National Academies Press: OpenBook

Europe 1992: The Implications of Market Integration for R & D-Intensive Firms (1991)

Chapter: Views and Concerns of the U.S. Science and Technology Community

« Previous: Science and Technology and European Market Integration: Changes and Continuity
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
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Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
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Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
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Page 15
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
×
Page 16
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
×
Page 17
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
×
Page 18
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
×
Page 19
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
×
Page 20
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
×
Page 21
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
×
Page 22
Suggested Citation:"Views and Concerns of the U.S. Science and Technology Community." National Research Council. 1991. Europe 1992: The Implications of Market Integration for R & D-Intensive Firms. Washington, DC: The National Academies Press. doi: 10.17226/1775.
×
Page 23

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Views and Concerns of the U.S. Science and Technology Community DR. PRESS: To give an American view of concerns and opportunities, we have Erich Bloch, who since 1984 has been director of our National Science Foundation. This is one of the key government agencies that supports basic science and engineering in the United States. Mr. Bloch is an electrical engineer. His entire career was spent at IBM, where he rose to the position of corporate vice president. Two years ago he received the National Medal of Technology from President Reagan for his work on the famous IBM 360 computer. He is a very important spokesman in the United States on issues of science and technology policy, both domestic and international. MR. BLOCH: My assignment is to offer a U.S. perspective on some of the issues that are raised by European economic integration for science and engineering, from the viewpoint and concerns of the science and technology community. This is a subject that the Committee on International Science, Engineer- ing, and Technology in OSTP is examining in some detail. In addition, the National Science Board has established a special committee to consider the implications of European integration for our policy, and there are many more committees and task forces in place to look at the same subject. One reason the formation of the European Community is of significant interest to the United States and to its science and technology communities is that we have a tradition of strong ties with individual European countries in these areas. We have, therefore, a natural interest in maintaining these strong bilateral cooperative links in education and basic research as well as in industry technology. The establishment of the European Community raises a question as to whether these traditional ties are being disrupted or at least changed substantially because of the EC or if, alternatively, the EC constitutes for the United States just one more actor in a complex web of 13

14 EUROPE 1992 relationships. Beyond that, however, the European integration is causing us to take a close look at a series of science and technology issues that, far from being uniquely European, are becoming pervasive in the era of global technology. Before I address any of these questions, I have a couple of more general observations. We are, as is quite obvious, living in a time of extraordinary change. The dramatic transformation of eastern European politics and eco- nomics is just one aspect of this process; EC 1992 is another. The shift from national economies to an integrated world economy is yet another. It affects a global economic arena that has become fiercely and broadly com- petitive for all nations. But important as these events are, they are unlikely to define the essence of our age. I suggest that this role will fall to the information and knowledge technologies that have contributed so heavily to these and other social developments. Knowledge, in fact, has become the critical resource, as important as natural resources or access to low-cost skilled labor were in the past. It has become the engine of economic growth and change, and, in the context of the new global economy, new knowledge is the foundation of new industries such as computers, biotechnology, semiconductors, new materials, and many other things. New knowledge has revolutionized the workplace, education, and even research itself, through computers and information science, and has made it possible for us to address, on a joint basis, global issues like environmental pollution, ozone depletion, and others. The new information and knowledge technologies, because of the effect they have on society and the competitive power they confer, have played a significant role in reshaping political and economic relations. They are responsible for the emergence of this country as a world technological and economic leader after World War II and the emergence of the Pacific power bloc. And while the reasons for European unification are complex and many, one might well ask whether the process or the rapid pace that we are witnessing today would have come about without the knowledge revolution that is occurring at the same time. The effect of the new knowledge economy is to underscore the critical importance of investing in science and engineering research and of having a well-educated technical work force. All industrial countries, and those that aspire to join the ranks, are responding to these circumstances in similar ways. Systematic innovation and effective commercialization of new products and processes are key to economic leadership. This requires national investments in research and technical infrastructure. While total U.S. R&D spending continues to exceed the collective European total, European nations have made significant progress in narrowing the gap, based on a higher growth rate in their research investments. This is particularly true in civilian R&D. In 1984, for example, U.S.

