[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
THE FUTURE OF MANUFACTURING: WHAT
IS THE ROLE OF THE FEDERAL
GOVERNMENT IN SUPPORTING INNOVATION
BY U.S. MANUFACTURERS?
COMMITTEE ON SCIENCE AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
MARCH 17, 2010
Serial No. 111-87
Printed for the use of the Committee on Science and Technology
Available via the World Wide Web: http://www.science.house.gov
U.S. GOVERNMENT PRINTING OFFICE
55-845PDF WASHINGTON : 2010
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
COMMITTEE ON SCIENCE AND TECHNOLOGY
HON. BART GORDON, Tennessee, Chairman
JERRY F. COSTELLO, Illinois RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas F. JAMES SENSENBRENNER JR.,
LYNN C. WOOLSEY, California Wisconsin
DAVID WU, Oregon LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington DANA ROHRABACHER, California
BRAD MILLER, North Carolina ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York BOB INGLIS, South Carolina
STEVEN R. ROTHMAN, New Jersey MICHAEL T. McCAUL, Texas
JIM MATHESON, Utah MARIO DIAZ-BALART, Florida
LINCOLN DAVIS, Tennessee BRIAN P. BILBRAY, California
BEN CHANDLER, Kentucky ADRIAN SMITH, Nebraska
RUSS CARNAHAN, Missouri PAUL C. BROUN, Georgia
BARON P. HILL, Indiana PETE OLSON, Texas
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
JOHN GARAMENDI, California
C O N T E N T S
March 17, 2010
Witness List..................................................... 2
Hearing Charter.................................................. 3
Statement by Representative Bart Gordon, Chairman, Committee on
Science and Technology, U.S. House of Representatives.......... 9
Written Statement............................................ 10
Statement by Representative Ralph M. Hall, Minority Ranking
Member, Committee on Science and Technology, U.S. House of
Written Statement............................................ 11
Prepared Statement by Representative Jerry F. Costello, Member,
Committee on Science and Technology, U.S. House of
Dr. Susan Smyth, Director of Manufacturing Systems Research, GM
R&D and Chief Scientist for Manufacturing, General Motors
Oral Statement............................................... 12
Written Statement............................................ 14
Dr. Len Sauers, Vice President of Global Sustainability, Procter
Oral Statement............................................... 18
Written Statement............................................ 20
Mr. Debtosh Chakrabarti, President and Chief Operating Officer,
PMC Group Inc.
Oral Statement............................................... 23
Written Statement............................................ 25
Dr. Mark Tuominen, Director, National Nanomanufacturing Network
Oral Statement............................................... 31
Written Statement............................................ 33
Mr. Wayne Crews, Vice President for Policy and Director of
Technology Studies, Competitive Enterprise Institute
Oral Statement............................................... 41
Written Statement............................................ 42
Appendix 1: Answers to Post-Hearing Questions
Dr. Len Sauers, Vice President of Global Sustainability, Procter
and Gamble..................................................... 76
Appendix 2: Additional Material for the Record
Written Statement from National Petrochemical and Refiners
Association (NPRA)............................................. 80
Prepared Statement from Representative John D. Dingell........... 85
THE FUTURE OF MANUFACTURING: WHAT IS THE ROLE OF THE FEDERAL GOVERNMENT
IN SUPPORTING INNOVATION BY U.S. MANUFACTURERS?
WEDNESDAY, MARCH 17, 2010
House of Representatives,
Committee on Science and Technology,
The Committee met, pursuant to call, at 10:03 a.m., in Room
2318 of the Rayburn House Office Building, Hon. Bart Gordon
[Chairman of the Committee] presiding.
U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON SCIENCE AND TECHNOLOGY
The Future of Manufacturing:
What is the Role of the
Federal Government in Supporting
Innovation by U.S. Manufacturers?
wednesday, march 17, 2010
10:00 a.m.-12:00 p.m.
2318 rayburn house office building
On Wednesday, March 17, 2010, the House Committee on Science and
Technology will hold a hearing to receive testimony on the need for
U.S. manufacturers to adopt innovative technologies and processes in
order to remain globally competitive, and to determine the appropriate
role for the Federal Government in supporting efforts by U.S.
manufacturers to innovate.
Dr. Susan Smyth, Director of Manufacturing, GM R&D,
and Chief Scientist for Manufacturing, General Motors Company
Dr. Len Sauers, Vice President, Global
Sustainability, Procter & Gamble
Mr. Debtosh Chakrabarti, President and Chief
Operating Officer, PMC Group Inc.
Dr. Mark Tuominen, Director, National
Mr. Wayne Crews, Vice President for Policy and
Director of Technology Studies, Competitive Enterprise
The manufacturing sector plays a critical role in the U.S. economy.
According to the Manufacturing Institute, in 2008, the manufacturing
sector generated $1.64 trillion worth of goods and, if it were a
country by itself, would have ranked as the eighth largest economy in
the world.\1\ The manufacturing sector accounted for nearly 57 percent
of total U.S. exports in 2008, and employed nearly 12 million people
\1\ The Facts About Modern Manufacturing, 8th Edition
(Manufacturing Institute, 2009)
\2\ The Facts About Modern Manufacturing, 8th Edition
However, manufacturing is no longer as dominant a sector of the
U.S. economy as it has been in the past. In 2008, manufacturing
represented 12 percent of GDP, which is a significant decline from
nearly 30 percent in the early 1950s.\3\ In addition, between 2000 and
2007, the U.S. global market share of manufactured exports fell from 19
percent to 14 percent. During that same period, the Chinese share of
global exports rose from seven percent to 17 percent.\4\
\3\ Innovation and Product Development in the 21st Century
(Hollings Manufacturing Extension Partnership Advisory Board, February
\4\ The Facts About Modern Manufacturing, 8th Edition
In recent years, several key reports have argued that innovation--
both in terms of the processes being used and the products being
produced--is one key to preserving, and perhaps even growing, the
manufacturing sector in the U.S.
In its recent annual report entitled Innovation and
Product Development in the 21st Century, the Manufacturing
Extension Partnership Advisory Committee included a
recommendation to manufacturers to ``innovate constantly to
adapt to economic and technological changes.'' The Advisory
Committee noted that leading manufacturing firms continue to
innovate their way through economic and technological shocks
and disruptions, and even use them to their advantage.\5\
\5\ Innovation and Product Development in the 21st Century
The Interagency Working Group on Manufacturing R & D
made the following observation in Manufacturing the Future:
Federal Priorities for Manufacturing R & D: ``There is strong
consensus in industry, academia, and government that the future
competitiveness of U.S. manufacturing--and all that it
underpins--will be determined, in large part, by research,
innovation, and how quickly firms and industries can apply and
incorporate new technologies into high value-added products and
high-efficiency processes.'' \6\
\6\ Manufacturing the Future: Federal Priorities for Manufacturing
R & D (Interagency Working Group on Manufacturing R & D, Committee on
Technology, National Science and Technology Council, March 2008)
In The Innovation Imperative in Manufacturing. How
the United States Can Restore Its Edge, the Boston Consulting
Group and the Manufacturing Institute at the National
Association of Manufacturers concluded: ``With high-quality
inexpensive products flooding the market from every corner of
the globe, competing on cost alone is a losing battle for most
U.S.-based manufacturers . . . . To stay in the game, companies
in the United States must differentiate themselves through
innovation: new products and services, new ways of working, new
ways of going to market.'' \7\
\7\ The Innovation Imperative in Manufacturing: How the United
States Can Restore Its Edge (The Boston Consulting Group & The
Manufacturing Institute, March 2009)
National Science Foundation
The National Science Foundation (NSF) supports fundamental
manufacturing research. This work is done primarily through the
Division of Civil, Mechanical, and Manufacturing Innovation (CMMI) in
the Engineering Directorate. The budget request for CMMI for Fiscal
Year 2011 is $206.5 million, an increase of 9.8 percent over the Fiscal
Year 2010 enacted level.
The Division is divided into four program clusters, including an
Advanced Manufacturing cluster. The cluster supports fundamental
research leading to transformative advances in manufacturing
technologies in the following areas:
The Manufacturing and Construction Machines and
Equipment Program supports fundamental research leading to
improved machines and applications for manufacturing.
The Materials Processing and Manufacturing Program
supports fundamental research on the interrelationship of
materials processing, structure, performance and process
control. Analytical, experimental, and numerical studies are
supported covering processing methods such as molding, forging,
casting, welding, hydroforming, composite layup, and other
materials processing approaches.
The Manufacturing Enterprise Systems Program supports
research on design, planning, and control of operations in
manufacturing enterprises. Research is supported that impacts
the analytical and computational techniques relevant to
extended operations and that offer the prospect of
The Nanomanufacturing Program supports research and
education on manufacturing at the nanoscale, and the transfer
of research results in nanoscience and nanotechnology to
NSF supports four Nano Science and Engineering Centers that
focus on nanomanufacturing: the Center for Hierarchical
Manufacturing at the University of Massachusetts, the Center
for Scalable and Integrated Nanomanufacturing at the University
of California at Berkeley, the Center for High-Rate
Nanomanufacturing at Northeastern, and the Center for Nano-
Chemical-Electrical-Mechanical Manufacturing Systems at the
University of Illinois at Urbana-Champaign.
NSF also supports the National Nanomanufacturing Network,
which includes the four Nano Science and Engineering Centers
and other academic, government, and industry partners. The
Network is focused on facilitating and expediting the
transition of nanotechnologies from core research and
breakthroughs in the laboratory to production manufacturing.
Finally, NSF hosts and sponsors workshops on manufacturing. For
example, in 2009, NSF hosted workshops on energy manufacturing,
additive manufacturing, and nanomanufacturing.
National Institute of Standards and Technology
Manufacturing Engineering Laboratory
Through its Manufacturing Engineering Laboratory (MEL), the
National Institute of Standards and Technology (NIST) promotes
innovation and the competitiveness of U.S. manufacturing through
measurement science, measurement services, and technical contributions
to standards. MEL has a budget of approximately $43 million and a staff
of 250 scientists and engineers, support personnel, craftsmen,
technicians, and visiting scientists.
MEL is comprised of the following five divisions:
The Precision Engineering Division conducts research
in dimensional measurements, develops new measurement methods,
provides measurement services, develops national and
international artifact and documentary standards, and
disseminates the resulting technology and length-based
The Manufacturing Metrology Division develops
methods, models, sensors, and data to improve metrology,
machines, and processes and provides services in mechanical
metrology, machine metrology, process metrology, and sensor
The Intelligent Systems Division develops measurement
and interoperability standards to enhance manufacturing
robotics and automation equipment and the underlying industrial
The Manufacturing Systems Integration Division
develops and applies measurements and standards that advance
information-based manufacturing technology.
The Fabrication Technology Division provides
instrument and specialized fabrication support for NIST
researchers and serves as a testbed for many NIST/MEL programs.
MEL also hosts workshops on manufacturing. For example, last year,
MEL hosted workshops entitled ``National Workshop on Challenges to
Innovation in Advanced Manufacturing: Industry Drivers and R & D
Needs'' and ``Workshop on Sustainable Manufacturing: Metrics,
Standards, and Infrastructure''.
Manufacturing Extension Partnership
The Manufacturing Extension Partnership (MEP) program at NIST is a
network of 59 centers located in every State and Puerto Rico, providing
a range of services to small and medium-sized manufacturers. The MEP
centers advise businesses in a variety of areas, including lean
manufacturing techniques. The Fiscal Year 2011 budget request for MEP
includes a request for $4.64 million to expedite and facilitate
adoption of technological innovations by smaller U.S. manufacturers,
especially clean technologies and processes that improve manufacturers'
Technology Innovation Program
The Technology Innovation Program (TIP) at NIST was created in 2007
through the America COMPETES Act (P.L. 110-69). Its purpose is to
support, promote, and accelerate innovation in the United States by
funding high-risk, high-reward research in areas of critical need. In
Fiscal Year 2009, manufacturing was one of two areas of critical
national need for which TIP proposals were solicited. The TIP
manufacturing solicitation emphasized: (1) process scale-up,
integration, and design for advanced materials; and (2) predictive
modeling for advanced materials and materials processing. TIP announced
more than $40 million in funding for manufacturing-related projects in
Fiscal Year 2009.
Small Business Innovation Research and Small Business
Executive Order 13329 (``Encouraging Innovation in Manufacturing
'') was signed on February 24, 2004. It ordered the head of each
executive branch department or agency with one or more Small Business
Innovation Research (SBIR) programs or one or more Small Business
Technology Transfer (STTR) programs to give high priority within such
programs to manufacturing-related research and development to advance
innovation in manufacturing.
In Fiscal Year 2009, about 100 of the 320 SBIR/STTR awards made at
NSF had a major manufacturing innovation component. At the same time,
in Fiscal Year 2009, more than 40% of SBIR/STTR awards at NIST had
implications for manufacturing.
There are several Federal Government programs focused on
sustainable manufacturing, also known as green manufacturing. The
Department of Commerce defines sustainable manufacturing as ``the
creation of manufactured products that use processes that are non-
polluting, conserve energy and natural resources, and are economically
sound and safe for employees, communities, and consumers.'' \8\
\8\ How Does Commerce define Sustainable Manufacturing? (http://
NIST's Manufacturing Engineering Lab conducts research in the area
of green manufacturing. In fact, in its Fiscal Year 2011 budget
request, NIST is requesting $10 million in additional funding (for a
total of $16.4 million) for Green Manufacturing and Construction
programs. According to the budget request, the funding will be used in
part to develop an information infrastructure, based on open standards,
to communicate critical sustainability information efficiently among
suppliers, customers, and regulators and to identify and disseminate
bestpractice methods, processes, and assessment tools for sustainable
manufacturing in key industrial sectors.
At the Department of Energy, the Office of Energy Efficiency and
Renewable Energy's Industrial Technologies Program partners with U.S.
industry to carry out research, development, and demonstration of next-
generation manufacturing technologies to reduce the use of energy by
the U.S. industrial sector. The program supports research and
development of new energy efficient technologies, supports
commercialization of emerging technologies, and provides plants with
access to proven technologies, energy assessments, software tools and
The budget request for Fiscal Year 2011 for the Industrial
Technologies Program is $100 million, a $4 million increase over the
Fiscal Year 2010 enacted level. The request includes $10 million in
funding for a new Manufacturing Energy Systems program focused on
enhancing the competitiveness of America's manufacturers through the
rapid innovation of new products and processes that significantly
reduce manufacturing energy intensity and carbon emissions. According
to the budget request, the program will be anchored at two premier
universities and will serve as knowledge development and dissemination
centers organized around distinct manufacturing areas with critical
There are also several multi-agency efforts focused on sustainable
manufacturing. These include the Green Suppliers Network, which is a
collaborative venture among industry, the Environmental Protection
Agency, and NIST's Manufacturing Extension Partnership. The program
works with large manufacturers to engage their small- and medium-sized
suppliers in low-cost technical reviews that focus on process
improvement and waste minimization. The technical reviews, which are
conducted by NIST, combine ``lean and clean'' manufacturing techniques
to assist manufacturers in increasing energy efficiency, identifying
cost-saving opportunities, and optimizing resources to eliminate waste
within their manufacturing processes.
In addition, five Federal agencies--NIST (through the Manufacturing
Extension Partnership), the Department of Energy (through the
Industrial Technologies Program), the Environmental Protection Agency,
the Department of Labor, and the Small Business Administration--
participate in the E3: Economy, Energy and Environment program. Federal
and local resources are combined to conduct assessments and gap
analyses of company manufacturing processes, the results of which are
used to develop comprehensive improvement plans on behalf of and in
collaboration with the participating communities. The goals of the
program, which operates under the umbrella of the Green Suppliers
Network, include making manufacturing plants more energy efficient and
cost effective; reducing the environmental impact of manufacturing
plants through green manufacturing practices and improvements;
improving regional economies by retaining jobs in more competitive
companies and positioning them for growth and job creation in emerging
green industries; and assisting manufacturers in growing and succeeding
in a sustainable business environment.
Coordination of Federal Manufacturing R & D
In January of 2004, the Department of Commerce released a report
entitled Manufacturing in America: A Comprehensive Strategy to Address
the Challenges to U.S. Manufacturers. One of the report's
recommendations was the establishment of an interagency working group
within the National Science and Technology Council (NSTC) to serve as a
forum for developing consensus and resolving issues associated with
manufacturing research and development policy, programs, and budget
guidance and direction. Shortly thereafter, the Interagency Working
Group (IWG) on Manufacturing Research and Development was established
under the NSTC with the chartered goal of identifying and integrating
requirements, conducting joint program planning, and developing joint
strategies for the manufacturing research and development programs
conducted by the Federal Government.
In March of 2008, the IWG produced a report entitled Manufacturing
the Future: Federal Priorities for Manufacturing R & D, which
identified three technology areas as areas of opportunity for Federal
manufacturing research and development: manufacturing r & d for
hydrogen technologies, nanomanufacturing, and intelligent and
The charter for the IWG expired in March of 2009. Since the
expiration of its charter, the IWG has not been active as a formal
entity within the NSTC.
Administration's Framework for Revitalizing American
In December of 2009, the Executive Office of the President released
A Framework for Revitalizing American Manufacturing. The Framework
included seven areas of focus, with a commitment to take specific
actions in each area. One of the framework's areas of focus is
``invest[ment] in the creation of new technologies and business
practices.'' Action items relating to this area of focus include:
Doubling r & d budgets of key science agencies;
Improving coordination of manufacturing-related r &
Exploring new options to stimulate innovations and
technological breakthroughs, such as prizes and reverse
Making the research and experimentation tax credit
Spurring innovation in manufacturing by increasing
the Technology Innovation Program;
Pursuing structural reforms that support innovation
and production, such as public-private partnerships, providing
anti-trust waivers for certain types of private cooperation,
and using the Federal Government's coordinating abilities to
overcome information problems and match innovators and markets;
Protecting intellectual property rights;
Doubling the Manufacturing Extension Partnership;
Streamlining and enhancing delivery of government
services to business; and
Creating an Office of Innovation and Entrepreneurship
and a National Advisory Council on Innovation in the Department
Other areas of focus in the framework included: (1) providing
workers with the opportunity to obtain the skills necessary to be
highly productive; (2) developing stable and efficient capital markets
for business investment; (3) helping communities and workers transition
to a better future; (4) investing in an advanced transportation
infrastructure; (5) ensuring market access and a level playing field;
and (6) improving the business climate.
5. Overarching Questions
Are the Federal Government's current manufacturing
research and development programs sufficient?
Are there areas of research and development related
to manufacturing that are not being addressed by the Federal
Government that should be addressed?
What is the current role of the manufacturing
industry in shaping the Federal manufacturing research and
development agenda? Are Federal program focused on
manufacturing research and development responsive to the needs
of the manufacturing industry? If not, why not?
Are the technologies and processes developed through
federally-funded manufacturing research and development
programs being utilized by manufacturers? If not, why not?
Are Federal programs focused on manufacturing
research and development duplicative? If so, is there a need
for better coordination and prioritization of Federal
manufacturing research and development?
Broadly speaking, what obstacles currently exist to
manufacturers adopting innovative technologies and processes?
Is there anything more that the Federal Government should be
doing, or could be doing, to help manufacturers adopt these
technologies and processes?
Chairman Gordon. The Committee will come to order.
I want to thank everyone for being here today for this
important hearing on innovation in manufacturing.
Let me also make a quick announcement, and that is that we
are expecting to have votes at 11:00 today, which in the world
around here means that we really don't have to leave until
about 11:10 or so. So I would--for the convenience of the
witnesses, we have your written statement. We are going to try
to move things along. If there are Members that feel a need,
then we will stay or come back, whatever might be. We just
don't want to put you out. I should also tell all of you that
there are several meetings, as you can imagine, going on at the
same time, and so we will have some Members coming in and
coming out but we have staff on both sides that are also here.
So there is a perception out there that the U.S.
manufacturing sector is on its last legs. The truth is,
however, that the manufacturing sector in the United States is
alive and well, and continues to be an important part of our
economy. Each year, the U.S. manufacturing sector generates
more than $1.5 trillion worth of goods, accounts for more than
half of the total U.S. exports, and employs millions of people.
Nevertheless, it is true that the manufacturing sector in
the United States is not as strong and vibrant as it once was.
There is a strong case to be made that, in order to avoid
further decline, we need to take action now to preserve, and
perhaps even grow, the U.S. manufacturing sector for the
A variety of factors have likely contributed to the decline
in U.S. manufacturing, including global competition. Be that as
it may, our manufacturers cannot and should not compete with
other countries on labor costs alone. In order to stay
competitive, the U.S. manufacturers will need to be leaner and
more efficient, and make better products faster. To accomplish
this, we will need to develop new manufacturing technologies
and cutting-edge processes. We will also need to ensure that
mechanisms are in place to take those technologies and
processes from the lab to the manufacturing plant.
U.S. manufacturers should also be at the forefront when it
comes to producing new and innovative, high-value-added
products. If we want to position our manufacturers to make the
next big things of the future, we need to make certain that
they have the ability to do so quickly and efficiently.
At the same time, the ability of U.S. manufacturers to
innovate and remain competitive is largely dependent on a
flexible, skilled workforce. The manufacturing plant of today
is not the manufacturing plant of the past. Today's
manufacturing is a high-technology activity, requiring a
workforce with scientific and technical skills. Unfortunately,
despite this need, U.S. manufacturers are experiencing a lack
of skilled workers at all levels. This Committee is committed
to doing what it takes to ensure that businesses in the United
States, including manufacturers, have access to workers they
need to get the job done.
In today's hearing, we will focus on what more the Federal
Government should do, if anything, to help U.S. manufacturers
innovate. It is my expectation that what we learn today will
help inform the reauthorization of the America COMPETES Act,
which the Committee is currently working towards.
I am confident that our witnesses will be able to offer us
unique perspectives on this issue, and I want to thank all of
you for being here and look forward to your testimony.
[The prepared statement of Chairman Gordon follows:]
Prepared Statement of Chairman Bart Gordon
Good morning. I want to thank everyone for being here today for
this important hearing on innovation in manufacturing.
There is a perception out there that the U.S. manufacturing sector
is on its last legs. The truth is, however, that the manufacturing
sector in the U.S. is alive and well, and continues to be an important
part of our economy. Each year, the U.S. manufacturing sector generates
more than $1.5 trillion worth of goods, accounts for more than half of
total U.S. exports, and employs millions of people.
Nevertheless, it is true that the manufacturing sector in the U.S.
is not as strong and vibrant as it once was. There is a strong case to
be made that, in order to avoid a further decline, we need to take
action now to preserve, and perhaps even grow, the U.S. manufacturing
sector for the future.
A variety of factors have likely contributed to the decline in U.S.
manufacturing, including global competition. Be that as it may, our
manufacturers cannot--and should not--compete with other countries on
labor costs alone. In order to stay competitive, U.S. manufacturers
will need to be leaner and more efficient, and make better products
faster. To accomplish this, we will need to develop new manufacturing
technologies and cutting-edge processes. We will also need to ensure
that mechanisms are in place to take those technologies and processes
from the lab to the manufacturing plant.
U.S. manufacturers should also be at the forefront when it comes to
producing new and innovative, high-value-added products. If we want to
position our manufacturers to make the ``next big things'' of the
future, we need to make certain that they have the ability to do so
quickly and efficiently.
At the same time, the ability of U.S. manufacturers to innovate and
remain competitive is largely dependent on a flexible, skilled
workforce. The manufacturing plant of today is not the manufacturing
plant of the past. Today's manufacturing is a high-technology activity,
requiring a workforce with scientific and technical training.
Unfortunately, despite this need, U.S. manufacturers are experiencing a
lack of skilled workers at all levels. This Committee is committed to
doing what it takes to ensure that businesses in the U.S., including
manufacturers, have access to the workers they need to get the job
In today's hearing, we will focus on what more the Federal
Government should be doing, if anything, to help U.S. manufacturers
innovate. It is my expectation that what we learn today will help
inform the reauthorization of the America COMPETES Act, which the
Committee is. currently working towards.
I am confident that our witnesses will be able to offer us unique
perspectives on this issue. I want to thank all of you for being here.
I look forward to your testimony.
Chairman Gordon. Now the Chair recognizes Mr. Hall for an
Mr. Hall. Thank you, Mr. Chairman, and I am very interested
to hear what our witnesses have to say, so I will try to be
brief, as you have been.
This is another hearing geared toward the reauthorization
of the America COMPETES Act, and let me reiterate that all of
us recognize the magnitude and importance a robust Federal
research and development enterprise has on our economy, our
national security and our ability to be globally competitive.
However, we also need to understand our current economic
realities. Unfortunately, instead of being responsive to
concerns and working to reduce regulatory burdens on
manufacturing, we are heading in the wrong direction. Cap-and-
trade is a prime example of this. It would add an unprecedented
combination of energy taxes and regulatory requirements on the
manufacturing sector that would obviously pressure businesses
to shift capital and jobs away from important areas such as
R&D, and it could be argued that some of our economic woes are
a result of manufacturers not unlike the ones before us today
being overregulated and forced to take their business outside
of the United States, costing Americans their jobs. I am sure
the same is true for U.S. manufacturing R&D efforts as well.
With specific regard to the R&D jurisdiction of this
committee when it comes to manufacturing, I am particularly
struck by a statement provided by the National Petroleum
Refineries Association that states, ``With increasing
regulations, many companies have been forced to decrease their
R&D budgets and shift their resources to regulatory
compliance.'' Mr. Chairman, I ask unanimous consent that their
written statement be made a part of the record.\1\
\1\ Written statement is located in Appendix 2.
Chairman Gordon. Without objection.
Mr. Hall. And I yield back my time. Thank you, sir.
[The prepared statement of Mr. Hall follows:]
Prepared Statement of Representative Ralph M. Hall
Thank you Chairman Gordon for calling this hearing to examine
whether there is an appropriate role for the Federal Government in
supporting U.S. manufacturing innovation, and if so, what that role is.
I am very interested to hear what our witnesses have to say today,
so I will be very brief. As this is another hearing geared towards the
reauthorization of the America COMPETES Act, let me reiterate that all
of us recognize the magnitude of importance that a robust Federal
research and development enterprise has on our economy, our national
security, and our ability to be globally competitive; however, we also
need to understand our current economic reality.
