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Session 10
Public and Private Programs and International Cooperation

Moderator:

Anne Solomon, Department of State

CHARLES WESSNER: We are very pleased to have as our moderator for this session Deputy Assistant Secretary Anne Solomon of the U.S. Department of State, who has line responsibility for a broad range of international cooperative issues on technology and the environment and, therefore, the future structure of our economies as well.

ANNE SOLOMON: In 1980 I directed a study here at the Academy that was very close to the topic of this conference, concerning policies that industrialized countries institute to generate and use new knowledge throughout society for economic and national security benefit. These topics are, if anything, even more important than they were then.

This panel has been preceded by a number of excellent presentations dealing with the relationship of technology to economic growth and security. Speakers have examined national policies that support technology development and diffusion and have provided examples of the return on that investment to industry.

In this panel we will explore the extension of public-private partnerships into international cooperation. Our first speaker, Robert Cattoi, is a senior vice president and technical advisor to the chairman of Rockwell International. In 1991 he served as the chair of the U.S. delegation to the international steering committee for the Intelligent Manufacturing Systems [IMS] program.

Next is Dr. Uwatoko, Chairman of the Board of Toyo Engineering, who will describe Japan's views of the IMS program. That program, as you all may know, was conceived and initiated by Professor Yoshikawa, a member of the Steering Committee and president of the University of Tokyo.

Our last speaker is Reinhard Loosch, who is head of the EUREKA Secretariat in Brussels. He will discuss EUREKA and the European Union Framework programs.



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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Session 10 Public and Private Programs and International Cooperation Moderator: Anne Solomon, Department of State CHARLES WESSNER: We are very pleased to have as our moderator for this session Deputy Assistant Secretary Anne Solomon of the U.S. Department of State, who has line responsibility for a broad range of international cooperative issues on technology and the environment and, therefore, the future structure of our economies as well. ANNE SOLOMON: In 1980 I directed a study here at the Academy that was very close to the topic of this conference, concerning policies that industrialized countries institute to generate and use new knowledge throughout society for economic and national security benefit. These topics are, if anything, even more important than they were then. This panel has been preceded by a number of excellent presentations dealing with the relationship of technology to economic growth and security. Speakers have examined national policies that support technology development and diffusion and have provided examples of the return on that investment to industry. In this panel we will explore the extension of public-private partnerships into international cooperation. Our first speaker, Robert Cattoi, is a senior vice president and technical advisor to the chairman of Rockwell International. In 1991 he served as the chair of the U.S. delegation to the international steering committee for the Intelligent Manufacturing Systems [IMS] program. Next is Dr. Uwatoko, Chairman of the Board of Toyo Engineering, who will describe Japan's views of the IMS program. That program, as you all may know, was conceived and initiated by Professor Yoshikawa, a member of the Steering Committee and president of the University of Tokyo. Our last speaker is Reinhard Loosch, who is head of the EUREKA Secretariat in Brussels. He will discuss EUREKA and the European Union Framework programs.

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings In recent years, the focus of international cooperation in science and technology has moved from cooperation in the basic sciences to cooperation in areas of more strategic research and even technology development. Strategic alliances among corporate competitors are challenging, but they are important and desirable to pool research strength for efficiency, to reduce the associated costs and risks of development, to facilitate market access, and to establish mutually beneficial protection of intellectual property. Strategic alliances will be discussed in some detail in Session 11, chaired by Stephen Merrill. Our panel will focus on ways that governments assist the private sector by promoting bilateral, regional, and multinational science and technology cooperation. Through this cooperation, governments help secure for industry a wider range of technologies than may be available domestically, thus raising the level of science and technology that industry can rely on for future growth. At the same time, these government-to-government ties can position private firms for greater opportunities for market access. To help achieve the balance between the goals of technology cooperation and corporate desires to seek competitive advantage, the international community is exploring some basic principles of international technology cooperation in a number of different contexts, including the OECD and the Asian-Pacific Economic Council. We are fortunate to have Ozzie Silverman here, the Canadian representative to the OECD in science and technology policy. I will call on him later to talk a little bit about what the OECD is doing in this area. Governments may undertake joint projects in support of industry or simply facilitate cooperation led by the firms themselves. The primary goal is to ensure the broadest possible transfer and diffusion of technology throughout the private sector. Our speakers today will review technology programs that are conceived jointly by the public and private sector and are international in scope. The International Intelligent Manufacturing Systems Program was conceived as an international effort to improve productivity through manufacturing techniques. The EU framework initiative and EUREKA are multidisciplinary R&D programs that are concrete expressions of the European intent to strengthen industry to be more competitive at the international level. Thank you. The Intelligent Manufacturing Systems Program: Two Perspectives Robert Cattoi, Rockwell International Program origins and objectives: As many of you know, IMS is a global, industry-led activity of international cooperation for the development of manufacturing technologies and systems.

