realizing sustainable growth, for example, by 

focusing on green innovation. The goal of this Basic Plan is to provide a 

concrete plan for implementing Japan’s comprehensive New Growth 

Strategy introduced in the same year. As an outgrowth of the third 

science and technology plan, the Japanese government initiated several 

regional innovation cluster programs to enhance Japan’s 

competitiveness. One of these programs, the Industrial Cluster Project, is 

composed of groups of local SMEs and venture businesses that use 

research obtained from universities and other institutions. One of 18 such 

clusters in Japan—the Technology Advanced Metropolitan Area (TAMA) 

Association—has over 600 entities, including universities, financial 

institutions, local governments, businesses, and industry groups, 

according to one TAMA Association official. The TAMA Association 

supports local SME manufacturers by matching them with larger 

businesses that have complementary needs at the national, regional, and 

local levels to improve R&D and commercialization of technology and 

products. For example, the TAMA Association connects manufacturers in 
Page 20 GAO-13-365 Global Manufacturing

need of a particular type of R&D to university researchers with projects in 

that field.

In response to the 2011 Fukushima nuclear disaster, Japan has 

intertwined energy issues—especially alternative energy projects—in its 

manufacturing policy. The national government has laid out detailed 

alternative energy policies through its 2011 and 2012 comprehensive 

Rebirth of Japan strategies.19 Among other things, the 2011 strategy 

outlines support for: (1) adopting renewable energies; (2) developing R&D 

hubs consisting of universities, research institutions, and private firms for 

industrial development and job creation purposes; and (3) adopting 

electric, heat, and other energy supply systems that make use of regional 

resources. The 2012 strategy outlines increased R&D for creating 

innovative green parts and materials, developing green vehicles, and 

improving battery performance. METI established the Next Generation 

Vehicle (NGV) Program, a key alternative energy initiative. According to 

METI officials, NGV’s strategy takes an integrated approach involving six 

components: (1) development and production of the vehicles; (2) battery 

R&D and technology; (3) rare metal and resource recycling systems; (4) 

installation and infrastructure of chargers; (5) vehicle systems; and (6) 

international standards for battery performance and safety evaluation 

methods—and associated roadmaps. According to METI officials, NGV 

identifies diffusion targets for alternative-fuel vehicles and the 

development of related technologies.20 For example, one of its goals is to 

develop advanced batteries for automobiles that will also have other 

uses, such as powering homes. As part of the NGV Program, Japan’s 

government, in conjunction with industrial leaders, seeks to influence 

international technological standards for related manufacturing 

accessories, including battery performance and chargers, for which 

various countries are developing competing models.21

 19 Japan developed the Rebirth of Japan strategy in 2011, updated in 2012. As part of this 

plan, Japan prioritized four key policy areas, including green energy and SMEs, providing 

the framework for about 40 initiatives and strategies to promote Japan as a technology 

and innovation leader.

The government 

also funds alternative energy projects, as well as other R&D intensive 

20 Japan’s Agency for Natural Resources and Energy and the private sector also 

contributed to the development of the NGV Program.

21 According to Japanese government and industry officials, there are competing 

technologies for quick battery chargers worldwide, which can charge electric vehicles up 

to 80 percent charge in 30 minutes—each with a separate nozzle for the charger plug. 
Page 21 GAO-13-365 Global Manufacturing

private-sector projects with commercial potential, through the New Energy 

and Industrial Technology Development Organization (NEDO). According 

to NEDO officials, NEDO connects university researchers and industry to 

collaborate on joint research, such as R&D in support of batteries and 

hydrogen fuel cells for electric vehicles.

The Rebirth of Japan strategies also include significant support for 

strengthening SMEs. For example, the 2011 strategy outlines overcoming 

the “valley of death”—the gap between innovative ideas and 

commercializable production—by promoting cooperation between 

industry, academia, and the government; encouraging joint R&D projects; 

and supporting overseas business for SMEs. The government also 

encourages SME technological innovation by offering technical and 

business support through a national network of Public Industrial 

Technology Research Institutes—known as Kohsetsushi centers. 

According to Japanese officials, these centers provide SME 

manufacturers with a range of services including technology guidance; 

technical assistance and training; networking; testing, analysis, and 

instrumentation; and access to open laboratories and test beds, and they 

typically offer technical consultation services free of charge. Kohsetsushi 

Centers support Japanese SME manufacturers in adopting emerging 

technologies, including nanotechnology and robotics. For example, the 

Tokyo Metropolitan Industrial Technology Research Institute (TIRI) serves 

about a quarter of Tokyo’s 40,000 manufacturers across three locations, 

primarily by providing services, information, and testing equipment and 

facilities to SMEs, according to TIRI officials.

In addition, the Kawasaki Business Incubation Center rents offices and 

lab space to SMEs and entrepreneurs and provides some free services, 

such as introductions to potential partners and funding entities and 

support for completing applications for government subsidies or loans and 

establishing a registered corporation, according to Kawasaki Business 

Incubation Center officials. The center is located in close proximity to a 

number of larger companies and research institutes, which incubation 

officials told us helps facilitate collaboration. The center also provides 

training sessions on topics including machine operation to help 

companies acquire necessary technical skills. Having these resources 

nearby helps companies to move from basic R&D to practical applications 

in commercial products, and eventually to mass production since many of 

the tools needed for designing and manufacturing are in one place, 

according to Kawasaki City officials.
Page 22 GAO-13-365 Global Manufacturing

Table 3 highlights examples of manufacturing-related programs in Japan. 

For further information on Japanese programs included in this review, see 

Appendix III.

Table 3: Japanese Programs That Support Manufacturing

Program/ initiative Program/ initiative description

Budget

(in USD millions, 

fiscal year 2012)

Year founded/ 

introduced

Innovation

Kawasaki Business 

Incubation Center

A center that rents office and lab space for companies as a 

venue for collaboration between companies.

1.4a 2003

Next Generation Vehicle 

Program

A comprehensive action plan for supporting research for nextgeneration cars, including battery technology, infrastructure 

(building and locating chargers), vehicle systems, and 

international standards.

434.8b 2010

New Energy and Industrial 

Technology Development 

Organization 

An organization that promotes and manages R&D of energy, 

environment, and industrial technologies.

1,637.6 1980

Kohsetsushi Centers/ 

Tokyo Metropolitan 

Industrial Technology 

Research Institute 

Centers that provide Japanese small- and medium-sized 

manufacturers with a range of services including technology 

guidance; technical assistance and training; networking; testing, 

analysis, and instrumentation; and access to open laboratories 

and test beds, among others.

2140/

78.9

1902c / 2006d

Technology Advanced 

Metropolitan Area 

Association

A regional cluster that seeks to match large manufacturers, 

small- and medium-sized enterprises, universities, local 

governments, and financial institutions to improve R&D and 

commercialization of technology and products.

2.8 1998

Source: GAO analysis of Kawasaki Business Incubation Center; Next Generation Vehicle Program; New Energy and Industrial 

Technology Development Organization; Tokyo Metropolitan Industrial Technology Research Institute; Technology Advanced 

Metropolitan Area Association documents.

Note: Amounts converted to U.S. dollars from Japanese yen and rounded to the nearest million.

a

Budget data as of 2011.

b

According to the Ministry of Economy, Trade, and Industry officials, the agency is planning to spend 

almost $1 billion between fiscal years 2009 and 2016 on battery development, infrastructure 

installation, and subsidies.

c

Refers to Kohsetsushi Centers.

d

The Tokyo Metropolitan Industrial Technology Research Institute has existed in its present form 

since 2006, although it dates back at least to the early 1920s.

Within the last 50 years, South Korea has shifted from receiving U.S. 

development assistance to becoming an OECD aid donor to other 

countries. According to the United States Agency for International 

Development, it is the only country to make this shift to date. Between 

1999 and 2011, South Korean manufacturing output (in current U.S. 

dollars) has almost tripled. This rise has coincided with an increase in its 

investment in R&D, from approximately 2.2 percent of GDP in 1999 to 

South Korea Has 

Substantially Expanded 

Investment in Research 

and Development to 

Strengthen Its 

Manufacturing Sector
Page 23 GAO-13-365 Global Manufacturing

approximately 3.4 percent in 2008, according to OECD statistics. As table 

4 shows, South Korea’s percentage increase in R&D spending over this 

period exceeded that of the other countries in our study, and as of 2009, 

South Korea spent more on R&D as a percentage of GDP than the other 

countries.22

Table 4: Overall Expenditure on Research and Development, for Five Selected 

Countries, 1999 and 2009 

Overall R&D expenditure

(percent of GDP)

1999 2009

Change in overall (public and 

private) R&D expenditures

(percent of GDP)

United States 2.64 2.79a 0.15

Canada 1.80 1.92 0.12

Germany 2.40 2.78 0.38

Japan 3.02 3.33 0.31

South Korea 2.17 3.36a 1.19

Source: GAO analysis of OECD data.

a

Data for 2008.

The South Korean government has invested in various research 

institutes, including those that are state-financed, university-based, and 

private-sector driven. According to Commerce officials in South Korea, 

every government ministry invests in several research institutes. For 

example, the Ministry of Science, ICT, and Future Planning supports 

approximately 25 research institutes, including the Electronics and 

Telecommunications Research Institute (ETRI), according to ETRI 

officials. ETRI is a global information technology research institute and 

the largest government-funded research institute in South Korea—whose 

work is partly responsible for putting South Korea on the map as a leader 

in information and communications technology, such as smart phones 

and mobile computing.

As part of South Korea’s 2009 growth strategy, the national government 

has emphasized its plans to train SMEs, promote R&D, and expand 

 22 Data for South Korea and the United States are as of 2008 because that is the most 

current data available for these countries. 
Page 24 GAO-13-365 Global Manufacturing

green energy technology development. For example, the government 

provides testing and standardization equipment and labs that SMEs 

would not otherwise be able to access through various research 

institutes, according to officials from the Ministry of Trade, Industry, and 

Energy (formerly known as the Ministry of Knowledge Economy)—the 

main ministry for manufacturing policy. South Korea also plans to 

encourage innovation and help make South Korea a world leader in green 

technology by turning green energy industries—such as renewables and 

smart grids—into export industries, and encouraging current industries to 

become green according to government documents.

23

South Korea has also emphasized the development of a network of 

technoparks—regional innovation centers that provide manufacturing 

assets, R&D facilities, business incubation, and education and production 

assistance to industry—to encourage growth and development 

throughout the country.

According to 

national government officials responsible for coordinating South Korea’s 

green growth policies, most green growth programs fit within South 

Korea’s larger manufacturing strategy, and the policy mechanisms that 

have been used have been integrated into or build on existing programs. 

These officials stated that existing tax subsidies for emerging industries, 

including information technology and biotechnology, have recently been 

extended to green areas. They pointed out that the government provides 

a R&D tax credit for private firms using green technology: 20 percent of 

total investment on green technology for large companies, and 30 percent 

for SMEs.

24

 23 South Korea’s National Strategy for Green Growth has three main objectives and ten 

policy directions, based on a consensus between public, private, and academic 

stakeholders. The three objectives are (1) mitigation of climate change and the 

strengthening of the country’s energy independence; (2) creation of new growth engines; 

and (3) improvement in quality of life and enhancement of Korea’s international standing. 

Policies include reducing the use of fossil fuels, developing green technology, and 

becoming a role model for the international community as a green growth leader. 

For example, Daejeon Technopark (Daejeon) 

assists with R&D by encouraging collaboration between industry, 

academia, research institutes, and local government, according to 

Daejeon officials. Specifically, it connects SMEs to researchers or 

universities working on related research. It also supports technology 

24 This initiative is, in part, intended to help fuel development outside of Seoul, where most 

economic activity is centered.
Page 25 GAO-13-365 Global Manufacturing

sharing by providing SMEs access to technology, along with the support 

and expertise of the park’s professional staff.

Table 5 highlights examples of manufacturing-related programs in South 

Korea. For further information on South Korean programs included in this 

review, see Appendix III.

Table 5: South Korean Programs That Support Manufacturing

Program/ initiative Program/ initiative description

Budget

(in USD millions, 

fiscal year 2012)

Year founded/ 

introduced

Innovation

Daedeok Innopolis An innovation ecosystem/ cluster that consists of universities, 

research institutes, government and government-invested 

institutions, corporate research institutes and venture 

corporations in several areas, including aerospace, robotics, 

nuclear and hydro power, and information technology, among 

others.

No information 

available

1973

Daejeon Technopark A government-sponsored technopark that focuses on growing 

existing enterprises supporting R&D in the information 

technology, nanotechnology, robotics, and mechatronics 

industries.a

No information 

available

2002

Electronics and 

Telecommunications Research 

Institute 

A global information technology research institute and the 

largest government funded research institute in South Korea, 

which focuses on mobile technology, among other things.

526 1976

Trade

Korea Trade-Investment 

Promotion Agency 

The national implementing agency for South Korea’s trade 

and investment goals and policies set by the Ministry of 

Trade, Industry, and Energy. 