VIEWS OF THE U.S. SCIENCE AND TECHNOLOGY COMMUNITY 15 spending for civilian R&D exceeded that of EC nations by 40 percent. By 1988 our lead declined to 10 percent, and it would not be unreasonable to expect relative parity in civilian R&D as 1992 approaches. If the eastern European countries are included, total European spending on civilian research would exceed that of the United States for sure. With regard to human resources, we face similar problems. In the United States science and engineering employment has grown at twice the rate of other professional employment. European countries, through their investment in the human resource base, are beginning to shorten the once substantial lead the United States enjoyed in technical personnel. The demand for a highly educated technical work force is increasing on both sides of the Atlantic, and because of demographics shortages are developing both here and there. Cooperation and open communication across international boundaries in the sciences have always been critical to the vitality of scientific inquiry. European integration and the importance of cooperation and communication in the political arena attest to the fact that science and engineering research is no longer unique in this regard. At the same time, because of the centrality of research to the economic competitiveness of individual nations, cooperation and competition in the sciences and engineering have a different meaning today than they have had over the past 40 years. Not surprisingly, cooperation in science and technology is becoming a political question. Despite the fact that today open communication of research is more important than ever, driven in part by the pace and richness of discoveries and capabilities, and despite the fact that escalating costs make cooperation increasingly attractive on major research issues and in the use of large capital-intensive facilities like drill ships and accelerators, cooperation in science and technology is being subjected to practical, political, and economic concerns. With these general observations then, I would now like to talk about Europe 1992 and its impact on the United States. Within this context, dominated by the growing role of research and the need for cooperation and sharing across national boundaries, European integration raises some very important issues for all of us. The first issue I want to look at is research investment. Generally stated, the question is whether the Single Market momentum will lead European researchers and their program administrators to look inward and inadvertently disrupt the relationships that have been developed on the bilateral basis. There is no doubt that in the past the scientific relationships of some coun- tries with the United States were stronger than with their neighbors. How or if the changes that we are seeing will change these relationships is the important question. Currently, EC R&D spending constitutes less than 4 percent of all R&D spending in Europe, and EC cooperation has been primarily in strategic technologies with commercial potential, that is, the Framework

16 EUROPE 1992 Programs, as was pointed out before. However, the European Community will focus on basic research as a matter of necessity. Contacts with the principal investigators in our universities at the basic research level occur mostly through public research facilities supported by national governments, augmented by university researchers. This is the level of interaction that is the focus of our bilateral arrangements with the individual countries. However, budgets for basic research in most EC countries have been declining or are stable, and funding increases have been directed principally at technology development. To the extent that this trend continues, it could result in even greater pressure on basic research and potentially diminish contacts be- tween U.S. and European researchers. The second issue is the European community of scientists. Until recently a regular sharing of ideas and approaches among European and American scientists was assured not only by contact among senior scientists but also by the fact that many Europeans received at least a part of their training in the United States. That is changing. Among European scientists aged 45 to 54, 21 percent obtained their doctorates in the United States, compared with 12 percent of those aged 30 to 35. This change is occurring simultaneously with the emergence of a European community of scholars more oriented toward intra-European communication. This could result in greater pressure on research administrators to redirect resources including grants, fellowships, and travel costs to European-centered activities, to the exclusion of coop- eration with scientists and engineers from other countries. In all fairness I need to add that my European colleagues have had the same concern about the alteration of the U.S. relationship to their countries when we discovered that the Pacific Rim was no longer an area that could be ignored, scientifi- cally and otherwise. The third issue is bilateralism. The EC process could also affect the quality and richness of these relationships. For example, will intra-European connections lessen the commitment of individual nations to interaction with the U.S. science and engineering communities over time? Another question is, what will be the role of the European Community on the research decisions of individual nations, especially since the individual countries are the locus of support for basic research? Or, a third question, will the momentum of Framework-type programs begin to affect the allocation of resources, espe- cially human resources, and with it the access of American researchers to programs at the individual and national levels? Last, will there be a stron- ger tendency toward large multinational projects at the expense of more flexible research arrangements at the level of the individual investigator? By the way, a similar question is being asked here when it comes to centers and individual investigators. All in all then, is there an arrogation of power, and by power I mean funding, at the EC level at the expense of the individual country level over time?

