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For some three years the so-called "technological gap" between Europe and the United States has been the subject of mounting concern to statesmen and to leaders of the business community on both sides of the Atlantic. Prime Minister Harold Wilson warns that Europe is about to succumb to a kind of "industrial helotry" to the United States. Charles de Gaulle, Ludwig Erhard and Franz-Josef Strauss speak in similar terms. It is one of the focal points for the ambivalence with which the United States is viewed by non- communist nations. Our power is feared; also it is needed. A part of the fear stems from that very need. And a part of the need is to remove the cause of fear. The time has come to sum up the diagnosis and direct our attention to the formulation of practical policies in Europe and America.
Is the gap between Europe and the United States really technological or, rather, something quite different? Is it really as serious as some of our friends in Europe appear to believe? The conclusions reached in this article indicate that the gap is managerial, not technological, and that its consequences, though serious enough to warrant Europe's attention, reflect the existence of natural comparative advantage among industrial nations. In other words, the gap between Europe and the United States should not serve as an excuse for autarkic measures and, to some extent at least, can be viewed as a necessary element in the continued international economic and political viability of the United States.
The nature and causes of the gap-whatever it may be called-should be approached through an examination of the economic, educational, cultural and political difficulties attending European attempts to advance scientific and technological knowledge and to apply its fruits. But it is desirable first to examine the ways in which the United States enters into and influences this picture. On the one side, there is within the United States itself the apparently irresistible force of invention and application of invention, partly based on governmental financing and carried through by huge and growing corporations. On the other side, there is the carry-over of this phenomenon into Europe by way of American enterprise.
Not only is the United States the home of giant corporations, which can afford the costs of basic research and development and the risks of innovation, but it also has a long lead in the establishment and growth of relatively small, new enterprises created for the development and exploitation of advanced technology. These technologically based businesses are found commonly in the areas of electronics, acoustics, optics, solid- state physics, high-energy physics, instrumentation, metallurgy, pharmaceuticals and plastics. Europe has no such tradition of broad-based industrial entrepreneurship and this, combined with its somewhat rigid social structure, hampers the formation of new business based on the latest technology. Also venture capital for exploiting new technology is in short supply. The European capital market still is poorly developed and organized to provide the initial financing needed by smaller, innovative enterprises. Another major obstacle is the lack of concerned and involved governments providing assured markets for the products of these new enterprises arising out of advanced research. By contrast, in the United States, the government is often the main or only initial customer, providing market support at the most crucial stage of establishing the business.
The carry-over of American activity to Europe can be measured by the size of our direct private investments and the sales of U.S. subsidiaries in Europe. Both have grown three times faster than the rate of European economic growth over the past eight years. Although in any one country sales of American subsidiaries still represent less than 5 percent of total economic activity, the increasingly obvious penetration of American goods, ranging from toothpaste to computers, provides a basis for European alarm. When our favorable trade balance with Europe is added, it is easy to understand how fears of dependence on the United States find a response in both European governmental and business circles. In addition, of course, American products manufactured under license represent an important factor in European consumer and industrial markets. The latest data available show a five-to-one advantage ($251 million to $45 million annually) for the United States in receipts from licensing agreements.
At the beginning of 1951, U.S. direct private investment in Europe stood at $1.7 billion. Fifteen years later, at the end of 1965, it was $13.9 billion- an eightfold increase. The largest absolute increase-more than $9.7 billion- took place during the latter half of this period, after the signing of the Treaty of Rome which established the European Economic Community (E.E.C.). Significantly enough, however, during this latter period, new U.S. investment in the E.E.C. has been less than in the rest of Europe.[i] It is quite possible to say, therefore, that although the formation of the E.E.C. triggered the American juggernaut by calling attention to the possibilities of the European market, since then U.S. corporate giants have straddled Europe, inside and outside of the E.E.C., apparently unaffected by a political and economic division which is most fundamental to the European psyche. American business, with its international character and huge resources, not only has been able to benefit more than all but a few European corporations from the supranational climate and potential within the E.E.C., but even has ignored successfully the continued split between the Six and the rest of Europe.
