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THE FUTURE OF MANUFACTURING: WHAT

IS THE ROLE OF THE FEDERAL

GOVERNMENT IN SUPPORTING INNOVATION

BY U.S. MANUFACTURERS?

HEARING

BEFORE THE

COMMITTEE ON SCIENCE AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

SECOND SESSION

MARCH 17, 2010

Serial No. 111–87

Printed for the use of the Committee on Science and Technology

(

Available via the World Wide Web: http://www.science.house.gov 
(II)

COMMITTEE ON SCIENCE AND TECHNOLOGY 

HON. BART GORDON, Tennessee, Chairman 

JERRY F. COSTELLO, Illinois 

EDDIE BERNICE JOHNSON, Texas 

LYNN C. WOOLSEY, California 

DAVID WU, Oregon 

BRIAN BAIRD, Washington 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

GABRIELLE GIFFORDS, Arizona 

DONNA F. EDWARDS, Maryland 

MARCIA L. FUDGE, Ohio 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

STEVEN R. ROTHMAN, New Jersey 

JIM MATHESON, Utah 

LINCOLN DAVIS, Tennessee 

BEN CHANDLER, Kentucky 

RUSS CARNAHAN, Missouri 

BARON P. HILL, Indiana 

HARRY E. MITCHELL, Arizona 

CHARLES A. WILSON, Ohio 

KATHLEEN DAHLKEMPER, Pennsylvania 

ALAN GRAYSON, Florida 

SUZANNE M. KOSMAS, Florida 

GARY C. PETERS, Michigan 

JOHN GARAMENDI, California 

VACANCY 

RALPH M. HALL, Texas 

F. JAMES SENSENBRENNER JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

VERNON J. EHLERS, Michigan 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

BOB INGLIS, South Carolina 

MICHAEL T. MCCAUL, Texas 

MARIO DIAZ-BALART, Florida 

BRIAN P. BILBRAY, California 

ADRIAN SMITH, Nebraska 

PAUL C. BROUN, Georgia 

PETE OLSON, Texas 
(III)

C O N T E N T S 

March 17, 2010

Page 

Witness List ............................................................................................................. 2

Hearing Charter ...................................................................................................... 3

Opening Statements

Statement by Representative Bart Gordon, Chairman, Committee on Science 

and Technology, U.S. House of Representatives ............................................... 9

Written Statement ............................................................................................ 10

Statement by Representative Ralph M. Hall, Minority Ranking Member, 

Committee on Science and Technology, U.S. House of Representatives ......... 10

Written Statement ............................................................................................ 11

Prepared Statement by Representative Jerry F. Costello, Member, Committee 

on Science and Technology, U.S. House of Representatives ............................. 11

Witnesses:

Dr. Susan Smyth, Director of Manufacturing Systems Research, GM R&D 

and Chief Scientist for Manufacturing, General Motors Company 

Oral Statement ................................................................................................. 12

Written Statement ............................................................................................ 14

Biography .......................................................................................................... 18

Dr. Len Sauers, Vice President of Global Sustainability, Procter and Gamble 

Oral Statement ................................................................................................. 18

Written Statement ............................................................................................ 20

Biography .......................................................................................................... 23

Mr. Debtosh Chakrabarti, President and Chief Operating Officer, PMC Group 

Inc. 

Oral Statement ................................................................................................. 23

Written Statement ............................................................................................ 25

Biography .......................................................................................................... 30

Dr. Mark Tuominen, Director, National Nanomanufacturing Network 

Oral Statement ................................................................................................. 31

Written Statement ............................................................................................ 33

Biography .......................................................................................................... 40

Mr. Wayne Crews, Vice President for Policy and Director of Technology Studies, Competitive Enterprise Institute 

Oral Statement ................................................................................................. 41

Written Statement ............................................................................................ 42

Biography .......................................................................................................... 63

Discussion ................................................................................................................. 63

Appendix 1: Answers to Post-Hearing Questions

Dr. Len Sauers, Vice President of Global Sustainability, Procter and Gamble . 76

Appendix 2: Additional Material for the Record

Written Statement from National Petrochemical and Refiners Association 

(NPRA) .................................................................................................................. 80
Page

IV

Prepared Statement from Representative John D. Dingell .................................. 85
(1)

THE FUTURE OF MANUFACTURING: WHAT IS 

THE ROLE OF THE FEDERAL GOVERNMENT 

IN SUPPORTING INNOVATION BY U.S. MANUFACTURERS? 

WEDNESDAY, MARCH 17, 2010

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SCIENCE AND TECHNOLOGY, 

Washington, DC.

The Committee met, pursuant to call, at 10:03 a.m., in Room 

2318 of the Rayburn House Office Building, Hon. Bart Gordon 

[Chairman of the Committee] presiding.
2
3

1The Facts About Modern Manufacturing, 8th Edition (Manufacturing Institute, 2009) 2The Facts About Modern Manufacturing, 8th Edition

3 Innovation and Product Development in the 21st Century (Hollings Manufacturing Extension 

Partnership Advisory Board, February 2010) 4The Facts About Modern Manufacturing, 8th Edition

HEARING CHARTER

U.S. HOUSE OF REPRESENTATIVES

COMMITTEE ON SCIENCE AND TECHNOLOGY 

The Future of Manufacturing:

What is the Role of the

Federal Government in Supporting

Innovation by U.S. Manufacturers? 

WEDNESDAY, MARCH 17, 2010

10:00 A.M.–12:00 P.M.

2318 RAYBURN HOUSE OFFICE BUILDING

1. Purpose 

On Wednesday, March 17, 2010, the House Committee on Science and Technology 

will hold a hearing to receive testimony on the need for U.S. manufacturers to adopt 

innovative technologies and processes in order to remain globally competitive, and 

to determine the appropriate role for the Federal Government in supporting efforts 

by U.S. manufacturers to innovate.

2. Witnesses

• Dr. Susan Smyth, Director of Manufacturing, GM R&D, and Chief Scientist 

for Manufacturing, General Motors Company

• Dr. Len Sauers, Vice President, Global Sustainability, Procter & Gamble

• Mr. Debtosh Chakrabarti, President and Chief Operating Officer, PMC 

Group Inc.

• Dr. Mark Tuominen, Director, National Nanomanufacturing Network

• Mr. Wayne Crews, Vice President for Policy and Director of Technology 

Studies, Competitive Enterprise Institute

3. Background 

The manufacturing sector plays a critical role in the U.S. economy. According to 

the Manufacturing Institute, in 2008, the manufacturing sector generated $1.64 trillion worth of goods and, if it were a country by itself, would have ranked as the 

eighth largest economy in the world.1 The manufacturing sector accounted for nearly 57 percent of total U.S. exports in 2008, and employed nearly 12 million people 

last year.2

However, manufacturing is no longer as dominant a sector of the U.S. economy 

as it has been in the past. In 2008, manufacturing represented 12 percent of GDP, 

which is a significant decline from nearly 30 percent in the early 1950s.3 In addition, between 2000 and 2007, the U.S. global market share of manufactured exports 

fell from 19 percent to 14 percent. During that same period, the Chinese share of 

global exports rose from seven percent to 17 percent.4

In recent years, several key reports have argued that innovation—both in terms 

of the processes being used and the products being produced—is one key to preserving, and perhaps even growing, the manufacturing sector in the U.S.

• In its recent annual report entitled Innovation and Product Development in 

the 21st Century, the Manufacturing Extension Partnership Advisory Committee included a recommendation to manufacturers to ‘‘innovate constantly 

to adapt to economic and technological changes.’’ The Advisory Committee 

noted that leading manufacturing firms continue to innovate their way 
4

5 Innovation and Product Development in the 21st Century

6Manufacturing the Future: Federal Priorities for Manufacturing R & D (Interagency Working 

Group on Manufacturing R & D, Committee on Technology, National Science and Technology 

Council, March 2008) 7The Innovation Imperative in Manufacturing: How the United States Can Restore Its Edge

(The Boston Consulting Group & The Manufacturing Institute, March 2009)

through economic and technological shocks and disruptions, and even use 

them to their advantage.5

• The Interagency Working Group on Manufacturing R & D made the following 

observation in Manufacturing the Future: Federal Priorities for Manufacturing R & D: ‘‘There is strong consensus in industry, academia, and government that the future competitiveness of U.S. manufacturing—and all that it 

underpins—will be determined, in large part, by research, innovation, and 

how quickly firms and industries can apply and incorporate new technologies 

into high value-added products and high-efficiency processes.’’ 6

• In The Innovation Imperative in Manufacturing. How the United States Can 

Restore Its Edge, the Boston Consulting Group and the Manufacturing Institute at the National Association of Manufacturers concluded: ‘‘With high-quality inexpensive products flooding the market from every corner of the globe, 

competing on cost alone is a losing battle for most U.S.-based manufacturers 

. . . . To stay in the game, companies in the United States must differentiate 

themselves through innovation: new products and services, new ways of working, new ways of going to market.’’ 7

4. Overview

National Science Foundation 

The National Science Foundation (NSF) supports fundamental manufacturing research. This work is done primarily through the Division of Civil, Mechanical, and 

Manufacturing Innovation (CMMI) in the Engineering Directorate. The budget request for CMMI for Fiscal Year 2011 is $206.5 million, an increase of 9.8 percent 

over the Fiscal Year 2010 enacted level. 

The Division is divided into four program clusters, including an Advanced Manufacturing cluster. The cluster supports fundamental research leading to transformative advances in manufacturing technologies in the following areas:

• The Manufacturing and Construction Machines and Equipment Program supports fundamental research leading to improved machines and applications 

for manufacturing.

• The Materials Processing and Manufacturing Program supports fundamental 

research on the interrelationship of materials processing, structure, performance and process control. Analytical, experimental, and numerical studies are 

supported covering processing methods such as molding, forging, casting, 

welding, hydroforming, composite layup, and other materials processing approaches.

• The Manufacturing Enterprise Systems Program supports research on design, 

planning, and control of operations in manufacturing enterprises. Research is 

supported that impacts the analytical and computational techniques relevant 

to extended operations and that offer the prospect of implementable solutions.

• The Nanomanufacturing Program supports research and education on manufacturing at the nanoscale, and the transfer of research results in nanoscience 

and nanotechnology to industrial applications.