VIEWS OF THE U.S. SCIENCE AND TECHNOLOGY COMMUNITY 1 77 Another issue is the tripartite relationship. The nature of government-to- government relations in science and technology is the area of concern. Our contacts today are at the bilateral level. As the European Community be- comes a larger factor in research funding, what should be the nature of U.S. contacts with the integrated Community? There is some discussion already of a U.S.-EC bilateralism, and rightly so. The prospects of a fruitful rela- tionship in this area will no doubt be strongly influenced by funding and policy choices for Europe-wide science and technology. The basic question here is, will the U.S.-EC relationship emerge in place of bilaterals or in addition to them? Another area of concern is access to information. The competitive advan- tage conferred by access to the newest ideas and processes and the prospect of early commercialization give rise to pressures for limiting access to in- formation. Current discussion of intellectual property rights is a case in point. The tougher EC position on this issue raises questions with respect to cross-licensing, protection of proprietary information, the assignment of rights in personnel exchanges, and joint research endeavors, as well as the geographic boundaries where intellectual property rights apply. Standards have already been discussed, but let me say a word about them. The adoption of a single system of standards is an issue of obvious concern to industry, to the extent that standardization is not only a means to further the integration but could also be used to exclude some American products from European markets. However, standardization of products and services will also affect research and development activities between countries, in such areas as data processing, software, networking, telecom- munications in general, environment, and biotechnology. Technology transfer is another issue. The obvious interest of eastern European countries in the rich markets and developmental possibilities of the western European arrangement could also raise questions with respect to technology transfer. Changes in the eastern European countries and in our own relationship with them are rapid and dramatic. But the degree of openness and sharing will remain an issue, and not only a scientific one but also a political one in the foreseeable future. Stronger relations and greater sharing within a planned European context will require further examination of this topic. To conclude, the process of European integration will undoubtedly in- vigorate the science and engineering research base throughout Europe. But the process also raises some important issues and could force major dislocations in established relationships dictated by the economic climate within which this integration is taking place. One thing is sure: we Americans, the U.S. science and engineering community in particular, and maybe the European Community itself and its member nations 'are underestimating the rapidity with which these changes will occur and the far-reaching effects they will =, —— —-——c' -

8 EUROPE 1992 have. I want to expand a bit on Vice President Pandolfi's earlier remark. Maybe the timing and the results will surprise us, but I want to be clearly understood. These are positive forces at work, but they need to be under- stood and not ignored or understood too late. The year 1992 is not a curtain raiser; it is the end of the first or maybe even the second act of a drama of historical proportions. I am very much encouraged about the subject that Vice President Pandolfi raised, with respect to putting actual program discussions ahead of Framework discussions or a memorandum of understanding and other arcane instru- ments that we normally deal with. In the interest of preserving mutually beneficial relations across the Atlantic in the sciences and engineering, however, we should bear in mind some basic principles as we discuss the details or the generalities. Some of these principles are very clear. We must ensure reciprocal freedom of access to basic science and engineering programs and facilities for all qualified researchers. We must make provision for sharing major facilities and data bases. We must assure appropriate intellectual property protection. There must be fair terms for private sector access to publicly funded technology-based programs such as ESPRIT, EUREKA, and others. And there must be a standards- and regulation-setting process that is open, fair, and flexible without sacrificing the commonality that is so important both to us and to the Common Market. There is every reason to believe that the strong commitment to openness and cooperation that has characterized our relations in the past will continue to inform our policies in the future. It will surely help us all to deal with common concerns and to address an increasingly complex research agenda. Such a commitment will also contribute to the growth of the knowledge pool from which we all benefit. DR. PRESS: We have 20 minutes or so for comments, discussion from the floor, or questions to be addressed to our two speakers. Our speakers may also wish to comment on each other's papers. I will start, just to begin the discussion. Between the European countries and the United States, there are differences in style, in culture, in the way governments behave, and in their relationship with industry. It's not to say that one is right or one is wrong. They simply differ. I have the impression that in some European countries the governments could go very easily from research and development support in the civilian sector to seeing that whatever emerges in the form of new technology ends up in a commercially successful product. In other words, the governments might intrude more in the process of manufacturing investment or ownership of corporations and in that way perhaps provide some degree of advantage compared to our system where the support of basic sciences is as far as the government goes. As I said before, it isn't a question of which tradition is correct or which attitude is wrong, but it does lead to some degree of