Thus a measure of discouragement enters into the European attitude-a discouragement that leads not only to hostility but to an abdication of responsibility for taking practical steps to meet American competition. In the view of Peter Hilton, of the Institute for New Products, Inc., there is "an inclination to cut back research and development allocations by European industry on the premise that they would only be rediscovering what the United States has already discovered."
An important element in the gap is believed to stem from differences in research and development (R. & D.). Undoubtedly R. & D. expenditures in this country exceed those in Europe; the figures are something like $23 billion versus $9 billion annually. On a per capita basis, the ratios are 3 to 1 vis-à-vis the United Kingdom and Germany, 8 to 1 for Belgium and 25 to 1 for Italy. But when calculated in terms of relative gross national product and purchasing power these ratios are reduced. Further, the overwhelming portion of our R. & D. expenditures goes into defense and space efforts which are only indirectly related to our success in applying technology to commercial uses. How indirectly is an important question.
On the one hand, the United States Government provides a market for companies in advanced technological fields and provides a raison d'être for the pool of trained personnel which has been built up and maintained to serve this market. On the other hand, legitimate questions can be raised as to the effectiveness of governmentally sponsored R. & D. efforts in serving the real needs of our society and of our international competitive position.
Finally, there are clear indications that research and development in Europe is first-rate. As will be seen, it is its application and (in the words of the chairman of a major U. S. electronics corporation) "the engineering follow-through [which] bears the burden of the difference in results here and there." In lieu of a full discussion, it can be stated that, whether or not the differences in R. & D. expenditures and quality are as large a factor in favor of the United States as may appear at first glance, there can be little doubt that they do help and constitute an element of some importance.
None the less, there are other elements which are more fundamental. One is the prevalent-although far from universal-European attitude toward risk- taking. Competition and the consequent need to innovate generally are deprecated in Europe. Indeed the role of European governments is often to protect against innovation, and private enterprises too generally prefer to let others do the hard work of breaking new ground, while hoping that future developments will not profoundly affect traditional ways of doing things.
This attitude affects the most crucial problems of management: the harnessing of inventive efforts to meet market needs, the evaluation and development of markets, product planning, production scheduling, a certain type of dependence on government, and the administration (training, promotion, incentives) of managerial personnel itself. The following examples come to mind:
1. The French Compagnie des Machines Bull lost a prosperous business (and still is in deep trouble, in spite of massive infusions of capital and know- how from General Electric) primarily because it disregarded its competition in the computer field and miscalculated both its market and its own capabilities. It is most likely that sound management in these areas could have retained for Bull a significant and Independent position as a computer manufacturer.
2. I.C.T., the British-owned computer manufacturer, until recently did not have a management sufficiently strong to bring together the diverse parts of its merger-built structure. The primary managerial areas to suffer were product planning and marketing.
3. The electronics division of a large European firm functioned entirely without product planning that would put it in touch with the market. It consistently lost money for several years. After the recommendation was made that a top managerial post for product planning be established, it took one year before the company's management accepted the need and another year before the position actually was filled.
Of course, these kinds of failures are found in American firms as well. But the examples cited here not only are typical of the European situation but concern some of the most important companies in the economies of their respective countries. Another characteristic of European business is its failure to gear up to meet the demands for innovation, through the application of systems engineering and a readiness to fill orders under short lead times.
Again, with regard to marketing, an interesting example is found in the field of machine tools controlled by magnetic tape. European-and, particularly, British-companies developed some first-rate control devices. But, disregarding actual market needs, they concentrated on very high- precision and, therefore, high-cost controls. A major U.S. firm, in developing control equipment for the American market, found that considerably larger tolerances were quite acceptable, hence used a different and much less expensive technology to produce a relatively low- cost control system. As a result, the firm not only has a major market position in this country but also is taking the bulk of the European market away from the European suppliers. This is one of the most impressive cases showing that Europeans do have a technology of the highest order, but fail to meet real needs in spite of-and, to some extent, perhaps because of- their technological capabilities. The gap here certainly is not a technological one.
