INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 27, 1999

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order. Pursuant to Standing Order 108(2), this is a study on a document entitled Sustaining Canada as an Innovative Society: An Action Agenda.

For our guests, I'm Susan Whelan, and I'm the chair of the committee.

I'd like to welcome our witnesses from Washington, D.C. We have Dr. Barfield from the American Enterprise Institute. He's the resident scholar, director of science and technology policy studies, and coordinator of trade policy studies. And we have Dr. Stephen Nelson from the American Association for the Advancement of Science. He's the program director of science, technology, and government programs.

We're very pleased to have you join us today via satellite. I understand you both have opening statements. I would propose that we proceed in the order of the witnesses as listed and begin with Dr. Barfield.

Dr. Claude E. Barfield (Resident Scholar; Director, Science and Technology Policy Studies; Coordinator, Trade Policy Studies, American Enterprise Institute for Public Policy Research): Actually we would prefer that we begin with Mr. Nelson. He has an overview that is better to start with than mine. So if it's okay with you, we'll start that way.

The Chair: Thank you very much.

Dr. Nelson.

Dr. Stephen D. Nelson (Program Director, Science, Technology, and Government Programs, American Association for the Advancement of Science): Thank you, Madam Chairman and the rest of the members of the committee, for the opportunity to testify before you today.

I'm going to be following, but in briefer fashion, a version of the written testimony I submitted earlier. I'll be presenting first evidence on the sources of support for basic research in the United States, and then evidence on the performers of basic research, and finally wrapping up with just a few overview policy issues that one might need to think about concerning public sector support for basic research.

In my written testimony I provided a working definition that most of the major institutions in the United States use for basic research, so in the interest of time, I won't go over that here. I think it's fairly well understood.

The first question I want to address concerns the issue of who provides support for basic research in the U.S. In this section I'll rely mostly on figures that we at AAAS, the American Association for the Advancement of Science, have been collecting since 1976, on federal funding for R and D.

You have before you figures I submitted with my written testimony. To provide some context for basic research, if you look at figure 1, it shows total spending for R and D in 1998 at approximately $220 billion, nearly two-thirds of which is provided by industry and just over 30% by the federal government.

However, in the case of basic research, as shown in the second figure, the federal government leads in support, with about 57% of a national total in 1998 of about $34 billion in support. That figure represents about 16% of total U.S. R and D spending. That proportion has been relatively stable over the past 25 years or so.

Because the federal government is the primary supporter for basic research in the U.S., I want to focus primarily on its various components.

In the third figure you see an illustration of the place of R and D support within the overall federal budget. Only about one-third of our overall federal budget is considered discretionary—in other words, capable of year-to-year spending decisions—the rest of it being mandatory. The discretionary portion is shown at roughly the 12 o'clock to 4 o'clock positions on that diagram. All of the R and D programs the federal government funds are in those discretionary portions. Defence R and D and non-defence R and D each comprise about 12% to 14% of their respective components.

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In the interest of time, I'm also going to skip over figure 4 and go straight to a look at basic research in figure 5. Where does it fit in all of this? The answer is very different, depending upon whether you look at defence R and D, which is fairly prominent in U.S. R and D overall, or at non-defence R and D.

Within defence, basic research is only a very small proportion, about 3%. It's the smallest category of the various categories listed there—basic, applied, development, and facilities—perhaps except for facilities, which is very close. But within non-defence R and D, by contrast, basic research is the largest single category, accounting for about 43% of non-defence R and D, or it will in fiscal year 2000 if the President's programs are accepted.

How much basic research is anticipated for fiscal year 2000 and how do the various federal agencies compare in their support? If you take a look at figure 6, the total for fiscal year 2000 would be about $18.1 billion, up nearly 5% over the current year, uncorrected for inflation.

By far the largest supporter of basic research in the U.S. federal government is the National Institutes of Health, which accounts for about 47%—nearly half—of the basic research funded by the federal government. It's over three times as large as the next-largest contributor to basic research, the National Science Foundation.

As I mention in my written testimony, this illustrates one of the central features of budgeting for R and D in the United States, namely that the greatest bulk of R and D budgeting, even at the level of basic research, is in support of programmatic missions. Here you see by far the largest supporter of basic research is in support of the mission of controlling health and disease.

Finally, figure 7 extends those inter-agency comparisons over about a 30-year timespan. You can see there has been significant growth in federal support for basic research, even adjusted for inflation, and it's been fueled primarily by the growth in the National Institutes of Health, again. Other agencies have made some gains, but basic research, for example in the Department of Defense, has been nearly constant in real spending since nearly 28 years ago.

Turning now to who performs basic research, I will rely on data that has been collected by the National Science Foundation's Division of Science Resources Studies.

Although colleges and universities are relatively small players in the overall U.S. R and D system, performing just about 12% of total national R and D in dollars, they are the nation's primary performers of basic research. Of the $31.2 billion spent in 1997, colleges and universities accounted for about 51% or 52%. The historical percentage they have accounted for over the past couple of decades has fluctuated between 44% and 53%.

Next in order of scale is industry, which accounted in 1997 for about $6.6 billion, about one-fifth of the total national basic research.

Then the federal intramural laboratories spent about $2.7 billion, not quite 9% of the national total. That amount has been relatively stable over a considerable period of time.

Finally, in the last section of my testimony, I raise several issues. I won't go over them in as great detail as I did in the written testimony, but in considering the whole issue of governmental support for basic research, there are several issues one should think about.

The obvious issue is how much one should spend in this area. This entails considerations of what areas ought to be spent in, which is dependent upon where the public need is greatest as well as where the scientific opportunity is greatest. In addition, one needs to think about the balance between basic research and the other kinds of R and D and innovation activities in the entire portfolio.

Second is the issue of quality assurance. In this country, as in many others, we rely primarily on peer review to do that, although we haven't worked out all the bugs in that.

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Third is the issue of how to coordinate related areas of basic research across agencies, which are often very turf-conscious. Some recent organizational innovations in this country have tried to address that, with some degree of success.

Fourth is the issue of how well articulated, in a national sense, the federally funded basic research is with other kinds of R and D or innovation activities.

And finally, at the basis of all this, at least in a democracy, is the issue of public support. Is basic research supported by the public? In the United States that tends to be true. Figures have been roughly in the 80% area in terms of the percent of Americans who agree that the federal government should support basic research that advances the frontiers of knowledge, even when it doesn't provide any immediate benefits. It's up to policymakers and program staff alike to conduct the basic research programs in such a way that general public confidence is deserved.

Thank you for the opportunity to present these broad features. I'll be happy to answer any questions when the time comes.

The Chair: Thank you very much, Dr. Nelson.

Dr. Barfield, did you have anything to add to that at this time?

Dr. Claude Barfield: Yes, I do. I knew Steve was going to walk you through the numbers, so I left that to him, and I'll pick up on that.

I apologize for not having a written statement. When I was called a week and a half ago.... I have another duty at my institute, and that is in trade policy. I'm just finishing a book on China and the World Trade Organization, and Premier Zhu Rongji's visit to the United States has turned things around a lot in that book, so I've been crashing to do that.

Let me start by saying that, if you're not aware, there are two recent reports in the United States that are excellent, and I think Dr. Nelson would agree with me.

One is quite recent, within the last five or six months, by the Committee for Economic Development, and it's called America's Basic Research: Prosperity Through Discovery.

The second one is now four years old, but it is a report that still contains a great deal of wisdom and is still quite valid. It was issued in 1995 by the National Academy of Sciences here, and it is called Allocating Federal Funds for Science and Technology. The chairman of the committee that put the report together was the former president of the National Academy of Sciences, Frank Press, and it is popularly known here in the United States as the Press report.

In these two reports, there are some differences and there is some overlap. Both of these reports give you excellent analysis. Obviously there's a personal bias here: I agree with much of what they recommend, and I'm going to pick up on some of the things they have to say.

