Technology in Europe's future

SUMMARY European fears in the !96O’s of U.S. technological domins tion have proved to be unfounded. The continuing U.S. lead in aerospace and defense technology has not spread to other set tars. European companies and governmen ts have steadily upgraded their capabilities in civilian science and technology. tic1wever, hopes that the “impera tives of modern techno!ogy ” would stimulate closer European integration have been disappointed. There remain, however, ver;I/ severe imper fee tions in the utilization of Europe’s resolllrcesin the “‘strategic” technological seetom; commufi ica tions, aerospace, energy. The immediate action requ+ed to deal with them is not the creation of “European ” companies with ownership and top-level managerial control spread amongst a number of countries; nor the creation of large European budgets to finance various seetors of science and technoiogy. Both these things rnight even tualfy happen, but only long after other changes, namely, the acceptance of a far greater degree of tt chnological interdependence amongst European coun tril ?s,resulting from the in tegratinn of Europe’s public narkets, competition amongst European firms to satisfy tilese markets, and - in certain sectors - agreemt at on what Europe’s objW%tives should be. Reaching this stage reL;uires that ihe technologically weaker European countries;, like Italy, be convinced that such integration wi/l not make their weakness permanen t. It requires also that Britain, France and Germany be much more willing tha 3 in the past to become technologicall y dependen t on t bneano ther. If these requirements are met, European firms should become competitive in world markets in nuclear energy, telecommunications and einerging technologies to satisfy social needs such as trar sportation, medical care and education. Europe would be able to satisfy its requiremen ts economically for ,3 significant proporlion of its con ventional military equ ipmen t, including aircraft. But it would be an illusion to 1rxpect European in tegratitin to result in parity with the USA in aerospace technology. This could happen only if Europe itself were a superpovvcr with strategic ambitions similar to those of the USA and the USSR. It would also be an illusion to expect the USA, in spite 01’ its professed policy of encouraging European in tegraticIn, to be happy about some of the consequences of tech)7ologic& integration. Research Policy I (I 9 71 /I 9 72) 21 Cl-2 73

North-Holland

ology in bY K. PAVITT” Science Policy Research Unit, Univmity

1.

of Smsex, Brighton, England

1NTRODUCTION

There is little public discussion tocay on the role of technology in Europe’s future. Five years ago, a noisy debate was engaged around the so-called “technological gap” between Europe and the USA. ‘I’echnology was very much in evidence at the time of Britain’s second attempt to join the Common Market in 1966, and there was no shorta:ge of suggestions at that time as to
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Yet there has been precious little movement towards a technological Europe e past five years. Given that technolllgy will have a key role in Europe’s future, it is important to try to understand why this has been the case, and what it might mean for the future. This first requires looking back at Europes’s fears and hopes about technology in the 1960’s and the events that led up to them.

Z!.SOME RECENT HIST0R.Y 2.1. The consequences of World War nYo

World War Two saw a rapid shift in the technological balance of power reflecting the same shift in the economic, military and political balance. Beforehand, Europe’s civilian technological callability had been on a par with that of the USA, and Anglo/German rivalry had meant that these two countries set the world pace in the development Dfmilitary technology. During the war, the USA expanded its relatively small military capability, obtained a considerable amount of relevant knowledge from allied and enemy sources, and by 1945 - with the development of the atomic bomb - was the world leader. During the 1950’s, a number of European countries re-established their previous pre-eminence in certain civilian technologies, but the U.S. remained the military leader. The Cold War ensured that huge resources were available in the USA for the development of nuclear, aircraft, advanced electronics and rocket technologies. At the same lime, Germany was forbidden to develop military, nuclear technology, and Britain found that the huge and growing scale of military technology was an important drain on its financial and industrial resources. This huge U.S. effect in rnilitary and space 1ethnology inevitably had repercussions in related civilian fields. U3. firms developing civilian and aeroengines, electronic computers and compone ntry, and nuclear reactors faced Lowe* technical and mark.et risks than their European counterparts when, as was often the case at that time in these fields, there was considerable overlap between civilian and military technology. G ven this fact, and also the size of the USA which enabled it to pursue a large!, number of technical options, it was not altogether surgrising that, in the 1960’s, U.S. firms emerged supreme both in technology and in shares of world commercial markets, in civilian aircraft, electronic computers, advanced ccmponentry and instrumentation. Nor was it surprising that the USA had a huge iead in the applications of space technology, and that European scienlists axl engineers were enticed to the USA by the direct and indirect opporrtinitie:, offered by the space p’yogram.

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‘sfears and hopes in the 1960 S. The repercussions of the U.S. lead led to considerable concern in Europe,, although for different reasons in different countries. In Britain, there were the ::ontinuing problems of the aircraft industry, the czmigrationof scienusts and engineers, and a government initiative to save a national computer industry. In Germany, there was also a strong emigration of scientists and1 engineers but, unlike in Britain, no heavy commitment to civilian technologies closely linked to defense. Instead, there was a feeling that, having reestablished itself in the industries and technologies in which it had always been strong, Germany should begin to build up a capabitiity in the exciting new technologies which were then flourishing in the USA, but flounder@ in neighbouring European countries. But it was in France that the reaction to the tJ.S. lead was the strongest. The French aircraft industry was smaller and more compact than Britain’s, and there was precious little emigration of scientists and engineers. But France had not had the privileged access to U.S. defense technology that the British had had since World War II, and therefore felt the U.S. lead all the more acutely. Furthermore, the U.S. advantage in related civilian technologies was ai least one cause of the rapid growth of direct inveastmeritin Europe beginning in the late 1950’s. France, after nearly a hunlzired years of economic protectionism and autarky, and an even longer experience of being invadedi military, was both industrially and psychologically less ready than its European neighbors to adjust to this new industrial invasion. These fears wouldl have existed even if General de Gaulle had not been President of France,, although without him, the response to thern might well hiavebeen different. Nonetheless, the most grandiloquent expression of r:he European fears c;ame not from the French Government, but from a Common Market Commissioner, and from a British Prime Minister. Thus, Robert Marjolin cited a Common Market report which predicted. that “..,if -the six countries remain., as they probably have done for a generation, the main world imgorters of discoveries and exporters of brains, they will be condemning themsetlvesto a cumulative under-development which will soon render their decline irremediable.” [l] . And Harold Wilson warned of “... an industrial helotrrr under which we in Europe produced only the conventional1apparatus of the modern economy, whiLebecoming increasingly dependent on American business for the slophis& cated apparatus which will call the industrial tune in the 70’s and 80’s.” [?!Il In brief, there was the fear that the U.S. lead in ael-ospacetechnology w~~u1.d. result in a U.S. lead in all technology anid to the consequent control of al’1 firms; and that this would in tulnrl Europe’s sophisticated industry 2.2.

Ewope

lead to the decline of ~u~~pc’s trading situation. of its intellectual vi eventually of”its living standards. sals were m;ide to deal wnth the s~~~~s~d Many fanciful and unreal m. One was that there should be a “tc

the ~m~ri~~~ cthi~ t

themselves. But the graposal came at ;b tim able tension between the U.S. Governmen accessof the latter to t&z former’s mtiita

U.S. Government doubted its ability to technology to their European competitors given that technological advance was one trading advantage with the rest of the world. e other hand, the proposals r&ted to European integration appeared to __ make sense. Here, it was argued that, given the growing scale requirements of modern technology, a successful response to the U.S. challengecould only be European rather than national: first, by widening the Common Liarket to include Britain’s tcchnolo@cal strength; second, by deepening it by removing ri and fiscal barriers thereby e bling firms to write off the costs of develaping new technslogy over a la int cgratcd market; third, by developing powerful, integrated European prog NXISit; such expensive areas as space. nuclear reactor development and aircraft This movement resulted in the creation of :I Directorate fur !Sc Technology within the Common MarLet %zretariat. the establishment of f ~~rnb~r~states responsible for regular meetings of” officials an ssions with dry

~~v~rx?r~~nts of the four countries now

rle~~3t~atir~~ to join t hc Common MarketBaredan examin Gonof the possibilin~lo~ic~~~ btii)peratian in scvcn areas: information techications, new n11thod5 of’ trnal nletallurpy, e~~viron~~l~~?tal s\uosanczs811~ At the same time, there was a variety of independent propc13alsfor strengthening European-wide institutions to rsleal wieh science and techno most comprehensive and ambitious wctre ut forward by Christqher Layton and included an aviation planning group, uropean Space Authority, a European Science Foun ation, a Technolog Fund and an Industrial Marriage Bureau [S] .

From :he v Wage point of 197 2, both the fears and :.he hopes of the 1960’s app 3r to htlvc WI cxaggcratcd. To begin with, a closer look at the facts sespe and effects of the U.S. technological challenge may ritwn, Europe’s economic and trade performance have been over the 1960’s, and both have bene*r’ittedvery conslderably anti the way it has been exploited on world markets. U.S. multina:ional firms and lower trade barriers have enabled U.S. production technolqy to get into use ever more qurckly in Europe. And given the growing propensity of large U.S. firms to sell in the European market through local r)roduction rather t fan exports, about one third of the expansion 01 European exports in high technology product groups c:an be attributed tcl U.S. multinati~n:rl tlrms 161. Indeed, this latlter trerd, and its effects on thtl U.S. Balance of payments, has been a cause ofconsiderable concern amongst some U.S. policy-makers 17). 3.1.

Research

arid

developmerrt

However, it would be altogether wrong to conclude that Europe is living well off U.S. capital and technology, but has surrended -- silently or noisily - its own mhnologiical and industrial capability to the USA. The R & D statzstic? collected by the OECD show that the American chalienge has not led to the technological depletion of Europe, or - more generally -- to what has sometimes been referred to as a technologically “unipolar” system. Quite the contrary. Europe has increased its technological capability relative to the U.S.A. very considerably during the 1960’s. The USA still devotes much more resources to defense and space R & D than Europe does. But, when R dt D cost differences between the USA and Europe are taken into account?, European governments devote more resources Lonuclear R & D than the USA, and European industry spends near15 as much as U.S. industry outside the aerospace sector. To be more precise: (a) between 196 1 and 1967, the total R & D efforts of Britain, France, Germanv * and Japan increased from 51 to <&%of the U.S. total. For in&isThe R & 14 statistics do, of course, measure inputs into scientific and technological acaivities and not outputs. But em~kicai tvidence across ten countries shows a signif& cant correlation between inputs and outputs of industrially-financed R & D activity. Set ref. IS], Annex A, p.143. It is assumed that R & D costs in Europe are 60% of those of the USA, at exchang,e ra*es existing in 1966. The basis for this assumption is !;et out at the beginning of the appendix. Even if it is wrong y up to IO to 20% it would not invalidal the main ccnclusions of the paper.

K

216

itt

Table 1 Comparisons of nationa R & D expenditures in 196 1 and 1967 (

Country

Government f hmced cs 1961 1967

Industry financed 1961 1967

Total

Tota. f rspita

p__-

-__L III--s...

1961 1967

1961 196

* Source: For all the tables, Y. Fabian, A. Young and ~lle~\ws.

SW the appendix,

Table 2 Corp,parisonsof governmental esjxnd iturcfson dcfensc R W.S. = 100). Total

Total per capits

Country 1961

1969

1961

1969

a) ltaly excluded. b) Austria, Switzerland, Denmark and Portuga: excluded.

try-financed R & D only (i.e. the R 86 D most directly linked to ec growth and industrial competition in world markets), the equivalent figures were from 67 to 84%; (b) between 1961 and 1969, European (i.e., EEC plus EFTA) defen increased from ody 26 to 32% cf the U.S. Titan 1969 was only 13% of that of thz U.S.

217

a) Ital) excluded. b) Austria, Switzerland, Denmark and Portugal excluded.

Table 4 Comparison of governmental expenditures on nuclear R & D in 1961 and 1969 (U.S. = 100). Total per capita

Total Country

USA Canada

__-.-_-. -___ .- .---.-

France _ Germany Belgium Netherlands .C_rrC_

E.E.C. a) U.K. Sweden Norway E.F.T.A. bJ Japan

1961

1969

1961

1969

100

100

100

5

7

49

100 64

35 14 2 2

52 38

139

3

4 PI52 98 rr_cl___-V____IB--32 27 6 4 1 1 39

32

4

11

ItaJy excltded. b) Austria, Switzerland, Denmark and Portugal excluded.

a)

44 31

2s

211 128 56

77

70 _--149

113 135 32

99 95 42

_ ___.^

11 7

22

_

__

(a) (b) (c) G) (e) (f) (g) (h) (0

. .

14 38 -.

0

.

~_ 27 53

39 96 -_-~_-___27 53 15 30

31 83

1 ---_ 44 116 -_ -_--- _-I_._ 50 97

. .

.

--

100 100

Food & drink, textiles, rubber

25 67 ---_23 44

. 0

.

. 1 ____-._-~_II_. 53 138 __-I_-g____-_42 81

.

23 i0 3 10 . 13 --_ __ _ -58 57 62 60 --__--. --22 47 2 5 0 1

17 28 0 13

100 100

Transportation equipment excl. aircraft

1966 data used for USA and Austria. Denmark excluded in all but total manufacturing. Population of E.F.T.A. properly adjusted. Switzerland excluded in all but total manufacturing and chemicals and drugs. Population adjusted. Chemicals and drugs for Switzerland assumed to be 60% of total manufacturing. Data for Netherlands is for total intramural expenditures on R & D. Total manufacturing data for Denmark is for total intramural expenditures on R & D. French data were corrected to exclude funds coming from government. For The Netherlands machinery was assumed to be all Gectrical. A dot indicates that the figure for the sector is included in another sector or in a total.

Tota! E.F.T.A. E.F.T.A. per capita -Japan Japan per capita

0

.

--_

.

13 2

I

. .

0UL Y ‘3% ‘95

.

22 2 0

30 5 1

.

14

United Kingdom Sweden Norway Denmark Switzerland Austria .--__ -

7580 ---

.

11 48 6 4

100 100

J:errous and non-fer+rr!lc l.___ metals and fabricated metal products

---__--______ 33 69 35 -~--74 24 28 6 12 0 2

15 16

67 71

7

I(!

4

14

. .

11 20 1 1

100 100

electrical machinery

Non

- ----.----P--p---

36 4

!7

100 100

‘.6 30 2

__--

100. 100

14 2 0

100 100

Chemicais, drugs and petroleum products

Total E.E.C. E.E.C. per capita

France Germany Belgium Italy Netherlands

United States U.S.A. per capita

---

Aircraft 2nd 1 missiles

. --

r-?-.P.r4,,1 ClG;L Li LGti.I products and instruments

--

Table 5 Comparison of industry-financed R & D in 1947 CUS. = 100).

16 26 2 5 7

100 100

Total manufacturing

56 60 -------43 25 8 4 2 1 . 1 . 5 1 1 _ __ _-_ 53 37 142 85 - __---____-44 24 86 48

49 53

28 !!.! 5 3 4

100 100

Other

W W 00

European nuclear research financed by governments increased from 91 to 1303 of the U.S. total; (c) by IW7, industrv-financed R Sr D in the EEC countries plus the U.K. . amounted to 81% of the equivalent U.S. total. If the aerospace industry (where EEC plus U.K. efforts amounted to a out 305%of the U.S. total) is excluded, then the EEC plus U.K. figure increased to 88% of that of the USA; (d) in the same year, R & D financed by EE&Iand British industry in the electrical and instruments industry was slightly more than the equivalent 1J.S. figure. When government financed R & D is included, however, total European R & D perjtvwzedin this industry was only 60% of the U.S. total; (e) in the same year, the EEC plus U.K. figure for industry-financed R Sr D was more than 90% of the equivalent U.S. figure in chemicals, drugs and petroleum products; ferrous and non-fc rrous metals, and fabricated metal p oducts? It was between 80 and 90% in transportation (exclu lirlg aircraft), between 70 and 80% in food and drink, and between 58 and 60% in machinery and rubber “f. 3.2. The Brain Drain Coupled with the growth of Europe’s technological capability has been the reduction of the so-called “brain-drain” - the einigration of European scientists and engineers to the USA, the number of which dropped from nearly 3,600 in 1968 to nearly 2,400 in I970 [9]. Some argue that tlhis drop reflects changes in the U.S. immigration laws so that the USA now gets more of its foreign scientists from poor Asian countries than frorn rich European countries. But this explanation is not entirely convincing. The drop in the emigration of European medical doctors - where the USA has a continued and pronounced shortage - has been far less sharp. Changes in the conditions of supply and demand for scientists and engineers in both Europe and the USA have also played a role. In the early 1960’s the [JSA was building up huge space programs whilst Britain bwasreducing its defense establishment, .and Germany - with a strong system of scientific and technical education - had not yet bui!t up its own R & D expenditures. Under these circumstances, it was not surprising that * Also, the EEC plus U.K. figure was more than 90% of the U.S. total in the aggregate R & D expenditures of the following industries, swhere relatively little R & D is done: tobacco, clothing, footwear, leather, wood, furniture, paper, printing and publishing, stone, clay and glass. t Some prudence is necessary in interpreting the data for specific industries. R & D is often done in large companies which span a number of industrial sectors. In the absent;: of R & D data broken down by product fielil within these large companies, the D to one industrial sector can sometimes attribution of a large company’s total lead tc: considerably distortions.

