Business has ideas for Reagan on how to keep US ahead in high-tech
Washington — ''This administration is committed to keeping America the technological leader of the world now and into the 21st century,'' President Reagan said last week in his State of the Union message. He didn't go into many details of the commitment he stressed so emphatically, but business leaders have plenty of suggestions.
Both business and government are concerned about the declining position of US technological products in world competition. To keep the United States No. 1, business and academic leaders say, the government will have to help more.
David Packard, chairman of the Hewlett-Packard Company, says there are at least five areas where government has to provide more support. In order of importance, he ranks them as education, research and development, capital formation for entrepreneurs, tax policy, and trade policy.
''The most important factor in our future is education,'' Mr. Packard told industry leaders here who met at a conference this week on government's role in high technology. He cited obsolete college laboratories, inadequate science and math instruction in grade schools, and a lack of qualified engineering and science professors in the universities.
''Government and universities need to make being a professor prestigious again,'' Packard said. ''Higher wages paid by industry, coupled with obsolete equipment, are causing some of our most talented technical people to leave careers in teaching and university research.'' More than 1,000 faculty positions in engineering are vacant, according to Packard.
Right after the call for better education is an appeal for more research-and-development funds and government incentives. ''R&D is the lifeblood of industry,'' says Erich Bloch, vice-president for technical personnel at IBM.
''While we still spend a greater percentage of our GNP on research and development that any other country,'' Mr. Packard says, ''R&D funding is growing faster abroad than it is here. Only industrial spending on R&D has shown any real growth in the past decade.''
Businessmen have some complaints about the way government divvies up its spending, too. Too much is going for defense and not enough for commercial applications and applied science, they argue. In the President's budget proposal , science is one area that did not get the ax - but defense still gets most of the increase. High-tech leaders are glad that government spending in high-tech areas is at least going up, but they're concerned that the increases stop in 1985. ''R&D commitment must be long-term,'' Sen. John Glenn (D) of Ohio told technology leaders here.
Business doesn't want to complain too much about last year's R&D tax credit. But one businessman at the conference was frustrated because the credit expires in 1985: That's ''too short for a long-term investment,'' he said. He added that his company had not been able to take advantage of the credit yet, because the Treasury Department was still working on the specific regulations for it.
Overall tax policy is another problem area for high-tech industries. ''The government has to stop changing the tax law so often,'' says Ralph Landau, vice-president of the National Academy of Engineering. ''It's impossible for us to make long-range changes and [planning].''
Investors and entrepreneurs have been helped by a reduction of the capital-gains tax to generate new risk capital for businesses starting up in high technology. It's now half of what it was in 1978. But capital costs for US companies are higher than those for other countries, says David Packard. ''Capital costs were the greatest single factor that helped the Japanese in their recent (semiconductor) incursion into the US market,'' he stated. Mr.Packard proposes reducing the capital-gains tax from 20 percent to zero for all new capital invested in high-tech industries.
Although government hasn't done everything business thinks it should for education, R&D, and tax policy, most of the attention it is giving to high-tech is in these areas. That's because it is ''easier'' for the government to focus on these areas, said Robert W. Galvin, chairman of Motorola Inc.
''If government does all these things, they will be overlooking the most serious area of attack - trade,'' Mr. Galvin said in an interview.
For the last two years, the trade surplus for US high-technology products has been a bright spot - exceeding $60 billion, says Lionel Olmer, undersecretary for international trade in the US Department of Commerce. But the position is ''declining'' and competition is ''fierce,'' he adds.
The high-tech business strongly favors free trade access to foreign markets and no protectionism in the US. But it complains that certain key businesses, such as semi-conductors, consumer electronics, robotics, and aerospace, have been staked out by the Japanese and Europeans. With foreign governments subsidizing development of these kinds of products, they are able to sell their products in the US at cheaper prices, business complains.
Mr. Galvin, at Motorola, says the US has got to send a ''strong message'' to Japan. ''They will only understand countervailing duties, not rhetoric about free trade,'' he said.
Others in the industry, especially small business, are concerned that imposing countervailing duties would cause retaliation overseas. ''A small high-tech firm needs free access to other markets and can't contend with retaliation.,'' says T.Z. Chu, chairman of Finnigan Corporation, of Sunnyvale, Calif., which makes scientific instruments.
While there has been a lot of talk about developing a national policy on these issues, high-tech leaders would prefer a kind of national pep rally for education and high-tech. They do not want any kind of central planning to begin simmering.
''We need a philosophy, a national spirit first - then come the specific policies,'' says Senator Glenn.