- Email: [email protected]
National strategies for technology trade
0160-791X189 $3.00 + .OO 1989 Pergamon Press plc
TcdnoIogy in &m&y, Vol. 11, pp. 181-188 (1989)
Printed in the USA. All tights reserved.
National Strategies for Technology Trade A Response to Chris Hill Victor G. Bradley
ABSTRACT. Tecbno/ogy is increasingly at the root of many modern trade disputes either in its own rtkbt or embodied in goods or services. Frictions between the USA andJapan, and American concerns about its competitiveness are beavdy technology related. Europe 1992 bar, as one goaL, to re-estabtikb tecbno/ogica/ “indepenuhce. ” This paper argues that there appears to be a dn$ towards technological protectionism, that protectihnism in this area w;ll be at least as destructive as other forms of trade protectionism and tbat it is not in the interest of hge or sr&i economies to go down this road. It uses the current international debate on intellect&property protection and export controh as exampIes.
Introduction
Unlike the approach taken by Chris Hill in his paper, in my view it is not feasible for Canada (nor for that matter for most countries) to look at the technology/trade question as an external (sometimes marginal) input to domestic decision making on economic, technology or industrial policies. Few countries besides the United States, Japan and Europe collectively by 1992 and possibly the Soviet Union for different reasons can even pretend to have a potential for self sufficiency in technology. Most countries, like Canada, are technologically dependent. This dependence is not negative or pejorative but, rather a fact of life reflecting small populations, small internal markets and thus, relatively speaking, a small capacity to produce technology. Thus, in the following discussion of the technology and trade interface, I will look at the question from the point of view of Canada with a strong, open, trade-dependent economy with interests both as a technology importer-importing something over 90 % of the technology we need - and a technology exporter of know-how as well as products and services resulting from technology. I would like also to make a distinction between science and technology recognizing the grey area that exists and is indeed expanding. In simple (and I hope not An engineer trained at Queen’s University, Victor G. Bradiey has had a long career in science,technoIogY and Cam&a’s international aflairs at both the Ministry of Statefor Science and Technology and at the Department of lkternai Affairs. He akcurrently the Counse/lor (Science and Technology) at the Canadian EmbarJy in Washington, D. C. The views expressed in this paper are those of the author and should not be associated with the Government of Canada. 181
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simplistic) terms, science involves the description of the natural world and the laws that guide it. It has traditionally been treated as a public good. Technology is the application of these natural laws to the production of a good, process or service. Technology both as know-how and that embodied in goods has economic value, has been appropriable by individuals or companies and for this latter purpose has received various kinds of legal protection. Canada, being a strong member of the middle economies of the world between the US, the European Community and Japan on the one hand and the bulk of the Third World economies on the other, has interests which do not clearly identify with either of the groups but are often a blend which, while clearly close to the interests of developed market economies, sometimes gives us a foot in both camps. This is certainly true in the technology area where we share many of the views of the big economies with respect to better protection of the intellectual property, but we also wish to ensure adequate access to the technology produced by others-a theme most often associated with the Third World. This somewhat schizophrenic approach is neither unique to Canada nor unique to technology policy in Canada. In fact, I believe the vast majority of countries including the US, Europe and Japan should have a great deal of interest in maintaining and enhancing open access to the world body of technology. Canada’s approach here is not fundamentally different from our approach to goods, services and capital, i.e., the free movement of technology with few, if any, artificial barriers will ultimately best serve global economic development from which all can benefit. There are, however, increasing numbers of threats to this hitherto relatively open exchange, some of which I would like to discuss. Let me first say, however, that like Chris Hill’s paper much of my comment will be in the nature of speculation and opinion. I also have found that relatively little has been written on the relationship between trade and technology or trade and R&D especially by trade policy professionals or academics. It appears to be a new area in trade policy arguably first put forward by the United States in the context of its concerns with US “competitiveness.” As with many new policy areas, especially those that achieve early political support (regardless of their merits), the initial proposed solutions are often based on less than full analysis. Regardless of how much or how little analysis there has been, I think it is safe to say that technology will continue to grow in recognition as a major factor in economic competitiveness, and in the economic efficiency of companies and nations (productivity). As such it could lead to increased friction (and in my view it is) in the international trade arena both in policy and operational terms. Most agree that we live in an increasingly interdependent world and what one country does with respect to, say, environmental policy or monetary policy inevitably has an effect on other nations and in turn usually has feedback effects on the instigator. Nowhere is this more true than in trade where protectionist actions by one nation almost always lead to retaliation by others whose trade is adversely affected. Usually, this leads to a net negative effect all around with consumers and taxpayers footing the bill. Protectionist approaches to technology will in my view be no less damaging, leading, for example, to increased domestic costs in duplicating R&D or by slowing the development of others such that they can’t afford to purchase
