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4 Conclusions and Recommendations In this consensus statement, the Panel on Advanced Technology Competition and the Industrialized Allies has described why the United States must elevate, in the scheme of national priorities, efforts to strengthen the nation's capacity for technological innovation, including a vigorous international trade position. The panel believes that the U.S. advanced technology enterprise has been undervalued in the past and now must be placed as one of the nation's most valued objectives. The panel has described also how the United States may negotiate internationally to strengthen the international trading system in harmony with healthy, mutually beneficial trading relations, and how the United States may respond should these international efforts fail. The following is a summary of the panel's conclusions and recommendations. . CONCLUSIONS The United States must act now to preserve its basic capacity to develop and use economically advanced technology. This innovative capacity is essential for the self-renewal and well-being of the economy and the nation's military security. Trade in advanced technology products and services will contribute enormously to our economic health. Advanced technology products and processes not only permeate the economy, increasing productivity, but also form the basis of modern defense hardware. The nation's capacity for technological innovation is vulnerable both from domestic weaknesses and from damaging practices of other nations. Measures designed to 52

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53 maintain this vital aspect of the American economy within a healthy international trading system will include both domestic actions and international negotiations. Effective actions require a sound understanding of the nature of innovative capacity and of the innova- tion process through which it is primarily manifest. Innovative capacity is the capability, widely diffused throughout the economy, to produce continuously forefront technological resources, and to use those resources for the national benefit. The innovation process includes not only basic research and development, but also pro- duction, marketing, and distribution in domestic and foreign markets. Each part of the process must be sound for success. Some of the elements that support our nation's Innovative capabilities include a strong national research base, technically educated manpower and a technically literate population, capable and farsighted industrial managers, a financial base that provides capital to both new and established firms, and sizable markets. Essen- tial, too, are a national understanding of and attention to advanced technology as a vital contributor to the national welfare. i . The U.S. government has in effect a range of policies and practices including tax policies, patent laws, regulation and deregulation, antitrust measures, export/import bank loans, government procurement, and others that, although designed to serve other national objectives, also affect the U.S. technological enterprise and international trade position. These policies and practices and the other domestic and international elements affecting U.S. technology and trade must be well understood by senior policymakers. If viewed in ensemble, existing government instruments may become powerful means to support U.S. technology and trade interests. Responsibility for improving U.S. performance in advanced technology and trade rests to a large degree with the individual firm and its management. Successful managers increasingly will have to be cognizant of frontier technologies as they build businesses and compete in an international world. . Our major industrialized allies--most notably Japan and France--have designed comprehensive national policies to help ensure successful technology and trade development in major sectors. Thus, individual U.S. firms often find themselves competing internationally,

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54 . not with firms acting alone, but with countries or with consortia of firms with country backing. There is considerable dispute among industrialized allies regarding which practices are acceptable and which are not. Efforts to evaluate practices are protracted and difficult, but essential. RECOMMENDATIONS Accordingly, the panel recommends the following: . Advanced technology development and trade must be considered as among the highest priorities of the nation. These vital interests must be well understood domestically and conveyed to our trading partners. The United States must initiate a two-part strategy: to maintain the nation's canacitv for technological innovation and to foster an open healthy international trading system. The federal government should initiate a biennial, cabinet-level review that comprehensively assesses U.S. trade competitiveness and the health of the nation's innovative capacity in both relative and absolute terms. This review should consider the nation's overall performance: the private sector activities and the totality of government actions on technology and trade, as well as the effects of other governments' practices. These assessments would consider the strength of key technological sectors across all stages of the innovation process--research, development, manufacture, and distri- bution. In addition, assessments would evaluate broad elements as they affect innovation, such as the macroeco- nomic environment, regulatory policy, patent policy, and antitrust policy. Careful attention would be given to maintaining the health and effectiveness of both university- and industry-based research, education, and training. The cabinet-level review should be supported by a continuing mechanism that would draw on expertise both from within the government and from outside. Managers of private firms must be cognizant of technological trends as they make renewed efforts to build businesses and compete in an international context. Managers should consider new institutional arranamm~n~-c-- ~ ~ ~ ~ _ _ - .: ~ . . _ . ~ = y`~w.~y, mucua' By supportive, industry-university research relationships, cooperative research ventures among groups of firms, or consortia to seek information and ideas systematically from abroad.

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55 Internationally, the United States should negotiate in existing forums to encourage a healthy mutual trading system. This should include continued efforts to evaluate national trade practices and to agree on criteria for acceptability. An objective must be to encourage open markets and healthy competition. Countries, including the United States, throughout negotiations should be prepared to alter fundamental policies so that each country may maintain advanced technology capacities fundamental to its individual welfare. The United States should review the content and application of its trade laws to ensure that U.S. indus- tries can obtain timely and meaningful trade and/or other relief in the U.S. market when imports from particular countries, based on unreasonable or excessive foreign industrial policies, threaten them. If key technology industries essential to national economic welfare and military security are considered endangered by the actions of another country, even with all necessary domestic efforts to strengthen these sectors, then the United States should negotiate with the other country requesting immediate relief. Negotiations should take place first in existing forums, explaining our country's vital interest in preserving advanced tech- nology capacity. If such mechanisms prove ineffective or too slow to prevent damage to essential U.S. capabilities, then the United States should negotiate directly with the country in question. If those bilateral negotiations fail or if the threat of damage is imminent, the United States should take immediate unilateral actions as a step of last resort. The panel concludes that the advanced technology enter- prise has the potential to contribute significantly to economic and social welfare, both in the United States and throughout the world. It is essential that the indus- trialized allies work individually and cooperatively toward advanced technology development and a healthy free trade system for their mutual benefit.

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