International competition has eroded the once commanding U.S. advantage in technology. It has caused a shift in government and business relationships in the United States and raised fundamental questions about the conduct of American foreign policy. Both the public and private sectors are increasingly concerned with a new set of technological issues related to industrial competitiveness. This concern has forced a reassessment of national priorities and caused both industry and government to rethink their traditional roles in the development and application of technology. The implications for foreign policy stem from one overriding fact: when it comes to advanced technology, national security can no longer be viewed in purely military terms; economic security is also a vital consideration. Moreover, just as it is increasingly difficult to make a meaningful policy distinction between military and commercial technologies, so is it difficult to determine how to manage international relationships, since important political allies in military technology are often hard-nosed economic competitors in commercial technology.

As a result of these trends a new U.S. public policy framework is emerging that focuses on industrial competitiveness and technology. This focus raises some important issues about the evolving roles of business and government in the economy, and forces new thinking about how U.S. foreign policy can accommodate strategic economic concerns.


Recent policy debates reflect the concern with the erosion of U.S. technological superiority and shifting business and government interests. In many ways the debate about the proper policy for technology mirrors the debate about the proper role of government in the economy. Should the government intervene to assist certain sectors? If so, what form should government intervention take? Which sectors should receive public assistance? How should government policies and institutions be structured to facilitate commercial technology? Recent technological developments have highlighted questions such as these and generated a lively policy debate, pitting traditional notions about the proper role of government against the need for prompt, pragmatic policy responses. The answers to these questions and the implications for U.S. foreign policy are only beginning to be understood. Indeed some observers have complained that Washington suffers from a "technology of the week" syndrome, in which such diverse technologies as cold fusion, supercomputers and biotechnology emerge unexpectedly as burning issues and stir tremendous policy debates, only to be forgotten in a few weeks.

Five technological debates profile the changing public policy dialogue: consumer electronics, semiconductors, superconductors, the FSX fighter airplane and high-definition television (HDTV). These debates do not include all of the technologies that have engaged the federal government in recent years, but they are indicative of the kinds of issues that are driving public policy deliberations.

Consumer Electronics

The decline of the American consumer electronics industry was one of the early signals that the United States was facing a challenge to its technological leadership. For most of the past century American industry enjoyed a strong position in consumer electronics. During the past fifteen years, however, U.S. companies have ceded that market to foreign competitors. The American era of consumer electronics manufacturing began in 1887 with Thomas Edison's invention of the phonograph. That breakthrough was followed by a string of other U.S. inventions, including the cathode ray tube (1897), wireless transmission of speech (1900), radio broadcasting (1920), television receivers (1923), magnetic wire recorders (1946), the transistor (1947), color televisions (1954), portable radios (1954) and home videocassette recorders (1963).

Until 1970 American industry dominated these fields and enjoyed almost complete control of the American consumer electronics manufacturing market. Since then it has lost virtually the entire market. At present the U.S. industry has less than five percent of the consumer electronics market, despite the fact that it has more than tripled in value to $25 billion in annual sales over the last decade.

Some highly visible industries, such as stereo equipment and television, are indicative of this trend. In 1970 the U.S. industry held a 90-percent share of the American market for phonographs; today it holds one percent. Similarly in 1970 U.S. companies held a 90-percent share of the American market for color televisions and 65 percent for black and white televisions; today they account for about ten percent and one percent of the U.S. market, respectively.

Many economists dismissed the demise of the U.S. consumer electronics industry as the inevitable result of the law of comparative advantage. According to their analyses, consumer electronics was destined to go the same route as the shoe and apparel industries-American industry simply could not compete with such low-wage countries as Japan and Korea, which enjoyed an inherent advantage in low-tech mass-produced commodity products. Those who held such a view counseled U.S. industry to quit the consumer electronics market and move into more sophisticated technologies in which those factors were not as important a determinant of market success.

