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Technology Administration
21st Century Policy Challenges for American Innovation Leadership

Remarks by Bruce P. Mehlman
Assistant Secretary for Technology Policy
United States Department of Commerce


Before the
Georgia Institute of Technology, Atlanta, GA, Oct. 23, 2003
Kennedy School of Government, Boston, MA, Oct. 1, 2003
Computer & Communications Industry Association
Washington, DC, Sept. 25, 2003

It took 55 years after the commercial introduction of the automobile before 25% of the U.S. population owned cars. Electricity did not reach one-quarter of Americans until 46 years after its introduction. Telephones took 35 years, televisions 26 years, and personal computers 15. Cell phones proved faster, reaching one-quarter adoption in 13 years, while the Internet took just 7 years, and broadband is on track to reach 25% penetration in only 6 years, according to McKinsey.

It has been estimated that about 90% of all scientific knowledge has been generated over just the last 30 years, by about 90% of all scientists and engineers who have ever lived...and now are living and working. Both the rate of generation of new technology, and the number of workers globally engaged in S&T may double again over the next 15 years. With computer processing power and genomic data also doubling every 18 months or faster, it is no exaggeration to predict that there will be more change in the next 30 years than we saw in all of the last 100.

Driven by convergence, globalization and radically disruptive new technologies such as nanotechnology, changes in the 21st century will come faster, disruptions to legacy business models and products will cut deeper, and the nations, firms, and individuals who succeed will be those best able to adapt. Coping with this accelerating rate of change and complexity may prove to be the most significant dynamic impacting American success and leadership in the 21st century. While the United States is better-positioned for such a world right now than most other nations, competitors are rapidly gaining and pressing their own comparative advantages. The future will be global, hyper-competitive, technologically intensive, and rapidly changing… and we must be prepared.

INNOVATION & ENTREPRENEURSHIP, THE KEYS TO AMERICAN COMPETITIVENESS

While past performance is no guarantee of future results, the past does offer some guidance on how America can successfully navigate a changing world, and how our American economy might continue to lead global growth. What our past shows is that America’s strength and status as the world’s sole superpower are based heavily on our historical investments in science and technology and our ability to harness new technologies to grow companies, jobs and industries. Innovation and entrepreneurship stand as the twin pillars of our economy and the key sources for strength of our society.

Technological innovation is critical to our nation for many reasons. First and foremost, technology fuels sustainable economic expansion – creating high-wage jobs, world-class exports and the robust productivity growth so critical to our long-term global competitiveness - even as other nations improve their own economies and capabilities. Technology-based innovations also improve our quality of life… from new drugs and cures that help people live longer and healthier lives, to agricultural advances that permit more bountiful harvests with less herbicides and pesticides. Advances in technology are vital to our efforts to protect our homeland by hardening our infrastructure, detecting dangers and empowering our defenders. Energy innovations are the key to meeting our extraordinary future power needs while protecting our environment, and technology holds unique promise for the future of education at all levels. Further, by exporting our technology innovations around the world we help improve the standard of living of the other six billion people on the planet.

America’s great success is also attributable to our unique culture of entrepreneurship. Our system rewards risk-taking and hard work. We celebrate, glorify and look up to our entrepreneurs as popular icons and civic leaders. This is because entrepreneurs create jobs, companies and wealth, making our economy stronger and communities better. According to the National Commission on Entrepreneurship:

  • Each year, Americans start 600,000 to 800,000 new businesses with employees – another 2 million Americans start their own self-employment ventures (NCOE);
  • Since 1980, the United States has added 34 million new jobs despite the fact that Fortune 500 companies lost more than 5 million jobs (NCOE);
  • In the 1990s, existing companies in Silicon Valley cut 121,000 jobs, while companies started after 1990 created 259,000 jobs, according to the Public Policy Institute of California; and
  • Entrepreneurs grow our economy by selling our products around the world. Small businesses with fewer than 500 employees make up nearly 97% of all U.S. exporting firms (NCOE).

If innovation and entrepreneurship profoundly shaped the 20th century, they will define the 21st. Knowledge development and technology commercialization are the new drivers of economic growth, both in the U.S. and around the world. Our ability to lead all nations in creating new innovations and harnessing their power will directly impact our prosperity, security and global influence. But American leadership is anything but assured in today’s global economy – in fact, it’s very much at stake. Going forward, the quality and intensity of global competition is likely to increase – indeed, it already is. We will face more significant challenges to our innovation leadership and long-term competitiveness than ever before, as other nations continue to make their business climates more attractive to employers and improve their home-grown technology capabilities.