NSF supports four Nano Science and Engineering Centers that focus on 

nanomanufacturing: the Center for Hierarchical Manufacturing at the University of Massachusetts, the Center for Scalable and Integrated 

Nanomanufacturing at the University of California at Berkeley, the Center for 

High-Rate Nanomanufacturing at Northeastern, and the Center for NanoChemical-Electrical-Mechanical Manufacturing Systems at the University of Illinois at Urbana-Champaign.

NSF also supports the National Nanomanufacturing Network, which includes 

the four Nano Science and Engineering Centers and other academic, government, and industry partners. The Network is focused on facilitating and expediting the transition of nanotechnologies from core research and breakthroughs 

in the laboratory to production manufacturing.
5

Finally, NSF hosts and sponsors workshops on manufacturing. For example, in 

2009, NSF hosted workshops on energy manufacturing, additive manufacturing, and 

nanomanufacturing.

National Institute of Standards and Technology

Manufacturing Engineering Laboratory 

Through its Manufacturing Engineering Laboratory (MEL), the National Institute 

of Standards and Technology (NIST) promotes innovation and the competitiveness 

of U.S. manufacturing through measurement science, measurement services, and 

technical contributions to standards. MEL has a budget of approximately $43 million and a staff of 250 scientists and engineers, support personnel, craftsmen, technicians, and visiting scientists. 

MEL is comprised of the following five divisions:

• The Precision Engineering Division conducts research in dimensional measurements, develops new measurement methods, provides measurement services, develops national and international artifact and documentary standards, 

and disseminates the resulting technology and length-based standards.

• The Manufacturing Metrology Division develops methods, models, sensors, 

and data to improve metrology, machines, and processes and provides services 

in mechanical metrology, machine metrology, process metrology, and sensor 

integration.

• The Intelligent Systems Division develops measurement and interoperability 

standards to enhance manufacturing robotics and automation equipment and 

the underlying industrial control systems.

• The Manufacturing Systems Integration Division develops and applies measurements and standards that advance information-based manufacturing technology.

• The Fabrication Technology Division provides instrument and specialized fabrication support for NIST researchers and serves as a testbed for many NIST/

MEL programs.

MEL also hosts workshops on manufacturing. For example, last year, MEL hosted 

workshops entitled ‘‘National Workshop on Challenges to Innovation in Advanced 

Manufacturing: Industry Drivers and R & D Needs’’ and ‘‘Workshop on Sustainable 

Manufacturing: Metrics, Standards, and Infrastructure’’.

Manufacturing Extension Partnership 

The Manufacturing Extension Partnership (MEP) program at NIST is a network 

of 59 centers located in every State and Puerto Rico, providing a range of services 

to small and medium-sized manufacturers. The MEP centers advise businesses in 

a variety of areas, including lean manufacturing techniques. The Fiscal Year 2011 

budget request for MEP includes a request for $4.64 million to expedite and facilitate adoption of technological innovations by smaller U.S. manufacturers, especially 

clean technologies and processes that improve manufacturers’ competitive position.

Technology Innovation Program 

The Technology Innovation Program (TIP) at NIST was created in 2007 through 

the America COMPETES Act (P.L. 110–69). Its purpose is to support, promote, and 

accelerate innovation in the United States by funding high-risk, high-reward research in areas of critical need. In Fiscal Year 2009, manufacturing was one of two 

areas of critical national need for which TIP proposals were solicited. The TIP manufacturing solicitation emphasized: (1) process scale-up, integration, and design for 

advanced materials; and (2) predictive modeling for advanced materials and materials processing. TIP announced more than $40 million in funding for manufacturing-related projects in Fiscal Year 2009.

Small Business Innovation Research and Small Business Technology Transfer 

Executive Order 13329 (‘‘Encouraging Innovation in Manufacturing ’’) was signed 

on February 24, 2004. It ordered the head of each executive branch department or 

agency with one or more Small Business Innovation Research (SBIR) programs or 

one or more Small Business Technology Transfer (STTR) programs to give high priority within such programs to manufacturing-related research and development to 

advance innovation in manufacturing. 

In Fiscal Year 2009, about 100 of the 320 SBIR/STTR awards made at NSF had 

a major manufacturing innovation component. At the same time, in Fiscal Year 
6

8 How Does Commerce define Sustainable Manufacturing? (http://www.ita.doc.gov/competitiveness/sustainablemanufacturing/how¥doc¥defines¥SM.asp.) 

2009, more than 40% of SBIR/STTR awards at NIST had implications for manufacturing.

Sustainable Manufacturing 

There are several Federal Government programs focused on sustainable manufacturing, also known as green manufacturing. The Department of Commerce defines 

sustainable manufacturing as ‘‘the creation of manufactured products that use processes that are non-polluting, conserve energy and natural resources, and are economically sound and safe for employees, communities, and consumers.’’ 8

NIST’s Manufacturing Engineering Lab conducts research in the area of green 

manufacturing. In fact, in its Fiscal Year 2011 budget request, NIST is requesting 

$10 million in additional funding (for a total of $16.4 million) for Green Manufacturing and Construction programs. According to the budget request, the funding will 

be used in part to develop an information infrastructure, based on open standards, 

to communicate critical sustainability information efficiently among suppliers, customers, and regulators and to identify and disseminate bestpractice methods, processes, and assessment tools for sustainable manufacturing in key industrial sectors. 

At the Department of Energy, the Office of Energy Efficiency and Renewable Energy’s Industrial Technologies Program partners with U.S. industry to carry out 

research, development, and demonstration of next-generation manufacturing technologies to reduce the use of energy by the U.S. industrial sector. The program supports research and development of new energy efficient technologies, supports commercialization of emerging technologies, and provides plants with access to proven 

technologies, energy assessments, software tools and other resources. 

The budget request for Fiscal Year 2011 for the Industrial Technologies Program is $100 million, a $4 million increase over the Fiscal Year 2010 enacted level. The 

request includes $10 million in funding for a new Manufacturing Energy Systems 

program focused on enhancing the competitiveness of America’s manufacturers 

through the rapid innovation of new products and processes that significantly reduce manufacturing energy intensity and carbon emissions. According to the budget 

request, the program will be anchored at two premier universities and will serve 

as knowledge development and dissemination centers organized around distinct 

manufacturing areas with critical technical needs. 

There are also several multi-agency efforts focused on sustainable manufacturing. 

These include the Green Suppliers Network, which is a collaborative venture 

among industry, the Environmental Protection Agency, and NIST’s Manufacturing 

Extension Partnership. The program works with large manufacturers to engage 

their small- and medium-sized suppliers in low-cost technical reviews that focus on 

process improvement and waste minimization. The technical reviews, which are conducted by NIST, combine ‘‘lean and clean’’ manufacturing techniques to assist manufacturers in increasing energy efficiency, identifying cost-saving opportunities, and 

optimizing resources to eliminate waste within their manufacturing processes. 

In addition, five Federal agencies—NIST (through the Manufacturing Extension 

Partnership), the Department of Energy (through the Industrial Technologies Program), the Environmental Protection Agency, the Department of Labor, and the 

Small Business Administration—participate in the E3: Economy, Energy and Environment program. Federal and local resources are combined to conduct assessments and gap analyses of company manufacturing processes, the results of which 

are used to develop comprehensive improvement plans on behalf of and in collaboration with the participating communities. The goals of the program, which operates 

under the umbrella of the Green Suppliers Network, include making manufacturing 

plants more energy efficient and cost effective; reducing the environmental impact 

of manufacturing plants through green manufacturing practices and improvements; 

improving regional economies by retaining jobs in more competitive companies and 

positioning them for growth and job creation in emerging green industries; and assisting manufacturers in growing and succeeding in a sustainable business environment.

Coordination of Federal Manufacturing R & D 

In January of 2004, the Department of Commerce released a report entitled Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. 

Manufacturers. One of the report’s recommendations was the establishment of an 

interagency working group within the National Science and Technology Council 

(NSTC) to serve as a forum for developing consensus and resolving issues associated 
7

with manufacturing research and development policy, programs, and budget guidance and direction. Shortly thereafter, the Interagency Working Group (IWG) on 

Manufacturing Research and Development was established under the NSTC with 

the chartered goal of identifying and integrating requirements, conducting joint program planning, and developing joint strategies for the manufacturing research and 

development programs conducted by the Federal Government. 

In March of 2008, the IWG produced a report entitled Manufacturing the Future: 

Federal Priorities for Manufacturing R & D, which identified three technology areas 

as areas of opportunity for Federal manufacturing research and development: manufacturing r & d for hydrogen technologies, nanomanufacturing, and intelligent and 

integrated manufacturing. 

The charter for the IWG expired in March of 2009. Since the expiration of its 

charter, the IWG has not been active as a formal entity within the NSTC.

Administration’s Framework for Revitalizing American Manufacturing 

In December of 2009, the Executive Office of the President released A Framework 

for Revitalizing American Manufacturing. The Framework included seven areas of 

focus, with a commitment to take specific actions in each area. One of the framework’s areas of focus is ‘‘invest[ment] in the creation of new technologies and business practices.’’ Action items relating to this area of focus include:

• Doubling r & d budgets of key science agencies;

• Improving coordination of manufacturing-related r & d;

• Exploring new options to stimulate innovations and technological breakthroughs, such as prizes and reverse auctions;

• Making the research and experimentation tax credit permanent;

• Spurring innovation in manufacturing by increasing the Technology Innovation Program;

• Pursuing structural reforms that support innovation and production, such as 

public-private partnerships, providing anti-trust waivers for certain types of 

private cooperation, and using the Federal Government’s coordinating abilities to overcome information problems and match innovators and markets;

• Protecting intellectual property rights;

• Doubling the Manufacturing Extension Partnership;

• Streamlining and enhancing delivery of government services to business; and

• Creating an Office of Innovation and Entrepreneurship and a National Advisory Council on Innovation in the Department of Commerce

Other areas of focus in the framework included: (1) providing workers with the 

opportunity to obtain the skills necessary to be highly productive; (2) developing stable and efficient capital markets for business investment; (3) helping communities 

and workers transition to a better future; (4) investing in an advanced transportation infrastructure; (5) ensuring market access and a level playing field; and (6) 

improving the business climate.

5. Overarching Questions

• Are the Federal Government’s current manufacturing research and development programs sufficient?

• Are there areas of research and development related to manufacturing that 

are not being addressed by the Federal Government that should be addressed?