What this perspective failed to take into account, however, was the linkage between low-tech and leading-edge electronics. Although the end products that distinguish the two segments of the market may differ, the manufacturing expertise and technical competence that underpin them are closely related. Furthermore, because of the sheer size of the consumer electronics market, firms that are active players in it benefit from large economies of scale that give them a competitive advantage in related markets, such as semiconductors. The decision to abandon the consumer electronics market in the 1970s would come back to haunt the U.S. electronics industry in the 1980s.


While it may be convenient to write off troubled U.S. industries as the victims of the law of comparative advantage, it becomes increasingly difficult to do so when leading high-tech industries begin to stumble when faced with foreign competition. This lesson was driven home during the 1980s by the U.S. semiconductor industry.

Semiconductors, as the name suggests, are materials that are neither good insulators nor good conductors. They are usually made of silicon, germanium or gallium arsenide. The term has come to refer to all electronic devices made of semiconducting material, including integrated circuits, transistors and diodes. The semiconductor debate of recent years has focused on the integrated circuit, which is a complete electronic circuit. It is composed of interconnected diodes and transistors that channel the electron flows used to process information extremely rapidly.

The integrated circuit was invented almost simultaneously in 1959 by two Americans, Jack Kilby, working at Texas Instruments, and Robert Noyce, working at Fairchild. During the 1960s and 1970s, U.S. companies dominated the world market for the design and manufacture of integrated circuits. In 1976, however, the Japanese Ministry of Trade and Industry (MITI) launched the Very Large Scale Integration program, which helped participating firms develop process technology and 64K memory chips. This program was terminated prematurely in 1979 after the United States pressured Japan in trade cases and raised questions about industrial targeting. Japanese participants in the VLSI program were so convinced of its merits, however, that they launched a three-year private sector follow-up initiative with no government funding in order to complete its research agenda.

Japanese producers of semiconductors complemented the VLSI research agenda with intense concentration on the manufacturing process. As a result they were able to parallel advances in technology with gains in quality, productivity and reduced cost. The results exceeded all expectations. By 1980 Japanese companies had surpassed U.S. merchant semiconductor firms in the design and manufacture of the latest generation of semiconductor devices. By 1983 Japanese-based firms held a share of the world market equal to that of U.S.-based firms. By 1986 the Japanese had taken 65 percent of the world market for memory products, while the U.S. share had fallen to under 30 percent. In 1988 Japan held 85 percent of the market for one-megabit memory chips, while the American share (not including IBM, which makes memory chips for its own use) had dwindled to eight percent. In retrospect the success of the VLSI program represented a historical watershed for public policy-it worked. And governments and industries in other countries took notice.

The trials of the U.S. semiconductor industry captured the public's imagination. For many Americans, semiconductors symbolized high technology. They were invented by Americans, the market was developed and initially dominated by U.S. firms, and they are closely linked to computers and national defense. The sudden and unforeseen reversals suffered by the U.S. semiconductor industry made it clear that there were new forces at work in world markets; the American lead in technology could no longer be taken for granted. Four policy lessons are worth noting.

First, the problems of the semiconductor industry demonstrated that the competitive challenge facing the United States is not limited to low-tech or low-wage industries; even high-tech industries can be devastated by foreign competition. Second, semiconductors highlighted the impact that government intervention can have on industrial performance. The loss of U.S. market leadership was not due to a sudden shift in inherent national abilities or resources, but in large part to a foreign government's technological program. After the success of Japan's VLSI program, there was no longer any question that prudent government intervention in the marketplace could compensate for a late start in technology and significantly contribute to an industry's comparative advantage.

Third, semiconductors forced attention on the importance of the commercialization process. The problem that the U.S. semiconductor industry faced was the same one that the U.S. steel and automobile industries had faced earlier. It was not a lack of advanced technology or a failure of research. On the contrary, many American firms had a clear advantage in leading-edge technology. Instead the problem was related to their ability to bring new technology rapidly to the market and to manufacture high-quality products. There is no doubt that the private sector has the primary responsibility for commercializing technology. It alone can develop, produce and market new products and processes. But because public policies create the climate in which American scientists, engineers and managers work, they must facilitate private sector efforts to commercialize technology.

