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III. Partnering the Growth of Civilian Technology

To meet the challenges that I have outlined, this Administration is committed to providing Americans with the tools they need to meet the challenges of global competition and the need for constant innovation. Our role is to provide an environment which empowers our workers and businesses and communities to embrace change -- with a government that works with them. Just as we provided the traditional tools for success in agrarian and industrial times -- including public education and the basic infrastructure of commerce from the Erie Canal to the national highways systems of this century -- now we must empower Americans with the tools to succeed in a global, high-technology, information-dominated society.

The Department of Commerce's focus on civilian technology has three basic components, each designed to enhance the technological capabilities of American industry. We emphasize:

  • Supporting industry-led technology partnerships,
  • Facilitating the rapid deployment and commercialization of civilian technologies, and
  • Facilitating a technology infrastructure for the 21st Century.
Mr. Chairman, appended to my testimony is a short description of each of our Department's science and technology activities. For purposes of this testimony, however, I would like simply to describe each of the basic components of our policy.

A. Supporting Industry-led Technology Partnerships

Mr. Chairman, I have already described the basic rationale of our Advanced Technology Program -- to address the market gap in our mid- and long-term R& D portfolio which threatens to make us less competitive in the year 2015 -- and beyond.

Governmental action to redress market defects that threaten national prosperity is scarcely novel. For example, the laws establishing intellectual property rights are designed, in a similar manner, to correct market imperfections by establishing rules of conduct that must be obeyed -- and, in the international context, that we are working hard to have uniformly adopted.

The ATP program is a carefully-targeted remedy for the problem our nation faces. By sharing the costs of research, it reduces the risk for private businesses, thus allowing them to conduct research and development that might otherwise not be conducted at all -- a wise investment for our nation as a whole. Through a rigorous, merits-based review, the ATP program ensures that funded research has both technological and commercial potential. And, with a bottom-up, private sector approach, the ATP program maintains private-sector priorities, not government fiat, as the driving force for technological achievement and focus.

Because of the risk involved, some projects will fail. Others may proceed faster than anticipated. But let me make this clear: it is the company that picks up the cost of product development, not the ATP.

The strength of the ATP -- and the reason that it is a solid and successful part of the nation's technology portfolio -- is that the program is a true partnership with industry. While government provides the catalyst -- and in many cases, critical technical support -- industry conceives, cost-shares, manages and executes ATP projects. Management of projects is geared to ensure that the work performed is what industry believes should be done and is what it can do best.

The ATP relies on the substantial involvement of industry to define and implement its R& D programs. ATP research directions are selected based on direct input from industry and developed in consultation with industry. Specific R& D projects are selected from proposals developed and submitted by industry in response to announced competitions.

The ATP emphasizes cost sharing -- ATP recipients on average pay more than half the total costs of the R&D. This ensures that companies have a vested interest in the success of projects and in timely commercialization, that they will engage in the R&D only because it makes sense as a matter of commercial policy. At the same time, participation by small companies and start-ups is made easier by allowing the single applicant's cost share to be its indirect costs, which are usually low. The first four years of the ATP have shown small businesses to be eager participants: of the awards made since 1990, roughly half have been to individual small businesses or joint ventures led by small businesses.

Thanks to strong support from its industrial partners, the ATP already has documented a number of success stories in its short lifetime. Let me tell you about one of these to illustrate how the program works .

Diamond Semiconductor Group of Gloucester, Massachusetts, was a two-person operation with a promising, but unrealized innovation in semiconductor manufacturing. They hoped to develop a new type of ion implantation machine, one of the primary tools of the industry. The new machine would be smaller, faster, cheaper and more accurate than existing devices but it required design breakthroughs considered very difficult. And expensive.

The concept wasn't easy to sell. Diamond's President spent a year and a half looking for funding from U.S. companies, and when that proved unsuccessful, began considering overseas investors. Fortunately, the partners decided to first apply for an ATP award. Their project was one of 21 selected in 1992, and the fledgling company quickly attracted the attention of Varian Associates, one of the largest suppliers of ion-implantation equipment in the world.

Under the ATP award, Diamond developed their concept and convinced Varian to purchase a worldwide license to manufacture, sell and service devices based on this technology. And then Varian began funding the product development, an area not covered by ATP awards .

Today, Diamond has 35 full- and part-time employees. The partners credit the company's success -- and in fact, its very existence -- to the ATP award for a high-risk technology that only became attractive to a private-sector investor once it was shown to be feasible.

Early results indicate that the ATP is successfully improving the capability of the nation's businesses to capture economic returns from scientific and technological innovations. Two independent studies of projects funded in FY 1991 revealed substantial, early beneficial impacts on participating companies, including expanded R& D activity, particularly the ability to engage in high-risk, long-term research with high-payoff potential; cost and time savings, improved productivity, and other benefits from industry- industry, industry-government, and industry-university collaborations; improved competitive standing; formation of valuable strategic business alliances; improved ability to attract investors; assistance in converting from defense to commercial applications; and acceleration of technology development, leading to improved market share.