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K. Pmitt

Britain and Germany were the source of a large scientific and technological emigration. Today, conditions are radically different and there is even talk of a “rtverse brain-drain”. Europe is - as we have seen - increasing its technological capability. In the USA, there are a number of factors reducing the demand and attractive ess of scientific and technical jobs. Hopefully, some of these factors are temporary: social and campus unrest, the Vietnam war, wild fluctuations in the funding of academic research, the economic recession. But others are not: the a ustment to a smaller space program, the reduction of the future university demand for Doctors of Science and Engineering [lo]. Certainly, industry-financed R & D will continue to increase in the USA, as long as economic growth and international, industrial competitiveness are objectives of U.S. policy. But, unless there is a very severe worsening of relations between the USA and the USSR, it is difficult to forsee U.S. government funding of R & D again reaching the levels of the 1960’s, and thereby starting a “brain-drain” ah over again. 3.3. International investment The large and growing strength of Europe’s industrial technology is not yet fully reflected in the number of multinational firms based in European countries. Certainly, Hymer and Rowthom have shown that, contrary to the conventional wisdom, large U.S. corporations did not grow more quickly than European ones from 1957 to 1963 [ 111. But Frank0 has estimated that, in 1966, the ratio of large non-U.S. to U.S. mulitinational corporations was still just under 0.4*, even though firms in high-technology industries made up 55 per cent of both the U.S. and the non-U.S. totals [ 121, The key markets for high-technology products (as well as new consumer products) are the USA and Western Europe. Hymer and Rowthorn have argued that, as U.S. firms penetrated European markets in the 1960’s, so European firms will penetrate the U.S. market in the 1970’s. The Europeans have a long way to to catch up. In 1969, direct investment of European firms in the USA w only 34% of that or- U.S. firms in Europe**. But the trend is in the upward direction. &id given the rapid increase of industrial R & D in Europe by comparison with the USA.,one can expect an increasing number oB‘Europea I firms to have one of the essential ingredients of success in the U.S. market, namely, a product advantage based on superior technology [ 13) .

* The non-U.S. figure includes non-European firn~s. F?ms were considered m national if they owned 25% or more of at least six max,Jfacturing affilitates ou their home countries. See ref. [ 121. ** Manufacturing and Petroleum investment o y. Seer&. [14].

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The relati-rely small amount of European investment in the a.SA also reflects the greater propensity of European firms, by comparison wi& U.S. firms, to exploit tl:!eir ttchnological advantage through exports rathl;:r than through direct, foreign investment. And this propensity varies vey considerably amongst Individual European countries. The Netherlands, Switzerland and Sweden have a considerably higher proportion of their industrial assets in the USA then do Belgium and the U K., who in turn have a considerably higher proportion than France, Germany and Italy. For example, Dutch industry has twenty times as much as direct investment in the USA as Italian industry, with a much smaller population. And British industry has about five times as much as German industry, although both are about the same size. The relatsvely low levels of U.S. investment by French and IItalianindustries can be explained by the high levels of protection and COln6*q uen t inefficiency that existed there until 1958. But such is not the case for Germany which has a technologically strong industry. Economists might expl,ain lthe Jack of German Investment in the USA in terms of an undervalued currency, whilst historians might point out that German industry has had its foreign assets confiscated twice in this century. In any event, one can expect a certain degree CC? convergence of performance amongst the different national industries in f-Jture. French and Italian mdustries are growing accustomed to international markets and are upgrading their technological capabilities. The Germar currency has been reva.lued yet again, and the genera.tion of top management that remembers past confiscatiol!s has passed on. The tremendous potential for the expansion of German investment in the USA is suggested b:, the 60% absolute increase between 1968 and 1969 [ 141. Assuming thai Germany moves up to the present British level of investment, and that France and I tally move up to the present Belgium level, then direct investment in U.S. .manufacturing and petroleum by EEC’plus U.K. indtJstry alone would be over half the present level of LJ.S.direct investment in all of Europe. Thus, the considerable U.S. lead over Europe in aerospace technology haz not spread to all advanced civilian technologies. On the con::rary, Europe has steadily improved its position in the latter over the past ten years. Furthermore, trends in the 1960’s suggest that such other transa taantic disparities that do ‘exist, be they in trade 2nd international investment in high technology industries, or in productivity Tevels,are also bleing reduced. This ha,s happened in part because, with increasingly effective methods of transmitting knowledge across national boundalries, and with the growth of the multinational firm implementing its new product and production strategy on a world scale, countries no longer able to pre-empt such alhi proportion as in the past of the growth and trade advantages of their technological

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advance. it has also happened in part because European firms and European governments have responded to the U.S. challenge: sometimes defensively by promoting national mergers and by keeping out U.S. investment. But sometimes offensively: European Grms by steadily increasing their R & D expendirspean governments tures, and their exports and international investment, by building up better equipped and more flexible re rch facilities i universities. 3.4. European technologjcal cooperation But what of the hoped-for European-wide res onse to the U.S. challenge? Here the horizon is much more cloudy and obscure. European governments continue to pay lip-service to the notion of greater technological cooperation. Yet in two expensive areas of techhology, namely, space and nuclear energy, two of the three organizations set up by Europan Governments to provide and manage European-wide programs* are in a state of disarray. There is disagreement on what the objectives of a European space program should be; Euratom’s role in developing a European nuclear energy policy and industrial has been much smaller than its founders had hoped; and during the ‘s, the proportion of total Eurcbpean space and nuclear research Table 6 Percentage of total governmental expenditure on space R & D devoted to international programs in the 1960”s. Country

1962

1965

PX9

1970

U.S.A. Belgium France Germany Netherkmds U.K. Sweden

1 100 34 44 0 90 67

2 74 36 58 68 66 57

2 63 19 33 44 50 47

NA 69 19 NA 29 NA NA

expenditure:, allocated to multinational programs has been getting steadily smaller (see tables 6 and 7). European cooperation in the aircraft industry has also had disappointing results. I’he dcvelopmeil\ and operating costs of the Concorde, the AngloFrench supersonic transport, have escafated Rioa level where sales prospects look decidedly poor, and all hope has been lost of recovering the development and launching costs through sales. In ad ition, a tedious game musical chairs has been played amongst European ents and aircra fkX around the development of a European Airbus and a swing-wing military * ELDO and Euratom.

Table 7 Percentage of tot 1governmental expenditure on nuclear K & D devored to international programs in the 1960’s (includes only Euratom and E.N.E.A.). Country

Years

France

1962 1970

Percentage “-12 3

Germany

1961 1969

14 9

Belgium

1961 1970

53 45

Netherlands

1961 1970

35 16

U.K.

1961 1970

4 2

Sweden

1961 1970

4 a.

Norway

1961 1970

3

fighter. The final result has been that the French and the German governments have gone ahead with an Airbus project, in which the British government decided not to participate because it did not see a market for the aircraft big enough to make the ventlrre commercially worthwhile. The conception of the swing-wing fighter, even as described lbytwo advocates of closer European technological cooperation, show the very severe limitations of present methods of cooperation: “...WestI Germany, Italy, Belgium, The Netherlands, Norway and Canada had... decided on a joint study for a new aircraft to replace the F 104 used by their defense forces... The British... took part in the study of the new machine.. Under their influence the original plan, which was simple and inexpansive, turned into a much more elaborate enterprise, the Multi-Role Combat Aircraft (MRCA); but as costs grew, the number of participants dwindled to three -- Britain, Germany and Italy... Owing to rising costs, the number it is intended to manufacture has been much reduced. Meanwhile the French government and the Dasstult company are suggesting to countries aiarmed by the rising costs of the MRCA that they should cooperate... to produce a simpler and less expensive (variable geome“Dassault is the most dynamic co its field... The question has to be with its essential quality of deciposed how much the entre sivcness, is compatible (Niththe mutual gi\*eand take essential to ‘cooperative’ projects on present lines.” [S] .

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Furthermore the initiatives begun in the framework of the Common Market have had little result. The decision to examine possibilities for scientific and technological cooperation in seven sectors, mentioned earlier, lead to seventy-two proposals, ranging from the building of a giant computer to studies of future needs in telecommunications [4] . This exercise led to a diplomatic &my about the degree to Nhich the four candidate countries should be involved and, for this reason, to a perhaps excessive show of politeness from these countries towards the proposals. In any event, many of the proposals, including the building of the giant computer, have not been followed up. Ministers from nineteen European countries did eventually meet to give birth to seven projects (of which three were in the currently fashionable fieldof the environment), the total cost of which will be about $20 million: in other words to just over 1% of what the British Government alone spent on R & D in 1870 [ 161. One cannot avoid the suspicion that this concern for “concrete action” is, at least for some Common Market countries, a means of avoiding discussion of the more fundamental, but more delicate, problems of European technological cooperation. There are three other areas-where new steps have been in European cooperation. First, it is likely that the CERN project to build a large particle accelerator will go ahead; but this is a fundamental research project, with an organizatron,al structure and management team with a proven record of past success, without any of the problems of access to results, and industrial interests to plague other European programs, and where the choice between a national or a European program does not erist because the required equipment is so costly. Second, there has been agreement aj.mongstthe British, Dutch and German governments to cooperate on the development of the centrifuge method for making enriched uranium. This cooperation may at least improve Europe’s bargaining position for supplies of the enriched uranium needed for the generation of nuclear energy. But the implications of the development of this new technology for nuclear proliferation have caused considerable concern in the U.S. Government, which in consequence is supporting the French Government in its drive to get the alternative gaseous diffusion method of fabrication accepted by the European Governments [ 171. Third, European Governments have recently ag ed on what aIpplications satellites they should build together for the 1980’s. ut there rem(ainslatent disagreement them on whether it should be Europeandesigned or Americanrockets that put them into orbit [17a] . Fur+hermore, in economic terms, some doubt can be cast on the ah-healing effects on European technology of the large, unified, Common Netherlands, Sweden and Switzerland are, a, r al, countries wt tionai markets, yet with technologically so sticated industries, with high

Technology irtEurope ‘s future

22s

levels of’ industrial competitiveness. In a recent OECDlreport, this author has concluded: “...The es jntial element in national innovative performance is less the size and intensity of national demand for technological innovation than the entrepreneurial, organizational and technological resources within a. country that are capable of identifying and responding to market demands anywhere in the world. Firms and countries that have these capabilities appear to be able to overcome tariff and non tariff barriers, as well as the barriers of distance, differing legislations and standards, in order to respond to worldwide demands for technological innovation.” [8] . The same report suggests that the most difficult national barriers to overcome are when governments are important customers and practicing ‘“buy national” policies. Yet, in spite of the existence of the Common Market, these barriers are still high in such areas as aircraft, telecommunications and energy. Certainly. the recent report of the Common Market Commission on industrial policy proposes that they be dismantled [ 18] . But there has not been a mad i\lsh by the Member States to implement this proq7osal. Thus the answer to the challenge resulting from the supposedly escalating scale requirements of modern technology do not appear to lie i-nthe Common1 Market - at least in its present form. Indeed, the degree of suc,rsessof a. European firm’s technological strategy is more likely to be measured in terms of its penetration of the U.S. market than of the European market, since it is in the USA that the markets for new technology generally emerge first [ 19,201. And it is sad to note that fhms tend to foster or advocate “European” solutions only when they are in trouble competing on world mar,kets. Rolls Rcyce, the British aero engine firm, made a rapid dash towarcil; “Europe” - in thk,month before it went bank.rupt [2 l] . More generally, European firms in the aerospace sector, which often have understandable difficulties in competing successfully against the American counterparts, also tend to be advocates of a strong “European” effort in aerospace. Neither the politics nor the economics of technology have led to a more integrated Europe. The “American Challenge” has not rersulted in the European response of vigorous, united programs in space, nuclear energy and aircralft that the advocates of European integration h’adhoped for. And, given strategic importance of the 1J.S. market for fthe successful commercialization of new technology, it is rather surprising that it was, and sz:illis, the advocates of the European Common Market who claim that the economic requirements of n cd&n technology support their case, rather than the advocates of a North Atlantic Free Trade Association. 1 believe that Europe must have its own Clearly, European policytechnological capability if it is to maintain that measure of independence

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normally associated with a sovereign state. But the experience of the past decade shows that it is necessary to repeat a series of questions which many Europeans thought, and still think, have been answered, namely: “1s any measure of common, Europe-wide action necessary in order to ac ieve this objettive? If so, what form should it take, and what policy imphcations does it have?” Ht is to these questions that the remainder of this paper will address itself.

4. ALTERNATIVES FOR THE FUTURE 4.1. One option: do nothing It is possible to argue that nothing of a European-wide nature needs to be done and can be done under present circumstances. Given the speed with which new technology is already being spread internationally, there is no reason to fear that Europe’s growth and trade performance need suffer because of lack of technology. Furthermore, the data on R&D expenditures shows that Europe’s own technological capability is growing relative to the USA, so that Europe will not become completely dependent on the USA for its new technology as Mr. Wilson feared in 1966; even after the “American invasion”, ther: are still independent European firms involved in such sectors as nuclear energy, aircraft and computers. In addition, the post-war experiences in advanced technology of Germany, Japan, The Netherlands and Switzerland show that it is possible to maintain strong, independent scientific and technological capabilities by the simple expl:dient of encouraging or constraining industrial firms to compete on world markets. On the other hand, the British and French experiences show thal it is possible to allocate a high proportion of national resources to expensive, spectacular technology, with scant economic return. Thus, it can be argued, Europe should follow the experience of the former group of countries. This would lead to good European science, good European technology, which would grow steadily aimresponse to the needs of the world market, instead of fluctuating in response to the whims of government policy. Furthermore, until there is a real willingness to accept a greater degree of mutual dependence amongst European countries, European-wide programs in space, nuclear energy and aircraft are bound to fail, and to harm rather than to advance the cause of European cooperation Finally, it can be argued that such a policy of concentrating Europe’s rp,sources on civilian technology responding to world market needs would not forclose the option to develop defense techlnology. In 1940, thl= I.!

virtually no capability in defense techr 945 it had cqhded the atornc br:,nb. This was possible in lrl e U.S. industry had by 194b a 5Tfongtechnolqica base, built up SISa I ~sult of compe t US firms in civilian markets, an eby equipped to respond to new, defense require ents. During the riad of depr~~s~i~~n in industrial act ikrity - he number of ~~searc~~scientists and c dustry nnnetheless increased by a factor of three. By 194 devoting the same proportion of its resources tOi,R & D which had not been subjected to the same degree of co in the late 1950’s. T%s meant that, in absolute te:r three times the techr4ogical base for its nucle;~r pcl had in I.958 1221. Clearly, such a “do nothing” approach is (convincing in relation to the economic use of Europe’s scientific, technological and financial resources. And it rightly stresses that Europe’s technological capitbiiity ultimately depends not on the planning, the ambitions and the financial largesse of one, six or ten governments, but on the steady increase in whitt hundreds of industri:J firms spend on R & D in response to .t.hepressures 2nd opportuniaies of competition in world markets. 4.2. Its limitations: “strategic ” technologies But would it be feasible to fellow this policy in its pure form, until the moment of European political integration arrives? One might be ;em]lted to believe so, and to interpret the present loss of interest in Europzan multinarograms in “big technology” to a deliberate policy of “benign ney the participating governments. However, for most countries, such an nterpretation is probably incorrect. There are strong pressures for European-wide programs in big technology: from aerospace industries which have seen the limitations of relying OIII national programs: from those committed to the European ideal: from the German Govr:rnment, which until r,ow has found it politically more c onveni.ent to undertake ‘“lbigtechnology”’ projects internationally rather than nationally. In addition, there are legitimate grounds for governmentrtl interest in certain techno’ogies. The validity of thrr: “do nothing” approach to Europe’s technology, describ above, holds (only when thlr:re are no restrictions on the in terna tional dis mination of technology. This is the case ~OI-most ter:hnologies, but not all of them. In particular, those related to communil;*ations, nuclear energy and aerospace are “strategic”, &her for national defi!nse, or ustrial development., a times for both, Their develop;7nerlt, control and international disse,~ination are inevitably and heavily \nfluel*lcedby national governments. And they happen to be expensive to develop.