We may take some comfort from the fact that we have risen to seemingly overwhelming challenges before. My office was established in the 1980s, with Congress convinced that America was insufficiently competitive with “Japan, Inc.,” and that our future looked bleak. But to succeed in the face of today’s growing challenges we’re going to need extraordinary efforts from industry, educators, researchers – and policy makers. More than ever before, getting the policy environment “right” will be critical to sustaining American economic growth, innovative capacity and global competitiveness. Indeed, America’s historical succees in leading the world in technology innovation and development thanks to the far-sighted policies set by prior generations of leaders.

Going forward, the nations with the most competitive technology-based economies will be those whose policies promote innovation, support entrepreneurship, and make sustained investments in scientific research and talent. And that is why America needs its business, scientific and thought leaders, such as those at Georgia Tech and the Kennedy School, to interface closely and frequently with policy makers. We will need our best and brightest minds to wrestle with and most effectively resolve the myriad difficult policy choices and questions that will arise.

At the Commerce Department’s Office of Technology Policy, my team seeks to maximize technology’s contribution to America’s economic growth, job creation and global competitiveness. We serve as policy analysts, ambassadors from the federal government to the innovation community, and advocates for innovation within the Department and Administration. Our analytical efforts include constant review and assessment of long and short-term trends and implications, prompting aggressive outreach, regular publishing of reporting and analyses and frequent recommendations to policy makers. (Our published analytical work can be found at http://www.technology.gov/Reports.htm).

In 2002 we gathered together national innovation leaders in a series of conferences on Innovation in America. (Transcripts from these extraordinary discussions can be found on our web site. In these discussions, as well as subsequent interactions with other global innovation leaders, we heard about many looming policy challenges – some familiar, some that have not yet revealed themselves in the mainstream of science and technology policy discussions. Today I’d like to offer nine of the most difficult ones and invite your feedback, both today and going forward. Getting the answers to these questions right will be critical to America’s long-term success and to our ability to leverage technology to improve the human condition.

  1. Security vs. Connectivity. By now we have all seen the power of the networked world. Connectivity increases value and innovative capacity. As Metcalfe’s Law tells us, the value of a network increases exponentially as the number of users grows. Unfortunately, connectivity also increases vulnerability. For example, with 600 million users the Internet is exponentially more powerful today than it was a decade ago, when there were less than one million people online. Yet while a 1993 computer virus would only cause relatively minor disruption, 2003 viruses can cost billions and threaten critical infrastructures that carry more than $2 trillion in annual business-to-business commerce. This creates challenges for developing global business models, protecting privacy while bringing the benefits of IT to health care, deploying widespread e-government systems and other efforts to tap into a networked world.

    In a similar vein, bench scientists want to collaborate with other scientists, correctly perceiving that the more brains attacking a problem, the more likely a solution will be found. Yet policy makers (and corporate and university intellectual property managers) are understandably concerned about unchecked access to their science and scientists, correctly observing the need to prevent potent secrets or proprietary information from falling into the hands of terrorists, rogue nations or corporate competitors.

    Similarly, businesses understand that the bigger the potential market, the more money they make, so they push to globalize and export. Yet policy makers must impose some reasonable export controls to ensure that the most powerful technologies do not fall into the wrong hands.

    Of greatest concern to me, our need to prevent further terrorist abuse of our wonderfully open society (and in particular, our student visa process) could significantly limit our access to the best and brightest young minds in the world, people who have historically made great contributions to our universities, industries and society. The question for you: How can we best harness the power of the networked world while protecting ourselves from technology’s misuse?

