Cover Image

PAPERBACK
$77.50



View/Hide Left Panel

International Friction and Cooperation in High-Technology Development and Trade

PAPERS AND PROCEEDINGS

Charles W. Wessner, Editor

Based on a Conference held in Washington, D.C. on 30-31 May 1995

Board on Science, Technology, and Economic Policy

National Research Council

NATIONAL ACADEMY PRESS
Washington,D.C.
1997



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings International Friction and Cooperation in High-Technology Development and Trade PAPERS AND PROCEEDINGS Charles W. Wessner, Editor Based on a Conference held in Washington, D.C. on 30-31 May 1995 Board on Science, Technology, and Economic Policy National Research Council NATIONAL ACADEMY PRESS Washington,D.C. 1997

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings NATIONAL ACADEMY PRESS 2101 Constitution Ave., N.W. Washington, DC 20418 The National Academy of Sciences is a private, nonprofit society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by Congress in 1863, the Academy has a mandate that requires it to advise the federal government on science and technical matters. Dr. Bruce Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce Alberts and Dr. William A. Wulf are chairman and vice chairman, respectively, of the National Research Council. Limited copies are available from: Board on Science, Technology, and Economic Policy National Research Council 2101 Constitution Ave., N.W. Washington, DC 20418 202-334-2200 Additional copies are available for sale from: National Academy Press Box 285 2101 Constitution Ave., N.W. Washington, DC 20055 800-624-6242 202-334-3313 (in the Washington Metropolitan Area) International Standard Book Number 0-309-05729-9 Copyright 1997 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings For the National Research Council, this project was overseen by the Board on Science, Technology, and Economic Policy (STEP), a standing Board of the NRC established by the National Academies of Sciences and Engineering and the Institute of Medicine in 1991. The mandate of the STEP Board is to integrate understanding of scientific, technological, and economic elements in the formulation of national policies to promote the economic well-being of the United States. A distinctive characteristic of STEP's approach is its frequent interactions with public and private sector decisionmakers. STEP bridges the disciplines of business management, engineering, economics, and the social sciences to bring diverse expertise to bear on pressing public policy questions. The members of the STEP Board are listed below:* A. Michael Spence, Chairman Dean, Graduate School of Business Stanford University James T. Lynn Advisor Lazard Freres John A. Armstrong Amherst, Massachusetts Burton J. McMurtry General Partner Technology Venture Investors James F. Gibbons Dean, School of Engineering Stanford University Ruben Mettler Chairman and CEO (retired) TRW, Inc. George N. Hatsopoulos President and CEO Thermo Electron Corporation Mark B. Myers Senior Vice President Xerox Corporation Karen N. Horn Chairman and CEO Bank One Cleveland Donald E. Peterson Chairman and CEO (retired) Ford Motor Company Dale Jorgenson Frederic Eaton Abbe Professor of Economics Harvard University James M. Poterba Professor of Economics Massachusetts Institute of Technology Ralph Landau Consulting Professor of Economics Stanford University George M. Whitesides Professor of Chemistry Harvard University Staff Stephen A. Merrill Executive Director Charles W. Wessner Program Director Lena J. Lawrence Administrative Assistant George Georgountzos Program Associate *   Membership as of May 1995

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings NATIONAL RESEARCH COUNCIL BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY Sponsors The National Research Council gratefully acknowledges the support of the following sponsors: The German-American Academic Council Northern Telecom Limited MEMC Electronic Materials, Inc. Trimble Navigation Samsung Electronics Co., Ltd. Varian Associates, Inc. Hitachi, Ltd. Siemens Corporation Philips Electronics N.V. AT&T General Electric Company Program Support for the Board on Science, Technology and Economic Policy is provided by a grant from the Alfred P. Sloan Foundation. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the views of the project sponsors.

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings PROJECT STEERING COMMITTEE Erhard Kantzenbach, Co-Chairman President Hamburg Institute for Economic Research Institute für Wirtschaftsforschung Hamburg GERMANY Richard E. Baldwin Professor of International Economics Graduate Institute of International Studies Geneva SWITZERLAND Charles Fine Associate Professor of Management Sloan School of Management Massachusetts Institute of Technology Cambridge, Massachusetts USA Frieder Meyer-Krahmer President Fraunhofer Institute for Systems Analysis and Innovation Research Karlsruhe GERMANY Sylvia Ostry Chairman Centre for International Studies University of Toronto Toronto CANADA George M. Scalise Executive Vice President and Chief Administrative Officer Apple Computer, Inc. Cupertino, California USA Alan Wm. Wolff, Co-Chairman Managing Partner Dewey Ballantine Washington, D.C. USA Horst Siebert President Kiel Institute for World Economics Institute für Weltwirtschaft Kiel GERMANY Luc L.G. Soete Professor Maastricht Economic Research Institute for Innovation and Technology (MERIT) Maastricht THE NETHERLANDS William J. Spencer President and CEO SEMATECH Austin, Texas USA Hiroyuki Yoshikawa President University of Tokyo Tokyo JAPAN Gerhard Zeidler Chairman, Committee for Research and Development Confederation of German Industry Bonn GERMANY

