China will not permit the US to build an economy based on dominance of innovation.

The de facto US trade/globalization policy is that we gladly give away blue collar jobs and will keep the high-value-added jobs in innovation.  That, in a nutshell, is our national economic strategy.  It is doomed to failure. As the military understands in its milieu, the enemy gets a vote, and here, courtesy of Foreign Affairs, is the Chinese vote in a 2006 state-issued report: 

. . . . China will become “an innovative nation in the next 15 years and a world power in science and technology fields by the middle of the twenty-first century.” By 2020, the report states, China should reduce its “degree of dependence on technology from other countries to 30 percent or less” (down from 50 percent today, as measured by the spending on technology imports as a share of the sum of domestic R&D funding plus technology imports). Noting that reliance on other countries--especially the United States and Japan -- is a threat to Chinese national and economic security, the paper calls for China not to purchase any “core technologies in key fields that affect the lifeblood of the national economy and national security,” such as next-generation Internet technologies; high-end, numerically controlled machine tools; and high-resolution earth observation systems.

New Chinese policies prompted by the report have raised the hackles of foreign governments and technology enterprises. In 2009, for example, China’s government, a massive consumer of high-tech products, announced that in order to be a recognized vendor in the government’s procurement catalog, a company would have to demonstrate that its products included indigenous innovation and were free of foreign intellectual property. Yet since R&D is a global, collaborative process, no individual high-tech product is completely independent of technology from outside of China. In April 2010, Beijing ordered those high-tech companies seeking to be listed on its procurement catalog to turn over the encryption codes to their smart cards, Internet routers, and other technology products.

Wake up, America.