Conflict and Cooperation in National Competition for High-Technology Industry (1996)

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RECOMMENDATIONS AND FINDINGS 5 III. Steering Committee Policy Recommendations and Findings* 1. High-technology products and their development require particular attention in light of their importance to the national economy and because these industries are the target of industrial policies of many participants in the multilateral trading system. OPEN MARKETS 2. Markets for high-technology industries should be open and contest- able. Market openness through both trade and investment is a powerful means for improving national and global welfare. 3. Governments should seek to enhance competition, and thereby in- crease global efficiency, rather than resisting market forces and discourag- ing competition. 4. Public policymakers should avoid restricting, wherever possible, transnational cooperative efforts among firms, provided that sufficient com- petition is preserved. *Recommendations and Findings Endorsed by all Members of the Steering Committee. 5 

6 CONFLICT AND COOPERATION GOVERNMENT SUPPORT FOR RESEARCH 5. Government support for public research infrastructure and its link- ages to private sector research is essential for scientific and technological progress. In addition, governments should support research and develop- ment for essential government functions. 6. In general, social benefits of R&D exceed private benefits of R&D, providing justification for government support. 7. When supporting R&D, governments should generally support R&D itself, and not target products or trade to avoid distorting markets. 8. Government can serve as a facilitating agent to create the necessary credibility, commitment and mutual trust among private firms in the forma- tion of research consortia. It would be valuable for policymakers to learn from private sector experiments in structuring, and participating in, interna- tional consortia undertaken to reduce the risks and costs associated with the development of new technologies and standards for their application. 9. Governments should be encouraged to allow qualified foreign enti- ties’ participation in national R&D programs which receive government support, on conditions which are transparent, mutually agreed, and mutually beneficial. To the extent that international agreements have not been reached, governments’ national benefits requirements for participants in national technology development programs should seek to avoid imposing constraints on private participants concerning the transfer or deployment of technologies resulting from such programs. 10. Effective protection of intellectual property is also a key element of viable programs of international cooperation in research and development. TRADE ISSUES 11. With respect to the Subsidies Code of the General Agreement on Tariffs and Trade (GATT), governments should consider, in light of current experience, eliminating the special treatment (greenlighting)* now provided for R&D and certain other subsidies. 12. Effective and adequate protection of intellectual property rights is essential for encouraging innovation, and its commercial exploitation, throughout the global economy. 13. Governments must also address challenges to the existing intellectual property regime. These challenges include: differences in intellectual property regimes among major trading countries; effective enforcement in the rapidly industrializing countries; the issues posed by rapid technological change in high-technology industries such as biotechnology (e.g., the Human Genome *Editor’s note: “greenlighting” refers to subsidies that are not actionable under trade remedy provisions because their purpose is internationally accepted. 

RECOMMENDATIONS AND FINDINGS 7 Project); and the global information infrastructure (e.g., copyright of digital information). International negotiations are needed to adjust existing norms. 14. Foreign direct investment remains a central issue in high-technology development and trade. It is a major channel for both technology and trade flows. An effective international investment regime based on a multilateral investment accord should promptly be completed. Excessive incentives in competition for new investments should be limited at the national, regional, and perhaps international level. Compulsory technology transfer must be prohibited. Market access through investment must be open. 15. Some policies designed to support high-technology industries are harmful to the multilateral trading system. In addition to investment re- strictions and performance requirements, activities such as discriminatory public procurement, offsets, and counter trade, and exclusionary product standards and certification requirements should therefore be brought under international review and scrutiny. 16. Discrimination based on national origin in the public procurement of high-technology products and services should be minimized. To the extent it exists, it should be expressed as a clear price or cost margin differential, the levels of which should be bound* and then reduced or eliminated. 17. Standards competition has become increasingly important in high- technology sectors. In this context, new issues of market power and collu- sive behavior (including “fair” access for competing firms) may arise, pos- ing problems for international competition policy. Standards-setting should not be designed to achieve anticompetitive results. In addition, government regulation and participation should not unduly delay the establishment of new standards. 18. For certain technology products, substantial tariff barriers still per- sist. A concerted multilateral effort should be undertaken to eliminate re- maining tariffs in high-technology sectors by the year 2000, or sooner, and should be promptly agreed. 19. Existing barriers to market access for information technologies and the development of a global information infrastructure, e.g., restrictions on telecommunications investment and services, should be removed. 20. Structural impediments to trade must be eliminated. Existing GATT articles offer a multilateral route to conflict resolution. The nonviolation clause of Article 23 of GATT provides access to multilateral dispute settle- ment even when the defending country has not explicitly violated the GATT. Where actionable under the World Trade Organization (WTO), multilateral dispute settlement should be utilized. Where the WTO rules are inadequate, they should be amended to achieve these results. 21. No consensus could be achieved over dumping and antidumping issues. *Editor’s note: contractually committed to by international agreement. 

8 CONFLICT AND COOPERATION COMPETITION POLICY 22. Anticompetitive business practices, both within national economies and in the international system, can have severe trade-distorting effects. A sustained effort to develop principles and practical guidelines for interna- tional cooperation with respect to competition policy should be undertaken as a natural extension of international trade principles. 23. In this regard, three steps should be taken: Minimum standards should be developed, to be observed by antitrust authorities in the partici- pating countries in dealing with private restraints of international trade. Multilateral means should be developed to ensure the application of na- tional law by an inactive member state where it will not act on its own initiative. Governments should consider applying WTO dispute settlement to anticompetitive activities which, occurring in one signatory country, have adverse effects in another. FURTHER WORK 24. To address the issues raised by international competition among na- tional economies for high-technology industry, governments must ensure adequate information and analysis on which to base policy. A number of issues requiring further study were raised in the course of our discussions, including • Further analytical work concerning the principles of effective coop- eration in technology development, the lessons from national and interna- tional consortia, including eligibility standards, should be undertaken. This work could also include assessments of what new cooperative mechanisms might be applied to meet the challenges of international cooperation in high-technology products. • Further work on the role and support for the university and research institutes in international science and technology research should be under- taken. • Further work on current trends in public and private support for basic research is recommended. Specific projects related to research and development and trade in high- technology goods and services might include further analytical work in • Government procurement • Intellectual property protection • R&D subsidies • Standards competition • Investment restrictions and performance requirements • Private restraints of trade