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings THE BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY wishes to acknowledge the many fine contributions of the conference speakers and participants from global high-technology corporations, universities and think tanks, and senior policy officials from the United States and other governments. The Board especially wishes to recognize the contributions of the project chairmen, Dr. Erhard Kantzenbach and Ambassador Alan Wm. Wolff, to the success of this complex international endeavor. The Steering Committee deliberations benefitted especially from the experience and expertise of William Spencer of SEMATECH, George Scalise of National Semiconductor, now president of the Semiconductor Industry Association, and Sylvia Ostry of the University of Toronto. The Board also wishes to extend special recognition to Charles Wessner, who was responsible for organizing this exceptionally comprehensive conference, and George Georgountzos, whose assistance was instrumental in assuring its success.

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Contents PREFACE   xiii I. INTRODUCTION   1 II. PROCEEDINGS   9     Welcome Robert White, President, National Academy of Engineering   11     Introductions by Project Co-Chairs Alan Wm. Wolff, Dewey Ballantine Erhard Kantzenbach, HWWA   13     The End of the Endless Frontier The Honorable Jeff Bingaman, U.S. Senate   16     The Multilateral System and National Economic Strategies PANEL 1 MODERATOR: Mark Dadd, AT&T   25     Producer versus Consumer-Oriented Economies Bruce Scott, Harvard University         The Challenge of the East Asian Economic System James Fallows, The Atlantic Monthly         Consequences for the International Economic System Lawrence Chimerine, Economic Strategy Institute         Discussion    

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Regional Cooperation in Core Technologies: The Case of Airbus PANEL 2 MODERATOR: Karl-Heinz Paqué, IfW   46     An Assessment of Project Goals, Means, and International Consequences David Mowery, University of California at Berkeley         The American Reaction Sally Bath, Department of Commerce         Lessons and Prospects: Industry Views Raymond Waldmann, The Boeing Company Jonathan Schofield, Airbus Industries         Discussion         Luncheon Address: International Competition for High-Technology Industry and the Multilateral Trading System The Honorable Jeffrey Lang, Deputy United States Trade Representative   62     National Policies in Support of High-Technology Industry PANEL 3 MODERATOR: Horst Siebert, IfW   71     French and German Technology Acquisition, Diffusion, and Development J. Nicholas Ziegler, Massachusetts Institute of Technology         Japanese Technology Acquisition, Diffusion, and Development Y. Takeda, Hitachi         Evolution in National Policy Support Kazuhiko Hombu, MITI         U.S. Technology Acquisition, Diffusion, and Development: Assessment of Current Trends Chris Hill, George Mason University         Discussion         From Conflict to Cooperation: Trade in Semiconductors PANEL 4 MODERATOR: Michael Borrus, University of California, Berkeley   89     Current Trends in the Semiconductor Industry Claudine Simson, Nortel         Capital Costs, Standards, and the Need for Cooperation Y. S. Kim, Samsung Electronics         Strategic Partnerships: Challenges and Opportunities Owen Williams, Motorola         Discussion    

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings     Foreign Direct Investment Restrictions: Consequences for Trade and Technology PANEL 5 MODERATOR: Sylvia Ostry, University of Toronto   107     Investment, Trade, and Corporate Strategies Bruce Duncombe, Department of State         Asymmetries in National Patterns of Foreign Direct Investment: Consequences for Trade and Technology Development Simon Reich, University of Pittsburgh         Sanctuary Markets and the Development of New Industries Michael Gadbaw, General Electric         Discussion and Close of First Day's Proceedings         Second Day's Welcome Charles Wessner, National Research Council   119     Introduction E. William Colglazier, Executive Officer, National Research Council   120     Opening Address The Honorable Daniel Goldin, Administrator, NASA   121     Dual-Use Technologies and National Security PANEL 6 MODERATOR: W. Clark McFadden, Dewey Ballantine   130     A New Model for Defense Acquisition Paul Kaminski, Department of Defense         Policy and Budgetary Drivers William Andahazy, U.S. House of Representatives Staff         Dual-Use: Implicit Japanese Policy Richard Samuels, Massachusetts Institute of Technology         Military, Commercial, and International Realities Jacques Gansler, TASC, Inc.         Research, Economic Growth, and Competitiveness PANEL 7 MODERATOR: Ozzie Silverman, Government of Canada   153     Defense Research and Technological Superiority Anita K. Jones, Department of Defense         Public Funding of Research: A Strategic Imperative? Charles Curtis, Department of Energy         Foreign Contributions to the U.S. Research Base Knut Merten, Siemens Corporate Research    

