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Access to Precompetitive Research Programs of the European Communities DR. STEVER: Our first speaker on this interesting subject of access to precompetitive research programs of the European Communities, is Paolo Fasella. He studied medicine and biochemistry. He started out, as so many of the leaders of all of our nations in science and technology do, in the academic world. Then his interests broadened. He is now director general of science, research, and development of the Joint Research Center of the EEC. DR. FASELLA: Mr. Pandolfi's authoritative presentation and the excellent background material from the National Research Council provide the political framework and the basic information on the content, scope, and operational mechanisms of the European Communities' multiannual research program and its implementation. It should also be clear that, as foreseen by the Single European Act and specified in the 1990-1994 Framework Program, the Community is ready to cooperate with third countries on a basis of mutual advantage. I shall confine myself to some considerations directly bearing on the access to EC programs of noncommunity countries, institutions, and companies. I shall first outline three key concepts that guide the EC research policy. These are: subsidiarily, concerning relations between EC activities and those of the member states; precompetiti~'eness, concerning relations with indus- try; and prenormative research, concerning relations with EC regulatory activities. I shall then discuss the various levels of access of EC programs and the modalities presently available for participation by non-EC countries. On the first point, American colleagues often asked me questions such as: Will Community R&D programs progressively replace national programs? Does the existence of a Community program abolish or interfere with bilat- eral agreements between the United States and individual EC member states? 24

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 25 The answers to these and similar questions are given by the principle of "subsidiarily of Community action." According to this principle, actions are carried out at the Community level only when there is an identified advantage in doing so. For research, we have the "Riesenhuber criteria," named after the German minister for science and technology who elaborated them during Germany's presidency of the European Council. The stringency with which the subsidiarily principle applies to research programs shows in the figures: as of now, the annual research budget of the Community is only 3 percent of the public spending for research in the 12 member states. You can find the data for 1987 in the background document prepared for this conference (Appendix B). Since then EC funding has increased and will continue to do so, at least up to 1992, but it will probably not go beyond 6 percent of total national funding. Also, the background paper reports the funds estimated to be necessary for the 1990-1994 Frame- work Program. To these must be added 3.1 billion ECUs carried forward from the 1987-1991 Framework Program. The total therefore amounts to 8.8 billion ECUs. Since most Community interventions cover only 50 per- cent of the costs, the EC is directly involved in research actions for about 17.6 billion ECUs, or $20 billion, for the 1990-1994 period. It is not a large sum, but it is significant, particularly because it is focused on relatively few key areas. As clearly indicated in the background documents, information and communication technologies are the largest single item. Environmental research and the development of human resources through postdoctoral training in networks of centers of excellence have increased considerably; so have the life sciences and technologies, whereas energy has decreased, in relative but not absolute terms. In areas such as information and communication technologies, some member states have readjusted their own national programs in favor of Community action. In other sectors, such as controlled thermonuclear fusion, the Community program comprises practically all activities carried out in the member states. Demand from industry research institutes and universities for participation in Community research programs largely exceeds present resources. While the rate of acceptance of good to very good project proposals ranges from 30 to 50 percent in most national programs, it is only 10 to 20 percent in Community programs. These figures suggest that the Community tries to satisfy widely felt needs but that the financial means available are inad- equate. What are the trends for the future? The next decision will be taken in 1992, when a fourth Framework Program partly overlapping the present third program, will be proposed for the 1993-1997 period. The European Parliament will probably insist on substantial increases, whereas the European Council, and especially certain member states, will be more reserved. In some member states, departments that advise the

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26 EUROPE 1992 government on the Community's Framework Programs are asked by their national budgetary authorities to accept cuts in their own budgets, corresponding to the national contributions to the Framework Program. Quite an effective way of encouraging subsidiarily! All factors considered, I expect that the Community's research budget for 1993-1997 will increase but not drastically. The answer to the first question of my American colleagues is therefore straightforward: EC research programs will not replace national programs but will represent a useful and perhaps necessary complement to them, not just because they provide fresh funds but because they promote new forms of collaboration. The answer to the second question is equally simple: the existence of EC programs does not abolish present or prevent future bilateral agreements and collaboration between the United States and EC member states but may add to them. Let us now consider relations with industry and the concept of precompetitiveness. Industry is consulted, along with other social partners and the scientific community, during the preparation of the program. Industry also participates in the implementation of programs, by carrying out some of the research and/or by paying up to 50 percent of the costs. Eventually industry is expected to make use of the results and to benefit from the increased knowledge acquired. Community support covers basic research, practical applications, general development, and demonstration, but it stops short of actual product devel- opment, industrial production, and commercialization. The term precompetitive is used to describe this situation. Several definitions have been given, referring either to the time lapse between the end of Community support and commercialization or to the financial efforts needed to develop prod- ucts and take them to the market after Community support has ceased. In practice the present system works quite well and has not resulted in complaints since the EC's precompetitive programs were launched in the early 1980s. This lack of complaints is significant, since the EC offers plenty of legal and administrative means for recourse against any violation of its Competition Rules, including state and public aids, as spelled out in articles 85 to 94 of the Treaty of Rome. The EC legislation, which assures fair competition to all, is a guarantee for non-EC countries as well as for EC member states. The third key concept to which I referred is prenormative research. Though the term is not found in the Oxford or Webster dictionaries, its meaning is clear: research aimed at providing the scientific knowledge and technical know-how on which reasonable and effective regulations, norms, and stan- dards can be based. The importance of this research is increasing as we approach 1992. The interest of non-EC countries in this Community activ-