It could be argued that some of our economic woes are a result of
manufacturers, not unlike the ones before us today, being overregulated
and forced to take their business outside of the United States, costing
everyday Americans their jobs. I'm sure the same is true for U.S.
manufacturing R&D efforts, as well. With specific regard to the R&D
jurisdiction of this Committee when it comes to manufacturing, I am
particularly struck by a statement provided by the National Petroleum
Refiners Association that states, ``With increasing regulations, many
companies have been forced to decrease their R&D budgets and shift
their resources to regulatory compliance.'' (Mr. Chairman, I ask
unanimous consent that their written statement be made part of the
In addition, I am also eager to hear how the billions of dollars
the Federal Government has invested in GM is helping them spur
innovation and technology in their manufacturing, but perhaps that's
best left for questioning.
So, with that, I welcome our witnesses to the hearing, and I look
forward to receiving your testimony.
Chairman Gordon. If there are Members who wish to submit
additional opening statements, your statements will be added to
the record at this point.
[The prepared statement of Mr. Costello follows:]
Prepared Statement of Representative Jerry F. Costello
Good morning. Thank you, Mr. Chairman, for holding today's hearing
on opportunities for innovation in the U.S. manufacturing industry and
the role of the Federal Government in keeping manufacturers competitive
in the future.
As a member of the Congressional Manufacturing Caucus, I have
consistently supported our manufacturing industry, the backbone of the
American economy. For centuries, the U.S. has been the world leader in
manufacturing, and the American workforce has been the most competitive
and innovative in the world. However, in recent years, we have seen
this leadership position begin to slip as low-cost products
manufactured overseas have flooded our markets. Constant innovation and
rapid application of new technologies and techniques are vital to
maintain our competitiveness and ensure the future of American
We have seen first-hand the effectiveness of innovation in the
manufacturing sector through programs like the Manufacturing Extension
Partnerships (MEP) and the Technology Innovation Program (TIP). First,
MEP provides technical assistance to help small and medium size
manufacturers modernize and innovate. I have heard directly from my
constituents about the positive impact MEPs have had on their
businesses. I would like to hear from our witnesses how we can continue
to improve the MEP. In particular, I am interested in how we can link
these partnerships to community colleges.
Second, TIP supports and funds high-risk, high-reward research on
critical issues for the manufacturing sector. While the results of this
research will impact manufacturers of all sizes around the country, one
challenge facing the manufacturing industry is attracting students and
researchers to manufacturing sciences and careers in manufacturing. I
am interested to hear from our witnesses what options they see for
attracting more students to this important sector of our economy.
I welcome our witnesses, and I look forward to their testimony.
At this time I would like to introduce our witnesses.
First, Dr. Susan Smyth is the Director of Manufacturing Systems
Research and Chief Manufacturing Scientist for Manufacturing
for General Motors Company. Dr. Len Sauers is the Vice
President of Global Sustainability for Procter and Gamble. Dr.
Debtosh Chakrabarti is the President and Chief Operating
Officer for PMC Group Incorporated. Dr. Mark Tuominen is the
Director of the National Nanomanufacturing Network, and Dr.
Wayne Crews is the Vice President for Policy and Director of
Technology Studies at the Competitiveness Enterprise Institute.
As our witnesses should know, we try to keep our testimony
to around five minutes. Your written testimony will be included
in the record for the hearing, and when all of you have
completed your spoken testimony, we will begin questions. Each
Member will then have five minutes to question the panel.
So Dr. Smyth, please begin your testimony.
STATEMENT OF SUSAN SMYTH, DIRECTOR OF MANUFACTURING SYSTEMS
RESEARCH, GM R&D AND CHIEF SCIENTIST FOR MANUFACTURING, GENERAL
Dr. Smyth. Mr. Chairman and Committee members, thank you
for the opportunity to testify on behalf of General Motors. I
am Susan Smyth, Director of General Motors' Manufacturing
Systems Research Lab, and I lead worldwide research and
development efforts in support of advanced manufacturing. I am
pleased to be able to speak to you today about advanced
manufacturing and the important role the National Institute of
Standards and Technology, NIST, and other Federal agencies play
in support of this vital area of national interest. I also look
forward to discussing some of the challenges associated with
advanced manufacturing and suggesting areas where we can
Automotive manufacturing is one area where we have
significant opportunity to expand U.S. competitiveness and
stimulate economic development and grow jobs. Chrysler, Ford
and General Motors together account for 110,000 U.S.
manufacturing jobs and support three million additional jobs
located in all 50 of the United States. Our three companies
annually invest $10 billion in U.S. plants and equipment, and
in 2008 we purchased $100 billion of U.S. auto parts, materials
and services. We also spent $12 billion on engineering and
research and development.
The United States, along with the rest of the world, is
working to reinvent manufacturing to ensure competitiveness,
improve efficiency, and increase energy and environmental
stewardship, and I would like to highlight a few projects that
show the strength of these private-public manufacturing
NIST/MEL: The Manufacturing Engineering Laboratory at NIST
promotes competitiveness in key manufacturing-related areas
such as robotics, virtual manufacturing, green manufacturing
and nanotechnologies. In addition, the NIST lab derives
standards that are key to the adoption of efficient, safe and
repeatable processes. As just one example of the power of
partnering, NIST worked with General Motors, Ford and Chrysler
through the United States Council for Automotive Research,
USCAR, to develop standards for certification of wireless
technologies. These standards have increased OEM [Original
Equipment Manufacturer] productivity and lowered our costs
because now we can buy off-the-shelf certified products and
know they will work for a specified function as opposed to
testing them all ourselves. The NIST-USCAR collaboration
resulted in the growth of new jobs in a network of small local
companies which now certify all these network devices that they
conform to industry standards.
Many national labs, including NIST, have an influence on
manufacturing. However, MEL stands alone as an organization
that has the core technical skills, profound knowledge of
manufacturing processes and a passion for manufacturing.
Although MEL is an effective organization focused on customer
needs, the structure in which it resides is not optimal, and
the percentage of resources that are dedicated to manufacturing
are a very small part of the overall NIST budget.
We greatly appreciate working with NIST, but we believe the
NIST charter should be revisited to allow a more equal footing
between small and large business. The rationale for this
request is that the challenges we are facing today are system-
level challenges. Two examples are vehicle electrification,
which is nothing less than the reinvention of the automobile,
and the drive towards sustainable manufacturing. Technology
solutions that will help us meet these challenges need to be
driven by balanced effort of small and large companies, to
better leverage the speed of the small and the system
integration perspective of the large.
DOE: The Department of Energy has been supporting crucial
research and helping build manufacturing capability on
batteries, motors, and other electric vehicle technologies
through FreedomCAR and the Fuel Partnerships. GM is grateful
for the stimulus grants that we received to help us open our
new battery manufacturing plant in Brownstown, Michigan, and
our electric drive production center in White Marsh, Maryland.
These two facilities will provide us with valuable learning and
allow us to more rapidly move down the cost curve on these
technologies, enabling us to get to higher production volumes.
NASA: NASA [National Aeronautics and Space Administration]
has recently been an important partner on the manufacturing
front for us. Together we were able to develop and build
Robonaut2--or R2 for short--a faster, more dexterous, more
technologically advanced robot. This new generation of robot is
able to use its hands to do work beyond the scope of any
existing humanoid robot and can do it safely side by side with
people, which is the key to our robotic strategy of humans
working in harmony and enabled, not replaced, by robots.
As I have mentioned, other countries see the value of
robotic technology and they have made it a national priority.
We need to adopt similar industrial priorities in this and
other important areas of manufacturing.
In conclusion, General Motors would ask the Committee to
focus on the following: first, the creation of a cross-agency
forum with a charter to align large-scale manufacturing,
driving collaborative prioritization of key technologies by
industry and government. Second, sufficient funding to allow
the United States to compete with efforts in other countries.
And third, reframing the goals and scope of advanced
manufacturing in the national labs from the point where the
technology metrics are met for the product, to the point where
high-volume production is possible. General Motors welcomes
initiatives like these, as well as government, public, private
and cross-industry partnerships to accelerate those technology
developments and early commercialization.
Thank you for the opportunity to testify today. I look
forward to your questions.
[The prepared statement of Dr. Smyth follows:]
Prepared Statement of Susan Smyth
Mr. Chairman and Committee Members, thank you for the opportunity
to testify on behalf of General Motors. I am Susan Smyth, Director of
GM's Manufacturing Systems Research Laboratory. I lead GM's worldwide
R&D efforts in support of advanced manufacturing processes and systems.
While this past year has been one of unprecedented challenge and change
at General Motors, in the wake of the bankruptcy, we are a smaller,
leaner company that is even more focused on advanced technology.
I am pleased to be able to speak to you today about advanced
manufacturing and the important role the National Institute of
Standards and Technology (NIST) and other Federal agencies play in
support of this vital area of national interest. I also look forward to
discussing some of the challenges associated with advanced
manufacturing and suggesting areas where we can strengthen
collaboration, especially in manufacturing R&D.
This is an important time in the history of the automobile
industry. As we have seen recently, the world in which we live and do
business in is changing. Automotive technology is rapidly advancing,
presenting challenges and opportunities with high levels of risk to
both the industry and the manufacturing base of entire nations.
Automotive manufacturing is one arena where we have significant
opportunity to expand U.S. competitiveness and stimulate economic
development and jobs growth. Chrysler, Ford, and General Motors
together account for 110,000 U.S. manufacturing jobs and support three
million additional jobs located in all 50 states. Our three companies
annually invest $10 billion in U.S. plants and equipment. We also spend
$12 billion on engineering and R&D, which is helping to drive a
resurgence in American manufacturing.
This starts with the supplier community, which we know you care
greatly about. We are currently updating the figures for 2009, but for
2008 the three domestic manufacturers purchased over $100 billion in
U.S. auto parts, materials, and services. Every dollar spent in the
manufacturing sector generates an additional $1.36 in economic
activity. This represents a greater return than in any other sector.
The U.S., along with the rest of the world, is working to reinvent
manufacturing to ensure competitiveness, improve efficiency, and
increase energy and environmental stewardship. I would like to
highlight a few projects that show the strength of private/public
NIST's Manufacturing Engineering Laboratory (MEL) promotes
competitiveness in key manufacturing-related areas such as robotics,
virtual, green, and nano technologies. In addition, the NIST lab drives
standards that are key to adoption of efficient, safe, and repeatable
processes. As just one example of the power of partnering, NIST worked
with GM, Ford, and Chrysler through the United States Council for
Automotive Research (USCAR) to develop the standards for certification
of wireless technologies such as the Ethernet, DeviceNet, and
These standards have increased OEM productivity and lowered cost
because now we can buy off-the-shelf certified products and know they
will work for the specified function. As companies strive to become
leaner and compete in a global market, we cannot afford to waste our
technical resources on non-core business. This NIST-USCAR collaboration
has resulted in the growth of new jobs in a network of small local
companies, which now certify that all these network devices conform to
the new industry standards.
Many national labs, including NIST, have an influence on
manufacturing technology. However, MEL stands alone as an organization
having core technical skills, profound knowledge of the manufacturing
domain, and a passion for manufacturing. Although MEL is a highly
effective organization, well focused on customer needs, the structure
in which it resides is not optimal. The percentage of resources
dedicated to manufacturing remains a small part of the overall NIST
We greatly appreciate working with NIST, but we believe the NIST
charter should be revisited to allow a more equal footing between small
and large business. The rationale for this request is that many of the
challenges we are facing today are ``systems-level'' problems. Two
examples are vehicle electrification--which is nothing less than the
reinvention of the automobile--and the drive towards sustainable
manufacturing. Technology solutions to enable us to meet these
challenges need to be driven by a more nuanced mix of effort among
small and large companies, to better leverage the speed of the small
and the system-integration perspective of the large.
Another positive interaction between GM and MEL has been in the
area of virtual manufacturing, which allows us to design and validate
processes and tools in a computer prior to physically building a plant
or product. In virtual manufacturing, we can mathematically model the
form, fit, and function of manufacturing processes. It is a technology
lever that we use to drive costs down and quality up, and we currently
have active programs linking GM, USCAR, NIST, and several universities.
One such research program, led by the University of Iowa, is linked
with the Virtual Soldier, which will create a digital human to design
safer and more ergonomically acceptable manufacturing processes.
The Department of Energy has been supporting crucial research and
helping build manufacturing capability on batteries, motors, and other
electric vehicle technologies through the FreedomCAR and Fuel
Partnership. GM is grateful for the Stimulus grants we received to help
us open our new battery manufacturing plant in Brownstown Township,
Michigan and our electric drive production center in White Marsh,
These two facilities are among the first advanced battery and
electric motor manufacturing plants in the United States to be operated
by a major auto company. They will provide us with valuable learnings
and allow us to more rapidly move down the cost curve on these
technologies--thus enabling us to get to higher production volumes,
which is where these technologies start to have real-world impacts on
petroleum consumption and greenhouse gas emissions.
Lightweight materials is another area where there has been great
success with government-industry collaboration. Our collaboration with
DOE through USCAR has led to introduction of more high-strength steels,
aluminum and magnesium alloys, composites, and associated processes.
These collaborative efforts have led to reduced material and energy
requirements and lower material scrap rates in our plants.
To build on this progress, we support the creation of the
Automotive Manufacturing Energy Reduction Partnership, which has been
jointly mapped out by DOE and USCAR. Although yet to be funded, this
partnership is intended to be a means to grow jobs by creating a more
energy-efficient and, therefore, more competitive auto industry and
supply base while simultaneously meeting the national objective of
energy use reduction. We also feel that potential partnerships between
the automotive and defense sectors in energy and materials research
could produce synergistic results for both business sectors.
NASA has also been an important partner on manufacturing R&D.
Recently, NASA and GM announced our advanced robotics partnership to
accelerate development of the next generation of dexterous robots for
use in both the automotive and aerospace industries.
Together, we were able to develop and build Robonaut2--or R2 for
short--a faster, more dexterous, and more technologically advanced
robot. This new generation is able to use its hands to do work beyond
the scope of existing humanoid robots, and it can safely do it side-by-
side with people, which is the key to our robotic strategy of humans
working in harmony and enabled not replaced by robots.
This partnership should interest the Committee for two reasons.
First, the GM NASA partnership was a new business model for conducting
high-end research with embedded personnel beyond the traditional
sabbatical model. It is critical for both NASA and GM, as the joint
learnings from the program help move robotics to the next level. For
GM, we see the collaboration leading to development of assembly
processes that integrate robotic technology with people. This has the
potential to improve manufacturing processes, increase flexibility, and
enhance the safety of the production environment. GM is also actively
looking for ways to apply the robotics, controls, sensor, and vision
technologies developed as part of this collaboration to leading-edge
advanced vehicle safety systems.
Second, robotics is a central element of competitiveness in
advanced manufacturing. The creation of the ``roadmap for U.S.
Robotics'' was stimulated by the bipartisan Congressional Caucus on
Robotics. It states that ``Led by Japan, Korea, and the European Union,
the rest of the world has recognized the irrefutable need to advance
robotics technology and have made research investment commitments
totally over a billion dollars, while the U.S. investment in robotics
technology (outside unmanned systems for defense) remains practically
This new segment in robotics is estimated to double the current
$25-billion U.S.-based robotics industry (direct revenue, plus
auxiliary automation equipment, castings, etc.) with many applications
in the assembly area of manufacturing processes over the next 5-10
The opportunity to create manufacturing jobs with this new type of
robot can be extrapolated from the success of the medical robot
industry. Since the inception of this business at the beginning of the
decade, the annual growth rate has exceeded 30 percent and is estimated
to reach revenue levels of $2.8 billion by 2011.
As I have mentioned, other countries also see the value of robotics
technology and have made it a national priority. What this means is
that government and business are working together in a highly
collaborative way to ensure that the technology moves from research to
commercial implementation quickly. We are starting to see similar
support in other areas of advanced manufacturing, such as radio
frequency identification in Korea, lightweight materials and processes
in China to name but two.
We need to adopt similar industrial priorities in other important
areas of advanced manufacturing to ensure that the U.S. remains or
becomes competitive and that jobs remain on shore. We can build on the
successes that I have already outlined by:
Providing more funding to the NIST Manufacturing
Engineering Laboratory to grow its ability to manage important
new projects and provide oversight for strengthened
Modifying the industrial technical program (ITP)
charter of engagement with NIST to better engage large business
on complex systems-level issues, and encourage technical
transfer without significant royalty clauses, which impede
commercialization and the creation of jobs in spinoff
Creating a cross-agency forum to create and manage a
national agenda for manufacturing technology. This forum could
identify key technology goals and metrics and orchestrate
collaboration to better leverage resources and eliminate
Nurturing the creation of product and manufacturing
technologies related to the electrification of the vehicle. We
need to develop a successful U.S. manufacturing base for this
new breed of automobile. We also need to invent manufacturing
systems capable of delivering automotive quality for new
electric vehicle components at volume rates. As an example, we
require technology for non-destructive evaluation during
battery manufacturing processes and reversible joining
processes that would enable remanufacturing, and repurposing of
used automotive batteries for stationary power storage
As we look to the future, we need to focus our collective attention
on technologies that enhance our virtual and flexible manufacturing
capabilities at a project level. Areas such as robotics, virtual
manufacturing, and sustainability are key technology areas of focus for
our business, and we would ask for additional development funding to:
Develop the manufacturing aspects of batteries, fuel
cells, electric motors, and power electronic components,
including real-time quality processes.
Support technology that creates flexible systems and
facilities, which will enable more consumer custom-ordering
using efficient manufacturing processes that can quickly
respond to changing customer demand.
Drive other cross-industry improvements such as those
needed in the field of virtual manufacturing. Here, the
development of standards would enable better communication
between IT systems and help alleviate the unending challenge of
system interoperability--expanding, for example, on some of the
award-winning work in ISO STEP Standards for the exchange of
product model data that was carried out by the NIST MEL lab.
In the virtual arena, we also need to create linkages
between different virtual tools. This would enable a more
efficient use of the software products that we have today,
e.g., such as the development of automatic meshing
Finally, continuous support for technology is
required to enable energy-efficient and environmentally neutral
Rethinking the Goal Line
Beyond funding, we may need to revise how we think about the
meaning of success in automotive technology R&D. In addition to
technical success, we also need to address how we take innovation to
commercial scale and high rates of adoption.
Just as with any other advanced technology, there are three phases
involved in adoption of advanced manufacturing technologies. These
include innovation, demonstration, and commercial implementation.
Moving through the three phases required to commercialize new
technologies is a particularly difficult challenge in the auto industry
because of the long time horizons and high capital cost. This is a
challenge that urgently needs to be addressed because of the magnitude
and importance of the dual societal objectives of energy reduction and
Historically, the U.S. has emphasized R&D discovery, but in order
for innovation to be implemented (and have a meaningful impact on
challenges such as petroleum consumption and greenhouse gas emissions),
funding and collaboration must continue on to the next level, which is
scale production. Many new ideas can be managed on small production
lines, but the challenge of scaling to large and fast output rates
cannot be overlooked. In order to be relevant to these great societal
challenges, we need to ensure that government R&D programs are focused
on ways to provide high-quality assembly, non-destructive evaluation,
and high rates of repeatability at large volumes. Currently, the U.S.
focus is on the first phase of innovation, which is essential but not
sufficient because we must also give priority to demonstration and
technical inventions required to enable high-volume, high-speed
Some countries have a different approach and focus support on
development of the linkage to business. Germany, for example, has
invested in a technology transfer infrastructure, i.e., the Fraunhofer
Institutes, and also mandates that engineering academics spend a
significant time in industry. China has a government-directed agenda
and a strong focus on advanced manufacturing. Japan has a culture of
OEMs and suppliers collaborating through government-funded initiatives.
All of these countries have advanced manufacturing strategies,
collaboration models, and a funding charter that extends beyond
In summary, General Motors asks the committee to focus on the
First, collaborative prioritization of key
technologies by industry and government. These priorities
should include robotics and other flexible manufacturing
enablers, virtual manufacturing, and green manufacturing, and
manufacturing of key electric drive components, including
batteries, fuel cells, motors, and power electronics.
Second: Increased funding for the NIST Manufacturing
Engineering Laboratory (MEL) to support these priorities.
Third: The creation of a cross-agency forum with a
charter to align with large-scale manufacturing R&D and with
sufficient funding to compete with efforts in other countries.
Fourth: Congressional consideration of DOE funding
for the proposed Automotive Manufacturing Energy Reduction
Partnership, which will be focused on enhancing the
competitiveness and energy-efficiency of the U.S. auto industry
and supply base.
Fifth: Reframing the goals and priorities for
advanced technology vehicle manufacturing at DOE, NIST, etc.,
from the point where technology metrics are met to the point
where high-volume production is possible.
General Motors welcomes initiatives like these as well as
government, public/private, and cross-industry partnerships to
accelerate both technology development and early commercialization.
Thank you for the opportunity to testify today. I look forward to
Biography for Susan Smyth
Susan Smyth is the Chief Scientist for Global Manufacturing at
General Motors and the Director of the GM R&D Manufacturing Systems
Research Lab. In this capacity, she directs the creation of GM's global
advanced manufacturing strategies and oversees innovation and
implementation of GM's advanced manufacturing portfolio. Susan is
recognized as one of GM's key strategic technology leaders inside and
outside General Motors. She chairs the Technology Leadership Council
for Manufacturing at USCAR, the preeminent technical organization for
pre-competitive automotive technology. She is a member of
Northwestern's Master of Manufacturing Management executive governance
Council at the Kellogg School of Management. Furthermore, she is an
executive advisor to the Tennenbaum Institute at Georgia Tech.
In her role as Chief Manufacturing Scientist, she has aggressively
grown GM's global collaboration footprint in the US, Europe, Israel,
Korea, and China. She is the co-Director of Collaborative Research Labs
at University of Michigan, MIT, and Shanghai Jiao-Tong University.
These collaborations have yielded internal and external recognitions.
Susan's teams have garnered an unprecedented number of Boss Kettering
Awards, GM's highest corporate innovation prize, numerous McCuen
Innovation Awards, and the 2009 Korean Presidents Award for Technology.
Prior to this assignment, Smyth was Global Math Process Leader for
Manufacturing Engineering, responsible for developing and implementing
math-based strategies for GM Manufacturing, driving towards a
completely virtually integrated manufacturing system design. This
resulted in significant advances in quality, throughput, maintenance
enabling world class product launches.
Susan began her career with General Motors as a Senior Project
Engineer with the advanced engineering staff. Since then she has held a
variety of leadership positions in strategic business planning,
advanced engineering, manufacturing and quality. She holds a Bachelor
of Science degree in Physics, Masters of Science in Optoelectronics and
Information Technology, and a Ph.D. in Physics.
Chairman Gordon. And Dr. Sauers, you are recognized.
STATEMENT OF LEN SAUERS, VICE PRESIDENT OF GLOBAL
SUSTAINABILITY, PROCTER AND GAMBLE
Dr. Sauers. Chairman Gordon, Ranking Member Hall and
distinguished Members of the Committee, thank you for inviting
me to testify today. My name is Len Sauers. I am the Vice
President for Global Sustainability at the Procter and Gamble
Company. I lead P&G's overall program in this area.
P&G manufactures and markets a broad range of consumer
products: beauty, health and wellness, and home care products
in the United States and globally. We have operated in the
United States for more than 170 years. As a major American
manufacturer, we are fully committed to innovate and invest in
the United States.
While our business is robust, much of our future growth is
tied to serving the world's consumers, 95 percent of whom
reside outside the United States. Emerging markets are an
engine of growth for P&G and are also critical to P&G's
employment in the United States. One of five P&G jobs in the
United States supports our global business, and our business
has a multiplier effect, supporting 1.5 million jobs in our
U.S. and global supply chain and another 100,000 jobs in our
go-to-market distribution and merchandiser network.
P&G has historically viewed sustainability as largely a
corporate responsibility. As a large multinational company, we
believe being socially and environmentally responsible are
simply the right things to do. However, more recently, there
has been greater attention placed on sustainability by
consumers, governments and NGOs. Due to this greater attention,
we believe that sustainability can move beyond just being a
responsibility to also being an opportunity to build our
To leverage this opportunity, we recently developed a
renewed program in environmental sustainability with strategies
and goals that are focused in two areas: improving the
environmental profile of our products, and improving the
environmental profile of our operations. Please let me make a
few comments on both, starting first with our products.
In order to improve the environmental profile of their
products, a consumer products company must clearly understand
their consumer. Relative to sustainability, we find that only a
small percentage of consumers are willing to accept tradeoffs
such as increase in price or a decrease in performance in order
to purchase a product that claims to be environmentally
sustainable. We find that the vast majority of consumers, over
70 percent, will buy a sustainable product but only if all
their other needs of cost and performance are met. The
challenge for P&G is to develop products that enable consumers
to be sustainable, but for which there are no tradeoffs, and
this represents a huge challenge for our R&D community.
An example of one such product which I brought today that
we recently developed and is on the market is Tide Cold Water,
which is a laundry detergent specially designed to provide the
same performance in cold water that consumers see in hot or
cold. The environmental benefits of such a product are
enormous. If every household in the United States that used hot
water today switched to cold water for laundry, the energy
savings would be 70 to 90 billion kilowatt-hours per year,
which is three percent of the Nation's total household energy.
It would reduce carbon dioxide emissions by 34 million metric
tons, which is about seven percent of the U.S.'s Kyoto target.
This is just one example of a sustainable product we have
developed, and we have committed to develop and market at least
$50 billion in sales of these products like this over the next
Innovation is critical to accomplishing this and our other
business goals. As such, we have invested over $2 billion in
R&D annually. We have 24 innovation centers on four continents
with over 9,000 people in our R&D facility. Over 1,000 Ph.D.s
represent more than 120 scientific disciplines and hold over
35,000 patents globally. To meet the continued challenges we
face in our product innovation and operational improvements, we
have identified five areas of opportunity where the Federal
Government can be helpful.
First, the government needs to drive research in the area
of renewable energy, to develop more cost-effective
alternatives and a grid that can deliver the renewable energy
to manufacturers. Second, the America COMPETES Act needs to be
reauthorized, which will lead to the creation of new markets
and technologies. I would like to thank you, Mr. Chairman, and
Ranking Member Hall, for your prior support of this program.