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings     International Cooperation and Market Access in Telecommunications PANEL 8 MODERATOR: W. Bowman Cutter, National Economic Council   168     Global Opportunities Carlos Primo Braga, The World Bank         The Need for Market Access Don Abelson, Office of the United States Trade Representative         An Industry View Randolph Lumb, AT&T         Participation in National Technology Development Programs PANEL 9 MODERATOR: Charles Wessner, National Research Council   181     Opportunities and Challenges in International Collaboration: Civil and Military Perspectives William Spencer, SEMATECH Marc Pelaez, U.S. Navy         Criteria for Foreign Participation in National Programs William Keller, Office of Technology Assessment         Public and Private Programs and International Cooperation PANEL 10 MODERATOR: Anne Solomon, Department of State   198     The Intelligent Manufacturing Systems Program: Two Perspectives Robert Cattoi, Rockwell International U. Uwatoko, Toyo Engineering         European Programs: EUREKA and the European Framework Reinhard Loosch, EUREKA Secretariat         Discussion         Strategic Alliances Among Private Firms PANEL 11 MODERATOR: Stephen Merrill, National Research Council   216     The Growth in Strategic Alliances: Rationales and Types Carol Evans, Georgetown University         Issues for Alliance Partners Charles White, Motorola         National Technology Programs and Strategic Alliances in a Global Economy: A Challenge for Public Policy? Alan Tonelson, Economic Strategy Institute         Concluding Remarks   230     National Investments and Global Economic Competition Lionel Johns, Office of Science and Technology Policy    

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings III. PROJECT PAPERS   237     The Concept of National Economic Strategy Bruce R. Scott, Harvard Business School   239     Japan: The Philosophy of Government Support for Information Technology John P. Stern, Asian Technology Information Program   267     Asymmetries in National Patterns of Foreign Direct Investment: Consequences for Trade and Technology Development Simon Reich, University of Pittsburgh   278     Technology Issues in the International Trading System Sylvia Ostry, University of Toronto   304     Dumping: Still a Problem in International Trade Thomas R. Howell, Dewey Ballantine   325

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings This page in the original is blank.

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Preface This volume is part of an innovative, international project on the Sources of International Friction and Cooperation in High-Technology Development, Competition, and Trade, organized under the auspices of three cooperating institutions—the Hamburg Institute for Economic Research, the Kiel Institute for World Economics, and the National Research Council's Board on Science, Technology, and Economic Policy. The three institutions were brought together through a grant by the German-American Academic Council (GAAC).1 As its first policy project, the GAAC chose to sponsor an examination of the development of new technologies and the industries based on them. These technologies and industries are sources of economic growth and high-wage employment; competition for high technology markets makes them also a source of growing international friction that, over time, could undermine both the multilateral trading system and the tradition of shared scientific and technological information. Because policy questions related to trade, investment, technology developments and cooperative activities have both national and international dimensions, their analysis can only benefit from a variety of perspectives. Moreover, one of the project's goals was to ensure that the project yield practical policy recommendations for national governments. Consequently, every effort was made to bring a variety of perspectives to bear, not only 1    Established in March 1993, the purpose of the Council is to support cooperation between Germany and the United States in all fields of science and scholarship by providing a forum for transatlantic dialogue and by collaborating on policy studies on issues confronting decisio nmakers in both countries.

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings scholarly analysis and technical expertise, but also business management and government policymaking experience. Accordingly, an innovative structure was adopted to secure the broadest participation with respect to project guidance, finance, conferences, and related activities. PRIVATE SECTOR PARTICIPATION The generous GAAC grant covered the costs of participation for the German institutes and provided a foundation for the fundraising effort required of the National Research Council to meet its different budgetary requirements as a private independent institution. The challenge of securing adequate funding was also seen as an opportunity to secure broad private sector participation in the information-gathering phase of the project. Validating the project's concept and the GAAC's interest, the National Research Council succeeded in assembling a group of private sponsors very diverse in terms of nationality, sector of activity, and corporate size. These corporate contributors and participants included companies based in the United States, the Netherlands, Japan, Canada, Korea, and Germany, with operations across a broad range of high-technology sectors such as consumer electronics, semiconductors, computers, telecommunications, turbines, and materials. The participating companies include Northern Telecom, Siemens, Hitachi, Samsung, Philips, General Electric, MEMC, Trimble Navigation, Varian Associates, and AT&T. The substantive and financial contributions of the project sponsors were essential to the success of this undertaking. Without their financial support, the NRC could not have carried out a project of this scope and intensity. Equally important, the active participation of senior industry representatives from these sponsors and a wide range of other companies, as well as of academic experts and senior policymakers, helped ensure that the presentations and discussions of the conferences accurately reflected the genuine opportunities for increased cooperation, the realities of global commercial competition for high-technology markets, the national stakes inherent in this competition, and the resulting policy challenges. THREE CONFERENCES Each of the cooperating institutions was responsible for an independently organized conference reflecting its particular analytical strengths, policy interests, and traditions. The first conference, The Economics of High-Technology Competition and Cooperation in Global Markets, was held at the Hamburg Institute for Economic Research (HWWA) in Hamburg, Germany, on 2-3 February 1995. This conference was designed to lay the theoretical and empirical foundations of the study, addressing new growth