VIEWS OF THE U.S. SCIENCE AND TECHNOLOGY COMMUNITY 19 asymmetry that might end up in perceptions of unfair competition. This may be the sort of issue that would be very difficult to resolve between western Europe and the United States. Of course, it shows the advantage of your recommendations that we cooperate in basic science in large projects to mitigate this degree of difference, of competition, but these issues will arise nevertheless. What is your picture of the future? Do you think that these differences are serious? Are they manageable? How do you think they could be reconciled? MR. PANDOLFI: First an observation. You have mentioned the fact that in Europe we have different styles and different traditions, legislative traditions for example, in the various member states. Yes, this is clearly the present situation, but I think that the increasing role of the Community as a catalyst, beyond the small percentage of funding directly dedicated by the Communities to our programs, will produce a more homogeneous situation in the various member states. For example, one of the important policies of the Community is the competition policy. And we have more and more severe monitoring of, for example, state assistance, so I think that in the future these differences will be reduced, but in line with a higher respect for competition, free competition rules, avoiding, for example, a tendency in certain member states to use some legislative provisions to directly support competitive research, not just precompetitive research. The future situation is probably advantageous as far as the relationship between the United States and Europe is concerned, not only for the obvious reason that it is easier to manage a bilateral relationship than a multilateral one, but also because it will be possible to negotiate and to have mutual monitoring. The United States, I think, will have a greater influence on the Community compared with its influence on the individual member states. That is why I have proposed to start immediately with this kind of joint work, because I think working together will demonstrate the advantages of direct bilateralism for removing obstacles, if they exist, ameliorating the atmosphere, and also solving some of the problems you have rightly mentioned. In any case, our policy is only to support precompetitive research, leaving to the companies the responsibility to join the market with their production. This is a clear line for the Community. MR. BLOCH: Regarding your specific question of governments' influ- ence on funding beyond basic research, I must point out that we are not as pure as we sometimes appear to be. For example, there is heavy funding, 50 percent, from the federal government. So we have problems on both sides, access to each other where we have a commingling of funds. But I want to elevate your question to a more general one. I think we will have asymmetries for a long time asymmetries in our institutions, in where the funding is, and so forth. And we have lived with these asymmetries over the last decades. We have to recognize from the beginning that things will

20 EUROPE 1992 not be that simple, that access to an activity in one country and access to one in another country mean two different things, involve two different institutions. Most of the basic research in the United States 75 percent- is done in universities. Seventy-five percent of the basic research in Europe is not done in universities; it's done in government labs. It might even be done in EC labs in the future. So I think we should be prepared to deal with that issue, recognize that differences exist and then move forward and make sure that we have access to similar kinds of activities on a similar kind of a basis. But it will never be the same, and it will never be quite as easy to determine what access means. DR. PRESS: Those are two very good responses. Now let me turn to the audience. MR. COONEY: Stephen Cooney, National Association of Manufactur- ers. My question is to Vice President Pandolfi: What are the approximate levels of funding in each of the six major areas in the revised third Frame- work Program? Can you give us those figures at this time? I know originally it was 7.7 billion ECUs. That was changed to 5.7 billion ECUs, but what's the distribution among the six program areas? MR. PANDOLFI: In spite of the fact that I am the author of the proposal, I do not have the exact figures in mind, but my associate, Professor Fasella, does but first a preliminary remark. The original proposal of the Commission was 7.7 billion ECUs, as you have mentioned, for the five-year period. We had a lot of problems with the Council. The final result was 5.7 billion ECUs, but with the possibility of obtaining additional money in 1992 for the last two years of the program, 1993-1994. So I am confident of ameliorating our situation and adding something to the figure already agreed to by the Council. (See Figure 1.) Of course, there is another element of novelty. It is a certain modifica- tion inside the various actions. For example, for the first action, related to information and communication technologies, we have a new research pro- gram aimed at the interconnection of the various national networks, both of public administrations and of systems supporting industries. And this is one of the major necessities for the Community. MR. BURLANT: Bill Burlant, GAP Chemicals. You mentioned the role of the rather profound and pervasive areas, like environmental and life sciences and biotechnology, but what impact, if any, do you project on the smaller chemical companies that are involved in a variety of research projects but not in those categories in the next five or 10 years? MR. PANDOLFI: There is not in our programs a preliminary, a priori distinction between big companies and small enterprises. Our goal is to ameliorate the access of small and medium-size enterprises to our pro- grams. Of course, it would be stupid to deny the driving force of big companies, but one of the characteristics of the new Framework Program,