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings This program was first proposed by the Japanese in 1989. After subsequent meetings of MITI, the U.S. Department of Commerce, and the Commission of the European Communities, a feasibility study for IMS was inaugurated in 1991. The geographic-political regions that agreed to participate in this study were the United States, Canada, the European Union, the European Free Trade Association, Japan, and Australia. The goal was to use shared investment for developing precompetitive or noncompetitive manufacturing technologies and systems, with the objective of improving the effectiveness—and the seamlessness—of global manufacturing operations. Corollary objectives included the development of manufacturing processes that would be environmentally friendly and the establishment of an international management structure that would motivate and facilitate international research collaboration. Manufacturing consortia: This collaboration was to be achieved by establishing various consortia to address relevant manufacturing research projects. Each consortium was to be composed of industrial companies from at least three of the participating geopolitical regions, along with university and/or government lab participation, as deemed necessary or desirable. This IMS feasibility study, which included the establishment and monitoring of six international consortia called "test cases," concluded in early 1994. These six test cases involved 21 countries and 140 project partners of all sizes. After a review of the study, the International Steering Committee, which governed this activity, declared that the objectives of IMS were valid; that international consortia involving large companies, small companies, universities, and government laboratories could be effectively established and managed both equitably and beneficially; and that the IMS concept was, in fact, feasible. A recommendation for a full-scale ten-year IMS initiative was passed on to the six participating governments. The terms of reference for such a full-scale activity were subsequently ratified by the United States, Japan, Australia, and Canada, with the ratification by Europe expected soon. By agreement, Canada will chair the International Steering Committee for the first two years. The technical themes that are proposed for the full-scale IMS activity are the following: total product life-cycle issues; clean, energy-efficient manufacturing processes; virtual and extended enterprises; strategy, planning, and design tools; and human, organization, and social issues. Obviously, this short list is not intended to limit the scope of projects. Further detail on the proposed themes can be gained from the IMS Secretariat at the Department of Commerce.

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Noting that summary background, we are ready to launch our full-scale IMS activity here in the United States. Let me briefly outline the management structure for this initiative. THE IMS MANAGEMENT STRUCTURE At the top of the management structure is an International Steering Committee, followed by the U.S. organizational structure. We intend to have a high-level policy and strategy board to provide guidance to the U.S. Steering Committee, with top people from organizations such as the Council on Competitiveness, NSF, NAM [National Association of Manufacturing], NIST, NCMS [National Center for Manufacturing Sciences], and CIMS [Coalition for Intelligent Manufacturing Systems], which I will discuss later, as members. We will also have a set of standing committees to deal with topics such as manufacturing technologies, intellectual property rights [IPR], and communications. All of these slots, top to bottom, are filled with volunteers from industry, government, and academia. Secretariat support will come from the Department of Commerce. CIMS: Those familiar with the IMS feasibility study know that CIMS provided the real industrial support for the IMS. Membership of CIMS includes a reasonable cross section of U.S. companies, along with industry associations such as NAM and centers such as NCMS. ACIMS: There is currently in formation an organization called ACIMS, or the Academic Coalition for IMS. Membership will consist of universities and colleges throughout the United States. This is obviously patterned after, and is a sister organization, to CIMS. Academic outreach to associations such as the Engineering Deans' Institute, ASEE [American Society for Engineering Education], and state university or college extension programs will be coordinated by this activity. CIMS will have standing committees that mirror those of the Steering Committee. These CIMS committees will be staffed with industry experts who will conduct necessary studies, perform analyses, bring industry views to the surface, and provide evaluations of the research projects. CIMS and ACIMS will also provide the links to trade associations, academic associations, and interagency groups to help keep IMS on the proper track. A steering committee: A three-person U.S. Steering Committee has been appointed by the Secretary of Commerce. The members are Dr. John White of Georgia Tech, representing the university community; Dr. Graham Mitchell from the Department of Commerce, representing government; and I will represent industry and be the chair of this delegation. The government members of the national committee are observers on the international committee. The unique aspect of this initiative, from the U.S. viewpoint, is that it is intended to be a government-sanctioned, but an industry-managed and, for the most part, industry-funded, activity. Industry representatives set the objectives, goals, and priorities, and of course are intended to be the primary beneficiaries of the research output.