• What is the current role of the manufacturing industry in shaping the Federal manufacturing research and development agenda? Are Federal program 

focused on manufacturing research and development responsive to the needs 

of the manufacturing industry? If not, why not?

• Are the technologies and processes developed through federally-funded manufacturing research and development programs being utilized by manufacturers? If not, why not?

• Are Federal programs focused on manufacturing research and development 

duplicative? If so, is there a need for better coordination and prioritization of 

Federal manufacturing research and development?

• Broadly speaking, what obstacles currently exist to manufacturers adopting 

innovative technologies and processes? Is there anything more that the Fed-
8

eral Government should be doing, or could be doing, to help manufacturers 

adopt these technologies and processes?
9

Chairman GORDON. The Committee will come to order. 

I want to thank everyone for being here today for this important 

hearing on innovation in manufacturing. 

Let me also make a quick announcement, and that is that we are 

expecting to have votes at 11:00 today, which in the world around 

here means that we really don’t have to leave until about 11:10 or 

so. So I would—for the convenience of the witnesses, we have your 

written statement. We are going to try to move things along. If 

there are Members that feel a need, then we will stay or come 

back, whatever might be. We just don’t want to put you out. I 

should also tell all of you that there are several meetings, as you 

can imagine, going on at the same time, and so we will have some 

Members coming in and coming out but we have staff on both sides 

that are also here. 

So there is a perception out there that the U.S. manufacturing 

sector is on its last legs. The truth is, however, that the manufacturing sector in the United States is alive and well, and continues 

to be an important part of our economy. Each year, the U.S. manufacturing sector generates more than $1.5 trillion worth of goods, 

accounts for more than half of the total U.S. exports, and employs 

millions of people. 

Nevertheless, it is true that the manufacturing sector in the 

United States is not as strong and vibrant as it once was. There 

is a strong case to be made that, in order to avoid further decline, 

we need to take action now to preserve, and perhaps even grow, 

the U.S. manufacturing sector for the future. 

A variety of factors have likely contributed to the decline in U.S. 

manufacturing, including global competition. Be that as it may, our 

manufacturers cannot and should not compete with other countries 

on labor costs alone. In order to stay competitive, the U.S. manufacturers will need to be leaner and more efficient, and make better 

products faster. To accomplish this, we will need to develop new 

manufacturing technologies and cutting-edge processes. We will 

also need to ensure that mechanisms are in place to take those 

technologies and processes from the lab to the manufacturing 

plant. 

U.S. manufacturers should also be at the forefront when it comes 

to producing new and innovative, high-value-added products. If we 

want to position our manufacturers to make the next big things of 

the future, we need to make certain that they have the ability to 

do so quickly and efficiently. 

At the same time, the ability of U.S. manufacturers to innovate 

and remain competitive is largely dependent on a flexible, skilled 

workforce. The manufacturing plant of today is not the manufacturing plant of the past. Today’s manufacturing is a high-technology activity, requiring a workforce with scientific and technical 

skills. Unfortunately, despite this need, U.S. manufacturers are experiencing a lack of skilled workers at all levels. This Committee 

is committed to doing what it takes to ensure that businesses in 

the United States, including manufacturers, have access to workers 

they need to get the job done. 

In today’s hearing, we will focus on what more the Federal Government should do, if anything, to help U.S. manufacturers innovate. It is my expectation that what we learn today will help in-
10

form the reauthorization of the America COMPETES Act, which 

the Committee is currently working towards. 

I am confident that our witnesses will be able to offer us unique 

perspectives on this issue, and I want to thank all of you for being 

here and look forward to your testimony. 

[The prepared statement of Chairman Gordon follows:]

PREPARED STATEMENT OF CHAIRMAN BART GORDON

Good morning. I want to thank everyone for being here today for this important 

hearing on innovation in manufacturing. 

There is a perception out there that the U.S. manufacturing sector is on its last 

legs. The truth is, however, that the manufacturing sector in the U.S. is alive and 

well, and continues to be an important part of our economy. Each year, the U.S. 

manufacturing sector generates more than $1.5 trillion worth of goods, accounts for 

more than half of total U.S. exports, and employs millions of people. 

Nevertheless, it is true that the manufacturing sector in the U.S. is not as strong 

and vibrant as it once was. There is a strong case to be made that, in order to avoid 

a further decline, we need to take action now to preserve, and perhaps even grow, 

the U.S. manufacturing sector for the future. 

A variety of factors have likely contributed to the decline in U.S. manufacturing, 

including global competition. Be that as it may, our manufacturers cannot—and 

should not—compete with other countries on labor costs alone. In order to stay competitive, U.S. manufacturers will need to be leaner and more efficient, and make 

better products faster. To accomplish this, we will need to develop new manufacturing technologies and cutting-edge processes. We will also need to ensure that 

mechanisms are in place to take those technologies and processes from the lab to 

the manufacturing plant. 

U.S. manufacturers should also be at the forefront when it comes to producing 

new and innovative, high-value-added products. If we want to position our manufacturers to make the ‘‘next big things’’ of the future, we need to make certain that 

they have the ability to do so quickly and efficiently. 

At the same time, the ability of U.S. manufacturers to innovate and remain competitive is largely dependent on a flexible, skilled workforce. The manufacturing 

plant of today is not the manufacturing plant of the past. Today’s manufacturing 

is a high-technology activity, requiring a workforce with scientific and technical 

training. Unfortunately, despite this need, U.S. manufacturers are experiencing a 

lack of skilled workers at all levels. This Committee is committed to doing what it 

takes to ensure that businesses in the U.S., including manufacturers, have access 

to the workers they need to get the job done. 

In today’s hearing, we will focus on what more the Federal Government should 

be doing, if anything, to help U.S. manufacturers innovate. It is my expectation that 

what we learn today will help inform the reauthorization of the America COMPETES Act, which the Committee is. currently working towards. 

I am confident that our witnesses will be able to offer us unique perspectives on 

this issue. I want to thank all of you for being here. I look forward to your testimony.

Chairman GORDON. Now the Chair recognizes Mr. Hall for an 

opening statement. 

Mr. HALL. Thank you, Mr. Chairman, and I am very interested 

to hear what our witnesses have to say, so I will try to be brief, 

as you have been. 

This is another hearing geared toward the reauthorization of the 

America COMPETES Act, and let me reiterate that all of us recognize the magnitude and importance a robust Federal research and 

development enterprise has on our economy, our national security 

and our ability to be globally competitive. However, we also need 

to understand our current economic realities. Unfortunately, instead of being responsive to concerns and working to reduce regulatory burdens on manufacturing, we are heading in the wrong direction. Cap-and-trade is a prime example of this. It would add an 

unprecedented combination of energy taxes and regulatory require-
11

1Written statement is located in Appendix 2. 

ments on the manufacturing sector that would obviously pressure 

businesses to shift capital and jobs away from important areas 

such as R&D, and it could be argued that some of our economic 

woes are a result of manufacturers not unlike the ones before us 

today being overregulated and forced to take their business outside 

of the United States, costing Americans their jobs. I am sure the 

same is true for U.S. manufacturing R&D efforts as well. 

With specific regard to the R&D jurisdiction of this committee 

when it comes to manufacturing, I am particularly struck by a 

statement provided by the National Petroleum Refineries Association that states, ‘‘With increasing regulations, many companies 

have been forced to decrease their R&D budgets and shift their resources to regulatory compliance.’’ Mr. Chairman, I ask unanimous 

consent that their written statement be made a part of the record.1

Chairman GORDON. Without objection. 

Mr. HALL. And I yield back my time. Thank you, sir. 

[The prepared statement of Mr. Hall follows:]

PREPARED STATEMENT OF REPRESENTATIVE RALPH M. HALL

Thank you Chairman Gordon for calling this hearing to examine whether there 

is an appropriate role for the Federal Government in supporting U.S. manufacturing 

innovation, and if so, what that role is. 

I am very interested to hear what our witnesses have to say today, so I will be 

very brief. As this is another hearing geared towards the reauthorization of the 

America COMPETES Act, let me reiterate that all of us recognize the magnitude 

of importance that a robust Federal research and development enterprise has on our 

economy, our national security, and our ability to be globally competitive; however, 

we also need to understand our current economic reality. 

It could be argued that some of our economic woes are a result of manufacturers, 

not unlike the ones before us today, being overregulated and forced to take their 

business outside of the United States, costing everyday Americans their jobs. I’m 

sure the same is true for U.S. manufacturing R&D efforts, as well. With specific regard to the R&D jurisdiction of this Committee when it comes to manufacturing, 

I am particularly struck by a statement provided by the National Petroleum Refiners Association that states, ‘‘With increasing regulations, many companies have 

been forced to decrease their R&D budgets and shift their resources to regulatory 

compliance.’’ (Mr. Chairman, I ask unanimous consent that their written statement 

be made part of the record.) 

In addition, I am also eager to hear how the billions of dollars the Federal Government has invested in GM is helping them spur innovation and technology in 

their manufacturing, but perhaps that’s best left for questioning. 

So, with that, I welcome our witnesses to the hearing, and I look forward to receiving your testimony.

Chairman GORDON. If there are Members who wish to submit additional opening statements, your statements will be added to the 

record at this point. 

[The prepared statement of Mr. Costello follows:]

PREPARED STATEMENT OF REPRESENTATIVE JERRY F. COSTELLO

Good morning. Thank you, Mr. Chairman, for holding today’s hearing on opportunities for innovation in the U.S. manufacturing industry and the role of the Federal 

Government in keeping manufacturers competitive in the future. 

As a member of the Congressional Manufacturing Caucus, I have consistently 

supported our manufacturing industry, the backbone of the American economy. For 

centuries, the U.S. has been the world leader in manufacturing, and the American 

workforce has been the most competitive and innovative in the world. However, in 

recent years, we have seen this leadership position begin to slip as low-cost products 

manufactured overseas have flooded our markets. Constant innovation and rapid 
12

application of new technologies and techniques are vital to maintain our competitiveness and ensure the future of American manufacturing. 

We have seen first-hand the effectiveness of innovation in the manufacturing sector through programs like the Manufacturing Extension Partnerships (MEP) and 

the Technology Innovation Program (TIP). First, MEP provides technical assistance 

to help small and medium size manufacturers modernize and innovate. I have heard 

directly from my constituents about the positive impact MEPs have had on their 

businesses. I would like to hear from our witnesses how we can continue to improve 

the MEP. In particular, I am interested in how we can link these partnerships to 

community colleges. 