I'm also going to start far away from what would be counted as science and technology policy per se. I do that because, as I understand it, the title of your set of hearings is Sustaining Canada as an Innovative Society: An Action Agenda. I would argue that while science policy per se—the kinds of programs Dr. Nelson talked about—are important, sustaining Canada or the United States or Britain or Germany or Japan as an innovative society both begins and ends with policies that are outside what one would normally count as science and technology policy.

It seems to me the important thing is to get in order the fundamentals about what the government, the private sector, the non-profit sector, and the universities do, and then build upon that.

This is not to say science policy and support for basic research are not important, but key areas that would sustain innovation, as opposed to just merely sustaining science, have to do with governments having pro-competitive regulatory policies, getting macroeconomic policies correct, controlling inflation—in other words, the large picture. Then governments must also have a solid base and an education policy that actually trains—not just for the workplace, but for life—a workforce that is capable of handling technological challenges as they come along. This gets me in the direction at least of what is Canada's science policy.

In other words, it's the broad patterns of policies that you really need to base your policy on.

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I'm not going to say a lot about this, but I would point out that though it was skewed and though it was quite narrow, the Soviet Union had a very strong science defence base policy. Some people argued in the 1960s and 1970s that it was even stronger than ours. But the problem the Soviet society faced finally, and that any society would face, was that the underpinning of this highly specialized and quite good technological workforce and set of scientists and engineers was what finally brought them down. As I say, I'm not going to spend a lot of time on this. We can talk about this in question period.

Science policy has to be embedded in sensible, efficient, and just economic and social policies.

Picking up on some things Dr. Nelson pointed out, let me turn to a few areas in science policy per se, getting away from numbers and talking about principles.

We don't believe this in the United States for the last year, but governments always have limited resources. Because of the prosperity of the business cycle over the last six or seven years, and particularly in the last several years, we have had an enormous influx of public funds into the taxing system. But in general, your government, and ultimately our government, are governments of limited resources. Therefore you have to decide where you will put your public funds.

My argument, and I think the argument of both the reports I cited, is this—and it is going to be true, by the way, in the United States, even though we seem to be awash in public money now. As you know, there's a big debate going on that we actually have not funded social security and many of our social programs. So the scientific community, after panicking in 1994, when it looked as if we were going to have major cuts, since 1996 has thought there was going to be a lot of money. However, we're going to go back to a fairly traditional pattern, I think, and the discretionary part of the U.S. budget—just like, I suspect, your budget and all developed countries' budgets—is going to remain quite small.

That being the case, there are still major questions of allocation. I would argue that while the federal government or the state governments might spend some money on what were called technology programs, or programs that bring products or processes to market, the fundamental priority, at least in the United States—and I think this would be true in Canada too—should be to the research universities and to the training of scientists and engineers within those universities.

When we look back in history, and certainly as we move farther along in the post-Second World War period—and this is already being said—the most important fundamental of the U.S. science policy system was the connection that was made and strongly supported, through thick and thin, from the 1960s through the 1990s, between graduate education in science and engineering and support for basic research. That still remains the key element of any system.

Let me go on and say a few things about some issues we face within that.

I mentioned the question of the balance between basic research on the one hand and so-called applied research and demonstration on the other.

A second was alluded to briefly by Dr. Nelson, though he didn't talk about its implications. We in the United States are heading for a tremendous imbalance in our support of basic research. Part of it is legitimate and part of it is political. We are giving overwhelming support to help R and D.

It is legitimate in the sense that this is one of the most exciting times in contemporary history and in contempory science for biomedical research and biotechnology, with the breakthroughs in genetics. But it is also true that we spend a lot of money at NIH because we have very powerful lobbies.

If you look back at the history of science and the history of innovation, you'll see one area cannot get too far out ahead of the other without creating problems. So down the road, the fact that we are not putting as much money into, let's say, physics, chemistry, geology, astronomy, or some other seemingly wholly out-of-the-way science discipline, will come back to haunt us. It's one of the problems the United States has not really faced up to yet, and must.

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As I say, it is as much a political problem. Every senator and every member of the House of Representatives has a mother, a sister, or a cousin who has died of cancer, heart disease, or some other disease that NIH is funding. So they tend to forget that the NIH funding has to be embedded in broader science disciplines and support for science disciplines.

A second question we will face—and I apologize that I can't speak to this in terms of Canada—is that we've had an explosion of research universities in the United States, and it continues to go up. At some point we are going to have to begin to decide among those universities, it seems to me—and this would be highly controversial—as to whether we begin to move towards centres of excellence, because I am not sure public support will sustain the kind of willy-nilly, growing-like-Topsy support we've had in the past.

Let me raise with you one final issue that is important here. Again, it is an issue and a problem that comes out of a great success story. Increasingly in the United States, we have had collaborations between government on the one hand—government-supported research in universities—and industry on the other hand. By and large, this has been a tremendous benefit for both sides.

But in key areas of software and in biotechnology, we're getting major questions about an increasingly strong intellectual property system that is fencing off from the public domain key elements of what had normally been called science and knowledge that had been universal. As with the question of the ability to support research universities, the question of the limits of intellectual property, particularly with public funds, is going to be a major challenge for the United States.

I'll just leave it there. I'd be happy, with my colleague, to answer any questions.

The Chair: Thank you very much.

We're going to turn to questions. The process we have at committee is that we move around in five-minute sections. So we'll allow the first person to ask questions, and you're both entitled to comment on the question, if you both have a reply.

Ms. Meredith.

Ms. Val Meredith (South Surrey—White Rock—Langley, Ref.): Thank you, Madam Chair.

My first question is to Dr. Nelson.

I thank you for your comments. You may have covered this and I just didn't catch it. Although government is very much a large contributor to R and D, how does that compare to the private sector, industry?

Dr. Stephen Nelson: In terms of total R and D spending?

Ms. Val Meredith: Yes.

Dr. Stephen Nelson: I believe that's shown in the first figure I included with my written testimony.

Historically the relationship has changed. Right now about two-thirds of the total is contributed by industrial R and D, and a little bit less than a third by the federal government. That was not true, say, three decades ago. It was reversed. Federal government led in overall R and D spending.

What happened was, as you can see from that figure, the federal government's contributions, adjusted for inflation, as these figures are, began to level off and then even decline throughout the 1970s, climbed a bit in the 1980s, peaked in 1987, and have declined in real terms ever since.

Meanwhile, industrial R and D, which is the portion above that in each of those bars, has continued to grow rather significantly every year. The projection for the latest year alone is something like 9%. So that has fueled the overall growth of the total R and D in the U.S. from the industrial side, rather than the federal government side.

Dr. Claude Barfield: But within that, and against the next chart you have, there's an imbalance in the sense that the federal government supports most of basic research.

Dr. Stephen Nelson: Right.

Dr. Claude Barfield: And it's continued to do so, even though we had an increase in the last decade of industry supporting basic research. But it is still quite small and will probably remain quite small.

The other point about the change is a lot of that in the last decade has to do with the decline in defence R and D as a proportion of the total. So if you looked at civilian, I suspect the figures would not be so dramatic in terms of the federal government support, though it may have declined.

Dr. Stephen Nelson: There's not quite as much of a loss, yes.

Ms. Val Meredith: So when you look at presently the two-thirds industrial support for R and D, is this where you run into a problem of intellectual property control and not sharing? And if most of the federal government's dollars are going to basic research, then the more advanced research that industry is doing would be protected by copyright or by intellectual property rights, or what?

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Dr. Stephen Nelson: Intellectual property is more of an issue in the private sector of course. Certain federal policies, beginning back about a couple of decades ago—

Dr. Claude Barfield: Yes, 1980 or 1979.

Mr. Stephen Nelson: —have tried to create incentives for capitalizing on even basic research by creating incentives for colleges and universities, for example, in the conduct of basic research to hold title to that. It's increasingly an issue.

I think Claude could speak better to the question.

Dr. Claude Barfield: Again, for what were at the time very good reasons, the federal government argued that it should be getting....