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Let me emphasize that point another way. IMS is not a government program in the typical sense of the word. There is no line item in some government agency budget that will support the collection of research projects carried out in the IMS consortia. Therefore, there will be no competitive bidding for IMS projects. There will be no "customer-specified" requirements for government R&D content, and there will be no contractual requirements or related government oversight. There will, however, be government support through the Department of Commerce to handle government-to-government negotiations regarding the legal and regulatory issues, such as intellectual property rights agreements, technology export control, and so forth. And the DoC will provide a small secretariat—two or three people—to handle international meeting logistics and information dissemination. A GLOBAL DIMENSION Quite often we hear the argument that there are a number of national-level manufacturing activities—such as NIST's MEP [Manufacturing Extension Partnership] or NSF's manufacturing research programs. So why do we need IMS? The answer is quite simple and straightforward: We in the United States must add a global dimension to this network of ongoing activities. We can all agree that U.S. manufacturing must become increasingly global if, in fact, we want to become globally competitive. I believe that all of the other participating countries feel the same way. The objectives of the IMS initiative, from a U.S. perspective, are closely aligned with this mandate. Global standards: For example, one objective at IMS is to establish—not react to—global manufacturing standards. These include standards for industrial automation systems, CAD [computer assisted design] and CAM [computer assisted manufacturing] tools, control architectures, manufacturing processes, electronic commerce, etc. I note that this segment of the activity is fully complementary with CALS and product data exchange initiatives. Another objective is to develop the most effective processes for global concurrent engineering. Global manufacturing is not a mutually exclusive function—designing for manufacturability in conjunction with designing manufacturing processes is an imperative. Global IPR: We have an objective to establish a framework for intellectual property rights protection that transcends national borders for companies large and small, as well as for academic institutions large and small. Major headway was made here in the feasibility study, but more needs to be done. Benchmarking: There is an objective to provide for a cadre of properly trained engineers for U.S. companies in all of the geographies of interest to them—all of these engineers working in an environment that respects their professionalism. There is an objective to provide an environment for efficient, effective benchmarking of global manufacturing operations. This contributes to increasing knowledge of, or even awareness of, the state of global competition. U.S. universities and colleges will participate with industry and the research

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings consortia. This participation has an objective, from an IMS viewpoint, to strengthen industrial ties and to allow academic partners to further improve and modernize manufacturing engineering education curricula required to make U.S. manufacturing engineers the best in the world. And I add, to raise the professional status of manufacturing engineers in this country. SMEs: Most important, there is an objective of involving U.S. second-and third-tier companies, the SMEs [small-and medium-sized enterprises] in activities that can raise the level of their manufacturing competencies and increase their ability to be globally competitive, directly or indirectly. It is our intent, and it is an IMS imperative, to involve significant SME participation in all the consortia we are a part of. MANAGEMENT ISSUES Allow me to give you some thoughts on management issues related to the IMS initiative. The future success of a full-scale IMS activity will depend heavily on the effectiveness of the industrial infrastructure that will determine national and international priorities; facilitate the formation of meaningful research consortia; monitor technical and business-related progress; and most importantly, provide the information network that disseminates useful output to those who can use it. Japan has a well-organized IMS center to accomplish this. The European Union has a structure headquartered in Brussels to serve this purpose. Australia and Canada have similar networks. In the United States, the backbone of such an infrastructure is provided by CIMS. The success of CIMS will depend heavily on the level of support it will get from its industrial members—support in terms of dollars and volunteer resources. This, in turn, requires solid backing from the CEO level and active participation from the vice presidents of engineering and manufacturing. A priority task of the IMS management team is to help ensure that support. Traps: Another issue relates to the formation of international consortia and the dynamic environment of global competition. This obviously includes company-to-company competition, industry-to-industry competition, as well as government-to-government competition. The pitfalls or traps embedded here are many. One relates to the protection of IPR with a maze of sometimes contradictory national IPR laws. Another trap relates to ensuring balance and equity and the equation of resource inputs versus direct project benefit for each partner large or small. And, of course, there is the concern about hidden national agendas—often stated in such terms as, "What does Japan really have up its sleeve?" or "Whose side is the EU on?" The IMS feasibility study and related test cases indicate that there is a more than reasonable chance of success in facing these issues.

