International collaboration on innovation is vital given China’s growth in advanced technologies

Canada and like-minded Western countries can learn from each other how to strengthen their research and innovation ecosystems to grow their economies, an international panel told Research Money’s annual conference in Ottawa.

But one of  the biggest reasons for collaborating is to counter the techno-economic “existential threat” posed by China to the West, conference participants heard during a session on “Lessons learned from other countries.”

“I think ultimately we have to rethink the Western approach to science,” said Robert Atkinson (photo at left) president and founder of the Information Technology and Innovation Foundation (ITIF), a Washington, D.C.-based science policy think tank.

 “Science is going to have to be more nationalistic in focus. I think governments are going to demand that,” he said.

The ITIF last week opened a Canadian affiliate, the Ottawa-based Centre for Canadian Innovation and Competitiveness. The new centre is to help policymakers and the public better understand the innovation economy and the types of policies necessary to drive Canadian innovation, productivity and global competitiveness.

The Hamilton Index, 2023, a report by the ITIF, found that over the last 25 years China took 88 per cent of the non-OECD growth of advanced industries, Atkinson said. “We cannot underestimate the juggernaut of China.”

China recently launched an initiative to essentially identify every single scientific output in the world, “and then suck it into China,” he said.

China’s approach is “learning by doing,” he added. It involves taking as much foreign knowledge as possible – whether it’s through spying, cyber-theft, forced technology transfer, reading journals, or whatever means necessary – and then applying this knowledge within their own industrial firms.

These firms are given huge subsidies to develop technologies. China then closes its market so no foreign competition is allowed in these technologies, which are scaled up massively – driving down costs – and sold globally, Atkinson said.

For example, China leads in global production of electric vehicles and plug-in hybrid EVs which it is now selling around the world. China’s estimated EV production level is expected to exceed the combined output of other large markets, including the U.S., Germany and Japan, according to a report by Statista.

China also is investing heavily in its aerospace industry. In February, the state-owned Commercial Aircraft Corporation of China unveiled its first large homegrown passenger jet – the C919 airliner, a potential rival to Western-made Boeing and Airbus planes.

“As long as we allow China to co-exist in the global trading system, our innovation system [in the West] is fundamentally flawed,” Atkinson said. “They cannot co-exist without us losing.”

Much greater and strategically focused collaboration on research and innovation among allied and like-minded Western nations is needed to counter China’s threat, he said.

However, he said it’s frustrating to see U.S. political leaders ignore the opportunity to work as closely as possible with Canada on innovation.

“Let’s build a cross-border innovation system where we can jointly fund science projects more effectively,” Atkinson said.

Nathalie Dubé (photo at right) who moderated the panel, told conference participants that Canada and the U.S. are negotiating a memorandum of understanding on science, technology and innovation, to enable both countries to do more together. Dubé is director general for investment, innovation and education at Global Affairs Canada.

 Learnings from the U.S., U.K., the Netherlands, and Brazil

The session’s international panel included representatives from the U.S., U.K., the Netherlands and Brazil.

Dubé noted that on the World Intellectual Property Organization’s Global Innovation Index 2023, the U.S. ranks No. 3, U.K. No. 4, the Netherlands No. 8, and Brazil No. 49 but at the top of the Latin America-Caribbean category. Canada is ranked No. 15 on the index.

The U.K. government has made research and innovation a pillar of its policy, said David Barnes, head of the science, climate and energy team at the British High Commission in Ottawa. Prime Minister Rishi Sunak last year created the stand-alone Department of Science, Innovation and Technology.

The U.K. has selected five critical technologies that are important for the U.K and on which to focus R&D efforts.: artificial intelligence, engineering biology, future communications, semiconductors, and quantum technologies. The government is in the process of publishing a strategy for each of these technologies, Barnes said.

Like Canada, the excellence of the U.K.’s university sector is a strength for the country and anchors its science and technology clusters, he said.

The U.K. has three science and technology clusters on the Global Innovation Index, in London, Oxford and Cambridge. Canada has four S&T clusters on the index, in Waterloo, Toronto, Vancouver and Ottawa.

Barnes said that last year, the U.K. announced reforms to its public pension funds to create new investment vehicles tailored to support investment in the U.K.’s most promising high-growth companies, while also providing an extra £1,000 in people’s pensions every year. 

The initiative is expected to provide more than £1 billion of investment from pension funds and other sources into U.K. science and technology companies.

In Canada, the federal government has called on public pension funds to invest more in homegrown tech firms, but there has been a mixed response to that call, including negative reaction from pension fund managers.

Business leaders have pointed out that Canada’s eight largest pensions have invested some $88 billion in China – more than the $81 billion they’ve invested in Canadian public and private companies combined.

In the Netherlands, government recognized over the last couple of decades that technology and innovation are crucial to respond to the challenges society faces, said Taake Manning (photo at right) councilor for innovation, technology and science at the Royal Netherlands Embassy in Washington, D.C.

