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Are Legacy MDCP Projects Still Relevant Today?

As noted on the project workload page, several MDCP projects continue despite there being no competitions for new MDCP awards in fiscal 2017 or 2018. Prior to 2017, the only previous year without an MDCP competition was 2006. Work on projects supported through awards made prior to fiscal 2006, so called "legacy" projects, continued. Like that time, work on legacy MDCP projects today continues despite the lack of new awards. In fact, the number of active legacy projects in fiscal 2017, 2018, and 2019 is greater than the number of legacy projects active in fiscal 2006, 2007, and 2008. Through cooperative agreements signed in 2016 or before, ITA is bound to continue to support 20 legacy MDCP projects through fiscal 2018 and at least 13 through fiscal 2019. In view of this ongoing ITA commitment to legacy projects, it makes sense to address head-on some questions that are relevant to MDCP projects.

• Is MDCP a form of corporate welfare?
• Aren't grants a waste of tax dollars?
• Is an MDCP award a grant?
• Why focus on barriers to U.S. exports when imports are unfairly traded?
• Do MDCP projects promote the off-shoring of U.S. jobs?
• What do bureaucrats know that entrepreneurs do not?
• If people are free to trade, they will trade. Is government assistance needed?
• Why invest in projects that open international markets to U.S. exports? Is no entrepreneur willing to provide the capital?
• Why do MDCP projects tend to be industry-specific?
• Why does ITA follow industry's lead with MDCP projects?
• MDCP is like DARPA?

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Is MDCP a form of corporate welfare?
No. MDCP awards are made to non-profit industry groups. Moreoever:

Individual firms are not eligible to receive MDCP awards. Projects are designed to benefit all firms in an industry.

The vast majority of firms in an industry, whether they are members of industry groups or not, are small- and medium-sized enterprises (SMEs). ITA's evaluation criteria for MDCP proposals ensure that projects that mostly help SMEs are those that are selected for MDCP support.

The membership of most associations and other industry groups tend to be SMEs anyway. It is natural for them to focus their efforts on projects that benefit as many SMEs as possible.

ITA seed money for a project in the form of an MDCP award never exceeds 1/3 of total project cost. In practice, the average MDCP award share for all projects is even less, 27%.

MDCP awards are made through a transparent, competitive process. No lobbying is involved.

Aren't grants a waste of tax dollars?
Cost-effective and free from waste, MDCP has been a useful tool to make U.S. industry more competitive in international markets:

On average, every dollar of MDCP award generates $357 in exports.

As cooperative agreements not grants, MDCP projects require ITA collaboration. Working shoulder-to-shoulder allows ITA to “look over the shoulder” of MDCP award recipients (cooperators) to ensure that funds are spent so as to achieve project objectives.

ITA insists on performance. Of 146 awards totaling $40 m made since 1993, ITA terminated 7, totaling $2 m and de-obligated the $1.5 m unspent balance for re-purposing by the U.S. Treasury.

ITA oversight minimizes spending on unproductive projects. Over 25 years of MDCP project activity, only one (1) percent of the total award funds spent has gone for projects that were not completed. In the rare case that a cooperator appears to be unable to achieve project objectives, ITA terminates the project so the U.S. Treasury can spend the funds elsewhere.

Is an MDCP award a grant?
No. MDCP awards are not grants, but rather cooperative agreements. Like a grant, a cooperative agreement includes financial assistance for the recipient organization. But unlike a grant, the recipient or "cooperator" does not undertake its project alone. A team of ITA professionals, and if needed, experts from other federal agencies, assist.

Why focus on barriers or promote U.S. exports when imports are unfairly traded?
Since 2017, ITA has stepped up its investigations of imports alleged to be traded unfairly. Resort to existing remedies for import relief by business groups is also up. Imports constitute one part of the trade deficit calculation. However:

• Exports are the other half of the equation. Countries that run trade surpluses, like Germany for example, could not do so without increasing and maintaining exports.
• MDCP experience shows that removal of trade barriers coupled with export promotion can dramatically grow trade surpluses.

Do MDCP projects promote the off-shoring of U.S. jobs?
No.

• Only projects that create or sustain U.S. jobs are MDCP-eligible.
• MDCP projects primarily help small U.S. firms that are likely to stay in business in the United States as they get more export orders.