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Let me touch on the management issue related to the involvement of, or more importantly, to the upgrading of SMEs. Obviously, only a relatively small percentage of thousands of SMEs will be involved directly in the manufacturing research consortia established as part of the IMS initiative. We can assume that these relatively few will benefit from their participation, but the standing question is, "How about all the others? How restrictive is the IMS structure?" I now want to make two points. First, a significant portion of the IMS process and system research output will be available to industry at large. Of course, there will be some that is proprietary, protected output, but that which is not can still give great leverage to those who accept and use it. Also, the increased awareness of global manufacturing technologies and processes and the related global benchmarking provided by IMS projects will be available to U.S. industry. The issue will be the effective dissemination of this knowledge, especially to the U.S. SMEs. My second point. I indicated earlier that IMS must be a complementary, integral part of our total set of national manufacturing activities—adding a global dimension to this network. If, for IMS outreach and knowledge dissemination purposes, we can use the existing infrastructures of NIST' s manufacturing extension centers, NSF's engineering research centers, NCMS, and the many state university extension programs, we have a high probability of reaching out successfully to a high percentage of SMEs. Thus, another priority of the IMS management team is to develop the coupling to these infrastructures and to provide an effective, workable network. Funding: My last topic is one that always gets the most questions and discussions—funding. If we can first establish that there is an important reason for IMS to exist as part of the national framework to improve global competitiveness—and then establish an effective process to manage IMS—can we really get the necessary funding from the larger industrial partners to support the participation of SMEs and universities, the smaller guys who cannot afford to proceed without resource help? This works in the IMS test cases—but how about a full-scale initiative? I remind you that in all the other participating countries—except possibly Canada—the governments will fund approximately 50 percent of the consortia costs for the companies and universities within their boundaries. A government-industry sharing concept has been implemented. This is not so in the United States. So can the United States, in these budget-slicing times, get any seed money from U.S. government sources that small companies or universities could tap to support their collaborative efforts? I refer to direct grant monies, as well as resources embedded in approved programs that support national manufacturing efforts—resources that can be competed for by individual project teams and are not funneled through an IMS superstructure. Are there funds in major foundations or trusts or in industry associations that

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings could help? Obviously, the jury is out on the answers to these questions. So the third major challenge or priority of the IMS management team is to get a workable solution to the funding issue. My personal belief is that those larger companies who are truthfully progressive, who are, or are emerging, as leaders, will step up and provide reasonable support. They will recognize the future leverage to themselves and to their supplier base when operating in a global marketplace. There are, on the other hand, those who feel we cannot win—that the U.S. industrial partners always lose when collaborating with those from offshore. In my opinion, those who think that way are inherently not winners, and fit best in a follower role. Not much funding support will come from this segment. As to government sources or foundations sources, time will tell. I think there are opportunities, but they must be worked aggressively. As is true with most challenges, nobody said it would be easy. Thank you. The Intelligent Manufacturing Systems Program U. Uwatoko, Toyo Engineering I am chairman of the Toyo Engineering Corporation, and it is a great honor to make this presentation on the IMS program at the American National Academy of Sciences. Since 1989 when IMS activities were started, I have committed myself to the promotion of this program. During the international feasibility study from 1992 to 1993, I represented the Japan region as the chair of the International Technical Committee. Before beginning my presentation on the IMS activities, I will briefly introduce my company, Toyo Engineering. Toyo Engineering Corporation was founded in 1961 to provide engineering and construction services. The corporation now has approximately 1,600 employees, with annual net sales of approximately $2 billion. Our businesses cover plant engineering, industrial systems engineering, and nuclear and electric power engineering. Through our main business, which is plant engineering and system integration, we supply products such as fertilizer plants, petrochemical plants, oil and gas processing plants, and computer-integrated manufacturing systems to clients worldwide. The successful results of our company reach out to 40 countries on 5 continents. In this presentation I will focus on the strategic and political aspect, rather than the technical aspect, of the IMS program on the basis of our five-year experience of the feasibility study in Japan and the international test cases. IMS FEASIBILITY STUDIES Manufacturing industries are developed based on the following basic understandings:

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings manufacturing is the basis for all economic activities; efforts to develop manufacturing technologies are essential to realize a sound and richer world; and, free competition stimulates intellectual activity and promotes the development of manufacturing technologies. These efforts, however, have caused unevenly distributed technical knowledge and wealth, which results in various conflicts among countries under the globalization of economic activities. In Japan, the sharp increase of the value of the yen is having serious impacts on Japanese enterprises, forcing the deployment of manufacturing facilities overseas. This overseas deployment is causing the hollowing out of Japanese industries. It is also causing problems in standardization of technologies that are transferred to foreign countries and problems in global business management. Toyo Engineering is also experiencing these problems through its deployment in Asian countries. Two other issues that are important: We have long been facing the problem that young people prefer working for service industries rather than working for manufacturing industries. And we must try to realize human-centered manufacturing and recycling of products to resolve global environmental issues. These issues cannot be resolved by individual organizations, countries, or regions. All the developed industrial countries must cooperate in tackling these issues. The IMS program is a concerted international effort to tackle these issues with vigor, foresight, and intelligence through research and development embracing industry, academia, and government. In 1990, the IMS Promotion Center was founded to form the IMS management infrastructure. The center was designed to function as a regional secretariat in cooperation with MITI, to promote a domestic feasibility study, and to finance research projects. To promote the IMS activities, the Domestic Steering Committee, the Technical Committee, and the IPR Committee were organized. In 1991, the Domestic Preliminary Study was begun to identify the image of the IMS and also to extract and classify R&D topics for an IMS feasibility study. The Domestic Feasibility Study was carried out from 1991 to 1994 to establish study items for international test cases. As a result, 21 study items were selected and conducted. Along with the domestic activities, Japan approached the United States and the European Community to spread out the IMS activities. As a result of talks between governments, it was agreed that the nations of Australia, Canada, Europe—consisting of the European Community and the European Free Trade Agreement—Japan, and the United States should participate in the International Feasibility Study. This study was to assess the technical and management process and the feasibilities of a full-scale IMS program. The International Steering

