[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?

=======================================================================

                                HEARING

                               BEFORE THE

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             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



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                                 ______

                  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
VACANCY















                            C O N T E N T S

                             March 17, 2010

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

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 
  Representatives................................................    10
    Written Statement............................................    11

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science and Technology, U.S. House of 
  Representatives................................................    11

                               Witnesses:

Dr. Susan Smyth, Director of Manufacturing Systems Research, GM 
  R&D and Chief Scientist for Manufacturing, General Motors 
  Company
    Oral Statement...............................................    12
    Written Statement............................................    14
    Biography....................................................    18

Dr. Len Sauers, Vice President of Global Sustainability, Procter 
  and Gamble
    Oral Statement...............................................    18
    Written Statement............................................    20
    Biography....................................................    23

Mr. Debtosh Chakrabarti, President and Chief Operating Officer, 
  PMC Group Inc.
    Oral Statement...............................................    23
    Written Statement............................................    25
    Biography....................................................    30

Dr. Mark Tuominen, Director, National Nanomanufacturing Network
    Oral Statement...............................................    31
    Written Statement............................................    33
    Biography....................................................    40

Mr. Wayne Crews, Vice President for Policy and Director of 
  Technology Studies, Competitive Enterprise Institute
    Oral Statement...............................................    41
    Written Statement............................................    42
    Biography....................................................    63

Discussion.......................................................    63

             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,
                                                    Washington, DC.

    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.





                            hearing charter

                     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

1. Purpose

    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.

2. Witnesses

          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 
        Nanomanufacturing Network

          Mr. Wayne Crews, Vice President for Policy and 
        Director of Technology Studies, Competitive Enterprise 
        Institute

3. Background

    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 
last year.\2\
---------------------------------------------------------------------------
    \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 
2010)
    \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)

---------------------------------------------------------------------------
4. Overview

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 
        implementable solutions.

          The Nanomanufacturing Program supports research and 
        education on manufacturing at the nanoscale, and the transfer 
        of research results in nanoscience and nanotechnology to 
        industrial applications.

          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 
        standards.

          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 
        integration.

          The Intelligent Systems Division develops measurement 
        and interoperability standards to enhance manufacturing 
        robotics and automation equipment and the underlying industrial 
        control systems.

          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' 
competitive position.

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 
                    Technology Transfer
    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.

            Sustainable 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://
www.ita.doc.gov/competitiveness/sustainablemanufacturing/
how-doc-defines-SM.asp.)
---------------------------------------------------------------------------
    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 
other resources.
    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 
technical needs.
    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 
integrated manufacturing.
    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 
                    Manufacturing
    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 & 
        d;

          Exploring new options to stimulate innovations and 
        technological breakthroughs, such as prizes and reverse 
        auctions;

          Making the research and experimentation tax credit 
        permanent;

          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 
        of Commerce

    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 
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, 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 
done.
    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 
opening statement.
    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 
record.)
    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 
manufacturing.
    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 
                         MOTORS COMPANY

    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 
strengthen collaboration.
    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 
partnerships.
    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 
manufacturing partnerships.

NIST/MEL

    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 
ControlNet.
    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 
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 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.

DOE

    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, 
Maryland.
    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

    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 
non-existing.''
    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 
years.
    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 
        collaboration.

          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 
        businesses.

          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 
        redundant efforts.

          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 
        applications.

    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 
        capabilities.

          Finally, continuous support for technology is 
        required to enable energy-efficient and environmentally neutral 
        manufacturing processes.

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 
jobs creation.
    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 
production.
    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 
technical innovation.

Conclusion

    In summary, General Motors asks the committee to focus on the 
following:

          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 
your questions.

                       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 
business.
    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 
several years.
    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-
based framework.
    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

Introduction

    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 
develop'' capability.
    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 
Pacesetter list.
    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 
        products.

          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 
        responsible way.

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 
year.
    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 
opportunities.
    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 
                    Innovation

    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 
        manufacturing operations.

        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 
        business.

Conclusion

    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 
commercialization phase.
    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 
manufacturing.
    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 
Analysis
---------------------------------------------------------------------------
    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 
footprint.
    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 
                feedstocks.

                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 
                certain end-uses.

                e.  Funding the development of pragmatic standard 
                methodologies for identifying renewable chemical 
                content, carbon footprint, and petroleum replacement 
                content.

        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 
                systems.

                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, 
Asha.

    Chairman Gordon. And now we will hear from Dr. Mark 
Tuominen.

        STATEMENT OF MARK TUOMINEN, DIRECTOR, NATIONAL 
                   NANOMANUFACTURING NETWORK

    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 
        applications.

          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 
        optical lithography.

          Scalable processes for the production of carbon 
        nanotubes and graphene--impacting many applications from 
        electronics to structural materials to thermal management 
        materials.

          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 
sustainability.

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 
                institutions

                  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 
        listed above;

          The Nanomanufacturing program within the NSF 
        Engineering Directorate;

          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 
        projects;

          NSF manufacturing research programs, generically, 
        within the Engineering Directorate, some of which have 
        nanomanufacturing relevance;

    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 
        production purposes;

        2)  Hierarchical manufacturing of nanosystems by assembling 
        nanoscale components into new architectures and fundamentally 
        new products;

        3)  Manufacturing by design by using new computer principles, 
        computer simulations, and nanoinformatics;

        4)  Hybrid nanomanufacturing, including nanobiotechnology and 
        nanostructured catalysts.

    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 
collaborations.
    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 
effectiveness.
    Are there areas of nanomanufacturing research and development that 
are not currently being addressed by the Federal Government that should 
be addressed?
    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 
nanoinformatics.
    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 
extensibility.
    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 
success.
    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 
development?
    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 
Manufacturing.
    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 
nanomanufacturing R&D:

          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 
        broad-based informatics.