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 27 ity is also increasing. This is why I mention it here. However, I shall say no more about it, because EC research activities related to standards setting, certification, and testing will be dealt with by J. P. Contzen. Let us now focus on the central issue for today, namely access by non- EC countries to EC programs. We do have some experience with this, particularly for what concerns the EFTA countries. They have all concluded framework agreements for science and technology collaboration with the EC. Access can take place at various levels and through various modalities. It can include joint planning and conception of programs; "contribution to" and "access to" funding of programs; participation in the implementation of either a program or a project; and access to research results, be they published, stored in data banks, patented, or protected by copyright. The legal terms of reference for access to Community programs are to be found in the treaties establishing the Communities, the Framework Program and specific program decisions, and the harmonized research contract. The latter is of interest not only to participants in our program but also to anybody wishing to have access to the results. The harmonized contract requires users' rights and nonexclusive licenses to be granted in specified circumstances to orga- nizations carrying out R&D in the EC or established in the EC. However, participants in the project are not prevented from granting licenses to orga- nizations established outside the EC, provided that they do so in conformity with the interest of the EC. Moreover, third parties outside the EC may manufacture products incorporating the results of EC-funded projects. Each specific program decision taken by the Council of Ministers in cooperation with the European Parliament on the basis of a Commission proposal specifies if and how that program can be opened to non-Commu- nity countries/agents or institutions. Actual cooperation with non-Community countries or institutions can be established on the basis of article 130, according to the procedures spelled out in articles 228 and 130. The latter foresees a Council decision taken by qualified majority in collaboration with the European Parliament, on the basis of a proposal by the Commission. Several cooperation agreements have been established by this procedure with non-EC countries, namely with the EFTA countries. So far three modalities have been successfully used to implement these agreements: (1) Mutual information and consulta- tion through semiannual meetings. (2) Participation on a project-by-project basis in one or more specific programs. Here the possibility of such a collaboration must be specifically foreseen in the corresponding Council decision adopting the program. Participation is through persons, institutions, or companies; participation from third countries must be proposed by at least one EC partner and accepted by the others. The country from which the non-EC participants originate does not contribute to the financing of the

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28 EUROPE 1992 program, but a small fee is generally required to cover the additional ad- ministrative expenses of the Community. Non-EC participants do not receive any contribution from the EC budget. They participate in the projects and have access to information related to or generated by the projects but not to that from the whole program. (3) Full participation in a program. This must be foreseen by the program decision and must be the object of a formal agreement between the EC and the third country concerned, as stipulated under article 130. This involves contributions to the funding of the program by the participating third country on the basis of its GNP. This third country is represented in the advisory committee for the program and its institutions, and firms can participate on the basis of equality with participants from EC member states. Several such agreements for full participation have been signed, with EFTA countries for example, on programs concerning the en- vironment, medicine, advanced training, and basic research. No such agree- ments presently exist between the EC and the United States, but they could be envisaged for the future. The above concerns collaboration foreseen by the treaty establishing the EEC. Other forms of collaboration with the third countries can be implemented under the EURATOM Treaty. A joint enterprise, the Joint European Torus (construction and operation of a large reactor for controlled thermonuclear fusion), includes the full participation of Switzerland and Sweden, while the EC cooperates with the United States, Japan, and the USSR in the ITER program (joint design of a new reactor for controlled nuclear fusion). Sev- eral agreements exist between the United States and the EC for collaboration on various aspects of nuclear fission research. Finally, the position of U.S. companies operating in the EC should be considered. There is no restriction in any EC R&D program to a subsidiary of a U.S. company or other organization participating in EC-funded projects provided that the subsidiary is established in the EC. Subsidiaries of U.S. organizations that are located in an EFTA country must participate in the EC-funded projects on the same basis as other EFTA Organizations. The harmonized contract also permits the participation of organizations established outside the EC and EFTA in specific projects with the agree- ment of the Commission. In all cases there is a general limitation on the transfer of results and information to organizations established outside the EC, including U.S. parent companies. As of now, several subsidiaries of U.S. organizations established in the EC participate in EC-funded projects. To summarize, U.S. researchers and companies do have access to EC programs at various levels. Collaboration between the EC and the United States could be developed further. On the EC side, the legal and administrative

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 29 tools for this do exist. It is up to us to use them imaginatively and to our mutual advantage. DR. STEVER: Our next speaker is Jean-Jacques Duby. He graduated with a degree in mathematics from the Ecole Normal Superior in Paris. He joined IBM in 1963 at the Yorktown Heights laboratory, in the research division. Since then he has spent most of his career at IBM, holding various management positions in research, development, sales, and education. He thus has all of the advantages and disadvantages of our earlier speaker, Erich Bloch, in preparation for these kinds of jobs. But in parallel with his IBM career, he has been teaching at the Ecole Polytechnique in Paris and the universities of Grenoble in Paris, France, and Geneva, Switzerland. And he has done other international work. He is also a member of the French National Scientific Research Committee and of the Research and Innovation Committee of the French Employer's Union. DR. DUBY: I've been asked to briefly present the viewpoint of non- European-held European companies regarding access to European precompetitive programs. It's difficult for me to speak in the name of all non-European- held European companies, so they decided that I would draw a random sample, and I'm going to present the viewpoint of say, IBM. The first question that arises is, why would a non-European-held European company want or need or be asked to participate in a European research program? I see three reasons. For IBM Europe, at least, the first reason is "Why not?" As a matter of fact, IBM has been in Europe for more than 80 years. We have 100,000 employees there, 9 research and development laboratories, 15 manufacturing locations (which, incidentally, manufacture more than 90 percent of what we sell in Europe; there are not many of our competitors, even European-held ones, that can boast the same ratio). And last but not least, we pay one and a half billion dollars a year in corporate taxes, so we believe that we have solid reasons to view ourselves as a European company. The second reason, which sometimes is not stated loud enough, is that IBM needs a technologically and scientifically strong Europe. This may come as a surprise to you, but we have 35,000 suppliers and subcontractors in Europe, and we need them to be at the top technological level. We are the largest producer of electronic components in Europe, but we are also the largest buyer of electronic components in Europe. So we need good Euro- pean components. We hire several thousand young scientists from European universities every year, so we need a top-class university and higher education and research system. To us, European technological leadership is vital to . ~ our presence In Europe. The third reason may look a little immodest to you, but we believe that we can contribute to the European precompetitive research programs. We can contribute with our thousands of scientists who work in our European