Third, there is a need to continue to focus on STEM [science,
technology, engineering, and mathematics] education and
training. The skills are needed so that we can attract and
build the best and brightest U.S. workforce. There is a need to
increase the collaborative government-industry innovation
through the national labs. P&G has a successful partnership
with Los Alamos National Lab where a comprehensive approach was
developed to reduce the cost of our equipment failures in
operations. And finally, the best way to preserve and create
U.S. manufacturing jobs and promote innovation in the United
States is through sound and predictable policies, legislation
and regulation that foster a competitive manufacturing
environment. Innovation cannot move forward without a science-
Thank you again for the opportunity to testify today and
share with you the importance of sustainable innovation at
Procter and Gamble.
[The prepared statement of Dr. Sauers follows:]
Prepared Statement of Len Sauers
Chairman Gordon, Ranking Member Hall and distinguish members of the
Committee, thank you for inviting me to testify on ``The Future of
Manufacturing: What is the Role of the Federal Government in Supporting
Innovation by U.S. Manufacturers?''
I am the Vice President, Global Sustainability at Procter & Gamble.
I am responsible for the company's sustainability efforts. Four billion
times a day, P&G brands touch the lives of people around the world. The
company has one of the strongest portfolios of trusted, quality,
leadership brands, including Pampers, Tide, Pantene, Duracell, Olay,
Gillette, and Braun. The P&G community includes approximately 135,000
employees working in about 80 countries worldwide.
I want to thank you Mr. Chairman and Ranking Member Hall for
champion roles in supporting the America COMPETES Act, authorizing
Federal funding for basic R&D and science, technology, engineering, and
mathematics (STEM) education which creates the opportunity for P&G to
find future skills to effectively innovate. P&G is a member of the Task
Force on American Innovation, whose mission it is to support basic
research in the physical sciences and engineering.
Innovation is P&G's lifeblood. When we look at innovation we are
faced with three critical questions:
How can we put consumer-driven innovation at the
center of everything we do?
How can we use innovation as a competitive advantage?
How can we manage the risks of innovation?
P&G invests over $2 billion in innovation annually. We have 24
innovation centers on 4 continents with over 9000 people in our R&D
facilities. Over 1000 Ph.D.s represent more than 120 scientific
disciplines and hold over 35,000 patents globally.
A few years ago, we set a goal for innovation, moving to an open
innovation model. Our goal was that 50% of all initiatives needed to
have at least one significant external partner. We wanted to ``turbo-
charge'' our innovation capacity. We built the capability to reach
nearly 2 million researchers, entrepreneurs and companies doing work in
areas relevant to our businesses. Today, we've met and exceeded our 50%
goal and we are now building the next generation of our ``connect and
Another key component of our innovation model is to develop an
understanding of the consumer. Since 2001, we have spent over $3
billion, more then double the industry average, to learn about the
consumer. This leads us to breakthrough innovation, where we have
delivered 110 new initiatives in the last 14 years that have made the
Information Resources, Inc (IRI) Pacesetter's top 25 list. In 2008, P&G
had 5 of the top 10 product launches in the U.S. and 10 of the top 25.
We are expecting similar results when IRI announces their 2009
At P&G, we focus our sustainability efforts to innovate
improvements that matter to the consumer, making the most meaningful
impact possible. Our commitment begins with our Purpose, Values, and
Principles, where sustainability is embedded, and manifests itself in a
systemic and long term approach. We strive to make our actions matter.
We pursue our sustainability goals with the aim of improving quality of
life now and for generations to come. In 2007, we established five
sustainability strategies and goals for 2012. In March, 2009 we
increased our goals to reflect our progress and to demonstrate our
ongoing commitment to sustainable, responsible growth. Our five
sustainability strategies are:
Products--delight the consumer with sustainable
innovations that improve the environmental profile of our
Operations--Improve the environmental profile of
P&G's own operations.
Social Responsibility--Improve children's lives
through P&G's social responsibility programs.
Employees--Engage and equip all P&Gers to build
sustainability thinking and practices into their everyday work.
Shape the future by working transparently with our
stakeholders to enable continued freedom to innovate in a
Sustainable Product Innovation
Our goal is to develop and market at least $50 billion in
cumulative sales of ``sustainable innovation products'' which are
products with a significantly reduced (> 10%) environmental footprint
versus previous or alternative products. We combine two key strengths--
consumer understanding and science to deliver sustainable innovations
that do not require trade-offs in performance or value.
One example is helping consumers save energy and reduce their own
Green House Gas emissions through the development of sustainable
products. We developed Tide Coldwater, a new product technology which
focused on cold water-washing, which delivers the same cleaning
performance consumers expect from hot-water washing. If every household
in the United States used cold water for laundry, the energy savings
would be 70-90 billion kilowatt hours per year which is 3% of the total
nation's household energy consumption while reducing CO2
emissions by 34 million metric tons per year, which is about 7% of the
US's Kyoto target.
In 2007, we began to convert our North American liquid laundry
detergent portfolio to a 2X concentrated formulation. This innovation
created the following benefits: less water (saving 500 million liters a
year); reduced CO2 emissions by more than 100,000 metric
tons a year; reduced the amount of packaging materials by 15,000 metric
tons per year; and reduced the number of truck loads by 40,000 per
And through our open innovation model, we partnered with one of our
suppliers, which led to the development of a new polymer to be used in
our powdered laundry detergent, which reduces surfactant levels while
improving product performance.
Sustainable Operational Improvement
We continue to drive conservation efforts in manufacturing. Between
raw materials and the creation of a product, we strive to reduce waste,
water, energy and CO2 through systematic conservation
efforts. We apply smart eco-design through innovative construction
process improvements. And we re-use where feasible giving new life to
what was once waste. We have expanded our work from a focus on the core
of our manufacturing operations to a holistic end to end view of
Our goal is to deliver an additional 20% reduction (per unit of
production) in CO2 emissions, energy consumption, water
consumption and disposed waste from P&G plants, leading to a total
reduction over the decade of at least 50%.
We are proactively putting green technologies including solar, wind
and geothermal in our plants where it makes good business sense.
Examples of successful initiatives include the installation of a roof-
mounted photovoltaic solar energy system at our Oxnard, CA facility
which is projected to produce more than 1.9 million kilowatt hours
during the first year of operation. Over 20 years, this system is
estimated to product enough electricity to power over 3,200 homes for a
year. Heat exchange units that capture heat for reuse at our paper
plant in Mehoopany, PA reduces carbon emissions by 13,600 metric tons
per year and the energy savings will be greater than the per-site
energy consumption at 80% of our other facilities around the world.
Finally we have designed eco efficiencies at our new paper plant
facility being built in Box Elder County, Utah.
For decades, P&G has transported product in ``multi-modal'' fashion
that is using multiple forms of transport. But today, we are shifting
toward ``intermodal'' transportation, which uses shipping containers
that transfer smoothly from one mode to another. An intermodal approach
optimizes the transportation process. A transportation program in North
America, P&G's first to incorporate an intermodal component has reduced
transportation costs and improved sustainability, saving 11 million
liters of diesel fuel annually.
Opportunities for the Federal Government to Enhance Manufacturing
We have identified five areas where the role of the U.S. Government
is critical to innovation and manufacturing:
1. The government needs to drive research in the area of
renewable energy to develop more alternatives and a grid that
can deliver the renewable energy sources to manufacturers.
2. ``The America COMPETES Act'' needs to be reauthorized which
will lead to the creation of new markets and technologies.
3. There is a need to continue to focus on STEM education and
training. These skills are needed so that we can attract and
build the best and brightest workforce. One of the top 3 skill
sets that we seek for management positions are undergraduate
engineers. For our plant technician roles we are looking for
demonstrated technical and leadership skills, ideally through
trade schools and two year colleges.
4. There is a need to increase the collaborative government/
industry innovation through the National Labs. P&G has a
successful partnership with Los Alamos National Lab (LANL)
where a comprehensive approach was developed to reduce
operating costs and minimizing capital expenditures by
predicting, preventing, and reducing equipment failures in our
5. Finally, the best way to preserve and create U.S.
manufacturing jobs and innovation in the U.S. is through sound
and predictable policies, legislation and regulation that will
foster a competitive manufacturing environment. Innovation can
not move forward without a science based regulatory framework
in place. If not handled with care, the cumulative effect of
new legislation and regulation will result in added cost,
regulatory burden and less rather than more flexibility for
Chairman Gordon, Ranking Member Hall and other members of the
Committee, thank you for the opportunity to testify today and share
with you the importance sustainable innovation is to Procter & Gamble
(www.pginnovation.com). There is definitely a role for the Federal
Government to ensure that the necessary skills and technologies are
being developed to help manufacturers like P&G. We are supportive of
the efforts to sustain Federal R&D funding through the reauthorization
of America's Compete for NSF, NIST, and DoE Office of Science and
enhancing STEM education because the ability for us to continue to
reduce our environmental footprint of our products and our operations
depends on the skills of the future.
Biography for Len Sauers
Chairman Gordon. Thank you, Dr. Sauers.
And now Mr. Chakrabarti.
STATEMENT OF DEBTOSH CHAKRABARTI, PRESIDENT AND CHIEF OPERATING
OFFICER, PMC GROUP INC.
Mr. Chakrabarti. Mr. Chairman, Ranking Member Hall, Members
of the Committee, on behalf of myself and PMC Group, I thank
you for the opportunity to testify today on the important
subject of the future of U.S. manufacturing.
PMC is a growth-oriented global chemicals company dedicated
to innovative solutions to everyday needs. Our company was
built on a model of growth through innovation while promoting
social good. We are dedicated to sustainability. Over half of
our raw materials are derived from renewable sources.
In our Nation's history, Federal Government programs for
scientific research and development have yielded the seeds of
tremendous advances in the private sector. We must now refocus
our research efforts to the most important and promising areas
of growth, and invest in transitioning these technologies into
private-sector manufacturing growth and competitiveness.
From PMC's genesis in 1994 to the present, as a rapidly
growing manufacturer, we have experienced the challenges that
come with growth and implemented workable solutions. This
journey of ours gives us a fresh and real perspective on the
issues facing U.S. manufacturers.
The chemical manufacturing industry is one of the most
important sectors of the U.S. economy. The chemical industry
employs in excess of 840,000 employees with hourly earnings 22
percent greater than the private-sector average. When you
include indirect employment, the industry is responsible for
more than 5.4 million jobs.
Despite its importance to the economy, the chemical
industry continues to face challenges. Efficiency and improving
manufacturing technologies are spreading across the globe,
rapidly reducing the productivity advantage that once
compensated for higher costs in the United States. Lower
barriers to the flow of investment capital have led to newer,
more efficient manufacturing plant investments to be installed
elsewhere in the world. The gaps to our leadership are
shrinking. Innovation must lead the pathway to the future if we
are to maintain our leadership position.
The U.S. chemical industry is in need of growth revival. We
believe that two of the most important challenges facing our
Nation today are how to increase the number of good, high-
paying jobs, and how to reduce the dependence of our Nation on
foreign oil. We believe that increased development and
production of chemicals based on renewable sources is a viable
and sustainable pathway to further both of these objectives,
while at the same time reducing our Nation's carbon footprint.
Replacement of crude oil by renewable feedstocks through
the chemical supply chain is a ``real and now'' possibility. By
virtue of their higher value, downstream chemicals from
renewable sources can rapidly lead to the reduction of imported
crude oil and increased job creation. However, the renewable
chemicals industry faces challenges to get off the ground, and
these challenges lie primarily in the development and
We believe that there should be three critical pillars to
the development of a sustainable, renewable chemicals industry.
First, we must promote the development of new chemical products
based on renewable sources. Sustainable efforts by private
industry in this type of research should be supported by the
government through funding research programs for renewable
chemicals specifically, introducing jump-starting legislation
that calls for replacing petroleum-based chemicals in certain
end uses and funding the development of pragmatic standard
methodologies to support the growth of these products.
Second, we must promote investment in transforming existing
facilities to produce renewable chemicals. The access to
commercialization-phase investment capital, especially for
small- and medium-sized enterprises, is a significant challenge
to the early stages of transformation. We can promote this
transformation through grants for transformation of existing
facilities for manufacture of renewable chemicals, incentives
for private investment in the production of renewable
chemicals, supporting small- and medium-sized enterprises
through capital access programs, and through the development of
a one-stop-shopping approach to government support programs,
and elevating renewable chemicals to an important position in
the Nation's agenda, similar to biofuels.
Finally, we must maintain and extend our productivity
leadership through retrofitting existing facilities with
productivity improvement control and measurement systems, and
improving the access to best practices in manufacturing for
small and medium enterprises. The government can support these
efforts through the National Institute of Standards and
Technology by way of funding programs for manufacturers to
upgrade productivity-improving technologies, funding research
in new productivity improvement systems, and leveraging the
existing efforts of the Manufacturing Extension Partnership to
assist small- and medium-sized manufacturers in implementing
best practices and productivity.
At PMC, renewable chemicals are a substantial part of our
growth strategy. We have committed to this strategy because we
believe that it is a sustainable pathway for manufacturing
growth. The challenge that we face, along with other U.S.
manufacturers, is in accelerating the commercialization of
these technologies. In an uncertain economic environment,
companies normally take a conservative approach to investment.
Prudent government policies and standards are required to
change this mindset. Efficient government programs supporting
the renewable-chemicals industry would accelerate the
transformation of ideas into increased employment and decreased
reliance on foreign oil.
Mr. Chairman, Ranking Member Hall, Members of the
Committee, thank you for this opportunity to share our views
today. I look forward to your questions.
[The prepared statement of Mr. Chakrabarti follows:]
Prepared Statement of Debtosh Chakrabarti
Mr. Chairman and Members of the Committee, on behalf of myself and
PMC Group, I thank you for the opportunity to testify today on the
important subject of the Federal Government's role in supporting
innovation by U.S. manufacturers. My name is Debtosh Chakrabarti and I
am President of PMC Group.
PMC Group (``PMC'') is a growth oriented, diversified, global
chemicals and plastics company dedicated to innovative solutions to
everyday needs in a broad range of end markets including plastics,
consumer products, electronics, paints, packaging, personal care, food,
automotive and pharmaceuticals. Our company was built on a sustainable
model of growth through innovation while promoting social good. We are
dedicated to sustainability; over half of our raw materials are derived
from renewable sources.
In our nation's history, Federal Government programs for scientific
research and development have yielded the seeds of tremendous advances
in the private sector. We must now refocus our efforts in our federally
funded research to the most important and promising areas of growth,
align them through central focal points that coordinate these programs
and invest in the transitioning of these technologies to the private
sector, especially to small and medium-sized enterprises.
PMC is a rapidly growing manufacturing enterprise. From our genesis
in 1994 to today, we have experienced the challenges that come with
growth and implemented workable solutions. This journey of ours gives
us a fresh and real perspective on the issues facing U.S.
manufacturers, especially in the chemical industry.
We are a U.S. based multinational innovator, developer and
manufacturer of chemicals and have a significant interest in the growth
and sustainability of the manufacturing industry in the United States.
Accordingly, we appreciate the opportunity to share our views on the
future of U.S. manufacturing and the role that the Federal Government
can play in supporting the cornerstone of our sustainability--the
continuation of our country's leadership in innovation and
The chemical manufacturing industry is one of the most important
sectors of the U.S. economy. The chemical industry employs in excess of
840,000 employees with average hourly earnings 22% greater than the
private sector average. Considering the indirect employment associated
with supplier jobs and expenditure-induced jobs, the chemical industry
is responsible for greater than 5.4 million jobs \1\. The products of
chemical manufacturing are an integral part of our everyday lives and
the industry provides high-paying jobs that utilize our country's
skilled and productive workforce.
\1\ Source: Bureau of Labor Statistics, Bureau of the Census, PMC
Despite its importance to the economy, the U.S. chemical industry
has faced and continues to face challenges. The global spread of
existing efficient manufacturing technologies, lower costs of
operations and compliance elsewhere in the world, combined with freer
global flow of investment capital has intensified the competitive
landscape. Efficiency-improving manufacturing technologies are
spreading faster than ever across the globe, rapidly reducing the
productivity advantage that once compensated for higher costs of
operations in the U.S. Lower barriers to the flow of investment capital
has led to newer more efficient manufacturing plant investments to be
installed elsewhere in the world. These challenges apply to the entire
manufacturing industry. The gaps to our leadership are shrinking.
Innovation must lead the pathway to the future if we are to maintain
our leadership position.
The U.S. chemical industry is in need of growth revival. We believe
that two of the most important challenges facing our nation today are
(i) how to increase the number of good, high paying jobs and (ii) how
to reduce the dependence of our nation on foreign oil. We believe that
increased development and production of chemicals based on renewable
sources is a viable, sustainable pathway to further both of these
objectives, while at the same time reducing our nation's carbon
Replacement of crude oil by renewable feedstocks through the
chemical supply chain is a ``real and now'' possibility. By the virtue
of their higher value based on more diverse applications, downstream
chemicals from renewable sources can rapidly lead to reduction of
imported crude oil and increased job creation. Those of us that are
involved in renewable chemicals manufacture know that this is a near-
term and realistic opportunity. Government programs to support small
and medium-sized enterprises as well as larger enterprises in this
effort have the ability to have a sustainable and catalytic impact. The
foundation of this strategy should be our strengths, namely our large,
existing chemical manufacturing and related infrastructure, and our
deep base of skilled workers. However, the renewable chemicals industry
faces challenges to get off the ground, these challenges lie primarily
in the development and commercialization phase.
We believe that there should be three critical pillars to the
successful development of a sustainable renewable chemicals industry:
1. The development of new chemical products based upon
renewable resources to (i) reduce our dependence on petroleum,
(ii) promote America as a leader in a growing manufacturing
sector; and (iii) support the creation of high paying chemical
manufacturing jobs. The petroleum based chemical industry has
attracted decades of investment to adapt chemical technologies
to produce products that touch almost every minute of our daily
lives. Research and innovation in renewable chemicals should,
in the near term, be focused on the adaptation and application
of existing chemical processes on renewable feedstocks and, in
the mid-term, be focused on the creation of new techniques to
convert renewable feedstocks into valuable products.
Sustainable efforts by private industry in this type of
research should be supported by the Government through:
a. Funding programs to support private and public
research activities in the application of existing
chemical know-how to produce chemicals from renewable
b. Funding programs to support private and public
research activities for developing new and novel
chemical processes for converting renewable feedstocks.
c. Creating a stable policy environment and incentives
for manufacture of renewable chemicals.
d. Introducing ``jump-starting'' legislature that
calls for replacing petroleum-based chemicals in
e. Funding the development of pragmatic standard
methodologies for identifying renewable chemical
content, carbon footprint, and petroleum replacement
2. Invest in retooling existing facilities to commercialize
renewable chemicals. Reconfiguring existing facilities to
support the manufacture of new chemical products will require
investment. Our infrastructure, skill base and manufacturing
knowledge are our strengths. The access to commercialization
phase investment capital, especially for small and medium sized
enterprises, is a significant challenge to the early stages of
transformation. The transformation of existing manufacturing
infrastructure to support the growth of the renewable chemicals
industry should be supported by our Government through:
a. Funding programs to leverage private capital in the
commercialization phases of transformed facilities.
b. Implementing incentives for private investment in
the production of renewable chemicals.
c. Supporting small and medium-sized enterprises
through capital access programs and through the
development of a one-stop shopping approach to
Government support programs.
d. Elevating renewable chemicals to an important
position in the nation's agenda, similar to biofuels.
3. Maintain and extend our productivity leadership through (i)
retrofitting existing facilities with world-class measurement
systems and process control to support productivity improvement
to compete with newer facilities in other countries; and (ii)
improving the access to best practices in manufacturing for
small and medium enterprises. The use of existing manufacturing
infrastructure must be accompanied by investment in process
control and measurement systems for productivity improvement.
New manufacturing facilities in other countries are being built
with state-of-the-art process control and productivity
improvement systems. (Recall what happened to our steel
industry.) The competitiveness of American manufacturing must
be supported by retrofitting our facilities with state-of-the-
art technology for manufacturing productivity. The development
of these systems will benefit the entire manufacturing sector.
The government can support these efforts through the National
Institute of Standards and Technology by way of:
a. Funding programs for renewable chemicals
manufacturers to upgrade the competitiveness of their
measurement systems and process control technologies.
b. Funding public and private research in new
productivity improvement and process measurement
c. Leveraging the existing efforts of the
Manufacturing Extension Partnership to assist small and
medium-sized manufacturers in implementing best
practices focused on cost efficiency and productivity.
Finally, we appreciate the opportunity to share our views. Our
Government should continue and expand its roundtable programs to create
a dynamic process for feedback from small and medium-sized enterprises
to ensure that the most effective programs and policies are advanced.
At PMC, renewable chemicals are a substantial part of our growth
strategy. We have committed to this strategy because we believe that it
is a sustainable pathway for manufacturing growth. The challenge that
we face along with other U.S. manufacturers is in accelerating the
commercialization of these technologies. In an uncertain economic
environment, companies normally take a conservative approach to
investment. Prudent Government policies and standards are required to
change this mindset. Efficient and pragmatic government programs
supporting the renewable chemicals industry would accelerate the
transformation of ideas into increased employment and decreased
reliance on foreign oil.
Biography for Debtosh Chakrabarti
Debtosh Chakrabarti is the President of PMC Group. In this
capacity, he is responsible for the North American based operations and
businesses of PMC Group. In addition, he serves on PMC's corporate
committee responsible for overall corporate management of the global
group. PMC Group is a growth oriented, diversified, global chemicals
and plastics company dedicated to innovative solutions to everyday
needs in a broad range of end markets including plastics, consumer
products, electronics, paints, packaging, personal care, food,
automotive and pharmaceuticals. The Company was built on a sustainable
model of growth through innovation while promoting social good.
Dedicated to sustainability, PMC derives over half of its raw materials
from renewable sources and operates from a global manufacturing,
innovation and marketing platform with facilities in the Americas,
Europe and Asia. Mr. Chakrabarti has been instrumental in the growth of
PMC from a single site manufacturing operation to a global chemical
company. Born on June 11, 1973 in Wayne, New Jersey, he attended
primary and secondary schools in New Jersey and Pennsylvania. He
received his Bachelor of Science in Chemical Engineering from
Massachusetts Institute of Technology and is a graduate of the Advanced
Management Program at Harvard Business School. He currently resides in
Moorestown, New Jersey with his wife, Juliana, son, Deven and daughter,
Chairman Gordon. And now we will hear from Dr. Mark
STATEMENT OF MARK TUOMINEN, DIRECTOR, NATIONAL
Dr. Tuominen. Good morning. First I want to thank the
Committee for the opportunity to discuss this critically
important subject on behalf of the National Nanomanufacturing
Network. I am going to get directly to the heart of the matter.
Innovation is the raw fuel of the American economy.
Manufacturing is the engine. Now, although the discussion today
is on manufacturing innovation broadly, I am going to use the
key example of nanomanufacturing to emphasize my points.
Research and development in nanomanufacturing exemplifies
what we must pursue in 21st century manufacturing innovation.
It is the highest of high tech. Our Nation needs to embrace a
long-term strategy of manufacturing innovation and excellence.
Nanomanufacturing is the use of new techniques and tools that
generate and manipulate nanomaterials for reproducible
commercial-scale manufacturing. Nanomanufacturing is emerging
today because of the investment the Federal Government made in
the National Nanotechnology Initiative [NNI]. We must be
strategic now to reap the return on this investment.
The NNI, with its focus on fundamental research and
research infrastructure, has been a huge success with many
exciting nanotechnology demonstrations. Some are already in
products. However, making the transition from proof-of-concept
demonstration to full-scale manufacturing is not trivial.
Manufacturing brings up issues such as process development and
modeling, scale-up, metrology, process control, tooling,
workforce, safety and supply chain.
There have been huge strides in nanomanufacturing research
and development over the last few years, including a few
examples I will name now: processes to make transparent
conducting electrodes using carbon nanotubes: this replaces
indium tin oxide for displays and solar cells during a time
when the world supply of indium is becoming dramatically
scarce; the use of diblock copolymers for nanoscale patterning:
utilization of molecular self-assembly for magnetic data
storage, electronics, energy conversion and energy storage
applications; synthetic processes for making monodisperse
nanoparticles with designer surfaces, impacting many
applications from efficient lighting to solar cells to disease
diagnostics and therapy, and there are many others.
The companies and nations that figure out how to
manufacture products from these recent nanomanufacturing
innovations will reap the greatest benefits: jobs, economic
security, intellectual progress and sustainability.
I would like to address the specific questions posed by the
Committee. The first is on the NSF [National Science
Foundation] support of nanomanufacturing. The following NSF
activities are relevant. There are four complementary
nanomanufacturing research and development centers. There is a
National Nanomanufacturing Network, which is represented here
today, which networks these centers together and supports the
broader nanomanufacturing community through collaborative
activities and information sharing and through its Web
resource, InterNano. And there is also at the NSF a
nanomanufacturing program, which administers mainly individual-
investigator and small-team grants. There are other programs at
the NSF, including SBIR/STTR [Small Business Innovation
Research/Small Business Technology Transfer] and the
Nanoelectronics Research Initiative, that also support
nanomanufacturing research, but as a subcomponent only. The NSF
nanomanufacturing programs are currently funded at a level of
$22 million from the NNI. This low level severely limits the
impact and the speed that such activities could have on the
Nation's competitiveness and economy.
What else should be done? Strengthening the activities to
build a robust manufacturing workforce. This is at all levels,
but especially at the technical community college level.
Another is to strengthen nanomanufacturing research development
and education by adding the support for university-industry
manufacturing test beds and pilot projects. The close
involvement of industry in identifying fundamental research
targets is critical. We also need more activities based on 21st
century manufacturing research in general, and we also need to
strengthen the activities of the National Nanomanufacturing
Network through facilities, staff and scope.
In terms of the Federal Government, there is not currently
enough U.S. activity in process development combined with tool
and instrumentation development. Designing and building future
generations of scalable manufacturing tools enable us to get
our return on investment. Roll-to-roll manufacturing, TIP-based
[Technology Innovation Program, NIST] nanomanufacturing and
others are low-hanging fruit. There is not enough support for
nanoinformatics. There should be a stronger emphasis on
standards development. And in terms of the industry's role, I
would have to say that in the NNI, the industry has played an
important role. The semiconductor industry, the chemical
industry, the forest and paper industry have all provided
valuable input. Now the Industrial Research Institute and its
member companies are working to try to develop a program with
the NSF for industry-inspired fundamental research.
In terms of the nanotechnology's transition effectively to
manufacturers, this has occurred in some but not in all cases.