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All the:e characteristics would seem to point to the desirability of European policies and programs in relation to them. Why, then, the disappointing record of the past ten years.3 Some tend to blame what amounts to t shortsi#tedness and managerial incompetence of national civil servants: “...sect;onal institutions paralyzed by the obsession of a fair return, precarious budgets undergoing constant reviey, methods of management which have more in common with the Congress of Vienna than the Tiarvard Businesc School ..” [ 153 But arc these the fundamental causes? All national governments are, and will always be, concerned with getting a *‘fairreturn”: the real problem is finding ways c,f ensuring it with minimum interference with efficiency. Again, tie precariousness of budgets for international programs could mean that they are bad programs, or that internat onal programs are not really necessary. Finally, it is by no means certain that the management methods associated in ropean mind wi h Harvard Business School are necessarily those which successful, larg scale technological projects. In retrospect, the costly U.S. experiences with tie F-l 11 and GSA military aircraft show that one of the School’s most distinguished alumni, Mr. Robert Macnamara, even when equipped with PPBS and systems analysis, could still make expensive mistaklzs 1231. CcrtairlYy,there are specific economic, managerial and institutional characteristics *-hatmust be achieved if European-wide technological programs are to be effective. But more often thayo not these characteristics have not been suffi’cizntly well understood, and governments and industries have not been widing to face up to their political implications. To be more precise: debates and analyses about European technological cooperation have sometimes been based on the false assumption that centralized “planning”, “coordination” and “q,ontrol” of R & D, together with the consequent elimination of “duplicatior ” and “overlap” are the essential purposes and justification for international technological cooperation. In fact, given that R & D is a risky and often uncomfortable activity, pluralism, competition and even duplication are virtues rather than vices[24). The essential featulre of European technolo@cal coopc:ration has often been thou t to be the balance between “national” and ‘ European” R & D programs - in other words, the balance of power to run FL& D between national bureaucrats o; international bureaucrats, and the national bureaucrats seem to be winning. But the important problems are elsewhere and Mettexnich would nave been more at home dealing with many of them than Macnamara. Fundamentally, they have to do with the wihingness of the European nations to ecome technological y much more dspendent on one another than in the past. l

4.3. The ~~~terrlati(~nalrr;satiort uj prthi”icmarkets and nutimal tedv~d@d specicalisarion All governmcm give preference to national suppliers o: military equipumnt.

n civilian technology, even in the! 1JSA, regulations surl funding the electric power and communications indus#tries tend to flavor national swpplie:rs,In Europe, similar preferences are sometimes extended to such sectors as civil transport aircraft and computers used in public administrations. Thus, all Western governrnents heip make worllcl markets in dhese stzctors imperfect. But the imperfections have much more deleterious consequences in Europe than in the IJSA. Even when protected from foreign competition, the U.S. market is big enough to enabie the pursuit of a wide range of technical options, to maintain competition, and -- with the succ~sssf~~l technical developments - to permit cons derable economic:; of scale by writing off fixed casts and moving down 1earrGlgcurves over long prsductionr runs. But wi.:h the steeply rising scale requirements of aviation, energy ancl colmmunicatio:?s technology, individual European countries have not been able to do the same. Very often they have relied on one or two nati0:na.lsuppLstrsIwith very little competition, they have been unable to maintain all the technical options open and, even when tec!hrically successful, have not bf:ctnequippbed to penc:trate foreign markets and :-eap scale economies in production. The result has often been tlhe develop1len t of tc 4-m.ologicellyand zconomically second-best technology, the use 01 which has either required a government subsidq (e.g. certain British aircraft used by the British airlines)f, or has been rejectell in favor of U.S.-d!evelopedtechnology (e.g., French graph.il:e/natural uranium nuclear react,ors). The advantages to be gained from tile integration of Eurorlean p/abllc markets would be several: better technologilies available to users; better use of’Eurcqe’s technici and financial resources; :atreater likelihood of creating technologies, industriall structures and management attitudes wlzich are competitive in world markets. In its recent report on industrial policy, The Common Mrukte: Zmmissiion proposed that steps be taken to iint’:grate public markets in high tl;-rchnology sectors [ 181. he report contains0m lny sensible proposa!s, but tends to stress the a&/antages of “concertation”, “l)lanning” and ‘“scale”.The need for cornpetition is mentioned almost as an 2 fterthought, and the need fi3r the pursuit of mar y technical options is not meFtioned at all. The U.S. experience, *where government markets have played an important role in stimulating technalogical advance, is cited a.s a moc!el. But one negative aspect of this expericnze in, the 1960’s is not considered, name:y, the CSA and F- 11 I ain:raft, bar hi of which show that, when seeking ra id technological advance, it is me fficie:lt to choose technical options ear& in he illusory hope: of ” annin~j” technc4ogi-

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cal advance [ 251 . urthermore, the report suggests that the final choice of technology to be bought and used should be made by “concerting fact that tions”, presumably at the Community level; and th experience and analysis points to the conclusion that successful technological innovation requires close and continuous contact between the technica! development process and eventual customers [26]. In fact, procedura requirements for using public markets to get good aechnology into use, is much more simpler (a) define the requirement; (b) if opment contracts to industry necessary, award research and ex hich might meet the requirein order to explore the various te ment; (c) award the final order to the firm which comes up with the most cost/effective solution. In other words, governmer ts should simply act as tened customers. Yet experience shows that, in international pr European governments are not very enlightened as customers, and that they spend a good deal of energy advocating the cause of certain suppliers: 9Vhen the project is an international one, there is a tendency for the national framewcrk of customer and supplier, whatever it may be, to be shifted without any modification into the business of international procurement. This has the z-esultthat, on the customer side the major effort of the national agencies is srent at best on compromising the requireiment of each one to make it c\lmpatible with others, and at worst in political infighting to ensure that a part ocular national requirement becomes the model for international acceptance. There is, consequently, very little time cr energy left over for objective consideratik>n of what the performance standards of the product or process should be, and decisions about cost/effectiveness become subordinate to national ambitions. On the supplier side the danger which is involved in trying to make nationa facilities operate unmodified in the international field is thaj a major part of the effort may be spent on deciding how to carve up the available work, arnd questions of which technical system to use will be difficult to settle without reference to national ambitions in scientific expertise. Thus the settnng of a technical specification t,o fill the performance requirement may derive rather from the relative power of the participating facilities than from technica and cost considerations. In a similar way, access customer to information about different levels of cost and effectiveness may be hindered.” [27] . No doubt, these practices arise partly out of t.hGhabits of mind and ac taa4ion al officials. ut there are much morliepowerful forces behind such managerial ineffrciencies, which can best be sihown b examiI;ing what would ewes of adapting the effici t procedures suggested above. CmnrnOfi WQuire

energy where the ultimate aim

be ea sy in such areas as nuclear

ablp to

supply energy at fie lowest

cost. In areas like telecommunications, it is likehy to be more dif’fi‘icult bet:ause of tee hnical incompatibilities ;lmon ;st national communications systems incompatibilities whic2l have sometimes been deliberately created in order to protec t domestic industry. Finally, irl areas like defense and spaze, d.ifficullties in agr:eing on requirements may hide more fundamental differences bet fileen nations on what the objectives o!fEu mopeanprograms sho&d be.. (b) l%rwing ~echnkal options should be feasible on J European basis, except in very few cases. However, it is d:fficult to pursue them effe&ively in the framework of ad-hoc industrial consortia, created for specific projects for the purpcse of balancing out various nttional interests. Empirical studies show that ,;he effectiveness of R & D dr pends on unified management, and the abilit;! to move in new and unfores:en technical directions as new technical and market knowledge accumulate: [ $1. This ability is likely to be heavily restril:ted when bits of technical de relopment are divided up amongst a number of firms of different nationalities, often communicating mainly through the medium of an intergovern,mer tal committele. Very often it wouLd be possible to divide up technical development into a nunnber of reasonably coherent, well-contained lumps. But bringing those lumps topether re(quires that IJne firm has overall responsibtlity for the project, and that there should be teclhnical specialization amongs, the various participants. IButpa.st experienc: has shown that Wopean gcvernments [(and their national firms) have not shlown great enthusiasm for 1:tting firms in other European countries have prime contracting responsibil ty, nor for the inevitable conseque.nlceof technical specialization, which is gr :ater technical dependence on other Euro.. pean countries. This reluctarrce is v/e11illustrated by European coopera:iion in the aircraft industry, where tremendous battles are fought amongst: governments and firms for the juicy lumps of technical development, and where the main purpose of technical coo:peration is not effective speciali.zation, b;lt the widening of protected markets. Given the resulting inefficiencies th$altthis creates in the process of technical development, one can perhaps sympathize with a successful technical entrepreneur like the wicked Mr. Dassault. who avoids “cooperative” projects 1:ikethe plague? (c) Awarding production contmct$ is likely to cause the most politica pain. It is in general the :most visible z\ndcostly choice, and it has rno:;rfeffect 011jobs1 * Certainly, Dassault is cooperating 14th non-French firms in the developmc::nt anc’l desigrl manufacture of the Mercure - a sand1 jet passenger aircraft. But he retains f’u1.l leadership and prime contracting, responsibi!lity, which is ful~damentilgly different from Comorde, Airbus, MRCA etc. For information on the various European akcralft program:5 see ref. [ 281. This contains good facts but poor analysis which, for undr :I-stand-p abEe reasons, tends to exaggerate EP.;rope’sstrength in civil aviaticn tc’ an Arrlericarl audience.

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and profits. it is often difficult for the general public to understand the need to develop a number of technical options and then to choose only one or from amongst them. Eljen within countries, critical journalists and opposition politicians, together with regional. industrial and trade union lobbies can cause the choice amongst technical systems to be avoided or fudged. W oice is betwe!en a national and foreign system, the pressures are all the greater. Opposition politicians, industrialists, scientists and engineers, and trade unions can wave the national, technologiral fla , governments will wish to avoid the accusation of spend@ money on failed national projects, and can often justify the choice of natio.lally developed systems on the basis of a spurious “uniqueness” of national requirements. Thus, the apparently simple procedure for obtaining the full benefits from the unification of Europe’s public markets hides the need for far-reaching political change? namely: less tinkering by government officials (national or international) in the detatis and division of work in the technical devc;Iopment process; - the acceptance of a greater degree of technological specialization and dependence amongst European coun tries; the willingness to make choices going in to full-scale production on the basis of cost/effectiveness. 4.4. The “European ” c0mpan.v as ars alternative tion ?

technological specralisa-

However, it can be argued, as Layton has done, that such political change is unrealistic in present circumstances, and that there exists an alternative: “For political reasons the large European countries at least will continue some stake in key defense industries. ‘They will want a share in new industries which promise to contribute crucially to economic growth or to have a major social imyact. They may also want some share in the basic industries which pro?Jide material for the country’s basic communications system. Strong and efficient European companies are needed in which many nations have a stake, if thus desire for some local source of supply is to be reconciled with large sca!Ie. ..Row can Europe develop, nrlt just companies with international operations, but companies with a base of power and ownership in several nations? [S] . But is this concept of the Europe ssn company realistic? As the result of a d empirical enquiry in 55 mleltinational companies, Professor Behrman ded the following: “...The management control of the multinational enterprise is no na,tionalized.” “.. .The officials of the parent co no anies of both U.S. and European rmulti-

K!:ronal enterprises assert thau they will remain in their country of origin and, in the last analysis. will extend their allegiance to the government of that coun trir,,” “Many of the European enterprises ...would not want to be removed from their national origins.” “Until national governments are willing to give up their sovereignty to a supra-national entity, to which mu1 irrational enterprise is also subject, the enterprise will remain a complex of nationally incorporated entities...‘” [:!9] . In other words, there is not yet any such thing as the firm which has multinational leadership or which extends its ultimate loyalties to a multitude of nations. Certainly Shell, Unilever, Agfa-Gevaert and Dunlop-Firelli are binational companies. In the first two cases, Dutch and British companies merged early in their existence, the two nationalities have learned to work together, but the companies still have to do such.things as sharing he.ndquarters geographically between two countries, The lastt ttio companies are of much more recent origin, and hav3 been the outcome of middle-aged Imarrialges. Some of the difficulties of the ,Agfa-Gevaertmerger have been documented: much more important than the lack of a common European system of cornpany taxation and law have been the difficulties of balancing out the two sets of national interests, whether amongst stockholders, the attribut,ion of management functions, national trade union pressures to maintain employment, or management philosophies [30]. Furthermore, this balancing act has slowed down the process of rationalization on which the success of the AgfaGevaert merger depends: “... I am convinced that we are not suffering from a shortage of resources but muc!-i more from tihe absence of a concentrated exploitation of the resources that we have.” [3 lb] . If this set of problems arise in companies with bi-national direction, one can imagine the horrors that a company with five or six nations at its head would produce. This suggests that the truly “‘European” company,, which is at the same time efficient, will emerge only at the same rate as the withering of national sentiments and the devolution of sovereign po>werfrom individual European states to a European supra-national authority. At the end of this proces:;, the problem its advocates wanr the “European” company to solve -- namely, giving each European nation its bit In all the alvaneed technologies - prpsumably will no longer exist. Certainly, one can expect that commercial factors will lead to the: emergence of more b&national, European companies. But it would be dangerous fDr European governments to promote or force “European” mergers just for the sake of their “Europeanness”. [32] . There are bound to be strong centrjlfugd forces acting on any mult~nationsl merger whic:h attempts to rna~intaina balance of its various national\ corn onents. Unlt:ss there are strong motives

K. Pavitt

like profits tinit survival to overcome these forces, any merger is likely to remain “cosrrieaic”’ and not achieve the degree of integration necessary for both efficiency .ar,d the successful commercialization of technology. And if such powerful motives do exist, then government initiatives to promote a merger will be unnecessary. Most of the European mergers in the last ten ye;jrs have in fact been in sectors like chemicals, automobiles, and iron and steel,, where the problems posed by the choice between technological “balance” (and its consequent inefficiency), e one hand, and technological specialisation (with its efficiency, but also b of dominant/dependent relationships), on the other, are not very acute. In some of these sectors, R & D is not a prime factor in commercial titiveness, so that companies can easily put up with inefficiency in R & D for the sake of “balance”. In others, R& D is important, but national governments are not sensitive or concerned about dependance on foreign technology, so that the merged companies can move towards an international division of R & D labour within their managemlent structures. In the so-called “strategic sectors” of technology, however, R & D is an important factor in commercial efficiency, but governments are very reluctant indeed to become more dependent on one another, which is doubtless why there have been virtually no mergers. Here, efficiency requires - as we have seen - one R & D boss, and a division of 11% & D labour within the firm. U&cation of public markets in these sectors would pose this problem clearly for both governments and individual firms - far more clearly than through the Community being able to award R & D clontracts*. But posing the problem does not necessarily mean solving it. It has already been posed countless times in the aircraft industry, with the very disappointing results which have already been described earlier in this paper, namely, that European Governments are not willing to go towards greater technological speciaiisation, let alone full-scale mergers. Thus, the advocacy of tht “European” Company, as defined above, must be considered as an unrealistic attempt to ask private business to conjure away the problems of the continuing political divisions of Weste sta&gealong the way to the emergence of a politically sovereign Europe, and a “European” company, might be t.he acceptance of the consequences of integrated public markets as set out above, namely, less government interference in R & D, greater technological specialization and intzzdepcndence amongst the European countries, and the emergence of firms with specific tee caI strengths. able to sell in all of

* See sect.4 for a further discussion or‘ K & D contmcts.

Techtloiogy ia Europe ‘sfuture

4.5. Tt chnobgica/

,235

po Iarisaticvr olr spread?