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30 EUROPE 1992 laboratories and plants. We can also contribute, since we are a worldwide corporation, by disseminating European-originated technology through the world. For these reasons, IBM Europe wants to participate in European programs. And, indeed, we do participate; I am very proud to state that IBM is currently involved in 11 different projects in three different European programs. But I am very ashamed to state that IBM is involved in only 11 different projects in only three European programs. Because if we compare this participation with that of some of our European competitors and other European compa- nies, some much smaller than us, our participation is one order of magnitude below theirs. Some European Commission executives have been complaining to us about our limited participation, and rightly so. So if everyone agrees that IBM should do more in European programs, why do we not do more? It is because there are inhibitors to the participa- tion of non-European-held European companies in European programs. They may not be de jure inhibitors, but they are de facto inhibitors. And these inhibitors I would put in two categories. There are technical inhibitors in regulations and text, and there are also cultural inhibitors, which are probably more important and stronger. Not all the inhibitors are from outside IBM; some come from within our own shop. We have some technical inhibitors within our own mode of operation. Our development methodology and our business decision process do not make it easy for us to include participation in European programs in our development strategy. But that is our problem, and we are working to solve it. We also have our cultural inhibitors within IBM, the main one being that sometimes it is not so easy for us to look at Europe as a source of technologies. We have been used to looking at Europe as a source of markets, but only recently have we started to look at it as a source of technology; this is a shifting paradigm that our culture has to go through. Again, that's our problem and, as a matter of fact, it is one of my principal responsibilities to help with that problem. There are other inhibitors that we cannot do anything about, and these are the inhibitors that come from the Community itself. Again, we found technical and cultural inhibitors. Let me go over very briefly what I believe is the most important techni- cal inhibitor. In my opinion it is the discriminatory provision in the Com- mission research contract that prohibits the dissemination of confidential information into affiliated companies residing outside the European Community, if the parent company is not EC based. Now this is a very complex legal term, as Dr. Fasella would put it, but let me state simply the consequences: It means that Bull can transmit confidential information to Zenith, or Philips to Signetics, but that IBM France cannot transfer confidential information to IBM in the United States, nor can IBM Germany or IBM Italy for that matter. On a case-by-case basis, I am pleased to say that IBM and the

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 31 Commission have agreed that this provision was counterproductive and have found ways to circumvent it, but nevertheless it remains in the Commission contract and probably is an inhibitor for others. There also exist cultural inhibitors, which probably date back to the days when the first European research programs were launched. I'm alluding, for instance, to the initial ESPRIT programs in the early 1980s, where the original goal was to reestablish European computer industry competitiveness and independence from foreign "domination." At that time that meant mostly U.S. domination, and that implied IBM domination, and I recall the days when the success of European government programs to support and foster national computer industries was measured by the decrease of IBM's market share (incidentally, I must say that this measurement does not do justice to the efficiency of the European government programs, since, as you know, IBM's market share decreased more rapidly in the United States than in Europe). Those were the days when we were told by Commission officials that maybe we could participate in European programs but on a low-profile basis and certainly not as prime contractors. Today times are changing and, as I said, we are being told that we are not participating enough. Indeed, we have been accepted as the prime contractor in one project a small one, but it's a precedent nevertheless and we all heard Vice President Pandolfi say that there was no difference between European-held and non-European- held companies in terms of participating in European programs. I believe the problem today is that this new direction from the top man- agement of the Commission has not yet rippled down to the middle and lower management layers and that the old culture has not changed. I have many examples of this; let me quote but a few. Last year in one European program, IBM took part in several proposals; all of them were rejected and, when we inquired, we found out that all the proposals of other U.S.-held companies had been rejected, too. In another case, which is even more recent, we were told that our proposal was all right but that we needed to include a European-held competitor in the consortium. Of course, it may be the case that all of our proposals were bad ones and that our other proposal was better with additional participants, but.... Another case that I believe is characteristic of the difference in handling the European-held and non-European-held companies can be found in the two areas of the proposal selection work and the strategic program committee's work. The Commission asks outside experts to act as technical referees in the proposal selection process. Many of the technical referees come from European-held companies, computer companies in our case; none come from IBM. The Commission also asks outside experts to sit on strategic committees that steer its research, define future programs, or monitor existing programs. Many of these experts come from European-held companies; none come

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32 EUROPE 1992 from IBM. Now there can be different explanations for that. One is that all of the 100,000 European employees of IBM are morons or that none of them can be trusted to sound another opinion than his master's voice. Clearly, none of these explanations is reasonable. There have to be, statistically, a few smart and honest IBMers in Europe. Indeed, if I look at individual governments in Europe, many of them call on IBMers for their expertise and I personally although I don't list myself as necessarily smart and honest sit on several French government advisory committees and even held for several years a government-appointed job. So I would believe that probably IBMers have been overlooked in the selection process, and I would hope the situation would change in the future, because I really believe that it's even more a problem for Europe than it is for IBM. To summarize, I would like to say that based on IBM experience in Europe the non-European-held companies may participate in European precompetitive research programs. As Vice President Pandolfi said, they have equal rights to participate; I would submit that maybe, for the time being, they have slightly "less equal" rights than European-held companies. Now, of course, there are signs of mutual interest in relaxing the inhibitors, both within the Commission and within American-held companies and the many representatives of such companies here today are witness to that interest. But it will certainly require time, especially for minds to change. It will also, certainly, require top management involvement. And I mean by top management, top management within the American-held corporations and also in the Commission's political and executive management. DR. STEVER: Our next speaker is Dr. Josef Rembser. He studied physics and mathematics at the University of Mainz in Frankfurt and has a diploma in experimental neutron physics. He began his career, working as many such physicists do, on an accelerator program and then transferred into the nuclear power plant division of AEG in Frankfurt. Soon thereafter he joined government operations and has served as director of nuclear research and technology policy at the Federal Ministry of Education and Science, which was later renamed the Federal Ministry for Research and Technology. Following some years in many government positions, he is now the director general for basic research, research coordination, and international cooperation in the Federal Ministry for Research and Technology of the Federal Repub- lic of Germany. DR. REMBSER: The European Communities this means the 12 mem- ber states, their societies, economies, industries, scientific communities and governments, their 300 million citizens, the potential, and the market. The EC is, as we heard, politically represented by its three institutions, the European Parliament, the European Council of Ministers, and the European Commission. Let me present here some remarks from the standpoint of a member state and its governmental administration.