Some of this was an attempt actually to support science and technology, and to be able to explain to the people that you're getting more bang for your buck, as it were. So the argument was that the money you're putting into the universities or into the government labs....

We have a large government lab program here, with Department of Defense labs and Department of Energy labs, which take a substantial amount of money. The argument was that somehow you should be able to show a payoff from the money that was going in there. So several bills were passed—the Bayh-Dole Act of 1980 and others—to encourage universities and the government laboratories to work with business to get a product to market. A part of that was a granting of intellectual property.

That then, in the 1980s and early 1990s, was compounded by advances in two areas: one, biomedical research and biotechnology; and two, computer software.

Let me take the example of biotechnology. You have a situation where you go from basic research right to a product, when you're talking about patenting the expression of genes. So what has happened is that, increasingly in our system, courts have upheld farther-downstream, as it were, protection of intellectual property. A question has been raised as to whether or not we are fencing off areas that would traditionally have been counted as public knowledge.

It also becomes complicated because the rationale for the money going to the university originally was that this was what economists would call a public good—that is, it is for everyone. I don't want to get into technical terms here.

The argument on the other side, to be fair, is what is a public good going to do for gross national product? You have to get something in the innovation strain.

I by no means want to seem alarmist here. All I want to flag is that we do have a balancing that we will have to continually watch. We have, for instance, in the human genome project, direct competition between a private institute, which is going to patent what comes out—and by the way, that is with private money, by and large—and several public institutes, which are using public money and which will not patent. In other words, that will be part of the general knowledge everyone can use.

All I'm trying to say is, in a number of areas, not just the U.S. government but other governments will have to face, in terms of their own systems, where you fence off intellectual property vis-à-vis general knowledge.

The Chair: Ms. Meredith, make this your last question.

Ms. Val Meredith: But if they're public funds, taxpayers' funds, that are going into a university or a college for research and development, isn't the issue really accountability of public funding?

If the private sector wants to put money into research and development and go towards a patented product, that's one thing; it's their own money. But when you're talking about public moneys, how can a government ensure, when going into research and development, that it does become the public good—that it isn't protected and kept in a university's locked closet so that nobody else can use the research that has created an opportunity for everybody and that was funded by public funds? How does the government do that?

Dr. Claude Barfield: This is probably something that is bipartisan. This is not Conservative versus Liberal, Democrat versus Republican.

The Congress decided in the early 1980s, maybe without thinking it through all the way, that in the balance between the funding of public knowledge and getting public knowledge to become something that actually was of some economic worth, that contributed to economic growth and to prosperity and jobs in the United States, the balance was too far back. The view of the Congress was, “We funded all this knowledge, but what are we doing with it? We need to get it out.”

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By the way, I am one of those who tends to think we've now maybe gone too far the other way. But that is a legitimate question. It is a question, actually, in one sense, of using public funds for private good. We should be right upfront about that.

There was nothing secret about this. The Congress decided that was the way to get larger economic growth and greater productivity.

Ms. Val Meredith: Thank you.

The Chair: Thank you very much, Ms. Meredith.

We're now going to turn to Mr. Murray.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks, Madam Chairman.

My first question is for Mr. Barfield.

I was interested in your discussion of the imbalance between NIH funding and funding for other areas of research. I imagine that partly accounts for the 80% public support for basic research in the U.S., if you look at support for health funding generally. I want to ask you if you think smaller countries, such as Canada, should have a broad base of research right across all disciplines, rather than trying to specialize in one or two or three areas.

I'll tell you why I'm a bit concerned. A lot of our best and brightest researchers, especially when they're doing graduate work or post-graduate work, will often go down to a university in the States and find the resources there are so much greater than what we have in Canada that they just can't bring themselves to come home to Canada after they graduate, because they wouldn't be able to do the work they're doing in the States. I don't know if that's a question of concentration in one or two or three areas, or whether we as a much smaller country, with a tenth of the population of the United States, can afford to try to be all things to all people. Do you have any thoughts on that?

Dr. Claude Barfield: Well, I'm not going to give you a very satisfactory answer, I'm afraid.

I guess my instinct about it is that I suspect in the future it would make sense in some areas to attempt to specialize. On the other hand, the other side of research is a broadly technically sophisticated population and citizenry, and I would hate to see you move back to specialization and not....

That is, you're educating researchers on the one hand, yes, and you may lose some to the United States or to Europe or wherever. But also there's a broader social purpose, it seems to me, and that is to educate your population and make them scientifically sophisticated. You'll continually have to balance that.

So if it came down to the fact that you began wiping out a lot of scientific disciplines in your own universities because you were worried about the kind of brain drain you're talking about, I think it would be a mistake to go that way. You need a broad investment in science and technology, no matter what size you are. If we were talking about a less developed country, it would be a different story, but Canada has the resources to balance both.

However, I take your point about deciding on certain centres of excellence. The United States may end up having to do this. I'm not saying anything different there. As I've said, we have over 200 universities that count themselves as research universities today, and they're all looking across the board. So we have the same problem on a different scale.

Dr. Stephen Nelson: In fact there are the beginnings of a shake-out among those research universities. There are a lot of wannabes in that category, and as the constraints on federal funding for research have begun to tighten a bit, some of those universities have decided they have to specialize in one area or another.

But as a national pattern, I would agree with Claude in terms of a breadth of coverage.

Mr. Ian Murray: That leads me to my second question.

Mr. Barfield mentioned that one of the keys to success has been the support for graduate research and science at U.S. universities. I may have missed something, but I'm not sure where that support comes from.

Is that federal government support you were referring to?

Dr. Claude Barfield: It's partly federal government, it's partly state governments, it's partly foundations, it's partly corporations. Steve might know the exact breakdown, but it's a variety of sources for education.

Dr. Stephen Nelson: I don't know the breakdown of that, but it is from a number of different sources. A lot of graduate education actually is supported by federal research grants to professors, who then hire the graduate students as research assistants on their projects. That's how a lot of people are supported throughout their graduate studies.

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Mr. Ian Murray: I see I have time for a final question.

One thing we run into quite often in Ottawa is scientists comparing Canada with the United States when it comes to granting. We have granting councils in Canada that provide a lot of the funds for research. Our scientists tell us about how much easier it is to get funding in the States and how much larger the grants are when they get the grants. There's a lot of talk of the need for a science culture in Canada.

In other words, a lot of scientists feel they're perhaps not appreciated as much as they should be. They're definitely not funded as much.

My question is, does that sort of feeling exist among scientists in the United States as well? Is this something that perhaps is a worldwide phenomenon, so we can be concerned but not overly worried about it in Canada? Or are they all happy researchers in the U.S.?

Dr. Stephen Nelson: Not at all, no. I think to some extent that feeling is pervasive.

Among a few people whose formative years were during what's considered the golden age of science, which is largely the 1960s, when funding was growing as fast as the number of scientists, there still exists a feeling that almost any good idea should get federal support. People who've grown up in professional classes or different cohorts since then have faced a different reality, and they know there have to be some kinds of limitations.

I don't know the statistics on the size of the grants or the relative success in Canada versus the U.S., but to some extent that feeling is pervasive in a lot of countries.

Mr. Ian Murray: Thank you very much.

The Chair: Thank you very much, Mr. Murray.

[Translation]

Mr. Dubé, please.

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): I'll be asking my questions in French. Although I understand English well, I'm afraid that it might be difficult for you to understand my pronunciation. So I'll make use of the services of the interpreter.

I'm particularly interested in the funding of research. You referred to the funding provided by the federal government of the United States. I'd be interested in knowing whether, generally speaking, the States contribute to basic research.

[English]

Dr. Stephen Nelson: Relatively little. If you look at the second figure I provided, you'll see the contribution of the state governments is included in the top portion, the lightly shaded portion, of each of those bars, and it's included together with all kinds of other organizations. In practice, state governments, at least directly, support relatively little basic research, except perhaps indirectly through the colleges and universities.