The Netherlands’ approach includes the Netherlands Innovation Network for the U.S. and Canada, which Manning leads. The goal of the network, now in 22 cities – the “technology hotspots” – around the world, is to foster R&D collaboration and technology sharing between companies in the Netherlands and other countries.

The Netherlands works very hard on encouraging and supporting innovation, Manning said. “One reason for our success is the way that we encourage formulating these [innovation] policies in very deep dialogue with academia, companies [and] society as a whole.”

For example, the country’s National Science Agenda included dialogues with the public at large to identify which science areas should be prioritized in the coming years.

“That creates a sense of ownership with all the stakeholders and creates some form of direction in prioritizing areas of science and technology,” Manning noted.

Like Canada and the U.K., the Netherlands has a strong university sector, with its 14 research universities ranked in the top 200 in the world.

Also like Canada, the Netherlands has a challenge with access to homegrown venture capital. “Our institutional investors tend to be a little too cautious,” Manning said.

From the Netherlands’ perspective, he said, Canada’s approach to innovation recognizes the value of international collaboration, the country is keen to collaborate, and Canada also has an excellent system for developing talent and workforce mobility.

Innovation as law and innovation as culture

In Brazil, the country is engaged in mapping its entire innovation ecosystem and developing ways to stimulate more innovation, said Tiago Emmanuel Nunes Braga, director at Instituto Brasileiro de Informação em Ciência e Tecnologia (Brazilian Institute for Information in Science and Technology).

Brazil has created 18 research institutes which can provide a longer-term perspective, including supporting long-term research projects, he said. However, the country has struggled to maintain levels of investment in R&D in recent years.

The country introduced the Brazil Innovation Law in 2004, with measures aimed at incentivizing cooperation between government, academia and companies.

But the law didn’t work in practice because it got bogged down in bureaucracy, skills shortages, and the perceived need to keep a separation between the public and the private sectors, Braga said.

Brazil’s innovation goals – and where R&D is focused – include areas like the bioindustry and the green economy, he said.

The country has a strong commitment to open science and international collaboration, Braga said. Brazil’s universities are free for students and are producing knowledgeable graduates, including those who go on to do master’s and PhD degrees.

Although the U.S. is No. 3 (behind Switzerland and Sweden) on the Global Innovation Index, Atkinson said the U.S. used to be great because it had access to a huge global market, giving U.S. startups access to millions of customers.

“We were great, but we’re less great,” he said. “There are lot of things that we’re getting wrong now.”

The U.S. historically has a culture of risk taking and aggression, Atkinson said. “If you want to be a successful company, you’ve got to have both.”

But he said he worries the U.S. is losing this culture, or attitude, and becoming more like cautious Europeans invoking the “precautionary principle.” For example, he said, the European Union implemented “overly egregious and harsh regulation” with its “general data protection regulation” on how personal data of individuals may be processed and transferred.

 “There is no regulation race, there is only an innovation race,” Atkinson said.

When it comes to stimulating innovation, he said, the U.S. Chips and Science Act is providing US$49 billion in straight-up subsidies, plus a 25-per-cent tax credit for capital equipment expenses, to build semiconductor chip fabrication facilities.

However, the “science” funding part of the Act was chopped by a budget resolution in the House of Representatives which resulted in one of the largest drops in science funding in U.S. history, he noted. The U.S. National Science Foundation’s budget, for example, was reduced by eight per cent this year.

Atkinson said while international collaboration is crucial, the big problem for Canada is that there are very few large firms to collaborate with, compared with in the U.S., Germany or other nations. Canada needs a strategy to build this collaboration capacity from the ground up, he said.

Innovation strategies and policies at the national, regional and industrial sector levels all are required, but more work is needed to understand various sectors, Atkinson said. “I don’t think you can craft the right policy without deep sectoral knowledge.”

The U.S. does have some effective research and innovation initiatives that Canada could learn from, he said, pointing to the Industry and University Research Cooperation Program (IUCRC) run by the National Science Foundation, the State Science and Technology Institute, (SSTI) and a set of national manufacturing institutes.

The IUCRC program accelerates the impact of high-impact basic research to meet shared industrial needs and innovative technology development, through close relationships between industry innovators, world-class academic teams, and government leaders.

The non-profit SSTI offers information and services, including sharing best practices, to a nationwide network of regional technology groups and policymakers, to strengthen science, technology, innovation and entrepreneurship.

However, Atkinson said the biggest and potentially most damaging problem facing Western countries – especially with China’s rise – is their attitude toward technology.

Fifteen or 20 years ago in Europe, the U.S. and Canada, the narratives about technology were much more optimistic than they are now, he said. “The narratives now are that technology is either a problem or it doesn’t solve any problems.”

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