We have something tremendously special in America which, if we're not careful, we're going to squander away. Something that has given us an edge vis-a-vis our trading partners over the past decades and enabled us to capture a disproportionate share of global wealth. Something that constitutes our competitive edge in the world economy and figures prominently in our high standard of living.

What is it? In an earlier time the answer would have been one of the elements of classical economics--land, labor, valued resources. But in our era of world trade, the natural advantages of climate and the like figure much less prominently in national balance sheets than acquired advantages. The wealth of nations derives from manufacturing and the health of a country's manufacturing sector--in an age of integrated logistics where capital is borderless and moves quickly to exploit inexpensive labor--requires on-going improvements in productivity.

Innovation is what's made America prosper. It is what we have done and continue to do better than anybody else in the world. It is, according to those who study such matters, our principal comparative advantage. The question is how long we'll be able to sustain it?

We're very proud at World Trade of this issue, our annual rating of the Top 30 Countries for Trade and Expansion. Our own proprietary formula for ranking the economic climate has proven over the years to be a powerful leading indicator of subsequent national performance. But in compiling this year's report, the striking fact we're seeing is that the differences between developed markets--the factors that produce a higher return on capital in Country 1 versus Country 20--are flattening out.

Without doubt, this is good for international commerce. As the number of acceptable alternatives grows, global traders have access to multiple free trade outcomes as they calculate their scenarios. But is this equally good for the United States?

'Not necessarily' say the authors of Global Trade and Conflicting National Interests, Ralph Gomory (former IBM Senior Vice President for Science and Technology) and Wiliam J. Baumol (former President of the American Economic Association). Their lucid reasoning is too detailed to pursue here, but the bottom line is that there is a 'tipping point' at which a rich country's standard of living goes down as that of its poorer trading partner rises.

We're not there yet but it's only a matter of time. How should the U.S. stave off economic decline? Not through tariffs and trade barriers but by aggressively allocating resources, both private and public, to what we do best--innovation. Encouraging innovation needs to be a national economic priority. How? Through support for education (particularly targeted toward imaginative industrial problem solving), tax incentives for companies that demonstrate increased productivity (which many other countries already do), support for industries which we can retain in this country and gradual reduction of support for industries we are unlikely to retain (supporting winners, not losers).

America has always been special for finding original, unorthodox, pragmatic business solutions. Now, more than ever, we need to keep doing exactly that.

You can reach me at shistern@worldtrademag.com