[Translation]

Mr. Antoine Dubé: In Canada, although universities come under provincial responsibility, the federal government does give them grants for research. Is the same true in the United States? I know that private sector participation in universities is greater than in ours, but I would like to know whether the State governments contribute to the training of researchers and so forth through the universities?

[English]

Dr. Claude Barfield: Yes. I suspect that the figures Steve just spoke about don't include buildings and general things. The state governments contribute a great deal to universities that is not counted as directly research funds but that is support for research funds. That is, they build the laboratories. This is not to say the federal government doesn't do some of this, but there is direct support there. There are also state scholarships. So it may be a bit larger.

This is a part of the education system. You can think of it that way, rather than as a science system. Our education system is basically state-supported. Overall the federal government funds about 10% of education activities in the United States. I don't think that changes very much at the graduate level either, but it depends on what you do. Where the feds come in is with direct money for a science project, and they are there overwhelmingly.

I didn't hear the beginning of what you had to say, but it's also true that the federal government supports the states through support of state universities. In other words, the University of Michigan and the University of Virginia get money from the federal government.

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[Translation]

Mr. Antoine Dubé: What is the relationship between the States and the federal government with respect to research in terms of planning and consultation? Is there a close relationship?

[English]

Dr. Claude Barfield: Again, I missed the beginning, but if I understood the question, there is virtually no coordination in terms of priorities. The National Science Foundation and the Office of Management and Budget decide, and then the money flows out to the states. The decision is made at the federal level, with, as I say, little or no attempt to coordinate with 50 different states.

[Translation]

Mr. Antoine Dubé: Thank you.

[English]

The Chair: Thank you, Monsieur Dubé.

We're going to move to Ms. Barnes, please.

Mrs. Sue Barnes (London West, Lib.): Thank you, Madam Chair.

Thank you very much for your testimony and your time today.

I want to go over industrial R and D in the United States. In Canada we have an SR and ED tax credit system whereby over $1 billion annually goes towards industrial research. In the U.S. system, is there a government subsidy for industrial R and D in a similar manner?

Dr. Claude Barfield: There is, in several ways.

Let me take up the tax question. At the moment we do not have an R and D tax credit. We've had a temporary one for probably almost two decades, in which the Congress passes an R and D tax credit—it's been, at various times, 8% to 10%, and it has to be incremental—and then it lapses. The problem has always been that the Congress has been nervous about the costs of it over time, and there's been some dispute among economists as to the payoff you actually get from it. The preponderance of opinion now is that it's a reasonably efficient way to go, though you don't get any targeting there. The other side of it is that the private sector does the priorities, so you don't have a bureaucracy deciding the priorities of research. But it has never been made permanent.

The other side, however, is that, again fitfully, we have had direct support for technology development programs. There was a recent renewal of that in the first years of the Clinton administration, with the so-called advanced technology program in the commerce department. This is an issue that does divide our parties, so when the Republicans came in and took control of the Congress again after 1994, they did not kill the program, but they stopped its growth. It's now at about $200 million and will probably stay in that area.

We also have one other thing that I would warn you against. We in the United States are subject to the same sort of sentimentality about small business that inflicts most of the western world. So there is a small business apportionment—I think it's only 1% or 1.5%—of each R and D agency. That seems like a small amount, but when you're talking about the amount of money the Department of Defense, the National Science Foundation, and others spend, you have a slush fund there that can be fairly substantial.

Most economists who have looked at this program think it is a very bad way to go, because it is a dedicated fund where you don't get the competition for funds that you would in an advanced technology program. There is at least competition there. I may have reservations about it, but it is much better than a dedicated program that the agency knows it has to spend, and it has to spend on a certain class of business. That's a bad way to go, I would argue.

Mrs. Sue Barnes: One of the things Canada does have with the SR and ED tax credit is that there's no cap on those funds. In other words, if you qualify, you're in, unlike our granting councils, where you have your peer-reviewed research. You could have a lot of people qualify on the technicalities and the quality, but if the money's gone and capped, they're out of luck. That's one of the issues.

I come from London, Ontario, which is a huge medical research area of very high quality, and they're always saying to me how much greater per capita a dollar is down there for medical research. It was very interesting for me to hear you say that you in a sense feel there's a negative imbalance going on between your health research proportion of your R and D and the other areas of scientific research.

• 1615

Also, I'd like to explore something with you. You made a statement that you believe this to be in consequence of lobbying, and I got the impression it was emotional lobbying. I just want to give you the opportunity to clarify that. How much is just anecdotal and how much is real here?

Dr. Claude Barfield: We just had a number of sessions on Capitol Hill of the Diabetes Research Foundation and a multiplicity of cancer lobbying organizations. I'm not really against it. All I'm saying is the federal government has to be aware that you don't have a lot of lobbying for astronomers or geologists or other scientific disciplines that ultimately feed into biomedical research.

It's not that I am attacking biomedical research, because the other thing I tried to say first is this is one of the most exciting times in the history of mankind for those disciplines, and we are getting payoffs.

But they will do all right. Conservative Republican Senator Gramm of Texas and a couple of others have introduced bills to double basic research I think over five or seven years—some short term. Some of his original bills were to double biomedical research in that timeframe. I'm not worried about that. They will do very well.

I am sure there are people from biology departments and biochemistry and genetics departments who will be all over my head about what I'm saying here, but they will, compared to others, do reasonably well—as they should.

But I would repeat that there is a strong lobby, and an effective one, that you don't have for other disciplines. And as with anything else—as you know, as an elected official—no matter what country you're in, it does make a difference. That's not to say you can't have rational judgments and that people don't say, “Look, I understand what you're saying, but we also have to put some money here.” But it is a factor.

Mrs. Sue Barnes: Okay.

When I talked to some of the reps of the universities, they told me they're getting the research and they're getting their discoveries, but what they're having some problem with is the technology transfer, from the knowledge over to the applied use. Again, part of that is tied up with the tax treatment of universities. If they get into a commercialization, then they're into some grey areas, or potentially could be into some grey areas.

We're finding more and more a linkage between technology institutes based at universities that are there to partner and leverage into the industrial sector. Is that a development that's going on south of our border too, in your areas?

Dr. Stephen Nelson: Very much so. It was led by the major research universities to begin with and has been followed by almost every other university or college that tries to do significant amounts of research.

In particular there's an experimental program in the United States—perhaps it's not quite fair to call it experimental, because it's about 20 years old—called the Experimental Program to Stimulate Competitive Research; the acronym is EPSCoR. It's funded by our National Science Foundation, and it attempts to work directly with the least successful states, in terms of competing for federal funds from NSF, to build the competitiveness of their research programs.

Because of the necessity for matching funds from the state, there is a tremendous incentive within each of those states to capitalize on the research they are able to mount within the universities by showing some kind of payoff to the state. So yes, it's very much a theme that has taken root within many of the colleges and universities within the U.S.

The Chair: Make this your last question, please.

Mrs. Sue Barnes: Yes, this is my last question.

You mentioned a lack of coordination of who gets to do what research. I'm curious about whether there's any coordination of a long-term business plan of where the research organizations want to see the research developing in an area, or some goal-setting. Or is it just accidental and nobody's picking up the pieces and threading this all together?

Dr. Stephen Nelson: We do have a highly decentralized system in the U.S., but there are instances.... In fact there was a recent instance, where the leaders of the information technology sectors began to realize that there was a great need for making an additional effort, funded by the federal government, to provide a great deal more support of basic research in the area of information technology, so that we wouldn't start out with a development based upon the knowledge base we have already, and could keep developing the underlying fundamental science as well, as the basis for further technology development.

• 1620

That of course eventuated in the President's Information Technology Advisory Committee, which, you may have heard, made major recommendations for significant increases in research funding. Some of those recommendations were acted on in the President's proposed budget for fiscal year 2000.