One barrier to successful technology transition is the cultural
mismatch between the priorities between fundamental researchers
and manufacturing experts.
Lastly, in terms of coordination and prioritization,
supporting manufacturing innovation overall should be a
priority for the Federal Government.
In conclusion, to leverage resources effectively, the
Federal Government should consider the creation of a serious
interagency initiative focused on manufacturing innovation. As
I have already emphasized several times, a vibrant national
manufacturing enterprise system rich in innovation requires a
culture in which industry, academia and government work closely
together. Thank you.
[The prepared statement of Dr. Tuominen follows:]
Prepared Statement of Mark Tuominen
I thank the committee for the opportunity to discuss innovation and
manufacturing. It is an honor to be here and speak directly and plainly
about this vitally important topic.
Innovation is the raw fuel of the American economy. Manufacturing
is the engine.
I speak to you today on behalf of the National Nanomanufacturing
Network. Nanomanufacturing is the use of new techniques and tools that
generate and manipulate nanomaterials for reproducible commercial-scale
manufacturing. As I will discuss today, research and development (R&D)
in nanomanufacturing exemplifies what we must pursue in 21st century
manufacturing innovation. The National Nanomanufacturing Network (NNN),
funded by the National Science Foundation (NSF), operates as an open-
access network of centers, leaders, experts, and stakeholders from the
nanomanufacturing research, development and education community. The
network's mission is to serve as a catalyst to advance
nanomanufacturing in the U.S. by facilitating collaboration,
roadmapping, and prioritization activities on critical enabling areas
of nanomanufacturing, and by information sharing through its
nanomanufacturing database and information resource, InterNano. The NNN
includes a core of four contributing NSF Nanoscale Science and
Engineering Centers focused specifically on nanomanufacturing, as well
as nanomanufacturing centers from the Department of Energy (DOE) and
the National Institute for Standards and Technology (NIST), and many
other contributors from academia, industry and government. More details
about the ongoing activities of the NNN are described below. My
comments today are the distillation of ideas from many experts who
contribute to NNN activities.
Nanotechnology Research and Nanomanufacturing
The U.S. investment in nanotechnology through the National
Nanotechnology Initiative has resulted in enormous advancements in our
ability to make, control and utilize nanomaterials whose characteristic
features are 1-100 nanometers. The last ten years in nanotechnology has
been a period of dramatic discovery and exploration. Brilliant
scientists and engineers from interdisciplinary teams have created
proof-of-concept demonstrations with high performance nanoscale
materials and devices. These results are now beginning to impact just
about every commercial product sector, including, at the very least,
electronics, materials, health, transportation, consumer care products
and, especially, energy. However, making transition from proof-of-
concept demonstration, to prototype, to manufacturing pilot, to full-
scale manufacturing is not trivial. This is especially true in the case
of an emergent field like nanotechnology, where, in most cases, we
cannot simply adapt old designs of production tools for these new
methods. Manufacturing brings to bear a new range of issues: process
development and modeling, scale-up, metrology, process control,
tooling, workforce, safety, and supply chain. Ultimately, these issues
have to be addressed because, without manufacturing, there are no
products. Perhaps more than any other previous activity,
nanomanufacturing requires close cooperative efforts between industry,
academia and government. Since a considerable amount of the Federal
funding in nanotechnology has supported research at universities and
government labs, many of the new fundamental discoveries have occurred
at those places. Yet product development and manufacturing
traditionally occur in industry. For the U.S. to take full economic and
societal advantage of the many nanotechnology breakthoughs it has
fostered, the Federal Government needs to help build and support a
culture that strives to develop leading-edge manufacturing capabilities
through close collaboration of industry, academia and government.
Creating a culture that thrives on manufacturing excellence is a
challenge, but at the same time, an enormous opportunity.
Strides in Nanomanufacturing R&D
Nanomanufacturing R&D is focused on the creation of new processes
and tools to produce and utilize nanomaterials at a commercially-
relevant scale. Nanoscience research has resulted in the discovery and
development of new techniques to make and manipulate nanomaterials that
are so out-of-the box and revolutionary that it is difficult for the
manufacturing community to quickly reposition and take advantage. A few
recent examples include:
The production of carbon-nanotube-based transparent
conducting electrodes--replaces indium tin oxide for displays
and solar cells, during a time when the worldwide indium
resources are becoming increasingly scarce.
The use of diblock copolymers for nanoscale
patterning--utilization of molecular self-assembly for magnetic
data storage, electronics, energy conversion and energy storage
Self-alignment processes--utilizing natural molecular
interactions for device integration at the nanoscale and
enabling low cost roll-to-roll manufacturing processes.
Plasmonic lithography--producing nanostructures with
smaller critical dimensions by using surface plasmons to
circumvent the diffraction effects that limit conventional
Scalable processes for the production of carbon
nanotubes and graphene--impacting many applications from
electronics to structural materials to thermal management
Synthetic processes producing monodisperse
nanoparticles with designer surface ligands--impacting many
applications from efficient lighting to solar cells to disease
diagnosis and therapy.
More examples are discussed at the end of this written testimony.
The key point here is that nanomanufacturing introduces many new
disruptive, rather than evolutionary, process technologies. In most
cases, these innovations were not on any industrial roadmap. As a
consequence, there are gaps in the value chain--such as the lack of
availability of suitable production scale tools, feedstock suppliers
and trained workforce--that hinder commercial implementation. The
companies, and nations, that figure out how to manufacture products
from these recent innovations will reap the greatest benefits. It is
both a challenge and an opportunity.
A Strategic Long View of Nanomanufacturing
The Nation needs to embrace a strategic long view to advance
manufacturing science and engineering. The fast progress we observe in
nanomanufacturing R&D serves as an important reminder. It is a reminder
that we must continue to innovate in manufacturing, that manufacturing
holds many yet unsolved challenges, that manufacturing is an area that
needs continual research, and that we must train and sustain a
workforce driven to continue advancing our national capabilities in
manufacturing. This can only be accomplished effectively with strong
public-private partnerships with equally vested industry, academic and
government stakeholders. To complement the recent strides in
fundamental research, pre-competitive joint-development projects are
needed to take promising nanomanufacturing processes to scalable
manufacturing. If well managed and adequately supported, manufacturing
prototype and pilot projects will create critical knowledge to help
enable the considerably expensive jump to full-scale manufacturing.
This includes process development and modeling, application
prototyping, tool design and development, manufacturing informatics,
sustainable manufacturing design and manufacturing-by-design method
development. Doing so will translate into numerous societal benefits
including jobs, economic security, intellectual progress and
Nanomanufacturing Support by the National Nanotechnology Initiative
The Federal Government has steadily ramped up its support in
nanomanufacturing R&D in the National Nanotechnology Initiative (NNI)
funding \01\. In total, the NNI's actual nanomanufacturing funding
level was $75.6M (4.4% of NNI total) in 2009, with an added $28.5M
(5.5%) of 2009 ARRA funding. The estimated funding is $96.7M (5.4%) in
2010 and proposed funding is $101.4M (5.7%) in the 2011 budget request.
Historically, the NSF, NIST and DOD were the early leaders in creating
funding programs to address the distinct issues associated with
nanomanufacturing. Now DOE, NIH and other agencies have joined suit,
recognizing the essential role that nanomanufacturing plays in
progress. Advancing manufacturing in the U.S. is a mission and should
be increasingly supported, with long-term strategic management, by the
mission-based agencies. NIOSH has made substantial efforts to provide
guidance on controls for nanomanufacturing worker safety, and the EPA
has a growing base of activities in nanoparticle environmental, health
and safety. The topic of Sustainable Nanomanufacturing is one of three
NNI Nanotechnology Signature Initiatives planned for the 2011 budget.
This initiative, which involves contributing efforts by NIST, NSF, DOE,
EPA and NIH, at a level of $23M, will focus on the long-term
development of flexible ``bottom up'' nanomanufacturing methods that
can be applied broadly to applications including, solar energy
harvesting, communications and computation, waste heat management and
recovery, and energy storage.
\1\ ``The National Nanotechnology Initiative: Research and
Development Leading to a Revolution in Technology and Industry:
Supplement to the President's FY 2011 Budget,'' Subcommittee of
Nanoscale Science, Engineering, and Technology (NSET), Committee on
Technology, National Science and Technology Council. Available from the
National Nanotechnology Coordination Office (NNCO), www.nano.gov
Now, after this rather long introduction, I will address the
specific questions posed by the committee.
What is the National Science Foundation (NSF) doing to foster
innovation in manufacturing through research and development in
nanomanufacturing? In your opinion, are NSF's current research programs
sufficient? If not, why not?
Ultimately, it is my opinion that the NSF has some well-designed
programs supporting nanomanufacturing, it is primarily the low overall
level of support which limits the impact and speed that such activities
could have on the Nation's competitiveness and economy.
The NSF is placing a growing emphasis on nanomanufacturing R&D,
with $22.4M (5.4% of NSF NNI share) estimated in 2010 from the National
Nanotechnology Initiative budget and proposing $32.2 (8.0%) in 2011.
Currently NSF supports nanomanufacturing R&D within the following
listed programs or activities. The first three are specifically focused
on nanomanufacturing, whereas the others contain only a subcomponent of
activity on nanomanufacturing.
Four Nanoscale Science and Engineering Centers
(NSECs) specifically dedicated to nanomanufacturing:
Center for Hierarchical Manufacturing (CHM)--
University of Massachusetts at Amherst and partner
institutions; CHM is also the administrative hub of the
National Nanomanufacturing Network
Center for High-Rate Nanomanufacturing (CHN)--
Northeastern University and partner institutions
Center for Scalable and Integrated NanoManufacturing
(SINAM)--University of California Berkeley and partner
Center for Nanoscale Chemical-Electrical-Mechanical
Manufacturing Systems (Nano-CEMMS)--University of
Illinois Urbana Champaign and partner institutions
The National Nanomanufacturing Network--collaborative
activities and information sharing among a network of U.S.
centers, experts and stakeholders, including the four NSECs
The Nanomanufacturing program within the NSF
SBIR/STTR program, for small companies, frequently
working in collaboration with universities;
The Nanoelectronics Research Initiative (NRI)--a
program cooperatively funded with the Semiconductor Research
Corporation, research based on fundamental research needs of
the semiconductor device manufacturers, all large companies;
The GOALI program for joint university-industry
NSF manufacturing research programs, generically,
within the Engineering Directorate, some of which have
The proposed 2011 NSF investment plans to emphasize several program
topics that will have substantial nanomanufacturing impact:
1) New tools for measuring and restructuring matter for
2) Hierarchical manufacturing of nanosystems by assembling
nanoscale components into new architectures and fundamentally
3) Manufacturing by design by using new computer principles,
computer simulations, and nanoinformatics;
4) Hybrid nanomanufacturing, including nanobiotechnology and
One overall goal for 2011 is to strengthen support across the
National Nanomanufacturing Network in order to advance innovation and
to implement research results through partnerships with industry,
medical institutions and other government agencies. In my opinion, the
NNN effort should be strengthened and expanded significantly to provide
the physical and intellectual infrastructure needed to spur industrial
nanomanufacturing. This includes new centers on complementary
nanomanufacturing themes and stepping up the support to existing
nanomanufacturing centers to provide shared-use facilities and
professional staff specifically dedicated to nanomanufacturing
development with industry partners. As identified in NNN roadmapping
workshops, rapid progress could be made by strengthening R&D activity,
in a set of well-chosen, well-focused manufacturing test bed
development projects involving close university-industry
Overall, more co-funded projects are needed to enable universities
and industry to work collaboratively on advanced nanomanufacturing
issues. The NRI program, listed above, accomplishes this to a limited
degree, but only in the nanoelectronics area. More analogous efforts
are needed for other industry areas, including materials, energy,
health, communications, and others. One new program currently under
development to take steps in this direction is the ``Industry Inspired
Fundamental Research'' (IFR) program. This is a joint effort between
the NSF and 28 member companies of the Industrial Research Institute
(IRI). These are mainly large companies. The emphasis here is to
develop co-funded fundamental research projects at universities on
focused scientific topics that will have a direct impact on the success
of American industry. This partnership model should serve to
simultaneously train the future workforce and advance knowledge that
can be directly implemented in industry. If well managed and amply
funded, it should prove to be successful. In such case, its funding
should be augmented.
It is often stated that the most effective way to transfer new
technology from universities to industry is by way of people.
Graduating students who carry with them the ideas developed in an
environment rich with research activities, innovation culture, and a
genuine understanding of industry needs are ideally suited to quickly
transform ideas into products in industry. Student involvement in
university-industry projects will have a significant impact on the
speed by which new innovations can be implemented in industry.
I would like to emphasize an important and relevant observation:
From their inception in the late 1990s, NSF nanotech funding program
solicitations for group and center research projects required that
research be performed by interdisciplinary teams. Looking back, this
was a visionary strategy. It is my opinion that, over time, this
emphasis on interdisciplinary research transformed U.S. science and
research in a substantially beneficial way, since almost all the great
advancements in nanotechnology have occurred due to the synergy between
distinct, but complementary, disciplines. One may argue that without
such a required push, there would have been far less progress in
nanotechnology overall. The notion of interdisciplinary ``boundary
spanners'' as catalyst for innovation is well known, and in the recent
nanotechnology progress we have observed this in action. We see from
this recent experiment that suitable incentives can transform research
Are there areas of nanomanufacturing research and development that
are not currently being addressed by the Federal Government that should
Currently, there is not enough support for tool and instrumentation
development, in the form of longer-term continuing projects. Without
the development of manufacturing tools that enable the utilization of
new nanomanufacturing processes, we cannot benefit from the huge
research investment already made in nanotechnology research. This type
of research is best done through jointly-funded industry-university
projects, so that the manufacturing science learned can be directly
implemented in a new wave of process tools. For example, there are
several nanomanufacturing processes that could be implemented in a
roll-to-roll platform to substantially lower the production cost. The
knowledge gained and the tools developed here could be leveraged into
several distinct product areas including batteries, solar cells, water
filtration membranes and many other technologies. The same is true for
a variety of other emergent processing methods.
There is currently not enough support for nanoinformatics, where
cyberinfrastructure, data mining tools, modeling tools, and automated
data gathering are utilized to accelerate progress in discovery,
development, design and manufacturing. Nanoinformatics will be a
critical factor in cost- and time-efficient design of nanomanufacturing
processes and products. Associated with this is the collection and
curation of data that manufacturers can use for evaluation and design.
There should be more support for pilot projects that advance
There should be a stronger emphasis and support for the development
of international documentary standards and standard reference materials
for metrology and tool calibration. Nanomaterials certification
standards, nanomanufacturing process specification language (PSL)
standards, and reference standards for nanomanufacturing process
control are vital. Standards will impact nanomanufacturing capabilities
in environments ranging from the single production facility to the
global supply chain network.
In general, there are not enough funding opportunities for industry
and academia to work together collaboratively to pilot new
manufacturing methods based on promising laboratory discoveries. By
getting valuable test data, the industrial engineers can make go/no-go
decisions and design for scale up, and university scientists and
engineers can gain new knowledge regarding the underlying fundamentals.
To be effective and serious, it is important that for such projects to
be successful, all the stakeholders must have ``skin in the game'' and
co-invest in the project. I am shocked by the stark comparison I see
when observing the close industry-university ties in countries like
Ireland, Japan and China. In other countries such as these, I have seen
the equivalent of technical community college students, Ph.D. students
and industry scientists all working together under the same roof. We
have very few examples like this in the U.S., but that can change if we
create a favorable environment. Proximity and shared mindsets matter
significantly, especially with regards to closing the cultural gaps
that currently exist between community colleges, universities, and
industry in the U.S.
The development of new manufacturing education curricula should be
an integral part of such activities, with the natural involvement of
industrial engineering programs. There should be a strong emphasis on
innovation education and manufacturing engineering principles. The
principles underlying both continue to evolve, especially considering
the complexities of a new field such as nanomanufacturing. We need the
education and research in science-based manufacturing process-property
models, scale-up principles, design-of-experiment methods, data-rich
statistical techniques and design-for-manufacturing methods. These all
contribute to manufacturing excellence as measured by quality, cost,
process reproducibility, property optimization, process flexibility and
What role does the manufacturing industry play in shaping the
Federal Government's nanomanufacturing research and development agenda?
In your opinion, are Federal Government programs focused on
nanomanufacturing responsive to the needs of the manufacturing industry
and other stakeholders? If not, why not?
I will mostly defer to my industrial colleagues on this issue, but
from my nanotechnology perspective, there have been several valuable
industry inputs toward the development of the National Nanotechnology
Initiative priorities. The semiconductor industry (through the SIA and
the SRC) helped to identify areas of priority for integrated circuit
chip manufacturers. Similarly the Council for Chemical Research and the
American Forest & Paper Association provided input for nanotechnology
priorities through the development of their respective 2020 roadmaps.
As discussed above, the companies of the Industrial Research
Institute (IRI) are working with the NSF to create an Industry-inspired
Fundamental Research program to jointly fund research driven by
industry needs. This program could fund ``collaboratory'' style
university research projects focused on tackling scientific problems
that would advance future generations of manufacturing capabilities.
More joint interactions of this type would be desirable. Fast
``skunkworks''-style projects and facilities, co-funded by the Federal
Government and industry, would result in test data that would advance
the development of new manufacturing capabilities. In the case of
nanomanufacturing, the centers already established by research agencies
could be leveraged for this purpose.
The NIST Technology Innovation Program (TIP) is one good example in
which industry and universities can work together towards the
development of nanomanufacturing processes and techniques. The
Department of Energy's Energy Efficiency and Renewable Energy (EERE)
nanotechnology program, similarly has projects based on an industry
need: the creation of better materials for energy efficiency and more
energy efficient nanomanufacturing processes for sustainable
manufacturing. Augmenting both TIP and EERE would be beneficial.
Lastly one should not neglect the support and involvement of the
small and medium sized companies. The SBIR/STTR programs are one
mechanism, but it is important that these companies also have the
opportunity to benefit from all of the programs discussed above. Small
companies are rich with innovative ideas, but they often lack the
manufacturing experience and resources possessed by large companies.
Small-company/large-company partnerships can be very beneficial to
Are nanotechnologies developed through federally-funded research
and development being transitioned effectively to use by manufacturers?
If not, why not?
In some, but not all, cases. One barrier to successful technology
transition is the huge ``impedance mismatch'' in priorities between
fundamental researchers and manufacturing experts. The best ways to
improve this is to incentivize a change in the culture and support
innovation education. As observed in the impact of the NSF requirement
for interdisciplinary team research in nanotechnology over the last
decade, we see that that mindsets can be changed, and rather quickly,
over a period of only a few years. To do so requires the right
incentives. Funding of projects with requirements for university-
industry partnership, innovation education, or small-company/large-
company partnerships, are all activities that over time, emphasize new
priorities that change mindsets in beneficial ways.
Another barrier to success is the lack of sufficient data to make
informed go/no-go decisions for the implementation of new technologies.
Too many of the breakthroughs are only at the proof-of-concept level.
When there is far too much uncertainty in the properties, performance
and reproducibility of a new nanomaterial or property, it is an
enormous economic risk to jump in with both feet. Supporting the
development of the most promising nanotechnologies, in the form of
pilot projects or manufacturing test beds, can produce reliable test
data and build confidence for further investment and development.
In your opinion, is there a need for better coordination and
prioritization of federally-funded manufacturing research and
Supporting manufacturing innovation overall should be a priority
for the Federal Government. Why? Countries that do not manufacture
products are poor, typically. We do not want to head in that direction.
With home-grown U.S. research breakthroughs, such as those in
nanotechnology, we have a rich foundation of innovations from which we
can build manufacturing excellence. Better coordination for
manufacturing R&D is needed, indeed, but it can be built upon existing
or emerging programs that are already successful, but underfunded. In
the case of nanomanufacturing, the National Nanomanufacturing Network
and industrial organizations that the NNN works with (eg. IRI, SRC,
AF&PA) can assist the process substantially, since these organizations
have already started roadmapping activities with key stakeholders and
have identified priority activities that represent the ``low hanging
fruit'' as well as long view strategic action that can advance U.S.
manufacturing. In the case of nanomanufacturing, each research agency
already has engaged in manufacturing R&D prioritization at some level,
as discussed in a few examples mentioned above. For manufacturing in
general, it is important to have a complementary set of roadmapping
exercises, some tightly focused on specific themes and some broad, so
as to identify the needs, challenges, opportunities and desired
outcomes. As is currently the case in nanomanufacturing, through such
roadmapping efforts the key priorities will emerge. To leverage
resources efficiently, the Federal Government should consider the
creation of an interagency initiative focused on manufacturing
innovation. As I have already emphasized several times, a vibrant
national manufacturing enterprise system, rich in innovation, requires
synergistic participation of industry, academia and government.
More Information on the National Nanomanufacturing Network
The mission of the National Nanomanufacturing Network (NNN) is to
serve as a catalyst for progress in nanomanufacturing in the U.S.,
through the facilitation and promotion of nanomanufacturing workshops,
roadmapping, inter-institutional collaborations, technology transition,
test beds, and information exchange services. The NNN operates as an
open-access network of centers, leaders, experts, and stakeholders from
the nanomanufacturing research, development and education community. It
is a partnership among academia, industry and government that is built
to foster and serve nanomanufacturing communities of practice. The core
foundation of the NNN consists of the four NSF nanomanufacturing
NSECs--the Center for Hierarchical Manufacturing (CHM), the Center for
High-Rate Nanomanufacturing (CHN), the Center for Scalable and
Integrated NanoManufacturing (SINAM), and the Center for Nanoscale
Chemical-Electrical-Mechanical Manufacturing Systems (Nano-CEMMS)--as
well as the DOE Center for Integrated Nanotechnologies (CINT) at Sandia
National Laboratories and the NIST Center for Nanoscale Science and
Technology (CNST) and other affiliations. InterNano is the information
arm of the NNN--a digital library clearinghouse of timely information
on nanomanufacturing and a web platform for collaboration. It should be
noted that each center described above is funded independently. The NSF
funding for the NNN's cooperation and information sharing activities is
provided as a portion of the grant for the Center for Hierarchical
The NNN functions as part electronic resource, part community of
practice, and part network of experts working on the development of
nanomanufacturing. The NNN has made key progress in launching and
establishing an effective mechanism for information sharing
(InterNano), facilitating and organizing workshops and events with
topical focus on critical and emerging nanomanufacturing issues,
facilitating and contributing to critical areas of informatics,
standards, education and workforce training, and further providing an
open platform for archiving information where stakeholders can
contribute or access relevant information specific to their needs in
the area of nanomanufacturing. Subject to available funding resources,
the NNN has a vision of providing the following activities to support
Facilitate collaborative R&D activities that support
the development of nanomanufacturing systems through pilot
projects and test beds with industry partnership
A complementary portfolio of nanomanufacturing
education and training activities.
Share and disseminate best practices (process
implementation, tech transfer, EHS, supply chain)
Leading or assisting technology visioning and
roadmapping activities via workshops and working groups,
symposia, and summits on nanomanufacturing themes.
Guide the development, implementation and growth of
the InterNano nanomanufacturing information clearinghouse via
Economic analysis of emerging nanomanufacturing
Federated nanoinformatics efforts linking materials,
process, and application databases.
More Information on the Centers Affiliated with the NNN
The collection of centers represented by the NNN provides a
complementary portfolio of nanomanufacturing process technologies.
Detailed information can be found at www.internano.org and at each
The Center for Hierarchical Manufacturing (CHM) led by the
University of Massachusetts Amherst provides methods that use self-
assembling diblock copolymers and complementary nanomanufacturing
process to control structure from the nanoscale to the macroscale. The
center develops processing techniques and modeling methods for
nanomanufacturing both in batch and roll-to-roll production formats.
These processes have significant impact for the low-cost production of
data storage media, nanoelectronics, batteries, solar cells, water
filters and communications. The CHM is also the administrative hub of
the National Nanomanufacturing Network.
The NSF Center for Nanoscale Chemical-Electrical-Mechanical
Manufacturing (Nano-CEMMS) headquartered at the University of Illinois
concentrates on developing innovative processes that function in
ambient (as opposed to high vacuum processes) conditions, are well
suited to large-area formats, and with material sets not usually
associated with microelectronics. Nano-CEMMS has developed a
manufacturing platform that exploits efficient nano-fluidic and ionic
transport phenomena to realize a whole new class of products such as
semi-transparent flexible solar collectors, flexible-stretchable solid-
state lighting and bio-compatible electronics.
The NSF Center for High-Rate Nanomanufacturing (CHN) headquartered
at Northeastern University provides methods for fast large scale
directed assembly and transfer of nanostructures, including carbon
nanotubes as on chip wiring interconnects, transparent flexible
electronics using carbon nanotubes, wafer-level template-free assembly,
and custom made nanostructured carbons of various forms. The CHM also
works on the development of best practice guidelines to limit exposures
to nanomaterials and fast toxicity screening methods.
The NSF Center for Scalable and Integrated Nanomanufacturing
(SINAM) led by the University of California Berkeley has developed
tools and techniques for plasmonic nanolithography, which provides a
high throughput route to pattern nanostuctures having feature sizes
below 22 nm. This technology is relevant to semiconductor device
manufacturing and other application areas.
The DOE Center for Integrated Nanotechnologies (CINT) at Sandia
National Laboratory has developed and deployed the Discovery
PlatformTM. These platforms are modular micro-laboratories
designed and batch fabricated by CINT to allow easy integration of
nanomaterials into microscale structures. They allow easy connections,
a range of diagnostic and experimental measurement conditions, and a
degree of standardization and reproducibility in nanoscale
measurements. Sandia also is home to the National Institute for Nano-
Engineering (NINE)--a Public-Private Partnership formed to develop the
next generation of technical innovation leaders for the U.S., employing
the national strategy of the America COMPETES Act.
The NIST Center for Nanoscale Science and Technology (CNST)
supports the development of nanotechnology from discovery to
production. The Center provides this support through a research program
that develops innovative nanoscale measurement and fabrication
capabilities, and is accessible via collaboration with CNST scientists
and a national nanofabrication facility, the NanoFab, which is a
shared-use R&D facility with a suite of tools and processes for
Biography for Mark Tuominen
Professor Mark Tuominen is the Director of the National
Nanomanufacturing Network, Co-Director of the NSF Center for
Hierarchical Manufacturing and a Professor in Physics at the University
of Massachusetts Amherst. He was raised on a dairy farm in northern
Minnesota, worked as logger, in sheet metal manufacturing in a small
company, in manufacturing scale-up for a large multinational company,
and ultimately, in academia as a scientist and educator. Mark has a
bachelor's degree in Chemical Engineering (1986) and a Ph.D. in
Condensed Matter Physics (1990), both from the University of Minnesota.