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 33 The Europe of science and technology has grown constantly during the past 35 years. The starting point was the foundation of the CERN Labora- tory for particle physics in Geneva in 1953. Today CERN represents 14 European member states; Finland will join next year as the fifteenth. More than a dozen other multinational European research laboratories and institutes followed, for neutron and synchrotron radiation research in Grenoble, for molecular biology in Heidelberg. They demonstrate that European states are willing and able to learn the lessons of cooperation across their borders. In the technological sector, cooperation in advanced nuclear reactors and the nuclear fuel cycle developed early and successfully. The ESA, with 13 member states, was formed in 1972 merging its two forerunners, ELDO and ESRO. The development of European science and technology would not have been possible to this extent and with such speed without the substantial support and aid from science, industry, and the government of the United States, particularly in the first two decades after World War II. In 1985, against the background of intensified European steps toward the Europe of technology, and in view of the technological importance of the U.S. strategic defense initiative program, the governments of 19 European states and the Commission of the EC as a twentieth partner, launched the European technology initiative EUREKA in Paris and Hanover. The best- known EUREKA project today is a JESSI program for the development of the 64-megabyte microchip, its technology, manufacturing, and applications. EC contributes to JESSI by funding selected activities out of its ESPRIT II program. Many bilateral and multilateral relationships between European countries, on the level of individual experts, institutions, enterprises, and governments, make up the picture of intensive European networking in science and tech- nology today. Together with the Framework Programs of the EC, all these elements, ranging from basic science in academia to industry-intensive R&D form the large content and space of present-day Europe's science and tech- nology. In the center of its joint and common activities, there is no doubting the growing weight of the EC Framework R&D Program, with its importance for and influence on national policies. Both national governments and the EC Commission play a subsidiary role in European industrial technology and innovation policy. Let me, by the way, give my definition of precompetitiveness. Precompetitive research is research that competitors will do together; competitive research is research they will do alone. The first and primary responsibility for technological research and devel- opmental innovation is with the industrial enterprises and the managements themselves. In addition, on a second level, national governments provide a favorable climate for appropriate activities by suitable tax systems; by maintaining

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34 EUROPE 1992 scientific infrastructures in universities, institutes, and laboratories of the public sector; by stimulating the considerable number of small and medium- sized enterprises in the innovation process; by sharing large risks of technical development with industrial companies in new and emerging technologies; and by encouraging the transfer process from public sources of technology to its application in industrial products, processes, and services. On top of the private and national responsibilities, last but not least, come EC activities and support for projects for which individual countries alone would have great difficulties in providing the required funds and staff resources. Second, the EC supports projects that strengthen the European market or the European scientific and technological community, particularly as far as uniform norms, standards, and regulations are concerned. Third, the Community supports projects that when jointly implemented are ex- pected to bring financial rewards for all those concerned, despite the inevi- table additional costs involved in international cooperation projects. Fourth, it supports projects that by the very nature of the problem to be treated the environment, for examplecall for coordinated action along the line, particularly in large geographical and global regions. Coordination of national policies and programs in the EC is, according to article 130h of the Single Act, the task of the EC member states themselves, together with the Commission. The Commission may, in close contact with EC member states, take up every initiative that is suitable for such coordination. According to the primary role of industrial enterprises in the technological innovation process, and the stepwise subsidiary roles of national governments and the EC Commission, it is at first up to private enterprises to define and to develop their cooperation strategies with companies from abroad in R&D projects in technological sectors. We should realize that in Germany about two-thirds of all national R&D activities are performed in industry. Indus- try in 1987 was financing about 83 percent of its R&D work from its own private funds. Less than 1 percent of total industrial R&D in the Federal Republic of Germany is presently funded by the EC Framework Program; about 17 percent is from national, civilian and military resources. Against this background the influence of governments and the EC Com- mission on access to industrial R&D work and R&D results, either from national and European multinational enterprises or from overseas compa- nies, is very much limited more limited, I assume, than it is in the United States, with large governmental defense R&D support for American companies. European industry R&D projects that are promoted by national governments or by the EC Commission generally imply that a project's participants are willing and prepared to share relevant existing knowledge and the new results of a project with all the project partners, on a royalty-free basis, and that they are willing to give licenses to other national or European industrial companies on a normal commercial basis, if there are no substantial arguments .. .