No information 

available

1962

Source: GAO analysis of Daedeok Innopolis; Daejeon Technopark; Electronics and Telecommunications Research Institute; Korea 

Trade-Investment Promotion Agency documents.

Note: Amounts converted to U.S. dollars from South Korean won and rounded to the nearest million.

a

Mechatronics is the cross-disciplinary study of mechanical and electrical engineering and computer 

science.
Page 26 GAO-13-365 Global Manufacturing

When compared to the United States, the countries in our study offer 

some key distinctions in government programs to support the 

manufacturing sector.25 Based on our comparison of selected U.S. 

programs, the foreign countries place a stronger emphasis on innovation 

programs that support commercialization, especially through programs 

that provide technical support and product development and support for 

infrastructure and clusters. In contrast, the United States spends a 

relatively high amount on competitive funding for R&D projects with 

commercial potential. Within trade policy, countries in our study all 

provide similar services but there are several differences in how they are 

delivered. For example, the United States is an acknowledged leader in 

intellectual property protection, but the United States government plays a 

less prominent role than Japan in developing technological standards. 

Regarding training programs, Germany’s national government has a long 

history of managing a dual training system to provide graduates with 

vocational training and nationally recognized credentials and help ensure 

a supply of skilled manufacturing workers. The United States does not 

have a comparable program on such a scale. However, some federal, 

local, and private sector entities in the United States are taking steps to 

provide work-based and academic learning tailored to manufacturers’ 

needs and develop a framework for nationally portable credentials. In 

assessing differences among countries in program funding levels, it is 

important to keep in mind that higher relative funding levels may not 

necessarily produce better outcomes.

While the United States and the four countries we studied all provide 

support for innovation and R&D, Canada, Germany, Japan, and South 

Korea have made commercialization a central goal of their innovation 

programs. Each of the four foreign countries has taken a multi-pronged 

approach to spur innovation and help manufacturers bridge the “valley of 

death” between concept and market. The programs they implement to 

achieve these goals place a particular emphasis on bringing SMEs into 

the innovation process. Innovation programs abroad incorporate three 

broad strategies: (1) providing technical support and product development 

for client firms, especially SMEs; (2) fostering collaboration between 

manufacturers and researchers, as well as between small and large 

 25 The findings in this section cite various U.S. programs as examples to illustrate broad 

points of comparison between policies in our four study countries and the United States. 

We did not perform a comprehensive review of U.S. programs that support manufacturing. 

Foreign 

Manufacturing 

Programs Offer Some 

Key Contrasts to 

Those in the United 

States

Commercialization Is a 

Key Goal of Foreign 

Innovation Programs
Page 27 GAO-13-365 Global Manufacturing

manufacturers; and (3) providing competitive grants for private-sector 

R&D efforts with commercial potential. While the United States offers 

many similar types of programs, the programs we identified offer 

somewhat less extensive support for technical support and product 

development than those in some foreign countries, but relatively high 

funding for R&D grants.26

Canada, Germany, and Japan have set up national networks of centers 

that provide a wide range of hands-on technical and business support 

services to manufacturing firms, especially SMEs. The focus of many of 

these programs suggests that they see SMEs as a rich potential source of 

innovation that market barriers, such as the financial risks of conducting 

R&D, might impede without government support. For example, Japan’s 

Tokyo Metropolitan Industrial Research Institute (TIRI), one center among 

the national Kohsetsushi network of 182 centers, offers a wide array of 

services and facilities to SMEs, including testing services, laboratories for 

product development, information on international technical standards, 

and intellectual property support. TIRI also offers collaborative research 

partners for SMEs to engage in R&D for product and technology 

development. Germany’s Fraunhofer Institutes also operate an extensive 

network of nationwide centers—serving both SMEs and large 

manufacturers—that offer university-affiliated research expertise to 

clients. According to Fraunhofer officials, product and technology 

commercialization are central objectives of their centers. Canada’s 

Industrial Research Assistance Program (IRAP), that country’s national 

SME support network, emphasizes the role of expert technical advisers in 

helping clients commercialize their products through expertise with R&D, 

networking, and business strategy.

The United States has a comparable program in the Hollings 

Manufacturing Extension Partnership (MEP) network of technical support 

centers aimed at SMEs, which is administered by Commerce’s NIST. 

MEP operates a national network of 60 centers to provide support to SME 

manufacturers, focusing on helping manufacturers in five key areas: (1) 

technology acceleration, (2) supplier development, (3) sustainability, (4) 

 26 Various studies have examined government policies to support innovation and 

manufacturing. For example, see McKinsey Global Institute and McKinsey Operations 

Practice, Manufacturing the Future: The Next Era of Global Growth and Innovation (Nov. 

2012) and National Research Council of the National Academies, Rising to the Challenge: 

U.S. Innovation Policy for the Global Economy (Washington, D.C.: 2012).

Technical Support and Product 

Development
Page 28 GAO-13-365 Global Manufacturing

workforce, and (5) continuous improvement. Specifically, MEP centers 

enter into contracts with companies to deliver technical assistance to 

improve their manufacturing processes and productivity, expand capacity, 

adopt new technologies, utilize best management practices, and 

accelerate company growth. However, MEP officials with whom we spoke 

said that MEP centers offer a more limited focus on commercialization, 

and do not typically offer testing equipment or widespread expertise in 

product commercialization. Instead, MEP may connect client firms to third 

parties offering specific services.

As table 6 shows, Canada, Germany, and Japan invest more money and 

resources in their technical support programs than the United States does 

in MEP. According to NIST officials, MEP receives about $100 million in 

government funding, and two-thirds of its revenues comes from other 

sources such as client fees, states, or other partner resources. Canada’s 

IRAP, in comparison, had funding of $143 million (U.S.) in 2011-12, with 

an expanded budget of $257.6 million for 2012-13, a much higher 

investment relative to the size of the economy or the manufacturing 

sector than the United States. Further, according to IRAP officials, it 

provides its client services for free. MEP’s technical staff number 

approximately 1,300, a much larger number than IRAP, but Japan’s and 

Germany’s programs exceed the MEP in funding and the number of 

technical staff.

Table 6: Comparison of National Technical Support and Product Development 

Programs

Country (example 

program)

Government 

funding, 2012 

(in USD millions)

Number of 

centers

Number of 

technical staff

Charges 

client fees

United States (MEP) $100 60 1,300 Yes

Canada (IRAP) $258 Over 100 Over 200 No

Germany 

(Fraunhofer)

$595 60 15,000 Yes

Japan (Kohsetsushi) $2,140 182 6,000 Yesa

Source: GAO analysis of program information.

a

TIRI, one Kohsetsushi site, charges client fees, according to TIRI officials. We could not confirm if 

this holds true for all Kohsetsushi centers in Japan.
Page 29 GAO-13-365 Global Manufacturing

Canada, Germany, Japan, and South Korea also encourage 

manufacturing commercialization through programs that facilitate 

collaboration between manufacturers and researchers. Specifically, 

several foreign programs we analyzed support collaboration by providing 

access to facilities and funding for business clusters—almost a literal 

implementation of investment in the industrial “commons” —with 

programs that have been in operation longer than those in the United 

States. Japan’s Kawasaki-region business incubation centers provide 

office space, research laboratories and testing facilities. South Korea’s 

Daedeok Innopolis consists of universities, research institutes, 

government and government-invested institutions, corporate research 

institutes and venture corporations. These programs may encourage 

opportunities for applied R&D and product development not only through 

access to facilities, but also through interaction among companies in 

close physical proximity to each other. According to program officials, 

Japan’s TAMA Association, one site among 18 in the country’s Industrial 

Cluster project, and South Korea’s Daedeok Innopolis help SMEs match 

technologies they develop with larger companies that may be able to 

apply these technologies to products they make, or processes for making 

them, which may increase technology dissemination. Germany’s 

Spitzencluster program has encouraged cluster formation by providing 

funding to clusters judged to be among the country’s best, or “leading 

edge”; the program has awarded three rounds of funding of up to 

approximately $257 million per round to 15 total selected clusters. 

Canada offers manufacturers access to research facilities to conduct 

R&D in various scientific fields through its National Research Council.

In the United States, the federal government has recently begun to 

increase support for clusters. The Small Business Administration (SBA) 

Regional Innovation Cluster Initiative, a U.S. federal government cluster 

program piloted in 2010, has funded 10 existing U.S. clusters, with 7 

clusters receiving funding of $2.7 million in FY 2012, according to SBA. 

SBA’s 1-year evaluation of the initiative showed positive results, including 

over two-thirds of participating businesses reporting development of a 

new product, and over half commercializing new technology. In 2011, 

several federal partners, led by the Economic Development 

Administration, funded the Jobs and Innovation Accelerator Challenge

(JIAC), the first interagency cluster initiative. JIAC provided $37 million to 

20 existing clusters. Later in 2011, $9 million was awarded to 13 clusters 

in rural areas. In 2012, the 3rd JIAC awarded $20.2 million to 10 existing 

clusters focusing on Advanced Manufacturing. 

Fostering Collaboration 

through Infrastructure and 

Cluster Support

Innovation vouchers

• Innovation vouchers—credits that SMEs 

can use to purchase services from public 

knowledge providers—have gained 

attention as a strategy for spurring 

innovation. According to an ITIF official, 

they have been introduced in Austria, 

Belgium, Canada, Denmark, Germany, 

Ireland, the Netherlands, and Sweden.

• Proponents say that innovation vouchers 

offer a simple approach to increasing both 

SME access to research-intensive 

technology and disseminating SMEcreated technologies.

• Vouchers usually range in value from 

$5,000 to $30,000, according to the ITIF 

official.

• In the United States, Connecticut has 

launched an innovation voucher program 

in which businesses can apply for 

vouchers worth up to $10,000, which the 

firm can use to pay a service provider to 

complete clearly defined business or 

technology development projects, 

according to state documents.
Page 30 GAO-13-365 Global Manufacturing

Table 7 provides a comparison of spending across countries on cluster 

support programs.

Table 7: Comparison of Cluster Programs

Country (program)

Government funding, 2012 

(in USD millions)

Number 

of sites

Year 

established

United States (SBA Regional 

Innovation Cluster Initiative)

2.7 7 2010

United States (Jobs and 

Innovation Accelerator 

Challenge--JIAC)

37a 20 2011

United States (Rural JIAC) 9a 13 2011

United States (Advanced 

Manufacturing JIAC)

20.2 10 2012

Japan (Industrial Clusters 

Project)

177.4b 18 2001

S. Korea (Daedeok 

Innopolis)

45.8 100 1973

Germany (Spitzencluster) 77c 15 2007

Source: GAO analysis of program information.

a

Figure for 2011

b

Figure for 2009.

c

The Spitzencluster program awards 5 clusters a total of $51M each for a 5-year period. Over the 

2007-2017 period, a total of approximately $771 million in national government funding will be spent 

on Spitzencluster; this figure represents the annual average of that funding.

Another way countries support commercialization is through competitive 

funding programs that evaluate and fund private manufacturing R&D 

projects with commercial potential. Japan’s New Energy and Industrial 

Technology Development Organization (NEDO) was established in 1980 

to promote the development of new energy technologies but has since 

broadened its scope to fund industrial R&D projects. NEDO officials said 

that a typical project they fund would have a budget of $12.5 million for 

five years. NEDO’s overall budget for 2012 was approximately $1.6 

billion. Germany funds R&D through the Central Innovation Program for 

SMEs, which focuses on SMEs and business-related research 

establishments cooperating with them. The program funds up to half of a 

business’s costs for technical support, technology transfer, training, and 

other activities in the development of a new product or process, and has 

government funding of about $643 million per year. The Canadian 

Innovation Commercialization Program (CICP), with funding of 

approximately $32 million (U.S.) per year, is a federal program that helps 

companies bridge the pre-commercialization gap for their innovative 

Competitive Funding for R&D 

Projects with Commercial 

Potential
Page 31 GAO-13-365 Global Manufacturing

goods and services, in part by testing innovative goods and services 

within the Canadian government before taking them to the marketplace.

The United States devotes a large amount of money to competitivelyawarded R&D funding relative to other countries we studied. SBA 

administers two large funding programs through the Small Business 

Innovation Research (SBIR) and Small Business Technology Transfer 

(STTR) programs. The funds for the SBIR program are provided by 

federal agencies with an extramural budget of at least $100 million for 

research or R&D, and for STTR by agencies with extramural research or 

R&D budgets of at least $1 billion; SBA oversees the programs and the 

efforts of these agencies. According to SBA officials, the SBIR and STTR 

programs had combined budgets of approximately $2.5 billion in 2012 to 

fund awards in successive phases, designed to promote technological 

innovation and economic growth within small businesses. Generally, the 

agencies participating in the SBIR and STTR programs offer up to 

$150,000 to awardees for an initial 6-month period of performance, and 

those applicants who receive a subsequent phase award typically receive 

up to $1 million for a 2–year period of performance. SBA officials said that 

projects are often evaluated for potential commercial applications to the 

evaluating agency itself, such as the Department of Defense, as opposed 

to potential demand for the product from the private sector (although this 

varies by agency). This aspect of SBIR/STTR takes a similar approach to 

Canada’s CICP in that it uses government procurement as a means for 

potentially introducing innovative products into the larger market. Table 8 

compares funding for some countries’ R&D grant programs.