Second, TIP supports and funds high-risk, high-reward research on critical issues 

for the manufacturing sector. While the results of this research will impact manufacturers of all sizes around the country, one challenge facing the manufacturing industry is attracting students and researchers to manufacturing sciences and careers 

in manufacturing. I am interested to hear from our witnesses what options they see 

for attracting more students to this important sector of our economy. 

I welcome our witnesses, and I look forward to their testimony.

At this time I would like to introduce our witnesses. First, Dr. 

Susan Smyth is the Director of Manufacturing Systems Research 

and Chief Manufacturing Scientist for Manufacturing for General 

Motors Company. Dr. Len Sauers is the Vice President of Global 

Sustainability for Procter and Gamble. Dr. Debtosh Chakrabarti is 

the President and Chief Operating Officer for PMC Group Incorporated. Dr. Mark Tuominen is the Director of the National 

Nanomanufacturing Network, and Dr. Wayne Crews is the Vice 

President for Policy and Director of Technology Studies at the Competitiveness Enterprise Institute. 

As our witnesses should know, we try to keep our testimony to 

around five minutes. Your written testimony will be included in the 

record for the hearing, and when all of you have completed your 

spoken testimony, we will begin questions. Each Member will then 

have five minutes to question the panel. 

So Dr. Smyth, please begin your testimony. 

STATEMENT OF SUSAN SMYTH, DIRECTOR OF MANUFACTURING SYSTEMS RESEARCH, GM R&D AND CHIEF SCIENTIST FOR MANUFACTURING, GENERAL MOTORS COMPANY 

Dr. SMYTH. Mr. Chairman and Committee members, thank you 

for the opportunity to testify on behalf of General Motors. I am 

Susan Smyth, Director of General Motors’ Manufacturing Systems 

Research Lab, and I lead worldwide research and development efforts in support of advanced manufacturing. I am pleased to be 

able to speak to you today about advanced manufacturing and the 

important role the National Institute of Standards and Technology, 

NIST, and other Federal agencies play in support of this vital area 

of national interest. I also look forward to discussing some of the 

challenges associated with advanced manufacturing and suggesting 

areas where we can strengthen collaboration. 

Automotive manufacturing is one area where we have significant 

opportunity to expand U.S. competitiveness and stimulate economic 

development and grow jobs. Chrysler, Ford and General Motors together account for 110,000 U.S. manufacturing jobs and support 

three million additional jobs located in all 50 of the United States. 

Our three companies annually invest $10 billion in U.S. plants and 

equipment, and in 2008 we purchased $100 billion of U.S. auto 
13

parts, materials and services. We also spent $12 billion on engineering and research and development. 

The United States, along with the rest of the world, is working 

to reinvent manufacturing to ensure competitiveness, improve efficiency, and increase energy and environmental stewardship, and I 

would like to highlight a few projects that show the strength of 

these private-public manufacturing partnerships. 

NIST/MEL: The Manufacturing Engineering Laboratory at NIST 

promotes competitiveness in key manufacturing-related areas such 

as robotics, virtual manufacturing, green manufacturing and 

nanotechnologies. In addition, the NIST lab derives standards that 

are key to the adoption of efficient, safe and repeatable processes. 

As just one example of the power of partnering, NIST worked with 

General Motors, Ford and Chrysler through the United States 

Council for Automotive Research, USCAR, to develop standards for 

certification of wireless technologies. These standards have increased OEM [Original Equipment Manufacturer] productivity and 

lowered our costs because now we can buy off-the-shelf certified 

products and know they will work for a specified function as opposed to testing them all ourselves. The NIST–USCAR collaboration resulted in the growth of new jobs in a network of small local 

companies which now certify all these network devices that they 

conform to industry standards. 

Many national labs, including NIST, have an influence on manufacturing. However, MEL stands alone as an organization that has 

the core technical skills, profound knowledge of manufacturing 

processes and a passion for manufacturing. Although MEL is an effective organization focused on customer needs, the structure in 

which it resides is not optimal, and the percentage of resources 

that are dedicated to manufacturing are a very small part of the 

overall NIST budget. 

We greatly appreciate working with NIST, but we believe the 

NIST charter should be revisited to allow a more equal footing between small and large business. The rationale for this request is 

that the challenges we are facing today are system-level challenges. 

Two examples are vehicle electrification, which is nothing less than 

the reinvention of the automobile, and the drive towards sustainable manufacturing. Technology solutions that will help us meet 

these challenges need to be driven by balanced effort of small and 

large companies, to better leverage the speed of the small and the 

system integration perspective of the large. 

DOE: The Department of Energy has been supporting crucial research and helping build manufacturing capability on batteries, 

motors, and other electric vehicle technologies through 

FreedomCAR and the Fuel Partnerships. GM is grateful for the 

stimulus grants that we received to help us open our new battery 

manufacturing plant in Brownstown, Michigan, and our electric 

drive production center in White Marsh, Maryland. These two facilities will provide us with valuable learning and allow us to more 

rapidly move down the cost curve on these technologies, enabling 

us to get to higher production volumes. 

NASA: NASA [National Aeronautics and Space Administration] 

has recently been an important partner on the manufacturing front 

for us. Together we were able to develop and build Robonaut2—or 
14

R2 for short—a faster, more dexterous, more technologically advanced robot. This new generation of robot is able to use its hands 

to do work beyond the scope of any existing humanoid robot and 

can do it safely side by side with people, which is the key to our 

robotic strategy of humans working in harmony and enabled, not 

replaced, by robots. 

As I have mentioned, other countries see the value of robotic 

technology and they have made it a national priority. We need to 

adopt similar industrial priorities in this and other important areas 

of manufacturing. 

In conclusion, General Motors would ask the Committee to focus 

on the following: first, the creation of a cross-agency forum with a 

charter to align large-scale manufacturing, driving collaborative 

prioritization of key technologies by industry and government. Second, sufficient funding to allow the United States to compete with 

efforts in other countries. And third, reframing the goals and scope 

of advanced manufacturing in the national labs from the point 

where the technology metrics are met for the product, to the point 

where high-volume production is possible. General Motors welcomes initiatives like these, as well as government, public, private 

and cross-industry partnerships to accelerate those technology developments and early commercialization. 

Thank you for the opportunity to testify today. I look forward to 

your questions. 

[The prepared statement of Dr. Smyth follows:]

PREPARED STATEMENT OF SUSAN SMYTH

Mr. Chairman and Committee Members, thank you for the opportunity to testify 

on behalf of General Motors. I am Susan Smyth, Director of GM’s Manufacturing 

Systems Research Laboratory. I lead GM’s worldwide R&D efforts in support of advanced manufacturing processes and systems. While this past year has been one of 

unprecedented challenge and change at General Motors, in the wake of the bankruptcy, we are a smaller, leaner company that is even more focused on advanced 

technology. 

I am pleased to be able to speak to you today about advanced manufacturing and 

the important role the National Institute of Standards and Technology (NIST) and 

other Federal agencies play in support of this vital area of national interest. I also 

look forward to discussing some of the challenges associated with advanced manufacturing and suggesting areas where we can strengthen collaboration, especially in 

manufacturing R&D. 

This is an important time in the history of the automobile industry. As we have 

seen recently, the world in which we live and do business in is changing. Automotive technology is rapidly advancing, presenting challenges and opportunities 

with high levels of risk to both the industry and the manufacturing base of entire 

nations. 

Automotive manufacturing is one arena where we have significant opportunity to 

expand U.S. competitiveness and stimulate economic development and jobs growth. 

Chrysler, Ford, and General Motors together account for 110,000 U.S. manufacturing jobs and support three million additional jobs located in all 50 states. Our 

three companies annually invest $10 billion in U.S. plants and equipment. We also 

spend $12 billion on engineering and R&D, which is helping to drive a resurgence 

in American manufacturing. 

This starts with the supplier community, which we know you care greatly about. 

We are currently updating the figures for 2009, but for 2008 the three domestic 

manufacturers purchased over $100 billion in U.S. auto parts, materials, and services. Every dollar spent in the manufacturing sector generates an additional $1.36 

in economic activity. This represents a greater return than in any other sector. 

The U.S., along with the rest of the world, is working to reinvent manufacturing 

to ensure competitiveness, improve efficiency, and increase energy and environmental stewardship. I would like to highlight a few projects that show the strength 

of private/public manufacturing partnerships.
15

NIST/MEL 

NIST’s Manufacturing Engineering Laboratory (MEL) promotes competitiveness 

in key manufacturing-related areas such as robotics, virtual, green, and nano technologies. In addition, the NIST lab drives standards that are key to adoption of efficient, safe, and repeatable processes. As just one example of the power of 

partnering, NIST worked with GM, Ford, and Chrysler through the United States 

Council for Automotive Research (USCAR) to develop the standards for certification 

of wireless technologies such as the Ethernet, DeviceNet, and ControlNet. 

These standards have increased OEM productivity and lowered cost because now 

we can buy off-the-shelf certified products and know they will work for the specified 

function. As companies strive to become leaner and compete in a global market, we 

cannot afford to waste our technical resources on non-core business. This NIST–

USCAR collaboration has resulted in the growth of new jobs in a network of small 

local companies, which now certify that all these network devices conform to the 

new industry standards. 

Many national labs, including NIST, have an influence on manufacturing technology. However, MEL stands alone as an organization having core technical skills, 

profound knowledge of the manufacturing domain, and a passion for manufacturing. 

Although MEL is a highly effective organization, well focused on customer needs, 

the structure in which it resides is not optimal. The percentage of resources dedicated to manufacturing remains a small part of the overall NIST budget. 

We greatly appreciate working with NIST, but we believe the NIST charter 

should be revisited to allow a more equal footing between small and large business. 

The rationale for this request is that many of the challenges we are facing today 

are ‘‘systems-level’’ problems. Two examples are vehicle electrification—which is 

nothing less than the reinvention of the automobile—and the drive towards sustainable manufacturing. Technology solutions to enable us to meet these challenges 

need to be driven by a more nuanced mix of effort among small and large companies, to better leverage the speed of the small and the system-integration perspective of the large. 

Another positive interaction between GM and MEL has been in the area of virtual 

manufacturing, which allows us to design and validate processes and tools in a computer prior to physically building a plant or product. In virtual manufacturing, we 

can mathematically model the form, fit, and function of manufacturing processes. 