National Strategies for Technology Trade
183
goods and services from abroad. This would not be good for either the national economies of nations or for the international economy as a whole. I should note that I am not one of those who subscribes to the view that the US is in absolute decline in technological terms even if they may be in relative terms. They have their problems, to be sure, but the relative decline can better be seen as the success of other policies, including the rebuilding of Europe and Japan since the Second World War and the efforts taken to assist the development of the Third World. What I fear as a Canadian is that the competition between the “big three” economic powers -the US, Japan and the European Community-will lead to destructive forms of competition with each trying to dominate in technological leadership, resulting in the erection of various kinds of barriers to both technology and markets for technology-based goods and services. Canada could not win in such a situation and we must therefore work toward establishing a set of rules where the competition is constructive and the ground rules are indeed level and enforceable. With the above context in mind, I would like to address a few of the issues which are currently or prospectively part of the trade/ technology debate. Two issues in particular will dominate my remarks, namely the protection of Intellectual Property and protectionism related to technology which I will discuss under the rubric of access to technology. Intellectua/ Property The best place to start is with a topic already on the international agenda and which is being discussed in the MTN’s, i.e., trade-related aspects of intellectual property or ‘TRIPS” in the jargon. Intellectual property protection was early identified by the United States as major plank in their objectives for reform in the international trade rules. It remains, along with agriculture, the top agenda item for US negotiators. The basic premise that the treatment of intellectual property insofar as it affects fair trade should be the subject of some international disciple is more or less embraced by most OECD countries. On the other side are the developing countries most of whom are at best suspicious of Western motives, at worst clearly hostile to a move that they see as yet another attempt to prevent developing countries from developing economically. Two pieces of historical perspective on intellectual property are in order. First, legal protection of intellectual property, as exemplified by patent and copyright law evolved as a social contract between inventors (usually industry) and national govemments. In essence the government (and I emphasize government) agrees to confer certain limited monopoly rights on inventors or authors in exchange for disclosure of the knowledge. In the case of patents the inventor acquires the legal right to control the use of his/ her invention and reap the financial rewards for some period of time in recognition of the investment risk undertaken in doing the research and development associated with the invention. In exchange the inventor must disclose publicly the knowledge behind or contained in the invention so that society generally can benefit from that knowledge. Second, many of you will recall that the developed and developing countries have
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been trying off and on for 15 years to develop an International Code of Conduct for the Transfer of Technology. Replacing the expression “Transfer of Technology” with “Trade in Technology, ” this Code is an attempt to establish a commonly accepted set of rules, in the form of guidelines, with respect to commercial transactions involving technology or know-how. In the early days the basic premise of the developing countries was that technology, like science, should be regarded as “the common heritage of mankind.” While the developing countries have publicly retreated from this position in the Code negotiations, many of their decision makers and bureaucrats still embrace this idea as their ultimate goal. Needless to say, this “common heritage” approach was totally inimical to the interests of developed countries. This approach of the developing countries can be expected to be their counter proposal to the TRIPS agenda being established by the West. With these two factors in mind, where are we today in the legal protection of intellectual property ? In most OECD countries industry is strongly pursuing demands for increased protection for inventions and sometimes discoveries, paying less and less attention to the obligations originally undertaken as part of the social contract. For example, there are always individuals trying to patent or copyright mathematical algorithms (ideas), and they are getting an increasingly sympathetic hearing at least in the United States from Congressmen, and to some extent from the courts if not from patent examiners. The recent legal actions initiated by Apple Computers against Microsoft, IBM and others on the Windows concept is a related case in point. In the area of biotechnology the distinction between science and invention is becoming increasingly blurred and the question of the patentability of life forms or units of life forms (e.g., the element GP-124 of the AIDS virus) are being decided by the courts, and the public policy debate in the USA and most other countries has yet to be fully enjoined. In Japan, Japanese companies are flooding the Japanese patent office and foreign patent offices, in particular that of the US, with patent applications related to superconductivity many of which, in