But wlDuld s ch a solution meet the very real problem raised by Layton.. namel!l, the concern of each lxropean state to obtain technol~~gicaland. production benefits out of nuclear energy, telecommunications, ai.rcra.ft and! other public sector markets? Certainly it is unrealistic to expect all European countries to have a major sta of them, 13ut it is equally unrealisthc to expect some counrtries to have a stake in HOI~~B oi‘ them. Whilst the British Dutch, German and Swedish governments are confi:dent that their ind.ustries could held their own in European public markets, other governments are concernf?d lest this be their fate. It has been the prime o Govermnent’s technological foreign policy to ensun: tha enough R & D, production and technical information out of European-cvide programs in such sectors as sprace and nuclear energy, and has withdrawn from programs when (as has often been the case) it has not. The B4giar-n Government has pursued similair objectives. Aad even in France, where industrvc has done very well out of European slpace programs, there are Fears that It would fare much worse in, say, nuclear energy. Would the liber;llization of European public markets lead tie the polarization of R & D and resulting production in the technologically strt’ilg countries of Europe, or to a more even spread amongst all df them? A recent study of trends in Common Ma&et production and trade between. 1958 arId 1969 sheds some light. on this subject [33] . Over this period, during whic’n trade barriers were eliminated: (a) Italy, technologically the weakest country, had the most rapid gains in both manufacturing production and. intra-EEC trade, incllJding significant trade gains in such high-technology sectors as electrical and non-electrical machinery, drugs and scientific instru=, menas; (b) Germany and The N’etherlands,technologically the strongest countries. both saw their shares of intre-EEC trade decline. Germany lost significant trade shares in high technology sectors like plastics., electrical and nonelectrical machinery. But the reverse happened for The Netherlands, whose shark: in many chemic,al products and in electrical machinery increasedi considerably; (c) in Belgium and JFrance, total g,rowth of indu:stria.liproduction was below that of German;:/, Italy and The Netherlands. France increased its intro-EEC trade share., including in some high. technology sectors, whilst the reve rse happened for Belgium. These date suggest that, at leiast for Germany and Italy, the “;:lpread”effects have outweighed the ‘“polarizi:ng’”effects following trade libleralization in thle Common Market. For the &her member-,coiuntries,the data are inconclusive. But perhaps more significar t is one o*!.herconclusion of the stud-y, n:arnel;/,thali; the formation ol’ thr: Common Mar’klethas not resulted in a greater degree csf specialization in production and trade am.ongst the member=eountries. On the

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K. Puvitt

contrary, in the majority of sectors where countries had relatively high production or trade shares in 1958, they were smallnzrin 1969; and where they had low shares in 1958, they were higher in 1969. We can only speculate on what have been the reasons for this trend. For example, one can argue that, when the Common Market became inevitable, industrialists in the high tariff countries, France and Italy, recognized that they would have to change their ways and therefore made more vigorous attempts to develop, maintain and exploit thei]- product advantages on international markets. In addition, Italy’s relatively low-wage but skilled labor force gave it a consi erable advantage in standardized products like refrigerators and washing machines. At the same time, it can be argued, firms in the technologically strong European countries, viewing the Common Market as an integrated market for the first time, decided to rationalize production on a European scale. In certain circumstances, this led to more production and exports from the home country (Dutch eiectrical equipment?), in others to the exploitation of locational and factor-cost advantages outside the home country (non-Dutch chemical firms in Amsterdam? Contracts with Italian firms for the supply of durable consumers goods?). And, of course, the U.S. firms expanding in urope in the 1960’s went further and faster in this direction than their ropean counterparts, and had a considerable influence on patterns of production and trade in Europe, particularly in the hightechnology industries [34] . Thus, European market irttegration so far has not led to the polarisation of production of technologically advanced goods in thz technologically strong countries of Western Europe: in fact, quite the opposite has been happening. But this conclusion, in itself, is unlikely to satisfy the technologically weaker countries who, for political if not for economic reasons, have no desire to become snnply “ ranch plant” or “subcontracting” economies [35]. They also wish to main in and develop their own rlltsearchand development capabilities, to be capable of setting up their own plants or subcontracting technologically advanced production in other countries. R & D, unlike production does not lend itself easily to international spread. Production techniques are set and known, and1can be spread internationally to take advantage of factor costs. R & D is dealing with the unknown and its efficiency depends less on factor costs than trn the intensity of formal and informa! communication, a:jd on the rapidity with which c:ecisionsare taken. Hence the strong pressures tcwards geographic concentratitin of R & D, bo within companies (multinational or otherwise) and witbin countries [3 Thus, it is unlikeHy that relative factor costs are li1 21~to have an eqLa effect on the regional distribution of R & D in Europe. On the contmry, the integration of European public tickets is moirelikely to lead the techrologi-

tally st ong firms IO rationdizz t eir Is & II, along with their pro&~&n, 011 lean blr;is. Arld whilst this might lead t;> gsc~ter in~ematim~l tipread in prodw ion, it is so likely io lea to greater national U & D. There arle, iowever, countervailing forces, The hei t about by market integration is 1ikely to increa the wcs ker firms and governments to upgrade their technological capability in order to compete againit foreign competition. These ljroblems of the international and regional location of research were raised in the early 1960’s by C. Freeman and A, Young in their classic comparison of research and development in the U.S.A., Western Europe and the USSR [ 361. Their main concern was to emphasize the very heavy cmcentration of R & D in the economically advanced countries by comparison with the less developed ones. But they also asked whether the disparitie; in 1~8~D between the USA and Western Europe would tend to grow or diminish. But, as we have already seen, the American challenge has been met by a European response, which has increased the Eatter’s technological capabiity by comparison with the former throughout tlhe 1960’s. The vigor of -the response is all the more marked wlhenone considers the change in the relative weight of the two technologically “dominant” western powers of early 1968’s namely, the USA and U.K. In 1961, the combined R & D expenditure of France, Germany and Japan. was only about 19% of the combined US. and U.K. total; by 1967, after a period of only six years, it had increased to about 42%. For thz Common Market countries, comprehensive data are available only for 1963 and 1967, which is not long enough period to detect a clear trend. In both years, the technologically weaker countries (i.e., Belgium, France and Italy) accounted for 46% of industrially financed IX& D in the EEC. Over this four year period, French industry increased its shares somewhat, whilst both Belgium and Italian industry lost a little. Thus, urends in the 1960’s within the transatlantic and transpacific fra.,l-xeworks suggest that the internlrtional challenge of “competition through innovation”’ has stimulated the weaker countries to get stronger; within the hJopean framework, the nature of the trend is as yel. much less clear. Would the same sort_of mechanisms be ‘tt work if Europear public markets were lilberalized? Certainly, there seems no reason why, say, a German manufacturer of communications equipment should not have manufacturi g plant in ltal:y especially if this would help penetrate the Italian public market. Equally, opera public markets may stirrulate the technologically weak and protected to -e efficient in their R &‘L D activities. become both more generms a

238

K. Prrwitt

5. KEY POLITICAL lSSUES It remains to be seen whether the Italian Government and industry will be convinced that greater hope for upgrading Italy’s technological capability in the liberalisation of public marke s and in a competitive system, tha programmes of so-called technological cooperation where PI if past precedent in the space and nuclear fields is any guide *- the strong countries (in these cases, France and Germany) tend to walk off with the lion’s share of the total resources. 5.1. imxwnpa~ible policy objectives: Britain, France and Germany But it would be both unfair and inaccurate to @ve the impression that it 4s

Italy’s defence of what it considers to be its national nnterest that is the main stumbling block to he more efficient use of Europe’s technological resources. Its contribution palls into insignificance by comparison with that which has been made by Britain and France in the past, and which could be made by Germany in future, These three, big European countries, all of which have been world powers in the recent past, have national technological policies which go beyond making money, and international technological policies which go beyond getting a “fair share” of internatic2al contracts. Given their pretentions to the status of “mini” great powers, and the mutual competition amongst them for power and influence on the European scene, they have certain characteristics in common which make effective technological integration difficult to achieve. For example, all three intend to maintain in ependent, national firms in aircraft, power-generating equipmen and communications equipment, thcreby forestalling the emergence of firms based in one European country, and with integrated, European-wide operations. Fortunately this need not interfere with competition and efficiency. The technologically sophisticated equipment in these sectors is often custom built. Although there may be some economies of scale in producing it, these are less important than efficiency in the technical development process, and in matching the technological ‘configuraltion to customer requirements. Thus, although the development process must be managed by one, nationally-based boss, there are considerable possibilities for subcontracting and licensiing production to local indus, tries. This has already been done successfully in the air firms (e.g., Loc&eed and the production of the F Japan [37] and by Dassault (selling “Mirage” fighters t the power-generating equipment industry (KS. ; German firms in nut But once again, certair-ipoliiticd conditions mu:,t be met if the maintenance of

indepenclent, national suppliers is not to interfere with efficiency. Gowernments mist make it 1:lear from the beginniilg of the R & D process that there will be ro discrl,nination in their final choice against foreign-developed technologies. provided that some satisfactions is given an terms of local production. In the past, the sequence of eve ts has often been very different. European governments have supported e line of technical ‘development to satisfy their own needs, have found that they have backed a loser, and have only then shopped around for a foreign technology. And, as in the case of the ent for the British TSR fighter, or the French graphiteinational uranium nuclear power-generator, the foreign tech.nology chosen has ofte:n been American. Perhaps such choices have been the most cost-effective ones, but there are reasons to doubt that this is the sole explanation, For exalmple, as a replacement for the TSR2 tighter aircraft, the British Government chose the F-l I 1 rather Clan Dassault’s Mirage, supposedly on the grounds of cost-effectiveness; but since the F-1 11 was a complete failure, and the British Government then switched to the Phantom, one cannot help suspecting that buying an American aircraft rather than a French aircraft (and a Gaullist one at that) was also an important input to the decision. Similarly, th.e French Government recently chose American nuclear reactor technolog, even though German technology was offered too; and the malin French aero-enginfe firm, SNECMA, has steadfastly preferred to cooperate with powerfirl yet distant Amerkn firms rather than with its (until recentky) powerful but much closer neighbolur, Rolls-Royce. Germany has been even more dependant on American, strategic technology but, given her overridinp, military dependance on the USA, and the existence of the ‘“offset” agreements, one can easily understand Germany’s vulnerability to US pressure. Similar pressures have doubtless been applied to Britain and France too. But their behaviour suggests (alltoo strongly that rhey diistrust each other (and Germany as well) more th;an they dis ike being dependant of: the USA. Until such attitudes change, all the best, modern rnanagement in the world is not going to make the use of Europe’s technological resources more efficient. Will the three, big European powers be ready to move towards greateir technological interdependance and specialisation in exampllz, woulrll France be willing to buy German-designed nucle ant, or 63 sell off its computer interests to a British or German firm? Would either Germany, with its present ambitions, or Britain, with its pas! glories, be willing to rely on a French-deslgned military aircraft (one cam imagine how quiizlkly the Iany would point out what happened to alerospace lobbies in Britain and Israel after it had ordered some “Mirages”)? ‘WcbuldBritain be willing to

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K. Pavitt

become heavily dependant on French and German space technology? Unless the answers to questions of this kind are “yes”, European :echnological cooperation will be inefficient, a sham, or both Yet a positive answer to lies the surrender by each country of a sizeable lump of national Ia questions is crucial. To answer them is impossible. But looking at the trends in the place of science and techno ogy in each of the three countries’ national policies will help to identify some of the key factors in, and the key decisions about, European technological cooperation in future. It will also help to show why specific programmes of technological cooperation in the 1960’s failed. Britain came out of the World War Two technologically the second country in the world after the USA, with a huge aircraft ndustry, advanced nuclear technology, close technological relations with the USA, and world-wide political commitments. In the 1950’s, successive governments pursued technologically ambitious programs related to national needs in nuclear, aircraft and defense technologies, in spite of growing scale requirements, a very limited resource and market base by comparison with the USA, and ever-diminishing mitmen ts. The result was expensive and technologically advanced failures in civil and military aircraft in the late 1950’s and early 196O”s,the more recent demise of Rolls-Royce as a major force in the world’s ? and nuclear power technology which - although satisfying a relatively high proportion of national energy needs - has not met with success in world markets. With the and with severe economic problems at home, BritrJn in the 1F60’s did not undertake similarly ambitious programs in misstie dnd space technology, became heavily dependant on the USA for defense t~haology, and began to take a more -cost-effective, commerciallyoriented approach to large scale technological programs. In 1961, total expenditure by the British G vernment on R & D was more than that of the French and German Governments combined. By 1967, it was only a half, and by 1969 both France and Germany were spending more on nuclear and space R dir.II than Britain ( see table 8). These shifts have been reflected in ritain’s attiti:udeto European technological cooperation 1381. Kaving taken the initiative to establish European cooperation in space, ritain then became more reluctant than many of its European neighbours to spend money in this sector, an it eventually refused to participate in t e funding of t nt of a European Air Nonetheless, wanting arl %, Britain has been urnwilling to cance its joint development ‘th France of the Concorde, and has entered into new arrangements with Germanjr , for the development of a

Teclmo~ogv

in Europe’s

Comparisor

Country

f!c ture

241

Tabk 8 of expenditures on R & D by France, Germany and the 1J.K. (percent of total of all three). Total government financed

Defense

Hindustry financed

Nuclear

Space

_I_-

1961 1967 Franc? Germany U.K. Total (Fr. + Gr. -t U.K.)

1961 1967

28 21 51

40 28 32

2-i 3 67

100

100

100

117 119 ~14 100

1961 1967

1961 1967

1961 59617

36 19 45

44 34 22

43 17 40

44 33 23

20 30 so

26 35 39

100

100

100

100

100

100

military fighter (i.e., the MRCA) and for the centrifuge method of enriching uranium I Given the costly lessons of its past, BrF.tainwill certainly not be ready - even as a full member of the EEC - to commit itself to European programmes if they are spectacular, risky, expensive and unprofitable. Two factors are likely to hinder any moves5towards closer technological interdependance with the other European powers. First, the existence of an aircraft industry too big for present levels of demand, fighting for its existence, and likely to interpret any move towards interdependance as a “sell-out” (and rightly from its point of view). Second, the high level of unemployment and the considerable hostility towards Europe amongst certain sections of the public. This second hindrance should evaporate in the course of time. The key decisions for European technology will be those about the futures of the aircraft and nuclear industries, whether or not to continue with the MRCA, and - if not - what ,other aircraft is bought. France *zameout of the Second World War a technologically weak country. Even beforehand, French industry, sheltered from internatiolnal competition, had not been technologically strong, and the French military had been less quick than their British and German counterparts in recognizing the importance 0” new technology. French scientists had not participated in the technological developments of the Secon World War, except for a Key group of nuclear scientists, who forme the core of France”s nuclear program [ 39). Unlike Britain, France did not have - and still does not have - privileged access to U.S. nuclear technology. In the 1950’s, the F’rench nuclear program gave France thfncoption of developing nuclear weapons and nuclear power. The capability to develop military

242

X. Pavitt

aircraft was built up, but -- compared to Britain -- the technical development objectives of M. Dassault were less ambitious, the d :velopment philosophy was incremental, the operational requirel,lents less varied, and the willingness to use foreign cchnolou greater 140). In additic* , the relatively successful airliner the “C avelle” was developed. was exposed to internzltional competition for the fjrst time in a h~ndre ears, and decisions had been taken to develop a ~rench~esjgned nuclcsr power system. Given his overriding objective of national inter ependence, President de Gaulle went ahead with ambitious sile development, with a space policy intended to challenge e U.S. monopoly in applilzationy satellites, and with a program to build up an indigenous computer industry. Whilst the French hat large-scale technological development programs Govern men t claime were helping to upgrade the technical level (If French industry, the weakness of French industry coupled with the “Jacobin” tradition of centralization and State direction, meant that a relatively high proportion of R& D work was done in Government laboratories, and that scant attention was very often paid to the technical and commercial criteria normally governing technical ench policy towards European cooperarion has reflected both the overriding desire for national independence in essentials, and the predilection for large-scale technological programs. The sJpranationa1 pretentions of Euratom were squashed and -- no doubt encouraged by M. Dassault - there hss been a move away from the joint international development of military aircraft. The French Government has been mtich less concerned than the British about the cost overruns and poor comrlercial prospects of the Concorde, and have joined the Germans in the Airbus venture. And - unlike the it is convinced that Europe must h:ave an independent launcher for its applications satellites. Since May 1968 and resident de G;:ulle’s departure, Governmental resources e devoted to big technological progra4mshave brzn cut, ambitions in defense technology have been severely curtailed, and the graphite/natural uranium nuclear reactor prog ;~rn flas been abandoned because it was not competitive 14I] . In the su mer of 197 1, an official of the Ministry of Fiance publicly questlone the commercial usefulnr:ss of the planned, FrancoGerman applications sateilite; criticized the laclc of commercial realism in the rench Government-created, computer company; made no mention of the rench color television system (SECAM), but praised a rench company that ought ,alicense far the American (RCA) Zystem [4 hese more comr~er~~~~y-or~en ted attitudes to penetrate other parts of the ,~dm~n~st~~tior~. As an when th.:y do, the French Government’s

Technology in Europe ‘sfir ture

243

att, t lde towards European, technological co-operation will presumabl!, change: tit first towards asking Europe as a whole to do what in the past France had intehrded to do alone; and perhaps eventually towards questioning whether even Europe as a whole really needs such vast, technological ambitions in certain sectors. But it is difficult to see President Pompidou, at least in this term of his presidency, accepting with good grace greater technological interdependance with Britain and Germany in such sectors as aircraft, nu:llea.r energy and computers. Before the Second World War, Germany was probably the strongest cou.ntry in th-?;world in science and technology. In 1945, it was defeated, its defense industries dismantled, its patents and foreign assets confiscated, and many gifted scientists and engineers lost. Yet the essen!tialsof its technolo@cal and organizational skills remained, and the absence of a large-scale commitment to defense technology enabled it in the 1950’s to concentrate its resourcn:son produdtive investment, to re-establish its strong position in civilian, high technology industries, and - unlike the British - to atvoidcompetition on impossible terms with the USA in defense-related technologies. Furthermore, the powerful [German firms in the electrical industry obtained licenses for civilian nuclear and computer technologies on favorable terms from American firms with wh*:m they had had cross-licensing agreements before the Second World War. The 19601’shas seen the continued growth of Germany’s strength in civilian technology, and the R & D expenditures of German industry reached about the Sam2 as those of British industry. At the same time, Governmental expenditures on science and technology increased steadily. In 1961, they amoun?ed to 21% of the combined totals of the French, German and British Governments. By 1967, they had increased to 28% and by 1969 the German Government W:Sspending more on nuclear aEd space R tScD than the British Government. These upward trends reflect a number of factors. The German nuclear ,industry, ha’lring benefitted considerably from licensing U.S. technology in the 1950’s, and having made a significant technical effort of its own, has now terminated its licensing arrangements with U.S. firms and, with increasing government support, intends to be a major force in world competition in the 1970’s and 1980’s The German aerospace industry, although much smaller, more fi*agmented and technicafiy weaker than th.e nuclear industry, has no!netheless been able to extract increasing sums of money from a Govennment lich, unlike the British or the French, has not ;yet had the experience of having to extract itself from expensive, technologi{::a.lfailures, and which has behind it the economic growth recor and fiscal resources which make such expenLit;ures more Ieasily acceptable than in Britain or, since 1968, in Fkance.