It is a technology lever that we use to drive costs down and quality up, and we currently have active programs linking GM, USCAR, NIST, and several universities. 

One such research program, led by the University of Iowa, is linked with the Virtual 

Soldier, which will create a digital human to design safer and more ergonomically 

acceptable manufacturing processes.

DOE 

The Department of Energy has been supporting crucial research and helping build 

manufacturing capability on batteries, motors, and other electric vehicle technologies through the FreedomCAR and Fuel Partnership. GM is grateful for the 

Stimulus grants we received to help us open our new battery manufacturing plant 

in Brownstown Township, Michigan and our electric drive production center in 

White Marsh, Maryland. 

These two facilities are among the first advanced battery and electric motor manufacturing plants in the United States to be operated by a major auto company. 

They will provide us with valuable learnings and allow us to more rapidly move 

down the cost curve on these technologies—thus enabling us to get to higher production volumes, which is where these technologies start to have real-world impacts on 

petroleum consumption and greenhouse gas emissions. 

Lightweight materials is another area where there has been great success with 

government-industry collaboration. Our collaboration with DOE through USCAR 

has led to introduction of more high-strength steels, aluminum and magnesium alloys, composites, and associated processes. These collaborative efforts have led to reduced material and energy requirements and lower material scrap rates in our 

plants. 

To build on this progress, we support the creation of the Automotive Manufacturing Energy Reduction Partnership, which has been jointly mapped out by DOE 

and USCAR. Although yet to be funded, this partnership is intended to be a means 

to grow jobs by creating a more energy-efficient and, therefore, more competitive 

auto industry and supply base while simultaneously meeting the national objective 

of energy use reduction. We also feel that potential partnerships between the automotive and defense sectors in energy and materials research could produce synergistic results for both business sectors.
16

NASA 

NASA has also been an important partner on manufacturing R&D. Recently, 

NASA and GM announced our advanced robotics partnership to accelerate development of the next generation of dexterous robots for use in both the automotive and 

aerospace industries. 

Together, we were able to develop and build Robonaut2—or R2 for short—a faster, 

more dexterous, and more technologically advanced robot. This new generation is 

able to use its hands to do work beyond the scope of existing humanoid robots, and 

it can safely do it side-by-side with people, which is the key to our robotic strategy 

of humans working in harmony and enabled not replaced by robots. 

This partnership should interest the Committee for two reasons. First, the GM 

NASA partnership was a new business model for conducting high-end research with 

embedded personnel beyond the traditional sabbatical model. It is critical for both 

NASA and GM, as the joint learnings from the program help move robotics to the 

next level. For GM, we see the collaboration leading to development of assembly 

processes that integrate robotic technology with people. This has the potential to improve manufacturing processes, increase flexibility, and enhance the safety of the 

production environment. GM is also actively looking for ways to apply the robotics, 

controls, sensor, and vision technologies developed as part of this collaboration to 

leading-edge advanced vehicle safety systems. 

Second, robotics is a central element of competitiveness in advanced manufacturing. The creation of the ‘‘roadmap for U.S. Robotics’’ was stimulated by the bipartisan Congressional Caucus on Robotics. It states that ‘‘Led by Japan, Korea, and 

the European Union, the rest of the world has recognized the irrefutable need to 

advance robotics technology and have made research investment commitments totally over a billion dollars, while the U.S. investment in robotics technology (outside 

unmanned systems for defense) remains practically non-existing.’’

This new segment in robotics is estimated to double the current $25-billion U.S.-

based robotics industry (direct revenue, plus auxiliary automation equipment, castings, etc.) with many applications in the assembly area of manufacturing processes 

over the next 5–10 years. 

The opportunity to create manufacturing jobs with this new type of robot can be 

extrapolated from the success of the medical robot industry. Since the inception of 

this business at the beginning of the decade, the annual growth rate has exceeded 

30 percent and is estimated to reach revenue levels of $2.8 billion by 2011. 

As I have mentioned, other countries also see the value of robotics technology and 

have made it a national priority. What this means is that government and business 

are working together in a highly collaborative way to ensure that the technology 

moves from research to commercial implementation quickly. We are starting to see 

similar support in other areas of advanced manufacturing, such as radio frequency 

identification in Korea, lightweight materials and processes in China to name but 

two. 

We need to adopt similar industrial priorities in other important areas of advanced manufacturing to ensure that the U.S. remains or becomes competitive and 

that jobs remain on shore. We can build on the successes that I have already outlined by:

• Providing more funding to the NIST Manufacturing Engineering Laboratory 

to grow its ability to manage important new projects and provide oversight 

for strengthened collaboration.

• Modifying the industrial technical program (ITP) charter of engagement with 

NIST to better engage large business on complex systems-level issues, and encourage technical transfer without significant royalty clauses, which impede 

commercialization and the creation of jobs in spinoff businesses.

• Creating a cross-agency forum to create and manage a national agenda for 

manufacturing technology. This forum could identify key technology goals and 

metrics and orchestrate collaboration to better leverage resources and eliminate redundant efforts.

• Nurturing the creation of product and manufacturing technologies related to 

the electrification of the vehicle. We need to develop a successful U.S. manufacturing base for this new breed of automobile. We also need to invent manufacturing systems capable of delivering automotive quality for new electric vehicle components at volume rates. As an example, we require technology for 

non-destructive evaluation during battery manufacturing processes and reversible joining processes that would enable remanufacturing, and 

repurposing of used automotive batteries for stationary power storage applications.
17

As we look to the future, we need to focus our collective attention on technologies 

that enhance our virtual and flexible manufacturing capabilities at a project level. Areas such as robotics, virtual manufacturing, and sustainability are key technology 

areas of focus for our business, and we would ask for additional development funding to:

• Develop the manufacturing aspects of batteries, fuel cells, electric motors, and 

power electronic components, including real-time quality processes.

• Support technology that creates flexible systems and facilities, which will enable more consumer custom-ordering using efficient manufacturing processes 

that can quickly respond to changing customer demand.

• Drive other cross-industry improvements such as those needed in the field of 

virtual manufacturing. Here, the development of standards would enable better communication between IT systems and help alleviate the unending challenge of system interoperability—expanding, for example, on some of the 

award-winning work in ISO STEP Standards for the exchange of product 

model data that was carried out by the NIST MEL lab.

• In the virtual arena, we also need to create linkages between different virtual 

tools. This would enable a more efficient use of the software products that we 

have today, e.g., such as the development of automatic meshing capabilities.

• Finally, continuous support for technology is required to enable energy-efficient and environmentally neutral manufacturing processes.

Rethinking the Goal Line 

Beyond funding, we may need to revise how we think about the meaning of success in automotive technology R&D. In addition to technical success, we also need 

to address how we take innovation to commercial scale and high rates of adoption. 

Just as with any other advanced technology, there are three phases involved in 

adoption of advanced manufacturing technologies. These include innovation, demonstration, and commercial implementation. Moving through the three phases required to commercialize new technologies is a particularly difficult challenge in the 

auto industry because of the long time horizons and high capital cost. This is a challenge that urgently needs to be addressed because of the magnitude and importance 

of the dual societal objectives of energy reduction and jobs creation. 

Historically, the U.S. has emphasized R&D discovery, but in order for innovation 

to be implemented (and have a meaningful impact on challenges such as petroleum 

consumption and greenhouse gas emissions), funding and collaboration must continue on to the next level, which is scale production. Many new ideas can be managed on small production lines, but the challenge of scaling to large and fast output 

rates cannot be overlooked. In order to be relevant to these great societal challenges, 

we need to ensure that government R&D programs are focused on ways to provide 

high-quality assembly, non-destructive evaluation, and high rates of repeatability at 

large volumes. Currently, the U.S. focus is on the first phase of innovation, which 

is essential but not sufficient because we must also give priority to demonstration 

and technical inventions required to enable high-volume, high-speed production. 

Some countries have a different approach and focus support on development of the 

linkage to business. Germany, for example, has invested in a technology transfer infrastructure, i.e., the Fraunhofer Institutes, and also mandates that engineering 

academics spend a significant time in industry. China has a government-directed 

agenda and a strong focus on advanced manufacturing. Japan has a culture of 

OEMs and suppliers collaborating through government-funded initiatives. All of 

these countries have advanced manufacturing strategies, collaboration models, and 

a funding charter that extends beyond technical innovation.

Conclusion 

In summary, General Motors asks the committee to focus on the following:

• First, collaborative prioritization of key technologies by industry and government. These priorities should include robotics and other flexible manufacturing enablers, virtual manufacturing, and green manufacturing, and manufacturing of key electric drive components, including batteries, fuel cells, motors, and power electronics.

• Second: Increased funding for the NIST Manufacturing Engineering Laboratory (MEL) to support these priorities.

• Third: The creation of a cross-agency forum with a charter to align with 

large-scale manufacturing R&D and with sufficient funding to compete with 

efforts in other countries.
18

• Fourth: Congressional consideration of DOE funding for the proposed Automotive Manufacturing Energy Reduction Partnership, which will be focused 

on enhancing the competitiveness and energy-efficiency of the U.S. auto industry and supply base.

• Fifth: Reframing the goals and priorities for advanced technology vehicle 

manufacturing at DOE, NIST, etc., from the point where technology metrics 

are met to the point where high-volume production is possible.

General Motors welcomes initiatives like these as well as government, public/private, and cross-industry partnerships to accelerate both technology development and 

early commercialization. 

Thank you for the opportunity to testify today. I look forward to your questions.

BIOGRAPHY FOR SUSAN SMYTH

Susan Smyth is the Chief Scientist for Global Manufacturing at General Motors 

and the Director of the GM R&D Manufacturing Systems Research Lab. In this capacity, she directs the creation of GM’s global advanced manufacturing strategies 

and oversees innovation and implementation of GM’s advanced manufacturing portfolio. Susan is recognized as one of GM’s key strategic technology leaders inside and 

outside General Motors. She chairs the Technology Leadership Council for Manufacturing at USCAR, the preeminent technical organization for pre-competitive automotive technology. She is a member of Northwestern’s Master of Manufacturing 

Management executive governance Council at the Kellogg School of Management. 

Furthermore, she is an executive advisor to the Tennenbaum Institute at Georgia 

Tech. 