An entrepreneurial and managerial concept peculiar to Europe, and found in some of its most important enterprises, is the desire to become sufficiently large, at the cost of unprofitable product lines and operating losses, so that the government cannot afford to let the enterprise collapse. This results in a type of dependence on government which greatly widens the division between what a company produces and the actual markets it should serve.
There is also a tradition which prevents the dismissal of managers, except for the grossest blunders, and which discourages risk-taking because the failure to innovate is not considered a cause for censure while the failure of an innovation might be. In such an atmosphere business and profit planning, and the consequent search for and adaptation to markets, hardly exist. Another factor contributing to this atmosphere is that key scientists and managers rarely have an equity in the companies they serve. What Europe needs are not only capital markets which will finance risk- taking and innovative ventures, but participation in these kinds of investments by the men who can make them succeed. There are indications that such steps are beginning to be taken.
Some further examples serve to reinforce the conclusion that Europe's inadequacies do not reside so much in the fields of scientific and technological invention or R. & D. as in the availability of entrepreneurship, managerial skill and capital for turning inventive genius into profitable innovation. Many technologies in the aerospace industry, including the swing-wing plane and the hovercraft, were initially developed in Western Europe but are being applied successfully in the United States. The same is true of laser technology and cryogenics, A majority of the inventions underlying the office copying machine industry in which the United States is dominant can be traced to Europe-specifically France, England and the Netherlands. Fluidics, vital to engine control in supersonic jets, and holography-with wide areas of application, including photography, molecular biology, mass data storage and the direct transfer of handwriting into computer language-were originally European efforts now being put to practical use in the United States.
An examination of patents granted in various countries provides another approach to the nature and causes of the gap between Europe and the United States. It shows not only a lack of actual or intended application of inventions on the part of Europeans, but also a consequently growing gap in the inventive process itself. The countries selected for this examination are Belgium, France, West Germany, the United Kingdom and Sweden, with Japan and the United States providing the basic comparison. Between 1951 and 1965, patents issued by these European countries to their own nationals generally declined. Excluding the United Kingdom, for which comparable data are not available, the decline was from 42,616 to 28,085 annually-or more than one-third. In both Japan and the United States, domestic patents increased greatly over this period-from 4,350 to 17,797 and from 39,606 to 50,332, respectively. In the European countries examined-West Germany excepted-patents issued to foreigners in 1965 greatly exceeded patents issued to nationals. However, in the United States the number of patents issued to foreigners was only one-fourth of those issued to American citizens and in Japan foreign patents were one-half of domestic ones. Between 1951 and 1965, U.S. patents formed an increasing percentage of all patents issued to foreigners in the European countries, with the exception of Sweden. Meanwhile, there was no substantial increase in the number of patents issued by the United States to nationals of the European countries, except West Germany.
But U.S. patents issued to Japanese nationals jumped from virtually none in 1951 to nearly 10 percent of all those granted to foreigners in 1965. Some of this increase may be ascribed to Japan's postwar recovery. But, since nearly all of the increase took place after 1960, one must seek other reasons also. Japan has a competitive international spirit which stimulates investment in development and application engineering and, above all, in managerial and marketing innovations that make the technology pay off. The Japanese have learned what Peter Drucker calls "creative imitation." Many of their patents carry already developed products and processes one or two steps further, improving quality, cost effectiveness of production and marketability. And their adaptation of U.S. managerial methods-another instance of "creative imitation"-appears to be the driving force behind both the applications and the growth of profitable markets for them.