Fourth, the difficulties facing the U.S. semiconductor industry demonstrated that the U.S. government not only lacked a coherent set of policies for commercial technology, it also lacked appropriate institutions. When the American semiconductor industry proposed a joint private/public venture-which ultimately came into being as Sematech (Semiconductor Manufacturing Technology)-their motivation stemmed primarily from concern about commercial markets, although there were also legitimate national security concerns. Since World War II, however, U.S. science and technology policy has focused primarily on basic research and military security, not on commercial technology. Therefore, when the semiconductor proposal surfaced, there was neither the consensus nor the institutional capability within the U.S. government to sponsor such a commercial venture. Consequently, when Sematech was ultimately created in 1988, it was placed under the umbrella of national security and funded by the Department of Defense. Sematech's objective is to achieve global leadership in semiconductor manufacturing technology by 1993. Its five-year $1-billion budget is funded half by the federal government and half by U.S industries.


Close on the heels of the semiconductor debate came the superconductor breakthrough. In late 1986 two researchers in an IBM lab in Zurich pioneered a revolutionary discovery in high-temperature superconductors. Superconductors consist of materials that conduct electricity with no loss of energy. Prior to 1986 superconductors had been known to work at extremely low temperatures (-459.7° Fahrenheit), but they had few practical uses. The "high-temperature" breakthrough resulted from the discovery of exotic new ceramic compounds that could reach a state of superconductivity at temperatures as high as -230° Fahrenheit. Although this is still too cold for most practical purposes, it has opened the possibility of important new commercial applications, magnetically levitating trains being perhaps the best-known example.

Within a few months after the initial discoveries, U.S. federal agencies had redirected $45 million for research and development of high-temperature superconductivity. In July 1987 President Reagan proposed an 11-point superconductivity initiative at a much-publicized conference in Washington that was closed to non-Americans. Congress in turn drafted numerous bills with proposals ranging from study commissions to full-scale national programs. Other countries, notably Japan, were also quick to respond with their own technological programs. Whereas American programs focused primarily on basic research, however, Japan focused on commercial applications.

The debate over superconductors demonstrated two important lessons. First, it showed just how quickly technical knowledge is diffused throughout the world. The scientific breakthrough in Switzerland set off an international chain reaction. The existence of high-temperature superconductors was confirmed quickly by scientists in Tokyo, and subsequently extended by U.S. researchers working at the University of Houston. Within a matter of weeks, new advances were being regularly publicized and confirmed by laboratories in China, Europe, Japan and the United States.

In addition, the policy debate over superconductors directed American attention to the overriding issue: how to translate basic research into products and processes that would yield military and economic benefits. Congress was especially concerned that the United States avoid the situation that had occurred in consumer electronics and semiconductors, in which American industry had pioneered the initial breakthrough only to cede much of the market to foreign competitors who were able to commercialize the technology rapidly.

So far no U.S. or foreign company has announced full commercialization of complex devices using high-temperature superconductors. Nonetheless, progress is being made. Fujitsu has already developed a prototype for a crude superconducting chip, and Japan's International Superconductivity Technology Center has more than 50 full members and 100 associate members. By contrast, with much of the basic science surrounding superconductors still unresolved, the U.S. push for commercial applications has proceeded more cautiously. In addition to the government seed money provided for research, several start-up ventures have been formed and some cooperative research ventures have been created, but overall U.S. commercialization efforts are not nearly as ambitious as those of Japan.

The FSX Fighter

In the spring of 1989 another technological issue made front page news-the FSX fighter. The source of the debate was a proposed joint venture between the United States and Japan to coproduce a new tactical fighter plane. Mitsubishi was to be the prime contractor for the new plane, which was to be based on the American-made F-16 produced by General Dynamics.

Critics of the deal feared that it would result in a giveaway to Japan of American technology. They emphasized that Japan's ultimate objective was not military, but commercial. The FSX deal would help Japan achieve its goal of launching a civilian aerospace industry that might well take jobs and profits from the United States. In particular, they were concerned that the joint-production agreement would give Japan access to the systems integration knowledge that is a major strength of the U.S. aerospace industry. Instead they proposed that Japan simply buy the F-16 off-the-shelf from the United States or, as a second-best option, that Japan enter into a coproduction arrangement with the United States with a minimal transfer of technology. This view focused primarily on the economic implications of the FSX deal. It was supported by the economic agencies of the U.S. government, such as the Commerce Department, the Energy Department and the U.S. Trade Representative's Office.