K. Pavitt

At the same time, Germany has become less content with its role as an economic giant and a political dwarf. One must presume that one factor s incre;ising commitment to the “strategc” technologies has bee the desire to increase its bargaining power with it:; European neighbors and domestic and foreign policy, anti with the USA. But, for ity is relatively weak in many o!* because Germany’s techr~~lo~cal cap these sectors, Germany has relied much more on co8Iaborative programs than its European neighbors. It is building the airbus with the French. and ii military fighter with the British. It supports the French view that Europe should have an independent launcher capability and, together with thlt French, is building the “symphonie” communications satellite. And it is collaborating with rhe British and Dutch in developing le centrifuge method for making enriched uranium. In futtxe, Germany may well become dissatisfied with the inefficiencies and delays surrounding cooperative projects, especiail:, in the aerospace sector. Three options would then be open to it: to return to fuller dependancc on the USA, to move towards closer interdependance IwithBritain and France, or to try to go it alone. The last would be the most disastrous course both for the future developmsnt of Europe, and for the use of Germany’s limited resources. The choice between the first two is an agonising one which it has ad to tace a number of times and - in the aerospace sector at least has usually chosen the USA. As in other importam areas of German policy, it is irnpossible to dissociate its development from thl: future political shape and security of the whole of Europe. What directions of European technological cooperation will result from t’kle interaction of these trends is very difficult indeed to predict. But it is clear from the 1960’s that conflicting national objectives were an imporlant factor in the misunderstandings, delays, tensions and failures recurrent in such c\ooperation. For example, it took five years of talking around the airbus eir prime objective 0.” a project before the British finally decided that commercially viable venture was incompatible wit French objet tives of elnployment and independance, and with the GenIIan eagerness to buy into aircraft design. In the MRCA military fighter project, the British propensity to write tech.rologically ultra-sophisticated milil.ary requirements, coupled with the same German eagerness to build up a design capability, has mezint that a relativeky weak esign team now has important responsibilities in an unnecessarily sophistlcsded development project. 5.2. Rocket launchers and enriched umnium t fbr the Europeans to reach National differences ave also made it di agreement on a comrrxi~ policy for satellite app ications, or for supplies of

enriched uranium, both of which ultimately require: the definitiort of a common position towards a virtual monopoly supplier, namely the USA. As a result of ITShuge investmGrlts II-Idefense and sparce,the USA has a huge technico-ctJ)mmerciallead in emiched uranium, rocket launchers and applic;ltions satellites. Because of potential military applications, the U.S. Govern ment has been reluctant to license its enriched uraniulm and launcher knowhow to foreign countries, although it has been willing to make available for civilian use. Because of civilian applications, European Governments are reluctant to become completely dependent on a monopoly supplier who, even if a friendly nation, is also a commercial competitor in related sectors, and therefore under permanent temptation to abuse its monopoly position [43] . All European Governments agree that there is this Idanger,but they differ on what should be done about it. In space policy, where the problem is the conditions under which the USA will make a&ilable launcher facilities f’or European regional satellites, Europe is split r&t clown the middle. The British, wYth privileged access to U.S. defense technology (including missile A technology), and remembering its experiences with big technology in .;he 1950’s, say that it is much cheaper to buy U.S. launchers tkan to develo:p a European one, that the USA would in all probability supply launching facilities under conditions which Europe can accept, and that - if the USA doles not - then Europe could buy launchers from the Russians. The British a.re supported by the cost-conscious Scandinavian Governments. The French, on the other hand, without privileged access to U.S. defense technology, with an ambitious space program with a strong military component, and perhaps with rather more ambitious ideas about what European applications satellites should be able to do, stress the political importance of a;u independent, European launcer capability. In this they are supported by the Germans and the Belgians, with whom they are building an applications satellite, and a launcher. Anglo-French rivalries are also at the heart of differences of opinion about what should be done about Europe’s supplies of enriclhed uranium. Both cou~ltries have national facilities for the fabrication of enriched u .anium. Ho\l-ev% neither fazility can compete commercially with U.S. supplies. r$,othhave trit!d at various times to persuade other European countries -- an.d particularly tlte Germans - to help pay for the enlargement of their facriities, and to buy the resulting :;upplies. But neither has been willing to slhare its technology witi the other European countrie s, which have not responded positively to either offer. The British alre now cooperating with the Germans and the Dutch: to develop the inci ient centrifuge method for enriching u:ranium. And tlhe French have recently bought supplies of enriched1 uranium from the UcLZ;X

246

.K. hat

(for use in U.S.-designed nuclear plant), whilsl continuing to push for a European decision to build a gaseous diffusion plant based on French techlldOgy.

differences of opinion, and even o,?en competition, amongst the European Governments, although diplomatica.Jly embarrassing, have so far been fruitful in one very important sense: they have erlsured that, in conditions of considerable technical, economic and political uncertainty, major decisions have not been taken too early. In both cases, thle uncertainties relate r’o the conditions under which the U.S. Government will1allow access to U.S. products and technology, to the scale and nature of Europe’s future demands and to the economics of various technical possibilities. In both cases, differing national policy objectives in Europe have stopped major, premature commitmen ts - diplomatic or financial - to policies which might later have proven to be unwise, and competition amongst European Governments has even opened up new policy options and hereby improved Europe’s bargaining power. But, although the harmful effects of past or present European differences in these two sectors have been grossly exaggeral,.ed, not to have a common position in future could be disastrous. Eventually, the economics of the various technical possibilities will become clear, an.! Europe’s needs will become more sharply defined and more pressing. The moment of truth will.come, both in bargaining with the USA and in deciding whether or not, or to what degree, it wiJ1be necessary to commit major resources. At this time, a lack of a common front will reduce Europe’s b..lrgaining power and make resource commitments sub-optimal and uneconomic. What the European position should be will of course depe,rd on the conditions under which the U.S. Government offers’ access to its enrichment and launcher technologies And what the U.S. paiition will be depends on the relative strength of two points of view existing in the USA. On the one hand, tlhere is the view that foreign access to U.S. tee hnology should still be heavily restricted, for military reasons, and so as to avoid the erosion of commercial advantages that accrue to U.S. industry. The commercial argument is likely to ‘,-.arryparticular weight when, as now, high technology markets in the USA are depressed, and there is concern about the diminution of the U.S. trading advantage in high technology industries, On the other hand, there is the view that such a policy would be selfdefeating. It would make the Europeans develop their own technologies in these two areas, so as to reduce their dependzlnce on U.S.-controlled sources IOfsupply *. These technological efforts woul :I lead to a loss of mar These

* The

same goes for Japan. For a description of Japan’s technological capabi policies, see ref. WI *

the USA. And more imporriant, they would result in greater, independant military capabilities in strategic sectors. 1Jnder such circumstances, the argumen t con tinu 3, it would be preferable to give t?e Europeans access tc! U.S. technology under carefully controlled conditions, which eliminate the possibilities of military use, and which assure U.S. industry of a!tleast some come mercial outlets. It is difficult to detect which of these two views is preva.iling, although it is clear that the State Department, the AEC and NASA are all aclvocaitingtke second, more far-sighted opt%on[45] . With regard to rockets launchers, EUIVpean pirrticipation - both financial and industrial - in the Space Shutt!le program suddenly became a new U.S. condition about three years ago for launching European, regional satellit.cs. But it was later found that the U.S. conditixrs for giving the launcher still did not satisfy
248

K. Pmitt

busirness, and the French Government, \?hich IIioesnot recognize Euratom’s clompetence in this sector, but which is the main protagonist for gaseous diffusion technology in Europe. If, in addition, the centrifuge method is economic, then Britain, Germany and The Netherlands may be less interested in the U.S. offer of gaseous diffusion technology. All of which does not augur well for either transat antic or in tramEuropeana:,;reement. 5.3. Relations with the USA This discussion of space and enriched uraniu.n shows just how closely the direction of Europe’s technological efforts, as well as the degree of cooperation depends on what happens in the USA. ‘The same is obvi lusly true of European weapons policy, where the USA’s European policy will determine how much military R & D the Europeans wil want, or feel constrained, to do. And what happens to the British and Frel h nuclear forces, either separately or together, again depends on the USA [49]. Furthermore, although the US Government still gives public support to the general principle of European integration, it is by no means clear that some of the specific steps towards technological integral ion would be construed as being in the US interest. In particular, the rejection by the Eurupeal ;; of the USA’s present role of mos favoured nation to supply expensive technology, when nationa! programmes have failed, would be talLenparticularly hard. It is likely that the USA will continue to have unused aerospace capacity a.nd a ‘balance of payments deficit in the 1970’s. Under themsecircumstances, the U.S. government might tolerate the British and the Germ.ansgetting together to develop a military aircraft, but react far less favorabliy if these two countries were to buy French fighters rather than Amerilzan fighters*. In addition, the unificatitil of Eur Jpean public markets, if done properly, would mean stronger European competition and fewer opportunities for U.S. firms to pick up the pieces after unrealistically ambitious national programs, And, even if not done properly, such unification might, in the short term :It least, mean discrimination against U.S. firms, even if it meant juicier piece!; to pick up in the longer term.

* The effects of the recession in the U.S. aerospace industry is already being felt in transatlantic arms deals. The German Government recently decided ta3buy IJ.S. Fhantams, and ‘The German indu s had been given to understand that they would receive contracts worth $125 ion as suppkrs of Phantom components under McDonnell-Douglas licenses. So far, the AmeriLar company has a,NardecI for further contracts $6 million in contracts to the German concerns zlnd the ootloo is dim.” See ref. [SO].

249

6. EUROPEAN TECHNOLCKICAL iNTEGRATION The dscussIon so far shows that lile major decisions affecting Europiean technclogical Integration ~4.1vary corlsiderably in nature, and will be taken in different places at different times. They will often involve c oices on whether European nations are willing to become technologically more dependant on one another for some economic and industrial1 benefit; and sometimes, on whether they are willing to become more dependant on one another instead of on the USA. Technology is one of the prime aspects of power in the modern state, so t.hat these decisions are major ones. They are not going to be taken by international civil servants” or even by the Ministers of Science and Technology of the European States, meeting together in Brussels. Tlhey are going to be taken by Heads of Government and Cabinets. Given this fundamental constraint, what policy-making machinery is needed at the European level? What results should we expect from European technological integration? And what are the Imost important areas of policy that need to be tackled within the European framework? 6.1. Policy-makingmachinery To start with, it is quite clear from the experience of J$ratom that setting up a supranational executive agency in a sensitive area of technology, b&rt? the political and industrial consequences of effective technological cooperation are understood and accepted, will lead to disillusionment and disaster. And even after the politics are understood and accepted, there are still irery strong grounds for questioning whether a supranational agency responsible for fundng, and for conducting large R & D programs is really the best way r to do things. As has been mentioned earlier in this paper, there has been a tendency to equate successful “European” policies for science and technology with supranational programs, and a spate of proposals have been made to create European agencies for funding technology generally, as well as in specific sectors such as aerospace and oceanography. How vafii;lare these proposals? Decentralized initia rive, competition, rapid (decision-making and flexilbility are essential for efficient science and technology. Even assuming Ipolitical agreement amongst the Member-States, international organizations - either in gestation or operation -- ,are rarely distinguished by any of these prcperties*. And attempts at centralized “planning” of a myriad of scientific and technical activities would be unnecessary, and very inefficient. * Consider, for example, the inordinate amount of time, preparation and discti.lssionthat ha!, gone into EMBO (European Molecular Biology Organization) for a rxogxamnx which, if it ever does materialize, will have running costs of only just over !iPImillion A year. See ref. I,5 11 .

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It is often argued in response to this objection that the scale of modern te&nology is such that only European-wide efforts make any sense. But these scale requirements, although growing, have ‘3een grossly exaggerated. ln sectors where there are scale problems, they aire still in general problems of insufficient m;&et size. These are precious few sectors of science and technology which are so costly or so big that their cevelopment and operation are beyond the technical and financial resources ;>findividual, European counItries. Four sectors where this is the case do, howevelr, immediately spring to mind: first, high energy physics, where there has been the recent CERN agreement to pool Europe’s esources; second, the next generation of nuclear weapons’ systems, which could be developed only on an Anglo-French basis, if at all; thtrd, applications satellites, where the failure of EILDOreflects the lack of a Europe-wide will to develop its own launcher, and the success of ESRO a European agreement on what Europe’s future needs for satellite services will be; and fourth, enriched uranium, where it is not yet clear what Europe will need to do, and agree to do, together. Certainly, there will be an increasing number of sectors where public services involving science and technology could best bc provided on a ccmmon, European basis - especially where expensive equipment is required. For example, one of the more useful and significant of the proposals emerging from the rlecent EEC exercise in “mini” R & D project cooperation is that for a Centre for Weather Forecasting, capable of forecasting weather in Europe for periods of four to ten days ahead. But here the role of the EEC is that of catalyst, helping to bring into existence an institution which would no doubt be operated completely independently of the EEC Commission. In other words, technological scale does not justify the creation of new European agencies for the purpose of performing scientific and technological programmes. There is, however. a third purpose advanced for a European funding agency, namely to stimulate technological development and the emergence of “‘European” companies, through awarding develop,nent contracts to industry. The subject of government development contrazts will be discussed in full in subsect. 6.2 below. Suffice to say here th;it there are strong grounds for arguing that national governments will not al ow this to happen, that it would not lead to commercially successful, new t~:chn~c,logy, and that large R & D contracts would not be a sufficient incenrive to create truly “European” companies. Indeed, one can go furthl to argue that they are not even a mc)r: fruitful for Eurcpean Covernnfecessary incentive, and that it would conditior;s ments to concentrate their ajttention on cfeaAg t : boundary progressive, commerwhich would stimulate the emergence of technologic cially strong, European companies; in other words, on creating a unified,

competitive, public market, and on working towards greater politi,cal trust and merging c &* sovereignity amongst the European states. Thus. ally European-wide organization dealing with science and technology p&cy will be at too low a level to make the political decisions which are the necessary prerecluisites for effective cooperation, and -- in qr:arly all cases al. too high a level to be responsible for planning, finan sing or executing jrograms. This lesson has been learned by the Common Market Secreta.riat, ivhich does not now inf:erpret its role as taking over research and development projects which can be run satisfactorily cn a nit ional or regional basis, but rightly sees that it hss an important advisory role to play [52]. However, one can question whether it is realistic or useful for the European Commission to give advice on a “global policy for R & D, the absence of which in 197 1 does not make eclJnomic or political sense”. [ 521. It was with such an objective that “national science policy” machinery was established in :I number of Western, industrialized countries in the late 1950’s and early 1960’s. But such machinery has in no case become responsible for financing all - or indeed hardly any - governmental R & D. This is still done by a variety of government agencies that have been doing so for a long time, because these agencies have not wished to give up power, and because! it makes manbgerial sense to lhavc R & D financed by those who will benefit most immediately from its results. Furthermore, no government has worked out a satisfactory, rational method for allocation of R & D resources amongst a variety of national objectives for two very good reasons: first, that the: rnajor choices (and even m:any of the minor ones) affecting how much and where national R & D resources should go are political choices which cannot be reduced simply to h.ard, economic calculation; second, that nobody (not even industrial firms) has yet succeeded in developing a satisfactory method of measuring ex ante rates of return on R & D activities [53.$4] . There is little reason to think it would be any easier to develop a global R & D policy at the European level than it has been at the nationa;l level; (quite Fhe contrary. Nonetheless, what “natiorral science policy” machinery has in fact been able to achieve over the past ten years, [ 551 (as distinct from what has sometimes been claimed that it was achieving)1offers important clues a.sto what could usefully be done at the European level. What national science policy machinery has been able to do, and whalt is needed at the European level, is to look at the effects of major decisions on the total employment and effectiveness of scientific and tec:hnological resources, and to act as a catal st in recognizing emerging problems or opportunitie:s, in developing new instit tions and in getting existing institutions to change their ways. A large proportion of these functions are entrepreneurial and, as with all entrepreneurial functions, they depend on access to informa-