Dr. Claude Barfield: I have one interjection. You have to be very careful about the goals and timetables you set for science, for basic research. The Congress passed a bill—I forget the title—for all agencies, which quite legitimately said, “Look, we are putting money into the Department of Commerce, the Department of the Interior, and the Department of Defense for particular programs. What are your program goals and where are you going to be in three or five years?” It's called the something performance act.

Dr. Stephen Nelson: It's the Government Performance and Results Act.

Dr. Claude Barfield: Right.

It is very difficult to apply that to the National Science Foundation, however, and it is very dangerous. It is not that I have a bleeding heart about bureaucracies, but it is very difficult. How are you going to say where you will be in three years in, let's say, chemistry or physics? If you're heading toward a weapons system, that's one thing, but basic research is another.

That's not to say there are not ways you could measure performance in the way NSF conducts its business, about how it handles grants or something like that, but you can't really predict changes or advances in scientific disciplines.

Quite frankly, speaking as an outsider, what happened was sad to see. The National Science Foundation did all kinds of backflips and turns and twists to try to show it was living up to the act. It was because of confusion on the part of the Congress about what they can and should expect from this government agency.

The Chair: Thank you very much, Ms. Barnes.

Mr. Jones.

Mr. Jim Jones (Markham, PC): Thank you very much.

What is the GDP of the U.S.?

Dr. Claude Barfield: It's just over $8 trillion, I think.

Mr. Jim Jones: Of the $220 billion that's spent on research, I guess $160 billion is by the private sector. Is that all basic research? How much is basic and how much is product development?

Dr. Stephen Nelson: I would have to check the figures to be sure, but my memory is that only about 6% of industrial R and D is considered basic research. The rest is overwhelmingly applied and developmental in nature.

Dr. Claude Barfield: I can give you a very rough set of numbers for the breakdown in total across the R and D spectrum. About 15% is generally for basic research, another 20% to 25% is for what is called applied research or demonstration, and the rest will be counted as development of products or processes. That's a rough calculation.

Mr. Jim Jones: And that $160 billion that's done by the private sector, is that in the U.S. only, or is that by companies that have branches around the world and that do research in those countries too?

Dr. Stephen Nelson: That's getting increasingly difficult to ascertain. I think it's from U.S.-based companies only, but as you know, there is increasing movement of R and D by various firms to different nations. Our commerce department within the United States did a study about three years ago and discovered that approximately $15 billion of U.S. firms' R and D was being conducted in other countries, and a comparable amount—about $15 billion—from firms in other nations was being conducted within the U.S. So it's getting a bit less clear than it used to be.

Mr. Jim Jones: I don't know the exact numbers that Canada spends on total R and D, government and private sector, but I have to believe we're not even at a fraction of what you folks are spending. I just wonder if a country such as Canada can keep up, unless they are doing some type of cooperative research and development with the U.S. government and U.S. organizations.

• 1625

Somehow this $220 billion you're spending on research on a yearly basis sooner or later has to transfer into wealth generation and creation.

Dr. Claude Barfield: That's right, but I don't think it's all bleak. You have the Swedens of the world. Look at Korea over the last three decades. Even with all the trouble they're having right now, it is still a very much more technically sophisticated society than it was, and their investment was never as large as the United States'.

It's a question of targeting resources. I would keep coming back to getting the basics right in terms of gradually training.... I don't want to keep coming back to a workforce. You're training a citizenry for life beyond just work. You need to keep hammering at those fundamentals, and you need to have at the top of that a university system that is at least primarily education, but also research.

You know, we waste a lot of money here too.

Mr. Jim Jones: What was the determining factor? You said a few years ago government used to spend a lot more money on research than the private sector. What turned that around so that now the private sector is roughly two-thirds and the government a third?

Dr. Stephen Nelson: Partly it was fiscal issues at the federal level that stalled things. For one thing, it was the close of the space age in the 1960s. Once we had realized several of the program objectives there, support for space, which drove the growth in federal funding throughout the 1960s, fell off a bit. Similarly, since the end of the Cold War, there's been a lesser interest on the part of the federal government in supporting defence R and D. The follow-up has been primarily in applied areas.

Similarly, there had been a growing realization within industry that increasingly wealth was going to be created by economic development, that that was going to be primarily technological in origin, and that the basis of that was knowledge. So they invested.

Mr. Jim Jones: Thank you.

The Chair: Thank you very much, Mr. Jones.

Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): Thank you, Madam Chair.

Dr. Nelson, what's the total budget of the Department of Defense?

Dr. Stephen Nelson: It's about $280 billion, I believe. I can get the exact figure for you if you'd like.

Mr. Janko Peric: Okay. You mentioned that only 3% of $220 billion is for basic research for the Department of Defense. Does the Department of Defense use any money from their own budget for basic research?

Dr. Stephen Nelson: Yes. If you look at figure 5 there, on the left it shows defence R and D, and that's largely the Department of Defense. A little bit of money is channelled through the Department of Energy, but it's primarily the Department of Defense. That dark stripe across the bottom represents the investment within defence R and D in basic research. That's the 3% figure of the total defence R and D that I mentioned.

Mr. Janko Peric: All right.

Right at the beginning, I would say in the first week or week and a half after the engagement in Kosovo, one U.S. airplane was shot down, and the comment from the Defense people was that they didn't care too much, they didn't worry too much, because that technology was 20 or 25 years old.

As you know, there's a new role for the United States within NATO. In your opinion, will the budget, especially for the Department of Defense, be increased in the future? Do you have any comments on that?

There are opinions that the Americans are just dumping their old weapons over there on the Balkans. Do you think the industry has anything to do with that? Are the lobbyists very active in encouraging them to dump as much as possible so that they can lobby the government for more money?

• 1630

Dr. Stephen Nelson: I don't have any idea about your last question.

In terms of speculating about whether there will be more spending for defence research and development, the indication from the President's proposed budget for fiscal year 2000 is that it will not increase; in fact there will be a decrease, primarily in the applied area.

There is bipartisan consensus, I think, that would support greater spending for defence issues of a broad sort, but that doesn't include defence R and D this year.

Mr. Janko Peric: Thank you.

The Chair: Thank you very much, Mr. Peric.

Ms. Meredith, do you have any more questions?

Ms. Val Meredith: Yes.

I'm curious as to the funding of the universities. You were saying that over 200 universities and colleges consider themselves research institutions. How do they get their grants from the government? On what basis are they judged as to how much of the R and D dollars would go to them? Is there a scale the government grades them on?

Dr. Claude Barfield: The federal government does not fund institutions. They get their money through the individual researchers who apply for grants in chemistry or physics or biology or whatever, on a project-by-project basis. That has been a key characteristic of the post-secondary.... Well, it was before, but there has occasionally been institutional support for Johns Hopkins for a special deal with the Department of Defense.

Generally you're judged on the basis of the faculty you recruit, and they in turn compete with other faculties for individual grants.

Ms. Val Meredith: So then their project has to be judged on its own merits, and if there's a feeling that it deserves to continue to be supported, then it will be?

Dr. Claude Barfield: Yes.

Dr. Stephen Nelson: Exactly.

Ms. Val Meredith: Okay. You were saying you thought maybe the United States was going to have to get into centres of excellence. Then it's a question of universities trying to stockpile researchers whose projects are good enough to sustain support?

Dr. Claude Barfield: That would be one way you'd do it, and you also might go to institutional support. I'm not suggesting that is likely to happen, but unless we find a period when we have sustained pressure and we keep going up in the number of research universities, I don't see what the alternative would be.

Ms. Val Meredith: How does the little old astrologer compete, in a research program, with your biotechnology and medical researchers? You were suggesting we need to make sure it's not just one scientific field that's getting the support, but that it's branched out and broadened so that all scientific fields are considered. How on earth does somebody in a field that doesn't have some pizzazz to it compete on a project-by-project basis?

Dr. Stephen Nelson: The competition among projects is usually within one particular area. In other words, the astronomers would be competing only against other astronomers' proposals for pots of money that are identified within particular agencies—say, NASA or part of the National Science Foundation—for advanced study in astronomy.