Table 8: Comparison of Funding for R&D Grant Programs 

Country (program) Government funding, 2012 (in USD millions)

United States (SBIR/STTR) 2,500

Canada (CICP) 32a

Japan (NEDO) 1,600

Germany (ZIM) 643

Source: GAO analysis of program information.

a

Canadian officials reported that the CICP received a total of $95 million over a 3–year period 

beginning in 2010.
Page 32 GAO-13-365 Global Manufacturing

In each of the countries we studied, trade policy is an important part of 

manufacturing policy, and each country’s approach shares commonalities 

with the others. Every country we studied—including the United States—

focuses on export promotion, harmonization of standards, and protection 

of intellectual property rights.27

According to the World Trade Organization, in 2011, Canada, Germany, 

Japan, South Korea, and the United States were among the world’s 

largest exporters of manufactured goods—accounting for about $3.7 

trillion in manufactured exports (or about 32 percent of the global export 

value in this category).

Canadian, German, Japanese, South 

Korean, and U.S. export promotion programs offer help in market 

identification and development. However, there are some differences. For 

example, in Japan, efforts to promote and harmonize product standards 

are supported by the government in conjunction with industrial leaders, 

but in the United States, they are led by the private sector in most 

cases. All five countries also provide information to help businesses 

establish or protect intellectual property rights as a way to encourage 

innovation and help ensure that manufactured goods can be sold abroad.

28

• According to Canada’s Trade Commissioner Service officials, the 

Trade Commissioner Service manages the Export USA program, 

which helps Canadian SMEs understand the specific legal 

fundamentals of exporting to the United States, Canada’s largest 

trading partner.

These countries generally offer similar types of 

export promotion services to domestic businesses, including assistance 

for participation in trade fairs, participation in trade missions, data and 

market analytics, and services targeted towards SMEs. However, there 

are some differences in how they provide these services. For example:

• According to State and Commercial Service officials at the U.S. 

embassy in Berlin, Germany’s trade fair system is key to German 

manufacturers’ success because it helps create awareness of global 

trends in different sectors, and showcases Germany as a place to do 

business.

 27 We did not conduct a comprehensive survey of trade policy tools in these three areas 

that countries in our study use to support manufacturing.

28 International Trade and Tariff Data, in the World Trade Organization’s International 

Trade and Market Access Data online (includes the ‘manufactures’ sector in the ‘exports’ 

trade flow category), accessed June 19, 2013, http://www.wto.org.

Countries Continue to See 

Trade as an Important 

Component of 

Manufacturing Policy

Export Promotion
Page 33 GAO-13-365 Global Manufacturing

• According to TIRI officials, Japan’s Metropolitan Technical Support 

Network for Export Products—a cooperative initiative of nine 

prefecture-based research institutes—offers consultation and 

information on international product standards to SMEs for export 

products, as well as testing to determine compliance with those 

standards.

• According to officials from South Korea’s Korea Trade-Investment 

Promotion Agency, 99 Korea Business Centers around the world can 

be used as SME branch offices. The Korea Trade-Investment 

Promotion Agency also manages logistics centers—operated with 

UPS or DHL—to facilitate Korean firms’ distribution operations 

overseas.

Canada, Germany, Japan, South Korea, and the United States also differ 

in the amount of resources they provide for export promotion and the 

number of locations that their export promotion efforts reach. For 

example, according to a recent U.S. International Trade Administration 

study, while all of these countries employ expert staff abroad to assist 

with the exporting process, the total number of staff varies somewhat, 

with the United States and Japan employing the fewest export promotion 

personnel (see table 9).29

Table 9: Number of Export Promotion Personnel and Number of Countries where 

Export Promotion Activities Are Conducted by Five Countries

Countrya Number of export 

promotion personnel 

Number of countries where export 

promotion activities are conducted

Canada 2,308 99

Germany 2,227 85

Japan 1,545 57

South Korea 1,650 72

United States 1,545 72b

Source: International Trade Administration data, Commercial Service data, and foreign trade agency websites.

a

Canada amounts as of 2011-2012; Germany as of 2012; Japan as of 2011; South Korea as of 2010; 

United States as of 2012.

 29 The scope of this study is limited to foreign competitor government programs that are 

the equivalent to the International Trade Administration’s export promotion mandate, 

including the work of the International Trade Administration’s U.S. and Foreign 

Commercial Service, Market Access and Compliance, and Manufacturing and Services 

units. Many other U.S. agencies provide export promotion services, which are not included 

in this study. See also GAO, Export Promotion: Better Information Needed about Federal 

Resources, GAO-13-644 (Washington, D.C.: July 17, 2013).
Page 34 GAO-13-365 Global Manufacturing

b

As of 2011, State provided export promotion assistance in an additional 60 countries where 

Commerce has no Commercial Service presence. According to State officials, State also provides 

export promotion services in countries where the Commercial Service has a presence.

Similarly, although the amount of export promotion funding does not vary 

greatly across the countries in our study—from $226 to $381 million—the 

United States spends less on export promotion per $1000 of GDP and 

per $1000 of exports than many other similarly-situated countries, 

including Canada, Japan, and South Korea (see Table 10).

Table 10: Export Promotion Budgets of Five Countries Relative to GDP and Export Volumea

Export promotion 

budgetb

(in USD millions)

GDPc

(in USD billions)

Export promotion 

budget per $1000 GDP

Exportsd

(in USD billions)

Export promotion budget 

per $1000 of exports

Canada 296 1,759 $0.17 455 $0.65

Germany 226 3,629 $0.06 1,501 $0.15

Japan 285 5,855 $0.05 909 $0.31

South Korea 289 1,164 $0.25 548 $0.53

United States 381 15,094 $0.03 1,796 $0.21

Source: International Trade Administration data.

a

According to the International Trade Administration, there are limitations to quantitative comparisons 

of direct foreign counterparts on the export promotion programs being analyzed. The government and 

commercial fabric in some foreign competitor countries is sufficiently different from that of the United 

States that direct comparisons of government expenditures are difficult. For example, in Germany, 

Japan, and Korea, government and industry collaborate, which means that government expenditures 

on export promotion shown here understate the total expenditures on export promotion. Further, all 

countries in this analysis provide subsidies to businesses in some form.

b

Canada amounts as of 2011-2012; Germany as of 2012; Japan as of 2011; South Korea as of 2010; 

United States as of 2012.

c

As of 2011.

d

As of 2010.

Further, the four other countries in our review have a single agency 

primarily responsible for implementing export promotion, whereas the 

United States has several. For example, in the United States, the Trade 

Promotion Coordinating Committee (TPCC), an interagency task force, 

includes 20 agencies that participate in export promotion. Of the 20 TPCC 

agencies, seven are considered core agencies.30

 30 TPCC core agencies are Commerce, Export-Import Bank, Overseas Private Investment 

Corporation, U.S. Trade and Development Agency, Small Business Administration, State, 

and Department of Agriculture. The TPCC is chaired by the Secretary of Commerce and 

the Under Secretary of Commerce for International Trade.

In contrast, Canada’s 
Page 35 GAO-13-365 Global Manufacturing

Trade Commissioner Service, Germany’s Association of Chambers of 

Commerce and Industry, and South Korea’s Korea Trade-Investment 

Promotion Agency implement export promotion programs in their 

respective countries. We previously reported that Commerce’s Foreign 

Commercial Service activities align with relevant National Export Initiative 

trade promotion priorities, but that in an environment of limited resources, 

systematic use of economic, performance and activity data could help 

allocate resources to achieve its goals more efficiently and effectively.31

Although the United States and Japan both view international standards 

as an important component of manufacturing policy, they have different 

mechanisms for setting voluntary standards on industrial products. In the 

United States, the government primarily coordinates standards on 

industrial products through the private sector, whereas Japan’s national 

government plays a more active role in setting and enforcing standards.32

According to documents from the Japanese Industrial Standards 

Committee (JISC), a committee of up to 30 knowledgeable experts 

comprised of members from the national government, private sector, 

industry associations, and academia, METI administers the national 

standards system by drafting and enforcing standards-related laws and 

regulations. According to the committee, four additional government 

ministries have the ability to set standards with input from the committee. 

Japan’s Next Generation Vehicle program illustrates the government’s 

active role in trying to influence international technical standards for 

manufacturing. According to NIST officials, the South Korean government 

also plays an active role in trying to influence international technical 

standards for manufacturing through standards as well as conformity 

assessment requirements.

In the United States, NIST acts as a coordinator in getting manufacturers 

to adopt standards and provides services to assist manufacturers in 

implementing manufacturing standards but has no regulatory power to 

 31 GAO: National Export Initiative: U.S. and Foreign Commercial Service Should Improve 

Performance and Resource Allocation Management, GAO-11-909 (Washington, D.C.: 

Sep. 29, 2011); Export Promotion: Increases in Commercial Service Workforce Should be 

Better Planned, GAO-10-874 Washington, D.C. (August 31, 2010). See also Executive 

Order No. 13534.

32 We did not review mechanisms for setting standards on industrial products in Canada 

or Germany because these countries’ practices did not meet our selection criteria.

International Standards
Page 36 GAO-13-365 Global Manufacturing

enforce them, according to NIST and industry officials. According to NIST 

officials, hundreds of private sector organizations, including professional 

societies, trade associations, testing and certifying organizations, and 

industry consortia develop standards through an open, consensus-based 

process. Among other things, NIST coordinates the use of private sector 

standards by federal agencies, states, and local governments to avoid the 

development of duplicative standards. In addition, NIST scientists and 

engineers work with the private sector to develop standards that are 

based on sound science and ensure that the standards are supported by 

effective measurements, test methods, and appropriate conformity

assessment systems.

We did not identify any key differences between the four foreign countries 

and the United States with regard to protecting intellectual property rights. 

All of the foreign countries we studied promote R&D to create intellectual 

property and support manufacturers by protecting intellectual property 

rights through various mechanisms. See appendix III for details on how 

various programs support intellectual property rights. The United States is 

an acknowledged global leader in the creation of intellectual property, and 

has generally advocated strong intellectual property protection.

Germany’s national government has maintained a substantial 

commitment to a dual training system, which helps provide a supply of 

skilled workers for the manufacturing sector. In particular, Germany’s 

system has a long history of building public-private partnerships to

develop curriculum and standards and providing graduates with 

nationally-recognized, portable credentials. While not on the same scale 

as the German dual training system, some federal and local entities in the 

United States are taking steps to provide a combination of work-based 

and academic learning to meet manufacturers’ needs through publicprivate partnerships. In addition, Labor, some U.S. states, and Canada’s 

federal government have taken steps to encourage participation in their 

apprenticeship programs to train workers in the skilled trades needed by 

manufacturers. While the United States does not have a national system 

to issue industry-recognized credentials, the manufacturing industry, with 

participation from the federal government, has recently started moving in 

this direction.

Germany’s dual training system facilitates broad consensus among 

stakeholders in business, labor, and education, which in turn creates a 

supply of workers with skills needed in the manufacturing sector. The 

national government enforces the dual training system’s regulations and 

Intellectual Property Rights

Germany’s Sustained 

Commitment to Vocational 

Training Helps Provide a 

Supply of Skilled 

Manufacturing Workers
Page 37 GAO-13-365 Global Manufacturing

has coordinated with industry, union, and state government stakeholders 

to develop skill standards in 350 occupations. One agency, the Federal 

Institute for Vocational Education and Training, is responsible for 

conducting education and labor market research, facilitating regular 

stakeholder coordination among public agencies and private industry 

associations on needed skills, and managing changes to the system’s 

standards. The Federal Institute for Vocational Education and Training 

was established in 1970 and, given its central role in bringing 

stakeholders together, its board is referred to as the “parliament” of 

vocational education. Some experts note that this unified approach and 

cooperative relationship among the various stakeholders are strengths of 

this system, and representatives of German government and industry 

cited the system as an important support to the manufacturing sector. 

Moreover, Germany has a high overall societal acceptance of the need 

for the dual training system. In addition, support for training and for the 

skilled trades is deeply embedded in German society, and about 55 

percent of high school students enter the dual training system each year.

In contrast, the United States and Canada have a more decentralized 

system of skills training programs, with management of these programs 

largely devolved to states and localities. In the United States, Labor has a 

major role in administering a number of federally-funded skills training 

programs, including those under the Workforce Investment Act of 1998 

(WIA), which largely target dislocated workers and economically 

disadvantaged adults and youth.33 WIA programs are overseen at the 

local level by Workforce Investment Boards, committees of local 

business, labor, and government representatives, with services provided 

through local American Job Centers.

34

 33 Labor’s Trade Adjustment Assistance program funds employment and training services 

to manufacturing workers who lose their jobs as a result of international trade. 