A major reason for the patent situation as it has been described resides in the complexities and incompatibilities of the various national patent systems themselves. These make the process of applying for patents in foreign countries both difficult and expensive. Such expenses, of course, are most easily borne and justified by American industry, with its relatively large assets and its desire to apply internationally the results of its own research and development. Further, there appear to be some fundamental weaknesses in the patent laws of certain European countries. As compared to the United States, Europe offers weaker protection for its patent holders. This not only discourages inventive efforts, but results in a secretiveness among inventors and their employers which severely hampers the dissemination of information.
A widely discussed phenomenon in connection with the gap between Europe and the United States is the brain drain. During the five years, 1962 through 1966, more than 60,000 professional and technical workers came from Europe to the United States. The yearly average has remained fairly steady, between 11,000 and 13,000. Among certain professions, up to 15 or 20 percent of those graduated annually from European universities are emigrating, and often they are the best in their field.
The reasons are not hard to find. Starting opportunities and salaries in Europe are far below what can be found by professional people in the United States. The scientists' and technicians' access to top management and to the decision-making process in day-to-day operations, as well as their eventual chance to rise to management positions, is much more limited in Europe. Financial participation in the results of innovative processes still is virtually nonexistent. Thus, a large number of European scientists and technicians are attracted to the United States by better pay, higher status and greater opportunities for creativity and responsible decision- making. A fundamental aspect of these advantages is the so-called "mission- oriented" approach of American research and development. Although far from all scientific personnel like to be tied to profit-making or otherwise tangible objectives, many find expression for their creativity, as well as financial reward, in this approach. American enterprise is known for tying creative endeavor to tangible objectives in the most advanced fields, especially computer and communications systems, aerospace and certain areas of metallurgy.
The incentives given to potential European immigrants to the United States are summarized well by an excerpt from a typical recruiting ad in Europe: "Employers will pay the full fare to the States for you, your family and belongings-probably offer you an advanced study course-give you staff support and facilities you never had before. The powerful American economy offers terrific prospects for technical people at all levels of experience. Major long-term projects opening up are creating new opportunities. The professional's role in research, development and manufacturing is highly valued in the U.S.A. Employers are more willing than ever to hire a man for his potential and give him lots of responsibility fast."
There is nothing really new in this. A similar situation was noted nearly a century and a half ago by Alexis de Tocqueville, who wrote in 1831: "To build a house, to run a ship, to manufacture an object, or to produce wheat the American people always found a way to use half the manpower needed in Europe. Hence, salaries are twice as high and this in turn draws always larger groups of immigrants."
Lest the picture we are drawing get out of balance, it must be remembered that European achievements are far from negligible in pursuits that lie just below the pinnacles of advanced technology. These are of fundamental importance to scientific advance and human progress, and though sometimes lacking in glamor, they reap great economic benefits.
The Pilkington glass process, developed and applied in England, has revolutionized plate glass manufacture in the United States and the rest of the world. New steel-making processes found their first applications in Europe and only some of them have even at this late date been applied by an American steel industry hampered by huge investments in old processes and serving a market affected by the introduction of substitute products. The development and production of the Philips color television camera is a major European achievement in the area of advanced electronics itself. The high quality of European automobile and pharmaceutical manufactures and the superiority of Italy's pharmaceutical equipment are well known throughout the world. Although widely scattered, some of the most advanced and creative installations of computer and communications systems-that is, the software aspects of an industry which is becoming central to nearly every aspect of human endeavor-are to be found in Europe. Even though much of the equipment originates in the United States, its advanced application is a European achievement. One consequence of these European advances is that the U.S. share of world exports of manufactured goods has been falling over the past decade. The shares of most European countries have more than held their own.
With regard to the brain drain, an examination by the European countries of what their critical manpower needs are as against what they are actually losing could well result in a revision of judgments regarding the real effects and seriousness of the brain drain. And it could resolve the question of the extent to which European scientists and technicians who return to their countries after a stay in the United States are subtracted from the brain-drain totals. Presumably, those coming to this country under governmentally financed educational programs are never included-except for the 1 percent that meet the legal requirements permitting them to remain. But what about others who return after having gained valuable experience? For example, this year my firm is bringing six such people from our European subsidiaries for training in the United States. In a year or two, they will go back. Are they a part of the brain drain? Also, Europe-like the United States-actually experiences a substantial inflow of manpower from the developing nations. These persons come for additional training but unfortunately they often fail to return to their homelands. Are they considered in the total assessment of the European problem? And to what extent is the brain-drain issue quite understandably exploited by the European scientific community itself to enhance the financial remuneration and the professional opportunities of its members, especially where governmental support is involved?