Proponents held a different view. They argued that the deal would keep Japan from building its own plane. Rather than worrying about Japan's access to U.S. technology, they emphasized that the United States would actually gain access to Japanese technology. They rejected the option of having Japan purchase off-the-shelf U.S. technology as unrealistic, pointing out that Japan had not done so since the 1950s. Furthermore they noted that the president had already established the precedent of joint U.S.-Japanese ventures with the F-86, the F-104 and the F-15. This perspective concentrated primarily on military issues related to national security. It was supported by the Pentagon and the National Security Council.

Although a modified version of the original U.S.-Japanese agreement to coproduce the FSX was eventually agreed to, the debate highlighted a deeper policy question: Should American economic interests be given as much weight as traditional national security concerns in the formulation of U.S. foreign policy? In the past negotiating such technological arrangements has fallen exclusively to the Department of Defense, which tends to view them in purely military and geopolitical terms. Because of the erosion of America's international position in industrial technology and the new spirit of accommodation with the Soviet Union, however, there is renewed interest in strategic economic issues related to proprietary technology, leverage across markets and development of manufacturing know-how.

The lesson of the FSX deal is clear: where advanced technology is concerned, it is no longer possible to treat defense and economic concerns as two separate policy issues. U.S. international competitiveness is central to America's standing and influence in the decades ahead. In the future, the traditional U.S. approach to foreign policy will have to give more serious consideration to strategic industrial issues, such as the strength of the American manufacturing base and the leverage of key technologies across industries. This shift in focus will require a reassessment of both the priorities that govern foreign policy and the government institutions that are involved in the policymaking process. National security can no longer be viewed exclusively in military terms; economic security must also be taken into account.

High-Definition Television

For the last two years Washington has been embroiled in a policy debate about HDTV-a new television technology that provides picture clarity comparable to 35-mm film and has wide-screen pictures and digital stereo sound. Backers have hailed it as the most significant breakthrough since color television. They believe that it will deliver motion-picture-quality television to consumers before the end of the century. They are convinced that it is not only a major market but also a driver of several related technologies, and that the U.S. industry must therefore establish itself as a serious player in its manufacture and distribution. Critics have downplayed HDTV as a technical advance that is limited to a narrow segment of the consumer electronics market, since the large television screens required to carry HDTV would currently cost about $2,000. Nor are they convinced that U.S. manufacturers should attempt to establish themselves in this industry since Europe and Japan already have a lead in the technology as well as a well-established television industry.

For many the controversy over HDTV has come to symbolize the government's difficulty in developing a coherent policy on technology. The urgency of the debate stems from the perception that the United States is behind in a technology that not only has immense market potential, but also is a critical driver of several important electronics-related industries. Although the technology for HDTV is understood by the U.S. industry, Zenith is the only American company that is still in the television business. Consequently, U.S. industry does not have the capacity to develop the technology, manufacture it and bring it to market on a large scale.

The policy debate is characterized by disagreement on several fronts, including appropriate technical standards, the size of the potential market, the readiness of the technology, the role of foreign companies and the linkage across technology-intensive industries. Those differences became most evident on February 1, 1989, when industry, academic experts and special interest groups submitted about two dozen reports on HDTV to the House Telecommunications and Finance Subcommittee. The debate picked up steam in early May 1989 when the Senate Commerce Committee held hearings on HDTV. At this hearing, the American Electronics Association presented a plan calling for the creation of a corporation to guide the development of the U.S. HDTV industry. This corporation would be managed by a board appointed by the president and Congress, representing government, industry and academia. The AEA requested $1.3 billion in government assistance for HDTV in the form of direct loans, loan guarantees and funding for research.