Labor also administers a 

Registered Apprenticeship Program, which offers assistance in creating 

on-the-job training programs in accordance with accepted skills 

certification organizations in relevant disciplines. Registered 

apprenticeship programs are sponsored on a voluntary basis by individual 

34 WIA created a comprehensive workforce investment system that brought together 

multiple federally funded employment and training programs into a single system called 

the One-Stop system. The One-Stop system is composed of One-Stop Career Centers 

around the country that are designed to provide a full range of assistance to job seekers, 

including training referrals, career counseling, and job listings. In 2012, Labor changed the 

name of One-Stop Career Centers to American Job Centers.
Page 38 GAO-13-365 Global Manufacturing

employers, employer associations, or labor-employer agreements, and 

are federally administered by Labor in 25 states and by state 

apprenticeship agencies in 25 states. In addition, the Department of 

Education plays a major role in supporting career and technical education 

in community colleges and regional and technical centers through the 

Carl D. Perkins Career and Technical Education Improvement Act of 

2006 (Perkins Act).

Unlike Germany, U.S. officials and experts reported that the United States 

does not have widespread societal support for vocational education and 

training for the skilled trades, although some federal and local entities are 

taking steps to target training to meet manufacturers’ needs through 

public-private partnerships. For example, at the federal level, Labor and 

the Department of Education are providing $2 billion over 4 years to 

community colleges around the country through the Trade Adjustment 

Assistance Community College and Career Training initiative. The grants 

support partnerships between community colleges and employers to 

develop instructional programs for workers dislocated by international 

competition that meet specific industry needs, including the 

manufacturing industry. At the local level, community and technical 

colleges provide skills training under WIA and the Perkins Act, and in 

many areas, work closely with employers to develop customized training 

in key disciplines where workers are needed. One example of this 

customized training is a partnership that the German corporation Siemens 

has established with Central Piedmont Community College in North 

Carolina in order to create a pipeline of skilled workers for manufacturing 

plants located in the area. Participating students work at Siemens while 

taking courses in the college’s mechatronics degree program.35 Siemens 

pays each student’s tuition costs, while the participant earns a paycheck 

and receives company-specific technical training and hands-on 

experience. Our recent report highlighted similar efforts of Workforce 

Investment Boards in various locations, including California, Colorado, 

Illinois, Kansas and Michigan to build public-private partnerships and 

tailor training programs to meet the specific needs of manufacturers.36

 35 Mechatronics is the cross-disciplinary study of mechanical and electrical engineering.

In 

addition, some states in the United States have taken steps to focus on 

36 See GAO, Workforce Investment Act: Innovative Collaborations between Workforce 

Boards and Employers Helped Meet Local Needs, GAO-12-97 (Washington, D.C.: 

January 19, 2012). 
Page 39 GAO-13-365 Global Manufacturing

skilled trades needed by manufacturers. For example, according to state 

documents, South Carolina’s Personal Pathways to Success system 

combines academic training with options for work-based learning in 16 

career clusters, including manufacturing.

In Canada, apprenticeship programs are primarily administered by the 13 

provincial or territorial governments. According to Canadian officials, in 

recognition of the economic need for apprentices and to increase 

participation in provincial and territorial apprenticeship programs, the 

Canadian government offers incentives for continuing and completing an 

apprenticeship within the country’s Red Seal program, which 

encompasses 55 trades and includes skills needed in the manufacturing 

sector. In addition, these officials noted that the Canadian government 

also offers a tax credit for businesses that hire apprentices and a tax 

deduction for the purchase of tools by any eligible apprentice.37

Unlike Germany and Canada, the United States has no unified national 

system through which credentials are granted or skills are assessed, 

though the manufacturing industry, with participation from the federal 

government, has recently started moving in this direction. Germany’s dual 

training system provides graduates with a nationally recognized credential 

upon finishing a program of study. Similarly, Canada’s Red Seal program 

offers an exam for apprentices to take at the end of their training to obtain 

a nationally recognized certification of advanced skill. In this way, the 

German dual training system and the Red Seal exam establish nationally 

recognized standards of competency, which German officials told us has 

played a role in facilitating labor mobility, and Canadian officials told us 

this has played a role in facilitating national recognition of trade 

qualifications. In contrast, the United States currently has many different 

types of organizations that award various credentials.

See 

Appendix III for more information on Canada’s programs.

38

 37 In addition, according to Labor, South Carolina has increased the number of Registered 

Apprenticeship programs in the state by offering a tax incentive of $1,000 per apprentice 

employed for at least seven months during each year of an apprentice’s program, for up to 

four years of such a program.

However, the 

Manufacturing Institute, with participation from Labor, Commerce, and 

other entities, recently launched the Skills Certification System, which 

38 Labor defines a credential as a recognition of an individual’s attainment of measurable 

technical or occupational skills necessary to obtain employment or advance within an 

occupation.
Page 40 GAO-13-365 Global Manufacturing

aims to provide a unified framework to align skills certifications from 

various industry associations with Labor’s Advanced Manufacturing 

Competency Model.39 According to the Manufacturing Institute, the Skills 

Certification System is intended to establish a comprehensive set of 

nationally portable, industry-recognized credentials to validate the skills 

and competencies needed to be productive in any manufacturing 

environment. Currently, the Skills Certification System endorses industry 

certifications in several areas, including machining and metalworking; 

automation; fabrication; mechatronics; and transportation, distribution, 

and logistics. While federal and private sector entities are collaborating on 

this effort, the more established German system suggests that it will 

require a long-term, sustained commitment and coordination between 

federal and state authorities to bring such an effort to fruition on a large 

scale.

As the United States considers policies to enhance the global 

competitiveness of its manufacturing sector, the actions other 

economically-advanced countries have taken to improve their competitive 

edge in manufacturing are of particular interest. The manufacturing 

policies and programs in each of the four countries we examined are 

shaped by each country’s unique political, social, cultural, and economic 

characteristics and may not be readily applicable to the United States. 

However, their manufacturing approaches suggest some key areas that 

the United States may wish to consider as it continues to formulate its 

manufacturing strategy and programs to carry out that strategy. Each of 

the foreign countries took a multi-faceted and hands-on approach to spur 

innovation in ways that are intended to lead to commercialization, 

suggesting that no one program or mechanism can fully address the 

challenge of bridging the gap between innovative ideas and 

manufacturing sales. In addition, we noted the sustained government 

commitment to managing a national system of vocational skills training 

and credentialing that facilitates consensus among business, labor, and 

education. This was particularly evident in Germany. The United States 

 39 The Manufacturing Institute is a non-profit research organization affiliated with the 

National Association of Manufacturers. The National Association of Manufacturers is a 

trade association that encourages the expansion of manufacturing in the United States. 

Labor, in partnership with manufacturing industry groups, created the Advanced 

Manufacturing Competency Model as a roadmap of the skills needed by workers in 

various trades in the manufacturing sector.

Concluding 

Observations
Page 41 GAO-13-365 Global Manufacturing

has no corollary, and due to major cultural differences it is unlikely that we 

would consider a similar system of the same scale. However, some 

recent examples of public-private partnerships established to target 

training for the manufacturing sector and develop a set of nationally 

portable, industry-recognized credentials show how certain aspects of the 

German dual training system might be applied through incremental 

actions.

More generally, our analysis of the manufacturing programs in the four 

selected countries shows the broad extent to which U.S. competitors are 

leveraging the public sector to help their manufacturing industries 

maintain competitiveness in a rapidly changing global economy. Their 

programs involve a partnership of government and the private sector, with 

varying but shared responsibilities for supporting applied R&D and 

commercialization efforts; facilities for research, testing and production; 

and expertise and services. Many of these programs go beyond a more 

traditional government role of setting incentives, establishing regulations, 

and providing funding. In the end, the best guide to devising U.S. 

manufacturing policy may be to think about how the mix of existing and 

proposed federal programs fits into our unique economic context and can 

provide the most benefit to the economy at large.

We sent a draft of this report to Commerce, Labor, and State, and

selected draft report sections to SBA, the Department of Education, and 

the Department of Energy. Commerce, Labor, SBA, and Energy provided 

technical comments, which we incorporated, as appropriate. State and 

Education did not have comments. We also sent draft report sections to 

foreign officials to verify information on foreign programs that support 

manufacturing, and incorporated technical comments from these officials,

as appropriate.

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution until 30 days after the date of this 

letter. At that time, we will send copies to the Secretaries of Commerce, 

Labor, and State, appropriate congressional committees, and other 

interested parties. In addition, the report is available at no charge on the 

GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

Andrew Sherrill at (202) 512-7215 or SherrillA@gao.gov; or Lawrance 

Evans at (202) 512-4802 or EvansL@gao.gov. Contact points for our 

Agency and ThirdParty Comments and 

Our Evaluation
Page 42 GAO-13-365 Global Manufacturing

Offices of Congressional Relations and Public Affairs may be found on

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix IV.

Sincerely Yours,

Andrew Sherrill

Director, Education, Workforce,

 and Income Security Issues

Lawrance L. Evans, Jr.

Director, International Affairs and Trade
Appendix I: Objectives, Scope, and 

Methodology

Page 43 GAO-13-365 Global Manufacturing

Our key objectives for this report ask:

1. What government strategies and programs have other advanced 

economies implemented to approach issues similar to those facing 

manufacturing in the United States?

2. What key distinctions exist between policy approaches to support 

manufacturing in other advanced economies and those in the United 

States?

We selected four study countries—Canada, Germany, Japan, and South 

Korea— and the programs that support manufacturing in each country 

based on several factors. Since we focused on “similarly situated” 

countries for comparison to the United States, we considered primarily 

high-GDP countries that have democratic governments. We contacted 

approximately 20 experts whose career involved studying or advocating 

for manufacturing policy; these included representatives from industry 

associations, labor, academia, think tanks, and trade groups.1

We then worked with officials from the U.S Department of State (State) 

stationed in our selected countries and foreign embassy officials to 

finalize programs for our review, based on our research and the 

recommendations of the foreign officials. We did not attempt to perform a 

comprehensive review of programs that support manufacturing in the four 

selected foreign countries, nor did we seek information in all countries 

about programs in each of our three key policy categories—innovation, 

trade, and training. For example, in some countries, we did not examine 

training or trade programs because through expert opinion, input from 

We

interviewed these experts about key manufacturing issues and obtained 

their views about which foreign countries had innovative programs to 

support manufacturing. We also asked officials from the Departments of 

Labor (Labor) and Commerce (Commerce) to comment on some of the 

selected foreign programs recommended by experts. We conducted 

additional research on the programs in the countries experts mentioned. 

To make our final country selection, we considered factors such as the 

number of experts that mentioned a country as a candidate for study and 

the number and breadth of programs our research indicated each country 

offered.

 1 We identified experts primarily through a “snowball” approach, in which we contacted 

people we interviewed for suggestions of other people we should contact.

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 44 GAO-13-365 Global Manufacturing

U.S. officials, and our literature review, we did not identify programs in 

these areas as being particularly informative for U.S. policy.

To obtain specific program information, we traveled to each country to 

interview foreign officials overseeing each program. We also analyzed 

documents with key program information that these officials provided. We 

did not analyze or review foreign laws or regulations, and relied on 

program information, including budget information, from sources provided 

by foreign agency officials and other sources. We also sent report 

excerpts to foreign officials to verify information on the programs and 

incorporated technical comments from these officials where appropriate. 

Moreover, we did not evaluate the effectiveness of any foreign programs.

Because we did not conduct original analyses, none of the program 

descriptions regarding foreign programs in this report should be 

considered GAO assessments or evaluations of those programs. 

To identify key differences in manufacturing policies between our selected 

foreign countries and those in the United States, we synthesized our 

analyses of the foreign programs we examined to identify common and 

unique features among them. We then researched comparable programs 

in the United States, in part based on suggestions from Commerce and 

Labor, and interviewed staff at agencies administering those programs. 

We did not attempt to conduct a comprehensive review of U.S. 

manufacturing policy or programs, nor did we evaluate the effectiveness 

of U.S. programs.

This report uses data obtained from large U.S. and international agencies 

and from foreign manufacturing agencies. We assessed the reliability of 

data from the Bureau of Labor Statistics, the Bureau of Economic 

Analysis, World Bank, and Organisation for Economic Co-operation and 

Development (OECD) by reviewing literature provided by the 

organizations regarding their methodology for compiling data, including 

measures to ensure data quality and comparability across countries. We 

determined that these data were sufficiently reliable for the purposes of 

our report. Regarding data provided by foreign agencies, we did not 

independently attempt to confirm provided data except where 

documentary evidence provided by those agencies allowed us to do so.

However, we did confirm the accuracy of the figures and our use of them 
Appendix I: Objectives, Scope, and 

Methodology

Page 45 GAO-13-365 Global Manufacturing

by having foreign officials review relevant excerpts of the report.2

For data on export promotion, we assessed the reliability of data from the 

World Trade Organization by reviewing literature provided by that 

organization regarding its methodology for compiling data, including the 

use of the international standard system for categorizing exports. We 

contacted cognizant Commerce officials with respect to an International 

Trade Administration study that compared and analyzed foreign countries’ 

export promotion budget levels, and with respect to data on the number of 

countries where the United States conducts export promotion activities.