Dr. Claude Barfield: The National Science Foundation really aims to be the kind of balancing institution you're talking about, and to be fair, the Department of Defense, for many years, and NASA didn't look at their narrow missions; they looked broadly across university support and also tried to balance things out. So you have that within a number of them, but particularly the National Science Foundation.

Ms. Val Meredith: So the importance really is in the agency that makes these decisions. The people at the National Science Foundation are not lobbying for any one particular field, but they can, from a distance or from a neutral perspective, look at all the scientific fields and make sure that balance is there. So probably a critical point is to make sure there's some kind of agency that thinks that way, to make sure everybody gets their fair share.

Dr. Claude Barfield: It's also reinforced. Our Office of Management and Budget has at times, certainly in the last four decades, been quite sophisticated about science funding and has generally been immune to the first line, as it were, of lobbying. It is they who have said at times, under both parties, “Look, we have this problem here. It looks to me like some examiner.” And they're not out there. They don't have to face the Congress, which in turn is facing some corporation.

• 1635

Ms. Val Meredith: So you don't find you have to battle through the Congress and the various levels of your government? You have your administration, you have your Senate—

Dr. Claude Barfield: Yes, I should say we do have another. I was talking just in terms of within the executive. Obviously the Congress gives the money, and you have an appropriations committee and a science committee, an authorization committee and then an appropriations committee, but again with exceptions.

We've had a problem over the last several decades of marauding by individual legislators, who come in to target a particular project for their university. But there's been a healthy reaction against that. It still happens, but I think most people realize that would destroy the system ultimately.

If you, with the clout of a congressman or a senator, begin to force the National Science Foundation to give money to the University of Massachusetts or the University of Maryland or the University of California—to take a random bipartisan sample—we know, and the scientists themselves knew, that is not the way to go. They might win this year, but they won't ultimately win, particularly those who are the best.

Ms. Val Meredith: Is there any concern to see that there's regional distribution—that, say, your western states or your southern states get equal access to the money? Is there any consideration of that, or is it strictly on merit?

Dr. Stephen Nelson: There certainly is that kind of concern within the Congress—you bet—and it's felt very keenly within the Congress from some of their constituents. That's played out is in the congressional part of the budgeting within the U.S.

Dr. Claude Barfield: I defer to Steve on this, but the program he talked about, the EPSCoR, was actually a way for the National Science Foundation to attempt to give some administrative help to states that did not traditionally get what somebody said.... To introduce the fair share here is to get you into real difficulty, it seems to me. But with the federal system, the agencies have always known you can't just ignore Mississippi or Alabama or North Dakota, even though they have smaller populations and fewer universities. So the system has had a political element with it all along.

I would argue, however, that the overwhelming majority of funds have gone on merit. Then you get periodic criticisms, with somebody saying, “Oh, for Chrissake! Look at Massachusetts. You have MIT; you have Harvard.” That happens, and you drive with it, and there's probably money siphoned off, but the large meritocracy elements have been maintained.

Dr. Stephen Nelson: Even within the EPSCoR program, there is a fairly rigorous merit competition for those funds. So they've tried to preserve that even within what looks like a set-aside program.

Ms. Val Meredith: Thank you.

The Chair: Thank you very much, Ms. Meredith.

Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): Thank you.

Please accept my apologies for being late. I missed your presentation, but from the questions back and forth, I think I have a concept of what's happening here.

One aspect I've always been interested in is how efficiently research and development money is expended. I often think the Japanese have the right way. They seem to have this massive government control and the insurance that they aren't duplicating their research. They don't have a situation like a university out in Massachusetts doing exactly the same kind of research as somebody in California.

I know there's an argument for saying that's good, that's a competitive environment, but at the same time, there are certain inefficiencies if people are doing exactly the same thing in different parts of the country.

Is there a methodology by which possibly the National Science Foundation tries to eliminate duplication?

Dr. Claude Barfield: I want to go back to Japan in a minute.

I don't think there's a methodology in the National Science Foundation. They're certainly aware. Despite the fact that they don't have control over the majority of funds, they are the agency that is supposed to look broadly across disciplines, to look for imbalance, and to be aware of what is going on in individual disciplines, and I think they do a reasonable job of that.

• 1640

However, in basic research, redundancy is not always a negative. The fact that the University of Maryland and the University of Virginia and the University of California are working in the same area is not necessarily negative. It depends on the situation.

As for Japan—and this is not American triumphalism, by the way; I would have said this in the 1980s, when we were supposed to be down the tubes and the Japanese were riding high—the Japanese have always self-admittedly had a lousy science system.

The other thing is that Japan Inc. did not include the government. The Japanese national government has always funded much less basic and applied research than the United States government, since the Second World War. They're much lower in terms of public funds. They've been very good at pushing their corporations to fund certainly applied research, but they are aware and are attempting—with, I would say, mixed success so far—to upgrade their university and basic research system.

They had a system that was rife with cronyism, where young people couldn't get ahead, and they had lousy facilities. That is changing in some areas, such as biotechnology, and Steve might know other areas.

But one problem they face is something we do here and something I'm sure at times you will have done. They decided the way to upgrade the system was to throw money at it. A lot of people looking at the system said, “If you throw money at the universities the way they are organized today, you're going to waste a lot of money.” I think the Japanese are fitfully coming to that perception: it was not just a question of their researchers not having enough money, though in some cases they had lousy facilities; it was the way the system was organized.

Mr. Alex Shepherd: We talked about centres of excellence. Our thought process is that in centres of excellence, we try to have the institutions coordinate their research rather than being strictly competitive. In other words, I'm once again getting back to the duplication argument. Our science portfolio being as small and meagre as it is, we want to get the maximum bang for its buck. You're saying that's not a problem in the United States—the issue of duplication or inefficient use of research dollars.

Dr. Stephen Nelson: Within the federal system there really is relatively little duplication per se. There is a fair amount of very informal cross-agency coordination and awareness on the part of the program managers of what other agencies are funding in particular areas. So there tends to be some relatively loose coordination at that level.

Even if there were some significant amount of duplication, there's an argument to be made, as Claude said, that at least within basic research, that's how it advances, basically: by competing paradigms, testing one interpretation versus another, and so forth.

But we have enough of a shortage of funds that we have to be careful how we parcel them out too. I would say there tends not to be very much of a problem with duplication.

Mr. Alex Shepherd: When I look at your allocation of expenditures, I see such a high portion of it is going into the defence industry. We were talking a short time ago about a peace dividend. What is this a statement of—that there's going to be continued conflict in the world and defence spending is a good place to invest?

Dr. Claude Barfield: If you look in real terms—and I don't have the numbers—there are various definitions of what a peace dividend would be, but in R and D we have certainly had a peace dividend over the last 10 years, because the Department of Defense peaked in the mid-1980s under Regan, in terms of R and D and in terms of total expenditures in relation to the rest of the federal government. Since 1987, and particularly since the end of the Cold War, we have downsized dramatically in the Department of Defense, to the point that, as a result of what is happening in eastern Europe today, we are going to have an increase in defence spending, as I think Steve said.

I think ultimately that will drive along R and D, because the United States is still, as it has been since 1945, committed to defending itself against all enemies on the basis of technology and not on the basis of numbers. That hasn't changed, even if we don't have a Cold War. So I think you will have an increase in R and D if you have an increase in the defence expenditure.

• 1645

I'd be perfectly willing to say we may be in for a situation where we're going to overreact. It is certainly true, however, that as long as we say we're going to have multiple theatres of defence, which includes R and D, we are going to be stretched to the limit, as we are now. Certainly that is the argument of the military, and that is going to be picked up by the Congress.

But defence, as a total part of our GDP—it's certainly part of federal spending—is way down. At the peak of the Cold War in the 1960s, it was about 6% of GDP. That's all defence. It is now down to probably 3% and was heading for 2.5% or 2%. I think I'm right about that. It may go up to 3%, but think of what that is as opposed to what we were at even in the early Reagan years.