the view of some experts, are of questionable legitimacy as they are either not inventions or they are only incremental changes on previous inventions in an attempt to corner the market in this new field. A recent report by the US Council on Competitiveness, “Picking up the Pace: The Commercial Challenge to American Innovation,” contains what I believe is a compelling discussion suggesting that Japan does not always play by existing rules of the game when it comes to intellectual property. Certain of industry’s demands are, in my view, legitimate complaints where some international discipline and sanctions are required as, for example, with respect to piracy and counterfeit goods. If you have been watching the Olympics on NBC, you might have seen the reports on the flood of counterfeit designer goods being produced in Korea. However, the rapid evolution of technology and the increasing rate of technology discovery and change have led to a situation where there are technologies that do not fit neatly into existing law (biotechnology for example) and policy makers are hard pressed to address the broader implications of the protection of new technologies on either national or global economic welfare given this rate of change. As a Canadian looking at Canada’s best interests, I believe that we must come
Nationai Strategies for Technology Trade
185
to a new understanding of intellectual property protection. In the first place, this understanding should reaffirm the free and open publication of the scientific discovery as indeed the “common heritage of mankind.” I believe this to be in the best interest of all countries because it is indeed the free open and rapid exchange of ideas that has allowed the scientific and technological revolution occurring around us. In turn this revolution has led the growth in both national economies and the international economy. Second, a new understanding must reach a compromise between the approach taken by some industry proponents which would erode historical distinctions between science and technology (i.e., discovery/idea and invention) and the social contract I mentioned earlier. Third, we must guard against the potential for trade harassment based on the enforcement of IP rights based on frivolous claims or where the infringing article is but a very small part of a much larger product -a computer chip or two in an automobile for example. Further, I believe that this consensus on what the rules are to be should be embodied in international law and enforceable internationally. But such a compromise should not, in my view, put the interests of one company or industry ahead of the general national welfare nor the interests of one country ahead of general international welfare.
Access to Technology Any of you who have read the study of the National Academy of Sciences entitled “Balancing the National Interest -US National Security Export Controls and Global Economic Competition” and similar studies will know there is a continuing debate in the United States and indeed throughout the West on the whole question of export controls and their impact on trade and economic development. Few will argue that, in the current global political environment, a strong and effective export control regime is required. The question arises, however, as to the extent of the coverage and the definition of national security that some authorities are using. I can recall looking at the American Military Critical Technologies List shortly after it was published and realizing that I could think of very few products that could not somehow fall under one part or the other of this list. It was only later, after coming to Washington, that I learned how this list was created. Basically every agency of the US government was asked to supply a list of technologies which in their view would not be in the US national security interests to export. There was no definition of national security. Basically agencies put down long “wish lists” which were then sorted and compiled into what became the MCTL.. There was little or no attempt to rationalize or cull the list to ensure that it reflected true military strategic technologies. Another story relates to the developments surrounding high temperature superconductivity. You have all probably heard about the conference hosted by the White House on 27, 28 July 1987 where foreign scientists were barred from participation (although I will note parenthetically that foreign journalists were allowed in). What you may not know is that subsequently the US administration attempted to introduce legislation restricting if not curtailing access to information of the results of
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superconductivity research in federal labs to foreigners. Fortunately, from my point of view, the administration could not find a single Congressman or Senator to introduce their proposal, primarily because of these restrictive clauses. What is my point? Namely that there appear to be forces at work that do not take a narrow view of national security, but are taking a broad definition which includes economic well-beingthat all of these events are but examples of a growing trend to technological protectionism. That is not to say that we will ever be able to agree on a nice definition of national security since it is inherently a subjective topic. The lack of any progress on that front in the FTA shows how difficult this subject is. Another example of what I see as technology protectionism in the US is the establishment of the SEMATECH Corporation which is a consortium of the major US chip manufacturers who are doing research on new production methods for semiconductors. The concern I have as a Canadian is that participation in this institution supported, but not entirely financed, by the US government is restricted by law to companies which are beneficially (5 1% ) owned and controlled by US citizens, i.e., Nofor as we say in the jargon. I wonder what the American reaction would be to similar