We reviewed the steps Commerce officials took in collecting and 

analyzing the data, and we found the data to be sufficiently reliable for our 

purposes. 

We 

found these data to be sufficiently reliable for our purposes. 

We obtained data on the number of countries in which Canada, Germany, 

Japan, and South Korea conduct export promotion activities using their 

officially released information on their governments’ website. We 

confirmed these numbers with cognizant Canadian, German, and South 

Korean officials. We were unable to confirm the number of countries in 

which Japan conducts export promotion activities with cognizant officials. 

We believe these sources are sufficiently reliable for the purpose of our 

report.

We conducted this performance audit from March 2012 to July 2013 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 2 We converted program budget and other foreign expenditure numbers into U.S. currency 

by using the average annual exchange rate, as reported by OECD, for the applicable year 

for the nominal figure. For example, to convert 2012 program expenditures, we used the 

average exchange rate for 2012. 
Appendix II: Examples of Recent U.S. 

Manufacturing Policy Initiatives

Page 46 GAO-13-365 Global Manufacturing

In recent years, both Congress and the Administration have taken steps 

to help define the goals and broad principles of a U.S. manufacturing 

strategy.1

Likewise, the Administration has proposed a framework for manufacturing 

and various initiatives to spur manufacturing. In 2009, the Administration 

put forth “A Framework for Revitalizing American Manufacturing,” which 

lays out policies in seven areas: (1) providing workers with the opportunity 

to obtain the skills necessary to be highly productive; (2) investing in the 

creation of new technologies and business practices; (3) developing 

stable and efficient capital markets for business investment; (4) helping 

communities and workers transition to a better future; (5) investing in an 

advanced transportation infrastructure; (6) ensuring market access and a 

level playing field; and (7) improving the general business climate, 

especially for manufacturing. The Administration has put forth several 

other documents laying out its manufacturing strategy since 2009—

including “The National Strategic Plan for Advanced Manufacturing,” 

which it published in February 2012 to guide Federal programs and 

The America COMPETES Reauthorization Act of 2010 aimed 

in part to increase the nation’s R&D investment in science and 

engineering research and in science, technology, engineering, and 

mathematics education. This law required the establishment of new 

programs, including Commerce’s Regional Innovation Program; required 

the establishment of a committee involved in STEM education; and 

required the establishment of an Advisory Council on Innovation and 

Entrepreneurship. In addition, it outlines requirements for various 

government agencies relating to improving the competitiveness of the 

manufacturing sector in the United States. It also created an interagency 

Committee on Technology under the National Science & Technology 

Council responsible for planning and coordinating federal programs and 

activities in advanced manufacturing. The act also directs Commerce to 

(1) analyze taxes, regulations, and the economy; trade and export 

policies; workforce issues; and barriers to U.S. competitiveness; and (2) 

develop a 10-year innovation and competitiveness strategy. Furthermore, 

the America COMPETES Reauthorization Act of 2010 authorized funding

for research through the National Science Foundation, the National 

Institute of Standards and Technology (NIST), the Department of Energy, 

and Commerce.

 1 We obtained information on this topic to highlight some examples but did not attempt to 

develop a comprehensive list of initiatives related to U.S. manufacturing. 

Appendix II: Examples of Recent U.S. 

Manufacturing Policy Initiatives
Appendix II: Examples of Recent U.S. 

Manufacturing Policy Initiatives

Page 47 GAO-13-365 Global Manufacturing

activities in support of advanced manufacturing R&D in response to the 

America COMPETES Reauthorization Act of 2010.2

In addition, the Administration has established several manufacturing 

initiatives.

• First, in 2009, the White House announced the formation of the 

President’s Council of Advisors on Science & Technology (PCAST), 

an advisory group of the nation’s leading scientists and engineers who 

directly advise the President on matters related to U.S. 

manufacturing.3

• In June 2011, the President launched the Advanced Manufacturing 

Partnership (AMP), a private-sector-led, national effort that brings 

together industry, universities, and the federal government to chart a 

course for investing and developing emerging technologies to create 

high quality manufacturing jobs and enhance U.S. global 

competitiveness.4

• In December 2011, the Administration established the White House 

Office of Manufacturing Policy, which has worked with PCAST and 

AMP to coordinate policy to enable innovation.5

In March 2012, the President announced the establishment of the 

National Network for Manufacturing Innovation (NNMI), one purpose of 

which is to close the gap between research and development activities 

and the deployment of technological innovations in domestic production 

of goods. To accomplish this goal, the NNMI plans to form up to 15 

 2 See Pub. L. No. 111-358, § 102(b)(7), 124 Stat. 3982, 3986 (2011).

3 PCAST makes policy recommendations in the many areas where understanding of 

science, technology, and innovation is essential to strengthening our economy and 

forming policy that works for the American people.

4 PCAST recommended a partnership involving government, industry, and academia to 

identify the most pressing challenges and transformative opportunities to improve 

technologies, processes and products across the manufacturing sector.

5

For example, AMP brings together industry, universities, and the federal government to 

chart a course for investing and furthering the development of the emerging technologies 

that will create high quality manufacturing jobs and enhance U.S. global competitiveness, 

PCAST recommended establishing the Advanced Manufacturing National Program Office, 

which has been done. The Advanced Manufacturing National Program Office includes 

participation from all federal agencies involved in U.S. manufacturing. Agencies involved 

are Department of Commerce, Department of Defense, Department of Energy, National 

Aeronautics and Space Administration, and National Science Foundation. 
Appendix II: Examples of Recent U.S. 

Manufacturing Policy Initiatives

Page 48 GAO-13-365 Global Manufacturing

manufacturing innovation institutes around the country to serve as 

regional hubs of manufacturing excellence. In August 2012, the National 

Additive Manufacturing Innovation Institute (NAMII) was formally 

established in Youngstown, Ohio, as the pilot institute under the NNMI 

infrastructure. NAMII is a public-private partnership with member 

organizations from industry, academia, government, and workforce 

development resources, with a goal to transition additive manufacturing 

technology to the mainstream U.S. manufacturing sector. Another effort in 

collaboration with the NAMII is the Department of Energy’s Manufacturing 

Demonstration Facilities, which are collaborative manufacturing 

communities that share a common R&D infrastructure. The first facility 

was launched at Oak Ridge National Laboratory in January 2012. This 

facility will provide equipment, scientists, and engineers to develop new 

energy-sector technologies for commercial application. In May, 2013, the 

Administration announced $200 million in funding to open three new 

manufacturing institutes under the NNMI.
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Page 49 GAO-13-365 Global Manufacturing

The following programs illustrate the ways in which Canada, Germany, 

Japan, and South Korea have pursued manufacturing goals through 

innovation, training, and trade policies. We did not independently evaluate 

these programs. Our descriptions are based on interviews with 

knowledgeable officials and review of relevant program documentation.

We analyzed documents with key information that these officials 

provided, but did not review or analyze the primary source materials for 

such program information. In addition, we did not analyze or review any 

foreign laws or regulations. Because we did not conduct original 

analyses, none of the program descriptions regarding foreign programs in 

this report should be considered GAO assessments or evaluations of 

those programs. We also sent report excerpts to foreign officials to verify 

information on the programs and incorporated technical comments from 

these officials where appropriate.

The Accelerated Capital Cost Allowance was first introduced in Canada’s 

2007 budget. According to Finance Canada officials, the policy allows for 

a 50 percent depreciation of new investment in machinery and equipment 

in the manufacturing and processing sector. By allowing a faster tax writeoff of eligible investments, this measure may help manufacturers remain 

competitive in the current global environment. According to Canadian 

officials, the policy has been extended until 2015. Representatives of the 

Canadian Manufacturers and Exporters—Canada’s major national 

association of manufacturers—told us that although they have advocated 

that the policy become permanent, this has not been achieved.

The Canadian Innovation Commercialization Program (CICP) was 

created to bolster innovation in Canada’s business sector and was made 

permanent in Canada’s 2012 budget, with $95 million for 3 years starting 

in 2013, and $40 million per year thereafter. CICP helps companies 

bridge the pre-commercialization gap for their innovative goods and 

services in several ways: (1) awarding contracts to entrepreneurs with 

pre-commercial innovations, (2) testing and providing feedback to 

entrepreneurs on the performance of their goods or services, (3) 

providing innovators with the opportunity to enter the marketplace with 

new goods and services, and (4) providing information on how to do 

business with the Government of Canada to enhance procurement 

Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Canada

Innovation

Accelerated Capital Cost 

Allowance

Canadian Innovation 

Commercialization Program 

(CICP)
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Page 50 GAO-13-365 Global Manufacturing

opportunities. The Canadian Innovation Commercialization Program 

targets innovations in the priority areas of environment, safety and 

security, health, and enabling technologies (e.g., biotechnology).

According to Canadian officials, Canada’s Scientific Research and 

Experimental Development (SR&ED) tax incentive program supports 

business research and development.

The SR&ED tax incentive program has two components:

1. An income tax deduction, which allows immediate expensing of all 

eligible expenditures, and;

2. An investment tax credit with the following characteristics:

• The general rate is 20 percent of qualified expenditures carried 

out in Canada.

• An enhanced rate of 35 percent is provided to small and mediumsized Canadian-controlled private corporations on their first $3 

million of eligible expenditures.

• Unused credits earned in a year are generally fully refundable for 

small and medium-sized Canadian-controlled private corporations 

on their first $3 million of current expenditures.1

Currently, eligible expenditures include most of the costs that are directly 

related to SR&ED, including salary and wages, materials, and overhead, 

as well as contracts and capital expenditures (other than most 

buildings).The 2012 budget announced that, effective January 1, 2014, 

the general rate would be reduced to 15 percent. In addition, the 2012 

budget announced that effective the same date, capital expenses (e.g., 

equipment and machinery) would be eliminated from eligible SR&ED 

costs. Finance Canada officials estimated $3.6 billion in SR&EDassociated tax expenditures in 2012.

Canada’s 2012 budget announced the Canadian government’s intent to 

double the funding for the Industrial Research Assistance Program 

(IRAP). IRAP—a federally-funded nationwide network of over 200 

Industrial Technology Advisors with sector-specific expertise who consult 

with SMEs on conducting research and development—had a budget of 

 1 Entities other than Canadian-controlled private corporations cannot receive the credit as 

income, but may use it to offset taxes owed.

Scientific Research and 

Experimental Development 

(SR&ED) Tax Incentive 

Program

Industrial Research Assistance 

Program (IRAP)
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Page 51 GAO-13-365 Global Manufacturing

$258 million in 2012-2013. IRAP advisors assist SMEs in developing, 

adopting, and adapting technologies as well as incorporating them into 

competitive products and leading to potential commercialization. 

According to IRAP officials, over 80 percent of IRAP clients have 50 or 

fewer employees. According to the 2012 IRAP survey, 62 percent of 

participating businesses indicated that the program had enhanced their 

ability to conduct research and development.

Canada’s five federal regional development organizations are another 

source of support for innovation. Each agency covers a specific 

geographic area. The Federal Economic Development Agency for 

Southern Ontario— the regional development agency that was 

established most recently— was provided $1 billion in funds to expend 

from 2009-2014 in support of local economic development and 

competitiveness. The Federal Economic Development Agency for 

Southern Ontario has created programs intended to boost private sector 

investment in start-up companies, help SMEs collaborate with colleges 

and universities to commercialize new products and services, and 

develop new technology. For example:

• Investing in Business Innovation. The Investing in Business 

Innovation program boosts private sector investment in start-up 

businesses and allows for the accelerated development and 

introduction to market of new products, processes, and practices. It 

also helps angel investor networks and their associations attract new 

investment and support the growth of angel investment funds.2

• Technology Development Program. The Technology Development 

Program helps research and innovation organizations, the private 

sector, post-secondary institutions, and nonprofit organizations work 

Eligible recipients include southern Ontario nonprofit angel investor 

networks, nonprofit organizations that represent angel investor 

networks, and start-up businesses with fewer than 50 employees who 

have an investment agreement with recognized angel and/or venture 

capital investors. Eligible activities include product and process 

applied research, engineering design, technology development, 

product testing, marketing studies, certification, proof of concept, 

piloting and demonstration, problem solving, and commercialization of 

intellectual property.

 2 Angel investors are high net worth individuals who invest their own money in start-up 

companies in exchange for part ownership of the business.

Federal Regional Development 

Organizations
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Page 52 GAO-13-365 Global Manufacturing

together to accelerate the development of technologies that will result 

in new market opportunities for southern Ontario businesses. Eligible 

recipients include southern Ontario nonprofit organizations, such as 

innovation and commercialization organizations, and southern Ontario 

post-secondary institutions.

• Applied Research and Commercialization Initiative. The Applied 

Research and Commercialization Initiative is designed to address the 

gap between research and commercialization in southern Ontario by 

encouraging collaboration between SMEs with pre-market needs and 

post-secondary institutions with applied research expertise. The goal 

of the initiative is to accelerate innovation and to improve productivity 

and competitiveness for businesses located in southern Ontario. 

