Statement before US House on April 20, 1994

This is historical material, "frozen in time." The web site is no longer updated and links to external web sites and some internal pages will not work.

NARA is disabling support for IPv4 and will support only IPv6 protocols for accessing this website after September 24, 2021. If you receive a network error or have other issues when attempting to access this site, please contact your Internet Service Provider for assistance.

The new agreement puts real teeth in disciplining unfair, trade distortingexport and production subsidies. At the sa me time, it protects our cooperativeR&D programs with industry from potential challenge from foreign countries.These cost-shared, merit-based programs are an important contribution toeconomic growth and the creation of good new jobs, and have had l ongstandingsupport from both sides of the aisle in Congress.

This Administration sees technology as an indispensable engine for economicgrowth, and science as the foundation on which all technical progress isultimately built.

The Clin ton Administration's S&T policy faces the reality of an era ofdynamic change. Let me highlight some of the more important changes facing ustoday:

The civilian sector is now the technology driver in the U.S. economy, thedefense sector is no w a technology follower. We must work directly withindustry to develop promising civilian technologies, technology spin-offs fromdefense projects are no longer good enough.

The American economy is undergoing rapid change. Corporations are down sizing.Smaller, entrepreneurial companies are now a leading source of technicalinnovation. their pockets aren't deep, smaller firms generally tend to focustheir investments in technologies directly related to bringing a product tomarket. Government investment in basic and applied research is now moreimportant than ever.

One of the pillars of the President's vision for R&D is a significantincrease in funding for our technology partnerships with industry. Sharingcosts of pre-competiti ve R&D leverages our investment and gets industryfully invested in the program, thereby enhancing the likelihood of success.

Unfortunately, it was precisely these partnership programs that were most atrisk under the Dunkel Text of the GATT Subsidies Code, and it was thischallenge which confronted our U.S. trade team in Geneva. The changes theynegotiated were critical to the continuation of our R&D partnerships withindustry.

The Dunkel text, as this Administration received i t, limited permissiblegovernment investments in R&D to a 50 percent share for "basic industrialresearch" or a 25 percent share for "applied research". This formulation wasparticularly bad for U.S. technology policy because our investments in "appl iedresearch" are generally made in a 50-50 partnership with industry.

As a result of the efforts of Ambassador Kantor, the final subsidies agreementfully protects U.S. research investments by increasing the permissiblegovernment share to 75 percent government for "basic industrial research" and50 percent for "applied research".

Without these efforts, a number of major U.S. programs that have long hadstrong support on both sides of the aisle would have been actionable. These programs include:

The world-class biomedical research at the National Institutes of Health thathas enabled the development of commercial pharmaceutical and biotechnologyproducts.

SEMATECH, the six year old government-industry consortium to improvesemiconductor manufacturing technology which has been credited with restoringthe competitive edge of the U.S. semiconductor industry and strengthening thesemicon ductor equipment industry.

The Technology Reinvestment Program, a cornerstone of our defense conversionprogram, which supports the development and commercialization of dual-usetechnologies.

The Commerce Department's Advanced Technol ogy Program which supports thedevelopment of high-risk, but potentially high-payoff civilian technologies.

The thousands of Cooperative Research and Development Agreements (CRADA's)that industry has signed with our federal laboratories to deve lop newcompetitive technologies.

Finally, the Partnership for a New Generation of Automobiles would also havebeen actionable under the Dunkel text.

I hope you will agree with me that the Uruguay Round subsidies agreement isgood for Am erican industry, and good for America's competitiveness. Thank youagain for this opportunity to address the Subcommittee on this importantsubject. I look forward to your questions.

Mr. Chairman, thank you for the opportunity to appear before the Subcommitteeto discuss this Administration's new vision for science and technology policyand how the new Uruguay Round subsidies agreement advances that vision. BeforeI b egin I would like to congratulate Ambassador Kantor, Ambassador Yerxa, andall our trade negotiators for their success in forging agreement on a new WorldTrade Organization. In my view the new arrangement will promote freer andfairer trade and enrich a ll the nations of the world.

I am particularly pleased with the treatment of subsidies in the agreement.The new subsidies agreement puts real teeth in disciplining unfair, tradedistorting production and export subsidies. In this way it protec ts Americanindustry from unfair competition. At the same time it protects our cooperativeR&D programs with industry from potential challenge by foreign countries.These programs are among our most important investments in America's economicfuture.

President Clinton and Vice President Gore recognize science and technology asfoundations for our nation's future. They realize that only a technologicallyvibrant and advanced economy will remain competitive in the global market.They are com mitted to ensuring that the United States not only remainscompetitive, but excels.

In advancing our science and technology policy, this Administration has takena fresh approach. Traditionally, U.S. science and technology policy was aimedmostly at supporting basic science and defense-related research. That was finefor the days when our greatest national challenge was military, and wedominated the world economy.

However, it is not good enough today. Certainly, more than ever, we must maintain our historic support for fundamental science. Furthermore, we mustcontinue to invest in advanced technologies to equip the finest fighting forceon earth. However, the cold war is over. Today, our greatest challenge iseconomic.

We see technology as an indispensable engine for economic growth, and scienceas the foundation on which all technical progress is ultimately built.Technological advance fuels growth in the economy and creates productive jobs;through energy efficiency and resource conservation, it links a cleanerenvironment with wider markets and higher profits for business; and it holdsthe promise of new ways in education and training that will challenge andreward all of us.

The Clinton Administration's S& ;T policy faces the reality of an era ofdynamic change. The challenges we face require a new direction for S&Tpolicy. This Administration is ready for the challenge.