Finally, in assessing "the gap," it is necessary to take a hard look at the development of American industry itself, both technologically and geographically. Hardly a day goes by when one does not read an account of the parlous state of some industry, its backwardness in applying the latest advances of science and technology, and the reluctance of the financial community to risk capital on new processes and necessary development. And hardly a day goes by that members of my firm do not deal with the problems of some major corporation where managerial caution or lack of personnel who are adequately equipped hampers the achievement of breakthroughs to new products and vital services.
Within the United States there are more significant gaps and brain drains than between Europe and the United States. The brilliance generated by a few centers on the East and West coasts cannot blind us to the dark areas of backwardness in Appalachia and other regions. The brain drain from the Midwest to California, Massachusetts and New York is greater than the whole world's loss of trained personnel to the United States. There is a remarkable similarity between the complaints of political leaders and businessmen from Illinois, Indiana and Michigan, and those in England, France and Italy: natives of these states and nations are educated at great expense only to be lured away by the glittering areas around Berkeley, M.I.T. and the Middle Atlantic coastline.
In due time, of course, these inequalities within the United States are likely to disappear-even be reversed-through the natural forces of our competitive economic system and the judicious application of governmental policy. But the problem does exist. The State Technical Services Act passed by Congress in 1965 is intended to spur state activities to provide local businesses with information on, and the ability to apply, the latest technological and scientific advances. The very existence of this Act-as well as other legislation, including the establishment of productivity councils, the support of small business enterprises and regional development schemes-is a reminder that, however far we have reached into the future in certain areas and industries, there are large parts of our country and of our economy which have not yet been brought out of the past.
It is true that I.B.M. has between 60 and 65 percent of the European computer market; almost all European long-distance aircraft are built in the United States; the Concorde supersonic aircraft being developed by France and Britain may be outdated within three years after coming off the production lines by the supersonic transport which will be built by the United States; and the brain drain of the 1950s and 1960s toward the American economic and technological colossus may be as serious and significant as the exodus of scientists, philosophers and poets away from the political madness of Europe during the 1930s and 1940s. None the less, neither has our technological superiority in a number of industries been achieved with ease nor is it certain to remain with us. The areas in which we lead are important but they are not the only determinants of economic and political power. In some cases they are far-flung salients only precariously supported from inadequate positions of fundamental economic, educational and political strength. Perhaps, rather than being the staging areas for further irresistible advances, they are only bargaining points. The advantages they represent are not necessarily permanent or even long lasting. The "dollar gap" changed within a few years into vast dollar and gold holdings by West European central banks. And Hiroshima has become one of the greatest cities of one of the world's most powerful industrial nations.
There is little doubt, then, that a type of gap exists between Europe and the United States in certain areas of the most advanced technology and science. But the appellation "technological" gap is a misnomer. It is in reality a gap caused by a number of European managerial and financial inadequacies, as well as by a still outmoded educational system, social immobilities and political barriers. The consequences of this situation are the cause for legitimate concern.
There are several things that reasonably might-but probably should not-be done. The United States, in a Marshall Plan type of program, could subvent the West European acquisition, both private and governmental, of American scientific and technological knowledge and of our managerial techniques for applying the fruits of research and development. The United States could, for example, transfer organic parts of its great academic-industrial complexes to European soil. These complexes could then be made to grow, training and employing Europeans exclusively. The operative conditions for such assistance could be the accelerated admission of the United Kingdom and her EFTA associates into the Common Market, the swift rationalization or unification of West European corporate, tax, patent and social service laws, and, perhaps, even the establishment of a unified European currency under a body similar to but more powerful than the old European Payments Union.
