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Making Foreign R&D Investment Work for Us

Policy-makers have long worked from the assumption that nations have self-contained and isolated science and technology systems. The basic idea is that governments should compensate for market failures by supporting risky, long-run basic research that will generate new technology and products. Such advances will help the government provide for national security, environmental protection, and the health of its citizens, as well as lead ultimately to economic growth.

This system worked well enough, so long as innovation systems were contained within national borders. As science and technology have become global enterprises, however, the underpinnings of this policy must
be questioned. The question becomes whether U.S. taxpayers should support science and technology activities that can, and will, benefit foreign-owned companies.

This is a tough question. But the answer, in my view, is a resounding yes. Foreign companies are investing considerable resources in American innovation, providing employment for large numbers of scientists and engineers and generating innovations and scientific discoveries that contribute to America’s science and technology infrastructure. Thus it stands to reason that government policy should encourage foreign investment in U.S. research and technology, not restrict it. There are three key steps to begin with.

First, U.S. business leaders and policy-makers should support efforts by the Organization for Economic Cooperation and Development and others to establish a global framework for science and technology investments. A vehicle for this exists in the form of the Multilateral Investment Agreement-an international trade treaty. This agreement begins to eliminate limitations on foreign investment in R&D, such as those that restrict foreign participation in domestically funded technology programs, and is thus a step toward creating a global playing field.

Second, U.S. science and technology funding agencies should promote foreign collaboration in science and
technology.

Third, the United States should work with large investors in science, including Japanese and European companies, to develop joint funding and review programs for scientific and technological initiatives. Such international cooperation could help to eliminate the redundancies of today’s system, in which many individual countries fund similar scientific work.

Furthermore, any policy measures that attempt to give U.S. companies an edge over foreign ones will inevitably provoke some sort of backlash as other nations respond in kind. The result would be a vicious downward spiral, in which all countries begin to impose tighter and tighter restrictions on one another. U.S. firms, which have a greater global presence than their overseas counterparts, would have the most to lose from such a trend. The best option for the United States is to embrace the new age of global innovation, and seek to attract R&D investment from all corners of the world.

Embracing the new realities of the global age of innovation is the only realistic path open. The United States has little choice but to take the lead in helping to establish a truly global environment for innovation. Our nation should lead, not only because we are the world’s largest economy and the world’s leading source of science and technology, but because we have the most to gain from a truly open and global system of innovation.

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