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36 EUROPE 1992 present estimates, until 1998 it will spend about 4.5 billion U.S. dollars, of which more than 50 percent will come from companies' own resources and less than 50 percent from national governments and the EC Commission. What proportion the EC Commission will contribute to JESSI, to what program activities it will contribute, and in which way are still under negotiation. Originally, between 20 and 25 percent of total JESSI costs were expected to be covered by EC money. This will probably not be realized, as the structures of the EC and its Framework Programs hardly allow spending for such a very large project as JESSI in which only a small number of member states, companies, and institutes are participating. Here EC policy is finding its real limits and restrictions. It is also not yet decided whether the EC will contribute to the JESSI program via a larger number of individual contracts for specific subprojects, according to article 130k of the Single Act, and out of its ESPRIT funds, or according to article 130m, which would allow global participation in this multilateral EUREKA program. The decisions about foreign participation in JESSI or in selected JESSI projects therefore lie mainly with the industrial JESSI consortium and its board. They have to consult the governments, but such foreign participation must follow the EUREKA rules I described earlier. One approach to including U.S. companies is on the basis of reciprocity for European participation in SEMATECH activities or in equivalent sharing of its results. In this context, we have heard that negotiations between the JESSI partners Siemens and IBM Germany have begun. Cooperation in privately as well as publicly funded R&D is always a give and take. This lesson has to be observed or learned. Cooperation cannot be a one-way road. Not only the magic date of 1992 but also the recent political developments in central and eastern Europe require an in- tensification of information, consultations, and contact between the EC and the United States. I highly appreciate U.S. activities to strengthen its own ties with Europe, and we are aware that opportunities in the East must not weaken European links to the West across the Atlantic. The U.S. organizers of this symposium were therefore right when they asked what would be the most productive government-to-government forums for addressing potential U.S.-European problems and whether there should be a new technology-specific forum. I also feel the necessity for such additional steps and measures. I could follow the idea of a U.S.-European technology forum or round table perhaps a permanent task force is another word for the 1990s, where competent personalities from the industrial and public sectors would project and exchange plans, experiences, and concerns on transatlantic scientific, and technological cooperation. Europe should in such a model contribute from the level of the EC Commission as well as from the industrial, scientific, and governmental sectors of EC member states.

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 37 Whether in the future there is a Community of 12 or more member states, Europeans are aware of our historical bindings to the United States. We will continue to treat this as the basis for an intensive partnership also in science and technology. DR. STEVER: We have heard from biologists and chemists, a physicist, and a mathematician, and now we are going to hear from a profession that has the capability either to draw all this together or to split it apart. Dr. Holderman, our next speaker, earned his B.A. degree from Denison University and his Ph.D. in political science from Northwestern University in 1961. And he was a professor of political science. He has served at the University of Illinois at Chicago Circle as associate chancellor and vice chancellor and as executive director of the Board of Higher Education of Illinois. He progressed through various posts in the academic world and then became president of the University of South Carolina. He is an authority on international education and the role of the campus as a progressive and dynamic influence in public affairs. He has held many international jobs, chairing many different groups and participating with leaders from many countries to bring them closer together. As a member of the National Science Board of the National Science Foundation, he is now chairman of the NSF Committee on Europe in 1992: Implications for U.S. Science and Technology. So he is in a good position to bring many of these thoughts together. DR. HOLDERMAN: I believe that what is needed more than anything else from the perspective of the United States is the courage of candor. Is the United States indeed ready for what we have been hearing about here? Is the educational system of the United States, the science and technology community, ready for 1992? I don't believe so. I feel a special obligation as a representative of both the National Science Board and higher educa- tion, and I feel quite strongly that as a nation we are not ready. I can think of no challenge greater than the fact that we are not educating people who can handle what 1992 and so many other events have thrust upon us. There is a general feeling among the populace that 1992 is truly the five-hundredth anniversary of the sailing of Christopher Columbus and not a great deal more. That is something with which we must begin to deal. There are three major issues I want to address: the broad nature and implications of the extraordinary changes occurring around the world and how they affect us, how our universities and our entire educational system have failed to adapt, and how we can change that for the better. Events of just the last year make the need to change obvious. One year ago the reunification of Germany seemed an impossibility; now it is inevitable. One year ago, in good conscience, South Africa and freedom could not be spoken about in the same sentence; now freedom in South Africa is on everyone's lips. And who would have imagined that Violeta Chamorro would be elected president of Nicaragua?

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38 EUROPE 1992 In fact, the world has undergone paradigm shifts in loyalties. In the Soviet Union, loyalty to obsolete political ideals moves in favor of loyalty to progress. In eastern Europe, loyalty, albeit imposed, to personality cults, is transformed by loyalty to individual freedom. In western Europe, loyalty to parochialism and loyalty to unity work together. Such transformations in loyalty underlie the social and political upheav- als around the world when we already face a world offering challenges enough a world beset by AIDS, poverty, and family dilemmas such as divorce, abortion, and abuse; a world in which ice storms strike Tokyo, London is besieged by hurricane-force winds, and in which rain forests disappear by the equivalent of almost a football field every second. It is a world in which some of the gloomiest predictions say global warming could one day leave all but the torch of the Statue of Liberty under water. Who else but our universities with their tremendous resources of people and capital can address these matters? In the midst of all this comes Project 1992. Elsewhere the integration of individual freedom and politics has set the pace, but in western Europe it is an economic integration and it is just as significant and just as courageous. Yet while the world has shifted toward integration, our universities remain trapped in ideas that no longer serve. We have not adapted. If Europe was suffering from Eurosclerosis, we have become prisoners of our own United Stasis. As a result, we are unable to provide the help that Europe and other nations seek which leads us to a second concern. Our distinguished guests from Europe have not come here to see Ameri- cans wash their dirty laundry, but what better place to acknowledge our problems than in the very building where scientists and engineers gathered to provide leadership on the Marshall Plan, in the very building where the American scientific community met to respond to Sputnik, and where the crucial questions of nuclear deterrence have been debated? In this special time and especially in this place, the truth demands our attention as Americans. The American education system, the main source of talent to resolve today's greatest dilemma, is crippled. It is crippled when 50 percent of our high school students in urban areas drop out of school and when those who remain are last in math, physics, chemistry, and biology compared with other industrial nations. It is crippled when the public school compensation rewards teachers not for their contributions as educators but for their ability to survive and for their seniority. And it is crippled when universities continue to reward specialists disproportionately while the world integrates. Elementary schools are separate from secondary schools; secondary schools are separate from universities; and university departments barely speak to each other. Akio Morita and Shintaro Ishihara in their book, A Japan that Can Say No, were right when they said Americans have forgotten how to change.