VIEWS OF THE U.S. SCIENCE AND TECHNOLOGY COMMUNITY 40 - 35 - 30 - au 25 a) c' a' CL 20 - 15 - 10 - 5— o 1 6 4 21 37.9 37 l 1 l 1 . Third FP = Second FP 8 6 6.3 12 74 30.9 7.9 \~ ~ q~ FIGURE 1 Distribution of Funds for the Third Framework Program. 3.6 the third one, is the utilization of some new mechanisms. One of these is a new element of our Community law: it's a new kind of European consortium whose name is European Economic Interest Grouping. Under the provisions of this new consortium, it is more possible than before to associate small laboratories, small industries why not your small chemical industries to big companies, with some new and very interesting and effective formulas. So we do hope that the new program will allow us to obtain much more coordination of the activities of small and medium-sized enterprises and the . . g companies. MR. BREMER: Mike Bremer, the Upjohn Company. Can you provide a distinction between precompetitive and competitive research? And, Dr. Bloch, would you tell us whether you would agree with that distinction?

22 EUROPE 1992 MR. PANDOLFI: It's a very complicated question, as you know. It is a dogmatic question, and there is some theology in these affairs. First, it's a problem of common-sense evaluation. It is impossible to establish a sharp demarcation line, absolutely impossible. But it is easy, on the contrary, to distinguish a certain body of research that is clearly included in the precompetitive area. And it is relatively easy to perceive the links between a certain type of research and a final product to put in the markets. Of course, there is an intermediate area. As far as the relationship between the United States and the European Community on this point, it is a problem of mutual confidence and better mutual knowledge. Therefore, I support this method of working together and monitoring each other, to know better what the respective activities are just to avoid misunderstanding, to in- crease our common vision, especially on crucial points such as this one. MR. BLOCH: Let me start from a set of definitions that are more prevalent in this country. It's really where to draw the line between basic research, advanced research, and development, if you want to structure it in those three areas. And I'll draw the line of precompetitive somewhere within this advanced research category certainly somewhat beyond basic research but stopping well before what we call development. By the way, let me focus on one aspect of it. Basic research applies to engineering research as well as scientific research, and I think that's where we have a problem once in a while, that everything that has the label engineering somewhere is automatically advanced research, at best, development more likely. It's being labeled that, and I think that is erroneous. The line is somewhere within this advanced research area. I don't think we should be that precise about it, however. I think a certain amount of nonclarity and nonprecision is to our advantage, and I think that's what you reflected on before. So let's not try to cut that particular definition so fine that we have no room to maneuver. Many things that start off in develop- ment, as you know very well, wind up in basic research and obviously vice versa. I think we should not try to draw a line that is too fine, too narrow, and too theological, by your definition. MS. PLATZER: Michaela Platzer, U.S. Chamber of Commerce. You've talked a lot about the European Community's Framework Program. Can you talk about the connection between the EC's Framework Programs and the EUREKA programs, which were obviously aimed at competitive re- search? MR. PANDOLFI: This is just the case to look at as far as this demarca- tion line is concerned. But this is a very important question and one of the crucial points of our activity. We have reflected and considered this prob- lem deeply. Our final conclusion is the following. We can't afford in Europe to disperse our resources. Where we have EUREKA projects, they have a different nature than our pure precompetitive projects. But it is

VIEWS OF TlIE U.S. SCIENCE AND TECHNOLOGY COMMUNITY 23 possible to have a certain combination of the two, if the Community partici- pates only in a certain part of a EUREKA project: precisely the precompetitive part of the overall project. For example, we have one of the well-known EUREKA projects, Project JESSI. Our problem has been how to identify precisely one part of this microelectronics program that is purely precompetitive research not directly related to the final production of memories, etc. So this is our formula. Probably there is something complicated in this exercise, but it is inevitable, and now we have found, I think, a reasonable guideline with a satisfactory solution for our member states. The same thing holds true for another well-known project, HDTV. In this case, our participation is absolutely small, and it is not related to the production of the final appa- ratus.

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The 12 member nations of the European Economic Community (EC) are engaged in a bold effort to create a Single European Market by the end of 1992. The changes brought about by European market integration will have a major impact on U.S. industry.

Although proponents of the plan argue that it will benefit businesses by allowing economies of scale, more efficient marketing, and increased demands for goods and services from outside the Community, there is some concern that the Single European Market may serve to exclude or limit participation of non-European competition. The impact is likely to be particularly pronounced in industries with heavy involvement in research and development.

This volume is based on a major two-day symposium which brought together officials of United States and other governments, industry representatives, and academic experts to examine EC policies on technical standards, intellectual property rights, access to the results of EC-supported basic research, and other issues affecting R&D intensive firms.

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