The AEA proposal met with a mixed reaction. Many American electronics companies supported it, but critics of HDTV viewed it as unnecessary. Even the federal government was split. While the Department of Commerce has emphasized the importance of HDTV, the Congressional Budget Office released a study in August 1989 that questioned the market projections and technological linkages that formed the basis of the AEA's analysis. Current government programs for HDTV are much more modest than the AEA proposal. The Defense Advanced Research Projects Agency at the Defense Department has funded some research in this area, but it does not appear that the government is prepared to provide the scale of support recommended by the AEA.

Nonetheless, the HDTV controversy highlighted several critical aspects of the technology policy debate. First, it demonstrated the complexity of the policy debate on technology. Technical feasibility, standards, market demand, the implications for military technology and the role of foreign competitors are all hotly debated issues. The debate is further complicated by the active involvement of numerous interest groups, both domestic and foreign, with widely varying perspectives about what is feasible and appropriate. The fact that policymakers have to anticipate future trends in technology and markets only makes the decisions more difficult.

Second, the HDTV debate has drawn attention to the fact that a solid manufacturing base is essential to technological leadership. U.S. industry got out of the television business when it was considered a low-tech, low-value-added industry. As a result the United States now finds itself faced with a competitive disadvantage in the production of advanced HDTV technology.

Third, it has highlighted the "food-chain" linkages between related technologies, such as semiconductors, computers, software and medical imaging. One senior government official summed up this point forcefully by stating that "the next generations of TVs are the next generation of computers."

Fourth, like the semiconductor debate, the HDTV controversy shows the absence of government institutions capable of dealing with complex technological issues that have both commercial and military implications and that cut across several industries. So far the federal response to HDTV has emphasized traditional policy measures centering around military applications and basic research. Efforts to develop policies for commercial applications have been hampered by lack of institutions capable of dealing with issues related to commercial technology.


Similar debates on technology are being played out in other countries. Although circumstances differ from one country to the next, governments are increasingly concerned with the impact of technology on their international competitiveness. Both in the United States and overseas, governments are attempting to develop domestic technology policies that are in tune with global market realities. In the scramble for new ideas governments are constantly looking over their shoulders to try to ascertain what technology policies have given other countries an advantage in world markets, and then borrowing those policies and adapting them to their own situations. This process has led to an international policy ricochet among the United States, Japan and Western Europe and has resulted in an increasing convergence of public policies for technology.

Perhaps the most obvious example of the international policy ricochet in technology is the rush toward cooperative research and development. Both Europe and the United States view cooperative R&D as an important element in Japan's technological success, and they are therefore experimenting with new R&D programs involving companies, universities and government. Among the best-known European cooperative R&D projects are Airbus, a consortium of aerospace companies from France, Britain, Spain and West Germany; Esprit, a multibillion-dollar European Community program with dozens of cooperative projects aimed at improving microelectronics technology; Eureka, a 19-nation program involving 297 research projects in which corporations cooperate to develop technologies with government funding; and Jessi, the $5-billion Joint European Submicron Silicon program to develop new generations of semiconductors and semiconductor manufacturing equipment. These cooperative European programs have been paralleled by efforts in the United States, which include among the best-known projects the Microelectronics and Computer Corporation and Sematech. In addition, the National Science Foundation has established several engineering research centers and science and technology centers that bring together university and industry researchers.

Japan also continues to borrow ideas from the West. Japan views basic research as a key to U.S. and European technological strength, and is moving to improve its national research base. In September 1988 a MITI White Paper on industrial technology stated that while Japan is known for the excellence of its application of industrial technology, it needs to put more emphasis on basic research. While noting that most of the conventional industrial products manufactured in Japan are technologically equal or superior to comparable products elsewhere, the White Paper emphasized that the research base in Japan is inadequate. MITI noted four concerns: (1) government investment in basic research in Japan remains below that of other industrial nations; (2) Japan has a large pool of researchers, but few hold doctorates or masters degrees; (3) the Japanese research environment is not as creative or flexible as that of the United States and Europe; (4) Japan lags behind other countries in large-scale research facilities. MITI concluded by recommending that the Japanese government play a much more significant role in research.