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 39 How strange that is for a country whose greatest strength was once its dynamism. Of course, in basic science our universities still lead the world. American basic science is why, in some fields, more foreign students get advanced degrees in the United States than our own students an incredible Irony. Unfortunately, such specialized success has blinded us to other possibilities. How many times has someone else come along and turned our know-how into their technological advances? The Academy leadership itself has warned us that preoccupation with a single discipline is dangerous. Last spring Erich Bloch reminded us that after World War II England's computer engi- neering and computer science programs were among the best, but the universities and industries did not work together and now Britain's universities are endangered by the country's larger economic problems. Frank Press himself has called for "full consideration of economic, envi- ronmental, and sociopolitical consequences." Demographics already suggest that in a few years such integrative talents will be even more important. These shifts will end a SOO-year epoch in which white men in a few countries controlled the world. And in speaking of white men and integration in the same breath, surely none of us miss some critical double entendres. At this conference integration means primarily economic integration on one continent, mainly with white men in charge. But in another context the meaning of integration makes America's glib talk of helping the EC ring hollow. How can we help provide an educated core of young people from all races when 63 percent of black students drop out of college? How can we help when we have not prepared for an America where by 2001 only 15 percent of the new labor force will be white males, compared with 51 percent today? How can we help with an America that is producing a generation whose most notable quality just might be its ignorance? With each day of inaction we leave the future in the hands of people who are unable to figure out what to do with it. But what can and must we do, ourselves, now? What can we do when change is not only in the air but is remaking the earth and the relationships among all its inhabitants? Commitments to react have been made time and time again in recent years but with little follow-through. Yet this is a rare gathering, a complex mosaic of leaders from two great continents candidly discussing mutual concerns. That one continent nearly half a century ago helped the other recover from the rav- ages of a terrible war tells us we can overcome great challenges. With that in mind, we can work to ensure that domestic crises don't impede America from again becoming a true scientific and technological compatriot. Such a sharing is not yet futile and it is on that note that I want to close. Domestic chaos does not have to destroy our mutual hope. First, we know inspired young people have overcome such chaos before. Religion, athletics, poetry, finance, industry, even the chance to save this planet, can

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40 EUROPE 1992 be such an inspiration again. We must alert young people that such inspira- tion is very real and very important. Consider the European Community's own example, Jean Monet, the Frenchman known as the father of the Common Market, who showed us all the potential of economic integration. Or consider this Academy, which has inspired so many universities to become first-class research institutions. Or people from Berlin to Capetown, from Nelson Mandela to Vaclav Havel, turning the world on its ear. We must help our young people draw inspiration and courage from such examples. This is the first path to a solution. Second, we must make education in grades K-12 exciting again. We must find feeder mechanisms by which the resources of our universities can modernize and recast our education system. Third and most importantly, our universities must change their own roles in society and must begin to do so immediately. Building from their strengths in basic research, universities must develop professionals, scientists, and teachers who can recreate secondary and elementary education across all sectors of our culture. We must deal with the question of academic politics. Some say it is so vicious because the stakes are so low. That is no longer true- the stakes are very high. The new world we have entered requires that kind of integrated training. Our young people, our love for them, our loyalty, not to yesterday but to our future and to their future, demand that we do all these things beginning now. Everywhere the alarms have gone off, and they are loud and clear. They are ringing in Europe, the Soviet Union, Latin America, South Africa in the skies, in our oceans, in our schools, in our factories, in our streets, in our homes; they are ringing more loudly with each passing day. They are the alarms that tell us to get up and to act. The courage to act and act decisively must come from each of us. We must enable our education system to meet the needs of our companies, your companies, and your industries. We are not ready. We must enable the United States to work with the European Community where it is needed. We are not ready. We must enable our teachers, our researchers, and our children to appreciate the integrated world we have entered. We are not ready. To make these things happen, to get ready, we must change the university's role in society, and we must begin now. Making all this possible is our challenge, yours and mine, and I look forward to making it a reality with you. DR. STEVER: We have had some excellent presentations, as promised, and now it is time for questions from the floor. MR. HADJILAMBRINOS: Constantine Hadjilambrinos, University of Delaware, also representing the Delaware Development Office. It seems to

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 41 me from the discussion we had both in the opening panel and in this panel that the big question in everybody's mind is where 1992 will lead the European Community. We have seen, from what one of the speakers talked about, that American companies or European companies that are owned by American companies face discrimination in Europe. While that might be so today, it might even be more so in the future if Europe proceeds with political integration along with economic integration. If political integration happens, Europe could entrench itself and build a wall around it and decide to become a competitor rather than a cooperator in the world scene. We have two possible futures, it seems to noteone where European cooperation provides for world cooperation and one where European inte- gration closes in on itself. I would like the commissioner to say how he sees the future with the possibility of political integration? Would that open up cooperation or would that be a detriment to it? DR. FASELLA: I think that the presentation of Vice President Pandolfi made it quite clear as to which way the Community, and certainly the Commission, is going. M. Delors has always been extremely clear about it and so have the commissioners who work with him. Like all processes that involve great change, it won't be easy and, of course, there will be backlashes and forces that will try to retreat, but all indications are that this notion of fortress Europe has really been overcome; it's not there. It's not there now, and it will not be so in the future. Pandolfi quoted the figures for international trade, and you saw how the Community trades much more than either the United States and, of course, enormously more than Japan. You saw the main points that the Community has tried to develop, which are first forming the union, but then opening up, liberalizing, and deregulating. In a way the stronger Europe becomes, the less it will need to be a fortress. In French this comes out very well; you could say, "Non, a l' Europe fortresse", no to Europe as a fortress, "Out, a l' Europe forte." And it is fully understood that if we want to be strong we must expose our companies to competition, including competition from other world partners, and the Americans are the strongest. Of course, when you are in the field, as Monsieur Duby made clear, there are problems such as those that IBM Europe met in participating in our programs. But he also said that this is progressively changing, that the political input from the top is in another direction and that this filters through. So I think that we are in the process of doing something new. There is a conviction that Europe must not try to build itself into a fortress because the very notion of fortresses is not a very good idea. Fortresses are needed when you feel weak and you feel you cannot defend yourself; sooner or later you will be starved in a fortress. We want to be open. The figures show that, and all the trends, including our presence here and Mr. Pandolfi's speech indicate that we want to be open. As Pandolfi said and it is something