institutions established by their allies. In my view, if everybody took this approach everybody would lose. Looking at some of these situations from an American point of view, I have a great deal of sympathy with the views of much of US industry. On export controls they believe, I think with reason, that they are losing a great deal of business to foreign competition, most of which is under equally onerous but much more selective export control regimes. On restricting access by foreigners to information or participation in research, they fear retaliation which would not be in their interests. I believe that most US industrialists recognize that the technological revolution is global, that US leadership in technology no longer implies virtually total selfreliance, and that they are going to need their own access to foreign technological developments. Looking at it from a Canadian point of view, all of these actions serve to limit Canadian competitiveness and not because we (meaning Canadian industry) are not prepared to pay the price for transferring technology. Rather, we are confronted with situations where normal commercial practice does not prevail, and where the current US definition of the national security interests of the Western allies is at best questionable, and the overriding if unstated objective is to restrict international competition by including economic well-being as part of a definition of national security. The recent adoption by the U.S. Congress of the Omnibus Trade Bill has attempted to address this issue by calling for a strengthening of the international enforcement of an agreed export control regime. Basically it calls for higher fences around fewer pastures with respect to transfers of technology to prescribed destinations and a freer transfer of technology within the COCOM group. I believe that this will be in the long-term economic interests of the Western countries both individually and collectively and will focus the energies of those responsible for ensuring that unwanted transfers of technology do not occur on shorter list of truly critical technologies. Technology protectionism is by no means limited to the US or even to the West. Japan has its own systems in place which inhibit if not prevent the transfer of tech-
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nology. This is aside from the language/culture barrier which I believe is a barrier that must be overcome by those wishing to do business in Japan. Many of these barriers are not dissimilar to their better known barriers to market access such as often deliberately obscure or complicated bureaucratic mechanisms - documentation requirements and technical standards for example. Others, however, are not unlike the SEMATECH example cited above where there is a deliberate attempt to exclude foreigners. One example comes to mind, that is the Japanese ftith generation computer project where it appears that only certain elements of the program are truly open to collaboration and for others you must be Japanese to get access. And in the case of Europe, we have the Eureka program where it is difficult at best for nonEuropean companies to participate in the projects. And in the case of the European Community with their proliferation of community-wide research programs (ESPRIT, RACE, etc.) this situation is sometimes worse and if you accept the analysis of some observers, the situation of “Europe for the Europeans” will only be exacerbated as we move towards Europe 1992. Brazil on the other hand has long had highly restrictive transfer of technology laws which are of questionable utility in their own development and their approach to patent protection leaves a great deal to be desired for those who wish to do business. Summary and Conclusion I would like to sum up by trying to answer the question, need protecting?”
“Do technologies
really
1. The protection
2.
3.
4.
5.
of technology is valid to the point that it does not distort fair commercial trade in technology. We (Canada) cannot afford to have artificial barriers to trade in technology erected especially at a time when we are attempting to reduce trade barriers to goods, services, and capital. Intellectual property protection is necessary to encourage future innovation international rules of the game must be developed, including enforcement mechanisms. However, we must ensure that these protection and enforcement measures do not become so onerous that they themselves become barriers to trade or to legitimate competition. Regarding patents and other intellectual property rights, a new international understanding must be reached on what is invention and what is discovery, i.e., what is technology and what is science. Also, mechanisms should be established to ensure some consistency in the application of these understandings. New understandings must be reached with respect to export controls and other national security controls which more clearly define collective western security interests relieving all but the most advanced and sensitive technologies from controls. National security must not become just another form of economic protectionism.
Last, I wish to say that if fair, open and free trade in goods and services is good for both our national economies and the international economy as a whole, then
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fair, open and free trade in technology is equally good and in the case of Canada absolutely necessary. I subscribe to the views of the National Academy of Sciences and others that one of the great strengths of the West in science and technology has been a free and open research and development system where the best minds can freely interact to discover, invent and develop our modern technologies. Restrictions on this open system will not only have a negative impact on trade and economic development but more generally would, in my view, inhibit progress in the quality of life for our children and grandchildren and especially for those in the developing world.