What do bureaucrats know that entrepreneurs do not?
Each MDCP competition is proof that ITA does not presume to know more than entrepreneurs.

• Industry, not government, initiates and leads each project. Through MDCP cooperative agreements (not grants) ITA helps industry to overcome obstacles.
• MDCP awards encourage competition and innovation. Consider the example of a cooperator leveraging an MDCP project to help its member companies to create new export-only products.

If people are free to trade, they will trade. Is government assistance needed?
The existance of trade barriers demonstrates that people are not always free to trade.

• Most barriers to trade stem from policies of foreign governments. Resolution often comes only after government-to-government engagement. Many industry groups have leveraged MDCP cooperative agreements to engage federal officials with their foreign government counterparts long-term to resolve issues.
• Even when no market access barriers are evident, U.S. firms have less natural incentive to trade than competitors in every other market because the U.S. market is the largest in the world and one of the most open.

Why invest in projects that open international markets to U.S. exports? Is no entrepreneur willing to provide the capital?
In fact, shareholders and others are generally more willing to put up capital so large corporations can export. But SMEs, lack such capacity to overcome export barriers on their own. MDCP helps fill this gap because:

• ITA has technical know-how and connections that can help all SMEs, not just large corporations.
• Via MDCP collaboration with industry groups, ITA can help hundreds of SMEs at a time.

Why are MDCP projects usually industry-specific?
Tariffs and non-tariff barriers tend to be industry-specific. Accordingly, projects to meet trade challenges tend to be industry-specific as well.

• Because trade challenges are usually specific to a particular industry, they tend to correlate with industry interests. Trade associations exist to help companies in a particular industry to pursure their collective interests.
• Most U.S. firms pay to belong to one or more associations. Because of their organization by industry, these groups are natural partners for ITA.
• Domestic and international business events, from standards committees to trade shows, are organized, essentially, by industry.

Why does ITA follow industry's lead with MDCP projects?
It is true that ITA's MDCP is, in effect, a nod to existing U.S. industry leadership and a nudge to capitalize on it.

• ITA trade professionals stand ready to help U.S. firms or entire industries to overcome barriers to trade. But ITA does not pretend to have all the answers. MDCP encourages private initiative to identify and address trade challenges.
• ITA is leveraging pre-existing allegiances. Industry groups, be they trade associations, standards-developing organizations, or chambers of commerce, have already demonstrated "buy-in" from companies that have chosen to be members.
• Industry groups tend to know their members better than any other organization could.
• Associations typically have executives and departments devoted to membership, government affairs, and meetings/exhibitions. MDCP funding challenges an association to add international trade support to what it offers its members. NEMA's opening of its Mexico City office is just one of many examples of MDCP support stimulating an industry group's own continued investment in supporting and encouraging U.S. firms' competing in international markets.

MDCP is like DARPA?
After reviewing the list of diverse, innovative projects, one trade association executive commented that "MDCP is to trade what DARPA is to defense." (The Defense Advanced Research Projects Agency's financial support of public and private sector projects stimulated innovation that is now the basis for many well-established features of modern life from the computer mouse to Google Maps.)

Sometimes MDCP projects help U.S. firms to innovate technical improvements. But, unlike DARPA, MDCP is not primarily focused on technical innovation. The ultimate goal of each MDCP projects is not necessarily a new patent but rather new capability for U.S. firms in a particular industry to compete internationally. MDCP applicants compete for funding, in part, based on innovation. And innovate they do in ways that federal agencies cannot. Some examples:

• AMT--The Association for Manufacturer Technology realized that Chinese manufacturers would be much more likely to buy machine tools and large equipment if they did not have to travel abroad to see it in action. To meet this need AMT established its Shanghai Technology and Service Center.
• USCIPP, a group of several U.S. hospitals, created ChooseUSHealth, an internet site in Mandarin, to enable Chinese patients and their local doctors to more easily choose the complex healthcare in the United States that they need. The site helps with details like interpreters, visas, and travel.
• U.S. information technology associations saw the challenge that intellectual property rights and other issues pose in China. They came together to establish the U.S. Information Technology Office in Beijing in order to better engage Chinese officials.