Remarks
Robert D. Hormats
Under Secretary for Economic, Energy and Agricultural Affairs
AAAS Conference
Washington, DC
February 16, 2011


Thank you for those kind words of introduction and your warm welcome. It is an honor to participate in this event along with other distinguished guests including John Holdren from the White House Office of Science and Technology Policy and my old friend and colleague Nina Fedoroff, president-elect of AAAS and previously the Secretary of State's Science and Technology Adviser.

Today I want to focus on science and technology in the context of innovation and economic development, specifically touching on three issues:

  • First, how innovation is relevant to countries at every stage of development;
  • Second, how countries can create an environment that fosters innovation; and
  • Finally, I will talk about some of the ways that the United States and Asia are cooperating on innovation, especially this year when we are hosting APEC.

Let me start with why innovation is vital to countries at every stage of development.

The United States remains the leader in global innovation, and innovation remains a key driver of our growth and prosperity. We spend more on research and development than any other country and our research universities are models to which other countries aspire. As a result of this research and development focus—the United States issues more patents than any other country and has the highest share of science and engineering articles published in the world.

R&D spending in Asia already exceeds that in the EU and is predicted to pass that in the United States within five years. Much of the rise in Asian spending on R&D is attributable to China, which plans to spend 2.5% of its GDP on R&D by 2020. The intense interest of countries like China and India in promoting innovation is relatively recent and there still remains an argument by many developing nations that innovation policies are not important for countries at early stages of economic development.

The logic goes: growth in the early stages comes from taking advantage of underutilized resources, such as cheap labor and natural resources, and that innovation is a rich man's game. This attitude is reflected in the position that many countries take in international fora, where they strenuously resist policies, such as IPR protection, that they claim are irrelevant or harmful to them.

Here I think it is important to understand that innovation is not just about costly laboratories and research facilities, important as they are, but also about adaptation and modification of existing technologies. Emerging economies have been creatively adopted developed world technologies to serve their needs. For example, I use my Blackberry to check my email and make telephone calls. Cell phone users in Asia may use them to search for the highest market prices for their produce, check whether the medicine they just bought is genuine or counterfeit, or, as we are now seeing, bring about political change.

Local innovators can work with foreign technology exporters to create new products to serve the needs of the local consumer, creating a win-win solution for both parties.

Adapting and modifying existing technology is the first step in the innovation process. Traditional R&D is vital—this can’t be escaped. Agriculture is a good example. Asia benefited tremendously from the first "green revolution," which both alleviated hunger and rural poverty and created an economic base for economic growth. More research is needed to increase productivity for crops grown in developing countries. Similarly, R&D is needed to develop new treatments for diseases that are prevalent in developing countries.

We know that innovation is important, so let me focus for a few minutes on how governments can create an environment that fosters innovation.

While government investment in R&D, especially in basic science, is important, the private sector drives R&D investment in most countries. In the United States, industry funds more than 65% of R&D. In China the figure is 70%, up from 58% in 2000, and in Japan and Korea it is even higher at 75%. India is an exception, with more than 80% of its R&D financing coming from the government.

To maximize the resources available for innovation, countries need to promote private sector as well as government R&D investment. The private sector brings more than financial resources to innovation. Private companies are close to the market and know the needs of their customers as well as having experience in introducing new products to the market. They provide the link between research and practical commercialization that leads to job creation and economic growth.

Government policies can help create an environment conducive of innovation. This includes education and research and development funding—which I recognize are costly and may not always be feasible—but also good governance, transparent regulatory policies, markets that are open and competitive, and policies that allow companies to succeed and sometimes fail. If countries do not get these policies right, even massive investments in education and R&D are unlikely to afford innovation gains. Strong IPR protection is also essential. Copyrights, trademarks, patents, and trade secrets protect creativity, entrepreneurship and innovation— are key drivers of domestic and global economic growth. Intellectual property fosters innovation, without it there is little or no incentive for companies—both domestic and foreign— to produce new products or services.

In today’s global economy, companies are increasingly forming “innovation networks,” working with other firms, customers, suppliers, universities and government institutions around the world. Their products incorporate technologies from several different countries and companies. Rarely are such complex products based solely on the intellectual property of a single business or a single nation. Nations that fail to protect intellectual property will find themselves cut off from these dynamic global partnerships because innovative firms will hesitate to invest in or form partnerships with countries where their intellectual property may be stolen.