TcdnoIogy in &m&y, Vol. 11, pp. 181-188 (1989)
Printed in the USA. All tights reserved.
National Strategies for Technology Trade A Response to Chris Hill Victor G. Bradley
ABSTRACT. Tecbno/ogy is increasingly at the root of many modern trade disputes either in its own rtkbt or embodied in goods or services. Frictions between the USA andJapan, and American concerns about its competitiveness are beavdy technology related. Europe 1992 bar, as one goaL, to re-estabtikb tecbno/ogica/ “indepenuhce. ” This paper argues that there appears to be a dn$ towards technological protectionism, that protectihnism in this area w;ll be at least as destructive as other forms of trade protectionism and tbat it is not in the interest of hge or sr&i economies to go down this road. It uses the current international debate on intellect&property protection and export controh as exampIes.
Introduction
Unlike the approach taken by Chris Hill in his paper, in my view it is not feasible for Canada (nor for that matter for most countries) to look at the technology/trade question as an external (sometimes marginal) input to domestic decision making on economic, technology or industrial policies. Few countries besides the United States, Japan and Europe collectively by 1992 and possibly the Soviet Union for different reasons can even pretend to have a potential for self sufficiency in technology. Most countries, like Canada, are technologically dependent. This dependence is not negative or pejorative but, rather a fact of life reflecting small populations, small internal markets and thus, relatively speaking, a small capacity to produce technology. Thus, in the following discussion of the technology and trade interface, I will look at the question from the point of view of Canada with a strong, open, trade-dependent economy with interests both as a technology importer-importing something over 90 % of the technology we need - and a technology exporter of know-how as well as products and services resulting from technology. I would like also to make a distinction between science and technology recognizing the grey area that exists and is indeed expanding. In simple (and I hope not An engineer trained at Queen’s University, Victor G. Bradiey has had a long career in science,technoIogY and Cam&a’s international aflairs at both the Ministry of Statefor Science and Technology and at the Department of lkternai Affairs. He akcurrently the Counse/lor (Science and Technology) at the Canadian EmbarJy in Washington, D. C. The views expressed in this paper are those of the author and should not be associated with the Government of Canada. 181
182
V. G. Bradley
simplistic) terms, science involves the description of the natural world and the laws that guide it. It has traditionally been treated as a public good. Technology is the application of these natural laws to the production of a good, process or service. Technology both as know-how and that embodied in goods has economic value, has been appropriable by individuals or companies and for this latter purpose has received various kinds of legal protection. Canada, being a strong member of the middle economies of the world between the US, the European Community and Japan on the one hand and the bulk of the Third World economies on the other, has interests which do not clearly identify with either of the groups but are often a blend which, while clearly close to the interests of developed market economies, sometimes gives us a foot in both camps. This is certainly true in the technology area where we share many of the views of the big economies with respect to better protection of the intellectual property, but we also wish to ensure adequate access to the technology produced by others-a theme most often associated with the Third World. This somewhat schizophrenic approach is neither unique to Canada nor unique to technology policy in Canada. In fact, I believe the vast majority of countries including the US, Europe and Japan should have a great deal of interest in maintaining and enhancing open access to the world body of technology. Canada’s approach here is not fundamentally different from our approach to goods, services and capital, i.e., the free movement of technology with few, if any, artificial barriers will ultimately best serve global economic development from which all can benefit. There are, however, increasing numbers of threats to this hitherto relatively open exchange, some of which I would like to discuss. Let me first say, however, that like Chris Hill’s paper much of my comment will be in the nature of speculation and opinion. I also have found that relatively little has been written on the relationship between trade and technology or trade and R&D especially by trade policy professionals or academics. It appears to be a new area in trade policy arguably first put forward by the United States in the context of its concerns with US “competitiveness.” As with many new policy areas, especially those that achieve early political support (regardless of their merits), the initial proposed solutions are often based on less than full analysis. Regardless of how much or how little analysis there has been, I think it is safe to say that technology will continue to grow in recognition as a major factor in economic competitiveness, and in the economic efficiency of companies and nations (productivity). As such it could lead to increased friction (and in my view it is) in the international trade arena both in policy and operational terms. Most agree that we live in an increasingly interdependent world and what one country does with respect to, say, environmental policy or monetary policy inevitably has an effect on other nations and in turn usually has feedback effects on the instigator. Nowhere is this more true than in trade where protectionist actions by one nation almost always lead to retaliation by others whose trade is adversely affected. Usually, this leads to a net negative effect all around with consumers and taxpayers footing the bill. Protectionist approaches to technology will in my view be no less damaging, leading, for example, to increased domestic costs in duplicating R&D or by slowing the development of others such that they can’t afford to purchase
