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9 March 1993
Doc. 6793
1403-8/3/93-2-E
OPINION
on European industrial competitiveness in a global context:
technological dimension1
(Rapporteur: Mr LENZER,
Germany, Christian Democrat)
Introduction
At the outset we have to admit that the situation is paradoxical.
On one hand the governments are encouraged to give high priority to enhancing the international competitiveness of their economies. On the other, they are faced to recognise the fact that their scope for action is shrinking with the emergence of globalisation. With the rapid increase of transfrontier economic relations and interdependence, many parameters begin to elude their control.
Technology is one of these parameters, perhaps one of the most important. Today, technological self-sufficiency is being replaced by technological interdependence. Many firms enter into inter-firm technology collaboration, by way of licensing, sub-contracting or transfers (See Table in Appendix I). Others co-operate within alliances, in sectors where costs of developing new technologies have become prohibitive, such as aircraft engineering and telecommunications. Thus, the global technology strategies of companies are multinational, whereas the economic (or industrial in this context) policies of governments are national. There is therefore an apparent divergence, if not conflict, between the two goals.
To overcome this contradiction many governments move towards reforming structural policies with a strong focus on promoting the technological adaptability of their productive structures. It seems that the 1990s may be dominated by these policies of "structural adjustment" in a radically changing world context.
These considerations lead to one fundamental question: what is the political relevance of the concept of national competitiveness? Isn't this concept better established at microeconomic level? In other words the individual firm's reactions to international market forces are a more reliable and efficient tool for change in national industry than discretionary action on the part of the government.
Key sectors
In some sectors government interference and support is widespread. These are technology-intensive sectors where competition is fierce and producers are forced to improve continually technological advance in order to have competitive prices. Needless to say governments' industrial policies often produce trade distortions at international level. The sectors that come under the spotlight at the moment are particularly: semiconductors, chemicals, computers, automobile industry and aircraft engineering.
While trade policies, such as import rules, technology transfer restrictions, conditions imposed on foreign investors etc. are short-term measures, designed to correct unreasonable trade imbalances or to allow sectors to adjust to international competition, industrial policies has more long-term impacts on structural development. New multilateral rules on governmental technology support may be necessary to ensure that competition between governments does not replace competition between companies.
Patents: a strategic weapon?
Another important dimension of the interface technology/industry is the patent issue. Some industries in the West, like chemicals suffer from patent infringement. The annual loss for OECD chemical producters is estimated at 6-8 thousand million US dollars, out of a total of 70 thousand million US dollars a year of unauthorised use of intellectual property2.
To be fair however, one has to recognise that there is a delicate balance between the rights of the patent holder and the public interest. There is now a very heated discussion about the "rights" of the developing nations to technology. We cannot either, overlook the fact that (a) 80% of patents developed in the South is granted to most industrialised countries (71% of it goes to Europe), (b) the patent infringement is somewhat counterbalanced by brain-drain from South to North (See Tables in Appendix II).
Whatever the figures and statistics, the fact is that the high-tech rivalry, which was object of discussions in other fora until now, has made its first appearance on the GATT agenda. This is an attempt to fusion technology/industry/trade in one global preoccupation. The central issue is how to reconcile the positions of countries which see International Patent Rights as part of liberal market economy and those which consider them as an important factor in national development.
Investment and technology
Investment behaviour of firms is governed by two forces that are related to each other in a complex way: the economy proper and innovation.
Economy is a topic which is dealt with extensively in Mr Rehn's paper. As regard innovation and the interface between the two, following observations could be made.
The innovation capacity of a firm or a sector depends on various factors: the know-how of the actors involved in the first place but also general factors such as the level of applied research in a given country; relations between university and industry; communications infrastructure; trained staff; technological alliances; standard-setting and certification systems; civilian and military interaction and last but not least the financial capacity. This last factor is particularly important in the case of SME's (Small and Medium Enterprises). Most of the disparities in structural competitiveness stem from differences of how these factors operate and interconnect in national innovation systems.
One thing is sure: the nature of investment has changed considerably in the last decades. It is now more technology intensive and consequently staff training also becomes more important. This observation raises two questions:
- Is it possible to quantify the investment required to create and implement new technologies?
- What are the consequences for economic theory of this qualitative change in investment policies?
What future policies?
Against this backdrop I have tried to describe briefly, it is obvious that the intrinsic insular bias for science and technology policies will loose ground in the future.
The internationalisation of technology is expected to continue and may bring smaller companies alongside the big ones into this trend. This should be regarded in the long run as a potentially positive sum development. To offset the contradiction with national interest, priority will have to be given to international collaboration in pre-commercial R and D, to combining resources and abilities and to put emphasis on generic technologies. OECD's "Technology and Economy" Programme and its "Mega Science" projects reflect this tendency.
As regards Europe's position vis-à-vis the United States of America, Japan and other technologically advanced NICs (Newly Industrialised Countries), Community Programmes such as BRITE (Modernisation of Industry) later followed by EURAM (Basic research on industrial technology for Europe), RACE (R and D in advanced communications' technology), JESSI and ESPRIT, aimed at promoting the pre-competitive R and D projects.
Eureka, which is an independent scheme, occupies a special place in this constellation. It was set up to close the gap with the United States of America and Japan. It promotes co-operation between the industries of nineteen countries, with nearly 3 000 partners. The most widely represented branches of activity are environment, robotics, biology, data processing and communications. A new programme "Prometheus", involving European car manufacturers aims at road traffic management, accident prevention and research into the "friendly vehicle" of the future. Eureka is a kind of "marriage broker" between firms and tries to pull the European innovation capacity to the market place.
To continue its success Eureka will have to:
- maintain its "bottom-up" character
- boost participation by SMEs
- encourage co-operation with central and eastern Europe
- increase "environment consciousness" of European industry.
A final word has to be said on the demands of new technology upon systems of human resources, in the perspective of more knowledge-intensive industry. Experts estimate the degree of adult functional illiteracy to approximately 10% to 25% in industrialised countries. It is not possible for a country or an enterprise to profit from the productivity potential of new technology without major investment in education and training.
In conclusion, I basically share the approach toward the role of technology in industry as expressed in the report by Mr Rehn. This paper's purpose was to bring more clarification to some of the issues and maybe complement it on a few points.
Sources
OECD publications: "Technology and the Economy: the Key Relations" 1992; "Technology and Productivity: the Challenge for Economic Policy", 1991; "Technology and the Global Economy", Conference Acts, Montreal 1991.
OECD "Observers": Nos. 173, 174, 179.
OECD Activity Report, 1991.
Eureka: progress reports.
APPENDIX I
APPENDIX II
Reporting committee: Committee on Economic Affairs and Development.
Committee for opinion: Committee on Science and Technology.
Reference to committee: Doc. 6511 and Reference No. 1720 of 11 March 1991.
Opinion: approved by the committee on 5 March 1993.
2 1Patents are protected by "industrial property law", which covers also models, industrial design, trademarks, etc. "Intellectual property", governed by the Bern and Geneva Conventions covers both artistic and software copyrights, plus industrial property rights.