  2. Growing, Attracting, Retaining and Maintaining the Best and Brightest. Within a generation we will need a far more technically-literate, technology-savvy society than we have today – as workers, consumers and teachers. Yet American students at the K-12 level continue to lag behind their international counterparts in math and science learning. U.S. eighth graders ranked 19th out of 38 nations in math and 18th in science in the 1999 Third International Math & Science Study Repeat. The World Competitiveness Yearbook ranked the U.S. 24th out of 45 nations in science education and 18th in “attractiveness of S&T to youth.” At the same time other nations are graduating far greater numbers of scientists and engineers, further improving their capabilities to handle high-end work. While the U.S. graduated 59,500 engineers last year, PCAST reports that China graduated 219,600. The Council of Scientific Society Presidents estimates that by 2010, if current trends continue, over 90% of all physical scientists and engineers in the world will be Asians working in Asia. Other nations are aggressively acting to stem their own brain drains and entice citizens trained in the U.S. to return to their native countries, and many are succeeding. How can we grow, educate, attract and retain the best and brightest scientists and engineering students? How do we avoid a disconnect between the jobs we want to keep in the U.S. and our workforce’s ability to do them?

  3. Funding the Future. Americans enjoy and expect a very generous entitlement system. Retirees are living longer and receiving far more in government benefits than they ever paid into the system. According to the Congressional Budget Office in 2001, the big entitlement programs accounted for 26 percent of non-interest federal spending; but in 2030, with the retirement of the “baby boomers,” they could account for up to 70 percent of government resources. Things we can afford to provide our parents may well become too expensive for our children to pay for us. How can we ensure sustained federal support for education, infrastructure, and research and development – the keys to long-term growth and success – when the cash crunch comes? What reasonable steps might we take today to avoid this train wreck in the future?

  4. Innovation vs. “Equality”. Differences between the “techno-haves” and “techno-have-nots” are already raising unprecedented global challenges. There is a great debate between those who want to raise the floor and those who seek to raise the ceiling in a world with limited budgets. For example, with millions of people in Africa dying from AIDS every year, there is incredible pressure to accelerate delivery of life-extending drugs and pharmaceuticals to those who desperately need but cannot afford them. (That is why President Bush committed $15 billion from the United States and challenged other nations to join him in fighting this scourge.) Yet these miracle drugs are the product of massive investments of capital, investments that would not get made unless the returns on investment and protections for the research results were robust. That forces policy makers to choose: Should we make existing life science discoveries more accessible by limiting innovators’ intellectual property rights (or regulating prices), or should we encourage new and even better life science breakthroughs by permitting robust returns on investment?

    Similarly, in education we ask: how can we use our limited resources to leave no child behind (which is compassionate, fair and vital) while leaving no genius undeveloped (which is also critical if we are to be competitive)? The question can also be asked as policy makers decide how to deploy federal investments in basic research, especially since the returns on such investments are likely higher at some schools than others. Should federal research dollars go to every state and every university to build up capacity across the country, or should we only invest taxpayer resources in the most proven and cutting-edge research programs that already receive the lion’s share (and deliver the most impactful results)?

  5. Defining National Interests in a Global Economy. While policymakers are hired to promote national interests, it is getting much harder to define them as the global economy develops. We encourage our businesses to grow, export and compete and grow globally, but that also means growing new jobs around the world, tapping global talent and ensuring proximity to growth markets and new customers. We used to say that “what’s good for GM is good for America,” but the lines are less clear today than when over 90% of GM's employees and partners were Americans working in America. For example, is it better for America to buy a BMW made by Americans in South Carolina or a Ford made by Canadians in Canada? How about IT services procured through IBM but performed in India, versus services purchased from Infosys but staffed using H1B workers living and spending their salaries in America? Is it better to help manufacturers remain competitive by enabling them to cut IT costs through off-shoring or help IT service workers remain employed by shielding them from global competition? Certainly consumers look for value, irrespective of the national origins of the products they purchase, but policy makers are expected to operate differently.

    Two real-world examples help illustrate why this is so difficult at the government level. In 2001, New Jersey’s Department of Human Services (Division of Family Development) outsourced a basic call center used to support a welfare program to an Arizona firm, which then sent the work – nine jobs – to India. State legislators were outraged, and in the wake of controversy, the state returned the jobs to New Jersey. Unfortunately, the cost of the call center work was 20 percent higher when done back in the U.S., thereby reducing the amount of funds available for the welfare recipients for whom the call center is needed.