In her role as Chief Manufacturing Scientist, she has aggressively grown GM’s 

global collaboration footprint in the US, Europe, Israel, Korea, and China. She is 

the co-Director of Collaborative Research Labs at University of Michigan, MIT, and 

Shanghai Jiao-Tong University. These collaborations have yielded internal and external recognitions. Susan’s teams have garnered an unprecedented number of Boss 

Kettering Awards, GM’s highest corporate innovation prize, numerous McCuen Innovation Awards, and the 2009 Korean Presidents Award for Technology. 

Prior to this assignment, Smyth was Global Math Process Leader for Manufacturing Engineering, responsible for developing and implementing math-based strategies for GM Manufacturing, driving towards a completely virtually integrated manufacturing system design. This resulted in significant advances in quality, throughput, maintenance enabling world class product launches. 

Susan began her career with General Motors as a Senior Project Engineer with 

the advanced engineering staff. Since then she has held a variety of leadership positions in strategic business planning, advanced engineering, manufacturing and quality. She holds a Bachelor of Science degree in Physics, Masters of Science in 

Optoelectronics and Information Technology, and a Ph.D. in Physics.

Chairman GORDON. And Dr. Sauers, you are recognized. 

STATEMENT OF LEN SAUERS, VICE PRESIDENT OF GLOBAL 

SUSTAINABILITY, PROCTER AND GAMBLE 

Dr. SAUERS. Chairman Gordon, Ranking Member Hall and distinguished Members of the Committee, thank you for inviting me 

to testify today. My name is Len Sauers. I am the Vice President 

for Global Sustainability at the Procter and Gamble Company. I 

lead P&G’s overall program in this area. 

P&G manufactures and markets a broad range of consumer products: beauty, health and wellness, and home care products in the 

United States and globally. We have operated in the United States 

for more than 170 years. As a major American manufacturer, we 

are fully committed to innovate and invest in the United States. 

While our business is robust, much of our future growth is tied 

to serving the world’s consumers, 95 percent of whom reside outside the United States. Emerging markets are an engine of growth 

for P&G and are also critical to P&G’s employment in the United 

States. One of five P&G jobs in the United States supports our 
19

global business, and our business has a multiplier effect, supporting 1.5 million jobs in our U.S. and global supply chain and another 100,000 jobs in our go-to-market distribution and merchandiser network. 

P&G has historically viewed sustainability as largely a corporate 

responsibility. As a large multinational company, we believe being 

socially and environmentally responsible are simply the right 

things to do. However, more recently, there has been greater attention placed on sustainability by consumers, governments and 

NGOs. Due to this greater attention, we believe that sustainability 

can move beyond just being a responsibility to also being an opportunity to build our business. 

To leverage this opportunity, we recently developed a renewed 

program in environmental sustainability with strategies and goals 

that are focused in two areas: improving the environmental profile 

of our products, and improving the environmental profile of our operations. Please let me make a few comments on both, starting first 

with our products. 

In order to improve the environmental profile of their products, 

a consumer products company must clearly understand their consumer. Relative to sustainability, we find that only a small percentage of consumers are willing to accept tradeoffs such as increase 

in price or a decrease in performance in order to purchase a product that claims to be environmentally sustainable. We find that the 

vast majority of consumers, over 70 percent, will buy a sustainable 

product but only if all their other needs of cost and performance 

are met. The challenge for P&G is to develop products that enable 

consumers to be sustainable, but for which there are no tradeoffs, 

and this represents a huge challenge for our R&D community. 

An example of one such product which I brought today that we 

recently developed and is on the market is Tide Cold Water, which 

is a laundry detergent specially designed to provide the same performance in cold water that consumers see in hot or cold. The environmental benefits of such a product are enormous. If every household in the United States that used hot water today switched to 

cold water for laundry, the energy savings would be 70 to 90 billion 

kilowatt-hours per year, which is three percent of the Nation’s total 

household energy. It would reduce carbon dioxide emissions by 34 

million metric tons, which is about seven percent of the U.S.’s 

Kyoto target. This is just one example of a sustainable product we 

have developed, and we have committed to develop and market at 

least $50 billion in sales of these products like this over the next 

several years. 

Innovation is critical to accomplishing this and our other business goals. As such, we have invested over $2 billion in R&D annually. We have 24 innovation centers on four continents with over 

9,000 people in our R&D facility. Over 1,000 Ph.D.s represent more 

than 120 scientific disciplines and hold over 35,000 patents globally. To meet the continued challenges we face in our product innovation and operational improvements, we have identified five areas 

of opportunity where the Federal Government can be helpful. 

First, the government needs to drive research in the area of renewable energy, to develop more cost-effective alternatives and a 

grid that can deliver the renewable energy to manufacturers. Sec-
20

ond, the America COMPETES Act needs to be reauthorized, which 

will lead to the creation of new markets and technologies. I would 

like to thank you, Mr. Chairman, and Ranking Member Hall, for 

your prior support of this program. Third, there is a need to continue to focus on STEM [science, technology, engineering, and 

mathematics] education and training. The skills are needed so that 

we can attract and build the best and brightest U.S. workforce. 

There is a need to increase the collaborative government-industry 

innovation through the national labs. P&G has a successful partnership with Los Alamos National Lab where a comprehensive approach was developed to reduce the cost of our equipment failures 

in operations. And finally, the best way to preserve and create U.S. 

manufacturing jobs and promote innovation in the United States is 

through sound and predictable policies, legislation and regulation 

that foster a competitive manufacturing environment. Innovation 

cannot move forward without a science-based framework. 

Thank you again for the opportunity to testify today and share 

with you the importance of sustainable innovation at Procter and 

Gamble. 

[The prepared statement of Dr. Sauers follows:]

PREPARED STATEMENT OF LEN SAUERS

Introduction 

Chairman Gordon, Ranking Member Hall and distinguish members of the Committee, thank you for inviting me to testify on ‘‘The Future of Manufacturing: What 

is the Role of the Federal Government in Supporting Innovation by U.S. Manufacturers?’’

I am the Vice President, Global Sustainability at Procter & Gamble. I am responsible for the company’s sustainability efforts. Four billion times a day, P&G brands 

touch the lives of people around the world. The company has one of the strongest 

portfolios of trusted, quality, leadership brands, including Pampers, Tide, Pantene, 

Duracell, Olay, Gillette, and Braun. The P&G community includes approximately 

135,000 employees working in about 80 countries worldwide. 

I want to thank you Mr. Chairman and Ranking Member Hall for champion roles 

in supporting the America COMPETES Act, authorizing Federal funding for basic 

R&D and science, technology, engineering, and mathematics (STEM) education 

which creates the opportunity for P&G to find future skills to effectively innovate. 

P&G is a member of the Task Force on American Innovation, whose mission it is 

to support basic research in the physical sciences and engineering. 

Innovation is P&G’s lifeblood. When we look at innovation we are faced with three 

critical questions:

• How can we put consumer-driven innovation at the center of everything we 

do?

• How can we use innovation as a competitive advantage?

• How can we manage the risks of innovation?

P&G invests over $2 billion in innovation annually. We have 24 innovation centers on 4 continents with over 9000 people in our R&D facilities. Over 1000 Ph.D.s 

represent more than 120 scientific disciplines and hold over 35,000 patents globally. 

A few years ago, we set a goal for innovation, moving to an open innovation 

model. Our goal was that 50% of all initiatives needed to have at least one significant external partner. We wanted to ‘‘turbo-charge’’ our innovation capacity. We 

built the capability to reach nearly 2 million researchers, entrepreneurs and companies doing work in areas relevant to our businesses. Today, we’ve met and exceeded 

our 50% goal and we are now building the next generation of our ‘‘connect and develop’’ capability. 

Another key component of our innovation model is to develop an understanding 

of the consumer. Since 2001, we have spent over $3 billion, more then double the 

industry average, to learn about the consumer. This leads us to breakthrough innovation, where we have delivered 110 new initiatives in the last 14 years that have 

made the Information Resources, Inc (IRI) Pacesetter’s top 25 list. In 2008, P&G 
21

had 5 of the top 10 product launches in the U.S. and 10 of the top 25. We are expecting similar results when IRI announces their 2009 Pacesetter list. 

At P&G, we focus our sustainability efforts to innovate improvements that matter 

to the consumer, making the most meaningful impact possible. Our commitment begins with our Purpose, Values, and Principles, where sustainability is embedded, 

and manifests itself in a systemic and long term approach. We strive to make our 

actions matter. We pursue our sustainability goals with the aim of improving quality of life now and for generations to come. In 2007, we established five sustainability strategies and goals for 2012. In March, 2009 we increased our goals to reflect our progress and to demonstrate our ongoing commitment to sustainable, responsible growth. Our five sustainability strategies are:

• Products—delight the consumer with sustainable innovations that improve 

the environmental profile of our products.

• Operations—Improve the environmental profile of P&G’s own operations.

• Social Responsibility—Improve children’s lives through P&G’s social responsibility programs.

• Employees—Engage and equip all P&Gers to build sustainability thinking 

and practices into their everyday work.

• Shape the future by working transparently with our stakeholders to enable 

continued freedom to innovate in a responsible way.

Sustainable Product Innovation 

Our goal is to develop and market at least $50 billion in cumulative sales of ‘‘sustainable innovation products’’ which are products with a significantly reduced (> 

10%) environmental footprint versus previous or alternative products. We combine 

two key strengths—consumer understanding and science to deliver sustainable innovations that do not require trade-offs in performance or value. 

One example is helping consumers save energy and reduce their own Green 

House Gas emissions through the development of sustainable products. We developed Tide Coldwater, a new product technology which focused on cold water-washing, which delivers the same cleaning performance consumers expect from hot-water 

washing. If every household in the United States used cold water for laundry, the 

energy savings would be 70–90 billion kilowatt hours per year which is 3% of the 

total nation’s household energy consumption while reducing CO2 emissions by 34 

million metric tons per year, which is about 7% of the US’s Kyoto target. 

In 2007, we began to convert our North American liquid laundry detergent portfolio to a 2X concentrated formulation. This innovation created the following benefits: less water (saving 500 million liters a year); reduced CO2 emissions by more 

than 100,000 metric tons a year; reduced the amount of packaging materials by 

15,000 metric tons per year; and reduced the number of truck loads by 40,000 per 

year. 