National Strategies for Technology Trade
183
goods and services from abroad. This would not be good for either the national economies of nations or for the international economy as a whole. I should note that I am not one of those who subscribes to the view that the US is in absolute decline in technological terms even if they may be in relative terms. They have their problems, to be sure, but the relative decline can better be seen as the success of other policies, including the rebuilding of Europe and Japan since the Second World War and the efforts taken to assist the development of the Third World. What I fear as a Canadian is that the competition between the “big three” economic powers -the US, Japan and the European Community-will lead to destructive forms of competition with each trying to dominate in technological leadership, resulting in the erection of various kinds of barriers to both technology and markets for technology-based goods and services. Canada could not win in such a situation and we must therefore work toward establishing a set of rules where the competition is constructive and the ground rules are indeed level and enforceable. With the above context in mind, I would like to address a few of the issues which are currently or prospectively part of the trade/ technology debate. Two issues in particular will dominate my remarks, namely the protection of Intellectual Property and protectionism related to technology which I will discuss under the rubric of access to technology. Intellectua/ Property The best place to start is with a topic already on the international agenda and which is being discussed in the MTN’s, i.e., trade-related aspects of intellectual property or ‘TRIPS” in the jargon. Intellectual property protection was early identified by the United States as major plank in their objectives for reform in the international trade rules. It remains, along with agriculture, the top agenda item for US negotiators. The basic premise that the treatment of intellectual property insofar as it affects fair trade should be the subject of some international disciple is more or less embraced by most OECD countries. On the other side are the developing countries most of whom are at best suspicious of Western motives, at worst clearly hostile to a move that they see as yet another attempt to prevent developing countries from developing economically. Two pieces of historical perspective on intellectual property are in order. First, legal protection of intellectual property, as exemplified by patent and copyright law evolved as a social contract between inventors (usually industry) and national govemments. In essence the government (and I emphasize government) agrees to confer certain limited monopoly rights on inventors or authors in exchange for disclosure of the knowledge. In the case of patents the inventor acquires the legal right to control the use of his/ her invention and reap the financial rewards for some period of time in recognition of the investment risk undertaken in doing the research and development associated with the invention. In exchange the inventor must disclose publicly the knowledge behind or contained in the invention so that society generally can benefit from that knowledge. Second, many of you will recall that the developed and developing countries have
184
V. G. Bradley
been trying off and on for 15 years to develop an International Code of Conduct for the Transfer of Technology. Replacing the expression “Transfer of Technology” with “Trade in Technology, ” this Code is an attempt to establish a commonly accepted set of rules, in the form of guidelines, with respect to commercial transactions involving technology or know-how. In the early days the basic premise of the developing countries was that technology, like science, should be regarded as “the common heritage of mankind.” While the developing countries have publicly retreated from this position in the Code negotiations, many of their decision makers and bureaucrats still embrace this idea as their ultimate goal. Needless to say, this “common heritage” approach was totally inimical to the interests of developed countries. This approach of the developing countries can be expected to be their counter proposal to the TRIPS agenda being established by the West. With these two factors in mind, where are we today in the legal protection of intellectual property ? In most OECD countries industry is strongly pursuing demands for increased protection for inventions and sometimes discoveries, paying less and less attention to the obligations originally undertaken as part of the social contract. For example, there are always individuals trying to patent or copyright mathematical algorithms (ideas), and they are getting an increasingly sympathetic hearing at least in the United States from Congressmen, and to some extent from the courts if not from patent examiners. The recent legal actions initiated by Apple Computers against Microsoft, IBM and others on the Windows concept is a related case in point. In the area of biotechnology the distinction between science and invention is becoming increasingly blurred and the question of the patentability of life forms or units of life forms (e.g., the element GP-124 of the AIDS virus) are being decided by the courts, and the public policy debate in the USA and most other countries has yet to be fully enjoined. In Japan, Japanese companies are flooding the Japanese patent office and foreign patent offices, in particular that of the US, with patent applications related to superconductivity many of which, in the view of some experts, are of questionable legitimacy as they are either not inventions