The Next Great Emerging Market?

Capitalizing on North America's Four Interlocking Revolutions

We live in a period of considerable uncertainty about the global economy. China’s growth is slowing. Japan—despite some promising signs due to “Abenomics”—and most of the Eurozone could epitomize the “new mediocre” of which IMF Managing Director Christine Lagarde has warned. India, perhaps on the threshold of the “Modi Moment,” has yet to develop convincing momentum. And Brazil is sliding into recession. There is, in short, much about which to be pessimistic.

While these traditional sources of global growth are slowing, the North American economy remains solid—and is even poised to accelerate. Some of our continent’s strength is due to structural advantages, such as U.S. entrepreneurship and labor-market flexibility, the soundness of the Canadian banking system, and the competitiveness of the Mexican manufacturing sector. But the lion’s share of renewed growth springs from dynamism in four key sectors:  energy, manufacturing, the life sciences, and information technology.

Unleashed, these sectors amount to four interlocking revolutions that could make North America the next great emerging market. The rapid pace of technological innovation is setting the stage for new, even unimaginable opportunities—though, to be sure, they are by no means assured. Policy choices will, in many cases, determine whether we capitalize fully on the opportunities at hand.

In brief, this report argues that:

• Technology-fueled innovation in energy production, advanced and digital manufacturing, the life sciences, and IT will drive substantial economic growth in North America.
• These technology transformations are synergistic. The technology that enabled the exploration and drilling advances that have enabled vastly increased U.S. and Canadian energy production are not only increasing the continent’s energy independence but enabling a resurgence in manufacturing, where advanced robotics and 3D printing are raising engineering standards and lowering costs. Technological advances are also the keys to development of new wonder drugs and personalized medicine, as well as to a host of breakthroughs in agriculture and food production. Meanwhile, expanding applications for IT, cloud computing, and big data portend the emergence of the “Industrial Internet” and the “Health Care Internet.”
• Unrecognized by most, the United States is the leader in each one of these four technological revolutions.
• Thanks to strong political and economic relationships, this leadership gives substantial advantages to the North American economy. By further integrating their markets, Canada, the U.S., and Mexico can ensure that they sustain them.
• American policymakers and legislators can do much to make the most of these trends, many of which today are tacking against policy headwinds. Government funding for basic and applied research, for example, has fallen substantially. Likewise, high corporate tax rates and a low quantity of H1B visas directly undercut the competitiveness of U.S. firms. By improving our long-term fiscal outlook, sustaining high quality human capital, ramping up and better integrating the North American energy market, and improving the country’s infrastructure, Congress and the White House can help promote these revolutions and seize the opportunities they present.

This paper will examine these issues in the four sections that follow. First, it will provide a brief overview of the economic situations in China, Europe, Japan, India, and Brazil. Second, it will discuss the comparative economic strengths of the North American economies. Third, it will explain the role that developments in the four key sectors have played in establishing North American competitive advantages. And, fourth, it will provide a series of recommendations for U.S. government action to capitalize on these advantages.

The complete report is downloadable below.