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Committee, the International Technical Committee, and the International IPR Committee were organized at the end of 1991. During 1992, six international meetings were held for preliminary work and to select study topics and schedules. After this preparation, the international test cases were begun in February 1993. Six test cases were implemented: TC-2: Clean Manufacturing in the Process Industry, TC-3: Global Concurrent Engineering, TC-4: Globeman 21: Enterprise Integration for Global Manufacturing toward the 21st Century, TC-5: Holonic Manufacturing System, TC-6: Rapid Product Development, and TC-7: Gnosis: Systematization of Knowledge. Japan participated in four of the six text cases: TC-2, TC-4, TC-5, and TC-7. Toyo Engineering participated in TC-2 and TC-4. First, I want to discuss our experience in Globeman 21, one of the six test cases. Globeman 21 was named after Enterprise Integration for Global Manufacturing toward the 21st Century. There were two missions in Globeman 21. One mission was to identify whether the international collaborative research would be feasible or not—that is, if participants from different regions and cultures could perform research as a team and to determine a framework for carrying out such research. The second mission was to clarify the technology issues of variable-kind and variable-lot manufacturing that should meet customers' needs and to study the mechanism for global manufacturing to be deployed over the world. The participants in Globeman were 19 enterprises, 13 universities, and research institutes from Australia, Canada, Europe, the United States, and Japan. As a result, the project was well balanced across the academic, industrial, and public sectors. A task for Globeman 21 was to determine which organizations should be employed for collaborative research. It was concluded that research activities should be carried out by individual subgroups and that these activities should be integrated by a Technical Management Committee. Furthermore, an Academic Support Committee could provide technical support to research activities, and a Management Board should manage all activities. Globeman 21 has concluded that global-scale collaborative research will be feasible, although various difficulties are anticipated, and the research goals of this project will be essential for future manufacturing industries. Globeman 21 was our first experience with such an international collaborative project. We have clarified various tasks and problems such as intellectual property rights. It is extremely important that we solve some of these problems and verify the effective management architecture. The IMS is a very unique program, and therefore it seems that there are many

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings difficulties with its features. The following points have been assessed through the international test cases: Multiregional and multinational. What difficulties are anticipated in communication among different countries, regions, or different time zones and cultures? Various industrial sectors. The consortium will be formed from various sectors, such as aircraft, automobile, construction, electronics, and shipbuilding. It can be difficult for these different sectors to find common issues. Various-sized companies. Will companies of different sizes be able to perform collaborative research under a common framework? Diversified interests of companies and researchers. People from different enterprises and universities will be from different backgrounds. Some people may be interested in product design, whereas other people may be interested in quality issues or production management. Different funding systems. Funding is accomplished differently in each region, and these differences will affect research activities. Distributed R&D system. Almost all the work is done by each region, spread style. How should we efficiently perform research activities in a distributed manner? Intellectual property rights. IPR rules are different among regions and partners. At the end of January 1994, the International Steering Committee declared that the full-scale IMS program would be feasible and recommended that it should be started as soon as possible. The key factors that made the test cases successful are summarized as the following two points: The members of the International Committee exerted a spirit of give and take collaboration and settlement by compromise. Although the project was carried out under close collaboration among academic, industrial, and public sectors, the Steering Committee industrial and public representatives took leadership for management matters, and in the Technical Committee the academic members took leadership for technical matters. BENEFITS OF IMS Finally, I would like to touch on the expected benefits of the IMS program. Specific objectives of the IMS program are described in the following five points. These points are common issues that the manufacturing industry in the world is facing today. Without any actions and responses to these problems, it will be very difficult for manufacturers to grow and improve. The IMS program is aiming to achieve various objectives and, at the same time, will be able to provide the following benefits and opportunities:

