Foreign Relations of the United States, 1964–1968, Volume XXXIV, Energy Diplomacy and Global Issues

15. Memorandum From the Interdepartmental Committee on the Technological Gap to President Johnson¹

Washington, December 22, 1967.

SUBJECT

• Principal Points Raised in Report on the Technological Gap

The final report of the Interdepartmental Committee on the Technological Gap is submitted herewith for your consideration (Attachment B).²

This Committee was created in November 1966 by NSAM 357³ to examine the problem of technological disparities between the U.S. and Western Europe and to explore possible courses of action.

We submitted a preliminary report in January 1967 and subsequently have completed a detailed analysis of the problem including a survey of American direct investments in Europe (Attachment C).⁴ Members of the Committee have had discussions with key European governmental and industrial leaders, and with leaders from American industry and universities. We have also cooperated in a joint study with the OECD countries in preparation for a Ministers of Science meeting next March.

In our study, we have started from the proposition that the expansion of technological capability and freer exchange of technology on both sides of the Atlantic can be to the mutual advantage of the U.S. and Western Europe and, indeed, the entire world.

THE “TECHNOLOGICAL GAP”

The problem of the “technological gap” is only partly technological. Psychological, political, economic, and social factors are probably more important.

• —The European lag in technological know-how is largely in a few sectors of advanced technology, principally those that have benefited from U.S. military, space, and atomic energy programs—computers, advanced aircraft, microminiature electronic components, civil nuclear power, space communications.
• —Although Europeans are concerned about the long-term national implications of these technological disparities, they also recognize the existence of an economically more significant lag in European industrial abilities to utilize available technology. For example, many inventions made in Europe were first introduced commercially in the U.S.
• —The European lag in the utilization of technological know-how is due to a number of long-standing structural factors that only the European countries themselves can overcome, including: underinvestment in education; less aggressive and skilled management; less profit-oriented social customs and work habits; slowness in industrial modernization; small size of firms and national markets; conservative investment attitudes; and lack of mobility and inadequate number of highly trained personnel.

This general view of the situation is now widely shared by informed European leaders. It represents a marked change in their understanding during the past year.

In our view, the technological gap problem is a current manifestation of the historical differences between Europe and the U.S. in aggressiveness and dynamism, reflecting the American frontier past and its restless quest for progress and change.

The Problem for the U.S.

Improved European understanding of the nature of the technological gap has already led to some corrective steps, both nationally and European-wide—a constructive response to American competitive pressures.

However, many Europeans are concerned that during the time they are taking corrective actions the U.S. will move further ahead of them in advanced technological development and industrial innovation, and will capture greater control of world markets for advanced technological products. This concern has been sharpened by the very rapid growth of American direct investments in the technology-intensive industries of Western Europe.

Some Europeans are also concerned that major decisions affecting the future of European industry, and even their national independence, may not be in their hands. They feel they may be undesirably influenced by American corporate decisions and by U.S. governmental trade and financial controls. Other Europeans recognize that American investment has been a highly valuable force in moving their economies forward.

As we see it, the technological gap issue is one aspect of the broad disparities in power and economic strength between the U.S. and a fragmented Europe which will be a recurrent problem for a long time to come. The frictions caused by these general disparities will continue, and will take different forms—economic and political—from time to time.

Although European concerns about the technological gap may be exaggerated, they may nonetheless result in European counteractions to discriminate against American firms or products and in other measures that would pose political and economic difficulties for the U.S.

However, we believe that the adoption of restrictive measures by Western European countries and ensuing pressures for countermeasures by the U.S. can be deterred (if not prevented) by: (a) a continuing long-range program of U.S. actions designed to show our cooperativeness, our desire to promote European advance, and our willingness to remove obstacles to the exchange of technology, and (b) the self-interest of European countries and their firms in maintaining the flow of American technology and management skills.

U.S. Strategy

The only long-range “cure” for the disparities problem lies in actions which must be taken by Europeans themselves: internal reforms in the European countries and moves toward greater European integration and cooperation.

There is little that the U.S. government can or should do by way of direct assistance. But, the U.S. can play a significant complementary role—primarily through promoting scientific and technological cooperation and through the mutual reduction of obstacles to the flow of technology and related trade.

At the same time, we should maximize both the short-term and long-term economic benefits to the U.S. from the transfer of technology. We should utilize our technological position to achieve the objectives set forth in this report.

Events of the past year have confirmed the soundness of the overall strategy recommended in our report of last January. Although we should look mainly to European initiatives, the U.S. should provide a positive response to European concerns.

The U.S. should try to convert European resentment about the technological gap into a constructive source of support for greater intra-European cooperation for solving the underlying problems. At the same time, we should discourage parochial solutions and attempt to ensure an outward-looking Europe which will be a strong force in the world economy.