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings theories, strategic trade theory, and issues of industrial organization as well as issues related to different national approaches to technology policy.2 The second conference, The Sources of Friction and Cooperation in High Technology Development and Trade, was hosted by the National Academy of Sciences on 30-31 May 1995 in Washington, D.C. and is the subject of this volume. The third conference, Toward a New Global Framework for High-Technology Competition and Cooperation, took place at the Kiel Institute of World Economics on 30-31 August 1995 in Kiel, Germany. This last conference in the series considered policy prescriptions with special emphasis on multilateral or plurilateral rules and mechanisms for conflict avoidance.3 The respective host institutions are each responsible for the publication of their conference volume. This volume is the second in this series of three conference volumes. In keeping with the NRC tradition of producing conference proceedings, as well as papers, when merited by the quality of the presentations, this volume includes both the presentations of the large number of distinguished speakers and comments of conference participants as well as commissioned papers prepared to address topics of particular relevance to the issues covered in the course of this conference. A MULTINATIONAL STEERING COMMITTEE The final report of this project was produced by the National Research Council in cooperation with the two German institutes under the direction of a multinational Steering Committee. The Steering Committee provided leadership and direction for the project as a whole. It was composed of distinguished academics, leading business executives, trade and technology policy practitioners, and other experts. The Committee included members from Canada, Japan, and other European countries as well as Germany and the United States.4 The diverse national perspectives and training of this distinguished Committee brought a multidisciplinary and global perspective to the complex issues considered by the project. Different perspectives have a value in their own right but by no means assure consensus. The Steering Committee discussions involved a sustained effort to identify the limits of consensus on a broad range of analytically difficult and often contentious issues of great consequence for international cooperation in science, technology, and trade. 2    See Georg Koopman and Hans-Eckart Scharrer (eds.), The Economics of High-Technology Competition and Cooperation in Global Markets. HWWA Institute for Economic Research, Hamburg, Germany, 1996. 3    See Towards a New Global Framework for High-Technology Competition and Cooperation. Kiel Institute of World Economics, Kiel, Germany, forthcoming. 4    The members of the Steering Committee are listed on page iv.

OCR for page R1
International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings The Steering Committee met on four occasions under the co-chairmanship of Professor Dr. Erhard Kantzenbach, president of the HWWA and Ambassador Alan Wm. Wolff. Three of the meetings were held in conjunction with the conferences, in which Committee members were principal participants. The final deliberative meeting, which took place at the NRC in Washington in December 1995, took into account the conference papers, presentations, and discussions, and the analysis prepared by the three institutions. In the course of this final meeting, the Steering Committee agreed to a comprehensive and significant set of recommendations on a series of interrelated and highly complex issues. These Findings and Recommendations form the basis for the summary report of the project. A SUMMARY REPORT That report, entitled Conflict and Cooperation in National Competition for High-Technology Industry, includes the Findings and Recommendations of the Steering Committee, and revised versions of the two reports considered by the Committee at its final meeting, the first prepared by the NRC staff, the second jointly prepared by the HWWA and IfW staffs.5 The Recommendations and Findings underscore the importance of the subject matter and address specific issues of technology and trade policy, government support of research and development, and policies affecting international cooperation. In the rare instances where no agreement was possible, the Steering Committee acknowledged its inability to achieve consensus on a recommendation. The recommendations also highlight the need for additional information and identify specific areas that would benefit from further analysis. This volume represents a key element in the Steering Committee deliberations. The presentations, discussions, and papers included in this volume illuminate many of the complex issues addressed by this project. Indeed, the questions addressed in this timely and comprehensive conference remain central elements of the international economic dialogue. Alan Wm. Wolff Project Co-Chairman 5    National Research Council, Conflict and Cooperation in National Competition for High Technology Industry. National Academy Press, Washington, D.C., 1996.