    The Pentagon faced similar outrage when it sought to procure black berets from China. Lawmakers were incensed that U.S. tax dollars in the Defense Department, of all places, were not being used to support American manufacturers, and the hats were procured from a domestic supplier. Yet unfortunately this question is a bit more complicated. Since even the Defense Department faces a ceiling on its budget, Defense planners are forced to make tough choices every day. Every dollar spent on clothing is a dollar less for improving soldiers’ pay (to keep military families off food stamps), supporting forward deployments, designing new defense systems to better protect our men and women in harm’s way, and improving the accuracy of our precision-guided munitions to minimize noncombatant casualties. The choices become very real and very difficult. How should we answer the question when choosing between U.S. jobs and maximizing resources for medical care for the elderly, education for our children or national security?

  6. Globalism vs. Local Control. Just as the desire to broaden networks often conflicts with the need to secure them, we often see battles over jurisdiction – should our rules be local, national or global? For example, every state and most nations use different taxing schemes to raise revenue to pay for government services. Yet the Internet is a global medium, raising new levels of complexity and transaction costs for those seeking to sell online to every jurisdiction concurrently. Similarly, different regions and nations have different beliefs about how activist the government should be in protecting consumers from things such as fraud, commercial speech or invasion of privacy. Any government acting to stem the torrent of unsolicited commercial email (or spam), for example, might quickly find that spammers simply move operations offshore, avoiding national jurisdiction, but others might find one-size-fits-all international responses to spam unduly restrictive to commerce.

    The technical standards to which new technologies are built are also increasingly an area where governments are intervening in markets, often using the standard-setting process to advantage national businesses over foreign competitors. Standards have already emerged as a dynamic economic battlefield, and much of the 21st century’s protectionist instincts will be fought on these fields. (Which is why Commerce Secretary Don Evans launched a new Standards Initiative this year). Questions over local versus global control prove even harder when our values are at stake, especially since different nations value different things. Most Americans believe it is reasonable for government to take steps to protect children from pornography, such as installing filters in schools and libraries. Yet the Chinese government feels the same way about filtering out information on democracy, a level of censorship we find neither reasonable nor right. How can we maintain the benefits of a global medium while respecting the need and desire for local control?

  7. Having Wisdom Keep Pace With Intelligence. We have not yet developed systems to assess the social implications and ethical consequences of new technologies. For example, most people would probably support a genetic screen that could ensure our offspring will be free of genetic defects before they are conceived. But what if parents also wish to pre-select gender? Eye-color? Intelligence? The Washington Post recently reported on a stud bull named Elevation who lived 60 miles west of Washington (June 30, 2002). Elevation’s genes were so good they used him to sire 80,000 daughters and at least 2.3 million granddaughters. Named Bull of the Century, it is estimated that about 15% of the DNA in today’s U.S. dairy cows came from this one animal. If we can find the gene that made Albert Einstein so smart, should we let people similarly splice it into our own future generations? And as we replace natural selection with human selection, do we enter what Frances Fukyama called a “post-human future.”

    The failure to understand and appreciate innovations in agriculture and health care will deny life-saving benefits to those who need them most. Fear of the unknown, for example, explains why some African nations with starving populations reject donations of genetically modified foods from the U.S. – foods that are safe and that millions of Americans eat every day. Similar fear could derail advances in biotechnology, nanotechnology and other technologies with the potential to radically improve our lives. How can we help people understand new technologies and changes, replacing rational caution for irrational ignorance?

  8. Equipping People and Building Systems Able to Cope With Accelerating Change. As noted above, globalization and the convergence of radically disruptive new technologies (such as nanotechnology, advanced IT and biotech), will bring more rapid changes in the 21st century. The nations, firms, and individuals who succeed will be those best able to manage the complexity and rapid change. The IT worker experience offers the quintessential example. In the late 1990s there was much talk of IT worker “shortages,” and many companies complained of difficulty in filling jobs even as many IT workers applied often but could not find work. In fact, the aggregate number of self-classified IT workers may have been near the number of corporate-classified IT jobs available – hence the extreme and understandable frustration among existing IT workers, especially as they watched the number of foreign workers admitted to the U.S. on H1B visas triple. But skill sets did not always match up. Mainframe programmers were not network administrators, Cobol is not C++, and someone ready to “hit the ground running” in Y2K remediation is not necessarily ready to tackle wireless security issues. As a comprehensive report on IT worker training issued this year by my office explains, because employers demand immediate expertise in whatever skill is “hot,” and today’s hot skill may not be in demand tomorrow, we could face a perennial skills mismatch putting great stress on our IT workforce and providers. How do we best equip U.S. workers with the tools, opportunity and resources to constantly update their skills and the ability to compete in a just-in-time world? How do we move from a model of reactive training (after workers lose their jobs) to proactive training?