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Sharing R&D risks and eliminating redundant investment. As many manufacturers face harsh competition, investment for improving competitiveness such as development of new products, improvement of productivity, and development of new technologies is becoming a heavy burden. Advancement and complexity of technologies require integration of various technology areas. Also, technological and financial risks of research and development are increasing and even a large corporation cannot absorb such risks by itself. To maximize such constrained resources, research and development through international cooperation will be a driving force for all manufacturers in the world, and it seems that this is the natural direction in today's world. Facilitating the development of new technologies through the integration of international technologies. There is a Japanese proverb that says ''Three people can create precious knowledge." This means that when individuals with different ideas get together, a new idea will be born. The IMS program will make this proverb real through international collaborative research activities, and each region and partner will bring excellent and unique technological ideas to the program. Such ideas will be organized and integrated to become better technologies than a single company or a single region can develop by itself. Acceleration of global standardization. Through international cooperative research activities, it is possible to accelerate global standardization related to manufacturing. Currently, there are any number of proposals for international standards yet to be developed. But it requires long periods of time and much research and development for the establishment of new standards. The IMS program will support and can respond quickly to the establishment of such international standards. Matching new partners. Through international consortium activities, partners or researchers will be able to understand each other. As a result, the matching of interdisciplinary partners will be much easier, and they will be able to exchange products and technologies. It also will lead to creating new business opportunities. Understanding of cultures and global markets. Cultural gaps will be filled through the IMS program, and it will also help the understanding of global markets, which could also provide a good opportunity to expand into the business. Today, such opportunities are open for very limited numbers of companies in the world. The new International Steering Committee recently issued a call for a proposal for a full-scale IMS program. In line with this call, the full-scale program will soon begin. The Japan region has been preparing infrastructure for this fullscale project. Toyo Engineering will participate in the program as a member of

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Globeman 21, and I myself would like to contribute to the promotion of the IMS program. In closing my presentation, may I ask you to cooperate with and support this ambitious and attractive program. Thank you. European Programs: EUREKA and the European Framework Reinhard Loosch, EUREKA Secretariat Today I will describe to you two large initiatives in Europe on international cooperation in research and development: the European Union framework program and its associated activities, and the EUREKA initiative. I will concentrate on the similarities and the differences between the EUREKA initiative and the European Union's framework program on research, technology development, and demonstration. But first I want to make two preliminary remarks. First of all, when we are talking about research and development in Europe, we are talking automatically about trans-boundary cooperation. This is all-pervasive, because we not only have the European Union with its big program, we not only have EUREKA, but we have in addition many other specialized European organizations that are concerned with cooperation in research and technology, such as the European Space Agency, the institute in Grenoble with the high-flux reactor, the European Synchrotron one cyclotron radiation facility, the European Southern Observatory, and many others. If you take all of these initiatives together, they account, however, for only approximately 12-15 percent of the expenditures on RD&D [research, demonstration, and development] in the area of the European Community, and a smaller percentage if you include the other European countries. But then you have to add the many, so to speak, unofficial international cooperations going on in Europe, partly because of the internal European market, where it is difficult to distinguish whether a particular R&D job is done by a French company or a German company or a French institute or a German institute or any other country you might mention, because it is all interlinked and all interrelated. Why is it that when we talk about R&D in Europe we are talking about international cooperation in Europe? First, of course, it is because of the European desire to unite and to become competitive on a global scale. Second, there are external factors. Some are direct, such as, for example, the U.S. influence on Europe to cooperate, basically motivated by Cold War considerations to have a strong, united Europe. Some are internal influences. To be competitive, we have to unite in Europe so as to compete. THE FRAMEWORK PROGRAM AND EUREKA: SIMILARITIES Now I turn to the similarities of the European framework program and the EUREKA initiative.

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings Identity of purpose: First, there is an identity of purpose. I will read to you the statement of the objective of the Hannover Declaration, which is the basic charter of the EUREKA initiative. It says: "The objective of EUREKA is to raise, through closer cooperation among enterprises and research institutes in the fields of advanced technologies, the productivity and competitiveness of Europe' s industries and national economies in the world market. And hence, strengthen the basis for lasting prosperity and employment. EUREKA should enable Europe to master and exploit new technologies that are appropriate for its future and to build up its capability in crucial areas." When you read the relevant article in the Maastricht Treaty, and preceding that in the Single European Act, you will find practically the same words, with one additional objective of the European Union which is to enhance cohesion among the member states of the European Union, to have a comparable state of development throughout the Union. The main purpose is identical both for the European framework program and for the EUREKA initiative. Membership: The membership is also similar. Of course, the European Union has only 15 member states. But if you add to that all the bilateral or plurilateral agreements concluded by the European Union and other European countries, then it covers more or less all of Western Europe and, increasingly, central and eastern Europe. EUREKA now has 22 member countries, which are the 19 European-member countries of the OECD plus, since the fall of the Iron Curtain, Hungary, Russia and Slovenia. And in one month's time, I am sure we will be adding two more countries to that list: Poland and the Czech Republic. They have requested membership and everything is processed, but only the Ministerial Conference of EUREKA can accept this request when it meets in June. There is one more member of EUREKA, and that is the European Union itself, which only proves the point again, that there must be an identity of purpose. Scope of activity: The scope of R&D activities to be undertaken in the two frameworks also shows a high degree of similarity. The European Union acts on the basis of specific programs defined in the framework programs that are passed from time to time, every four or five years, and these framework programs and the specific programs describe particular fields in which the European Union is willing to promote R&D in cooperation across the borders in Europe. But if you look at all these programs, they cover practically all the fields that are not covered by the more specialized agencies and international organizations that I mentioned before. EUREKA, on the other hand, is completely agnostic as to subject areas. We only say that we would like to foster cooperation across the borders in any R&D project no matter in what field. The only thing we say is, it has got to be R&D oriented toward civilian markets, toward civilian applications. International cooperation: There is one more similarity, which is the inter-