And through our open innovation model, we partnered with one of our suppliers, 

which led to the development of a new polymer to be used in our powdered laundry 

detergent, which reduces surfactant levels while improving product performance.

Sustainable Operational Improvement 

We continue to drive conservation efforts in manufacturing. Between raw materials and the creation of a product, we strive to reduce waste, water, energy and 

CO2 through systematic conservation efforts. We apply smart eco-design through innovative construction process improvements. And we re-use where feasible giving 

new life to what was once waste. We have expanded our work from a focus on the 

core of our manufacturing operations to a holistic end to end view of opportunities. 

Our goal is to deliver an additional 20% reduction (per unit of production) in CO2

emissions, energy consumption, water consumption and disposed waste from P&G 

plants, leading to a total reduction over the decade of at least 50%. 

We are proactively putting green technologies including solar, wind and geothermal in our plants where it makes good business sense. Examples of successful 

initiatives include the installation of a roof-mounted photovoltaic solar energy system at our Oxnard, CA facility which is projected to produce more than 1.9 million 

kilowatt hours during the first year of operation. Over 20 years, this system is estimated to product enough electricity to power over 3,200 homes for a year. Heat exchange units that capture heat for reuse at our paper plant in Mehoopany, PA reduces carbon emissions by 13,600 metric tons per year and the energy savings will 

be greater than the per-site energy consumption at 80% of our other facilities 

around the world. Finally we have designed eco efficiencies at our new paper plant 

facility being built in Box Elder County, Utah. 
22

For decades, P&G has transported product in ‘‘multi-modal’’ fashion that is using 

multiple forms of transport. But today, we are shifting toward ‘‘intermodal’’ transportation, which uses shipping containers that transfer smoothly from one mode to 

another. An intermodal approach optimizes the transportation process. A transportation program in North America, P&G’s first to incorporate an intermodal component has reduced transportation costs and improved sustainability, saving 11 million liters of diesel fuel annually.

Opportunities for the Federal Government to Enhance Manufacturing Innovation 

We have identified five areas where the role of the U.S. Government is critical 

to innovation and manufacturing:

1. The government needs to drive research in the area of renewable energy to 

develop more alternatives and a grid that can deliver the renewable energy 

sources to manufacturers.

2. ‘‘The America COMPETES Act’’ needs to be reauthorized which will lead to 

the creation of new markets and technologies.

3. There is a need to continue to focus on STEM education and training. These 

skills are needed so that we can attract and build the best and brightest 

workforce. One of the top 3 skill sets that we seek for management positions 

are undergraduate engineers. For our plant technician roles we are looking 

for demonstrated technical and leadership skills, ideally through trade 

schools and two year colleges.

4. There is a need to increase the collaborative government/industry innovation 

through the National Labs. P&G has a successful partnership with Los Alamos National Lab (LANL) where a comprehensive approach was developed 

to reduce operating costs and minimizing capital expenditures by predicting, 

preventing, and reducing equipment failures in our manufacturing operations.

5. Finally, the best way to preserve and create U.S. manufacturing jobs and innovation in the U.S. is through sound and predictable policies, legislation 

and regulation that will foster a competitive manufacturing environment. Innovation can not move forward without a science based regulatory framework in place. If not handled with care, the cumulative effect of new legislation and regulation will result in added cost, regulatory burden and less 

rather than more flexibility for business.

Conclusion 

Chairman Gordon, Ranking Member Hall and other members of the Committee, 

thank you for the opportunity to testify today and share with you the importance 

sustainable innovation is to Procter & Gamble (www.pginnovation.com). There is 

definitely a role for the Federal Government to ensure that the necessary skills and 

technologies are being developed to help manufacturers like P&G. We are supportive of the efforts to sustain Federal R&D funding through the reauthorization 

of America’s Compete for NSF, NIST, and DoE Office of Science and enhancing 

STEM education because the ability for us to continue to reduce our environmental 

footprint of our products and our operations depends on the skills of the future.
23

BIOGRAPHY FOR LEN SAUERS

Chairman GORDON. Thank you, Dr. Sauers. 

And now Mr. Chakrabarti. 

STATEMENT OF DEBTOSH CHAKRABARTI, PRESIDENT AND 

CHIEF OPERATING OFFICER, PMC GROUP INC. 

Mr. CHAKRABARTI. Mr. Chairman, Ranking Member Hall, Members of the Committee, on behalf of myself and PMC Group, I 

thank you for the opportunity to testify today on the important 

subject of the future of U.S. manufacturing. 

PMC is a growth-oriented global chemicals company dedicated to 

innovative solutions to everyday needs. Our company was built on 
24

a model of growth through innovation while promoting social good. 

We are dedicated to sustainability. Over half of our raw materials 

are derived from renewable sources. 

In our Nation’s history, Federal Government programs for scientific research and development have yielded the seeds of tremendous advances in the private sector. We must now refocus our research efforts to the most important and promising areas of 

growth, and invest in transitioning these technologies into privatesector manufacturing growth and competitiveness. 

From PMC’s genesis in 1994 to the present, as a rapidly growing 

manufacturer, we have experienced the challenges that come with 

growth and implemented workable solutions. This journey of ours 

gives us a fresh and real perspective on the issues facing U.S. manufacturers. 

The chemical manufacturing industry is one of the most important sectors of the U.S. economy. The chemical industry employs in 

excess of 840,000 employees with hourly earnings 22 percent greater than the private-sector average. When you include indirect employment, the industry is responsible for more than 5.4 million 

jobs. 

Despite its importance to the economy, the chemical industry 

continues to face challenges. Efficiency and improving manufacturing technologies are spreading across the globe, rapidly reducing 

the productivity advantage that once compensated for higher costs 

in the United States. Lower barriers to the flow of investment capital have led to newer, more efficient manufacturing plant investments to be installed elsewhere in the world. The gaps to our leadership are shrinking. Innovation must lead the pathway to the future if we are to maintain our leadership position. 

The U.S. chemical industry is in need of growth revival. We believe that two of the most important challenges facing our Nation 

today are how to increase the number of good, high-paying jobs, 

and how to reduce the dependence of our Nation on foreign oil. We 

believe that increased development and production of chemicals 

based on renewable sources is a viable and sustainable pathway to 

further both of these objectives, while at the same time reducing 

our Nation’s carbon footprint. 

Replacement of crude oil by renewable feedstocks through the 

chemical supply chain is a ‘‘real and now’’ possibility. By virtue of 

their higher value, downstream chemicals from renewable sources 

can rapidly lead to the reduction of imported crude oil and increased job creation. However, the renewable chemicals industry 

faces challenges to get off the ground, and these challenges lie primarily in the development and commercialization phase. 

We believe that there should be three critical pillars to the development of a sustainable, renewable chemicals industry. First, we 

must promote the development of new chemical products based on 

renewable sources. Sustainable efforts by private industry in this 

type of research should be supported by the government through 

funding research programs for renewable chemicals specifically, introducing jump-starting legislation that calls for replacing petroleum-based chemicals in certain end uses and funding the development of pragmatic standard methodologies to support the growth 

of these products. 
25

Second, we must promote investment in transforming existing facilities to produce renewable chemicals. The access to commercialization-phase investment capital, especially for small- and medium-sized enterprises, is a significant challenge to the early stages 

of transformation. We can promote this transformation through 

grants for transformation of existing facilities for manufacture of 

renewable chemicals, incentives for private investment in the production of renewable chemicals, supporting small- and mediumsized enterprises through capital access programs, and through the 

development of a one-stop-shopping approach to government support programs, and elevating renewable chemicals to an important 

position in the Nation’s agenda, similar to biofuels. 

Finally, we must maintain and extend our productivity leadership through retrofitting existing facilities with productivity improvement control and measurement systems, and improving the 

access to best practices in manufacturing for small and medium enterprises. The government can support these efforts through the 

National Institute of Standards and Technology by way of funding 

programs for manufacturers to upgrade productivity-improving 

technologies, funding research in new productivity improvement 

systems, and leveraging the existing efforts of the Manufacturing 

Extension Partnership to assist small- and medium-sized manufacturers in implementing best practices and productivity. 

At PMC, renewable chemicals are a substantial part of our 

growth strategy. We have committed to this strategy because we 

believe that it is a sustainable pathway for manufacturing growth. 

The challenge that we face, along with other U.S. manufacturers, 

is in accelerating the commercialization of these technologies. In an 

uncertain economic environment, companies normally take a conservative approach to investment. Prudent government policies and 

standards are required to change this mindset. Efficient government programs supporting the renewable-chemicals industry would 

accelerate the transformation of ideas into increased employment 

and decreased reliance on foreign oil. 

Mr. Chairman, Ranking Member Hall, Members of the Committee, thank you for this opportunity to share our views today. I 

look forward to your questions. 

[The prepared statement of Mr. Chakrabarti follows:]

PREPARED STATEMENT OF DEBTOSH CHAKRABARTI
26

1Source: Bureau of Labor Statistics, Bureau of the Census, PMC Analysis 

Mr. Chairman and Members of the Committee, on behalf of myself and PMC 

Group, I thank you for the opportunity to testify today on the important subject of 

the Federal Government’s role in supporting innovation by U.S. manufacturers. My 

name is Debtosh Chakrabarti and I am President of PMC Group. 

PMC Group (‘‘PMC’’) is a growth oriented, diversified, global chemicals and plastics company dedicated to innovative solutions to everyday needs in a broad range 

of end markets including plastics, consumer products, electronics, paints, packaging, 

personal care, food, automotive and pharmaceuticals. Our company was built on a 

sustainable model of growth through innovation while promoting social good. We are 

dedicated to sustainability; over half of our raw materials are derived from renewable sources. 

In our nation’s history, Federal Government programs for scientific research and 

development have yielded the seeds of tremendous advances in the private sector. 

We must now refocus our efforts in our federally funded research to the most important and promising areas of growth, align them through central focal points that 

coordinate these programs and invest in the transitioning of these technologies to 

the private sector, especially to small and medium-sized enterprises. 

PMC is a rapidly growing manufacturing enterprise. From our genesis in 1994 to 

today, we have experienced the challenges that come with growth and implemented 

workable solutions. This journey of ours gives us a fresh and real perspective on 

the issues facing U.S. manufacturers, especially in the chemical industry. 