or they are only incremental changes on previous inventions in an attempt to corner the market in this new field. A recent report by the US Council on Competitiveness, “Picking up the Pace: The Commercial Challenge to American Innovation,” contains what I believe is a compelling discussion suggesting that Japan does not always play by existing rules of the game when it comes to intellectual property. Certain of industry’s demands are, in my view, legitimate complaints where some international discipline and sanctions are required as, for example, with respect to piracy and counterfeit goods. If you have been watching the Olympics on NBC, you might have seen the reports on the flood of counterfeit designer goods being produced in Korea. However, the rapid evolution of technology and the increasing rate of technology discovery and change have led to a situation where there are technologies that do not fit neatly into existing law (biotechnology for example) and policy makers are hard pressed to address the broader implications of the protection of new technologies on either national or global economic welfare given this rate of change. As a Canadian looking at Canada’s best interests, I believe that we must come
Nationai Strategies for Technology Trade
185
to a new understanding of intellectual property protection. In the first place, this understanding should reaffirm the free and open publication of the scientific discovery as indeed the “common heritage of mankind.” I believe this to be in the best interest of all countries because it is indeed the free open and rapid exchange of ideas that has allowed the scientific and technological revolution occurring around us. In turn this revolution has led the growth in both national economies and the international economy. Second, a new understanding must reach a compromise between the approach taken by some industry proponents which would erode historical distinctions between science and technology (i.e., discovery/idea and invention) and the social contract I mentioned earlier. Third, we must guard against the potential for trade harassment based on the enforcement of IP rights based on frivolous claims or where the infringing article is but a very small part of a much larger product -a computer chip or two in an automobile for example. Further, I believe that this consensus on what the rules are to be should be embodied in international law and enforceable internationally. But such a compromise should not, in my view, put the interests of one company or industry ahead of the general national welfare nor the interests of one country ahead of general international welfare.
Access to Technology Any of you who have read the study of the National Academy of Sciences entitled “Balancing the National Interest -US National Security Export Controls and Global Economic Competition” and similar studies will know there is a continuing debate in the United States and indeed throughout the West on the whole question of export controls and their impact on trade and economic development. Few will argue that, in the current global political environment, a strong and effective export control regime is required. The question arises, however, as to the extent of the coverage and the definition of national security that some authorities are using. I can recall looking at the American Military Critical Technologies List shortly after it was published and realizing that I could think of very few products that could not somehow fall under one part or the other of this list. It was only later, after coming to Washington, that I learned how this list was created. Basically every agency of the US government was asked to supply a list of technologies which in their view would not be in the US national security interests to export. There was no definition of national security. Basically agencies put down long “wish lists” which were then sorted and compiled into what became the MCTL.. There was little or no attempt to rationalize or cull the list to ensure that it reflected true military strategic technologies. Another story relates to the developments surrounding high temperature superconductivity. You have all probably heard about the conference hosted by the White House on 27, 28 July 1987 where foreign scientists were barred from participation (although I will note parenthetically that foreign journalists were allowed in). What you may not know is that subsequently the US administration attempted to introduce legislation restricting if not curtailing access to information of the results of
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superconductivity research in federal labs to foreigners. Fortunately, from my point of view, the administration could not find a single Congressman or Senator to introduce their proposal, primarily because of these restrictive clauses. What is my point? Namely that there appear to be forces at work that do not take a narrow view of national security, but are taking a broad definition which includes economic well-beingthat all of these events are but examples of a growing trend to technological protectionism. That is not to say that we will ever be able to agree on a nice definition of national security since it is inherently a subjective topic. The lack of any progress on that front in the FTA shows how difficult this subject is. Another example of what I see as technology protectionism in the US is the establishment of the SEMATECH Corporation which is a consortium of the major US chip manufacturers who are doing research on new production methods for semiconductors. The concern I have as a Canadian is that participation in this institution supported, but not entirely financed, by the US government is restricted by law to companies which are beneficially (5 1% ) owned and controlled by US citizens, i.e., Nofor as we say in the jargon. I wonder what the American reaction would be to similar institutions established by their allies. In my