Eligible applicants include post-secondary institutions, where SMEs 

are the primary beneficiary.

Canada also sees the lack of venture capital as a challenge to the 

country’s innovation and manufacturing capabilities. To increase the 

formation and usage of venture capital and encourage innovation, the 

Canadian government proposed $400 million in venture capital funds in 

its 2012 budget. The purpose of the venture capital funding is to support 

early stage risk capital, and to support the creation of large-scale venture 

capital funds led by the private sector. 

Canada’s Trade Commissioner Service provides several key export 

support services to support manufacturers, including:

• Preparation for international markets. Trade Commissioner Service 

offices in Canada help exporting businesses determine whether they 

are internationally competitive, decide on target markets, collect 

market and industry information, and help businesses improve their 

international business strategy.

• Market intelligence and strategy. Trade Commissioner Service 

representatives help businesses determine the level of opportunity 

that exists in a particular market, appropriate approaches to the 

market and the amount of effort and resources required by providing 

up-to-date information on barriers and regulations associated with 

entering a specific region, as well as information on upcoming 

opportunities or emerging trends. Trade Commissioner Service

provides practical advice in areas such as navigating business and 

cultural practices, local representation, market entry strategies and 

participation in global value chains.

Federal Funding for Venture 

Capital

Trade

Trade Commissioner Service
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Page 53 GAO-13-365 Global Manufacturing

• Provision of qualified contact information. The Trade Commissioner 

Service provides exporters with business contacts that include 

potential buyers and partners, financial and legal professionals, 

technology sources, manufacturers, foreign regulatory authorities, and 

foreign investment promotion agencies.

• Advice to address market access challenges. The Trade 

Commissioner Service can advise on market access problems and 

other business challenges including customs clearance and shipping, 

unfair business treatment, contract bidding, storage and warehousing, 

insurance coverage and claims, and overdue accounts receivable.

According to the Trade Commissioner Service, agency staff provided 

these services to over 14,000 clients from April 2011 to March 2012. 

Trade Commissioner Service officials told us that many of the clients are 

manufacturers.

Canada also has some programs that provide a framework for skills 

training related to manufacturing. For example, Canada’s Interprovincial 

Red Seal Program, established in the 1950s, sets national standards for 

certification of excellence in 55 skilled trades, some of which are within 

the manufacturing sector. The Red Seal Program provides:

• National definition of competency. A national occupational analysis, 

developed for each Red Seal trade, identifies all the tasks performed 

in the trade and is used as a base document for the development of 

interprovincial standard examinations. The provinces and territories 

are encouraged to use the analysis for curriculum development.

• Endorsement of advanced skills. Through the program, apprentices 

who have completed their training and become certified 

journeypersons are able to obtain a Red Seal endorsement on their 

provincial or territorial Certificates of Qualification and Apprenticeship 

by successfully completing an interprovincial Red Seal examination.

The Red Seal Program is administered by the Canadian Council of 

Directors of Apprenticeship, a body composed of the Director of 

Apprenticeship from each province or territory, and representatives of 

Human Resources and Skills Development Canada, a federal agency. In 

2009, the council undertook an evaluation of the Red Seal Program, and 

determined that increased emphasis on specific, measurable, industrydefined standards and multiple forms of skills assessment would 

strengthen Canada’s apprenticeship system.

Training

Red Seal Program
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Page 54 GAO-13-365 Global Manufacturing

Canada offers the following financial support to individuals pursuing 

certification in Red Seal trades:

• Apprenticeship grants. The Apprenticeship Incentive Grant is a 

taxable grant of $1,000 per year or level, up to a maximum amount of 

$2,000 per person. It is available to registered apprentices once they 

have successfully completed their first or second year/level (or 

equivalent) of an apprenticeship program in one of the Red Seal 

trades. The Apprenticeship Completion Grant is a taxable grant of 

$2,000 for registered apprentices who complete their apprenticeship 

training and obtain their journeyperson certification in a designated 

Red Seal trade.

• Cost allowance for tools. In addition to grants to assist with 

apprenticeship completion, the Tradesperson’s Tools Deduction is a 

federal tax policy that provides employed tradespersons with an 

annual deduction of up to $501 to help cover the cost of new tools 

necessary to their trade. The deduction applies to eligible tools if the 

total cost exceeds $1,096, and the purchase was made by an 

employed tradesperson.

Germany established the Fraunhofer Institutes, a nationwide network of 

60 applied research facilities with expert research staff, in 1949 as part of 

its efforts to rebuild Germany’s research infrastructure after World War II, 

according to Fraunhofer officials. Today, each Fraunhofer institute 

specializes in a particular subject matter. The 60 institutes are divided into 

the following categories of specialization: (1) materials and components; 

(2) microelectronics; (3) information and communications technology; (4) 

production; (5) light and surfaces, and (6) life sciences. Fraunhofer 

Institutes are co-located with universities.

According to Fraunhofer officials, in 2012, the Fraunhofer network had a 

budget of $2.8 billion. Each individual Fraunhofer Institute’s funding is a 

mix of support from national and state government sources and private 

sector contracts for research.

• Applied research collaboration with the private sector on a contractual 

basis. Contracts or requests for work from private enterprises are the 

main way the institutes receive specific research tasks. For each 

Financial Support for 

Apprenticeships and Skilled 

Tradespersons

Germany

Innovation

Fraunhofer Institutes
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Page 55 GAO-13-365 Global Manufacturing

research project, enterprises that have developed a process or 

technology for potential commercialization enter into a contract for 

applied research services with the Fraunhofer Institute that has the 

appropriate subject matter expertise. All Fraunhofer Institutes 

measure their performance by the number of contracts and the 

amount of revenue generated by contracts with the private sector.

• Flexible intellectual property. In some instances, part of intellectual 

property can be retained by Fraunhofer, and in some cases, 

intellectual property can be shared by a combination of Fraunhofer, 

the university, and the company involved. The technology that was 

eventually developed into MP3 music files originated in Fraunhofer 

research, and Fraunhofer currently holds several related patents.

Germany also supports innovation through various industrial clusters 

around the country. The Spitzencluster program, the national 

government’s cluster initiative, is intended to strengthen clusters judged 

through a competitive application process to be the best clusters in the 

country. Spitzencluster competition winners are selected by an 

independent jury for demonstrating the ability to pursue strategic 

objectives in emerging industries identified in Germany’s High Tech 

Strategy 2020. Spitzencluster winners receive up to $51 million over 5 

years, and the cluster’s participating entities, including businesses and 

universities, provide the remaining operating costs in a 50-50 cost share 

arrangement. To date, 15 clusters around the country have received the 

Spitzencluster designation and are conducting research in a variety of 

areas, including the following:

• Information and communication technology. The Cool Silicon cluster 

in the region around Dresden develops components and complex 

system solutions that significantly reduce the energy consumption of 

information and communications technologies systems. The cluster 

comprises more than 100 companies and research facilities and is 

also linked with the Technical Universities of Dresden and Chemnitz. 

In the long term, the cluster aims to become one of the world’s leading 

locations for energy efficiency in electronics.

• Logistics. In addition to developing North Rhine-Westphalia’s leading 

global position in the field of logistics, the EffizienzCluster aims to 

establish itself as a center for the innovative design of high-quality 

logistics services. There are approximately 120 companies and 11 

research institutes working in the cluster. These include the 

Fraunhofer Institute for Material Flow and Logistics, the Technical 

University of Dortmund, and large and medium-sized enterprises.

• Electric car engineering. In the Electric Mobility South-West cluster, 

partners from the fields of automotive engineering, energy and supply 

Spitzencluster: Leading Edge 

Clusters Competition
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

Page 56 GAO-13-365 Global Manufacturing

engineering, information and communications technologies and 

services, as well as the cross-section field production engineering are 

working on new concepts for electric mobility. The cluster’s main 

projects include the design of battery production systems. Located in 

the Karlsruhe-Mannheim-Stuttgart-Ulm region, the cluster links 80 key 

players from industry, universities and research institutes, 

international companies, and SMEs.

Germany’s High Tech Strategy also emphasizes the importance of 

creating more innovation opportunities for SMEs. Germany has 

established several programs recently to encourage SME innovation. 

These programs include the Central Innovation Program for SMEs, which 

connects SMEs directly with technical advisors; the HighTech 

Grunderfonds program, which provides venture capital; and the Signo 

program, which provides assistance in filing for patent rights.

• Technical advisory services. The Central Innovation Program for 

SMEs is the German government’s largest program that supports 

innovation in SMEs by reducing the technological and economic risks 

of R&D projects. The program includes 100 technical advisors that 

help SMEs with eligible projects submit grant applications. Eligible 

projects are proposals for new products or processes that show high 

potential for commercialization, and contain technical risk. SMEs are 

matched with public or private nonprofit research institutions to 

conduct necessary research and development to explore possible 

ways to develop the new product. Initiated in 2009 and currently 

planned to continue through 2014, the program has an annual budget 

of $643 million and gives out about 4,000-5,000 project grants every 

year. Each grant covers 50 percent of the project costs, with the SME 

supplying the remaining 50 percent. At the close of each grant period, 

SMEs submit a report that details successes, challenges, and lessons 

learned in the process of attempting to develop the new product.

• Venture capital funding. The HighTech Grunderfonds program is a 

public-private venture capital fund that uses its annual budget of $411 

million to provide support in amounts up to $643,000 to innovative 

start-up companies.

• Assistance with filing for patent rights. Signo provides federal 

assistance to SMEs in securing intellectual property for innovative 

products. The program provides support to SMEs in completing 

national and international patent applications. In 2012, the Signo 

program had a budget of $22 million.

SME Innovation Support 

Programs
Appendix III: Examples of Government 

Programs that Support Manufacturing in 

Canada, Germany, Japan, and South Korea

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Germany’s Association of Chambers of Commerce and Industry manages 

the country’s largest export promotion effort. The national association 

brings together a network of 80 local chambers of commerce, which 

represent the interest of all commercial enterprises, with a focus on small 

businesses.3

• Selectively establishing partnerships abroad. To establish partnership 

offices in foreign countries, the Association of Chambers of 

Commerce and Industry works through Chambers of Commerce 

abroad and meets with relevant stakeholders to determine whether 

German companies have sufficient interest in establishing an office. 

Currently, there are German chambers of commerce in 85 countries 

around the world. Annually, the Association of Chambers of 

Commerce and Industry has a budget of $219 million to manage the 

network of local chambers of commerce in Germany, as well as the 

partnership offices worldwide.

The Association of Chambers of Commerce and Industry 

and its funding agency, the Ministry of Economics and Technology, foster 

export activities in two main ways:

• Providing assistance for trade fair attendance and participation in 

trade delegations. According to German officials, The Ministry of 

Economics and Technology provides funding for businesses to 

participate in trade fairs around the world. The program supports 

SMEs in particular, but larger companies are not excluded from the 

program. Annually, assistance is provided for participation in over 200 

trade events. The trade fair program has an annual budget of $54 

million.

Germany’s apprenticeship system—also referred to as the dual training 

system—provides post-secondary vocational education and training for 

students who wish to learn a skilled trade, and has several major 

features:

• Combined on-the-job training and classroom instruction, according to 

nationally defined standards. The program requires a combination of 

 3 According to German officials, all businesses in Germany are required to belong to their 

local chamber of commerce.

Trade

Association of Chambers of 

Commerce and Industry

Training

Dual Training System
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on-the-job-training and classroom instruction leading to certification in 

any of Germany’s 350 nationally recognized occupations. At the 

national level, industry associations and government officials 

negotiate the standards for certification as skilled in each occupation. 

At the state level, classroom instruction is formulated for each 

occupation.

4

• Nationally recognized credential. As a result of the coordination at the 

national and state levels, the credentials obtained through the 

apprenticeship program are recognized by businesses and 

jurisdictions across the country.

Through the Federal Institute for Vocational Education 

and Training, the national government coordinates with industry 

groups to obtain input on the types of skills and training necessary, 

and then structures apprenticeships to meet those needs. According 

to German officials, this coordination was established by the 

Vocational Education Reform Act of 1969 (as amended in 2005). The 

executive board of the Federal Institute for Vocational Education and 

Training includes representatives from German unions, employers’ 

associations, federal agencies, and state governments.

• Public-private cost sharing. Employers pay apprentices a contractually 

agreed-upon stipend, with national unions and employer associations 

agreeing on the base apprentice wage in each occupation. According 

to officials from the Federal Institute for Vocational Education and 

Training. German businesses spent about $31 billion on 

apprenticeship programs in 2010.

According to Ministry of Economy, Trade, and Industry officials, the initial 

impetus for the Next Generation Vehicle (NGV) Program—a component 

of its Green Growth strategy—was to reduce carbon dioxide emissions 

and high energy prices.5

 4 According to German officials, in Germany, education policy is the responsibility of the 

states.

More recently, the 2011 Fukushima disaster has 

5 The Ministry of Economy, Trade, and Industry and the Agency for Natural Resources 

and Energy are the main government agencies that administer this program. NGVs 

include hybrid vehicles, electric vehicles, plug-in hybrid vehicles, fuel-cell vehicles, clean 

diesel vehicles, and compressed natural gas vehicles. 