Let me highlight some of the more important changes that I believe dictat e anew approach to science and technology policy:

With economic growth a national priority, we need to aim directly atdeveloping promising civilian technologies in partnership with industry.Moreover, the civilian sector is now the technology dr iver in the U.S. economy.With some outstanding exceptions -- such as space technology -- the defensesector is now a technology follower. This means that the civilian economy is aprime source of leading-edge, affordable dual use technologies for defens e.Our goal is to equalize Federal support for military and civilian R&D by1998. A decade ago defense dominated federal research investments with morethan 60 percent of total R&D. Already, we have reached a level of 47percent civilian and dua l-use, verses 53 percent military.

The American economy is undergoing rapid change. Corporations are downsizing.The great corporate laboratories that once brought us revolutionarybreakthroughs -- like Bell Labs and the transistor -- are scaling back.Smaller, entrepreneurial companies are now a leading source of technicalinnovation. These structural changes have a significant effect on privatefunding of R&D. Because their pockets aren't deep, smaller firms generallytend to focus their investments in technologies directly related to bringing aproduct to market. Government investment in basic and applied research is nowmore important than ever.

The President's new vision for and commitment to science and technology isevident in his budget proposal for Fiscal Year 1995, which increases totalR&D funding by 4 percent in nominal terms, and 1 percent in real terms.This is quite remarkable when considered in light of the fact that this budgetis also one that reduces the def icit. The President recognizes the paramountimportance of saving and replenishing our seed corn. Budget limits that freezediscretionary spending mean that any increase in R&D funding must come atthe expense of other programs. The Federal Budget is no longer a zero sumgame, rather it is a negative sum game.

One of the pillars of the President's R&D proposal is a significantincrease in funding for our technology partnerships with industry. Sharingcosts of pre-competitive R&& ;D leverages our investment and getsindustry fully invested in the program, thereby enhancing the likelihood ofsuccess.

Unfortunately, it was precisely these partnership programs that were most atrisk under the Dunkel Text of the GATT Subsidi es Code, and it was thischallenge which confronted our U.S. trade team in Geneva. The changes theynegotiated were critical to the continuation of our R&D partnerships withindustry.

Let me explain why. The Dunkel text, as this Administrati on received it,would have created a "green light" category of non-actionable R&Dsubsidies. However, in order to be protected, the government contributioncould not exceed 50 percent for "basic industrial research" or 25 percent for"applied researc h". This formulation was particularly bad for U.S. technologypolicy because our investments in "applied research" are generally made in a50-50 partnership with industry. This level of assistance exceeded the Dunkellimits and would have left many of o ur R&D programs subject to challenge.

Our principal focus in fostering industrial competitiveness and economicgrowth is in the form of R&D investments. U.S. support for R&D is muchlarger than that of other countries, and consequentl y would have been a biggertarget under Dunkel. According to the latest comparable figures, the U.S.invested $28.4 billion in civilian R&D in 1991. Germany, the next largestprovider spent less than half as much, and Japan even less.

The Dunkel text would not have had a similar effect on other countries becausethey rely less heavily on central government R&D support and more on othertechnology policies in support of industry. For example, Japan and theEuropeans have used governmen t procurement to support selected industrialsectors. Airbus has been the beneficiary of very large success-dependent loansfrom the consortium governments. Japan also uses a complex system ofno-interest loans that the Japanese government provides to i ts aircraftindustry. Programs such as these that go beyond support for pre-competitivedevelopment can be challenged under the new subsidies agreement.

Before it was modified, the Dunkel text made U.S. programs uniquely exposed tothe un certainties of countervailing duty actions by our trading partners. Thissituation led to an urgent call to renegotiate the R&D language of thesubsidies agreement to provide greater protection for our investments inAmerican industry that have long had bipartisan support. Fortunately, withAmbassador Kantor's able leadership and unflinching energy we were successfulin renegotiating the R&D provisions.

As a result of these efforts, the final text fully protects the U.S.investment in fu ndamental research. Industrial research, planned with the ideaof some commercial application down the road, may receive as much as 75 percentgovernment support without challenge. Pre-competitive development activity, upto development of the first non -commercial prototype, can be funded with equalshares from government and industry. The definitions for these differentstages of R&D activity are drawn from the private sector IndustrialResearch Institute, and reflect real industrial practice.

Without these efforts, a number of major U.S. programs that have long hadstrong support on both sides of the aisle would have been actionable. Now,they are eligible for "green light" treatment. These programs include:

The world-class bio medical research at the National Institutes of Health thathas enabled the development of commercial pharmaceutical and biotechnologyproducts;

SEMATECH, th e six year old government-industry consortium to improvesemiconductor manufacturing technology which has been credited with restoringthe competitive edge of the U.S. semiconductor industry and strengthening thesemiconductor equipment industry;

The Technology Reinvestment Program, a cornerstone of our defense conversionprogram, which supports the development and commercialization of dual-usetechnologies;

The Commerce Department's Advanced Technology Program which supports thedevelop ment of high-risk, but potentially high-payoff civilian technologies;

The thousands of Cooperative Research and Development Agreements (CRADA's)that industry has signed with our federal laboratories to develop newcompetitive technologies.

Finally, the Partnership for a New Generation of Automobiles would also havebeen actionable under the Dunkel text. This public-private partnership isintended to

improve manufacturing techniques to make it easier to get new product ideas into the marketplace more quickly;

help develop technologies that can lead to near-term improvements inautomotive efficiency, safety, emissions; and

support research that could lead to production prototypes of vehicles capableof up t o three times greater fuel efficiency with no other changes in consumeramenities.

I hope you will agree with me that the new Uruguay Round subsidies agreementis good for American industry, and good for America's competitiveness. Itprotects the R&D investments that are the bread and butter of ourtechnology policy, but tightens the GATT discipline on export and productionsubsidies that many other countries typically grant. Our ability to workcooperatively with industry in developing