This is how the ATP fulfills an industry need that no other government or private-sector program can fill. By funding enabling technologies that most investors consider too risky, the ATP provides U.S. businesses with a bridge from today's innovative promises to tomorrow's breakthrough products and processes.

When I came into office, I said that if John Major or Francois Mitterand could travel around the world advocating on behalf of their nation's products, we could as well. And we have done just that. Here, too, why should we stand by and watch other nations prepare themselves for the future -- making their nations more attractive to the pursuit of long-term technologies, with the attendant economic benefits that brings, while we stand by inactively? We should not. Scaling back Federal investment in long-term, high-risk technology R&D is tantamount to unilateral disarmament in a fiercely competitive world marketplace.

B. Facilitating the Rapid Deployment of Civilian Technologies

Stimulating the development of innovative technologies is one-half of the equation. The other half -- getting new and existing products to market in a timely, cost-effective competitive basis -- is also critical if U.S. firms are to succeed in the global marketplace.

As part of those efforts, the Administration fully recognizes the fundamental role that our 370,000 small- and medium-sized manufacturers play. These firms are the source of two-thirds of our manufacturing jobs, account for 75 percent of new manufacturing jobs -- and contribute more than half the value-added in manufacturing in the U.S.

These facts advocate for expansion of the Manufacturing Extension Partnership (MEP) -- and for the potential that this program has to make a difference. The success of the agricultural extension service over the last 100 years in building an agricultural industry that is the envy of the world -- is a strong precedent for the MEP.

Today there are 44 extension centers already operating or soon to be operating in 32 states. By achieving the President's goal -- to establish a nationwide network -- the nation's 370,000 small and medium-sized manufacturers will have easy access to modern manufacturing technologies, production techniques and best practices through the MEP national system.

The network of manufacturing extension centers is growing because the centers are industry-driven, responsive, and focused on positive bottom-line impacts. Each center tailors its services to meet the needs of manufacturers in its region. And it is the centers' customers who indicate the impact those services have on their firm's performance -- in terms of sales, capital spending, inventory costs, productivity, and other bottom-line factors. The results are staggering. A recent analysis found that the economic benefits to client firms -- in terms of enhanced responsiveness to customer demands, reduced waste and inventory, and increased sales -- resulting from assistance from a center exceed the Government's cost at a rate of seven to one.

Manufacturing extension services are supported by governors, mayors, and CEOs because they understand the unique barriers facing small and medium-sized manufacturers and the need for making appropriate technology, information and resources more accessible to them. Historical experience indicates that smaller manufacturers cannot easily overcome these barriers without external assistance. Furthermore, the extension services provide essential customization of new technologies and process applications adapted to firm- specific operating environments. They also understand the prospective payoff of such services -- and the prospective losses, if these companies do not make the changes needed to remain competitive.

C. Facilitating a Technological Infrastructure for the 21st Century

For nearly a century, the primary responsibility for the constitutional mandates to "fix weights and measures" has fallen on the research laboratories of the National Institute of Standards and Technology, the only federal laboratory specifically commissioned to work with U.S. industry toward improving U.S. competitiveness. The laboratory research program at NIST is a crucial component in this Administration's strategy for competing successfully in the critical industries of the 21st century. Infrastructural technologies such as measurement methods, fundamental standards, materials property data, testing techniques, and advanced instrumentation provide manufacturers with the essential tools to continuously improve both their products and processes. NIST infrastructural technologies also speed market acceptance of advanced technologies by providing buyers and sellers with objective and technically sound methods with which to agree upon and assure product characteristics and performance. In order for U.S. industry to be able to implement changes necessary to remain competitive in the global marketplace, these basic tools require constant improvement. Without this continued development, U.S. firms in many emerging high-technology fields -- such as biotechnology, optical electronics, advanced manufacturing and materials, and high-performance computing and communications -- will lack the underlying measurement technologies and standards necessary to make quality products for future global competition.

NOAA is an integral part of the Department's technology R& D portfolio. NOAA's science has played an important role in U.S. strides in achieving improvements in environmental quality, managing natural resources more wisely, and understanding and predicting the behavior of earth systems so as to ensure sustainable economic opportunities. NOAA's scientific research supports its two missions - Environmental Assessment and Prediction, and Environmental Stewardship.

NOAA assesses and predicts environmental changes on different time scales. NOAA improves its short term weather forecasts through research into basic hydrometeorological processes and through the development of new observational technologies, such as doppler radar. Future improvements in forecasts and warning services will continue to enhance U.S. capabilities to mitigate adverse environmental conditions impacting safety and productivity, from managing evacuations during hurricanes to routing airplanes efficiently.

NOAA's research into the El Nino-Southern Oscillation phenomenon has led to the development of experimental seasonal climate forecasts. By the year 2015, NOAA should have the capability to produce multiseason forecasts of precipitation with accuracies approaching those of current short-term forecasts.