His current research includes nanomanufacturing R&D, magnetism,
nanoscale charge transport, and energy devices. He currently serves as
a U.S. delegate to the ISO TC-229 Committee on Nanotechnologies and as
leader of the ISO nanomanufacturing terminology project.
Chairman Gordon. Thank you. And Mr. Crews is recognized.
STATEMENT OF WAYNE CREWS, VICE PRESIDENT FOR POLICY AND
DIRECTOR OF TECHNOLOGY STUDIES, COMPETITIVE ENTERPRISE
Mr. Crews. Good morning, Mr. Chairman. I appreciate the
opportunity to appear.
I am a strong advocate of these new technologies but I do
want to sound a few warnings today. When it comes to our
economy, where are we going and why are we in this hand basket?
We want to make things in the United States, and create jobs,
but mired in recession, what is the national government's role
in manufacturing a more robust manufacturing economy?
First, we must avoid fostering a declaration of dependence
on the part of America's most crucial frontier industries.
Second, we must avoid having the government steer while the
market rows. Worthy knowledge and ideas are too widely
dispersed for that.
The need to deregulate this economy shouts at us, and I
will say a little bit about that in a few moments. Basically
you don't need to tell the grass to grow, you just need to take
the rock off it. America's real wealth is yet to be created,
but to fulfill that optimism requires recognizing the
limitations of politically driven R&D. Overly aggressive
taxpayer funding of science and manufacturing research can be
incompatible with a lightly regulated future. For one, Federal
science fosters conflicts over public access to data, the
merits of basic versus applied research, government versus
industry science, and intellectual-property disputes. For
another, politics has trouble with tradeoffs. When will it be
nanotech, or biotech, or fuel cells in the hydrogen economy, or
robotics, or bioengineered gills so we can live in the ocean.
Meanwhile, the science not created by the political redirection
of resources remains unseen. It wasn't the power to tax and
dispense that made the United States leapfrog the world's
economies in only 100 years.
So simply a warning: subsidies can mean subprime technology
policy for many reasons. Number one, government steering can
create artificial booms. Number two, government funding comes
with strings attached. Number three, political failure can
overwhelm market failure and basic research. Number four,
politicians can't choose rationally, present company excepted,
of course. The latest conceit is yesterday's FCC [Federal
Communications Commission] national broadband plan, which in a
way is `cap and trade' for telecom. Number five, taxpayer
funding sometimes wrongly fosters a view of technology as a
zero-sum global race, but commerce and trade are not like war.
Moreover, subsidies don't alter the ratio of GDP spent on
research and development. Number six, taxpayer funding can
create a glut of the wrong kinds of technology graduates.
Number seven, taxpayer funding creates pressures for poor
intellectual-property outcomes, like too much compulsory
licensing. Number eight, taxpayer funding can undermine safety,
because ``undiscovery'' of even the riskiest science is
unlikely, but market disciplines like liability and insurance
need to evolve alongside.
So what do we do? Well, doing something is more than just
spending money. The COMPETES Act may pull together a few
billion dollars for a lot of very worthy projects, but the real
gains come if we liberate to stimulate, if we work on
separating state and economics.
First, avoid picking technological favorites. Rather than
trying to improve speeds by picking the particular R&D horses
to run around the racetrack, improve the business and
regulatory environment so all can go faster, and let jockeys
keep more of their earnings.
Second, allow freer trade in skilled labor. Bright foreign
workers want to stay in the United States and create jobs after
graduating here. That is a better way to address the global
Third, avoid safety regulation that makes us less safe.
Many frontier technologies like nanotech make our environment
far cleaner. Emphasizing the hazards of these new technologies
overlooks the hazards of stagnation.
Fourth, liberalize capital markets. Post-Enron, Sarbanes-
Oxley regulation has distressed smaller companies severely.
Exempt firms with smaller market capitalizations.
Fifth, privatize. During the 1990s it was proposed that
commercial aspects of Federal labs be offered to the industries
they benefit or by allowing employees, research employees, to
buy them out.
Sixth, award prizes rather than grants, which is something
that is in the COMPETES Act that should be explored more.
Seventh, liberalize the infrastructure supporting American
commerce and manufacturing. Tearing down the regulatory silos
that artificially separate our great network industries, like
electricity and telecom and transportation, has enormous
potential for creating wealth in the United States.
Eighth, relax predatory and anti-consumer antitrust.
Markets require competition, but sometimes collusion is merely
a partial merger instead of a full one. In other words,
constraining productive firms in ways the market never intended
hobbles entire industry sectors and undermines the wealth
creation itself at times.
Finally, deal with regulation generally. Sixty agencies
issue 4,000 regulations a year, costing over $1 trillion and
some 70,000 Federal Register pages. So implement a bipartisan
regulatory reduction commission, sunset regulations, have
Congressional approval for controversial rules, more
flexibility for smaller businesses, points of order for
unfunded mandates, and a basic regulatory report card on the
state of regulation that accompanies the Federal budget.
I will close there, and I thank the Chair for your
[The prepared statement of Mr. Crews follows:]
Prepared Statement of Wayne Crews
Separation of State and Economics: A 21st Century American
Manufacturing Stimulus Package
Everyone agrees we still want to make a lot of stuff in the United
States of America and create jobs. So what are the prerequisites for
prosperity? Mired in recession now, how do we ``manufacture' a robust
American manufacturing economy?
For starters, we avoid fostering a ``Declaration of Dependence'' on
the part of America's most crucial frontier industries.
The purpose of this hearing (``The Future of Manufacturing: What is
the Role of the Federal Government in Supporting Innovation by U.S.
Manufacturers?'') is to examine ``the need to adopt innovative
technologies and processes'' and assess the National Government's role.
The positive message is that most of America's wealth has not been
created yet. But to fulfill that optimism, recognizing limitations of
politically driven research and development compared to what capital
markets and economic liberalization can achieve is vital. Most
politicians defend a significant, even pivotal, governmental role. I
say instead that when it comes to the creation of knowledge wealth
itself, that's a worrisome stance and better alternatives exist.
To go overboard in enshrining Washington predominance in terms of
``America COMPETES Act'' and ``Recovery and Reinvestment Act''-style
spending in a sense is taking the easy way out. The latter in
particular shirked genuine duties as the Nation endured economic
upheaval. Instead, there's difficult, important actual work for
Washington to do. At this vulnerable stage of business, economic, and
American history, Washington can't spend money on technology education,
science and manufacturing and think it's done any of the work required
to reinvigorate manufacturing.
The America COMPETES Act you might reauthorize should be different
in kind, not degree. It is now a vehicle for subsidizing various
popular education and technology ventures; it instead should removing
accumulated impediments to innovation: it should ``liberate to
Let's Avoid Having Government Steer While the Market Rows
The America COMPETES Act is bipartisan, but fifteen years ago the
tone was different; Congress sought to reduce government with sweeping
proposals like privatizing national labs and curbing business and
corporate welfare. Ironically, The National Nanotechnology Initiative
signed by President Bush directed about a third of funding to the very
Energy Department slated for abolition in 1995.
Aggressive taxpayer funding of scientific and manufacturing
research is not compatible with a future of optimally and lightly
regulated science and manufacturing specifically, or with limited
Moreover there are opportunity costs--tradeoffs. Politics cannot
determine optimal research portfolios: Why nanotech instead of biotech,
or space travel, or bioengineering gills so we can live in the oceans?
Or fuel cells and the hydrogen economy? All such rifts are impervious
to political resolution. And that's good.
No political party is immune from exacerbating distortions created
by politicized science, as politicians channel Federal dollars back
home regardless of scientific merit. In a sense, the debate over
science policy and where to allocate taxpayer resources isn't one over
science policy as such; rather, it's over problems of allocating the
spoils artificially created when government (an institution with the
power to tax) gets involved in the very production of knowledge itself
(and seducing industry), rather than in merely protecting rights in the
property that knowledge makes possible. Further, we want to avoid
politicized situations like ``junk science,'' ``climategate,'' bubbles
created by governmental investment, the undermining of freedom of
``research speech'' (or of its corollary, withholding one's speech/
Today, we see examples of artificially created conflicts rooted in
governmental science policy. These disputes include disagreements over:
The fundamental merit of basic vs. applied research
The impact of private vs. public funding on discovery
The alleged objectivity of government vs.
``industry'' science and the chastisement of industry science
in the marketplace of ideas
Potential confusions over the ownership or
intellectual property status of federally funded discoveries
(for example does the Genome belong in the public domain, or
are components patentable?)
Related information commons vs. proprietary views of
information; that is, the ``information wants to be free''
ethic that permeates Internet policy but can threaten
Public access to scientific data upon which
regulations are based
The right to not fund science with which one
Purported (but often exaggerated) conflicts of
interest among federally funded scientists \1\
\1\ Iain Murray, ``The Nationalization of Basic Science:
Overzealous Attempts to ``Protect'' Scientific Integrity will Damage
American Science as a Whole,'' CEI OnPoint No. 100, July 21, 2005.
We need at least some consideration of rising above or stepping
outside such seemingly irresolvable policy conflicts. Indeed, there are
lessons from other non-scientific areas--such as entertainment
intellectual property, financial and privacy debates, and the media
ownership debate (where many presume that information can be
``monopolized'')--that have implications for the science policy debate.
Disconnecting science from the technological gains to mankind in
the name of ``basic'' research can become a misguided passion. Science
is likely to advance human welfare and remain most relevant to mankind
if it is pulled into being by the actual needs of humanity, including
practical ones. There are also stories to tell about how practical R&D
led to general ``truths'' with wider application. Many are aware how
the attempt to solve problems in microwave transmission led to
discovery of the cosmic f background radiation, helping validate the
To advance science and manufacturing, it's right for the committee
to ask what the Federal Government should be doing; but rather than run
with the implied invitation to propose spending on scientific endeavors
(obviously Washington can't fund them all), Congress should ``liberate
to stimulate'' rather than try to steer research and investment in
particular directions. The national government's role in actually
fostering ``knowledge wealth'' is properly limited, but it's role in
liberalizing the American economy so that others can foster that wealth
is of the utmost importance.
I'll probably stand alone in suggesting to you that for the most
part, in civil society, ``science'' is not properly a public policy
issue. What fosters fundamental scientific and in turn manufacturing
wealth? What made the newborn United States lurch ahead of all the
world's economies in only 100 years, including Great Britain? Not the
power of taxation and dispensation. The nature of the relationship of
the state to free enterprise hasn't changed because our economy has
become high-tech. And getting policy right now is arguably more
important now than at America's founding; free enterprise is even more
crucial to tomorrow's scientific and information wealth than to the
paper clips and widgets of yesteryear.
Markets maximize output in tangible products and intangible
services. But what we forget is that markets maximize the production of
useful information economy-wide--including scientific information. It's
important for Washington to recognize free markets in knowledge-
creation as the source of true and more objective ``information
wealth'' and the resulting advances in manufacturing.
In asking about fostering innovation, we're really talking about
what conditions create a better business environment whether we're
talking about tangible manufacturing on the other hand the creation of
knowledge underlying it.
Anyone can propose a smorgasbord of subsidies to add to the ones
already contained in the COMPETE Act; but that shouldn't necessarily be
regarded as promotion of science and technology. There's also a bit of
the broken window fallacy here: not seen is the science not created by
the redirection of resources to this or that temporarily favored
project or field. Bolstering manufacturing and science requires
vigorous competition among ideas for funding, not a Scientific New
Deal. Nor is it optimal for sciences and applications to proceed walled
off apart from one another in an appropriations environment; that
undermines the swirling competition, cooperation, and ``co-opetition''
needed for the U.S. economy to surge and to stand up against overseas
So what is the national government's proper role in manufacturing?
Promote it? Constrain it? Or leave it alone?
The national government can't be the supercompliant superprovider
in an increasingly complex society with tacit knowledge dispersed in
countless ways; your outcome-oriented interventions, as opposed to
liberalizations that leave outcomes up to the free choices of others,
will produce prominent successes, but fail taken as a whole.
Interventions, subsidies and regulations create an economy made up of
suboptimal commercial entities that don't resemble what they would
under free enterprise, and that cannot function as the job engines
Basically, you don't need to tell the grass to grow, just take the
rock off of it. Following the next section on some specific hazards of
government steering the market, I'll point to some of the rocks to
move; that is, alternative approaches to advancing science and
manufacturing that you should implement.
Why Subsidies and Steering Can Mean ``Sub-Prime'' Technology Policy
Government Steering can create artificial booms
Vigorous calls for government research seem in part a reaction to
the tech market downturn and the harshness of America's recession. But
one lesson of the telecom meltdown is that government can contribute to
the inflation of artificial technology bubbles; we are at risk of a
similar ``green technology'' bubble or conversely inefficiencies right
now. For example, Spain's King Juan Carlos University released findings
that each ``green job'' created by the Spanish wind industry cost 4
other jobs elsewhere. \2\
\2\ ``The Big Wind Power Cover-Up,'' Investor's Business Daily,
March 12, 2010. http://www.investors.com/NewsAndAnalysis/
In another sector, policies may be teeing up another real estate
bubble as well. A brand new National Broadband Plan will distort
evolution in the crucial field of communications. Forthcoming
technologies should be products of capitalism, not central planning,
government-favored R&D, and pork barrel. That helps discipline excess.
We don't want a scientific world of researchers chasing politically
favored fads and steering their grant requests according to politics,
whether biofuels, alleged energy conservation, materials conservation,
smart grids, politically favored medical research, or whatever.
Eisenhower warned in his 1961 Farewell Address of the risks of
researchers designing proposals to link politically fashionable themes.
It should worry us that:
public policy could itself become the captive of a scientific-
technological elite . . . Partly because of the huge costs
involved, a government contract becomes virtually a substitute
for intellectual curiosity . . . The prospect of domination of
the nation's scholars by Federal employment, project
allocations, and the power of money is ever present--and is
gravely to be regarded.\3\
\3\ Eisenhower's Farewell Address to the Nation. http://
Government funding comes with strings attached
Washington passed the bipartisan 21st Century Nanotech Research and
Development Act in 2003 to provide nearly $4 billion to establish
numerous research grants for nanotechnology initiatives, set up
nanotechnology agencies, programs, subsidies, and steer students toward
nanotechnology research. Anti-nanotech groups were already lined up in
opposition, but Federal agencies are positioning themselves to regulate
risks of nanotech, not necessarily to the good.
Still another government/business funded report, called
``Nanotechnology: a UK industry View'' reaches yet again the same
conclusions about nanotechnology as the ones that appear occasionally
like the U.S. Environmental Protection Agency's ``Nanotechnology White
Paper'' or the Food and Drug Administration's ``Nanotechnology''. Such
reports uniformly call for open-ended role for political bodies to
govern otherwise private endeavors in frontier sciences like
The reports say--brace for it--that governments should fund
nanotechnology and study (endlessly) nanotechnology's risks; and that
they should then regulate the technology's undefined and unknown risks
besides. Since the business parties can become so dependent on
political funding, they go along, cut off from envisioning an
alternative approaches either to funding or managing hazards.
Fundamentally, we face the choice of treating frontier
manufacturing research, development and production like software and
essentially leaving them alone, or of treating them like medical
research such that they are regulated at every stage by an entity like
the Food and Drug Administration (which may not necessarily foster
Unfortunately, the approach of government steering while the market
rows is opposite from the way software is produced and marketed, and
assures that there will never be a ``Bill Gates of nanotechnology'' as
CEI's Fred Smith often puts it. That is, if every new nanotechnology
advance faces FDA medical-device-style hurdles, this is an industry
that cannot begin to reach its potential. Naturally we must defend
against risks (and this report will cover approaches shortly), but the
strings attached to American frontier sciences' practical applications
may move our entrepreneurs overseas, assuming overseas markets don't
overtake ours first.
Political failure overwhelms ``market failure'' in basic research
The intellectual case for taxpayer funding of science and favored
manufacturing is based on the market failure argument. Supposedly
research creates value not easily captured, and rivals can free ride.
Some also suggest an investment payback period intolerably distant for
market entrepreneurs. The market, it is argued, will under-invest. Of
course, everything about competitive rivalry is geared toward
compressing that discovery-to-deployment phase.
Part of the problem here is a false dichotomy between basic and
applied research. Regardless, price signals are needed to allocate
scarce R&D resources to challenges that, if overcome, would most reward
innovators, advance human needs, and maximize the rate of technological
progress and job creation. The absence of a residual claimant who can
garner windfall returns undermines the political appropriations
environment, but private investors can rationally invest in a range of
low probability projects, counting on the profits from the rare success
to offset the many failures (somewhat like the music business).
Besides, Teflon, Tang and Velcro did not spin off from NASA. Memory
foam did though.
Politicians can't choose rationally (no offense)
Except when a local earmark or pork-barrel project is at stake,
almost any politician will admit that government has no innate ability
to pick among competing technologies, particularly using taxpayer
money. And government plans operate on an election timeline that
doesn't conform to market needs; A current example, the Federal
Communications Commission's ``National Broadband Plan'' was presented
to Congress March 16, 2010, but it has little chance of going anywhere
this year,\4\ yet creates damaging uncertainty in the industry about
what will or won't happen. Making America's precious scientific and
manufacturing resources subordinate to such a process is sub-prime
public policy to say the least.
Politicians cannot assign rational priorities to the endless parade
of ``significant'' projects, thus will select popular ones benefiting
local constituencies; just note the continuing funding of new libraries
in the digital age (as opposed to just handing out wireless-enabled
laptops), new Post Offices, elements of the just-noted National
Broadband Plan, the Nanotech Initiative, recent jockeying over tech
programs for rural small businesses, and so on and on. Scientific merit
may be underwhelming, but the rhetoric of science and technology are
The hazards of a government appropriations process and the
accompanying beehive of lobbying for sub-optimal projects are numerous.
And expensive. Consider the Superconducting Supercollider. Or the Space
Station (recently called ``scientifically worthless''). In the space
program, entrenched contractors and legislators from flight-center
districts enjoy cost overruns, and lobby against cheaper unmanned
flights. An ethic of revolutionizing space flight becomes unthinkable,
and is a lesson for future technology implementation.
International competition is not zero sum
Sometimes politicians will bolster the market failure argument and
urge national government investment by characterizing technology as a
race against other nations that we stand to lose.
Experience suggests foreign investments like supersonic airliners
and before-its-time high definition TV can be turkeys as easily as some
U.S. domestic boondoggles.
But more importantly, we all benefit globally when countries find
more efficient ways of producing some good or service. Viewing such
gains as losses is to revert to the old mercantilist idea that
international trade and commerce are like war.
Besides, a better way to deal with this particular concern of
overseas competitors is for our policy to allow more of the world's
best and brightest to become American citizens and entrepreneurs. As
CEI analyst Alex Nowrasteh put it in a recent Detroit News column,
``Either businesses will move to the talent or the talent will move to
where the opportunities are. What movement occurs depends on
immigration, trade, and other regulatory regimes. Generally, all else
remaining equal, it is far cheaper and more beneficial to all concerned
when talent moves toward opportunities.'' \5\
\5\ Alex Nowrasteh, ``Let Immigrants Power America's Scientific
Progress,'' Detroit News, December 2, 2009.
Taxpayer Funding Misdirects Resources
Markets have to be good at killing bad projects as well as creating
new ones to prosper,\6\ but appropriations processes are less capable
of systematic pruning. The problem with government science is that
virtually all interested parties seek to grow government rather than
pull the plug on exhausted ill-considered projects, from tiny ones to
the gargantuan like the space station, shuttle or the supercollider.
The result is higher taxation and dollars directed to multiplying
unchosen ends. Science resembles any other rent-seeking interest in
this respect. In an examination of testimony before congressional
panels, nearly all ask for more money, not less, and the ratio was
hundreds seeking growth to one asking for less government.
\6\ Auren Hoffman, ``To Grow a Company, You Need to Be Good at
Killing Things,'' Summation, February 21, 2010. http://
Expansion of government-funded science doesn't help anyway if the
metric is the proportion of a nation's GDP devoted to R&D. Research by
scientist Terence Kealey suggests both that the private sector funds
basic research out of competitive necessity in a global economy, and
that total R&D expenditures tend to correlate to GDP rather than to
particular national policies.\7\ That is, where government R&D is low,
the private sector simply invests more. Higher GDP begets higher R&D,
in other words. Substitution and tradeoffs mean taxpayers gain little
from increased political R&D, and may lose a lot because of the
inefficiencies, sub-par policy and anti-competitive political choices.
(See Appendix I for a summary of some of Kealey's findings and other
bullets about government science funding.)
\7\ See, for example, Terence Kealey, ``End Government Science
Funding,'' Cato Institute, April 11, 1997. http://www.cato.org/
Taxpayer funding can create a glut of or the wrong kind of graduates
The COMPETE legislation is not alone in proposing higher numbers of
technology graduates; another is the recent cybersecurity legislation.
But if the market needs them, higher salaries will draw people to the
application-specific training actually required. Creating a premature
government-sponsored glut of Ph.D.s in this or that technological field
is not the same as actually advancing useful knowledge sought in the
marketplace. America's companies don't need Ph.D.s as such, they need
knowledge, which in the Internet age materializes in ways unrelated to
brick and mortar universities' offerings or to subsidies. It also
appears that government funding may have potentially detrimental
impacts on scientists' salaries (Appendix I).
Taxpayer funding artificially complicates intellectual property
Other complications involve patent ownership disputes between
university and corporate collaborators over who controls future
profits, the rights of taxpayers to the spoils, and access to research
results or data for competitors or the public. Examples are disputes
over the ownership status of genetic discoveries or basic molecular
information, the current controversy over access to source data
underlying predictions of global warming models (so-called ``climate-
gate''). Pharmaceuticals routinely face compulsory licensing threats
globally. Taxpayer funding as such assures similar vulnerability for
other frontier sciences.
Nanotechnology, biotechnology and other ``information wealth''
fields arise against a backdrop of disputes in seemingly unrelated
fields that nonetheless should set off alarms, such as the open source
vs. proprietary debate surrounding software. Even entertainment--online
music--faces calls for compulsory licensing, when digitization itself
has undermined the very ``market failures'' that led to compulsory
licenses in the first place. Property rights are also vulnerable in the
so called ``net neutrality'' debate, by which some hope to outlaw
proprietary business models altogether in favor of compulsory
``openness'' on communications networks. Taxpayer funded science and
manufacturing are inescapably vulnerable in this environment. Congress
must recognize that while we had a John Locke for the tangible
property, industrial age, we regrettably lack one for today's
information and knowledge-economy age.
One answer to the question raised in this hearing, ``What is the
Role of the Federal Government in Supporting Innovation by U.S.
Manufacturers?'' is that we urgently must legitimize the private-
property status of new forms of wealth, and not pursue policies that
delay these underlying institutional innovations.
Taxpayer funding may confront a ``Regulatory Bias Problem''
The Regulatory Bias Problem occurs when agencies' charters
encourage them to consider only certain risks or certain benefits. As
CEI president Fred L. Smith Jr. has pointed out in past testimony, DOE
and EPA both view energy efficiency as a ``good thing'' rather than one
of multiple product features. But a less safe energy efficient car may
be a ``bad thing.'' Inadequate attention to research on the unintended
consequences of funding and overregulation impacts technological
Substituting Government Funding For Competitive Discipline Can
Policymakers rarely can admit it, but their ``safety'' regulation
can undermine safety.
That's a problem, because ``undiscovery,'' or abandoning even the
riskiest scientific research is likely out of the question. Bans will
be ignored in a global environment, as failed cryptography bans and
spam laws and overseas (and likely domestic) efforts to clone
Government can exacerbate risks of new technologies. An
appropriations environment can send technology lurching in non-market
directions (again like the broadband plan), all subject to future
political rug-pulls. Meanwhile while political funding comes with
strings attached on the one hand, it can indemnify companies for the
hazards they create on the other. Homeland security technologies like
gas masks for example, can be indemnified in the event they fail.
Free enterprise actually can do a better job regulating risk. In
normal markets, before your nanotech company (for one example) can
attract investors and get off the ground, disciplinary institutions
like liability and insurance have to accompany you; One must satisfy
capital markets, insurers, upstream business suppliers, horizontal
business partners and institutional buyers, downstream business
customers, investors, consumers, public and global markets. Markets and
capitalism should, and do, bring highly risky products forth (financial
instruments, electricity, new forms of energy, behavioral advertising,
cybersecurity for sensitive-information networking, emergent low-earth-
orbit space touring); but government promotion, subsidies and
indemnification can short circuit the risk-mitigating disciplines that
must emerge alongside.
Dangerous, uninsurable ventures rightly scare off investors. But
government domination of risky, but promising frontier research can
take it out of the realm of insurability and an otherwise impossible
appearance in the marketplace, and even provide immunity. The Price
Andersen Act artificially limited the liability of nuclear power plants
but meant total regulation. Would a more market-oriented development
path have made nuclear power more viable over the past decades? We may
Today's military and homeland security emphasis for technologies
has significant implications for the evolution of and for the public
policy stances taken new technologies. Homeland security legislation
indemnifies companies from liability when their ``security
technologies'' fail. Taken too far, liability markets in crucial areas
may never emerge. But in a healthy marketplace, liability coverage and
product certification will likely flourish contingent upon adhering to
guidelines demanded by many stakeholders.
We want the defensive mechanisms to emerge, as well as appropriate
professional ethics regimes, but the way we choose to fund frontier
scientific fields will impact safety and the prospects for competitive
discipline as well as the horizon available to engineer
counterbalancing technologies to offset any risks that emerge. Market
``regulation'' or competitive discipline is quite demanding. If
nanotechnology (for example) introduces a risk of ``gray goo,'' \8\ the
competitive disciplines arrayed against it can constitute ``blue goo,''
or a policing mechanism. Government dominance can give our most
promising new industries an undeserved black eye, and guarantee
counterproductive regulation and less innovation.
\8\ As for the ``gray goo'' catastrophe scenario of runaway
``nanobots,'' it's not compelling since in every other instance
environmentalists say an organism needs an eco-system to survive. The
scenarios are silly, and moreover there's no shortage of proposed
solutions to the problem were it genuine.