Further, the United States could revise its immigration laws to exclude any potential West European immigrant certified by his or her native country as vital to that nation's interest. It even could expel any foreign residents in the United States who had not yet either applied for or attained citizenship, if their services were desired by their native countries.
These are things which might be done. It is even possible to construct an historical rationale for such a course of action, in the light of what the United States has done in the past. It is equally evident, however, that these are things that probably should not be done. This is not 1947, with Europe prostrated by war and ready to accept America's tutelage in return for the assistance needed to get back on its feet. For more than a decade now, Europe has been an increasingly successful rival of the United States in the competition for markets and political influence. Any attempt to enforce conditions-other than payment in hard cash-for U.S. assistance would serve only to raise the temperature of the still smoldering resentments left over from the days of American hegemony.
Indeed, Europe, in order to maintain its competitiveness, will have to learn increasingly to apply the advanced products and techniques of American science and technology and the methods of American management to the production and marketing of those items in which it excels.
What, then, should Europe do? On the basis of what we know today, the following steps might be considered:
1. Establish technological and scientific priorities and managerial goals on a country-by-country and on a supranational basis. This would imply, specifically, the application of information, communications and other hardware and systems techniques to the expansion of European industries and their world wide markets. It is necessary to go considerably beyond the $500 million governmental financing of private computer manufacturers planned in Britain, France and West Germany over the next five years. These are national investments, aimed principally at national markets. They tend to discourage mergers and other forms of coöperative and competitive action, and reinforce the continued development of incompatible and inadequately diversified systems which fail to meet the need of European industries for the latest technology. Similarly, this type of national financing is likely to provide computer manufacturers with little help in meeting competition outside of Europe.
2. Conclude intra-European political agreements to enact compatible corporate, tax, patent and social service laws which will permit the formulation of goals for business mergers and marketing. Figures for 1964 indicate that the United States, with 55 companies having sales of over $1 billion annually, enjoys a 3-to-1 advantage over Europe in this regard. However, in respect of companies with sales of over $250 million annually, the United States has a somewhat less forbidding lead of 2 to 1-248 United States companies against 119 European ones. Once the harmonization of European legal systems becomes a reality, one could reasonably expect a substantial increase in the number of European companies of the latter size, well able to afford large-scale R. & D. and marketing expenditures. But probably even more important than the matter of size for individual businesses is the formulation of competitive marketing strategies and the development of appropriate equipment among technologically advanced European industries. This process must take place on a supranational scale and requires a supranational legal and entrepreneurial climate.
3. Accelerate and expand the revisions begun in the European educational system, This is fundamental. Dr. James A. Perkins, President of Cornell University and Chairman of the President's Advisory Committee on Foreign Assistance Programs, writes in the July 1966 issue of Foreign Affairs: "Perhaps no wind of change in Europe is more important than the revolution, just started, that will inevitably lead to the democratization and modernization of the schools and universities. Until this reform is completed, the European educational system will be the bottle neck that shuts off the development of Europe's manpower and shortens the life of its great dreams." And one of the major recommendations of the Deauville conference last May, which was devoted to the "technological gap," was the creation of a European Institute of Science and Technology in order to expand Europe's educational facilities to provide scientific, technological and managerial training. These would graduate not only a large number of scientists of the highest quality, but also a proportionately even larger number of second- and third-level technicians and managers to serve vital supportive functions. For ex ample, by 1970 Europe will need 50,000 additional computer programmers and 25,000 additional systems analysts- increases of 140 and 270 percent respectively over 1966. Further, the modernization and expansion of existing institutions of higher education is essential. A number of other basic steps come to mind. One would be to establish academic chairs, research facilities and student scholarships sponsored by business firms. On the basis of such grants the possibilities of contractual relationships between students and business and between universities and business should also be considered.