Long-term changes in the global environment may alter the capacity of the Earth to sustain life. NOAA's research involves documenting and understanding these changes, leading to the development of models for their prediction. NOAA's basic research into atmospheric chemistry has led to immediate solutions for mitigating ozone depletion in the Earth's atmosphere. NOAA research on climate change will provide the basis for forecasts of decadal and longer changes with predictions of sufficient scientific credibility to support decisions.

NOAA's second major mission is stewardship of the coastal environment. NOAA's stewardship responsibilities include building sustainable fisheries, recovering protected marine species, maintaining healthy coastal ecosystems, and providing navigation and positioning services. NOAA is conducting and integrating the results of research efforts in multiple fields to better manage its responsibilities in these areas.

These efforts include improving fishery stock assessments using new technologies, such as hydroacoustics; and conducting habitat and marine biodiversity studies which will aid in recovering a number of protected marine species, such as the salmon in the Pacific Northwest. As coastal populations grow rapidly, NOAA is providing information for management decisions designed to promote sustainable economic growth in coastal regions, and to restore and conserve coastal ecosystems.

NOAA will meet national needs for improving navigation and positioning services. By exploiting emerging technologies, such as the Global Positioning System, NOAA will produce and integrate chart data, based on satellite geodetic positioning, and will improve a number of data products for clients who can utilize this real-time environmental information.

In addition to NIST's and NOAA's infrastructure work, the development of the National Information Infrastructure (NII) and its counterpart, the Global Information Infrastructure (GII), is a top priority. These initiatives will promote a stronger economy, more competitive businesses, more effective government, and better educational and technological leadership. The private sector is constructing the NII and GII. The Federal government is acting as a catalyst to promote its development and to ensure that the initiatives are accessible and affordable to all Americans. The Administration's NII and GII initiatives seek to ensure that all Americans can take advantage of the opportunities brought by the advanced information technologies and services -- a market that approaches 10 percent of our domestic economy.

The Commerce Department is focusing on a number of goals, chief among them are privatization and liberalization of markets, open standards, protection of intellectual property rights, regulatory flexibility, government advocacy and stimulating innovative applications. As a means of facilitating the private sector's development and use of NII applications to advance the public good, the Administration is funding NII demonstration projects such as telemedicine and distance learning. Last year the Commerce Department made its first competitive awards under the Telecommunications Information Infrastructure Assistance Program (TIIAP). The program is providing matching funds to state and local governments, nonprofit health care providers, school districts, libraries, universities, public safety services, and other non-profit entities in 44 states, the District of Columbia and the Virgin Islands. The TIIAP will help demonstrate to Americans at the local level the advantages of having access to modern, interactive information infrastructure.

I firmly believe that if you look:

  • at what our policies and programs are striving to accomplish,
  • at how they are being driven by private sector needs and by their contribution to reaching our society's goals, and
  • at the results that we are beginning to deliver,
you will come to the conclusion -- and agree -- that these efforts are making a real contribution.

You asked me to put our efforts in the context of how they will make a significant difference twenty years from now. Twenty years ago, we would have been hard-pressed to predict the stunning advances in science and technology that are transforming our workplaces and our lives. Today, there is no such thing as "business as usual," and we must adapt to the quickening pace of change in technologies and our economy. Our work at the Commerce Department is designed to make sure that American businesses and American works prosper both today and in the decades ahead.

IV. Conclusion -- The Role of the Department of Commerce

I would be remiss, Mr. Chairman, if I concluded without discussing another implication of the new economic challenges our nation faces.

In an era of re-inventing government, some have questioned the nature of the activities housed in, or even the existence itself, of the Department of Commerce. Such criticism usually focuses on the differences between the activities that I oversee: fisheries management and manufacturing centers; export promotion and control, and domestic economic development; the Census Bureau and minority business enterprise; and weather forecasting and economic statistics.

To emphasize the differences is, however, to miss the point. If my testimony today has emphasized anything it is this: We live in an increasingly competitive global economy in which all aspects of economic competitiveness are integrally connected. Trade policy opens opportunities for high-technology companies. Technological proficiency is a key ingredient to economic development in the United States. Economic development will often turn on our ability to sustain environmental resources and provide a predictive capability for environmental change. Measuring and monitoring resources is an important part of the economic information that we collect and the economic analysis that we perform.

The Department of Commerce is where these connections are made. We focus on economic growth and competitiveness and, within our ten bureaus, we work, in a myriad of ways, toward the complementary goals of economic growth, job creation, an increasing standard of living, and environmental protection. And we work better, in every respect, because we are, every day, confronted with the intersection of trade promotion, civilian technology, economic development, sustainable development and economic analysis.

That intersection is where the future of the United States economy is being fashioned, every day, by entrepreneurs who forge our future one deal, one contract and one transaction at a time. My Department works with them every day, to our mutual -- and our future -- benefit.

Thank you.

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Testimony Of Secretary Ron Brown 01/06/95