Another example of the tendency of governments to borrow policy ideas from their competitors and adapt them to their own situations is the plan for European economic integration. It is no secret that Europe views economies of scale as critical to the technological success of Japan and the United States. Consequently, one of the major concerns of "Europe 1992" is the creation of economies of scale that will allow European technology-intensive industries to flourish.


Global competition and the international ricochet of government policies have set the stage for a new U.S. public policy framework for technology. Although the policy debate is still unfolding, some basic concerns are widely shared. Discussion revolves around four issues: strengthening the American manufacturing base, improving the U.S. policymaking machinery for advancing the creation and use of technology, rebuilding the nation's technological infrastructure and encouraging wider national R&D efforts. Although several new programs have been created to address these needs, new policies on technology have yet to be fully developed, and the institutional capacity that is necessary to implement them has yet to be put in place.

Strengthening the U.S. manufacturing base

One issue on which there is wide consensus is the need to strengthen the U.S. manufacturing base. At one time U.S. manufacturing was viewed as synonymous with moribund industries that had more to do with America's industrial past than its high-tech future. This perspective has changed, in large part because of the technological debates discussed above. It is now generally recognized that a strong manufacturing base is essential to leading-edge industries as well as to mature industries. Moreover, mastery of the manufacturing process is increasingly viewed as an essential part of the technical competence that is necessary to advance existing technologies and create new ones.

In discussing manufacturing, two concerns immediately surface: the relatively high cost of capital in the United States and the pressure on American management for short-term results. Managers in U.S. technology-intensive industries claim that the high cost of capital in the United States puts them in a difficult competitive position by forcing them to forgo investments with low yields, even if these investments are important to the long-term health of their company. Furthermore, it means that the investments they do make must earn either a higher return or a faster return than their foreign competitors, thus reinforcing the tendency toward short-term thinking.

The primary reason for high capital costs is the low U.S. saving rate. Record U.S. federal budget deficits-averaging more than four percent of GNP in the 1980s-have eroded the pool of national savings needed to finance investment in both human and physical capital. Net national savings in 1986 and 1987 stood at only two percent of the nation's GNP, well below historical averages of approximately seven percent. The by-product of low national savings and the tight monetary policy that has been required to offset the massive fiscal stimulus has been high real interest rates and low levels of investment. Net investment in the 1980s-averaging 4.8 percent of GNP-is significantly below historical postwar averages of seven percent.

In addition to the cost of capital, the short-term bias of American management is a recurrent theme in policy discussions about U.S. manufacturing. In many ways the discussion about short-term versus long-term is a discussion about the increasing tension between the U.S. financial and manufacturing sectors. Financial markets, faced with a broad array of international investment opportunities, are increasingly unwilling to make long-term investments in U.S. manufacturing when they can earn a higher return in a shorter time period by investing in other areas. Manufacturing, by contrast, requires long-term investment and patient capital. The discussion about short-term versus long-term is therefore in many ways a commentary about the diverging interests of the financial and manufacturing sectors.

Improving the policymaking machinery

Another issue on which there is widespread agreement is the need to improve the U.S. policymaking machinery for technology. Because public policy has not addressed the issue of the commercial application of technology, government policies often tend to impede rather than assist industrial efforts to bring new technology rapidly to the world's market. No one agency of the federal government has broad responsibility for research and other activities related to civilian technology or for strategic coordination of technology policy at the national level. In the executive branch, responsibility for R&D is dispersed among 12 agencies. In Congress, the civilian science budget alone is divided among as many as 13 different appropriations subcommittees, and there is no mechanism for devising reasonable compromises or setting priorities.

An example of the confusion that results from this situation is the Reagan administration's 1987 proposal to double the National Science Foundation's budget over a five-year period. Although this proposal was initially greeted with enthusiasm by Congress, the funding targets have not been met because the subcommittee responsible for determining the NSF budget has had to choose between funding for science and funding for housing subsidies and veterans' benefits.