Moving the Rocks So the Grass Can Grow
``COMPETE'' by Separating State and Economics
We need an agenda for strengthening private manufacturing that
offers specifics on separating state and economics. This includes the
obvious, like systematically evaluating and reducing tax and regulatory
burdens. It also means thinking about how it was that the U.S.--only
235 years old--became richer than the rest of the world in a historical
eye-blink; and how that remarkable achievement can be sustained as
other nations embrace institutions of liberty and create ever-
``Doing something'' is not the same as just spending money. When
linking research to human needs and promoting manufacturing wealth,
capital markets trump the appropriations process. Interestingly, adding
up the dollars in the COMPETE Act, seems to total perhaps a few
billion. But the gains from removing barriers to private research could
yield far greater benefits. Emphasizing spending stimulus for science
and manufacturing has strings attached, invites rent-seeking and can
have a detrimental impact on safety. Government's proper stance is one
of indifference or neutrality, since many technologies, some not in
existence yet, will always compete for scarce investment dollars. A
better approach now is to ``liberate to stimulate.''
It was noted earlier that that Congress has a far more important
job to do that it can't escape by sprinkling cash on the technology
sector. As discussed in Still Stimulating Like It's 1999,\9\ there
exists a natural tendency toward recession when government fails to
perform its ``classical'' function of ensuring that prices of
materials, labor and other inputs aren't hoisted above market clearing
levels by rent-seeking behavior in the economy.
The job now is to liberalize, to perform the actual job of removing
impediments that hobble wealth creation, in particular in science and
technology. Borrowing from Friedrich Hayek in ``The New Confusion About
Planning,'' the issue is not whether industry has to be regulated, or
``planned.'' Rather, the question is who will do that planning; the
right approach is to unleash competitive discipline. Suggestions
First, Avoid Picking Favorites Among Technologies
As CEI's Fred Smith points out, in the Federal R&D sweepstakes,
bolstering promising technologies has been compared to efforts to
improve the speed records at a racetrack by picking the R&D horses to
run. However the condition of the track and the rewards available also
matter. Faster speeds might also be had by improving the track, the
business and regulatory environment, and by letting jockeys keep more
of their earnings.
The government-picking-technologies model undermines economic
liberty, innovation, wealth creation, ``national competitiveness'' (the
ever-present rationale for government R&D) and consumer benefits, and
is itself a source of risk. Many have argued that viable technology
doesn't need a subsidy, and non-viable technologies probably can't be
helped by one. Otherwise, we are distorting markets, creating bubbles,
and teeing up future rippling recessions. Rather than picking the
winning horses (or worse, actually being one of the horses),
government's legitimate role is to improve the track on which all the
horses run; that means liberalizing the tax and regulatory environment
within which entrepreneurs operate, for starters.
Interestingly, when the Wright Brothers made their historic flight,
their rival was Samuel Langley's War Department-funded, ``Aerodrome.''
He was catapulting the thing out over the Potomac river. The Wrights
ran a bike shop, but it became a state of the art aeronautics lab.
Frontier scientific manufacturing fields are plainly viable on
their own, moving forward on fronts too numerous to catalog. To
approach the matter otherwise is an impediment.
Minimize Tax Burdens and Implement Rational Tax Policy
Other commentators routinely address tax burdens. This report
focuses instead on the regulatory environment, which policy more often
tends to ignore. Nonetheless, accounting standards that treat R&D as an
investment to amortize, rather than an immediate expense, can be a
deterrent to non-governmental basic research that Congress should
evaluate. (Tax credits would be a poor substitute because they amount
to picking among technologies.)
Allow freer ``trade'' in skilled labor in the US
As noted briefly before, many knowledge workers want to move to the
United States and create companies and jobs, or want to stay after
being educated here.
Avoid Safety Regulation that Makes Us Less Safe
As Henry Miller of the Hoover Institution explained, ``A regulator
can approve a harmful product, or delay a beneficial product. Both
outcomes are bad, but regulators are attacked by the media and
politicians only approving a harmful product. Delaying beneficial ones
is a non-event.''
Biotech, nanotechnology and other frontier sciences introduce risks
but can also mitigate them. We should care about this not merely
because of the fact that wealth is enhanced by keeping precaution in
perspective, but because the precautionary principle is itself a
hazard; moving forward has risks, but so does stagnation. For example,
rather than being the asbestos or ``gray goo'' of tomorrow,
nanotechnology could be an input to make our environment cleaner. Most
agency studies emphasize the hazards of nanotechnology; they should
study the hazards of regulation and the hazards of government funding
hobbling the industry as well.
As described before, the drive to regulate safety isn't only
undermining wealth creation in frontier science and manufacturing, but
also threatening the emergence of needed safety and disciplinary
practices. It's important to avoid safety regulation that either
inadvertently or deliberately preempts superior competitive discipline.
Liberalize Capital Markets
While it doesn't enjoy the reputation for it, capitalism is among
the greatest democratizing forces in the world. The corporate structure
that emerged to spread risk in the days of sailing ships is now a
system of spreading of ownership of companies to millions of citizens;
the miracle of the fact that people unknown to one another can work
together to create unprecedented wealth is one of the great advances of
Recent regulation in the wake of the Enron and WorldCom scandals
has impacted smaller entities in unfavorable ways. While it did not
pass late last year, the ``Wall Street Reform and Consumer Protection
Act of 2009,'' would have rolled back at least one of the excesses of
Sarbanes-Oxley financial regulation impacting small public companies.
In a media advisory, the Biotechnology Industry Association praised
two provisions: one would have permanently exempted companies with
market capitalizations below $75 million from the SarbOx Act's Section
404(b) internal control requirements (which the Obama administration
supported along with most Republicans and 101 House Democrats. The
other provision would require an SEC study examining SarbOx compliance
costs (and benefits) for companies with floats below $700 million and
revenues under $250 million. Despite the bipartisan criticism of that
legislation, no reforms for small business relief have yet passed.
Nor were the relaxation provisions a part of the Chris Dodd
financial reform bill under consideration this March, but it could be
offered as an amendment.
Privatize: (Remember That?)
One aspect of liberalization is privatization of Federal research
facilities, which itself would remove constituencies for government
funding. Of course the America COMPETES emphasis is on government
spending rather than privatization. During the 1990s, it was proposed
that essential military aspects of Federal labs be transferred to the
Department of Defense, while commercial aspects should be privatized by
offering them to the industries they supposedly benefit or by allowing
research staffs to take them over via an employee buyout approach. Such
options should be discussed more than they are.
Award ``Prizes'' for the time being
Privatization of Federal research is a hard sell when the topic at
hand is public funding expansion. Perhaps one approach is to forbid
Federal funding for technologies that do not yet exist, and grow out of
the problem. In any event, a worthy idea noted in the discussions
surrounding the America COMPETES Act is that of awarding prizes, the
idea being that ``Payment to researchers would reward accomplishments
rather than promises.'' \10\
\10\ See Iain Murray, ``A Wall of Separation Between Science and
State,'' Competitive Enterprise Institute, October 19, 2006.
The idea is an appropriate one to consider in transitioning to a
more privately funded regime and will be (and is) attractive to
foundations. But why did grants take over prizes--which used to be
prevalent--in the past?
The answer appears to be the power of patronage. Research by
Robin Hanson when he was at UC Berkeley suggests that during
the 19th century, scientific societies that had collected money
from bequests to distribute as prizes realized that they had
much more power over the direction of scientific research if
they distributed the money as grants instead. So they could
finance favored scientists and preferred research directions,
something that genuine prizes would not allow . . . . All of
which suggests that scientific bureaucrats knew exactly what
they were doing when they moved from prizes to grants.\11\
\11\ From Iain Murray, ``Patronizing Science,'' National Review
Online's Corner, September 24, 2007. http://corner.nationalreview.com/
Enlarge regulatory flexibility to bolster small business
Congress can't manage and deal with the regulatory burden that
undermines innovation if it doesn't measure it, so should regularly
consider how regulations mount as a small firm grows. Especially in
today's economic recession, it's important to inventory all the
regulations that impact a small business as it grows, and look hard at
rollbacks (See Appendix II for a draft chart of how regulations mount
as a firm grows.)
Relatedly, Congress could boost a more ambitious ``R3'' program
(Regulatory Review and Reform) at the Small Business Administration's
Office of Advocacy \12\ to give entrepreneurs an avenue to protest
onerous rules pouring out of more than 60 agencies.
Avoid New Regulatory Mandates in Service and Manufacturing Sectors
The challenge is to foster the creation of scientific and
manufacturing wealth. Research and manufacturing do not happen in a
vacuum, and all our communications and critical infrastructure impact
the educational, scientific and manufacturing concerns at issue in the
America COMPETES Act. To that end, Congress should avoid such sweeping
policies as cybersecurity mandates that threaten infrastructure
investment, avoid the likes of the new ``National Broadband Plan,'' and
avoid ``net neutrality'' mandates that either inappropriately influence
funding decisions or dictate business models. New health care
legislation likewise will inevitably affect the ability of firms to
invest in research.
Liberalize the Nation's Communications Networks and Infrastructure
Innovation like basic research itself doesn't proceed in a vacuum;
sectors inform and enrich one another, making it advisable to tear down
regulatory silos artificially separating our great infrastructure
industries wherever possible so that knowledge, ideas, products and
collaboration flow more freely.
Maximizing infrastructure wealth creation--communications,
transportation, energy, electricity, water and so on--bolsters the
manufacturing sector that depends upon it all (as well as consumer well
being). Here are a few steps Washington could implement:
With respect to broadband deployment, declare ``net
neutrality'' permanently off the table; announce that
proprietary networks and investments will not be subjected to
forced sharing and price controls, only voluntary agreements
Remove exclusive franchises that make it illegal, not
difficult, for firms to compete with incumbent electric
companies. Right now, it's illegal to run an extension cord
across the street.\13\
\13\ See Wayne Crews, ``The Free Market Alternative to Mandatory
Open Access,'' Electricity Journal.
Establish an aggressive campaign to liberalize
network and infrastructure industries, which are now
artificially segregated into regulatory silos (telephone,
electricity, water, sewer, cable, railroad, airline, air
traffic control). This would create opportunities for them to
work together and jointly invest in new power lines, fiber to
the home, roads, bridges, airports, toll roads and more, and
boost industries that depend upon them.
Relax antitrust so that firms within and across
industry sectors can combine and create business plans to bring
capitalism and infrastructure wealth creation to the next level
(described further in the following section).
Liberalize spectrum and secondary markets in it such
that wireless wealth is freely created apart from regulators.
Relax Counter-Productive Antitrust Laws
President Obama has suggested a desire to boost antitrust
enforcement.\14\ That's unfortunate. Antitrust can be a highly
predatory anti-business and anti-consumer phenomenon.
Today, many universities and scientific centers pursue parallel
research. In an alternative setup, innovators might pool efforts, and
in so doing be a better target for VC investment with sophisticated
profit sharing agreements. Such approaches may be hampered by
A recent Financial Times article noted over 800 research institutes
involved in nanotechnology in the UK alone. What this reveals is an
industry crying out for consolidation into perhaps a few large-scale
research enterprises. Thus, antitrust liberalization obviously might
occur to observant political authorities, for example, but you may rest
assured that it likely has not. The same government-steers-while-the-
market-rows approach dominates in the U.S.; nanotech funding is spread
out not always according to market pressures, but across dozens of
The antitrust laws remain a significant barrier to a flowering of
cooperative business efforts and private R&D. It is precisely in tech
industries that private standard setting, joint research and risk
sharing arrangements are most likely to overcome alleged market
failures in basic research output. Yet some would block such
arrangements, as well as mergers among firms engaged in like research.
While vertical mergers are accepted, this sentiment should be extended
to horizontal mergers or ``collusion'' that could bolster frontier
research. Markets require competition, sometimes merger, and sometimes
merely the kind of cooperation or ``partial merger'' often miscast as
Through artificial constraints and interference, antitrust sends
our great, productive firms into directions the market never intended,
hobbling entire industry sectors. Antitrust vetoes market decisions and
subdues enterprise by keeping it fearful. That destroys the very
process of wealth creation itself. The misallocation of time, talent
and resources, and wealth destroyed over the years by antitrust, is
difficult to envision.
No firm is ``larger'' than the rivals, upstream suppliers,
downstream business customers downstream purchasers, partners,
consumers, Wall Street, advertisers, future competitors, global
competitors media watchdogs, trade press, local-national-and-global
capital markets. All of these discipline behavior, arrayed against the
firm if it misbehaves.
Antitrust deprives the marketplace and consumers of the otherwise
necessary competitive responses to the presumed monopolist's actions by
these entities. Such short-circuiting of the frenzy of large-scale free
enterprise causes economic disruption on a level a single firm could
never do. Other ways to discipline errant market behavior include
reinvigorating the market's own forces like hostile takeovers, the
private ``market for corporate control,'' \15\ that government itself
in some instances has neutralized.
No ``monopoly'' is as large as the government. At a time when the
economy needs stimulus we should not distract the wealth-creating
sector's attention with artificial hindrances to growth rooted in
smokestack era law.
Emphasize Rational Intellectual Property Policy
Give thought to the property rights regimes best suited to sustain
Government funding of research will increasingly present
intellectual property dilemmas, such as calls for ``open access'' to
either the data used in the conduct of research, or to the rights to
the intellectual property underlying the fruits of the research, or use
of the product itself.
Industries and companies seeking government funding of their pet
projects would best reconsider. In an era in which so much new research
in frontier scientific fields is government funded they should pause to
consider that they are undermining their own chances at self-protecting
their intellectual property, and are creating an environment for global
``compulsory licenses'' of sorts. Future hearings should address
alternatives to compulsory licensing, and address the hazards to
monitor regarding ownership status of government funded research. Ray
Kurzweil testified that ``The golden age of nanotechnology . . . will
bring us the ability to essentially convert software, i.e.,
information, directly into physical products.'' If the product is the
Ferrari he mentioned, we definitely want to get this policy right.
Public funding also creates often-needless conflict of interest
disputes when government scientists interact with private ones. See
``NIH Bans Collaboration With Outside Companies'' \16\ for example.
\16\ Rick Weiss, ``NIH Bans Collaboration With Outside Companies:
Policy Comes After Conflict-of-Interest Inquiry,'' Washington Post,
September 24, 2004; Page A23.
Public funding reintroduces the conflict between those who favor an
``information commons,'' and those who feel information might best
remain proprietary. The ``information commons'' approach is already
leading to compulsory licensing calls in entertainment--movies and
music--so it's a guarantee that open access will be demanded with
respect to the genome, biotech, nanotech, pharmaceuticals, space
science. If that occurs, even those who shun government money will not
be immune to threats to their intellectual property. In our mixed,
highly taxed and regulated economy, it's easy for anyone to claim that
all research is subsidized in some way, leading to ever more public
access, and a decrease in willingness to undertake research.
In certain respects public access to government data is appropriate
(when that information is used to regulate, for example) but as a rule,
that inclination is too sweeping, and we need to consider the broader
implications; we need a different, more complete vision that cuts
across issues, that warns of the downside of any expectation of
automatic public access to research data.\17\
\17\ For a related debate see James Robinson, ``MPs to call for
free online access to science journals,'' July 11, 2004. http://
The ethic of public access sounds appealing and it is, but there
can be downsides. Properly construed, in the productive economy,
proprietary models can serve to increase the amount of information
created more than open, non-proprietary ones do. In the productive
sphere, all government needs to do is permit open access to information
for those who prefer to operate that way (consider the case of open
source software), but leave room for other business models too.
Sometimes people and companies keep ``secrets,'' and there's nothing
sinister about their doing so, and it's ultimately good for basic
research and for mankind, and others can reject their results.
It's one thing for policymakers to be reluctant to extend legal
intellectual property protections; but for data and results to
automatically belong in the public domain, to even forbid private
intellectual property protection, seems to be the ultimate end of some
points of view. (In entertainment, for example, full-blown opposition
to copy protection technology is seen as a normal viewpoint.)
Open access policies are, of course, almost impossible to avoid
when government is funding the science. Transparency is critical when
government is involved since government does not rely on voluntary
arrangements. Thus, the analytic basis for, say, air pollution
regulations should be available. In contrast, no one should be able to
demand that a scientist disclose the recipe for Red Bull.
Sunset Regulations and Implement a Regulatory Reduction Commission
More than 60 departments, agencies and commissions issue some 4,000
regulations a year in thousands of Federal Register pages, all of which
are documented in Ten Thousand Commandments: An Annual Snapshot of the
Federal Regulatory State.
Costs of regulations run at an estimated $1.2 trillion annually.
Congress should implement a bipartisan ``Regulatory Reduction
Commission'' to survey existing rules and assemble a package to
eliminate with a straight up-or-down vote, no amendments allowed.
Halt ``Regulation Without Representation'' by Requiring Congressional
Approval for Major Business Regulations
Of the 4,000 annual regulations, 100 plus are ``economically
significant.'' Rather than the current ``resolution of disapproval''
process, these rules should require an expedited congressional approval
before they are effective. Apart from the competitiveness and
innovation issues that concern the COMPETE Act, the delegation of
legislative power to unelected agencies has long been something needing
attention. We should continue to challenge delegation of legislative
authority from Congress to agencies, and at least require congressional
fast-track approval before major or significant non-quantifiable
agency-promulgated regulations take effect.
Perform Basic Deregulatory Housekeeping
A difficulty is that the specific regulatory programs under each
agency also have cheerleaders that make it difficult to reform. So in
the meantime, freezes, purges and the like should be actively pursued;
those can be based on gleaning better information about just what it is
that the dozens of agencies are up to.
Performing government's proper task of liberating economic
enterprise instead of spending stimulus requires tasks like the ``move
the rock'' policies noted above; but also basic annual procedures,
monitoring and housekeeping like the below are part of maintaining
Re-discover federalism, that is, circumscribe the
Federal role regarding investment and regulatory matters best
left to states and private enterprise. Congress should look at
what Federal Government does that it could eliminate, or that
states could do instead to provide a manufacturing boost.
Improve the ethic of quantifying regulatory costs,
and selecting the least-cost compliance method.
Codify President Clinton's executive order on
``Regulatory Planning and Review" (E.O. 12866), or, Reagan's
E.O. 12291 which provided for more external review.
Require OMB's Regulatory Information Service Center
to publish number of major and minor rules produced by each
agency, and strengthen its oversight.
Reinstate the Regulatory Program of the U.S.
Government, which formerly appeared routinely as a companion
document to the Budget.
Declare Federal Register notices as insufficient
notice to small business
Hold hearings to boost the scope of the Small
Business Administrations' ``r3'' regulatory review program.
Lower the threshold at which a point-of-order against
unfunded mandates applies.
Implement a supermajority requirement for
extraordinarily costly mandates.
Lower the threshold for what counts as an
``economically significant'' rule, and improve explicit cost
Explore, hold hearings on, and devise a limited
Establish an annual Presidential address or statement
on the state of regulation and its impact on productivity and
Sunset regulations after fixed period unless explicit
reauthorization is made.
Require that agencies calculate Costs, but not
benefits, which Congress should have considered already
Create new categories of major rules to improve
Publish data on economic and health/safety
Disclose transfer, administrative and procedural
Explicitly note indirect regulatory costs
Require agencies and the OMB to: (1) Recommend rules
to eliminate and (2) Rank rules' effectiveness
Create benefit yardsticks to compare agency
Issue and Act Upon a Annual Regulatory Report Card to Accompany the
In attempting to implement economic liberalization for the wealth
creating sector, a ``Regulatory Report Card'' should be part of the
basic housekeeping just noted.
Regulatory Report Card . . . with five-year historical
tables . . .
Total major ($100 million-plus) rules and minor rules
by regulatory agency
Numbers/percentages of rules impacting small business
Numbers/percentages featuring numerical cost
Tallies of cost estimates, with subtotals by agencies
and grand total
Numbers and percentages failing to provide cost
Federal Register analysis: Pages, proposed and final
rules by agency
Most active rule-making agencies
Rules that are deregulatory rather than regulatory
Rules that affect internal agency procedures alone
Numbers/percentages required by statute vs. rules
agency discretionary rules
Rules for which weighing costs and benefits is
Detail on rules reviewed by the OMB, and action taken
If Taxpayers Do the Funding, Let Taxpayers Call the Shots
Other people have goals that are just as legitimate as those with
the wherewithal to get representation by lobbyists in Washington or to
appear at a hearing. We don't always hear their voices. My Cato
Institute colleague Tom Miller put it best when asked by tech reporter
about Federal nanotech funding: he said, ``I suggest giving them
In proposing an end to the Advanced Technology Program years ago,
Michael Gough offered a real test of taxpayer support: ``Let the
government give taxpayers who want to invest . . . a deduction from
their income . . . [and] share in any profits that flow from it. That's
what taxpayers get from private investments. It's not what they get
[when government] takes tax money . . . and invests it in private
In Conclusion, Compete for Real
As sometimes noted, occasionally the problem with research isn't
market failure but the failure to have markets.
This call for reassessment coincides with many months of recession.
The bold political action and genuine leadership needed in a crisis
today is different from what's going on. Indeed, the political price
can be too high for election-bound lawmakers or career politicians to
entertain non-governmental recession recovery.
As Friedrich Hayek pointed out, the politicians blamed during a
bumpy transition to something closer to laissez-faire will be the ones
who stop interest-group benefits, stop labor union benefits, or stop
the inflation, stop the mal-investment created by earlier government
interventions and favoritism, and so on--not the ones who started those
costly processes decades ago. Instead, government proposes to spend a
great deal of money, but leave all these interventions in place and add
more besides, cementing a national government ``role'' in science and
Real stimulus, that of comprehensive liberalization of a fettered
economy, requires perhaps unpalatable changes in what people expect
from government now that they've come to depend on what it
redistributes. That's a seemingly intractable problem, and I'm not sure
the country can recover from it--but leadership would require making
the attempt. So, again, political reality prevents halting the
compounded economic damage that artificial stimulation and financial
``bailouts to nowhere'' promise to deliver. Political reality tends to
prevent the separation of state and economics.
Markets and capitalism manage risk and generate wealth; our
shortfall is often to have too little capitalism and free enterprise,
properly understood, not too much. Unfortunately that lesson isn't
being learned, and the ability to reinvigorate the disciplinary
institutions of capitalism diminish by the day as governments assume
greater control and powers over important economic sectors like science
and technology that will be difficult, if not impossible, to wrest from
them. Another Contract with America may or may not be welcome, but a
handshake in deference to free enterprise would go a long way today.
Biography for Wayne Crews
Chairman Gordon. Thank you, Mr. Crews.
As I had mentioned earlier, but for the Members that have
just come in, we are expecting to have votes at 11:00, which
means that we will probably need to be leaving at 11:10 or so.
For that reason, I am going to be stricter on the five-minute
rule so that we can try to get through, and not impose on our
witnesses to have to stay, and also since I made an earlier
statement, I am going to waive my right for questions. I will
wait until later and call on Dr. Baird.
Mr. Baird. I thank the Chairman. I thank our distinguished
panel. Mr. Chairman, I think this is a critical issue and I
One of the things I am most impressed with is the
initiative of your various organizations, you know, especially
the chemical industry, particularly the consumer products, the
work you are doing in creating jobs, creating new products, GM
as well, and in nanotech that are environmentally friendly. I
think you deserve a tremendous amount of credit.
I am very intrigued by this issue, Dr. Tuominen, of an
interagency approach. You know, we tend to silo a little bit
and we hear a lot about this on this Committee. We have got NSF
and NIH [National Institutes of Health], sort of the basic
research, and then how do we scale that up? Dr. Smyth talked
about MEL as a vehicle, but it tended to seem to me that, if I
may paraphrase, we are strong on the innovation side but we are
not as strong on linking that innovation to the actual
manufacturing that is going to create the long-term jobs.
Expand on that theme, if you would. What else do we need to do
to make this more efficient? Dr. Tuominen and then any others.
Dr. Tuominen. I first will mention that I am answering from
the nanomanufacturing hat, and nanomanufacturing being a new
field, and that the agencies are already working together in
the National Nanotechnology Initiative, it makes it much
easier. But I can say from where I sit, that has been a great
benefit to the field, because we are aware of what is going on
in NIST, DOE, DOD [Department of Defense], NSF and other
agencies with regards to nanomanufacturing, and we see the
benefits of having this global vision in terms of avoiding
duplication, of taking advantage of synergies between the
agencies. It is proving to be very productive.
Mr. Baird. So you feel we have got some of that happening
already in the interagency work on the nanotech initiative. Dr.
Smyth or Sauers or Chakrabarti?
Dr. Smyth. I think I mentioned there are a number of
successful collaborations but they are kind of like islands of
excellence, such as the NASA robot initiative, such as some of
the work that we have done at MEL. I think if you had a cross-
agency forum, and not just one that created papers but one that
created a strategy and had people who were engaged from both
academia, the government and the systems perspective, both from
small and large business--get a strategy, get a roadmap and
start plugging in the technologies to that, because I am going
to quote the wall: ``Where there is no vision, the people
Dr. Sauers. And I think I will just continue the thought.
P&G has benefited greatly from the relationships we have had
with some of the national labs and the relationship we have
with the Department of Energy, but we stumble upon these
opportunities. There really isn't a transparency of what is
available and who is willing to work with industry, et cetera.
You know, I could see some sort of interagency approach like
that, helpful in providing that transparency.
Mr. Baird. Mr. Chakrabarti?
Mr. Chakrabarti. I am going to concur with Dr. Smyth. The
ability to create a cross-agency approach that also takes
feedback from both small and medium enterprise and large
enterprise is very critical. We have excellent technological
programs that are federally funded. We have large enterprises
that have both the financial ability as well as the expertise
to commercialize, and you have small and medium enterprises
that have the willingness and the entrepreneurialism to take
risk. Being able to bring all three of them together is a very
critical challenge, but a very critical opportunity for our
Mr. Baird. I should say, Mr. Chakrabarti, you have got two
delightful children in the back there.
There was an article in Harvard Business Review that I
bring up a lot in this Committee, and it was about maybe five
months ago now, about how we tend to do the innovation here and
then offshore the manufacturing and then ultimately the
manufacturing drives the innovation elsewhere and we lose our
lead. What can we do to reduce that?
