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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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International Friction and Cooperation in High-Technology Development and Trade: Papers and Proceedings
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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.
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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
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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.
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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.