The problem is compounded by the lack of federal focus on technology's economic implications. Individual agencies are responsible for the research and technology that relate solely to their particular missions. Only the Department of Energy and the Department of Agriculture extend their focus to economic performance, and then only in specific sectors. The one organization that provides an overview of federal research and other activities related to economic performance is the White House Office of Science and Technology Policy. The OSTP advises the president and helps coordinate federal R&D activities, but it has no line functions and a small budget, with staff mostly on temporary loan from other agencies.

The Department of Commerce has a wider economic perspective, but its new programs for technology are just beginning to take shape. The NSF also has a series of broader responsibilities. It supports education, research and information transfers in most scientific and engineering fields and, in effect, serves as the general science and engineering agency of the federal government. The NSF budget, however, accounts for only 2.5 percent of total government R&D funding.

The dispersed responsibility for technology apparent in the federal government is unusual among industrialized countries. Most national governments maintain a ministry of science and technology or a ministry of trade and industry that has broad responsibility for research and technology-related activities. Although there has been discussion of the creation of such an agency in the United States, it remains unclear how such an agency would be structured or what its responsibilities would be.

This does not mean, however, that there is no effort under way to strengthen the government's focus on industrial technology. Three government agencies are at the forefront of this trend: the OSTP, the Department of Commerce and the Department of Defense. President Bush has proposed an increase in the budget of the OSTP and elevated the National Science Adviser (who also serves as the head of the OSTP) to Assistant to the President for Science and Technology. Allan Bromley, who has assumed this position, has stated that one of his top priorities is strengthening U.S. industrial technology.

The Department of Commerce is also playing a more significant role in technological issues that are relevant to industry. The 1988 Omnibus Trade Act legislated an expanded involvement for Commerce in industrial technology, and Secretary Robert Mosbacher has stated that technology will be a priority focus of the department. The trade act created a technology administration at Commerce, renamed the National Bureau of Standards as the National Institute of Standards and Technology, and established the Advanced Technology Program in NIST. Although these new programs have yet to be fully implemented, they signal a growing government concern with industrial technology.

The Department of Defense has also been active. The Defense Advanced Research Projects Agency has a tradition of developing technology with military applications. It is important to note, however, that about half of DARPA's $1.4-billion budget is invested in dual-use technologies that have both civilian and military applications. DARPA is currently the source of funding for Sematech, the National Center for Manufacturing Sciences, and research in such technologies as X-ray lithography. The Defense Science Board and the Office of the Under Secretary of Defense for Acquisitions have also been trying to address issues related to competitiveness and the military's industrial base.

The NSF is also increasingly preoccupied with issues related to the development and commercialization of technology, and has launched a series of efforts to focus on issues more closely related to technology and competitiveness. For other agencies, such as NASA and the federal laboratories, technology transfer has been the rallying cry for new programs. Just how successful these programs will be, however, remains to be seen.

Rebuilding the technological infrastructure

The third area in which there is widespread consensus is the need to strengthen the education system, facilities and equipment that constitute the nation's technological infrastructure. While the federal government is being called on to assume a new role in some technological areas, there is a long tradition of government involvement in ensuring that the U.S. science and technological infrastructure is sound. Government programs contribute importantly to the education of scientists and engineers, provide equipment and facilities, and encourage the basic research that industry utilizes in its efforts to commercialize technology. Sustained investments in these areas are critical to the nation's economic future.

Although some recent initiatives highlight the importance of rebuilding the nation's technological infrastructure, these efforts continue to be hampered by a lack of funding. New congressional fellowships have been established for American students interested in pursuing science and engineering education, and funds have been reallocated in the Department of Defense to enable more graduate students to pursue an education in these fields. But these efforts fall far short of the national need. There are approximately 1,500 vacant engineering faculty positions in U.S. colleges and universities; moreover, according to the NSF, some 60,000 math and science teachers in America's secondary schools are not fully qualified to do their jobs. The shortages of trained faculty in these fields will increase during the 1990s as a wave of retirements of the faculty trained in the 1950s takes place.