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tion and competence from a wide spectrum, lsrnd their success can be mensured by the speed with which each new activiti becomes routine and is taken over by others *. The form of organizatilon znrf methods of work are similar across a number of countries: groups of exl)erts from outside con studies making recommendations to govern:nen ts and publishifig reports; groups of government officials from a number of agencies which meet to discuss and (hopefully) act on olicy matters; a Secretariat which services both those sets of activities [55]. The equivalent function at the European levrelshould serve to create ;i European “constituency” or “conscienceq’ with regard to science policy. But how will it make its influence felt? There is no :ffective political power at the European level and, unlike the reduction of t:lriff barriers or even agricultural icy, policy problems related to science and technology lend themselves very badly to incorporation in rigid, international treaties or agreements. The power of this constituency wil9 therefore depend on its ability to influence national governments and politicians through analysis, and on the degree to which it is able to stimulate informed discuss on and debate on science policy issues beyond a small grc)up of government officials. And this in turn will depend on the ability to do and to make knclwn good analysis setting out the political preconditions, the likely benefits, md the possible procedures for achieving closer European integration in science and technology. Sometimes, analyses and recommendations might best )e undertaken intramurally and submitted directly to national, governmen. off‘lcials. In other cases, they might best be done through independent advisory groups - especially when new or ill-explore policy issues arise, where national governments do not want to discuss em, or where industry and the universities are heavily / involved. Where this function should be fulfilled wrthin the framework of existing European institutions is perhaps a less imp Jrtant problem than what policy problems need to be looked at [56]. *Thtl:re follow some suggestions, the discussion of which makes no claim to be cxhawstive, but simply to provoke further thought. 6.2. Policies for irltegration: General princip les By far the most important problern is that of defining the procedures and the methods for unifying Ewope’s public rwrkets, which are critic sectors as aircraft, communications, nuc1ezl.renergy, education, medical care and mass transportation. In these set tars, governments play three, sometimes * As in the “venture managemeet” system empl )yqb in some industrial firms to lau new products. See; ref. [ 81, paragraph 109

confli:ting roles: that of a customer, that of an arbiter of the rules of competition, and that of a financial backer of particular technological developments. Let s first discuss this last role. All gc.vernnnents play a very Important and irreplaceable role in the development of civilian technology. In particular, they finance scientific and technical education and academic research, both of which are essential inputs to technological change, but the benefits of which cannot be pre-empted by those who finance them. They also play a key role in technological change in agriculture, where individual. private units are often too small to finance such change, and where both production. technology and products are reasonably homogeneous. But rhe record since the Second World War shows that governments have been far less successful when financing specijk technical ventures for cummerciaal;markets. The reasons for this are not hard to find. The habit blegan wher various European aircraft industries found themselves after World War -1 faced with far bigger technical and market risks :han their U.S. counterpart, given that the latter had much bigger military R & D and production con t rat ts, and that military and civilian technology overlapped considerably. Thus, whilst U.S. firms were able virtuously to finance their own civilian vemlres, similar action by European firms would have been financially irrespan sible - which is why governments were asked to fill the breach, and why there were some very heavy losses. To take one recent example, the IRolls Royce RB211 engine - technically ambitious, risky and heavily financledby the British Govllrr ment - was competing against alreadjr-working engines, a large proportion of the dievelopmcnt of which had been financed with U.S Government money. Ironically, similar Problems are now emerging in the USA, The Chairman of the U.S. Government’s Civil Aeronautics Board has recently been reported as argCng that the U.S. Government had traditionally financed commercial aircraft through the Defense Department. But JIOW that commercial R & D requirements have gone beyond what military developments can provide, new -“*rent assistance to civil developments [Y] . rne2ns must be found for govei~~~~ Wowever, Eads and Nelson have argued very stron y that the “new means” sho;rld not be a policy of large-scale g nment financing of specific, civilian y argue, is still able and willing to developments 1251. Private industry, uncertake very expensive technical ventures when the expected rate of return is high enough, as IBM’s $5 billion investm.ent in the 360 computer series shcws. Government money will inevitably be drawn towards projects with low rates of return, and government involvement will mean that bad technice-commercial bets will be recognized and acted upor later rather than sooner. They therefore propose an alternative policy, namely that,, if govern-

me:nt support is necessary because technology is risky and expensive, and because there is a social or economic gain to be made by getting it into use rntx-e quickly than would happen through normal market forces, then governments should finance research and exploratory clevelopment, so as to reduce technical risks, but still leave the financing of eventual commercial develop ment to private initiative. The unsuccessful experience of governments in financing specific, commercial ventures in technology is not restricted to the allrcraft industry. None of the numerous governments agencies set up around Eilrope for giving such finance outside the aircraft industry have made a profit. All of which suggests that, almost by definition, governments will be left tc) finance the “second best”, whilst industry keeps the “first best” to finance itself. opean debate about This last point is particularly relevant to the pn sent W./JOshould give governmental, R & D aid to industry . Colonna, who was the Common Market Commisioner responsible for the report on industrial policy, has argued that the Community itself ;hould complement national governments and finance R & D in certain high-technology sectors, since this would reduce one of the factors blocking the liberalization of government m:arkets, namely, irndividual government’s desie-esto get some return from thear own outlays on R & D. But it is unlikely that European Governments would be any wiser when acting together tharl when acting separately. Indeed, what happene when the government officials of the six Common Market countries got together to talk about cooperation in computers suggests quite the reverse, namely a lack. of technical and commercial realism, coupled with the temptation to offload on to a “European” budget R & D project which have 3 low, national priority” In other words, if national governments are ( y definition) left to finance “second best” projects, then (equally by definition) Europe will be 1e:ftto finance “‘third best” projects. Since financing even the second best. project bias not proved to be very rewarding, why bother at all about the third best” It is for this reason that some proponents of thz Common Market go further and propose that the Commission should noe complement, but replace na* The following

comments were made by a manager af a European computer company. “All the (EEC) projects in thle computer field, which include ideas for a scientafic data Fetwork, a software ibrary and computer educatiljn courses, are being processed by international civil servants and academics. Zn onP:r one has industry been asked to participate . ..whicb caYed for the joint d.evelopmer t and manufacture of a giant computer by 1980. Siemens, AEC-Telefunk,en, Olivetti, Philips, CII and IC meeting... for over two years to discuss how to realize t rs particular project. From the beginning they expressed doubts about both its rlxessity and its viability but it was not until the end of 1970 that this message was accqted by the relevant commrttee of the EEC.” See ref I591.

tional go\ ernments in their role of awarding R & D contracts to industry. In! this way, it is .;aimed, the Commission would not be left with the “third best”, anti national governments twould no longer be tempted to be nationalistic in public procurement in order to recoup their IR& D expenses. But there are a number of strong technical and political objections to this solution: (a) Centrally-financed R & D increases the danger of rigioity in pursuing either too few Technical options, or the wrong ones for too long, whilst nationally_ financed R&D will retain competition amongst a larger number of technical options. (b) Centrally-financed R & D inevitably creates the problem of the “f$r return”, whilst nationally-financed R & D eliminates this problem, and alloys lologically weaker countries the option of making an energetic effost to catch up. (c) Provided that sufficient provision is made for “local content” in tht: manufacture of foreign technology, there is no reason why national governments cr3uld not get more pleasure, and more national welfare, out of purchasing “‘first best” foreign technology - the cost of which may have been subsidised by foreign taxpayers, than out of buying nationally-subsidised, but “second best” technology. (d) FinaUy, there is the objection of “realpolitik” or “representation”, namely, that technology is too close to power for national government to give up lightly their prerogatives to finance technological developinen ts in strategic sectors. The sad experience of Euratom shows that European governments have not been willing to do SD in the past. There is little reason to think th;at they wti.1be willing to act differently in future. Indeed, they should not do so in such a major field of policy, until the Commissions’ expenditures are subject to a greater degree of scrutiny and control by an elected, Europeian Parliamzn t. If only because of this political constraint, it is very improbable that tlhe Commission will soon get maijor w executive powers for financi in the “strategic” sectors of technology. It will probably sa relatively small, complementary role in financing some R KcD outside the strategy sectors, thereby creating the precedent (which the Commission thti:lks to be important) of Community finance in a new area of policy. At least the British Government is likely to support such a line of action -- careful to keep the Commission out of financing in the strategic technologies, but eager (if only to satisfy British public opinion) to show ,that Britain is getting some.. it is giving away in agriculture. JO thing, back in industry to compensa inefficient expenditures wi!llhlelp is not very probable that the_;e s rnment to make great strides toeither the Commission or the Br wards the policy objectives that they are supposed to serve.

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This discussion of government’s role as a financial backer of civilian technology has been long, but its conclusion can onlas I be that this role Ii aq bee too much emphasis and attention. One can argue that the scale of government support has been too heavy in the past. One can also argue that the nature of the support sh shift from specific, commercial ventures ts research and exploratory de ment, and that supp rt should be given at the level rather than at the Community But one must above all argue that greater emphasis should be given at the Community level to government’s other i‘unctions, namely, an arbiter ofthe 0 anditionsofcompetition, and a customer. Lzt each national government and industry finance its own, technical thing. FCr the major European countries at least, this is still possibl: in nearly ail sectors of civilian technology. But, make it cleur .fbrn the OLtst*t that final (Tustumerchoices will be made throughout E’uropeon the grounds of cost-eAQxtiveness. AS we have seen, it makes little sense to expect truly “Europesn” companies today to be at the same time politically axeptable and managerially efficient. However, competition amongst nationally-based companies will not lead to technological polarization amongst strong ;flld weak. And the sort of equipment that govercments buy lends itself to sub-contracting and licensing so as go enable local, manufacturing content. Given this general framework., there ax a number of problems that merit discussion and analysis at the European leve (1) Do rules need to be established whrch define the degree to which local manufacturing is allowed to offset difft::erxes in tender prices? (Insofar as manufacture c!ose to the user is less costly, this problem does not arise.) (2) Do 1Jles need to be established which d+:firlethe degree to which Governr ments should be allowed to s’l,bsidizecivlliarl, technological ventures? It could be argued that considerable ? ferences alnongst countries in Government practice would distort the cond,itions of competition. But, if Governments do restrict themselves to financing R & D, hocli important would such a subsidy be in the final operating cost of the user? To take a hypothetical example of a , trapsport aircraft, if one as:;umes thar R &.D cost are 3oo/oof the total sales price, and that depreciation makes up 11.5% of total, ;tircraft running costs, then an R & D subsidy could make a dlifference of’ about 3.5% irl running costs On the other knd, a 10% improwment in the efficiency of the R 8~D process in matching technology tl:, user needs and in consequence reducing flying and maintenance costs by IO%, could lead to a reduction of operating costs f more than 47Ca3 In a ether an;~thin:, sh one to define ropean mm-m for R s depend!; on t3e importance of the size of the dis ortions 10 c;ompe bitio ties - political and administrative - of en%rcin,p Lneno

In ad&tion to defining and. enforcing the procedures for open anti c,ompetitive bidding. there is the problem of deciding how to organize the guvemmenif prucr~remem function. There is no efficiency justification

hr centraking

this

function at the European level, if this means nothing more than interposing an administrative body lbetween the equipment supplier and the eventual user. Procurement can continue to be decentralized in such areas as, nuclear enerw, air and ground transportation, medical and educational technology. Indeed, industrial firms are likely to prefer such decentralized procedures, since they are more likely to even out cyclical patterns in demand. And, once again, the process of technological innovation is likely to be all the more efficient if there are a variety of independent users, cooperating with a variety of technical developers, an exploring a variety of technical routes; rather than if there is one, central point of decision at the European level, where the choil:e of the appropriate technology (particularly in the early stages) could still go badly wrong and commit the whole of Europe to disaster, instead of just one user. The case for centralized procurement can be made only as part of a larger policy of European-wide standardization: of equipment and operation. And. such1a case can perhaps be made in such sectors as telecor2munications and1 mili*tary equipment. For example, the present proliferatio:1 of methods folp transmitting computer data through telephone systems makes little economic or tetchnical sense. But there are also dangers in trying to institute centralized procurement before the political commitment to ctandardization e:Gsts. F'oa example, it would be disastrous to try to build ‘,n; military aircrisft which tries to satisfy five or six different specifications, whilst past e:a:perience shows that it is more effic:ien*tto explore a nurnber of technical paths to meet one specification. 6.3 _ Specific sectors The general principles of a European policy for technology, as outlinec:l abfoyle:,merit debate discussion in their own right. Bu’thow are they likely to wor:k out in specific sectors? What benefits can be expected from European integration in the various ‘“str&egic” technologies, and what problems musat be !:atzk.ledif these benefits kireto be reaped? OIIClzffect (or, rather, non-effect) of the integration of Europe’s technological resources is perfectly clear. At present levels, it will rzcifenable Europe to achieve .technological, commercial or any other sort of parity with the USA !I:? aerospace tecknalogy. This may appe,hr to be a rather elementary point. The present gap is enormous, and the data in table 5 show that, in spite of the abrupt slowd.own in aerospace funding in the USA, U.S. efforts ;GCstill considerably greater than those of Europe.

K. Pavitt

Yet it is often assumA, either explicitly or implicitly, by advocates of kkopean, technological integration thai this is what will happen: or, alternatively, &at it should be mads to h;appl:n b;l Europeall governments giving lqc d2veloprnent ccwtracts Cur the de,~elopmtnt of cl~mmercial aircraft to cornpete: eth those from the USA. This second altornativc is a veq: doubtful commercial pro~ositSon, if it is meant to be a commercial proposition. the civilian and milita~ aerospace markets are deprecsed now, and there is i severe worsening of relal;ions between the USA and the USSR, they arc unlikely to expedence again the buojarrcy of the 1960’s for as far as one can see into thz future. At the same time, there are many U.S. aerospace firms with far stronger capabilities than their Furopean counterparts, and which are very hungry for markets an orclers. tinder such circumstances decljr.ing demand, strong competition, expenGve ilnd risky projects - backink European aerospace will not be tI;e besi way to s;cnd European money. This is not. to say that Europe cs.nnot maintain ‘ihecapability to design and build. military equipment along the lines of Das:;ault in France, or SAAB in Sweden [601. This rnaf be considered politically ji: stifiable and, if European defense markets are unified, it m.ay also make vc:ry good economic sense. 11n addition, it is likely E’nat,with the (:stab’lishmttnt of a common European ael ospace market, the better, European aerospacl: firms would find profitable segments in both the European and the world aerospace markets. But the only way to make the European aerospace capability equivalent to that r!f the USA would be to increase vastly Eur+>peandemands for aerospace protiticts, wClich European industry would then su,pply. The only circumst;mce under which csnecould imagine such. vasti;:’incredsed demand would be if Europe were a tectlnological super-power v&h the strategic ambitions of tlhe USA and the USSR. Opinions might differ sharply about whether such a Europe is either deriirable or feasible. But rno$,t would agree that it is very unlikely to exist in the next ten Yeats. Pa.lity in aerospace technology would therefore be an unprofitable and unrealistic objective for Europe in the 1970’s. And advocacy of such an ot!jectivc i:tl Dliesthat Europe should ultimately become a technological superpower. European Governments are already heaGly itlvolva:d Hn financing specir”lc, c +lian aircraft developments. Given Ure m srket trends, is this a sensible use of government money? What wil VIfjpc:4ingovernments do afte ‘I Concorde and the Airbus? Will tihey try more of’ the same, and fund specific large-scale: developments on a national, ‘belated OP’multi-national b;;as&+? Or will they jeave the funding of commercial ven tules to commercial firms, restrict ves trj financing research and explsrat~rq- lifevelop market sort out the pattern of desig;r and de\4o rope? For whttt types of aircraft skmld research and exploratory developmerrt be under?z,ken?