Mr. Chakrabarti. I think a first step is involving the
entire manufacturing economy in feedback when it comes to
Federal research. You touch upon a very sensitive point. If you
remember our steel industry, it is exactly what happened. We
were conquered with our own technology built on our own soil.
We don't want to see that happen again. The ability to create
the feedback and the input, it needs to be a dynamic process
between industry and federally funded research. The world is
changing. Our response must be dynamic. If we can have an
agency, a cross-agency approach that we just talked about,
along with an industry forum committee roundtable that provides
continuous feedback on its approach and its programs, I think
we would be much better off.
Chairman Gordon. Thank you, Dr. Baird.
Mrs. Biggert is recognized. Oh, I am sorry. Mr. Hall is
recognized. Excuse me, Mr. Hall.
Mr. Hall. I yield to Mrs. Biggert.
Mrs. Biggert. Oh, Mr. Hall, you are so kind. I appreciate
it. I will take advantage of it.
Dr. Smyth and Dr. Sauers and Mr. Chakrabarti, Dr. Holdren
testified before this committee a few weeks ago about how this
Administration's R&D investments will keep America competitive.
However, there are many factors other than that that play into
our competitiveness in the world, and what particular laws or
regulations are increasing your company's costs, and how is
this affecting your ability to manufacture in the United States
and invest in R&D? I will start with Dr. Smyth.
Dr. Smyth. That is basically outside my span of the ability
to comment. I would say in terms of laws, maybe if we go to
charters rather than laws, and talk about NIST or some of the
national labs, what you have is a charter that focuses on
technology readiness. If you had a scale from one to ten that
focuses one to three. What we really need to do is expand that
charter from three to six and do, for example, what Germany
does with the Fraunhofer Institutes and take technology from
where the concept of the product is ready to where you are
addressing manufacturing issues, so you can deploy stuff at
volume and at rate, because that is when you are going to make
the economic and you are also going to make the environmental
impacts. So it is about stretching maybe a charter rather than
a law in the context of manufacturing technology.
Mrs. Biggert. Dr. Sauers?
Dr. Sauers. And again, the specifics are outside my
specific area of knowledge but just in generality again, I
think we find ourselves more in so much uncertainty, and it is
really the uncertainty that causes problems, the lack of
predictability. And you can just see a whole host of
regulations today where we live in uncertainty: R&D tax credit,
health care, those kinds of things. And I think for us to be
most competitive, a sound, predictable, certain regulatory
structure is helpful.
Mrs. Biggert. Thank you.
Mr. Chakrabarti. I am going to echo what Dr. Sauers said,
but coming from the chemical industry, I will make two points.
Regulatory compliance in the United States, the costs
associated with it, as Mr. Chairman brought up in his opening
statement, is a significant cost to chemical industry. And by
its very virtue, it pulls capital dollars from other areas of
investment, especially innovation. Secondly, the cap and trade
has us very concerned. As we enter into a new era in
environmental responsibilities, we have to be very careful not
to increase the transaction costs associated with doing so.
Mrs. Biggert. Thank you.
Then Dr. Smyth, in your testimony you talk about vehicle
electrification and the domestic manufacturing needs to support
deployment. Do you see a need for more infrastructure capacity
to support electric vehicles?
Dr. Smyth. Absolutely. I think one of my esteemed
colleagues here talked about the infrastructure and the grid,
and that is essential if we are going to develop a reasonable
percentage of electric and extended-range electric vehicles.
You have to have an infrastructure to plug them into, so that
is very, very important.
Mrs. Biggert. Then Dr. Sauers, I think you answered part of
this, but in your testimony you mentioned that your company
sets a goal for innovation to have at least 50 percent of all
initiatives with at least one significant external partner. So
what type of entities do you typically seek partnership with?
You did mention the labs, but are there others that you deal
Dr. Sauers. Well, our process is to go through a consumer
understanding, understanding the needs of the consumer relative
to consumer products, then go through the innovation process to
develop those products that meet those needs. We are open to
partner with anybody that is able to bring forward to us ideas
that help us accomplish that goal. So we work with small and
medium enterprises, we will work with governments, national
labs, anyone that is able to come forward. We have a website,
our Connect + Develop website, where we put out what our needs
are relative to innovation, and then we ask people to respond
back to us through that website with their ideas.
Mrs. Biggert. Thank you. I yield back.
Chairman Gordon. Thank you, and Mr. Miller is recognized.
Mr. Miller. Thank you, Mr. Chairman. I am unconvinced by
any argument that government simply needs to get out of the way
and that innovation will come entirely from the private sector.
Far too many of the most important innovations, including
transformational technologies like DARPANET [Defense Advanced
Research Projects Agency Network], have come originally from
government research, and there obviously is too much at risk in
some basic research to think that it can all be privately
funded. But I am intrigued by the idea of prizes as
encouragement to the private sector. The Malcolm Baldrige
awards have been remarkably effective in encouraging not just
those who win the awards, but in kind of getting their minds
around what constitutes excellence. They have had remarkably
useful results for those companies that have competed for
Malcolm Baldrige awards. I think Mr. Crews mentioned the idea
of prizes as encouraging an entrepreneurial type of effort to--
we aren't going to dictate the technology, we are not going to
pick who does it, but if you can go do this, we will give you a
prize, and the prize can be big. And from what I have heard
from high-tech companies in my area at the Research Triangle,
SBIR and STTR is about as important for the imprimatur that you
get from having those awards as it is for the money itself.
What do each of you think about prizes? What are the
limits? What are the values? How can they fit into the overall
government effort, the role of government in encouraging
innovation in manufacturing?
Dr. Smyth. I think prizes are a really interesting
mechanism, and I think it depends very much on the type of
technology you are trying to drive. If you look at advanced
manufacturing, and you can go from anything from virtual down
to real, where you are working on sensors or you are working on
production lines, if you are focused on something that is more
capital-intensive, I would say prizes would be least effective.
If you are focused on something that is perhaps virtual, that
could open up maybe basically a person with a laptop trying to
figure out a solution, then I think it is a fantastic approach.
One thing I will say is, there was a DARPA Grand Challenge
and that was a prize that General Motors, in collaboration with
Carnegie Mellon, won a couple years ago. It was the autonomous
vehicle. And without going into detail, suffice to say the
investment in producing the autonomous vehicle outweighed by
orders of magnitude the individual prize, but the point that I
am making was that prize was about developing a system. It was
about developing a technical solution to a system on autonomous
driving. There were maybe 100 different sensors and detectors
that had to be integrated so we could understand how the
vehicle could move on its own. Only a company, or a partnership
as it was in this case of companies and universities, with a
systems-level approach could achieve the end goal.
Dr. Sauers. First to your initial comment, I personally see
great value in the government being involved in the R&D
investment. I think the government is necessary, through their
funding, to develop the disruptive technologies, and also plays
a great role in education, especially the STEM program as we're
seeing today. I think the R&D investment by our government is
really what sets us apart from others.
If I think about P&G and their R&D activity, you know, we
are driven by meeting consumer needs and will partner with
those that help us develop the innovations that meet those
needs. It is hard for me to necessarily see a primary role for
prizes to motivate something like that. It is really the
business application that does it.
Mr. Chakrabarti. First of all, I agree that the
government's role is very important in research. I can't talk
specifically on prizes, but the concept of a competition--I
will talk a little bit about the SBIR. I think it is a truly
valuable program. It targets high-risk innovators and provides
both the capital and, very importantly, the credibility they
desperately need for private funding. In addition, the
competitive nature not only helps pick the best prospects but
readies the recipients by requiring them to think through their
projects in a comprehensive manner, creating better quality
projects for research. The government's role in funding
research, both federally funded and through the private
industry, is very critical for the risk sharing that is
necessary for transformational technologies for the government
to assist private industry in taking those high-end risks for
Chairman Gordon. Mr. Miller, if it is okay, before we run
out of time, why don't we skip over to Mr. Crews, who really
raised this issue in the first place?
Mr. Crews. Okay, just quickly, I think prizes do have some
merit. The only point I would make about it is, you do have to
be careful about whether the end you are trying to achieve is
something that ought to be a governmental role or private-
sector role. If you need to come up with a new homeland
security technology, a much better--you know, any kind of major
technology like that that involves America's ends, political
ends and security ends, prizes make a lot of sense. They also
make a lot of sense in transitional ways, of finding new ways
of dealing with government investment in high-tech areas like
nanotech and other areas. The spaceship one was a prize
phenomenon, or parts of it were, same with the way Netflix
always tries to upgrade its search system and things like that.
There are numerous ways that they can be used as an
alternative. You just have to be careful and make sure that the
end is the right one, that it is something that----
Chairman Gordon. Thank you, Mr. Crews, and Dr. Ehlers is
Mr. Ehlers. Thank you, Mr. Chairman, and I thank the panel.
When I was elected to Congress some years ago, I never
expected how much time I would have to be spending on
manufacturing issues, largely because I come from a
manufacturing state first of all, but secondly, there was
little interest in the Congress in manufacturing and
innovation. There was sort of this laissez-faire attitude--
well, they are a business, they have got money, they can do the
research, they will develop the products, et cetera--neglecting
a very important role, and I have often compared the issue in
manufacturing with farming and agriculture and the role that
the government played in that starting with the land-grant
universities and going forward. And most people don't realize
the money that we spend still today on helping farming, and I
find it ironic that in agriculture, because of the change in
mechanization and so forth, back in the 1880s something like 80
percent of our economy was in farming and employees were in
farming. Today it is closer to two percent of the employees are
employed in farming. And yet we continue to spend about $400
million a year as a Federal Government on the Cooperative
Extension Service. Now, I am certainly not opposed to that. It
is very useful. That is a way for the government to get its
research results out quickly to the farming community, and I
was amazed that Michigan State University developed something
new in the labs one year and the next year the farmers are
using it in the fields. We don't have anything like that in
manufacturing. I have spent far more time than should have been
necessary on the Manufacturing Extension Partnership. It has
been like pulling teeth every year to try to get $100 million
out of the Congress and the President for the Manufacturing
Extension Partnership, which combined with SBIR, all of those
things working together really are very effective. This year we
are spending $400 million on a part of the economy that has two
percent of the employees, and I have to struggle to get $100
million to go towards a part of the economy that has 15 percent
of the workforce, namely manufacturing. We just don't have our
heads screwed on right here in the Congress, and I think in the
Nation, as to the importance of manufacturing and the
importance of the government role in innovation. I agree with
Mr. Miller and his comments, this idea that somehow if we
interfere with manufacturing we are interfering with the
private sector, but we interfere with agriculture and we are
not. It doesn't make sense. So I apologize for giving a sermon
but this is--now that I am retiring, I can act like an angry
old man and say why didn't you listen to me all these years.
But that is one of our big problems.
I do have a question that is related to this. How can we
more effectively compete as a Nation, and what is the
government's role in this competing against low-wage nations?
That is a major problem we face today. And I don't see a clear
path there, and I am wondering if any of you have any really
good wisdom on how we can best proceed there.
Dr. Tuominen. I will just make a short comment. In the new
technologies that are promising, we have to keep them here. We
have to set up the manufacturing base for those here and we
have to do it posthaste, and how do we do it? We need to
educate the workforce quickly so that there becomes a
manufacturing base, so, for example, in nanotechnology where
this is this demand for all these workers and they don't exist
in the United States, well, where do the ideas go? They go
overseas. The other thing we have to do is create an
environment for shared risk and loosen the capital markets by
any mechanism possible so that all factors can help those
companies grow here.
Mr. Ehlers. Yes, the capital market problem I hope is a
transitional problem we are having right now, but you are
absolutely right. I have a lot of manufacturers in my district.
They have firm orders: they cannot borrow the money to build
the product. But I appreciate the comment you made vis-a-vis
other countries but we really have to concentrate on that, and
the government's role is to the high-risk, high-reward research
but also to aid. It drives me out of my mind. Every year I have
fought to make the R&D tax credit permanent because the bean
counters in your companies don't want to take a chance that it
won't be renewed, and so it is not really a factor in their
thinking. If we make it permanent, it is there for you and I
think it should be increased.
Chairman Gordon. Thank you, Dr. Ehlers, and we are going to
let Mr. Smith have rebuttal in just a moment, but right now we
will go to Mr. Peters.
Mr. Peters. Thank you, Mr. Chairman.
Dr. Smyth, a question for you. You talk in your testimony
about the importance, certainly in the auto industry, of the
auto supplier network, where a great deal of innovation occurs
and certainly in the manufacturing process critical for General
Motors and all of the Big Three. If you could maybe flesh out a
little bit as to what we should be thinking about at the
Federal level to be helping those auto suppliers who right now
are, as you know, hanging on by their fingernails given where
the economic situation is right now, and their budgets are
strained for their ability to do the kind of research and
development necessary for them to continue to be competitive,
particularly with foreign suppliers that may be looking to
supply to our domestic automakers. What should we be doing?
Dr. Smyth. Well, I think two things. The suppliers being a
part obviously, a huge part of the relationship with USCAR,
which is the United States Council for Automotive Research and
that has been a big factor of it, and developing technologies--
I think a lot of times when people talk about developing
technologies in the automotive sector, I really think you are
developing it for the OEMs. We talked about some of the work
that we did at NIST to develop standards that generate into
smaller companies. There is a lot of technology that we can
develop that we will never be using as our core technology. I
think it is about providing forums for the big companies to
work with the small companies, but again, those forums, they
have to be resourced. They can't just be paper-generating,
strategy-writing forums, and I think that is really essential.
But I do think we should build on the success of consortia like
USCAR and introduce other Federal agencies--maybe it is DOD or
maybe it is the EPA [Environmental Protection Agency] or
whatever, introduce a wider spread of government agencies, get
that cross-agency forum and plug in supplier bodies.
Mr. Peters. Now, many of you have mentioned public-private
partnerships as the model for this kind of funding, so perhaps
there are some brief comments as to what is an ideal structure
for that public-private partnership. Mr. Crews, you may not
believe that there are any, and if there are, is there a model?
Maybe I will start with you. Is there a model that we could
Mr. Crews. Well, basically we talk a lot about cross-agency
consortia. I am just reminding you that whatever you do with
COMPETES Act and the investment, it is still a small fraction
of the resources that need to be freed up to get the economy
going. That is what I think is important to point out. You have
got to deregulate, you have to make it so that the foreign
workers who come here and get educated can stay. There are a
number of things like that, liberalizing infrastructure so tech
and telecom and those kinds of things can move along. But in
addition to considering cross-agency partnerships, also think
about what institutions it is in society that are the source of
wealth creation, and we know that is markets and the ability of
capitalism to bring together people who don't know one another
to put resources together to create great wealth. So look at
cross-industry consortia too. Look at what impact the antitrust
laws might have on preventing American companies from taking
free enterprise to the next level, so to speak, to compete on a
Chairman Gordon. Mr. Peters, would it okay if I went on to
Mr. Smith now?
Mr. Peters. Absolutely.
Chairman Gordon. Thank you. Mr. Smith, representing the
rural part of our country.
Mr. Smith. Thank you, Mr. Chairman. I will try to be brief.
A couple things.
One is my concern that the inputs to manufacturing are not
always subject to the marketplace and yet the output, although
some public policy folks would like to dictate what those
products are, ultimately it is still up to the consumer whether
or not--and the marketplace whether or not to purchase vehicle
A, B, C or D. And so I see that as unsustainable. If you might
wish to comment about that, but perhaps even more specifically,
Dr. Tuominen--with a last name like Smith, I am a big challenge
except by those with a Y instead of an I.
Dr. Smyth. Nice catch.
Mr. Smith. I do--I want to talk a little bit about the
Environmental, Health, and Safety program component area of the
National Nanotechnology Initiative. I know it is getting a 20
percent increase in fiscal year 2011 after receiving a
substantial increase in fiscal year 2010 as well. How do these
increases impact funding for the other, and I would say equally
important, six program component areas, one of which is
Dr. Tuominen. Well, with regards to nanomanufacturing, it
hasn't affected it at all, and in fact, I think they are
complementary, that worker safety, consumer safety,
environmental safety is a natural twin to nanomanufacturing
development, and here is a case where in terms of the funding
levels, if you look at 2009 through the proposed 2011, both of
these have grown commensurately, and that is how it should be.
So I think there is good progress in both areas.
Mr. Smith. Mr. Crews, would you wish to comment?
Mr. Crews. So what were you implying about the input to
manufacturing compared to output?
Mr. Smith. If you want to comment. I mean, the inputs into
manufacturing are not always based by the marketplace or based
on the marketplace and yet the output is. I mean, that seems to
be not sustainable, not necessarily environmentally but
economically sustainable, and how do we get around that
perhaps, and then also how do we counter that?
Mr. Crews. Well, I guess there a lot of ways. In the
testimony, I outline a lot of ways of looking at liberalizing
the economy and looking at different particular sectors and
removing regulation and looking at tax burdens and things of
that sort, but--well, I don't know. In terms of--I think it is
important to restructure, you know, look at this in terms of,
if you are going to invest federally, are there different ways
of doing it? Maybe taxpayers could have some selection, some
choice in what technologies they want to foster. It is just
that you run into a real problem when trying to select
technologies to invest in and what that will do in terms of how
that steers the market and where that is going to take things.
That is what you have to be really careful about, so while you
look at general research, also look at other ways that also
foster general research that the private sector can do too. I
know that the Federal Government has that role to play. I see
it specifically in defense areas and things of that sort.
But, please, I urge you to look at ways that you can deal
with antitrust law, liberalizing infrastructure, looking at
what it is that motivates scientists to do basic research in
the first place. It is true that basic research can get
captured, and there is always that market failure argument that
the private sector doesn't do enough, but it turns out that
when you have unfettered global markets, companies don't always
capture their own intellectual property, their own resources,
but they capture it from other firms who are doing it too. To
retain scientists, you have to pay them more and you can create
problems and disruptions in that by trying to direct things--I
am just saying you have to be very, very, very careful about
the Federal, I called it, you know, the Federal Government
steering while the market rows. You have to be very careful
about where you do that but at the same time that you do it,
make sure that you are liberalizing in other areas so that if
there is a way the private sector can take on that role, you
let that happen because that----
Chairman Gordon. Mr. Smith, is it all right if we go to
Mr. Smith. Thank you.
Chairman Gordon. Mrs. Dahlkemper, sorry, but could you
maybe have one real good question?
Mrs. Dahlkemper. I will be very brief.
I just want to reiterate what Dr. Ehlers said in terms of
the MEPs, and I sit on the Ag Committee too so I see that from
both sides, but I agree that the MEPs are doing a great job but
the small manufacturers sometimes struggle with the government
support programs. And Mr. Chakrabarti, could you talk a little
bit about--you talked about a one-stop-shop approach to
government support programs, and really how you would see that,
where it might be housed, how you could see the Federal
Government's role in terms of helping our small manufacturers,
small to medium?
Mr. Chakrabarti. Absolutely. Small and medium enterprises
lack the resources to evaluate the programs that can help them
innovate. These business leaders and owners are wearing many
hats every day. I speak from experience when I say the task of
identifying these programs from the government is very
daunting. I believe that a one-stop-shopping approach could be
developed using the input of agencies that are responsible for
the programs as well as a council of small and medium business
leaders. The inputs of the various constituencies will help
sharpen the efficacy of such a program. The cross-experience
team would need to evaluate which agencies have the best access
to the small and medium enterprises and specific industries in
order to find the best home for the one-stop shop. In other
words, the ability of the chemical industry to access
government programs may be housed in a different function than
the ability of a nanotechnology industry company or an
automotive industry company. The key is, how can we provide
single points of contact as low in the chain as possible that
have the access to the small and enterprise.
Mrs. Dahlkemper. So basically you see this as depending on
the industry there would a one-stop shop for that industry, not
one stop for all manufacturing going forward?
Mr. Chakrabarti. Correct.
Dr. Smyth. Can I make a comment?
Mrs. Dahlkemper. Yes.
Dr. Smyth. On the one-stop shopping, I think it is a great
idea but I think it should be expanded to big plus small. I
will just give an example. If you are looking at
electrification of the vehicle and you are working on
technologies to support that, if you are a small organization
and if the one-stop shopping--if I am a national lab and my
charter is, for example, a small business, then I will look and
say, okay, there is a lot of welding involved so I may go and
look at ultrasonic welding, and those people will work, small
companies, to optimize that process. If you include large
business, they look at a systems-level approach and they will
say yes, welding is a great idea but you also have to invest in
quality systems, you also have to invest in something like
reversible bonding that is going to put welding out of business
and allow us to make reconfigurable batteries that will be--it
will be able to recycle and re-manufacture. So you do get a
different perspective. I think the one-stop shopping is a
fabulous idea but I don't think it should be constrained to
Chairman Gordon. Thank you. If we could----
Mrs. Dahlkemper. Thank you. I yield back.
Chairman Gordon. I suspect that Mr. Rohrabacher has an
answer rather than a question and so do you want to give your
Mr. Rohrabacher. Thank you very much, Mr. Chairman. I would
just like to go on the record. I am sorry, I had to rush back
to another hearing that happened at the same time. But if we
are going to have U.S. manufacturing be competitive, the
Federal Government does have a role and the most important role
is protecting the intellectual-property rights of those
American businesses that will utilize technology to outcompete
the foreign competition. Unfortunately, Mr. Chairman, the
patent reform legislation that has been going through here for
the last few years would have the opposite impact and make the
theft of intellectual property more likely, and let me note
that we also need to make sure that the limited research and
development dollars that we are able to spend are not then in
some way used to set up manufacturing overseas, and I don't
think we have taken care in that job.
Chairman Gordon. Thank you, Mr. Rohrabacher.
Mr. Rohrabacher. Thank you.
Chairman Gordon. In the future you can just say ``number
one'' and we will put that into the record.
Mr. Hall is recognized.
Mr. Hall. I will probably answer mine too as I ask it. Mr.
Chakrabarti, I noticed PMC Group has manufacturing facilities
in France and India, and I guess my question is, what is it
about these countries or what business climate have they
created that make them more attractive to PMC than the United
States? Now, let me see if I can't answer it. Other than their
low cost of labor and Dr. Sauers said that we regulate over
here but we overregulate, which is probably true, and my
suggestion there is to do away with the EPA or have a three-
year moratorium on EPA and lawsuits. Now, if that doesn't
answer your question, we will write it to you again and let you
give it to us in writing.
Mr. Chakrabarti. I appreciate that.
Mr. Hall. Thank you.
Chairman Gordon. It is really unfortunate we had to hurry
today, and I don't mean any disrespect. We have had more what
you might call ``high-profile witnesses'' but we haven't had a
panel that has addressed an issue that has been more important
to us, I think, in trying to really save our manufacturing base
here in this country. We are at a tipping point. I think the
America COMPETES Act can help us greatly, and your input will
help us do a better bill. So I thank you for being here.
The record will remain open for two weeks for additional
statements from Members and for answers to any follow-up
questions the Committee may ask the witnesses. The witnesses
are excused and the hearing is adjourned.
[Whereupon, at 11:14 a.m., the Committee was adjourned.]
Answers to Post-Hearing Questions
Answers to Post-Hearing Questions
Responses by Dr. Len Sauers, Vice President of Global Sustainability,
Procter and Gamble
Questions submitted by Representative Daniel Lipinski
Q1. I know that Proctor and Gamble has used high-performance computing
in novel ways to help implement parts of its sustainability program.
For instance, you use numerical simulation of foams, detergents, and
packaging to develop products that save energy and materials and give
you a competitive advantage. In your written testimony, you recommend
increased collaboration between government and industry through the
Q1a. Would you say that high performance computing is an area ripe for
A1a. Yes, without question. A key focus area should be developing the
Software that takes full advantage of the latest hardware in solving
problems of interest to manufacturers. The commercial codes that are
being used today have their origins in National Lab codes from 20 to 30
years ago, but these have not been updated to utilize efficiently the
large multi-processor computer architectures that are part of the
Q1b. What other roles do you think the National Labs can play in
helping U.S. manufacturers innovate?
A1b. At SNL, LANL, ORNL and ANL we have collaborated and worked with
codes to better understand the physics of interest to us (as you talked
about earlier in the question). However, these codes are academic, some
would even say `user hostile', and their use by non-expert, non-
Ph.D.'s, that are more typical of our supply-chain is not reasonable.
We could see the National labs playing a role in progressing these
codes toward a commercial offering if there were fewer barriers in the
IP, some `larger scale' ways to pay for the conversion, and a higher
degree of collaboration between the Labs and the ISV's (independent
Q1c. Are there things we should be doing at our National Labs to take
this collaboration beyond large manufacturers, to help reach smaller
A1c. Why is an everyday use goods maker better connected with the Labs
on sophisticated software and high performance computing then a U.S.
company that makes its living selling high-end software that runs on
high performance computing? The answer normally offered to use is that
they do not perceive the market demand beyond the fortune 30 and do not
have the scale or the risk appetite to lean forward to make the
P&G is part of a `working group' of manufacturers (Boeing, GE,
Caterpillar) partnering with the Council on Competitiveness to promote
the idea that Modeling and Simulation and High Performance Computing
are not just for us . . . but for the entire supply chains that also
provide us goods and services. From the smaller regional Engineering
Service Providers, Packaging suppliers, Parts suppliers, Tool
providers, these enterprises are currently not able to `afford' using
high performance computing. Therefore, they use it ONLY for very rough
and coarse guidance . . . never to replace the slow and expensive
learning that is the hallmark of the larger higher tech entities.
What role is the Council on Competitiveness playing and what role would
be helpful for Congress?
The Council, coupled with the `working group' as described above,
has been communicating very broadly to increase awareness on the role
of HPC on national manufacturing competiveness and its influence on
jobs and the economy.
It has been very important to the working group, which does not
contain any ISV's or Computing Hardware manufacturers, that it is
understood that our advocacy here is not for the Government to buy
more. The working group has evolved out of a call to service for use to
mentor and support U.S. industry to remain strong and competitive.
As large multi-national companies, we for the most part have the
computing hardware and software we need to innovate. However, for small
to mid-sized enterprises and especially those in our supply chains,
they appear to be stuck in a PC world that is not able to solve the
larger, more realistic problems that replace the slow and expensive
learning cycles of today. In fact, the manufactures of the working
group do the analysis for the products or services that our suppliers
provide-- most of the time.
