From Martin Neil Baily and Matthew Slaughter in The Wall Street Journal.

A central theme of this report is the critical role that competitive product markets play in spurring productivity growth and boosting standards of living. One of the great U.S. policy successes of recent decades has been the bipartisan removal of regulations that stifle competition and innovation in product markets. U.S. industries that face strong competitive intensity are more productive than highly regulated or otherwise sheltered industries. This competition, in turn, yields higher incomes and greater choices for consumers.

Maintaining the productivity benefits of product market competition requires sound choices in areas including trade and investment, regulation and infrastructure.

Liberalization of international trade and investment has been especially important because it exposes U.S. companies to global best practices. Global trade has generated -- and has the potential to continue generating -- large gains for the United States. Annual U.S. income could be upwards of $500 billion higher with a move to global free trade in both merchandise and services.

It is crucial to reverse the current protectionist drift already underway with further liberalization. ...

Domestic regulation of product markets plays a legitimate and vital role in areas like consumer protection and worker safety, as well as in the financial system, as a tool for regulating against systemic risk. Indiscriminate elimination of regulation is unwise, but the current need is for sounder regulation -- not more.

We should not return to the days where policymakers micromanage companies and industries. This would dull growth of productivity and overall incomes. Reform of capital markets, for example, should aim to preserve a sound overall system, not necessarily particular companies or practices.

Many parts of the U.S. public infrastructure are deteriorating rapidly. Today, one in seven miles of U.S. highway is rated "not acceptable" by the federal government. This curtails productivity in many ways, such as congestion delays that impede supply-chain networks. Expanded federal spending is only one part of the needed solution (and one that will improve productivity only if based on nonpoliticized criteria and stable funding). At least as important will be to encourage private companies to compete in the provision of public services that, until now, have suffered from rigid and inefficient bureaucracies.

Foreign investment, in particular, can play a vital role here. Many global leaders in private infrastructure are foreign multinationals that could bring their best practices to address U.S. needs. This also means expanded use of market signals in public infrastructure projects, such as market and congestion pricing for transportation services.