What needs to be done to unify the European aircraft market, on acompztitiue basis? HCW should the social and human consequenczes of any reduction in the

size of the Furopean aircraft indu:;try be dealt with? It is in tkaling with these questions that the Europeans will show if and how they are ready to deal witty the problems of the aircraft industry in Eurepe. The British Government (but not necessarily the British ;lerospace industry) may no’\\’be ready to look into these problems on a European basis, together overnments. But, given the impor”ance of the French sircra.ft irldustry for the South West of France, and the imminence of Parliamentary elect:ons, the French Government could well adopt a Gaullist stance againist any such discussions, and against any reduction in the size of its aircraft industry. And Germany may not be ready to change its present ambitions to build up an aircraft industry unftil it has wasted more money on failed, military and civilian aircraft pro:ects. And given the general reduction of market demand, the aerospace industries in all couniries including the IJSA, will try to find any justification for their continuing at their present level of activity. “Staying in the technological race”, “balance of payments”, “t&chnological fall-out”, “‘Arncricag challenge”, “secutity of supply”, “Japanese challenge” and even “environmental challenge” are all slogans that will be used and abused in attempts to justify projects that are no longer justified on grounds of cost-ecfcctiveness [bl] . But with the proper integration of Europe’s public markets, the USA would not maintain its overwhelming lead in all sectors of advanced technology. There are others outside aerospace where the size of Europe’s market is not, and will not be, so vastly different from that of the USA, where world. markets are growing, where the “spin-off” from military and prestige to civilian technology is not so important, and where Europle’sindustry is more competitive. In such sectors--nuclear energy, telecommunications equipment, biomedical engineering, high-speed ground transportation and education the integration of European public markets would be a pailnful experience for inefficient, European firms, but would also lead to the emergence of firms as strong as their U.S. counti;rparts. For example, in nuclear energy, Europe’s level of R & D is about the s;17n:e as that in the USA. Certainly, the past French nuclear policy has failed. An.d by the tirne that this article goes to press, Britain m;ay have already followed the French example, abandone’di the present generation of nationally-designed reactors, and bought US technology, apparently without giving much consideral:ion to the potential economic and poli,tical benefits of buying the ct~rver~tGerman technology. Bu ins&these faliluresmust be set the rJuccess lesser ambitions than the British and of the German goiky French, but with techn ly strong firms familiar with selling to electri-

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cal utilities, benefited considerably from licensing first generation US technolow. Today, European countries have ambitious programmes of research and exploratory development in nuclear energy and part cularly in fast breeder tors, which some predict will become the most ct:ono ical source of e in the 1980’s. In the USA, both the AEC and the private equipment su are also pushing for an ambitious program 012fait breeder reactors, but the private suppliers are not willing to put up rr:uch money for it, because the expected rate of return is not high enough [52]. ape, there are at present plans for the construction of three such demonstration plants. This hz; sometimes been criticized as “unnecessary duplication”, [S] which perhaps misses e more important question, namely, wh.y does Europe feel it desirable to give so nuch and go so fast in fast breeders 1 I.r .omparison with the USA? Ne’lsonand Eads have argued that a major, government-financed program in the U!M. cannot be justified on the basis of possible, future shortages of fuel [25]. Perhaps this factor carries more weight, or appears now to carry more weight, in Europe, given its dependance on oi*tside sources of oil and of nuck:ar fuels, and given that fast breeder reactors will reduce these sources of dependance. But perhaps each major European country has a program simp!y belzausethe other major countries have a program. And perhaps there is the danger that Europe will repeat either the French policy of splendid, but unreah:;tic, technological isolation, or the British policy of great technological ambition and neglect of the realities -of the world market. In any event, there is clearly plenty of room for discussion and analysis by the European governments on how fast a European fast breeder programme nee:ds to go, about t e degree: to which tlhe pitsent level of duplication is effiicient or wasteful. and about ensuring open and competitive European markets in future. Whatever the difficulties that European Governments think the:y may have in reaching agreements on these points, the signs are that the lessons from the difficulties and failures of the pitst have not been lost on the European nuclear industry. Its behavior indicates that companies now see vezy clearly that, in financing the developme~ t of one particular line of reactors, technical and market uncertarnties art: such that one can nev:r be sure that the final development will be the rno!?tcompetitive one and that, even if it is, national markets are too small ?,oen;tble a.profit to be made. For this reason, a number of cress-licensing agreements and subcontracting arrangements are being discussed and agseed upon, which seem to ble des to ensure that, if a company has a successful re;lctor, It has access to fcreign markets and that if it 1~~san unsuccessful one, it hit:;accesbto foreign technology [63] L

261

k&h speed ground transport&m is another sector

by co,mparison with the USA, Furope has a relatively strong technological base, and where three Governments ritain, France and Germany - are fina.ncing ambitious programmes of research and exploratolry development. As in the nuclear energy, now is the time - at the beginning of the development -. for the governments to make sure that markets will be open and tive in future, and that technical incompatibilities will not become insurmountable. Europe’,s position in advanced &mmics - typified by computers ancl integrated ccircuits-- falls somewhere between its position in aerospace, on the one hand, and in nuclear energy and ground transportation, on the other. In the 1950’s and early 1960’s, technological developments and commercial market penetration were - as in aerospace - largely the result of government-funded R & D and government-created markets: hence the huge U.S. lead (641. In future, however, commercial developments are!likely to become far less dependent on defense and space developmenti, a? in lsuclear energy. Given that European firms hake been suffering under a disadvantage in the past, but that this disadvantage will disappear in future, an “infant industry” case can be made for giving a temporary subsid:y to European firms. Such subsidies for the design and manufacture of computers and advanced components’ have in fact been given bly a number of European Governments and by industrial firms themselves*. However, in the process, the “infant industry” argument has become perverted. It has often not been made clear that the subsidy is only a temporary one; the industrial firms involved have not always adequately felt the need to develop a commercialhy viable strategy. In particular, it is. by no means certain that the strategy followed by certain European firms - namely, attempting to compete head-on. with powerful U.S. firms like IBM is either profitable tor even necessary to stay in the advanced electronics business [65]. In thds context, the “security of supply” aspects of computers and advanced electronic componentry have perhaps been exaggerated. Even if computers and aldvanced components will be only half as important as their proponents claim that they will be, a case can be made for n maintainingan indigenous research, development and design capability, and for being very sure about securit;’ of supply. That the U.S. refused to sell Fnnce a large computer in the :mid-l96O’s is well known [ I]. More recentky i has been claimed that where,

* In part:cu!ar, the British, French zlnd German Governments, together with Philips Sietnerls.

262:

A’.

vitt

similar political pressures have been applied in .-elation to advanced componentry*. And given the growing importance of c Jmputers and components in the design of a whole range of electrical eq~uipmryn t, European electrical firms arrz naturally reluctant to become too dependent on sources of supply of computers and components which may also bt:, or become, potential petitors. But once again, these dangers do not necessardy and inevitably ju large. scale commitment of public money to ambitiou duction of computers and components. it costs mu ss to maintain and research, development and design ca ability than to compete head-on with PBM or Texas Instruments. Such a capability would enable either a firm or a nation to anticipate’and exploit technological change in computing or componentry, would make the threat to start local production a real one, and coupled with diplonlatic and other forms of l>ressure - it could be a more cost-effective way of de&rig with the problem of security of supply than the unprofitable chasing of IBM’sshadow [66] . ‘We have already seen that European computer companies very properly decided not to follow up the EEC proposal to build a giant computer toge thcr [ 59) . Instead, they are collaborating w .th one another to try to standar&ze their equipments’ interfaces and architecture. By this method they hope to increase the attractiveness of their equipment by comparison with IBM’s. It remains to be seen whether they sul:ceed in agreeing. Even if they ldo, it is by no means certain that their troubles will be over. If only fol political reasons, it is very unlikely th;li 1Bhl wants to chase the Europear! computer companies off the map. But for commercial reasons, it is also unlikely that IBM wants them to have an increasing share of the rapid13 growing European market. Standard components and interfaces w doubt help the European companies stake ou’. a share of this market. share, together with whatever small share of the US, market they would baz allowed td take, might stil; not be big enough to make all the existing Euro.,pean firms pr )fitable. This would at 1e:astrequire some degree of specializ tion amongst he various’ manufacturers, which implies a degree of cooper.ition going beyond what hLasbeen proposed SC far. Im any event, the ler,rporary but severe sic w down at present being expd:-

rienced in advanced electronics, the inevitable reluctance of governments at cl

” “...The U.S. Government has not scrupuled to u ;e its cc r_trol over component supp! es to ensure that European policies on computer sties to Eastern Europe do nf)t step but of line. It is a means of pressure that could be applied inamany fields of polrcy - fr urn defense and telecommunications to nuclear pow’?‘, see ref. 8671.

firms to pour money indefinitely into computers and components ny return, and the example of certain European firms whiclh have suci:essfully in world markets without government subsidy (e.g., Ohvet@, ah probably mean quite a big shake-up in European advanced electronic> in the not too distant f&ure. The p&y choices to Europe on rocket launchers and enriched uranium have been discussed in subsect.5.2 above. Suffice to say that - for the moment at least - European governments appear to have resolved their differences over which rocket should launch Eurc -tean alpplications satellites by agreeing that European rockets should be useo n preference to US rockets only if their cost is not more than 25% higher. But a somewhat premature ‘bllttle c ver ewiched uranium has been started by the French, who are eager to see Europe committed to France’s gaseous diffusion technology before the alternative centrifuge technology - now being developed jointly by the British, Dutch1 and Germans - proves its technological feasibility [68] . The debate has found its European institutional framework in Euratom wlhcre, once the United Kingdom is in the Common Market, all the main European protagonists will be present. Putting aside (no doubt unrealistically) questio8nsof prestige and technological dependance, the decision that Europe should take will depend above all on whether the eentrifuge method does prove its *technologicaland economic feasibility, and on the rate at which demand for enriched fuel grows in future. Some argue that, since the lead-time for building both ;I gaseous diffusion plant and an operational, nuclear reactor are about the same, it is not necessary to start building a gaseous diffusion plant until the decisions to build the nuclear reactors requiring etnriched uranium have in fact been taken. ‘Whether or not this is the case, a European decision on this important question is likely to be all the more efficient to the degree that Euratom has access to the relevant data, and an anallytical capability to make its own independant (though not binding) analysrs of the two possibilities, This does not appear to be the case at present. The policy problems posed by Europe’s high-technology public markets, and by launchers and uranium, ;ire politically the most delicate, substantively the most difficult, and in every sense the most important policy issues to be’ resolved if efficient, technological integration is ever to happen in Europe., But there is one other important policy area t!hat deserves attention, namely, fundamental research and higher education, upon which the strength o’r Europe’s technology ultimately depends. It is clear, however, that European fundamental research and higher education will not thrive throug$ a process of unifornization and regulation at thle European level. The French experience, at the lt~el of a nation, suggests quite

the cant rary [69] , The promulgation of a *‘European degree,” or the “equivalence of degrees” is not the means of making European science more vigorous and united. It might eventually be a means IJf ma&g the so-called “liberal professions” (e.g., medical doctors, architects, lawyers) accept that foreigners r:an practice in their country [70]) but there are ot!ler ways of achieving fi& isuch, as national governments having t e political qrvillto confront such prutectionist pressure groups. Academic science and education th rive on diver:;ity , experimentation and competition. In particular, good academic rzse:uch, like good business, depends on a well-developed system of international competition and exchange. International exchanges of academic research workers improve the effectiveness with which new knowledge is gem rat :d and transmitted across national boundaries. International competition. or “ju:Igeme t by international peers” reduces the danger that national .:tsientific communities become ingrown, back-scratching and mediocre. However, as Georges Ferne has recently pointed out, there are from a European standpoint some important imperfections in these international, scientific: relations [7 11. Each European country’s Me:ltific community has very strong bilateral relations with iis equivalfnt tc the USA, but relations the European scientific communllles leage much to be desired. To some extent, this is understandable. In the 19fiO’s,the USA had the largest, the most vigorous and the most rapidly growing ef’fort in academic science in the world. It was, therefore, inevitable and als3 e:‘ficient that, if a European scientist intended to follow international scientific developments, and if he intended to spend some time abroad, he was drawn first towards the USA. In addition, however, American universities found it much easier to accommodate scholars of foreign education and nationalit,. than some of their European counterparts. Conditions in the 1970’s will be different. U.S. academic science will continue to be strong, but there will be fewer places iind less money available for fore:igners. At the same time, European academic science will grow more quickly. If only for this reason, there is a strong case for eliminating the hindrances to intra-Europlean exchanges. But thi:re are other reasons: continuing the drive to open up the relatively closed academic systems of France snld Italy; striving for a bztter allocation of resources at the European leq:el; I “circulation of elites” amongst European countries, the would be of considerable politic:al significance in the longer term. What action does this require? In particular: [a) I-Iow u& more money should be devoted to intra-European exchanges

265

of academic personnel? The recent experience of the British European Exchange Pr Igram slows considerable possibilities for growth - at least for exchanges in and out of the U.K.. [72]. Is the same true for other European countries? At what level should the exchanges be encouraged: post-doctoral, uate or undergraduate? How should a more: ambitious and comprehensive sc&eme be managed? Sh.ould a community-level fund be created, or would thib lead - as some scienlists fear - to excessive bureaucracy? Is one alternative an international agreement and nationally administered funds? (b)What IJther factors, apart from lack of money, hinder intra-European exchanges’?Many European universities have full autonomy to accommodate foreigners. In others, government regulations coupled with academic politics make such exchanges difficult. Would a European-wide, intergovernme-ntal agreement! on such exchanges help the French and Italian authorities to overcome the protectionist elements with their systems? (c) What possibilities are there for the more effective: “planning” of European academic science? Strong pressures for the more efficient use of resources for academic science already exist in many European countries. By the mid-1970’s, they will probably exist in all countries. However, it would be futile to attempt to eliminate Duplication in normal academic science, the effectiveress of which is best improved by perfecting the self-regulating tendencies within the international, scientific system, as proposed in (a) and (b) above. These imperfections could perhaps be further reduced by a more intensive exchange of information and ideas amongst European Governments’ bodies responsible for distributing funds for academic science, and even by co-opting foreign scientists on to such bodies. In addition, in scientific fields where expensive investments in equipment are required, there may be some possibilitses for rationalizing thlose investments by promoting a “division of labor” amrjrigst European countries and at the same time promoting a greater international exchange of scientific personnel amongst the various national centres. The environment is now considered by some as a promising and important field for European scientific and technological cooperation. l-lowever, there is the &ngzr that current concern for action on envnionmental questions might lead to the neglect of the more critical problems of Europe’s science and technology, described above. Certainly, there is a ~~YvL~ problem of environmental quality, especially in a densely populateci dnd highly industrialized region like Western Europe. But is is mainly a problem of definirjg and above a4 - enforcing environment standards. Scient. fit and technological Id meettng sclch stanconsider ations are necessary inputs in characteristic:; arld dards, and In obtaining a bemr un

workings

of ecological systems. ut a better :, nvironment ultimately depends on matters of andustrial politics and pub ic administration [ 741. S the pressures towards European wide cooperation on the environment do noa arise out of any “imperatives of modem technology”, but from the simple fact that some harmful environ ental effects cross nationd frontiers and tjfiat environmenta rcgulations can beconscs barriers to inter trade [73]. There may also be some room foe-closev European cooperation on the scientific and technological componen s of not on157environmental standards, but also of other governmental functiort _.which deal with Ilarmful “externalities” in such areas as industrial and road safety, fare prevention, food and drug safety. Even assuming that these standards will continue to be designed and enforced nationally, their scientific and technic al basis is the same. National authorities can presumably benefit from excharges of such scientific information, and these exchanges could lay the bas .s for eventual integration of national scientific and testing programs, and for common standards, once the political will to have them exists. 7. CPNCLUSIONS

Euro~ an technolo@cal cooperation failed in the 1960’s because Europearl Governments wanted to have their cake anti to eat it. They wanted the benefits of technological cooperation without paying the political costs ntzces sary for these benei’lts to be reaped. These political costs were the removal o protection for national firms in pubhic markets for “strategic” technologies, an explicit willingness to become more dependant technologically on Eurcpean neighbours and a revision of the habit of turning to the USA when national, technological programmes failed. These political costs will still exist m the 19701’s,and they. will still have to b= pa,id if technological cooperation is to be alaything else than a sham or 3 shambles. Given their relative decline in the I 9~3’s, Britain and France ma / bc less hostile, but still not yet realdy, to pay thie costs. Germany, on the ofher hand, has in the 1960’s shown greater TAingness to cooperate with i s European partners, and greater success in its policies for technology. Rut no w Germany is rapidly building up its national programmes in “strategic” tec’anlologies, and it could be a few years before these programmes begin obvious-ly to fail and to waste resources. Once they do, Germany’s political positic n could make it very difficult to move from it: hi@ level of depePldance on I S ‘“strategic” technology. Of course, things could continue in future as in the past, Most of Europl:‘s civilian technology would continue to be irtrong. overnmen t-bat ked PIo-

267

grams itI expensive technologies would often fail, and the government would y American. Half-hearted +t-ograms of European cooperation would rtaken, would also fail, and would give the Curopeiin ideal a bad overnments would drift into indivi al or collective decisions with an t influence on the possibilities a the degree of European techno-, logical integration. In othri ,Nords, a Europe of sovereign WWL‘~ would c:jni f I tinue, no more, no less. ‘p On the other hand, European governments may become read!; ;us pay the political costs of efficient, technological cooperation. The European Community would tner have a very important, indeed irreplaceable. r4e to play as a c3 talyst for the emergence of a European policy for science and technology: through anticipating and analysing key, policy problems and options, both f(Jr public debate and for governmental decision. There are, however, still two nmzjor, pitfalls in the Community’s present approach to a European technological policy. First, iti. triple att.ack on the k?y problem of Europe’s public markets in “strategic” technologies, throq+. Com,nunity-financed development contracts, the formation of “European” companies, and through “concerted” procurement at the European level, in fact ~art~up~oses a politically united, sovereign,, European power if it is to work at all. Second, the Community’s preoccupation with retaining 01 obtaining the semblance of executive power and responsibility in science Y.!c~ technology could divert it from giving adequate attention to the major ptolicy issues in European science and technology. These policy problems, we ;:rust repeat, stem from the lack of ivilhngne:ssto accept greater, technol.@al interdependance amc11gst the major European powers. The Community would do Europe and itself a great service by siaying this loud and clear, by showing that responsibijity for success and faillure rests entirely with the nstiondl governments, and by showing what concrete steps can be taken to acihieveclosler and n:c f r: 4I5cien t technological integration.