Japan

Innovation

Next Generation Vehicle 

Program
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focused attention on the need to reduce reliance on nuclear energy 

without increasing imports of petroleum or natural gas.

Under the NGV program, private firms will manufacture the vehicles, but 

the Japanese national government plays the following roles:

• Setting targets for alternative-fuel vehicle diffusion. The program sets 

a target for NGVs to comprise between 20 and 50 percent of 

passenger car sales by 2020, and between 50 and 70 percent by 

2030. The program also sets a target of 2 million normal chargers and 

5,000 quick chargers by 2020.6

• Providing subsidies to encourage purchase of NGVs. The national 

government covered half of the price gap between the cost of an 

electric vehicle and that of a gasoline model, up to approximately USD 

$12,500 since 2009 for electric vehicles, plug-in hybrid vehicles, and 

clean diesel vehicles. It also provided a temporary tax reduction of 

between 50 and 75 percent on acquisition tax and tonnage tax. The 

national government also subsidizes half the price of installation for 

the charging stations.

• Establishing international standards for battery performance and 

charging systems.

7

Japan’s national government works with regional and local governments, 

universities, and/ or the private sectors in the following areas:

Japan’s government is actively seeking to 

influence the setting of international technological standards, among 

competing models, for various components of the NGV, including 

battery performance and chargers.

• Conducting R&D for battery technology. The national government 

collaborates with universities on related basic R&D, such as a 

 6 A normal charger is built into each electric vehicle and requires eight hours overnight to 

recharge a battery at home. Quick chargers can charge electric vehicles up to 80 percent 

charge in 30 minutes. These chargers are for public use and serve as a safety net, for 

example, if a driver is running low on battery power or if the driver is traveling a long way. 

7 International standards are generally developed through a process that is open to 

participation by representatives of interested countries, transparent, consensus-based, 

and subject to due process, according to NIST. NIST defines a standard as a document 

that contains technical specifications or other precise criteria to be used consistently as a 

rule, guideline, or definition of characteristics, to ensure that materials, products, 

processes, personnel or services are competent and/or fit for their intended purpose(s). 

According to the Japanese Industrial Standards Committee, standards specify size, 

material, quality, and performance of products, among other things.
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mechanism to analyze chemical response of batteries. However, for 

development of technology that will be commercially available in the 

near future, such as research on battery performance, the national 

government shares up to two-thirds of the cost with the private sector.

• Supporting related infrastructure. As part of its Green Growth 

Strategy, the private sector and local governments play a role in 

installation and operation of quick chargers. For example, car dealers 

offer memberships for quick chargers, and some local municipalities 

install quick chargers in their buildings and allow free use. According 

to Japanese national government officials, their role may include (1) 

developing the infrastructure for these chargers by contracting a 

private sector operator to form a network of charging stations; (2) 

developing a mechanism to charge users; (3) creating continuity in 

charger fees; and (4) ensuring payback to those providing these 

charger stations to accommodate the mix of actors and business 

models –some charging stations are free, others involve fees—and to 

ensure that charging stations are located in critical areas, such as 

along popular routes to rural/ resort areas.

According to Japanese national government officials, they plan to 

dedicate about 80 percent of the fiscal year 2012 budget to the subsidies 

that cover half of the price gap between the cost of an electric vehicle and 

that of a gasoline model and for charger installation. The remainder will 

fund the development of advanced batteries.

The New Energy and Industrial Technology Development Organization 

(NEDO) is Japan’s largest public agency that promotes R&D.8

 8 According to NEDO officials, NEDO was reorganized in 2003 as an “incorporated 

administrative agency” under the Ministry of Economy, Trade and Industry, which sets its 

overall objectives. NEDO officials said that NEDO independently draws up plans to 

achieve the objectives and carry out its activities. NEDO is required to achieve meaningful 

program results and have them evaluated by external experts. Results are then reflected 

in management plans for subsequent years. NEDO is also required to publish its 

objectives, operation plans, and evaluation results and make them available to the general 

public, according to NEDO officials. 

It aims to 

promote the development and introduction of new technologies. Its 

programs and projects include: (1) promotion of research and 

development of energy, environmental and industrial technologies; (2) 

development, demonstration and introduction of promising technologies 

that private sector enterprises cannot transfer to the practical application 

stage by themselves due to the high risk and long development period 

New Energy and Industrial 

Technology Development 

Organization
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required; and (3) project management to assist in carrying out private 

sector projects.9

NEDO typically follows R&D priorities set by Japan’s national 

government, but it also works with industry and universities to identify 

current trends and needs. It selects participants for its projects through a 

public solicitation process. Typically, NEDO connects university 

researchers and industry to collaborate on joint research. It may divide a 

project into different parts and assign responsibility for each part to a 

consortium of companies and/or universities. Research is conducted by 

the companies or universities, and project participants retain intellectual 

property, such as patents, resulting from their research.10

NEDO facilitates commercialization by coordinating research undertaken 

by the government and researchers and connecting relevant entities with 

potential users, according to officials.

After a project 

is complete and technologies are developed, project participants are 

mainly responsible for commercialization.

11

 9 According to NEDO documents, NEDO is also responsible for acquisition of emission 

reduction credits through the Kyoto Protocol, which involves coordinating and promoting 

various projects to fulfill Japan’s Kyoto Protocol obligation (6 percent greenhouse gas 

reduction compared to FY1990), among other things. According to NEDO officials, the 

Japanese government has not set an annual target or specific date to fulfill its greenhouse 

gas emission reduction under the first commitment period of the Kyoto Protocol.

NEDO, among others, is working 

to create a stronger link between R&D spending and profits. According to 

NEDO officials, its economic analysis illustrates a positive return on 

investment. For example, according to NEDO officials, annual product 

sales resulting from 50 outstanding projects have resulted in a return of 

seven times the initial investment. However, according to NEDO officials, 

they face challenges measuring concrete returns to taxpayers and in 

isolating NEDO’s contribution. Therefore, they cannot claim that these 

returns are the direct result of their efforts.

10 NEDO is public management agency; it does not have any research facilities of its own. 

11 According to Japanese government documents, efforts to integrate R&D across 

ministries and agencies with extensive collaboration between industry, academia and the 

government are part of Japan’s national comprehensive strategy. NEDO has overseas 

offices in Beijing, Bangkok, New Delhi, Paris, Washington, D.C., and Silicon Valley. NEDO 

officials told us that these offices exist largely to conduct research on trends in other 

countries and to create partnership opportunities with foreign research institutes as well as 

to maintain and advance Japan’s position as a global leader. 
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In fiscal year 2012, approximately 90 percent of NEDO’s funding was 

used to develop technology for national R&D projects, including new 

manufacturing technology, new energy, nanotechnology, and materials, 

among others, according to NEDO officials. Less than 3 percent was 

used to fund commercialization and practical application activities, 

including technology innovation for small businesses. Other funding went 

to financial support for young researchers and activities related to the 

Kyoto Protocol Mechanisms. According to NEDO officials, NEDO typically 

provides funding of up to $12.5 million for 5-year projects.

The Technology Advanced Metropolitan Area (TAMA) Association is a 

regional cluster that supports local manufacturers by matching them with 

national, regional, and local interests to improve R&D and 

commercialization of technology and products. It is one of 18 clusters in 

METI’s Industrial Cluster Project, which aims to strengthen over 10,000 

regional SMEs and promote industrial clusters throughout Japan. The 

TAMA Association is a membership organization with approximately 300 

manufacturing companies that focus on advanced technological and 

design capabilities or process technologies. In addition, it includes 

approximately 300 organizations and individuals that support innovations, 

including universities, financial institutions, local governments, and 

industry groups.12

• Creation of networks between large and SME manufacturers. The 

TAMA Association produces a technical report that includes 

summaries of technology for each member company to help connect 

SMEs to larger manufacturers seeking the technology in which it 

specializes. After viewing the report, the large manufacturers contact 

the SMEs to improve existing R&D or produce product samples. 

According to one TAMA Association official, 170 SMEs have been 

hired for projects by large companies as a result of these activities in 

2011. 

The TAMA Association provides its members with 

assistance services in the following areas, among others:

• Promotion of cooperation in R&D between manufacturers and 

universities. The association supports R&D to promote cooperation 

between manufacturers and universities. For example, a manufacturer 

in need of a particular type of R&D would hire the TAMA Association 

to connect the company to university researchers conducting R&D in 

 12 According to TAMA Association officials, it is Japan’s first cluster that includes financial 

institutions.

Technology Advanced 

Metropolitan Area Association
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that field. The TAMA Association also develops a network between 

SMEs, financial institutions, and research institutions to help a 

company develop a product or technology.

• Support for creation of new businesses and technologies. The TAMA 

Association relies on a network of about 150 experts, including 

consulting engineers and SME specialists, who support the creation of 

new businesses and development of new technologies by 

manufacturing companies. The TAMA Association helps SMEs apply 

for national government grants, and it works with financial institutions 

to provide funding for SME projects, according to a TAMA Association 

official. In addition, the association provides support to manufacturers 

that aim to enter a new field of business or commercialize 

technologies, including assistance with formulating business plans 

and acquiring business partners.

• Development of marketing channels and overseas operations. The 

TAMA Association works with experts to cultivate new markets for the 

region’s technologies—in part through its overseas branches in South 

Korea, China, and Taiwan and its affiliates in Germany, Italy, 

Singapore, and the United States—to develop a network and products 

that assist manufacturers with formulating marketing strategies. In 

addition, TAMA works with SMEs to acquire patents for their 

technologies and advise companies on how to protect their intellectual 

property rights. According to a TAMA Association official, the 

organization has successfully assisted with 500 cases to 

commercialize products within the past 15 years.

• Securing and fostering human resources. Among other professional 

development projects, the TAMA Association accepts personnel to 

help other organizations learn how to better support local businesses. 

For example, local government or private sector officials may work for 

the TAMA Association for a 2-year period.

Japan’s Public Industrial Technology Research Institutes, or Kohsetsushi 

Centers, provide Japanese SME manufacturers with a range of services 

including technology guidance; technical assistance and training; 

networking; testing, analysis, and instrumentation; and access to open 

laboratories and test beds. They typically offer technical consultation 

services free of charge. Kohsetsushi Centers support Japanese SME 

manufacturers in adopting emerging technologies, including 

nanotechnology and robotics, among others. According to one 

Kohsetsushi official, all centers are geared toward supporting local 

industry; they do not specialize in particular industries. The Kohsetsushi 

Centers are generally funded and managed by local prefectures but are 

operated under the guidance of the Ministry of Economy, Trade, and 

Kohsetsushi Centers/ Tokyo 

Metropolitan Industrial 

Technology Research Institute
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Industry. There are more than 180 centers throughout Japan—at least 

one in each of Japan’s 47 prefectures—and more than 6,000 staff.

The Tokyo Metropolitan Industrial Technology Research Institute (TIRI) is 

one of the three largest Kohsetsushi centers in Japan. With a staff of 

about 275, it serves about a quarter of Tokyo’s 40,000 manufacturers 

across three locations, primarily by providing services and information to 

SMEs, according to one TIRI official. TIRI serves not only SME 

manufacturers but SMEs in other industries, as well. In addition, larger 

enterprises may use TIRI’s services, but they pay more for some services 

than SMEs. It is funded primarily by the Tokyo prefectural government, 

but 5 percent of its funding comes from the national government and 

another 8 percent from user fees.

TIRI’s main support services include the following:

• Technical assistance. TIRI offers technical assistance including 

consultations and testing services and certifies test results. TIRI 

consultants provide advice and answer inquiries about technical 

problems free of charge by telephone or in person. In addition, TIRI 

tests products and parts to ensure they conform to industrial 

standards and provides non-standard testing upon request. TIRI 

conducts approximately 100,000 tests each year and has over 40 

pieces of testing equipment for tests including temperature, acoustics, 

electromagnetism, humidity, voltage, vibration, impact, corrosion, and 

noise tolerance. For example, one TIRI official told us that a vacuum 

cleaner manufacturer might use the acoustic testing room to measure 

the decibel level of its products, and electronics manufacturers might 

test the ability of their products to withstand an electromagnetic shock 

(see Figure 4). According to one TIRI official, TIRI typically charges a 

nominal fee for testing services, but not for consultation. It also 

performs customized measuring and analysis services according to 

customer needs.
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Figure 6: TIRI voltage testing room

• Product development. TIRI supports product development through 

rental laboratory space available 24 hours a day, experimental 

facilities and environmental testing equipment for shared use, and 

customer development support. TIRI also supports commercialization 

by supporting planning and design—such as branding for SME 

products—and prototyping of products using 3D printing technology.