Our group sees HPC like the enabling `roads and bridges' of our
digital age. For some of us, we are able to build our own roads to get
around our own `place'--so to speak. The Internet has also been part of
it . . . it allows data to move around, but move around to what--is the
question we are addressing. We seem far from having a commercially
viable infrastructure that small and mid-sized enterprises can utilize
when they support us or their other customers.
So, how can the congress help? Work with Industry, National Labs,
Academia to help create the support, partnership, and creative
alliances that can allow for the `trans-continental railroad' of our
modern era? When built, industries will pay for their time and usage of
the system, through usage fees, but it is something that they can have
access to when they need it.
It is correct that Modeling & Simulation, using High Performance
Computing, plays an important and increasingly critical role in our
innovation. It is replacing the slow and expensive learning cycles
typical of using only large scale, high speed, or very numerous
prototypes and samples to learn. Since we are in the business of making
and selling billions of products to billions of people every year, we
must learn how to design and manufacture these products to meet a wide
range of consumer needs from the store shelf to the landfill. Doing
this with `physical-only' prototypes is expensive, time consuming and
ultimately limits innovation.
One of the most important enabling capabilities changing the
`physical only' learning is the emergence of computers. It has changed
science and engineering at least as much as aviation has changed
travel. And it is not just the personal computer that everyone sees
everyday . . . it is also the large computer with hundreds and
thousands of processors that enables calculations that were not dreamed
possible a decade ago. This has enable us to learn about a chemical
reaction with a billion atoms, a bottle or mix tank expressed with
millions of equations, or an optimization that finds the best
formulation from thousands of choices.
As a large multi-national company dedicated to innovation, we have
invested in our own capability to use modeling & simulation, enabled by
high-performance computing, to innovate HOW we innovate. Our
relationships with Los Alamos, Sandia, Argonne & Oak Ridge National
labs are a matter of record in the attached document. Through CRADA's,
WFO agreements, and an INCITE award, we have focused on software and
the physics that has progressed both our interests.
Additional Material for the Record
Written Statement from National Petrochemical and Refiners Association
NPRA, the National Petrochemical and Refiners Association,
appreciates the opportunity to submit testimony on ``The Future of
Manufacturing: What is the Role of the Federal Government in Supporting
Innovation by U.S. Manufacturers.'' Our association represents more
than 450 businesses, including virtually all U.S. refiners and
petrochemical manufacturers, their suppliers, and vendors. NPRA members
supply consumers with a wide variety of products used daily in their
homes and businesses, including fuels, lubricants, and chemicals that
serve as building blocks for everything from plastics to clothing,
medicine, and computers. NPRA's members have a keen interest in the
future of research and development (R&D) and manufacturing in this
country, and we appreciate the opportunity to share our views on this
I. Petrochemical Products Are Vital to Our Economy and Way of Life
Petrochemicals, or chemicals derived from petroleum (crude oil) and
natural gas, are the foundation for many of the products used by
millions of Americans every day. Without petrochemicals, the standard
of living we have come to know and enjoy would simply not exist, nor
would thousands of petrochemical-based products ranging in applications
from healthcare to military supplies, safety and child care products,
food packaging, and even clothing.
One of the most prominent uses of petrochemical products is in
protecting the food we eat. Much of the food enjoyed by millions of
Americans every day is made possible because of the advances in food
packaging that have been made possible due to our products. Over 40
percent of the beverage packaging materials used in the U.S. are
derived from petrochemicals.\1\ Plastic packaging makes food
transportation much more energy efficient, since the lighter packaging
allows more food to be transported at lower costs. Plastic jars are
approximately 90 percent lighter than their glass counterparts and
weigh 38 percent less than steel cans.\2\ Lighter packaging also allows
for lighter loads, which decreases emissions, lowers shipping costs,
and reduces fuel consumption.
\1\ ``Petrochemicals in Consumer Products Critical to the United
States Economy.'' CMAI: January 2010.
An often overlooked use of petrochemicals is the prominent role
these products play in our nation's armed forces. The United States
military depends on petrochemical products to outfit American troops
with top-of-the-line combat gear essential for the protection of our
armed forces serving both domestically and in dangerous regions around
the world. The Army Combat Uniform (ACU) worn by every soldier in the
United States Army is made of approximately 50 percent nylon.\3\
Innovations in manufacturing have allowed our industry to develop
advanced helmets made of petrochemical materials capable of stopping a
9-millimeter round. The boots used by soldiers that allow them to move
easily over both desert and rocky terrain are composed of over 50
percent petrochemical products. Furthermore, Kevlar fiber, which is a
flame-resistant carbon-based aromatic polyamide five times stronger
than steel, is the main component of bullet-proof material, and has
allowed for the development of the bullet-proof vest, which protects
the wearer not only from ballistic threats, but from blasts and fire as
well. These vests provide crucial protection not just for our military
personnel, but also for police officers and other public servants
serving in dangerous professions.
Perhaps most significant to average Americans is the role
petrochemical products play in the health and safety of our society.
Protective clothing used by those working in hazardous or even deadly
environments is almost entirely made up of petrochemical products. This
includes bio-hazard suits, safety goggles, protective helmets, and
respiratory equipment. The seat belts in every passenger motor vehicle
sold in the United States are made pound for pound from the
petrochemical precursors paraxylene (aromatic) and ethylene.\4\ Nearly
a billion pounds of petrochemicals are used to make the approximately
22 billion diapers used annually in the United States.\5\ Surgical
gowns for hospitals, many bandages for wounds, sutures, blood bags,
sanitizing liquid, soaps, detergents, and aspirin are all mainly
comprised of petrochemicals. Furthermore, the 35 million Americans who
use dentures and the 24 million Americans who rely on contact lenses
are also reliant on the petrochemicals used to make these indispensable
\5\ Joyce A. Smith and Norma Pitts. ``The Diaper Decision, Not a
Clear Issue.'' Ohio State University.
\6\ ``Petrochemicals in Consumer Products Critical to the United
States Economy.'' CMAI: January 2010.
Petrochemicals also play a critical role in transportation and
alternative energy innovation. Polypropylene is often used in the
interior and exterior panels and bumpers of light vehicles, and
polycarbonate is used instead of glass in relevant applications. Also,
polyurethanes are used in seating cushions and ethyl vinyl acetate is
used in wiring and cables. All of these lightweight materials are
essential for helping vehicles to meet Corporate Average Fuel Economy
(CAFE) standards without compromising vehicle safety. Every passenger
motor vehicle in the United States uses over $1,300 in chemical
products.\7\ Additionally, major aircraft manufacturers Airbus and
Boeing both use carbon fiber-reinforced plastic wings in their
aircraft. Half of the airframe of one of the most popular new
domestically produced aircraft, the Boeing 787, is composed of carbon
fiber reinforced plastic. In the development of renewable energy
sources, 15 percent of wind turbine blades are derived from
petrochemical products, as are all solar panels.
II. Current Business Environment
The American petrochemical industry is an essential part of this
country's economic independence and stability in the global market. Not
only does our industry produce materials that are used in thousands of
products Americans rely on in their daily lives, but it is also a key
component of our international trading market. Our industry employs
nearly 195,000 Americans directly with an annual average salary of
$100,945. This industry employment number increases to more than one
million individuals when indirect employment is considered. These are
high-quality American jobs and our employees enjoy higher than average
wages, good benefits, and a safe working environment. Furthermore, the
American petrochemical industry is the global leader in providing the
raw materials for the development of new chemicals for the
international market that advance safer and more efficient
However, our country is at risk of losing its status as the
international leader in this industry due to international competition
and an increasingly hostile domestic business environment. Taxes, an
increasing number of overly burdensome regulations, and a flawed
domestic energy policy are adversely impacting our industry and
allowing other countries to forge ahead of us in research and
development, production, and international trade.
In the 1990s, the North American petrochemical industry enjoyed
strong demand growth, adding almost 50 million tons of new supply in
the basic chemicals and plastics market. However, 2000-01 saw a steep
rise in raw material prices, which abruptly muted this growth, and
North America has lost 10 million metric tons of chemical production
capacity over the past decade. This represents the equivalent of
approximately fifty facilities closing \8\. Furthermore, during the
current economic recession, demand for these products in North America
fell an alarming 16.2% over a two-year time span.\9\
\8\ ``State of the Industry: Exploring Tomorrow's ``Whys.'''' CMAI:
While the capacity to produce major petrochemical products in the
United States has stagnated since 2000 and continues to decline, new
capacity is rapidly being added in other parts of the world.\10\ In
recent years, China has begun to decrease its petrochemical imports
from the United States and has expanded its own domestic production of
petrochemicals to provide materials for the many consumer goods the
country produces. Concurrently, countries in the Middle East, such as
Saudi Arabia, Qatar, and the UAE, have begun to build their own
petrochemical plants and have become very competitive in the
international market. As a result, countries such as China that used to
import many petrochemical products from the United States have now
turned to these geographically closer, lower-cost Middle Eastern
markets to supplement their own domestic supply.
\10\ ``Petrochemicals in Consumer Products Critical to the United
States Economy.'' CMAI: January 2010.
Due to the abrupt pace of economic advancement in developing
countries, global demand for petrochemical products is booming and some
estimates show demand increasing seven percent a year. However, the
petrochemical industry in the United States is unable to benefit from
this international increase in demand due to the stagnant state of our
domestic industry, which allows countries like China and those in the
Middle East to fill the increasing global demand for petrochemical
In 2010, Chemical Market Associates, Inc. (CMAI) analyzed the
production capacity for 21 of the most commonly produced chemical
products (Attachment A). From 1999 to 2009, the United States'
production capacity for nearly every chemical has either decreased or
remained virtually stagnant, while overall global production capacity
has drastically increased.\11\ Unfortunately, as we are well aware,
decreasing or stagnant product growth is not conducive to job growth in
this country, but rather leads to jobs loss. Instead of focusing on
expansion and research and development, the domestic petrochemical
industry is simply trying to maintain its global competitiveness.
III. The Future of the Domestic Petrochemical Industry
The lack of support for research and development (R&D) is one
factor hindering the development of the manufacturing sector in the
United States. In fact, it can be readily observed that historically,
research and development, innovation and higher education tend to
follow the manufacturing base. Scientists from overseas who receive
their education in the U.S. are now leaving this country in ever
greater numbers. They are getting chemistry and engineering degrees in
American schools and returning to countries such as China and India to
work in the manufacturing sector. While R&D is beneficial for start-up
industries or in situations where risks may be too high for private
business ventures, a hostile business environment prevents the private-
sector R&D funding necessary for long-term development of new
Simply increasing R&D budgets and fostering innovation in the
United States does not ensure that the manufacturing and production
that comes about as a result of the R&D will occur here. Overall U.S.
manufacturing, no matter what the industry, will continue to move
overseas and lag behind international manufacturing until Congress
addresses four critical issues relating to the U.S. business
environment: education, taxes, over-regulation and energy costs.
It is common knowledge that the United States' primary and
secondary education systems suffer from a serious science and math
education deficiency. Since the United States has continually cut
budgets for these programs, many of our brightest young minds find
themselves considering going overseas to countries that advance
policies to expand the manufacturing base of their economies while
simultaneously increasing R&D budgets. Federal R&D grants that
companies can apply for in the U.S. often come with preconditions on
accepting government money, which stifles innovation even further.
Another issue that plays a significant role in hindering the
expansion of manufacturing in the U.S. is resource availability and
volatility. The petrochemical industry is very energy-intensive, and
relies on massive quantities of energy for production. U.S.
manufacturers account for nearly one-third of total U.S. energy
consumption. It is important to note that a decade ago, American
manufacturers benefited from energy prices 30 percent lower on average
than those of the United States' major trading partners. Today, energy
costs for U.S. manufacturers are nearly on par with those of their
global counterparts.\12\ In order to manufacture petrochemical
products, large quantities of feedstocks, such as oil and natural gas,
also are needed. According to the Energy Information Administration, in
2006 about 331 million barrels of liquefied petroleum gases (LPG) and
natural gas liquids (NGL) were used to make plastic products in the
plastic materials and resins industry of the United States.\13\ Natural
gas prices have been very volatile in the last decade, leading to great
energy cost uncertainty for domestic manufacturers. While recent
prospects of potential new shale gas resources provide hope for more
reliable and hopefully more stable supplies of natural gas, domestic
policy still limits development of natural gas resources. Congress is
also looking at policies that could lead to significant fuel switching
from coal to natural gas, contributing to uncertainty about future
costs at a time when total costs already put domestic manufacturing at
a disadvantage. Overall, in 2008, structural costs (costs of taxes,
labor, energy, and raw materials) for U.S. manufacturers were 17.6
percent higher than major international competitors on a trade-weighted
basis.\14\ In addition, the cost of energy and raw materials fluctuates
significantly on a daily basis, making it very difficult for companies
to financially plan for the cost of the materials that go into making
\14\ ``The Tide is Turning: An Update on Structural Cost Pressures
Facing U.S. Manufacturers.'' National Association of Manufacturers.
November 2008. p 14.
One of the largest threats to the survival of the domestic
manufacturing industry is the regulatory uncertainty that is more
prevalent in the United States than in any other country in the world.
In previous decades, the decision for a company to expand was much
easier than in today's marketplace, where companies must now look at
not only their financial situation, but also regulatory issues and
challenges that could arise in commissioning new projects and capital
investments. Furthermore, with increasing regulations, many companies
have been forced to decrease their R&D budgets and shift their
resources to regulatory compliance.
The recent regulatory environment limits what businesses can do and
how they can expand in the United States as well as overseas. In 2009-
10 alone, American businesses have faced the conceivable reality that
they could be forced to comply with several new, burdensome, and costly
governmental regulations. The past 15 months have witnessed serious
debates in Congress relating to cap-and-trade legislation, inherently
safer technology mandates, regulation of greenhouse gases (GHGs) under
the Clean Air Act and reform of the Toxic Substances Control Act, just
to name a few. Each of these proposals could result in costly programs
businesses would have to comply with or change their processes for,
leaving American industry in limbo, unable to expand or invest in new
projects because of the financial and regulatory uncertainty companies
will face in the upcoming years.
Businesses in the United States are faced with some of the most
extensive government regulations in the world. Several studies have
indicated that by 2004, regulatory compliance costs exceeded $160
billion annually for U.S. manufacturers--equivalent to a 12 percent
value-added tax.\15\ United States manufacturers pay some of the
highest regulatory compliance costs in the world. Furthermore,
individual states often enact their own regulations, creating a
regulatory patchwork of different standards with which businesses that
operate in multiple states have to comply. For example, one state may
regulate a product as a consumer product, while another may regulate
the same product for solely industrial use, leading to two entirely
\15\ ``The Tide is Turning: An Update on Structural Cost Pressures
Facing U.S. Manufacturers.'' National Association of Manufacturers.
November 2008. p 11.
The current regulatory environment forces companies to devote
significant financial resources that could otherwise be used in R&D or
capital investments to compliance with regulations promulgated by the
Environmental Protection Agency (EPA) and other government agencies.
For example, polyvinyl chloride is derived from petrochemicals and is
the third most widely produced plastic. It is an essential component of
hoses, flooring, and roofing, and is used commonly in clothing and
upholstery. In August 2009, EPA sent polyvinyl chloride manufacturers
an Information Collection Request (ICR) to provide data so that EPA
could establish emission limitations in accordance with the 40 CFR Part
63 PVC MACT rule. The cost of this information collection effort was
initially estimated to be $32 million, entirely paid for by the
manufacturers, simply to provide the EPA with testing information to
assist in their rulemaking process. These are financial resources that
otherwise could have gone to R&D.
To be clear, the petrochemical industry is not advocating weakening
existing environmental or safety regulations. On the contrary, our
members hold public and environmental safety in the highest regard.
However, the complexities, breadth and uncertainty of the current
domestic regulatory environment place American manufacturers at a
significant competitive disadvantage in the international marketplace.
Congress and the Federal Government should examine the current
regulatory climate and develop a framework for providing industry with
more regulatory certainty to create a predictable and favorable
financial environment. Such an initiative is critical to maintaining
the industry that exists in this country and expanding our domestic
manufacturing in the future.
In addition to regulatory uncertainty, one of the most significant
reasons for the decline of the American manufacturing industry is the
burdensome tax environment businesses face in the United States. Tax
policies make it increasingly difficult to compete with businesses in
more favorable tax environments overseas. While the United States has
been losing jobs, other countries such as China and those in the Middle
East and Southeast Asia have succeeded in attracting new business
development which has flourished under a more favorable tax
A PricewaterhouseCoopers survey released in 2009 showed the total
tax rate of U.S. businesses to be 36.4 percent, the second highest
corporate tax rate among the 30 countries in the Organization for
Economic Cooperation and Development (OECD). Furthermore, in addition
to income taxes, corporations bear a wide variety of non-income taxes,
adding $62 of tax liability for every $100 of corporate income taxes.
These non-income taxes do not include the additional $169 of sales,
excise, withholding, and other taxes imposed on customers and employees
for every $100 of corporate income taxes paid by survey
United States businesses are more highly taxed than those of any
other country in the world. While other countries have been lowering
their corporate tax rates in an attempt to grow their manufacturing
industries, the United States has continued to increase business taxes.
This has led to a tax rate discrepancy between the United States and
other countries that increases every year. On a trade-weighted basis,
the United States tax rate is 7.8 percent higher than its nine largest
trading partners.\17\ Only Japan has imposed a higher business tax rate
than the United States.
\17\ ``The Tide is Turning: An Update on Structural Cost Pressures
Facing U.S. Manufacturers.'' National Association of Manufacturers.
November 2008. p 13.
Taxes are not the only fees that businesses are expected to pay to
the Federal Government. Over the past 30 years there has been a move by
the government to ``recover'' costs it incurs to regulate business. In
addition to industry's enormous corporate taxes, companies are also
expected to fund the regulatory operations through ever-increasing fees
for everything from permitting to applications for introducing new
chemicals into commerce. For example, the current debates over TSCA
reform include a fee-based system similar to the one used to regulate
pesticides. Advocates of a fee-based system tend to dismiss the
argument that corporate taxes should be used to pay for the regulation
of those entities already paying taxes.
The United States also has one of the highest rates of labor costs
in the world. The largest share of taxes remitted, 43.5 percent, go to
employment-related taxes such as Social Security, pensions, and
Medicare. This amounts to an average of $25,889 in employment-related
taxes per U.S. employee, which is more than one-third of average
domestic employee compensation.\18\
With these extraordinarily high tax rates, rather than expansion in
the United States and investment in more research and development,
domestic innovation and capital is forced to relocate to other
countries with lower tax rates and a more favorable business
environment. This allows manufacturing and the jobs that come with it
to flourish in other countries, while manufacturing in the United
States declines, American jobs go overseas, and our country becomes
more dependent on products imported from abroad.
The American petrochemical industry is a vital source of American
jobs and products that allow us to maintain and advance our way of
life. The United States is a world leader in innovation and
manufacturing technology, and there is no reason why our country should
not remain superior in this field. The United States government must
set policies that not only foster R&D, but also encourage researchers
to remain in this country rather than go overseas. Many petrochemical
production companies were founded in the United States and would rather
operate here than in any other region around the world. However, in
order for our industry to not only maintain what we have already
created but to grow and capitalize on future demand increases and
global economic development, the Federal Government must create an
environment that attracts American businesses to expand their
operations in this country and fosters innovation rather than
encouraging jobs to be shipped overseas.
NPRA urges Congress to consider policies to bolster the overall
business environment in the United States as it examines initiatives to
advance R&D. We appreciate having the opportunity to submit comments on
this extraordinarily important topic.
Prepared Statement from Representative John D. Dingell
Thank you, Mr. Chairman, for your kind invitation to submit
testimony concerning the role of the Federal Government in supporting
innovation by U.S. manufacturers. As the representative of Michigan's
15th Congressional District, which has suffered more than most as a
result of the downturn in U.S. manufacturing over the past decade, I
believe fundamental changes in Federal policy are necessary for the
preservation and growth of this country's industrial base. These
changes include not only enforcement of existing law, but also the
drafting and implementation of new Federal initiatives, ranging from
loan and tax credit programs to improvements in the Nation's education
system. The comprehensive nature of this approach will by necessity
involve the participation of multiple committees of jurisdiction in the
Congress, and I commend the Committee on Science and Technology for its
continued desire to be at the forefront of this effort, as particularly
evidenced by today's hearing.
Prior to any discussion of supporting innovation by U.S.
manufacturers, we would do well to consider their current state. In
years gone by, the United States was the world's leading exporter of
high-quality manufactured goods. According to the World Bank, the
United States now ranks 15th in the world for the proportion of
manufacturing production its companies export. For years, the
manufacturing sector fostered the growth of the middle class in the
United States. Thanks, among other things, to this country's lack of a
pro-manufacturing agenda, its own short-sighted trade agreements, and
unfair practices by our trading partners, we have seen the U.S. trade
deficit balloon at an obscene rate and domestic industrial production
sink to dismal levels. As a result, millions of Americans, many of whom
live in my District, no longer have the option taking a manufacturing
job, something which allowed their parents and grandparents to make
better lives for themselves and their families.
With this in mind, I suggest the Federal Government take immediate
action with respect to our trading partners to shore up what remains of
this country's industrial base. For too long, the U.S. Department of
the Treasury has been reticent to cite countries such as Japan and
China for currency manipulation in spite of evidence that they have
used such policies to gain an unfair trade advantage vis-a-vis the
United States. These countries and others must not be allowed to
continue this illegal and trade-distorting practice, particularly given
the President's express desire to double U.S. exports in five years'
time. Similarly, the Administration must do all within its power to
open foreign markets to U.S. goods, while at the same time rigorously
enforcing domestic trade laws. Failure to do so will encourage our
trading partners to perpetuate unfair trade policies like Japan's,
which have been of particular detriment to U.S. automakers. While
foreign automakers collectively account for less than four percent of
vehicle sales in Japan thanks that country's restrictive trade
policies, Japanese automobile manufacturers enjoy considerable market
share in regions around the world, most significantly in the United
States, and benefit handsomely from the export subsidies their home
country's currency policy creates.
While ensuring our manufacturers can compete globally, we must also
make it easier for them to compete right here in the United States. As
I have argued for years, healthcare reform is necessary not only
because it is a fundamental right of all people, but also because it
makes good economic sense. In the automotive industry, healthcare
benefits account for a significant proportion of production costs. This
industry traditionally has had very slim profit margins, and by
enacting a national healthcare policy, we would improve the ability of
our domestic automakers to compete on a global level. The money they
would save as result of such reform could be re-invested in research
and development to produce advanced technologies for more
environmentally friendly vehicles, something which will be in high
demand in the future. Moreover, to those who would oppose national
healthcare on economic grounds, I offer the examples of Germany and
Japan, both of which have had national healthcare for some years now,
while at the same time maintained robust export economies.
At the same time as leveling the playing field for U.S.
manufacturers with adjustments to trade and health policy, the Federal
Government must ensure the existence of a well-trained domestic
workforce. In particular, I agree with President Obama's call that
community colleges must receive more funding. These institutions have
traditionally led the way in the technical and vocational training
essential for a worker's success in the manufacturing sector, let alone
the benefits a manufacturing company accrues from a well-educated labor
force capable of creative and independent thinking. Secondary and
primary schools in the United States must also renew emphasis on
mathematics and science, much as they did in the 1950s at the onset of
the space race.
On a related note, the Federal Government can prompt innovation in
the manufacturing sector by supporting public-private partnerships like
those fostered under the Manufacturing Extension Partnership (MEP).
Through a nationwide network of centers and specialists, MEP helps
small and medium-sized manufacturers improve their productivity,
increase their economic competitiveness, and enhance their
technological capabilities. Lamentably, MEP has suffered for want of
Federal funding over the past decade, and the amount of funds
individual states have been able to provide MEP centers has dwindled
due to budget shortfalls. Increased Federal appropriations to MEP would
be an easy and straightforward way to augment this program's ability to
spur manufacturing innovation.
Beyond workforce development, the Federal Government can
incentivize manufacturing research and development via tax credits,
grants, and loans. The Federal research and development tax credit has
long provided great encouragement to manufacturers to invest in
innovative new technologies and improve existing facilities. Sadly,
this credit expired for the 14th time at the end of 2009. I believe
Congress should act to make this tax credit permanent in order to
provide a long-term incentive to manufacturers to invest in research
and development. Similarly, Congress should enact legislation to allow
companies to use their existing alternative minimum tax (AMT) credits
to hire new workers and finance investments in manufacturing facilities
and new equipment. Also, tax credit programs like section 48C of the
Internal Revenue Code, which provides a 30 percent credit for
investments in new, expanded, or re-equipped advanced energy
manufacturing projects, should be funded for the long-term.
As I have noted, long-term incentives are necessary to ensure U.S.
manufacturers continue to devote substantial portions of their
resources to innovation. In this time of recession, however,
manufacturers require immediate short-term assistance in order to
continue operations and invest in the future. Section 136 of the Energy
Independence and Security Act of 2007, or the Advanced Technology
Vehicles Manufacturing Incentive Program, is one such source of
assistance. Demand for funding under the program is nearly double the
available funds, indicating the industrial sector's clear potential for
innovative growth. Congress should act to double funding for section
136, and the House of Representatives made wonderful strides in this
effort by passing the American Clean Energy and Security Act of 2009,
which contained such a provision.
Beyond direct loans to manufacturers from the Federal Government, I
remain convinced more must be done to increase private lending,
particularly to small and medium-sized manufacturers. Many
manufacturers, both in my district and around the country, find
themselves with diminished cash flow and depleted collateral. As a
result, even where private banks have the capital to lend, many viable
manufacturers are unable to qualify for the loan they need to diversify
their operations into so-called ``new economy'' products, such as clean
energy. My colleagues, Representatives Levin and Peters, and I have
introduced legislation to address small and medium-manufacturers'
pressing need for private sources of capital. H.R. 4629, the
Manufacturing Modernization and Diversification Act, provides Federal
funding for state-run collateral support and capital access programs,
building on a successful Michigan model that has yet to encounter a
loan default. I urge that this legislation be included in any small
business lending package the House and Senate send to the President for
Promoting innovation in domestic manufacturers makes economic sense
for United States. In addition to serving as an important component of
our effort to climb out of the current recession, Federal support for
manufacturing in the long-run will ensure our economy's foundation is
built on useful goods of tangible value. Just as manufacturers helped
Americans create better lives for themselves and propelled the United
States to historically unseen levels of economic prosperity, so too
will they again, but only if given proper, adequate, and enduring