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42 EUROPE 1992 we repeat very often to our firms the Common Market is an opportunity to all but a free ride to none. It will not be a free ride to European companies because they will have stiffer competition among themselves, and it will not be a free ride for weaker outsiders. But this, I think, is very much in the . . . American spirit. DR. DUBY: I would like to confirm Dr. Fasella's comment. The message I want to convey is that the facts do not exactly reflect Vice President Pandolfi's will and intent, but there is definitely progress in the right direction. I would also like to make a comment, this time not as an IBM executive but as a European citizen: I must say that the discrimination that American companies feel in Europe is nothing compared to the discrimination that European companies feel and I apologize to this wonderful country which I love and where I'm a guest today in the United States. DR. REMBSER: The magic date, 1992, will not change anything in a very large scale compared to 1990. The economic interests of Europe and European enterprises in having an open market, in operating in the United States, and in having competition are so large that there will be no fortress Europe. On the other hand, I think you in the United States with your big market, your big community, you have to learn a process of transboundary cooperation that Europe has learned perhaps a little better in the past 25 years. Perhaps also activating the consciousness of your people that there is a Europe where you have a historical role is also a very important necessity. This would be one element of the program James Holderman presented here. MR. FRENCH: Larry French, North American Philips. Dr. Duby just stole some of my thunder, but I really am envious of IBM's position in Europe, and I hope sometime to have equal opportunity to talk about dis- crimination in the United States. In the United States, foreign-owned U.S.- based companies are not allowed to participate in research programs of any nature, such as SEMATECH or the newly formed DARPA programs. And it would seem that reciprocity of participation in U.S. R&D programs is in order. As a matter of fact, I think that it was recently announced that IBM participates in JESSI, but a company that we hold dear here in the United States such as Signetics is denied participation. So I think some of the concern here perhaps exists on this side of the ocean as well. DR. FASELLA: We are concerned about this problem. We have a report called An Overview of International Participation in U.S. Federally Funded R&D, and we have a pretty thick study with a list of European companies that complain very much about the type of discrimination they find in the United States, which has just been mentioned. I did not want to raise this issue today, trying to be disciplined, which is very difficult for a person born in Italy, but now I've been tempted to go beyond this. The topic here is access to EC programs and not access of Europeans to

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 43 American programs. We should embrace the approach of symmetry, and I must say I'm glad that this point was raised. But it is a very serious point and perhaps we should have a symmetrical meeting to discuss the type of problems just raised, what chances U.S.-based subsidiaries of European companies have to gain access to American programs. DR. DUBY: I would like to add that the position of the IBM Corporation on this issue has always been that of total reciprocity. We believe that on each side of the ocean free access to government programs should be given to foreign-held companies on the strict basis of the research, development, and manufacturing they do in the country. I personally don't want to interfere with the legislative process in this country, but I understand that there is a bill, proposed by one of your senators, that says exactly this and includes reciprocity conditions. I guess that if similar laws were passed on both sides of the ocean, it would definitely be a very big step toward cooperation between our two entities I was going to say our two countries. MR. KALIL: Tom Kalil, Labor Industry Coalition for International Trade. Vice President Pandolfi kicked things off by saying that the United States and the EC ought to get specific and not just deal with Framework propos- als. I'd like to ask the panelists in what specific areas they see opportunities for cooperation in information technology. DR. DUBY: There are many areas in information technology where there is possible cooperation. My personal point of view is that we should look for areas that will materialize in the twenty-first century. Otherwise we run the risk of being nonprecompetitive; also we should not try to fix the problems of tomorrow but the problems of a couple of days after tomorrow. So in the technology area, for instance, I would see submicron electronics. Also, I would see areas like advanced methods of software engineering, based on some research breakthrough needed in logic or information theo- ries. Probably a third area is nonclassical computer architectures, I mean non-don Neumann architectures, such as highly parallel machines. But this is just a personal point of view. The main idea is really to shoot for 10 years ahead. MR. CVIJANOVICH: George B. Cvijanovich, AMP, Inc. I was listening very carefully and I was missing one thing, and this is the separation be- tween research and development as an idea-driven activity and implementa- tion of research and development in the industry. I think that the major difficulty, from what I hear from European organizations, will come in the domain of implementation, for a very simple reason. The European Community Is a very compact organization, and I think we will see some resistance, as we already have from the IBM example, where on the other hand the United States is a very loose organization. Therefore, the question arises here: Since industry lives on the patent, the invention, the priority, what are the organizational guarantees in the