4. Organize effective efforts both by government and private business to hire U.S. talent for such purposes as the improvement of European communications and other technological infrastructures, the establishment of management training programs and the specific application of R. & D. to the production of marketable goods and services.
In its role as both competitor and Atlantic Community partner the United States should be ready to provide appropriate assistance to such European efforts. American coöperation could take the following forms:
1. Provide tax and other incentives for American corporations to establish additional R. & D. facilities in Europe. Such facilities would provide both primary and secondary markets for scientific, technological and management skills in order to slow down or reverse the emigration of newly trained European talent. It seems to me, as David Rockefeller recently said: "The most important contribution that we can make to Europe's technological development . . . is to do more of our own exploratory research" in Europe itself.
2. Contribute to European education in science, technology and, above all, management training. Financial assistance by American businesses and foundations could be directed specific ally to facilitating the exchange of professors between Europe and the United States, especially in the field of management training. The direct participation of American businessmen in European management education can be a rewarding experience for both sides.
3. Reëxamine the Export Control Act of 1949 and its administration. This Act has been repeatedly extended by the Congress in virtually unchanged form. Its existence, and certainly its ad ministration, have made the United States an increasingly unreliable source of supply for equipment ranging from computers to printing presses. As American and European policies on East-West trade have diverged over the past decade, the Export Control Act has caused both annoyance to the Europeans and a loss of export opportunities for American firms. Now that U.S. policy regarding trade with most communist countries is undergoing a fundamental reëvaluation on the part of both government and private business, it would appear an appropriate moment to remove the divisive and often self-defeating aspects of the Export Control Act. The frequently arbitrary decisions made in the name of this legislation have served to reinforce Europe's reluctance to depend on the United States as a supplier of much-needed advanced technology. Understandably, this situation is used to justify the uneconomic diversion of European resources into the development of technologies which could be more economically produced and supplied by the United States.
4. Try to achieve a major increase in the financial participation of Europe in U.S. ventures. Of course, this is a two-way street; European banks, businesses and individuals have to be willing to put up the money. None the less, much more could be done to sell the idea of financial partnerships. This would almost surely benefit the investors, improve the international atmosphere and increase political coöperation across the Atlantic.
These suggestions are by no means exhaustive; new ideas and new forms of coöperation inevitably will arise. Purposely excluded are proposals that are primarily political. For example, is the recently initiated E.E.C. effort to achieve technological cooperation politically broad enough to achieve the objectives outlined here? This is for Europe to decide. The form or extent of European integration which would make possible the needed harmonization of legal systems is left open; and how measures taken should be coördinated is best left to the affected parties themselves. In any event, the emphasis should be on European initiatives, with active support by the United States. And the first consideration of our support should be the interest we have in Europe as an equal economic competitor and an effective partner in world affairs.
I believe that the fundamental conclusion which may be drawn from this discussion is that the so-called technological gap should be a reason neither for European isolation nor European backwardness. It is not a manifestation of technological failure which Europe must overcome through the isolated development of its own technology. Rather, it is the result of European political divisions and of disparities in managerial and financial capabilities between Europe and the United States. Also, it is an expression of natural comparative advantage in international economic affairs. It is not a "technological" gap at all. And, if the nations of the Atlantic Community understand and act upon this conclusion, the gap which does exist need not widen nor take on an importance which it does not have.
[i] At the end of 1965, U.S. direct private investments in E.E.C. nations totalled $6.25 billion, an increase of $4.57 billion over 1957. In the rest of Europe, U.S. investments totalled $7.64 billion at the end of 1965, an increase of $5.17 billion over 1957. It should be noted, however, that these figures represent a larger percentage increase for the E.E.C. than for the rest of Europe-272 percent as against 209 percent. Also, Switzerland accounted for 20 percent of the non-E.E.C. increase; and Britain, with $3.15 billion in additional investment, had only a 159 percent increase. None the less, there is no getting around the fact that U.S. investments in the rest of Europe exceeded those in the E.E.C. by $594 million during this period.