Partnership for innovation

When President Obama and the European Union presidents, Herman Van Rompuy and Jose Manuel Barroso, met on November 20 in Lisbon for the US-EU summit, the need for renewed economic growth topped their agenda.

By William E. Kennard

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Published: Thu 16 Dec 2010, 11:16 PM

Last updated: Thu 2 Apr 2015, 10:17 AM

Representing roughly 50 per cent of global GDP and delivering 14 million jobs to each side of the Atlantic, the trans-Atlantic economy dwarfs any other economic relationship in the world.

Given its scale, there is much more that the US-EU partnership can and should do to generate economic recovery, create jobs and address imbalances in the global economy.

Spurring more trans-Atlantic collaboration on innovation is an important first step. To that end, in Lisbon the presidents directed the US-EU Trans-Atlantic Economic Council to identify policies that spark innovation when it meets on Friday in Washington. Eliminating or preventing trade barriers and coordinating regulatory actions, especially in emerging technologies, are the top priorities.

For developed economies like Europe and the United States, innovation is the prime driver of economic growth and long-term job creation. But too often innovation policy is seen only as government investment in research and development. This ignores other vitally important government actions that create the conditions in which innovation and private-sector investment can thrive.

As chairman of the US Federal Communications Commission in the late 1990s, I had a front-row seat to the commercialisation of the Internet, one of the most important innovations of our time.

The US government’s Defense Advanced Research Projects Agency played a significant role in the Internet’s development by funding initial research. But would the Internet revolution have occurred without a world-class higher-education system and California’s networked universities and research institutions? Would the tech revolution have happened in the absence of a culture of risk-taking that fueled venture capital investment in start-up companies?

Other essential ingredients were surely a telecom regulatory environment of restraint that gave the Internet space to grow; favourable personal and corporate tax structures, including a moratorium on online transaction sales tax; and an intellectual property system allowing entrepreneurs to profit from their software and content inventions.

Finally, a fluid labour market and favourable immigration laws allowed growing technology companies to tap a global marketplace of talent. From 1995 to 2005, over half of Silicon Valley engineering and technology start-ups had one or more immigrants as key founders. Collectively, all these factors created an “innovation ecosystem” that nurtured the Internet’s incredible expansion.

Silicon Valley and the Internet are by no means the only examples where these ingredients have come together to produce innovation revolutions. Similar innovation clusters produced Scandinavia’s amazing wireless revolution, Spain’s burgeoning renewable energy industry, and the remarkable biotech cluster outside Boston.

What they had in common was an integrated, well-functioning innovation ecosystem, where government policy worked hand-in-hand with the private sector. The lesson is that innovation is a holistic process that cannot be supported by top-down government policies alone; it must also be driven from the bottom up with businesses and communities leading the way.

The good news is that both the Obama administration and the EU recognise this. President Obama’s “Strategy for American Innovation” and the European Commission’s “Innovation Union” are comprehensive strategies to encourage innovation.

The US strategy combines government investments in education, infrastructure modernisation, and R&D with private-sector incentives, such as research and experimentation tax credits. The EU plan includes a streamlined European Research Area and an EU-wide venture capital regime designed “to remove bottlenecks which stop ideas from reaching the market.”

While many government actions involve domestic policy, working together we can launch a new trans-Atlantic era of innovation.

First, we should coordinate regulatory policies and standards for new products and conduct joint research and development. We have done this before. By coordinating standards for online privacy in the late 1990s we helped accelerate the growth of global e-commerce.

Emerging technologies - renewable energy, smart grids, health IT, electric cars - offer promising areas for cooperation. In regulation and standard-setting for new technology platforms like smart grids or health IT, we can connect our markets through more unified rules, creating greater scale for innovation. We can create and connect trans-Atlantic innovation clusters.

These are the discussions our leaders had in Lisbon, and these are the areas primed for progress, including at this week’s Trans-Atlantic Economic Council meeting. If we get it right, we will give a boost to the trans-Atlantic economy, generating new jobs in sectors poised to lead our economies in the coming decades.

William E. Kennard is the US ambassador to the European Union© IHT

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