• R&D. TIRI supports R&D, including basic, joint, and commissioned 

research. TIRI plans and implements basic research independently to 

develop new technology or to solve various challenges that SMEs 

face. The center also conducts joint research with SMEs for product 

and technology development. For example, small manufacturers often 

send one or two of their staff members to work on Kohsetsushi Center 

projects. This provides opportunities for company research personnel 

to gain research experience, develop new technical skills, and transfer 

technology back to their firms. TIRI also conducts commissioned 

research for which it receives external grants from the national 

government and other organizations. According to a TIRI official, the 
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center primarily follows the R&D priorities and policies set by the 

prefecture and TIRI, but universities and companies also contribute to 

that agenda. About 24 percent of TIRI’s research is basic, 62 percent 

is commissioned, and 14 percent is joint.

• Technical training. TIRI has classrooms for seminars on product 

design and courses, for which students pay a fee, on new technology, 

industry trends, and internationalization. For example, officials 

showed us door knobs for home use that they helped one SME 

design. It offered this particular client assistance on usability, 

suggesting that they tilt the knob head to make opening the door 

easier. It also develops curricula and holds seminars to respond to 

needs from individual businesses or particular industry groups.

• Collaboration between industry and academic researchers. TIRI offers 

various services for connecting industry, academia, and public 

institutes. For example, it has instituted the Tokyo Innovation Hub to 

facilitate networking among SMEs and to promote cooperation 

between SMEs, universities, and research institutions. It also supports 

activities to encourage collaboration among more than 20 

associations through its Cross-industrial Association.

• Technology management. TIRI offers support for technology 

management, including seminars and on-site technical support to 

assist with strategic development and technology management 

techniques. It supports the development of new products that utilize 

TIRI patents.13

TIRI tracks 12 organizational targets to measure its performance, 

including the number of patents acquired by TIRI and its partners, the 

number of products commercialized, and the number of licenses granted. 

Furthermore, it conducts a satisfaction survey of users each year. 

According to TIRI officials, these surveys illustrate that the center has 

successfully provided customer service but they face challenges with 

R&D output. However, they said that, generally speaking, their testing 

services have been highly appreciated by customers.

It also provides information to SMEs related to 

international standards compliance for clients who export products or 

enter into foreign markets.

 13 TIRI can acquire intellectual property rights along with SMEs through joint research, 

and licensing TIRI’s patents is a source of revenue for the organization. 
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Along with two other centers in South Korea, the Daedeok Innopolis 

(Daedeok) is an innovation cluster that consists of universities, research 

institutes, government and government-invested institutions, corporate 

research institutes, and venture corporations. It receives funding from the 

national government—the Ministry of Trade, Industry, and Energy —but 

also generates revenue from private sector users. Focused on 

commercializing technology, Daedeok is the only science park in South 

Korea, according to officials.14 It has five separate zones, each with its 

own specialized field, including a research complex, and other research 

institutes; an area for hi-tech firms; and an area for traditional 

manufacturing industries.15

The Daejeon Technopark (Daejeon) focuses on the business aspects of a 

research institute, including growing existing SMEs and supporting R&D 

in the information technology, nanotechnology, robotics, and 

mechatronics industries. It was established in coordination with Daejeon 

city and the national government as an outgrowth of the Daedeok 

Innopolis, and it came into existence when it was designated as a special 

R&D zone.

Various entities located within Daedeok have 

developed technologies that have been popular in the marketplace,

including 4th generation (4G) mobile technology, and according to 

officials, the lithium ion battery, and a nuclear research reactor that put 

South Korea at the forefront of these technologies.

16

 14 The other two centers in the foundation, Gwangju Innopolis and Daegu Innopolis, 

primarily focus on the optics and the information technology industries, respectively.

While Daedeok focuses on technologies with great 

commercial potential, the Technopark focuses on smaller scale 

companies and more routine assistance, such as marketing, according to 

Daedeok officials.

15 Daejeon City–where both entities are located–was selected as the site for an 

International Science Business Belt in 2011, a government-sponsored project to foster 

basic science and potentially generate a South Korean Nobel Laureate. The project will 

involve a science research institute with 50 research groups and 3,000 employees. 

16 Daejeon is one of 18 technoparks across the country. There is at least one technopark 

in each of South Korea’s 16 provinces, each taking on characteristics of the region. 

South Korea

Innovation

Daedeok Innopolis and 

Daejeon Technopark
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Daedeok and Daejeon both provide support in the following areas for 

businesses that use their services:

• Commercialization. Daedeok networks with other regions and support 

organizations to promote its research results. Daejeon functions as a 

network hub between industry, academia, research institutes, and 

local government. For example, they connect SMEs to researchers or 

universities working on related research and provide SMEs access to 

technology.

• Intellectual property rights protection. Daejeon has a center dedicated 

to intellectual property through which they conduct research on 

existing technologies and trend analysis, support domestic and 

international applications, train companies on intellectual property 

protection, and support intellectual property planning for Daejeon City, 

among other things. Daedeok manages unused patents and 

evaluates new technology to match technology suppliers to potential 

customers.

• Technology sharing. For a fee, Daedeok provides facilities for various 

types of testing on product prototypes, such as electrical, 

temperature, or acoustic. Daejeon provides companies access to 

technology along with business expertise for consultation for SMEs. 

For example, during our visit, we observed testing of an electronic 

collection system (the technology used in “EZ Pass”-type cards) to 

see how it would perform under various speeds.

• Training. Daejeon provides a variety of training services for 

companies, both for new employees and continuing education on 

cutting-edge technology. Daedeok also provides training for start-up 

SMEs.

In addition to these services, Daedeok assists SMEs through grants and 

one-on-one consulting services, such as matching technology suppliers 

and customers, providing design services, and evaluating new 

technologies. Daedeok’s R&D expenditures comprise 15 percent of the 

country’s total R&D expenditures, according to officials. It houses 30 

research institutes, 5 universities, and approximately 1,000 companies 

(mostly SMEs). The area is responsible for developing approximately 

40,000 patents. For government-designed projects at Daejeon, the 

private sector typically shares 20 percent of the costs, according to 

Daejeon officials. Currently, there are about 2,000 high-tech firms, 

according to Daejeon officials.

One official noted that an assessment of Daejeon’s equipment centers 

revealed that provide access to SMEs revealed that these centers are 

only being used at 40 percent of their capacity. The official said that the 
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Canada, Germany, Japan, and South Korea

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usage rate is not an area for concern because these centers are relatively 

new. The official also emphasized that the center responds to the 

expressed need from over 250 area companies. In addition, the official 

noted that with a new president taking office, Daejeon could face 

challenges if policy changes occur, but the official opined that policy 

changes are likely to be minor.17

The Electronics and Telecommunications Research Institute (ETRI) is a 

global information technology research institute that works with the 

national South Korean government, the private sector, and universities to 

develop risky technology that the private sector is not willing to develop. It 

is the largest government-funded research institute in South Korea. ETRI, 

whose headquarters is located within the Daedeok Innopolis, collaborates 

with various institutes around Daedeok, such as research institutes 

focused on chemicals, energy, and satellites. It also conducts some joint 

projects with foreign universities, including some in the United States, and 

the private sector. These projects include research, technology transfer, 

research and business development, and training for foreign countries in 

areas such as information and communications technology.

ETRI is one of approximately 25 research institutes located within the 

Ministry of Science, ICT, and Future Planning. In calendar year 2012, the 

institute planned to spend almost 80 percent of its budget on government 

commissioned projects.18

ETRI is responsible for developing core information technology 

inventions, including 4th generation mobile technology, specialized 

handheld televisions, and a cancer diagnosis bio-chip for home use. The 

typical length for each project is between 3 and 5 years. ETRI measures 

success by the number of patent applications, amount of royalty income, 

number of international/domestic standards contributions, and the number 

of publications in science journals, according to one ETRI official. In 2012 

and 2013, ETRI was ranked number one with the highest patent activity 

ETRI conducts more than 500 projects each 

year and employs approximately 2,000 people, the majority of whom are 

engineers.

 17 South Korea elected a new President who took office in February 2013, after our 

meeting with Daejeon officials.

18 They also planned to fund government investments, royalties, and privately 

commissioned projects for companies such as Samsung and LG.

Electronics and 

Telecommunications Research 

Institute
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by an intellectual property trade journal, which cited approximately 540 

patents in 2012 and approximately 700 patents in 2013.19 The trade 

journal measures overall strength of patent portfolio holdings based on a 

combination of quality and quantity indicators, such as patents issued and 

science and research strength.20

The Korea Trade-Investment Promotion Agency (KOTRA) is the national 

implementing agency for Korea’s trade and investment goals and policies 

set by the Ministry of Trade, Industry & Energy. It facilitates South Korea’s 

economic development through various trade promotion activities, such 

as overseas market surveys and business matchmaking. It operates 

programs in:

• Intellectual property rights protection. KOTRA provides information 

about intellectual property right laws to firms that operate outside of 

South Korea.

• Overseas marketing. KOTRA develops and updates marketing 

strategies for South Korean products by the region and industry, and 

provides support to firms for their participation in exhibitions hosted 

overseas. KOTRA has also developed a “KOTRA global brand” 

program to support brand value to promote confidence in South 

Korean products that may be less familiar in overseas markets. 

KOTRA also hosts a global trade show to promote South Korea’s 

major export products.

• SME support. KOTRA has more than 100 Korea Business Centers in 

approximately 80 countries that function as incubation centers. 

KOTRA also connects SME exporters to logistics companies—

companies that help manage the flow of resources—in more than 20 

major cities and regions worldwide to lower logistics costs for more 

than 2,000 South Korean SMEs.

 19 “IPIQ Innovation Anchor Scorecard (TM), Korea’s Electronics & Telecommunications 

Research Institute Leads the Initial Ranking,” Intellectual Property Today, 2012; and “IPIQ 

Innovation Anchor Scorecard (TM), Korea’s Electronics & Telecommunications Research 

Institute #1 Again,” Intellectual Property Today, 2013.

20 Firms are measured against one another. Each firm’s portfolio is measured on its 

technical strength, patents issued, science and research strength, and the speed at which 

technology become patent assets.

Trade

Korea Trade-Investment 

Promotion Agency
Appendix IV: GAO Contacts and Staff 

Acknowledgments

Page 71 GAO-13-365 Global Manufacturing

Andrew Sherrill, (202) 512-7215 or sherrilla@gao.gov.

Lawrance L. Evans, Jr., (202) 512-4802 or evansl@gao.gov.

In addition to the contact named above, Laura Heald (Assistant Director), 

Kim Frankena (Assistant Director), Jaime Allentuck, Mark Glickman, and 

Cristina Ruggiero made key contributions to this report. In addition, key 

support was provided by James Bennett, David Chrisinger, Adam 

Cowles, Alexander Galuten, Jose A. Gomez, Ernie Jackson, John Lack, 

Kathy Leslie, Ashley McCall, Jean McSween, and Susan Offutt.

Appendix IV: GAO Contacts and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 72 GAO-13-365 Global Manufacturing

Export Promotion: Better Information Needed about Federal Resources. 

GAO-13-644. Washington, D.C.: July 17, 2013.

Export Promotion: Small Business Administration Needs to Improve 

Collaboration to Implement Its Expanded Role. GAO-13-217. 

Washington, D.C.: January 30, 2013.

Science, Technology, Engineering, and Mathematics Education: Strategic 

Planning Needed to Better Manage Overlapping Programs across 

Multiple Agencies. GAO-12-108. Washington, D.C.: January 20, 2012.

National Export Initiative: U.S. and Foreign Commercial Service Should 

Improve Performance and Resource Allocation Management. 

GAO-11-909. Washington, D.C.: September 29, 2011.

Small Business Innovation Research: SBA Should Work with Agencies to 

Improve the Data Available for Program Evaluation. GAO-11-698. 

Washington, D.C.: August 15, 2011.

Department of Commerce: Office of Manufacturing and Services Could 

Better Measure and Communicate Its Contributions to Trade Policy. 

GAO-11-583. Washington, D.C.: June 7, 2011.

Factors for Evaluating the Cost Share of Manufacturing Extension 

Partnership Program to Assist Small and Medium-Sized Manufacturers. 

GAO-11-437R. Washington, D.C.: April 4, 2011.

America COMPETES Act: It Is Too Early to Evaluate Program’s LongTerm Effectiveness, but Agencies Could Improve Reporting of High-Risk, 

High-Reward Research Priorities. GAO-11-127R. Washington, D.C.: 

October 7, 2010.

America COMPETES Act: NIST Applied Some Safeguards in Obtaining 

Expert Services, but Additional Direction from Congress Is Needed. 

GAO-09-789. Washington, D.C.: August 7, 2009.

Export Promotion: Increases in Commercial Service Workforce Should Be 

Better Planned. GAO-10-874. Washington, D.C.: August 31, 2010.

Best Practices: DOD Can Achieve Better Outcomes by Standardizing the 

Way Manufacturing Risks Are Managed. GAO-10-439. Washington, D.C.: 

April 22, 2010.

Related GAO Products
Related GAO Products

Page 73 GAO-13-365 Global Manufacturing

International Trade: Observations on U.S. and Foreign Countries’ Export 

Promotion Activities. GAO-10-310T. Washington, D.C.: December 9, 

2009.

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