[Congressional Record Volume 140, Number 29 (Wednesday, March 16, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 16, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                          SUBSIDIZED RESEARCH

  Mr. PRESSLER. Madam President, before the Senate decides to pass S. 
4, let's take a look at what Europe and Japan have undertaken in the 
area of subsidizing so-called critical technologies.
  The European Community has undertaken an ambitious program to fund 
precompetitive research, a mission very similar to the Advanced 
Technology Program in the National Institute of Standards and 
Technology. Over $7 billion is being spent on the three EC consortia--
RACE, ESPRIT, and JESSI. RACE supports research in broadband 
technologies; ESPRIT focuses on information technology and JESSI funds 
semiconductor research. Have these consortia been a resounding success? 
No. In fact, a review of the programs by a group of European 
industrialists recommended that all three efforts should be scrapped. 
Like most government-supported programs, however, all are still in 
existence.
  The criticisms of these EC-subsidized programs are that they favor 
specific technologies, and more importantly, that they are run by 
government bureaucrats for big companies. The assumption inherent in 
all of this is that government bureaucrats and large companies can make 
better decisions about what is a critical technology than the 
marketplace can.
  There are other examples of European subsidies that flopped. Notable 
among these is the British Government's attempt to subsidize 
telecommunications. John Browning, formerly with the Economist magazine 
wrote:

       Until British Telecom was privatized in 1984, its budget 
     was continually raided by ministers looking for cash to pay 
     for their favorite social programs. Investment in digital 
     switches lagged--though since privatization, British Telecom 
     has regained a lot of ground. Meanwhile, managerial and 
     technical problems plagued the development of the British 
     digital switch, called System X. So far, System X has won 
     only one export order, to a Caribbean island.

  European aviation subsidies have irritated the United States for 
years, as the ranking member of the Commerce Committee, Senator 
Danforth, has outlined. But it did not start with Airbus. The first 
effort at European aviation subsidy was the Concorde. But let us also 
look at the return European taxpayers have received on their 
investment. Neither aviation subsidy has turned into a moneymaker for 
the European Community.
  Let us also examine the example of Japan's so-called fifth generation 
computer project. The Japanese spent a half-billion dollars on the so-
called fifth generation computer, and they are currently following this 
failure with the real world computing project at a projected cost of 
another half-billion dollars. The fifth generation computer was 
declared dead by Japan's MITI and the Japanese offered to give away the 
software developed by the project. But they still continue with the new 
real world computing project, which once again will attempt to create a 
computer that thinks using artificial intelligence, and is massively 
paralleled. There are those who believe this new effort may not 
succeed, either, and it is generally believed that United States 
technology is ahead of the Japanese in both fields.
  Technology subsidies for critical technologies are supported by the 
administration. Of course the industries in these critical technologies 
like this idea, since no one thinks they are as important to the 
competitiveness of the United States than those receiving the benefits 
of these Federal dollars. Has Sematech been a success? I think we need 
to revisit whether, indeed, this has been the case. Sematech has lost a 
significant number of its members in the past year, and there are many 
skeptics. Are semiconductors, flat panel displays, artificial 
intelligence and other critical technologies more important than those 
sectors of our economy that are not considered critical technologies 
and yet are world leaders? I think not. Yet, this is the philosophy we 
are being asked to accept as the underlying premise of S. 4.
  We are being asked to approve a bill that dramatically expands 
funding for the Advanced Technology Program. This program targets 
funding to critical technologies. Many of the recipients of ATP grants 
to date have been large industries fully capable of funding their own 
research and development. The presumption is that the government and 
big industries are fully capable of determining what the marketplace 
demands. This sounds suspiciously similar to the failed policies our 
European colleagues have implemented. Why should the U.S. Government 
make the same mistakes as our European colleagues? Why do we think we 
will have better results?
  One program which has had success is the German Fraunhofer 
Institutes, which are similar to the manufacturing extension 
partnerships authorized under S. 4. These institutes establish 
partnerships with the government, universities and businesses. The 
research is conducted primarily by universities, and is not targeted to 
specific critical technologies. Many of the businesses benefiting from 
the Fraunhofer Institutes are not semiconductor, electronic or other 
high technology industries. Many of them are traditional machinery and 
metalworking industries. They tend to be small to medium-sized 
businesses.
  I have no doubt that the manufacturing extension partnerships, under 
which the State Technology Extension Program is funded, would benefit 
my state. We have an existing model that demonstrates that this concept 
can work in the German Fraunhofer Institutes, and the little funding my 
State universities--the South Dakota School of Mines and Technology, 
South Dakota State University, and the University of South Dakota--have 
received has benefited several businesses looking for technical 
assistance to get a product developed for market.
  If this bill merely increased funding for the manufacturing extension 
partnerships, I would not object to it. But the majority of the funds 
in this bill are targeted to the Advanced Technology Program, and the 
authorization in S.4 as it came to the floor is $668 million over 2 
years. Remember that this program only had an appropriation of $10 
million in 1990. The ATP program has not demonstrated the track record 
to justify such a dramatic increase in funds, and I am pleased the 
authorization level has been reduced significantly. It is patterned 
after several programs that have failed in other countries, and I 
cannot foresee that we will have any more success than the European 
Community with this flawed model.

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