    We already see similar challenge in the responsiveness of government systems. The difficulties faced today by CMS – the agency charged with overseeing Medicare’s reimbursement for new medical devices, procedures and medicines – pale in comparison to those of tomorrow, when “designer drugs” and “personalized medicine” rapidly expand. Failure to understand and adapt to rapid changes in life sciences could reduce the quality of health care provided to Americans, increase the program’s cost (since drugs are often far less costly than surgeries), and stifle the pace of innovation in health care.

  9. Competing Against a World That is Not Standing Still. Perhaps most significantly, we face the healthy but daunting challenge of global competition that keeps getting better. Those who believe in the notion of permanent superpowers would be wise to remember that the sun never set on the British Empire, and all roads used to lead to Rome. The battle for leadership in the Innovation Age is a many-horse race, and other nations and regions are also working to improve their own innovation systems. While the United States accounts for 44% of worldwide R&D today, in 1970 we accounted for 70%. The EU is racing to match our investments in nanotech, while Asian nations have collectively pulled ahead. The world is not standing still. Global competition will accelerate change and speed up the process of creative destruction, which can be good for innovative and market-based economies overall, but terribly difficult for displaced communities and individuals. America must never compete in the battle to see who can pay their workers the least. Our success or failure to maintain our leadership and raise our standard of living will turn on our ability to create and retain new jobs, new industries and new processes, goods and services – to innovate. How do we maintain our innovative capacity, so Americans can continue to raise our standard of living in an increasingly global world?

At the same Innovation in America roundtables I described a moment ago, we were particularly interested in better understanding the factors that influenced some private actors when they were deciding where to locate their R&D and knowledge work. Our goal, of course, was to assess how we might maximize those elements that promote innovation in America, while reducing any comparative disadvantages that discourage on-shore R&D. Here’s what we learned:

WHY INNOVATORS LOCATE KNOWLEDGE WORK ON U.S. SHORES

According to the corporate, university and government leaders we convened, America presently remains the premier destination for innovative activity for several reasons.

  1. PEOPLE. The R&D talent pool in this country is second to none, with industry experts, lab scientists and university researchers all contributing to an unmatched quality and quantity of expertise. For example, America publishes one-third of the world's scientific and technical articles, triple the share of the next largest country, and has the largest share of the world’s science, engineering, and technical workforce. Our university system is unequalled, attracting the best and brightest from around the world and remaining a hotbed for generating inventions and training inventors.

  2. BUSINESS CLIMATE. America has the most entrepreneurial business climate, one promoting market-based competition, rewarding risk, permitting failure and with relatively easy access to capital. Unburdened by government-owned national champions, new ideas and new entrants are able to compete and win on the merits. In this regard we fare very well against many European competitors, where governmental burdens make entrepreneurship more difficult and less common. For example, in March 2002 the Wall Street Journal reported on a British study that found it takes 43 months on average to get the regulatory approval needed to open a gas station in Europe, three times longer than in the United States.

  3. INFRASTRUCTURE. From world-class federal labs such as the National Institute of Standards & Technology and Argonne National Lab, to our telecom, energy and transportation systems, America’s infrastructure permits cutting-edge R&D almost anywhere in our nation. Innovators and technology entrepreneurs stay here to leverage these unique assets that underlie competitive discoveries and speed time-to-market.

  4. MARKET & MARKET ACCESS: Innovators want to conduct R&D in the world’s biggest and wealthiest market – close to the customer – with consumer, business and government spending encouraging innovation in America. Our culture offers a good fit for innovators – consumers are eager for new gadgets and medicines, success is rewarded handsomely and innovators are celebrated as cultural icons (e.g. Thomas Edison, Bill Gates, Albert Einstein, Jeff Bezos, etc.).

  5. INTELLECTUAL PROPERTY PROTECTION. It is not surprising that innovators will create jobs and technologies wherever their ideas are best protected and most profitable. The United States boasts the most consistent protections for intellectual property rights, the most effective patent office, and the system least likely to limit returns on investment in intensely innovative products such as pharmaceuticals. In this area we retain a significant advantage over rising powerhouse China, with its far less consistent commitment and ability to protect intellectual property.