University research facilities face similar problems of neglect. Over the past two decades, while many foreign competitors have been aggressively building up their R&D infrastructure, U.S. federal funding for university research plant and facilities declined by over 90 percent in real terms. In a 1986 study on the health of U.S. colleges and universities, the White House Science Council estimated that a $10-billion program over the next ten years would be required to bring U.S. university research facilities to an adequate level. Although legislation has been passed in Congress that would be able to provide some of the necessary funding, these funds have not been fully appropriated because of federal budget constraints.

Other indications of the growing recognition of the need to strengthen the nation's technological infrastructure are the proposed U.S. supercomputer network and the establishment of regional generic technology centers. Although these programs face funding and implementation problems, they are indications of the growing government concern with the nation's technological base.

Encouraging new national R&D efforts

The fourth area in which there is heightened interest and growing consensus is the need to forge new kinds of national R&D efforts. The most visible sign of this new commitment is the profusion of cooperative R&D ventures. Since the 1984 Cooperative Research Act was passed, more than 140 cooperative research ventures have been launched in the United States. They have been complemented by a host of state technological programs that attempt to harness technological development for economic growth. Even the federal government has embarked on some new policies, such as the program to encourage technology transfers from the national labs to U.S. industries.

Although these new initiatives are important, one should not let their stated objectives overshadow the underlying dynamic at work. While these efforts are effective in generating concentrated, long-term funding and an excellent pool of talent, it remains uncertain what their ultimate contribution to industrial technology will be. It is unrealistic to expect new technology of vital interest and immediate relevance to industry to be developed rapidly as a result of these new cooperative relationships. In fact, their primary importance may not be creating state-of-the-art technology that can be readily applied by industry, as much as building the new relationships necessary among businesses, universities and the government to compete in an increasingly competitive international environment.


The debate about U.S. policy on technology is already beginning to have an impact on the conduct of American foreign policy. The basic message is clear: national security can no longer be viewed in exclusively military terms; economic security and industrial competitiveness are also vital considerations. Indeed, where technology is concerned, it is difficult to tell where military concerns stop and economic issues begin. The implications for U.S. foreign policy are only beginning to be understood. The debate about technology and competitiveness promises to have a far-reaching impact not only on the strategic objectives the nation pursues, but also on the institutions that shape our policies.

The shift in the focus of U.S. foreign policy is already apparent. Along with the easing of the East-West military tensions that have been the central factor in U.S. foreign policy since the end of World War II, new economic issues are emerging. The fact that important political allies are also hard-nosed economic competitors means that the U.S. foreign policy establishment can no longer afford a cavalier attitude toward international competition in industrial technology. The performance of U.S. technology-intensive sectors, the strength of the American manufacturing base, the leverage of key technologies across different industries, the state of the nation's technical infrastructure-all these issues will increasingly occupy U.S. policymakers in the future. And as they grow in importance, they will exercise a mounting influence over our relationships with other nations. In some regions, such as Asia, the increasing U.S. preoccupation with economic issues will complicate existing diplomatic relationships; in others, such as Eastern Europe, it may provide a means by which to overcome traditional political tensions.

A new set of issues is emerging hand in hand with these strategic economic concerns. Arcane topics that in the past have been considered the realm of obscure bureaucrats will increasingly engage the highest levels of the U.S. foreign policy establishment. The growing preoccupation with such subjects as international technical standards, patent law, intellectual property protection and dual-use technology demonstrates that this trend is already well underway.

Finally, the policy shift toward strategic economic issues will require institutional realignments in Washington. As the FSX deal so clearly demonstrates, the Department of Defense and the State Department can no longer base policies solely on military and diplomatic criteria. There is a pressing need to incorporate economic issues related to industrial technology into the decision-making process that determines U.S. foreign policy. This new focus will require both internal reorganizations and new institutional alignments among government departments involved in the exercise of U.S. foreign policy.

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  • Admiral B. R. Inman retired from public service in 1982 and has subsequently been active in a variety of efforts to revitalize U.S. industrial competitiveness. He is a member of the Executive Committee of the Council on Competitiveness. Daniel F. Burton, Jr., is Executive Vice President of the Council on Competitiveness.
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