The Chair: Thank you.

Thank you, Mr. Shepherd.

Monsieur Dubé.

[Translation]

Mr. Antoine Dubé: Doctor Barfield, in your presentation you referred to two problems in particular, including the low degree of interest shown by the public in basic research. You even mentioned the appeal to emotion in the allocation of funds and the public's interest in research on heart disease and cancer. You seem to have a good grasp of the problem and a certain idea of how greater public interest can be created. I'd be interested in hearing you elaborate on this point.

[English]

Dr. Stephen Nelson: Public interest does vary considerably in terms of the kinds of research, depending upon, as you might guess, how readily applicable to one's own life it might be. As Claude said, that's why astronomers have trouble arguing for a bigger share of the budget than people in biomedical areas.

As to how one might go about that, a lot of different solutions have been proposed. One that I think makes a lot of sense is that our educational system might do a lot better job at stopping the dynamic of turning kids off science. Children are probably born scientists, or at least inquisitive, curious, about the world around them. They want to learn a great deal. Somehow, especially within our K through 12 schooling, we manage to convince them that science is not very interesting, that it's a body of facts rather than a method of inquiry, that it has to be taught out of textbooks rather than something you experience. If we can turn that experience within the educational system around, it might do a lot.

[Translation]

Mr. Antoine Dubé: The second problem you referred to is the lack of funding for more innovative research. What particular sciences were you thinking of when you talked about innovation?

[English]

Dr. Stephen Nelson: I'm not sure I understand the question.

Dr. Claude Barfield: We didn't hear the beginning of the question.

[Translation]

Mr. Antoine Dubé: In his presentation Mr. Barfield talked about innovation and emphasized that funding was generally granted to the same institutions, the same researchers and the same research groups. Independent researchers or those starting up new projects have a hard time obtaining grants. You said that you hoped this situation could be remedied with greater funding to these kinds of research projects. Would you be in favour of the idea of a quota for new projects or for people who have not yet received any subsidies?

[English]

Dr. Claude Barfield: It would be an interesting idea, but it is not one I would support.

I may have misspoken. I don't remember worrying particularly. You get some what would be counted as old-boy networks in some disciplines. I don't think it's a big issue in the United States.

• 1650

I would certainly support programs that are targeted to younger researchers, though as I said, one of the things I I am opposed to is the small business program I mentioned, which forces agencies to give 1% of their budget to small businesses. You end up with bad competition there. But that's a corporate thing.

For young researchers, you might very well target, and that then would then feed into whatever the National Science Foundation, or whoever the funding agency was, thought were the priorities within that discipline. I don't have any problem with that, but I don't think there's a big issue of the same people.

Sure, in the last four decades, since we've had this new system that came out after the Second World War, one could find glaring examples of grants that shouldn't have gone to a particular place or that went to MIT because somebody in the department 20 years ago was good. But generally that is not characteristic of our system. Merit has continued to win out.

You can see it in the change. I may worry about the number of so-called research universities we have today, but if you look back, the universities that got all the money in the 1950s and 1960s are not necessarily the same ones that got the money in the 1970s, 1980s, and 1990s. The system has adjusted. Partly it's because a lot of the state universities have attracted some of the better younger researchers, so money has followed them.

Sure, there were probably some politics. People knew you could not keep spending that much money in Pennsylvania or Massachusetts or California. But by and large, it was merit that worked; it was the fact that money followed where the best projects were.

[Translation]

Mr. Antoine Dubé: Thank you.

[English]

The Chair: Thank you, Mr. Dubé.

Mr. Murray, please.

Mr. Ian Murray: Thank you.

Mr. Barfield, going back to the early part of your presentation, you spoke about the fundamentals that are required to have an innovative society. One thing you mentioned is that we need an underpinning of economic and social policy to have that kind of society.

We're having quite a debate in Canada—actually it's not much of a debate any more; it seems to be pretty well accepted—that taxes are far too high and we need to lower them. I imagine people complain about taxes in the United States too, but when we look at U.S. tax rates from north of the border, they look awfully low.

My question is really about this underpinning of economic and social policy. I wasn't sure, when you were speaking, Mr. Barfield, if you believe the U.S. has that underpinning. That's really my question. Do you see some areas where the U.S. could do better? And in the Canadian context, is there something we could emulate there?

Dr. Claude Barfield: Let me say one thing up front. I'm not here to preach that the United States has a perfect system. It is imperfect in a lot of ways. Nor am I here to say Canada, Britain, Germany, Japan, or anybody else should emulate us. Each country will have a different mix of the way it handles some social, economic, and political problems.

There are some economic fundamentals. I don't think our tax system is perfect. There's a lot more we can do to clear out. And I have to be bipartisan. Republicans as well as Democrats—and I'm not going to get into a dissertation on our tax system—are beginning to use the tax system again for what they think are legitimate economic and social purposes, and they're complicating it again.

The best tax bill we had was in the 1980s, where we simplified the system. We aimed for several levels. One can argue today about whether you should go with some sort of flat tax or a tax on consumption, which I would tend to agree with, but I still think we have to keep working at the tax.

We have, as you have, major problems with our health care system. We had the debacle under Clinton, but we have nothing else that has replaced it. We have major issues, which no one is taking up yet, about our social security and our old age system, as I suspect you and a lot of nations have.

So I'm not saying we have the answers, but that's what you have to keep working on. That does back into what we were talking about in relation to money for fundamental research. R and D is a part of the so-called discretionary budget. If we cannot more efficiently handle the off-budget items such as social security, we'll eat up all that money and not be able to invest in the kinds of things we ought to be. I don't think we're anywhere close to that, and I think we will be able to handle it.

You don't think about social security or health care or whatever in terms of innovation, but those issues, the underpinning of the way government handles the functions it needs to handle, are as important in my mind as the direct so-called science policy that one talks about.

• 1655

That's not to underplay either one, but a science system, a technology system, is embedded in a society that is more or less efficient and more or less just. You can't separate them. I may have my prejudice about tax policy or the way we should handle health care. I tend to be more libertarian than probably most of the people around your table. We can argue about that, but that's the kind of thing where the argument has to be, as well as on what people call science policy.

Mr. Ian Murray: I have one other question that's totally unrelated. I want to know if federal labs are highly respected by researchers in industry labs and university labs. Do you find that people who work in federal labs—and they're quite large in the States, I gather—are constantly trying to justify their existence to their colleagues who are in industry? Is that a problem?

Dr. Stephen Nelson: Increasingly there's been an effort, as you say, on the part of the national labs to try to make linkages with industry and to collaborate in various areas. I don't know to what extent you could judge that successful or not yet.

Certainly in the area that many of the Department of Defense labs and the Department of Energy labs were created for—that is, weapons development—they do very sophisticated work. The people who work on those issues are respected within their fields.

Outside those areas, I'm less sure. Especially as the purposes of the national labs have broadened and they have sought to broaden the kinds of work they do and the clients they work for, it's less clear to me the esteem in which they're held in the broader scientific community.

Dr. Claude Barfield: I agree with that and would say more. It is very clear to me that we have a very inefficient, bloated system there. This is not to say there's not tremendous science at Los Alamos and other labs, but from my perspective, Steve was too kind. We've wandered away from the original defence missions. These are large and politically supported.

New Mexico would be nothing without Los Alamos and Sandia. So you're not going to get the very conservative Republican senator there to change that. But we're spending too much money at them in the non-defence areas.

The point you made and that Steve picked up on is that there's been a search, beginning with the so-called energy crisis in the 1970s, to find new missions, where I think they are less and less respected, not in terms of the science—the science to a great degree is still superb in physics and other areas—but in relation to what they seem to be attempting to do. They have taken a lot of money over the years.

Mr. Ian Murray: Thanks very much.

The Chair: Thank you very much, Mr. Murray.

Mr. Jones.