  6. GOVERNMENT. We provide an honest and transparent government, with political stability and a broad respect for the rule of law. While government taxes and regulates, we do not prop up national champions and we rely on the market, not federal agencies, to pick winners and losers.

  7. QUALITY OF LIFE. People who can choose where to live are often attracted by America’s high quality of life, the result in large part of our democracy, freedoms, clean environment and outstanding health care system. America’s relative security and abundance likewise attract the best-and-brightest to live and work on our shores.

WHY INNOVATORS GO OFFSHORE

At the same time, multiple factors are encouraging accelerating R&D and knowledge work in other parts of the world. While the National Science Foundation reports that the United States accounted for 44 percent of the total R&D among OECD nations in 2001 – more than the rest of the G7 nations combined – we accounted for 70 percent of this total in 1970. A great many nations have witnessed America’s unparalleled economic success over the past 60 years and understandably seek to emulate it by fostering their own innovation excellence. The rest of the world is not standing still, and they are competing for a growing share of foreign direct investment in research and knowledge work. Here’s why:

  1. COST. Research and other technical talent and facilities cost appreciably less in many areas of the world. Similarly, many foreign nations offer businesses and researchers significant financial incentives to locate R&D, technical services and manufacturing within their borders.

  2. PEOPLE. There are many highly talented researchers and technical workers among the more than six billion people on the planet who are not United States citizens, and some foreign nations such as China are now graduating more physical science and engineering students than the U.S. every year. U.S. companies facing global competition want to tap the best and the brightest, wherever they may live, and the GEs, Microsofts, IBMs and others like them are investing heavily in new research facilities in emerging technology clusters such as Bangalore, India and Guandong Province, China.

  3. MARKET ACCESS. Many business leaders are attracted to the perceived market possibilities in rapidly developing nations such as China and India, with over 2.4 billion people between them. Proximity to customers is often essential to compete for service sector business. Other innovators believe they need to globalize their research efforts to overcome foreign government impediments to doing business (e.g. standards, VAT taxes), or to ensure they can gain needed regulatory approvals in the future (e.g. merger approvals).

  4. INFRASTRUCTURE. Foreign governments are making their own investments in university and lab research facilities, transportation, energy and telecommunications to more effectively compete. It is no accident that the new global clusters attracting the most foreign investment and most knowledge work are precisely those with the most advanced infrastructures (though as stated above, America retains an advantage here for now).

  5. BUSINESS CLIMATE. A great number of top-tier innovative companies explain moves to Asia by pointing to their less burdensome taxation, regulation and litigation environments. These reflect both bottom-line and speed-to-market concerns, although many appropriately question whether nations lacking in freedom, robust intellectual property rights, and thorough worker protections can sustain innovation leadership over a long period.

  6. PROXIMITY TO OFFSHORE MANUFACTURING. While the rise in offshore IT service work does not appear to result predominantly from the global migration of manufacturing, some suggest that other knowledge and R&D jobs may be pulled abroad by off-shored manufacturing. Semiconductor industry experts, for example, indicate chip design work needs to happen close to manufacturing facilities. Thus the movement of manufacturing work portends the movement of the more innovative activities.


PROMOTING AMERICAN COMPETITIVENESS:
THE BUSH ADMINISTRATION’S INNOVATION AGENDA

To keep pace with change in such a dynamic environment, and to maintain American leadership, competitiveness and job growth, the Administration is pursuing a high tech agenda that optimizes the environment for innovation. As President Bush observed on June 12, 2002:

We'll continue to support science and technology because innovation makes America stronger. Innovation helps Americans to live longer, healthier and happier lives. Innovation helps our economy grow, and helps people find work. Innovation strengthens our national defense and our homeland security.

Specifically, our policies aim to promote innovation, support entrepreneurship, improve infrastructure and empower people.

To promote innovation, the President has proposed aggressive investments in new research and development – $123 billion for 2004, up more than 25 percent since taking office, with significant increases in critical emerging technologies such as nanotechnology and biotech. This will help ensure an ongoing innovation pipeline and a well-trained science and technology workforce. We have also been asking Congress to make the research and experimentation tax credit permanent, to reflect the importance of private investments in R&D, which are twice as large as government’s. We are trying to strengthen intellectual property protection – by devoting far more resources to the U.S. Patent & Trademark Office within the Commerce Department, overhauling its policies and procedures to speed operations and improve quality, and by enforcing intellectual property rights aggressively at home and abroad. The President also launched an initiative to improve math and science teaching at the K-12 level, devoting $1 billion through the National Science Foundation and Department of Education over five years.