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings national positioning of the two frameworks. Despite all talks about Fortress Europe, both systems are open to the outside world. In the case of the European Union, it is open through agreements with other countries. One of the oldest agreements between a European community and another country has been the nuclear energy agreement between EURATOM and the United States back in 1958. In the case of EUREKA, members are European countries and the European Union. Whenever project participants think it is useful to include someone from somewhere else, they can do it, and it has been done; not to a vast degree, but nevertheless it has been done quite often, including a few American companies that have joined EUREKA projects. Why two organizations? If the similarities are so numerous, why do we have two different organizations to achieve the same purpose, namely to increase competitiveness through international cooperation in Europe? Different approaches: The main reason is that EUREKA has a different approach. The European Union's approach is basically "top down." First you have to agree in the Council of Ministers and with the concurrence of the European Parliament on the program contents, on the funds to be allotted for promoting these programs, then on how to do it, how to cooperate, and, for example, how to exploit and use the results coming out of research and development promoted by the European Union. On the other hand, you have the EUREKA approach in which the project participants are free to decide on the content of their project, on who is cooperating in the project, who is going to use the results, the intellectual property rights, and whatever the end results are. Funding base: There is another big difference. The European Union has money. EUREKA has none. In the case of EUREKA, it is clear that it is up to the project participants to secure the funds they need for a project. Now, to an increasing extent, the money is put up by the project participants themselves, be it from their private company money or from their regular budgets, which may be from public sources, or by seeking access to one of the promotion schemes, be it of the member states or also the European Union programs. In the case of the European Union, the money is there but you have to compete for it. And this is a rather lengthy process to undertake before you even know whether you are one of the winners or not. This then also explains why the EUREKA initiative is a very small organization. The only central institution we have is the EUREKA Secretariat, which I have been heading for three years and will be heading until the end of next month. The Secretariat has 15 people, which includes all support staff. Our budget is on the order of $3 million a year, about half of which is spent on publications and public information, the rest on administrative expenses, including running our database on all EUREKA projects and project proposals. Funding levels: In regard to the volume of R&D expenditure mobilized by

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings the different schemes, the European Union framework program has a total funding of 12.3 billion ECU [European Currency Units] for 1994 to 1998. This may be increased to 13 billion ECU depending on a decision expected next year. This 2-3 billion ECU per year mobilizes, of course, a higher amount of R&D expenditure because the companies involved get no more then 50 percent of the total project cost from the EU and they must seek the rest elsewhere. The European Union program mobilizes approximately 5 billion ECU per year, whereas EUREKA mobilizes approximately 1.5 to 2 billion ECU per year. Altogether, in the eight years of EUREKA cooperation, we have committed something like 15 billion ECU on about a 1,000 different projects involving 4,000 participants. Of these 4,000 participants, approximately two-thirds are from industry. There is a very high SME participation, and one-third are research institutes of universities and public agencies. I have one more word of praise for EUREKA. I believe that the EUREKA initiative taken in 1985 has been a worthwhile experience. By the way, this initiative was a direct response to the shock many people in Europe felt after the announcement of President Reagan's SDI [Strategic Defense Initiative] program; the shock was not that there would be an SDI, but that this may be the perfect dual-use technology developed from defense resources so as to be ready to capture practically all civilian technologies of the future. But this has been a worthwhile adventure, and I do not say this only on the basis of a lot of ex post project evaluations that we undertook. I say this by listening to the participants. The ratio of people who, after completing their EUREKA exercise, would do it again is approximately 10 to 1. So, if our customers are happy, we are happy. And therefore, we hope to continue. We have volunteers to chair the EUREKA initiative up to the year 2002, so there is a certain long-term job assurance for EUREKA. But keep in mind that the European Union also provides the prospect of long-term reliable funding of R&D in international cooperation in Europe. Thank you. DISCUSSION ANNE SOLOMON: A number of our speakers have referred to the difficulty of balancing the objectives of international technological cooperation and the objectives to remain competitive. The OECD and the APEC [Asia-Pacific Economic Cooperation] are both considering basic principles for international technological cooperation that touch on this challenge, and I would like Ozzie Silverman, the Canadian representative to OECD, to discuss briefly the OECD efforts in this area. OZZIE SILVERMAN: At the OECD the work that is going on seems to be a deep secret for the rest of the world. But this a work is quite important and it is