I’ve touched on the importance of innovation and policies that can help support innovative growth. Let me close with a few examples of where we, the United States, have been working with Asian governments to promote innovation in science and technology.

As we expand our engagement with Asia we are increasingly using S&T to build relationships to develop local capacity to innovate as well as respond to regional challenges such as climate change and emerging infectious diseases. S&T issues are an important component of our engagement in multilateral fora such as ASEAN, APEC, and the Lower Mekong Initiative.

This year, the United States hosts the Asia-Pacific Economic Cooperation meetings leading to the November Summit in Honolulu. The forum offers a great opportunity to enhance cooperation science and innovation in the region. APEC, through its committees, sub-fora, working groups and task forces, provides the foundation needed for free and open trade and investment in the region. APEC can play an important role in creating the environment necessary to sustain innovation.

Innovation is one of the pillars of the APEC Growth Strategy set forth in 2010, which outlined the APEC Leaders’ vision for attaining high-quality, long-term economic growth in the region. Promoting innovation will be one of the underlying themes of our efforts as APEC 2011 host to promote environmentally sustainable economic growth and development. This includes efforts to ensure free and open trade and investment in green goods and technologies.

Equally, we are increasingly using science and technology in our bilateral relationships around the region. With the recent conclusion of the Science and Technology Agreements with Indonesia and Malaysia, we now have in place frameworks for expanded cooperation on science technology issues in nine Asian countries, and we are working to expand this list in the near future.

In July 2011, Indonesia will host a regional entrepreneurship summit as a follow-up to President Obama’s inaugural April 2010 Presidential Entrepreneurship Summit. This will include the participation of ASEAN countries, India, and China. Indonesia’s business community has established an Entrepreneurship Board to support Indonesia's selection as a pilot program for the Department's Global Entrepreneurship Program (GEP), which will further encourage innovation and strengthen our economic partnership. We are also planning an entrepreneurship trade mission to Indonesia for early 2011.

On November 13, 2010, President Obama and Japanese Prime Minister Kan formally launched the U.S.-Japan Dialogue to Promote Innovation, Entrepreneurship and Job Creation. Working with key partners like Japan gives us the opportunity to examine and share experiences on policies that can most effectively promote innovation and create high-quality jobs. This includes efforts to better train workforces to meet the demands of an innovative economy.

Under the U.S.-Japan Clean Technology Action Plan, national laboratories in both countries are collaborating on Transformative Energy Technologies with the potential to revolutionize energy production and use. The U.S. Department of Energy and the Japanese Ministry of Economy, Trade and Industry are working with the State of Hawaii and Okinawa Prefecture to promote solutions for renewable energy, smart grid, and energy efficiency applicable to island economies.

Cooperation with China, particularly on clean energy, is growing rapidly. The U.S.-China Renewable Energy Partnership fosters collaborative research and development of advanced biofuels, solar, wind, and grid technologies and promotes public-private partnerships. The multilateral Electric Vehicle Initiative, a nine-country initiative led by the U.S. and China, is working to explore development of joint product and testing standards, do joint demonstrations, and increase public awareness.

More broadly, over the past 30 years the U.S. and China have cooperated in scientific and technological innovation through the U.S.-China Agreement on Cooperation in Science and Technology (S&T Agreement) as well as U.S.-China Joint Commission on Science and Technology Cooperation (JCM). In July 2010, the U.S. and China convened the first meeting of the Innovation Dialogue, a forum where senior leaders and experts discuss a range of issues relating to the advancement of innovation.

As you can see, expanded engagement on science and technology is a critical component of the United States’ multilateral and bilateral engagements with countries around the region.

In summary, innovation—the development of new ideas and products—is necessary to offer previously unthought-of solutions to challenges such as climate change, energy shortages, disease epidemics, and famine. These are problems faced by all nations, at every stage of development. Hence, it is vital that countries throughout the globe embrace policies that foster innovation. The State Department is ready to help in this process and is working throughout the Asian Pacific region on both innovation policy and science and technology cooperation.

Thank you.