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44 EUROPE 1992 European Community that this will remain an effective way of implement- ing technology? What are your patent laws? What are your protection laws? You see, before it was easy. The corporations had to deal with governments, single governments and mostly through subsidiaries, whereas now there is an additional layer of inhibitors between the implementation and the discovery. DR. REMBSER: From my experience in national R&D policy, I would say that the question of implementing R&D results is a matter for the enterprises themselves, at least in the German policy and I think also in the EC policy. There are no direct measures from the EC or from governments to intervene directly in the implementation in the last stage of the innovation process, in the building up of manufacturing systems, in going into the market. This is really a matter for the enterprises. But there is a very important task for the public sector, to ease this process by tax systems, by advisory services, by norms and standards. I also would say it is important that the whole education process sends engi- neers and scientifically trained people to industry who are aware of the importance of modern technology. But what you heard here, at least from the EC side and the national government side, is their activity in the R&D phase of the innovation process, not so much in the implementation of the results. I hope I got your question right. DR. FASELLA: I would like to confirm what Dr. Rembser has just said on the Community side. The implementation of results is indeed the business of business. It's companies that must do that. I think public authorities, both national and Community authorities, have the responsibility to create a productive environment. Specifically in the Community, we must be very careful to avoid the creation of nontariff barriers, so that indeed the large unified market we all hope for is not fragmented again through different norms, different standards, different patent laws. So we do have a responsi- bility, certainly not that of taking the job of industry and companies in developing products, but in norms and standards, patent laws, open regula- tions, and education. On the latter point, education in the technical areas is a key aspect in Europe. Do not forget that we have nine languages, so that even to survive in Brussels, to go from your office to the toilet and from the toilet to the garage, you have to use three different languages. At the technical level this is very important, even though they say everybody speaks English or at least the Community variety of it. But it's not so widespread, and the national languages are an important heritage and must be respected. This requires an enormous effort in education, and this is a bit of what I was saying before about the importance of our program for facilitating move- ment within Europe at the postdoctoral level. Even the largest of our coun- tries, the Federal Republic of Germany, probably has the largest number of centers of excellence in Europe, but it cannot have the same number of centers

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ACCESS TO PRECOMPETITIVE RESEARCH PROGRAMS 45 of excellence as the United States, just because it's smaller. We do have to make it so that it's not so difficult for somebody to move from Heidelberg to Cambridge and from Cambridge to Bonn. This is an enormous educational problem on which the firms are becoming very attentive, because they find that if a German firm wishes to open a subsidiary in Spain it's very useful to have somebody who has all the German approach and is very thorough but understands the Spanish system and speaks the language. This is a nontrivial aspect, and it's a problem that you in the United States do not have unless you become bilingual, too, or trilingual, if we add the Asians. MS. TYSZKIEWICZ: Mary Tyszkiewicz, Syracuse University. Why should we be concerned about access to the European Community program? I was hoping the panel could articulate the specific benefits of cooperation. Have there been formal assessments or evaluations of the programs, especially from more than just a social aspect but also economic? What types of products have come out, and what type of money can we put to some of these benefits? Or is it too soon? DR. DUBY: I gave three reasons why a company like IBM would want to participate. Let me try to give an example as a fourth one. IBM took part in an ESPRIT program called CIMOSA. This program produced European standards, and IBM, when it recently announced its own computer integrated manufacturing architecture, committed to support European CIMOSA stan- dards. The benefits for both parties are obvious. For IBM the fact that we participated in that program allowed us to be aware of what was going on in its prenormative activity while taking part in its construction. For our European partners, the fact that IBM announced this new standard as part of its offering is helping their standard to be established on a worldwide basis. That's another example of the mutual gain that can be expected. I guess Dr. Fasella agrees with me. DR. FASELLA: Absolutely. Moreover, the problem of the evaluation of programs was raised. In all our specific programs, those that implement the Framework program are generally of four to five years' duration. And for each one we must set up panels of independent experts who scrutinize the program in its various aspects, once halfway through and another time when the program is finished, not only to see if it was competently implemented but also to determine the scientific and technological results and, especially for some programs, the economic and social aspects. This is a very inter- esting process; it is generally painful because the experts are really inde- pendent and they are generally rather critical but very useful. I think it's an interesting approach. There is still a lot to be done to improve the technique of this evaluation, but it should not be pushed too far. I think that in Europe Germany was the first country to introduce the evaluation and also the first to become a little bit more cautious as to its value. But on this I think Dr. Rembser can say more than I can. DR. REMBSER: I will add only one element, about the benefits. One of

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46 EUROPE 1992 the additional benefits I see in Germany is that our small and medium-sized companies learn to maneuver on the international market by participating in European projects. They learn to maneuver beyond the borders using different languages, looking into different thinking. To give you an example, in the ESPRIT I program about 13 small and medium-sized German companies participated. In ESPRIT II more than 60 small and medium-sized companies participated. So there are more and more advantages you can draw from programs of transboundary cooperation. MR. DOYLE: Jack Doyle, Institute of Electrical and Electronic Engineers. I've been bothered by the description of the kind of R&D we're talking about here and what it really is. On the one hand, we hear that it's very basic or, a new word to me, precompetitive. Somebody said it's very difficult to draw the line as to when you're really getting into product development, and I would agree that's very true. But then again when I hear about this I also hear, well, only those who are in it are going to be allowed to hear the results. I would make a suggestion, and I would like to hear any comments on it, that maybe the rule should be, in order to draw that line, simply that in an organizations like the EC one can do any kind of R&D as long as the results are public knowledge all over the world once it's done. DR. FASELLA: I think we cover a fairly broad spectrum of research activities. We start with some fundamental research. We even have a program called science that has no predetermined limits but is there just to pick up new ideas that might otherwise fall between multiple chairs, programs that could be too German to be British, too British to be Danish, too much physics to be biology, etc. We do have some fundamental programs, and in them the results are generally published in accepted journals. Then you have the whole spectrum and without ever reaching closeness to market, we do go toward the market. For these programs there are foreseen special laws that define intellectual property rights. They recognize the right of the inventor, and don't forget that for those programs companies generally pay at least 50 percent. It specifies under which conditions nonexclusive licenses may have to be given, this, I think, is altogether a reasonable approach. You handle the distribution of results differently depending on whether you are very much on the fundamental side or whether you are approaching the market. MR. DOYLE: These latter programs that you described, are they supported in all or in part by government money? DR. FASELLA: The latter ones are generally supported around 50 percent by Commission- MR. DOYLE: Yes, by government money. DR. STEVER: Thank you very much and I'd like to thank the panelists for all of us. Your unanswered questions will be answered tomorrow.