Specifically, the U.S. should:

• —stress that the U.S. and Europe have a joint stake in technological and economic progress; that our future prosperity is mutually interdependent; and that all stand to gain by promoting an open technological market, the international flow of scientific and technological advances, as well as management and organizational skills;
• —acknowledge (in low-key) that there is a U.S.-European gap in ability to utilize technological know-how, and to a certain extent in technological know-how per se; that this is a problem of mutual concern; and that the U.S. is prepared to participate constructively in seeking mutually beneficial actions—but that the basic actions to strengthen Europe must be taken by the Europeans themselves;
• —underscore the very extensive U.S. governmental programs and efforts to share the results of federally-financed research and development and to cooperate in R&D activities with Western European countries—in defense, aerospace, atomic energy, and other sectors;
• —emphasize that the technological gap issue reveals an essential need for the effective integration of Western Europe, and encourage Europeans to strengthen institutions which can deal comprehensively with the disparities problem, particularly the OECD and the European Communities;
• —avoid U.S. actions that might divert European attention from the need to act within a European framework, while taking initiatives that promote multilateral cooperation;
• —continue to work toward a common understanding of the nature and causes of the disparities and the role of governments in creating an atmosphere conducive to innovation, in the forthcoming meeting of the OECD Ministers of Science and other forums as they arise.

In implementing the foregoing strategy, the U.S. should:

• —carry out the Kennedy Round agreements and avoid the imposition of new barriers to trade;
• —take the initiative to cooperate with Western European countries in the mutual reduction of non-tariff trade barriers (including “Buy American” and corresponding European restrictions on government procurement) through appropriate channels as soon as preparations and conditions permit;
• —analyze the contributions of American direct investments abroad to achieving U.S. national goals (optimum growth of national income, full employment, price stability, satisfactory balance of payments, freedom of international capital movements, foreign assistance), and minimize the inconsistencies of various national policies in relation to these goals;
• —continue to develop among COCOM members a better understanding of the major technological-security issues involved in their controls in advance of the need for a particular control action;
• —explore ways to encourage joint U.S.-European technological contributions to governmental programs of common interest (such as defense, space pollution, and transportation), particularly through appropriate consortia of U.S.-European companies;
• —assist European initiatives toward intra-European technological cooperation in space science and technology, in atomic energy, and in the application of computers in research, industry, and government;
• —lead in the strengthening of international mechanisms for the exchange of scientific and technical information and for the development of internationally agreed commercial standards, and in promoting international patent cooperation;
• —promote exchanges between the U.S. and Western Europe of scientists, engineers, industrialists, and public officials to transfer technical skills and management understandings in relation to the problem of technological disparities;
• —cooperate with European governments in applying science and technology to the common problems of highly industrialized countries—in air and water pollution and urban problems, for example.

Recommendations

The Interdepartmental Committee has agreed on the substance of the attached report and recommends:

a that you endorse the foregoing strategy and the proposed assignment of responsibilities set forth in the attachment to this memorandum (Attachment A);⁵

b that the responsibility for annual review of the implementing studies and actions be placed in the Senior Interdepartmental Group;

c that the Cabinet Committee on Balance of Payments undertake a broad examination of the role of American direct investment in Western Europe in relation to U.S. overall economic and foreign policy goals, making use of studies by other agencies including the office of the President’s Special Trade Representative;

d that this memorandum and its attachments be distributed to appropriate U.S. officials and Ambassadors to communicate the understandings in the report and to facilitate follow-up actions; and

e that the Department of Commerce publicly release an appropriate version of the background analytical report (Attachment C).

Since we are not recommending major U.S. initiatives, we do not believe it desirable to make a Presidential statement concerning this report. However, in view of the considerable public interest in this report, I will be pleased to make a statement to the press reporting its submission and explaining its general thrust, if you so desire.

Donald Hornig

Mr. Robert R. Bowie

⁶
Department of State

Dr. Donald M. MacArthur

Department of Defense

Dr. John F. Kincaid

Department of Commerce

Mr. James E. Webb

National Aeronautics and Space Administration

Dr. Arthur M. Okun

Council of Economic Advisers

Mr. Wilfrid Johnson

Atomic Energy Commission

Mr. John R. Petty (Observer)

Department of the Treasury

Mr. Donald F. Turner (Observer)

Department of Justice

Ambassador William M. Roth (Observer)

Special Representative for Trade Negotiations

1. Source: Johnson Library, National Security File, Agency File, State Department, Senior Interdepartmental Group, Memos and Misc. [II], Box 60. Confidential. Transmitted to the President under cover of a memorandum from Hornig, Document 14.
2. Not printed.
3. Document 5.
4. Not printed.
5. Not printed. No action was taken on this attachment, and on March 16, 1968, Hornig wrote to the President: “Last December I sent you the report of the Technological Gap Committee which you had asked me to chair. Since I have had no response and have been unable to locate the report in the White House, another copy is attached for your attention.” (Memorandum from Hornig to Johnson, March 16, 1968; Johnson Library, Papers of Donald F. Hornig, Box 6)
6. The following typed names appear on the source text.