To support a more entrepreneurial business climate, the President continues to offer pro-job growth, pro-tech fiscal policies. Many experts believed the 2001 tax cut moderated the recession that began one month before President Bush took office. Our 2002 stimulus package extended benefits for displaced workers and accelerated depreciation schedules for businesses investment in capital equipment, which helped maintain new business investment in IT in the wake of uncertainty exacerbated by 9/11 and the corporate corruption scandals. The President’s recently enacted jobs and growth package should further stimulate job creation, investment and growth, including a tripling of allowances for small business investments. We are aggressively promoting export opportunities for American companies through the WTO and in multiple bilateral agreements, working to open global markets for goods and services made by American workers. The President has proposed expanding citizens’ access to quality health care by reducing costs imposed by frivolous litigation and expanding prescription drug benefits for seniors. And the Administration has taken a leadership role in addressing concerns about investor confidence after the excesses of the 1990s by aggressively prosecuting those who broke the law, implementing new rules to strengthen corporate governance and increasing transparency for investors.

To improve our infrastructure, the President’s technology priorities include hardening the Nation’s defenses, especially critical infrastructure protection and cyber security; implementing a national energy plan that uses innovative technologies to improve energy efficiency while expanding generation and transmission capacities; strongly supporting deployment and use of high-speed Internet (broadband) networks; and improving the efficiency with which we manage radio spectrum. Led by our colleagues at Commerce’s NTIA, we have made great strides already in spectrum, breaking a two year logjam to find spectrum for 3G services, supporting the elimination of spectrum caps, proposing a plan to expand spectrum available for unlicensed data use in the 5 GHz space (pending ratification at the World Radio Conference), and creating a fund to ensure that government users can relocate when the spectrum they are currently using is allocated for commercial use.

Lastly, to empower people, the President made e-government a top management priority for the Administration, leveraging federal investments in IT ($59 billion proposed for 2004) to provide more services to citizens and operate government more efficiently. Of greatest importance to this President may be the bipartisan efforts to improve our Nation’s education system, exemplified by the No Child Left Behind Act. The most significant education reform in a generation, effective implementation of this legislation will be key to sustaining American leadership and productivity in the 21st Century by ensuring our children learn and know how to learn. To remain globally competitive – both as a tech-led economy and as the most-inclusive opportunity society – we must place education first, and that is what President Bush is doing.

* * * * *

I would like to conclude with three observations.

First, we must not forget that technological innovation holds the key to our future prosperity. America must never compete in the battle to see who can pay their workers the least, and it will take sustained innovation to ensure we don’t have to. Technology holds the power to improve our lives and make the world a safer, more abundant, and more equitable place. Yet many will fear technology and the change it brings, while others may try to harness its power for evil. As leaders in government and industry, we must work to promote greater public understanding of, appreciation for, and widespread access to technology. We need to help our citizens understand this change and educate them to take advantage of it, relying on sound science and rational analysis to use technology to advance the human condition.

Second, it is clear that while governments have an important role to play in setting the proper business climate to promote innovation and entrepreneurship, private sector leadership is critical to solving the toughest challenges raised by technology convergence. Politics do not improve technology development, deployment or usage – never have, never will. Thus all of you need to weigh in. Policy makers need to hear from leaders in industry and academia – early and often – if we are to get the answers to these difficult challenges “right.”

Last, the Internet has reaffirmed the power of Metcalfe’s law. This principle states that the value of a network increases exponentially as more people connect – going from 10 to 100 users increases the value of a network by more than a factor of 10. As we look to solve the technology policy challenges before us, we must join together with others around the world as collaborators to make this incredible networked, digital world more valuable for everyone. While I speak often of American global competitiveness, I believe very deeply that America’s future depends greatly upon the concurrent success of citizens of many other nations, and we must find the win-win policy solutions so that a rising tide can lift all boats. We will all be better off – as businesses, as nations and as citizens of the world – when 5 billion people are online, instead of the 500 million who have logged on so far.

Thank you for inviting me here today and for your attention. I look forward to your questions, suggestions and ideas.