APPIINDIX 61dl:IDstatistics Sources: The tables rn the te:r.t are based on R 81.D statistics collr:cherdby

Mezaber-Governments and submitted to the UECD. The stjnecibicdocuments from which the data are taken have been prepared by ‘I’.Fabian, r1 Young and colleagues in .he Dire:, cate for Scientific 4ffairs to the 0WD. These documents are: (a) Al Study of Resources Devoted to R B D in OECD Member-Comtrks irr 1963/64, Voh. 1 and 2 (OESCD,Paris) 1967 andi 19G8). *I/1

;d

2!68

K. Pmitt

([b) Fit& E) in OECD Member-Guntries: Trends am’ Objectives, OECD document DAS/SBR/70.3 1, ! 7th August 1970; mineographed text dated March 197 1; l md document Say7 l)lO., dated 9th June, 1!)71. These docume steps in the first comprehensive analysis of trends in R & D expenditklres (during the 1960’s. I(C)hternational Suwy of the Resources devoted to R & D in 196 7 by OECD Member-Countries. Stat,isticalTables and Notes. Volume I. Business Entqwise Sector (OECD document DAS/SPR/70.7, Paris, May 1’970). Adjusting for International Differences ivl the Cost of R r&D Inputs: Clam-

paring real k & D inputs across countries is plagued by a number of difficulties. Comparison. of R & D manpower inputs assume heterogeneity across countries in the quality and functions of the manpower compared. It is difficult to find any measure of quality. ComparaKlity of fi_mctioncan best be obtained by comparing total R & D manpower, or R & D scientists, engineers md technicians, thereby avoiding the problem that an “engineer” in one country is called a “technician” in another. In addition, R & D manpower comparisons do not take account of differences in the price and quali‘ty of inputs of supporttig facilities, such as equipment and computing power. Antd, more important r the purposes of this paper, R & D manpower data are not so extensive as the R & D spending data. But R & D spending data also have limitations, since there are very big diffe*i.encesa nongst countries in the: cost of R & D manpower (particularly between the USA and Western Europe, and between these two areas and Japan),, and lesser but still significant cIifferences in the cost of equipment and other supporting inputs. For the purposes of the following R & D comparisons, it has been assu.med that IXJZIi costs in Europe are 60% off those in the USA*. This figurct has been r:hosen in the light of the following informatjion. First, a “research exchange rate”. calculated byi Freeman and Young for trans-itlantic R & D comparisons in 196 1162, and which - on the baais of comparisons of salaries of scientists and engineers - arrived at the 6W; figure [.36] . Second, a comparison of European and U.S. R & D costs per researlzhworker (i.e. scientists, en neers and technicians) in 1963164, which shows that the former was about 44% of the latter at convenlional exchange rates. isince * For tables I, 2, 7 and 8, the comparisons between ccuntries in diff :rent years 3re at current prices, and at exchange, rates existing between 1942 and N66. For tat les 3, 4,, S and 6, the comparisons are at constan.t i 196 1) price and a : exchange rates pre!railing in thie year ahat the comparison was made. These two d&rent bases were chosen solely for reasons of computational convenience The fact t&at they arc ‘difkent does not ;tifect the conclusions ‘that are drawn ill this paper.

R & D labor costs were!about half tot11 R & D costs in both Europe and the USA, the11 Europe; ‘1 R & D salaries c zn be estimated at 44% the USlevel. Assuming that equipment costs amounted to 20% of total R & D costs, and current expenditures other than labor costs to 30%; and that the former costs are the same in Europe and the USA, whilst the fatter are 50% higher in the USA, then total R & D costs in Europe come about 62% of the U.S. levelI*? Third, data collected by Michael.BoretskJe of the U.S. Department of Commerce for 1966-67, sh.ows that U.S. firms paid R & D personnel in Europe 58% of what they paid R & D personnel in the USA, that the R & D overh.ead costs in Europe were 78% of those in the USA, and that salary levels for R & D personnel in U.S. firms in Europe were between 10 and 20% higher than those paid elsewhere. Assuming, once again, that kabor costs are half total R (prD costs, and assuming a 20% salary differential, then R & D costs in Europe were 62% salary differential; assuming a 10% salary differential European R & D costs were 65% of the U.S. level. Little equivalent data are available on R & D costs in Japan. In the tables it is assumed, as Boretsky has done, that Japanese R & D costs are 55% the U.S. level. Limitations of the tables: The figures in the tables can be criticized on three

grounds. First,

the estimate of European‘R & D costs is too low. Certainly, with the above evidence, it would have been equally legitimate to have chos,en a 70% conversion rate rather than 60%. But, although this would have altered specific figures in the text, it vvould not have changed any of the conclusions drawn from them. Second, tthe tables showing trends in R & D expenditures over time do not take into account international differences in the rate of inflation of R.& D costs: - which is true, even if - as a firstt approximation - certain of the tables are based on figures deflated in relation to general price increases. However, none of the conclusions in the paper are based on very slight movements in R & D expenditures which might be due simply to inflation. Third, t’hie tables do not take into account R & D cost differences amongst European countries or amongst R dt D sectors: - which once again is true, but such differences as there arc of this nature are unlikely to affect any of the conclusions in the paper. that

** For slApporting data, see reference (a) above, Volume 1, table 2 and Volume 2, table T4. A&o ref. [ 361, p.92.

K. Pavitt

270

REFERENCES Speeci; to the European Parliament, 18th October, 196 5, cited in R. Gilpin, France iu the Age sfthe Scientific State (Princeton, 1968). Cited. in R. Cilpin, opdt. J. Newhouse, De Gaulle and the Anglosaxons (The Viking Press, New York, 1970). Commission des Communatt% Europ&tes, La Coopers rim2 Scientific et Technique t;ntrc les Pays Europee~s: les po sibiMies gui s’offient duns sept secteurs, &mite Politique Economique a Moyer Terme, document C78 1/11/69-F, Brussels, 19th March, 1969. C. “l..ayton, Europe~ tldvanced Techrtology: A Progrant for integration (George Uen and Unwin, London, 1969). For an analysis af these trends, see OECD Gaps in Tccirnolqy: Genmd Report and Arttrlyticai Repot, Books 111 and IV, Ptis, 1968, and 1970; also Dunning, ref. 134) 0

n, 196 1; Revic ws of Nationa! Science W&red States, ‘“IaSks1 knd 3, Paris, 1968; OECD, Selected Indicators for Changrps

2’U

?whndogy in Europe ‘sfuture

of il! & D Activity in OECD Memlber Countries, document. DAS/SI”R/69.35 (mimaeograph), Paris, 1969. For a review of recer! books dealing with this experience, see I.F. Stone, In The Etcwels of Behemoth, 1~1firle New York &view of Books, 11 th March, 1.97 1.

10 the Level

WI WI

more detailett discussion, see R. Nelson, Uncertainty, Learning and the Economics of ParaZi~:ilResearch and Development Efforts, Review of Econom‘ics and St&tics, November, 1961; R. Klein, A Radical Proposal for R & D, Fortune, Evlay1958. Vor a fuller discussion of these problems, see G, Eads and R. Nelson, Governmental Support of Advanced Civilian Technology: Power Rk;actors and the Supersonic Transport, in Public Policy, Harvard, Summer, 197 1. Also, R. Nelson, World Leadership, the Technological Gap and National Policy, in Minerva, July, 197 Il. B. Achilladelis, P. Jervis and A. Robertson, Project SAPPHO: A Study of Success and Failure in Innovation, Science Policy Research Unit, Sussex University, 19’71” C. Harlow, Sorrte Re_t?ectionson European Technological Cooperation, OECD document DASID168.307 1, 19th March, 1968. Avirttic,n Week and Space Technolom (McGraw Hill) 3 1st May, 1971. J. Behrman, SC * e Patterns in the Rise of the MultinationalEnterprise, Graduate School of Busin SJ Administration, University of North Carolina at Chapel Hill, Research Paper 1 1969, pp.1 18-129. & C. byton, t‘. 151. pp.243- 247; also, discussion by A. Beken in Vt3rs Une &&@~e lndus de Eurvpeene (Presses Universitaires de Bruxelles, 1970) pp.63 --67,97 = 9, A. Beken, ref. 1 “r&I , ! 7.97-98. For a recent and excellent summary of European ~ndust~~i~t~ ?n c ^ Ti the problems and possibilities of scientific and technological pcmtion a*E% 45 * Vlond boundaries, see Cooperative International Research, For

a

arke t, in Nationll-l Institute Patterns, US, Foreign Invertment and the prs in Economics, No. 17, I 1nveJttmentand Canada’s What: The Unkpmmw of the st a%Public and International

the Transfer of Tech-

ology Factor in Interna

nal Trade (NBER/Columbia

University Press,

For retrospective view of these shifts by the Minister of Technology in Mr. Wilson’s Govelmment, see A. Wedgwood Benn, Science, Europe and a Nt:w World, in New Scientist and Science Journal, 18th February, 197 1; see also, Gusir.zss Week,

_K Pavitr

272 13th February,

1971. And :for the fiavour of contc:mporary thinking by the Britih

Gcvernment about European coolperation in scill:nce and technology, see paper prepared by Cyril Silver fair the colloquium tintitled JLa folitique TechnologiQx the la Communaute Europeene, held at the University of Nice, 10th 2nd 11th December, 1971, the proceedings of which will be published in the Revtie de Marclie Commun. [39]! L. Schiemann,

Atomic

Energy Policy in France under the Fourth Republic,

(Princeton University Press, 1965). [$O] See: Avions Marcel Bassault -- Une affaire phenam’ene on la continuite’ et service de l’in telligence? , in Inferav#ia,Paris, October, 1970. [4 1 ] For a pointed analysis of the present problems of French science policy. see the “‘Postface” to the French edition of ref.6: R. ISilpin, La Science et L’Etat en France (Gallimard, Paris, 1970) pp. 3 74 - 395. [42) L. Stoleru, Quand 1’Etat se mele du muche’ in Le Mode, 25th June, 1971. [43] For an example, see Layton, ref. [S 1, p.117. L e Dt$ Indus triel kponais, Cen*i:re de Recherches EuropGent:s, 1443 N. Jauier, Lausanne. 1970. 1451 See statements by Messrs. Pollack, Frutkin and Mratzer in A General Review of International Cooperation in Science and Space, Hearings before the Subcommittee on International Cooperation in Science and Sp:lce of the Committee on Scierce and Astronautics, IJ.S. Mouse of Representatives, 92nd Congress, First Session, May 18, 19 and 20, 1971 (Government Printing Office, Washington, X971). [46] B. Valenti::, Obstacles to Space Cooperation: E,rJrope and The Post-Apollo Experience, (mimeo) Woodrow WI&on School of ‘Public and International1 Affairs, Zlst Kay, B9’iP;Research Policy : (197111972) !lO& \%7] !Yilliam P. Rogers, Secretary of State, U.S. Foreign Policy in a Technological Age, adclress before the 12th Meeting oi ttile Panel of Science and Astronautics of Tile Hciuce Committee on Scienc: and Astronautics, Washingtorn, 26th January, 197 1. [42] Great Deb;iie an Enrichment, in NucitpccrIndustol, May, 197 1. [49] See A. Pie- ‘0 Nuclear L$omacy: Britain, Trance and America, in Foreign Affai 3, January, 197 1. [SO] D. Binder, Bundestag Group approves Purchas: of U.S. Phantoms, in The f&-v York Times, 23 th June, 197 I. [ 5 1 ] See G. ChedG, A New Lab for Europe?, in New S’cierrtist, 18th February, 197 1. [ 521 A. SpineK L’Europe de la Nouvells Societe Industrielle, in 30 Jours D ‘Europe: Communaute Euh*opeene, February, JI97 1. ( 5 31 E. Slr;is, (Ed.) Criteria for Scientific Development: Public Policy and Natio& Goals (MIT Press, 1968). I.541 C. Maestre and K. Pavitt, ,dinalytical Methods in Government Science Policy: Ar, Evaluation (OECD document DAS/SPR/‘70.53, Paris, October, 1970). I[55 ] For a discussion of what might be realistically expected from national scierlcc policy machinery, see L. Gunn, et&, Goverrlrment and The Allocation of &?esources to Screnclcl(OECD, Paris, 1966). For one set of proposals, see P. Bourguignorll, Les Fonctions ci remplir par les organes d irile poli:.‘que technologique et scientr;ciclue de la Communaute’ eLcro_ pe’ene, %per presented to the University of Nice Colloquium (see ref. 13;) abo+/e). [ 57 “j R viation Week Space Technology, 2 1st Jual:, 197 1, p.15.

[583 G. Colonna di iano, Industrial I?olicy, Pulc~iicProcurement and Multinaticnal Industry, in European Community, iSeptember, 1970. [ $9 1 B. Murphy, Computing -- The Future in Europe, in iVew Scientist, 18th Febiuary 1971. 160) I. Dorfer. System 37 V&en: Science, Technology and the Domestication of Glory, in Public Polk,:. Volume XVI 1.

273

Tech&c 11&y in Europe ‘sfuture

[ 61) For a fuller discussion, see K. Pavit t, Tectznology, International Competition and Economic Growth: Some Lessons and Perspectives, (mimeo), Woo&ow Wilson School of ’ gblic and International Affairs, Princeton Uni\ ersity, Jl~ly.,19i”il;to be published in 197 2 in World Politics. [ 621 SW: The AEC asks billions for breeder reactors, in Business Week, 29th Mazy.1971; G. Seaborg and J. Bloom, Fast Breeder Reactors, in Scientific Amerzxrz, Novem-

beg, 1970. [63] Le Monde, 27th November,

1970 and 16th July, 1971; ;md The Eeoi:zomi;t,

18th September, 1971; Financial Times, 12th May, 1971.

[64] For .a history of the development of the computer and advanced compcmentry industries, see N. Jequier, Electronic Computers, and Electronic Componems, both published1 in the Gaps in 7’echnolog-y series of the OECD, Paris. [65] For a discussion of British policy, see article on ICL in Nature, 5th March. i.971. Similar arguments could be ,nade about French and German pslicy. See re.l.‘.[42]. [66 ] See, for example, the policy being followed by the British General Electric Company in integrated circuits, New Scientist, 22nd July, 197 1. [67) C. Layton, Catching up in Semiconductors, in lvew Scientist, 18th February,, 1971. [ 681 Le Monde, 9th September, 1371; lvew Scientist, 12th August and 16th Sep:Le:mber, 19’71. [69] See OECD Review of French Educational Policy, Paris, 1971. [ 701 W. Feld, European University Degrees, in European Communi,!y, April, 196!91. 1711 G. Ferne, Strategie de la Cooperation: Les Incitations Finansieres, (mfmeo), paper read before Colloquium on European University Cooperatilon, University of Grlenoble, 29th to 31st October, 1970. 1721 Sir Harold Thomson, European exchange to promote science, in New Scir?nFist, 18 th February, 197 1. [ 733 See M. Carpentier, L ‘action de la Communauti en MariGre d>rzvironncment, paper presented to the University of Nice Colloquium (see ref. [38] aT)ove). [ 741 Fsr a fuller discussion, see K. Pavitt, A European’s View of the PY?~tvirc~nmervl.taf Crisis”, Woodrow Wilson School of Public and International Affalr3, ?‘rinceton University, 197 1.