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings consistent with the discussions that have been taking place here over the past two days. The Committee for Scientific and Technological Policy [CSTP] set up a working group on technology and innovation, and that working group met for the first time in November 1993 under the chairmanship of Joe Clark, who is with the U.S. Department of Commerce. And in May 1994, the United States convened a conference hosted with the OECD in Paris on the matter of international technology cooperation. Since that time, the deliberations of the CSTP have lead to the drafting of a set of principles. The idea is that these principles would be endorsed by science ministers when they meet later in September of this year and then go on to the OECD council. Basically, the notion behind these principles is to encourage governments to maintain an openness, to be a catalyst, and to encourage collaboration between industries in technology that is of interest to them. The benefit of having these principles is that they are built on experience that industry actually has at the present time, particularly the IMS. Anyone who was associated with the IMS at its inception, or at the time that the MITI was proposing it, will recall that this was an extremely contentious issue until such time that the test cases and the feasibility study were negotiated between governments at the outset. But then it became industry led, and I would say that it is close to a miracle that the chairman of Toyo Engineering is here today promoting IMS and encouraging other countries to participate, because this effort has come a very long way. Many lessons were learned from IMS that can be incorporated and codified. And in part, these principles are going to do that. We are quite hopeful that they will be adopted by ministers. Tomorrow in parallel, the Business and Industry Advisory Committee of OECD is meeting, and they will be discussing the topic of international technology collaboration. Only one of the items on their agenda will be these principles. They will look at it in draft form. And they will be discussing other issues of collaboration. So it is very worthwhile to find a way to feed back to people the types of deliberations that they are conducting. You can access that through your own governments through the OECD. One final comment. By mid June I would expect that these principles will be in the final draft form and that all countries, including Japan, Germany, the United States, and Canada, will have accepted them, at least at the level of officials, and then they would go on to ministers in the autumn. HANS SCHARRER: I have a question for Mr. Loosch. If you look at JESSI [Joint European Submicron Silicon Initiative], which is a EUREKA project, or at ESPRIT [European Union Information Technology programs], which is a com-

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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings munity project, and compare this to SEMATECH, where would you see the major differences or similarities? REINHARD LOOSCH: In terms of the structure, SEMATECH is much closer to JESSI than to ESPRIT, ESPRIT being a program of a particular directed initiative. In fact, JESSI is a special animal in the EUREKA family. It is by far the biggest project. It alone accounts for approximately a fourth of the sums that I mentioned before, something like 3.8 billion ECU over eight years. But clearly also, between JESSI and SEMATECH, there is more than just a certain similarity in structure. There is also increasing linkage, not between JESSI as such and SEMATECH as such, but between the partners in SEMATECH and the partners in JESSI. ESPRIT is a different animal because, as I said, it is a program broken down into many different areas and many different projects, many of which are not really related to each other. KARL-HEINZ PAQUÉ?: I have a short question for Mr. Loosch about EUREKA. In your talk I heard that the two striking characteristics of EUREKA are, first, that it is bottom-up, not top-down, and second that it has no funds. The question arises, why do we need it? Because apparently it is just a clearinghouse for private corporations, and it appears to give something like a quality stamp to particular corporations. So I do not see the deep economic rationale for its existence, although I am sympathetic. REINHARD LOOSCH: As we just heard, there is a general tendency to support the idea that governments should support industry-led international cooperation. The OECD apparently wants to take over the EUREKA message, because that is exactly what we have been doing. It is the joint role of the European governments concerned and the European Union to say, please cooperate. Clearly, what we can provide is only certain brokerage help. On the other hand, this is very necessary, particularly when you are looking at the smaller companies. They are not used to international cooperation; they need a little prodding. And for that reason, it is a good attempt because it is clear, since all the governments are behind it, if somebody comes and says I would like to do this as a EUREKA project, he may also find a more open ear when applying for national or European Union funding, although there is certainly no defined preference for a EUREKA project in any one of the national schemes, except that some of the member governments have allotted particular seed money for launching and for preparing EUREKA projects, but not for the project work itself.