          Economic analysis of emerging nanomanufacturing 
        activities.

          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 
center's website.
    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 
nanomanufacturing research.

                      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 
                           INSTITUTE

    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 
competitiveness issue.
    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 
attention.
    [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 
stimulate.''

``COMPETE''ing Visions:

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 
government generally.
    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/
research).
    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 
        and well-being

          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 
        scientific endeavors

          Public access to scientific data upon which 
        regulations are based

          The right to not fund science with which one 
        disagrees

          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. 
http://cei.org/pdf/4696.pdf.

    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 
big bang.
    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 
competition.
    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 
needed now.
    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/
Article.aspx?id=527214
---------------------------------------------------------------------------
    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://
mcadams.posc.mu.edu/ike.htm.

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 
nanotechnology.
    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 
safety).
    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 
        investment
    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.
---------------------------------------------------------------------------
    \4\ http://www.pcworld.com/businesscenter/article/191438/
fccs-national-broadband-plan-

whats-in-it.html
---------------------------------------------------------------------------
    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 
assured.
    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://
blog.summation.net/2010/02/to-grow-a-company-you-need-to-be-good-at-
killing-things.html.
---------------------------------------------------------------------------
    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/
pub-display.php?pub-id=6168.

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 
        disputes
    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 
evolution.

Substituting Government Funding For Competitive Discipline Can 
        Undermine Safety
    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 
demonstrate.
    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 
never know.
    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-
competitive markets.
    ``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.
---------------------------------------------------------------------------
    \9\ http://cei.org/cei-files/fm/active/0/6425.pdf
---------------------------------------------------------------------------
    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 
follow.

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 
the millennium.
    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/
post/?q=Yzg0MThlYzFlMDAlMjY0NGM2NjlhOGM2O
DQ0YzhiNjk=

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.
---------------------------------------------------------------------------
    \12\ http://www.sba.gov/advo/r3.

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 
        and alliances.

          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.
---------------------------------------------------------------------------
    \14\ http://www.nytimes.com/2009/05/12/business/economy/
l2antitrust.html?-r=1&adxnnl=l&adxnnlx=1268514088-MohE/8/
mpcqIAEXJNqJ1JQ.
---------------------------------------------------------------------------
    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 
government domination.
    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 
congressional districts.
    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 
damaging collusion.
    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.
---------------------------------------------------------------------------
    \15\ http://papers.ssrn.com/sol3/
papers.cfm?abstract-id=244158.
---------------------------------------------------------------------------
    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 
wealth creation.
    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://
politics.guardian.co.uk/news/story/0,9174,1258849,00.html.
---------------------------------------------------------------------------
    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 
rational policy:

          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 
        analysis.

          Explore, hold hearings on, and devise a limited 
        ``regulatory budget.''

          Establish an annual Presidential address or statement 
        on the state of regulation and its impact on productivity and 
        GDP.

          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 
        analysis

          Publish data on economic and health/safety 
        regulations separately

          Disclose transfer, administrative and procedural 
        regulatory costs

          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 
        effectiveness

Issue and Act Upon a Annual Regulatory Report Card to Accompany the 
        Federal Budget
    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 
        estimates

          Tallies of cost estimates, with subtotals by agencies 
        and grand total

          Numbers and percentages failing to provide cost 
        estimates

          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 
        statutorily prohibited

          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 
nanodollars.''
    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 
enterprise.''

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 
manufacturing.
    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 
commend you.
    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 
perish.''
    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 
country.
    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.
    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 
with?
    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 
technological innovation.
    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 
recognized.
    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 
use?
    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 
global level.
    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 
nanomanufacturing?
    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 
Mrs. Dahlkemper?
    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 
small business.
    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 
answer quickly?
    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.]
                              Appendix 1:

                              ----------                              


                   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 
National Labs.

Q1a.  Would you say that high performance computing is an area ripe for 
collaboration?

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 
complex today.

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 
software vendors).

Q1c.  Are there things we should be doing at our National Labs to take 
this collaboration beyond large manufacturers, to help reach smaller 
supply-chain manufacturers?

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 
connection.
    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.

Background
    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.
                              Appendix 2:

                              ----------                              


                   Additional Material for the Record




Written Statement from National Petrochemical and Refiners Association 
                                 (NPRA)
    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 
topic.

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.
    \2\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \3\ http://www.armystudyguide.com/content/bmdoc/acu-
presentation.ppt
---------------------------------------------------------------------------
    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 
products.\6\
---------------------------------------------------------------------------
    \4\ http://www.epa.gov/ttn/chief/ap42/ch06/final/c06s06-2.pdf
    \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.
---------------------------------------------------------------------------
    \7\ Ibid.

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 
manufacturing techniques.
    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: 
March 2010.
    \9\ Ibid.
---------------------------------------------------------------------------
    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 
products.
    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.
---------------------------------------------------------------------------
    \11\ Ibid.

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 
technologies.
    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 
their products.
---------------------------------------------------------------------------
    \12\ Ibid.
    \13\ http://tonto.eia.doe.gov/ask/crudeoil-faqs.asp
    \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 
different standards.
---------------------------------------------------------------------------
    \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 
environment.
    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 
participants.\16\
---------------------------------------------------------------------------
    \16\ http://www.pwc.com/en-US/us/national-economic-
statistics/assets/total-tax-contribution.pdf
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \18\ http://www.pwc.com/en-US/us/national-economic-
statistics/assets/total-tax-contribution.pdf
---------------------------------------------------------------------------
    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.

IV. Conclusion

    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 
signature.
    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 
support.

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