Mr. Jim Jones: What percentage of the $67 billion that the U.S. government puts into research ends up in university-led research?

Dr. Stephen Nelson: I believe the latest figure is roughly in the range of $15 billion to $16 billion per year.

Mr. Jim Jones: And of the $160 billion that is done in the private sector, what percentage would end up in university-led research?

Dr. Stephen Nelson: It's a very small proportion, I would say probably less than 1%. But it's been growing. It's been growing on, admittedly, a small base, but it's been growing at a fairly rapid rate. Of the sources of funding for academic research—university- and college-based research—that is the one area that has grown the fastest, on a percentage basis, even though it's still quite small.

Mr. Jim Jones: The last question I have is, do foreign governments and foreign companies donate to university-led research in the U.S.? Do they contribute to research there?

Dr. Claude Barfield: Yes, they do. Nothing stops them from doing that. Indeed, the foreign corporations can participate in some R and D programs in the United States. The criteria revolve around whether they have plants in the United States, whether they're doing R and D in the United States, and that kind of thing.

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As you would expect of any parliament or elected body, the Congress gets curious when you're funding Siemens and Mitsubishi—particularly Mitsubishi, let's say, and Honda and Toyota—but they swallow it if the company can show some sort of payoff. We talked about this earlier. Whether it's a U.S. company, a Japanese company, a Canadian company, or a British company, a lot of multinationals are doing R and D in various places. But there are rules about your investment in the nation as opposed to the world.

Mr. Jim Jones: So when private sector companies or foreign companies fund university-led research, who owns the research? Who owns that data? Is that public domain data now, or is that owned by the companies?

Dr. Claude Barfield: That's where, to go back to some things we talked about before, things get very sticky.

If you are, to take a specific example, a Siemens and you are funding the University of California for basic research, and the University of California then publishes that research, everyone is the gainer. It gets sticky, however, if the University of California is blending money from Siemens with money from the National Science Foundation. Then you get a situation where the corporation—and this can be a U.S. corporation too—says they would like some sort of intellectual property to come out of this. That's when the Congress, correctly, gets notice.

The Congress could also get notice about when you're blending funding in basic research. I would think they would have less reason to.

There's also a legitimate question—but it's probably more a question for California citizens than for U.S. citizens—as to whether or not the facilities of the University of California should be supported by, let's say, a foreign corporation. I would have little problem with that, particularly if it's adding to the science, but those are the kinds of mixtures you can get. And you get them in every country now.

Mr. Jim Jones: Thank you.

The Chair: Thank you very much, Mr. Jones.

Dr. Barfield, you were just touching on the fact that there are some tensions when you're talking about university research and the business partnerships that now exist. We have entered that realm as well in Canada with our universities. Do you find as well that industry tends to lead the research in such a way, because they're not interested in certain aspects of it at the university level?

Dr. Claude Barfield: That certainly has happened and can happen. It is balanced in most universities, certainly the most important research universities. They get money from industry, but they get other money from the federal government. So I don't think there is evidence that there is major twisting of priorities—not yet, at any rate. The balance is still in the direction of public funding at a given university, versus private funding.

This is not to say there have not been issues about priorities, about holding back information over a period of time before it leaks out, over intellectual property. All I wanted to do today was flag that kind of thing, because as you have more and more of these public-private partnerships, it's the kind of thing that will always raise questions.

The Chair: Should the government be increasing its funding for basic research? What would be a strong argument in favour of it?

Dr. Claude Barfield: The strongest argument in favour of it would go back to the history of the 21st century in investment. You could find in the National Science Foundation—and I'm sure there are science councils in Canada and other places that have found—places where you could trace funds, where you see basic research. But that's sometimes difficult to do.

It is the fact that you know, even though you couldn't have predicted it in 1950 or 1960, that the investment you had in computers and the investment you had in high-end electronics finally tripped into public and private on the Internet. You couldn't have predicted that at the time, but you can find examples of things all the way back, not just in the 19th century, but in the 20th century. That is the defence of basic research.

Dr. Stephen Nelson: If I could just respond also, to come back to something Claude mentioned very early in our discussion, there is another element to the defence, and that is the continuing strengthening of your scientific technical workforce.

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We've seen situations in our country within the past 10 years where certain fields are shrinking and where the percentages of people who are getting advanced degrees in science or engineering and whose origins are from other countries are increasing. That makes a lot of people in this country nervous about whether we're continuing to build the capacity within our own country that we will need 20 years down the pike, into the future, in this broad array of scientific fields.

So part of the rationale for basic research is the research that's done, and part of it's in maintaining a workforce that can continue to make the advances on into the future.

The Chair: I just have one quick comment. Maybe, Dr. Barfield, you can something clarify for me. Who is the author of the first report you referred to, America's Basic Research: Prosperity Through Discovery?

Dr. Claude Barfield: It's put out by the Committee for Economic Development. It is a business-based committee in the United States, but they have a technical staff. This was done through a committee, and it was published late last year. If you have any problem—

The Chair: No, the researcher here has informed me we won't have any difficulty in getting a copy. I just wanted to pick up on that, because I know that as well in Congress—and I had the privilege of meeting with Congressman Ehlers earlier this week—

Dr. Stephen Nelson: Good.

The Chair: —they just completed, last fall, a study into the whole issue of basic research. What I found quite fascinating was the fact that, for example, the DNA movement and discovery wouldn't have taken place if government hadn't publicly funded basic research years ago. Have you had a chance to take a look at that report?

Dr. Claude Barfield: Yes. I apologize to Mr. Ehlers, but I would say it is in line with the general recommendations of the two reports I've cited. It is important because it is congressional. That is, these are outside organizations. This is a statement. I wouldn't say every congressman would subscribe to it, but I think it had broad support when they came up with it in the fall, I guess, or winter. So as I say, it's not a resolution of the Congress' past, but it is a good sense of where many congressmen and congresswomen are today.

The Chair: Okay, great.

I don't know if you have any final comments. We have no more questions for you. Did you have a final comment for us, Dr. Nelson and Dr. Barfield?

Dr. Stephen Nelson: I'd like to mention one thing, yes. I hope we haven't left you with the impression that R and D funding within the U.S. occurs within a certain pot of money that gets parcelled out to various fields. It's not been that way at all. In fact there is no such thing as an overall R and D budget in the federal government.

R and D is budgeted overwhelmingly through the various agencies that have particular missions to accomplish. The money that goes for research and development from the federal budget is proposed that way, is defended that way, and is allocated that way. So it's not necessarily the case that if one area gets more, another has to get less. Because of the very intricate details of budgeting, not only within the executive branch but especially within the Congress, there are rarely tradeoffs between R and D funding agencies, unless they happen to be within a particular appropriations bill, which is not often.

So when we talk about broad areas of emphasis—for example, the comment that I think we both subscribed to earlier that the gains were more rapid in the health and biomedical areas than in many of the others, leading to an imbalance—that doesn't necessarily mean those were conscious tradeoffs between areas. On the contrary, they were actions taken by the Congress in response to particular opportunities in one area, as well as applied political pressure in those areas. We're saying to maintain a strong science and technology capability across the board, attention has to be paid to the other areas as well.

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The Chair: Dr. Barfield.

Dr. Claude Barfield: As I said once before, if it were 10 years ago, we'd have been wringing our hands here. I don't want to leave the impression that the R and D system or the U.S. economy, even though it's called the Goldilocks economy, has everything right. We're building today a number of issues that we will have to face and do well by.

It may seem the reverse of what it was 10 years ago. Just as it wasn't as bad as we thought it was in the 1980s, it's not as good as we think it is now. There are major problems that we have to face up to in our R and D system.

The Chair: Thank you.

On behalf of the committee, I want to thank you both for taking the time to prepare and to join us today. We do very much appreciate your input. Thank you very much.

Dr. Claude Barfield: Thank you.

Dr. Stephen Nelson: Thank you.

The Chair: The meeting is now adjourned.