view, if everybody took this approach everybody would lose. Looking at some of these situations from an American point of view, I have a great deal of sympathy with the views of much of US industry. On export controls they believe, I think with reason, that they are losing a great deal of business to foreign competition, most of which is under equally onerous but much more selective export control regimes. On restricting access by foreigners to information or participation in research, they fear retaliation which would not be in their interests. I believe that most US industrialists recognize that the technological revolution is global, that US leadership in technology no longer implies virtually total selfreliance, and that they are going to need their own access to foreign technological developments. Looking at it from a Canadian point of view, all of these actions serve to limit Canadian competitiveness and not because we (meaning Canadian industry) are not prepared to pay the price for transferring technology. Rather, we are confronted with situations where normal commercial practice does not prevail, and where the current US definition of the national security interests of the Western allies is at best questionable, and the overriding if unstated objective is to restrict international competition by including economic well-being as part of a definition of national security. The recent adoption by the U.S. Congress of the Omnibus Trade Bill has attempted to address this issue by calling for a strengthening of the international enforcement of an agreed export control regime. Basically it calls for higher fences around fewer pastures with respect to transfers of technology to prescribed destinations and a freer transfer of technology within the COCOM group. I believe that this will be in the long-term economic interests of the Western countries both individually and collectively and will focus the energies of those responsible for ensuring that unwanted transfers of technology do not occur on shorter list of truly critical technologies. Technology protectionism is by no means limited to the US or even to the West. Japan has its own systems in place which inhibit if not prevent the transfer of tech-
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nology. This is aside from the language/culture barrier which I believe is a barrier that must be overcome by those wishing to do business in Japan. Many of these barriers are not dissimilar to their better known barriers to market access such as often deliberately obscure or complicated bureaucratic mechanisms - documentation requirements and technical standards for example. Others, however, are not unlike the SEMATECH example cited above where there is a deliberate attempt to exclude foreigners. One example comes to mind, that is the Japanese ftith generation computer project where it appears that only certain elements of the program are truly open to collaboration and for others you must be Japanese to get access. And in the case of Europe, we have the Eureka program where it is difficult at best for nonEuropean companies to participate in the projects. And in the case of the European Community with their proliferation of community-wide research programs (ESPRIT, RACE, etc.) this situation is sometimes worse and if you accept the analysis of some observers, the situation of “Europe for the Europeans” will only be exacerbated as we move towards Europe 1992. Brazil on the other hand has long had highly restrictive transfer of technology laws which are of questionable utility in their own development and their approach to patent protection leaves a great deal to be desired for those who wish to do business. Summary and Conclusion I would like to sum up by trying to answer the question, need protecting?”
“Do technologies
really
1. The protection
2.
3.
4.
5.
of technology is valid to the point that it does not distort fair commercial trade in technology. We (Canada) cannot afford to have artificial barriers to trade in technology erected especially at a time when we are attempting to reduce trade barriers to goods, services, and capital. Intellectual property protection is necessary to encourage future innovation international rules of the game must be developed, including enforcement mechanisms. However, we must ensure that these protection and enforcement measures do not become so onerous that they themselves become barriers to trade or to legitimate competition. Regarding patents and other intellectual property rights, a new international understanding must be reached on what is invention and what is discovery, i.e., what is technology and what is science. Also, mechanisms should be established to ensure some consistency in the application of these understandings. New understandings must be reached with respect to export controls and other national security controls which more clearly define collective western security interests relieving all but the most advanced and sensitive technologies from controls. National security must not become just another form of economic protectionism.
Last, I wish to say that if fair, open and free trade in goods and services is good for both our national economies and the international economy as a whole, then
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fair, open and free trade in technology is equally good and in the case of Canada absolutely necessary. I subscribe to the views of the National Academy of Sciences and others that one of the great strengths of the West in science and technology has been a free and open research and development system where the best minds can freely interact to discover, invent and develop our modern technologies. Restrictions on this open system will not only have a negative impact on trade and economic development but more generally would, in my view, inhibit progress in the quality of life for our children and grandchildren and especially for those in the developing world.