We are a U.S. based multinational innovator, developer and manufacturer of 

chemicals and have a significant interest in the growth and sustainability of the 

manufacturing industry in the United States. Accordingly, we appreciate the opportunity to share our views on the future of U.S. manufacturing and the role that the 

Federal Government can play in supporting the cornerstone of our sustainability—

the continuation of our country’s leadership in innovation and manufacturing. 

The chemical manufacturing industry is one of the most important sectors of the 

U.S. economy. The chemical industry employs in excess of 840,000 employees with 

average hourly earnings 22% greater than the private sector average. Considering 

the indirect employment associated with supplier jobs and expenditure-induced jobs, 

the chemical industry is responsible for greater than 5.4 million jobs 1. The products 

of chemical manufacturing are an integral part of our everyday lives and the industry provides high-paying jobs that utilize our country’s skilled and productive workforce. 

Despite its importance to the economy, the U.S. chemical industry has faced and 

continues to face challenges. The global spread of existing efficient manufacturing 

technologies, lower costs of operations and compliance elsewhere in the world, combined with freer global flow of investment capital has intensified the competitive 

landscape. Efficiency-improving manufacturing technologies are spreading faster 

than ever across the globe, rapidly reducing the productivity advantage that once 

compensated for higher costs of operations in the U.S. Lower barriers to the flow 

of investment capital has led to newer more efficient manufacturing plant investments to be installed elsewhere in the world. These challenges apply to the entire 

manufacturing industry. The gaps to our leadership are shrinking. Innovation must 

lead the pathway to the future if we are to maintain our leadership position. 

The U.S. chemical industry is in need of growth revival. We believe that two of 

the most important challenges facing our nation today are (i) how to increase the 

number of good, high paying jobs and (ii) how to reduce the dependence of our nation on foreign oil. We believe that increased development and production of chemicals based on renewable sources is a viable, sustainable pathway to further both of 

these objectives, while at the same time reducing our nation’s carbon footprint. 

Replacement of crude oil by renewable feedstocks through the chemical supply 

chain is a ‘‘real and now’’ possibility. By the virtue of their higher value based on 

more diverse applications, downstream chemicals from renewable sources can rapidly lead to reduction of imported crude oil and increased job creation. Those of us 

that are involved in renewable chemicals manufacture know that this is a near-term 

and realistic opportunity. Government programs to support small and medium-sized 

enterprises as well as larger enterprises in this effort have the ability to have a sustainable and catalytic impact. The foundation of this strategy should be our 

strengths, namely our large, existing chemical manufacturing and related infrastructure, and our deep base of skilled workers. However, the renewable chemicals 

industry faces challenges to get off the ground, these challenges lie primarily in the 

development and commercialization phase. 

We believe that there should be three critical pillars to the successful development 

of a sustainable renewable chemicals industry:
27

1. The development of new chemical products based upon renewable 

resources to (i) reduce our dependence on petroleum, (ii) promote America 

as a leader in a growing manufacturing sector; and (iii) support the creation 

of high paying chemical manufacturing jobs. The petroleum based chemical 

industry has attracted decades of investment to adapt chemical technologies 

to produce products that touch almost every minute of our daily lives. Research and innovation in renewable chemicals should, in the near term, be 

focused on the adaptation and application of existing chemical processes on 

renewable feedstocks and, in the mid-term, be focused on the creation of new 

techniques to convert renewable feedstocks into valuable products. Sustainable efforts by private industry in this type of research should be supported 

by the Government through:

a. Funding programs to support private and public research activities in 

the application of existing chemical know-how to produce chemicals from 

renewable feedstocks.

b. Funding programs to support private and public research activities for 

developing new and novel chemical processes for converting renewable 

feedstocks.

c. Creating a stable policy environment and incentives for manufacture of 

renewable chemicals.

d. Introducing ‘‘jump-starting’’ legislature that calls for replacing petroleum-based chemicals in certain end-uses.

e. Funding the development of pragmatic standard methodologies for identifying renewable chemical content, carbon footprint, and petroleum replacement content.

2. Invest in retooling existing facilities to commercialize renewable 

chemicals. Reconfiguring existing facilities to support the manufacture of 

new chemical products will require investment. Our infrastructure, skill base 

and manufacturing knowledge are our strengths. The access to commercialization phase investment capital, especially for small and medium sized 

enterprises, is a significant challenge to the early stages of transformation. 

The transformation of existing manufacturing infrastructure to support the 

growth of the renewable chemicals industry should be supported by our Government through:

a. Funding programs to leverage private capital in the commercialization 

phases of transformed facilities.

b. Implementing incentives for private investment in the production of renewable chemicals.

c. Supporting small and medium-sized enterprises through capital access 

programs and through the development of a one-stop shopping approach 

to Government support programs.

d. Elevating renewable chemicals to an important position in the nation’s 

agenda, similar to biofuels.

3. Maintain and extend our productivity leadership through (i) retrofitting existing facilities with world-class measurement systems and process 

control to support productivity improvement to compete with newer facilities 

in other countries; and (ii) improving the access to best practices in manufacturing for small and medium enterprises. The use of existing manufacturing 

infrastructure must be accompanied by investment in process control and 

measurement systems for productivity improvement. New manufacturing facilities in other countries are being built with state-of-the-art process control 

and productivity improvement systems. (Recall what happened to our steel 

industry.) The competitiveness of American manufacturing must be supported by retrofitting our facilities with state-of-the-art technology for manufacturing productivity. The development of these systems will benefit the entire manufacturing sector. The government can support these efforts through 

the National Institute of Standards and Technology by way of:

a. Funding programs for renewable chemicals manufacturers to upgrade 

the competitiveness of their measurement systems and process control 

technologies.

b. Funding public and private research in new productivity improvement 

and process measurement systems.
28

c. Leveraging the existing efforts of the Manufacturing Extension Partnership to assist small and medium-sized manufacturers in implementing 

best practices focused on cost efficiency and productivity.

Finally, we appreciate the opportunity to share our views. Our Government 

should continue and expand its roundtable programs to create a dynamic process 

for feedback from small and medium-sized enterprises to ensure that the most effective programs and policies are advanced. 

At PMC, renewable chemicals are a substantial part of our growth strategy. We 

have committed to this strategy because we believe that it is a sustainable pathway 

for manufacturing growth. The challenge that we face along with other U.S. manufacturers is in accelerating the commercialization of these technologies. In an uncertain economic environment, companies normally take a conservative approach to investment. Prudent Government policies and standards are required to change this 

mindset. Efficient and pragmatic government programs supporting the renewable 

chemicals industry would accelerate the transformation of ideas into increased employment and decreased reliance on foreign oil.
29
30

BIOGRAPHY FOR DEBTOSH CHAKRABARTI

Debtosh Chakrabarti is the President of PMC Group. In this capacity, he is responsible for the North American based operations and businesses of PMC Group. 

In addition, he serves on PMC’s corporate committee responsible for overall corporate management of the global group. PMC Group is a growth oriented, diversified, global chemicals and plastics company dedicated to innovative solutions to everyday needs in a broad range of end markets including plastics, consumer products, 

electronics, paints, packaging, personal care, food, automotive and pharmaceuticals. 

The Company was built on a sustainable model of growth through innovation while 

promoting social good. Dedicated to sustainability, PMC derives over half of its raw 

materials from renewable sources and operates from a global manufacturing, innovation and marketing platform with facilities in the Americas, Europe and Asia. Mr. 

Chakrabarti has been instrumental in the growth of PMC from a single site manufacturing operation to a global chemical company. Born on June 11, 1973 in Wayne, 

New Jersey, he attended primary and secondary schools in New Jersey and Pennsylvania. He received his Bachelor of Science in Chemical Engineering from Massachu-
31

setts Institute of Technology and is a graduate of the Advanced Management Program at Harvard Business School. He currently resides in Moorestown, New Jersey 

with his wife, Juliana, son, Deven and daughter, Asha.

Chairman GORDON. And now we will hear from Dr. Mark 

Tuominen. 

STATEMENT OF MARK TUOMINEN, DIRECTOR, NATIONAL 

NANOMANUFACTURING NETWORK 

Dr. TUOMINEN. Good morning. First I want to thank the Committee for the opportunity to discuss this critically important subject on behalf of the National Nanomanufacturing Network. I am 

going to get directly to the heart of the matter. 

Innovation is the raw fuel of the American economy. Manufacturing is the engine. Now, although the discussion today is on manufacturing innovation broadly, I am going to use the key example 

of nanomanufacturing to emphasize my points. 

Research and development in nanomanufacturing exemplifies 

what we must pursue in 21st century manufacturing innovation. It 

is the highest of high tech. Our Nation needs to embrace a longterm strategy of manufacturing innovation and excellence. 

Nanomanufacturing is the use of new techniques and tools that 

generate and manipulate nanomaterials for reproducible commercial-scale manufacturing. Nanomanufacturing is emerging today 

because of the investment the Federal Government made in the 

National Nanotechnology Initiative [NNI]. We must be strategic 

now to reap the return on this investment. 

The NNI, with its focus on fundamental research and research 

infrastructure, has been a huge success with many exciting 

nanotechnology demonstrations. Some are already in products. 

However, making the transition from proof-of-concept demonstration to full-scale manufacturing is not trivial. Manufacturing brings 

up issues such as process development and modeling, scale-up, metrology, process control, tooling, workforce, safety and supply chain. 

There have been huge strides in nanomanufacturing research 

and development over the last few years, including a few examples 

I will name now: processes to make transparent conducting electrodes using carbon nanotubes: this replaces indium tin oxide for 

displays and solar cells during a time when the world supply of indium is becoming dramatically scarce; the use of diblock copolymers for nanoscale patterning: utilization of molecular self-assembly for magnetic data storage, electronics, energy conversion and 

energy storage applications; synthetic processes for making 

monodisperse nanoparticles with designer surfaces, impacting 

many applications from efficient lighting to solar cells to disease 

diagnostics and therapy, and there are many others. 

The companies and nations that figure out how to manufacture 

products from these recent nanomanufacturing innovations will 

reap the greatest benefits: jobs, economic security, intellectual 

progress and sustainability. 

I would like to address the specific questions posed by the Committee. The first is on the NSF [National Science Foundation] support of nanomanufacturing. The following NSF activities are relevant. There are four complementary nanomanufacturing research 

and development centers. There is a National Nanomanufacturing 
32

Network, which is represented here today, which networks these 

centers together and supports the broader nanomanufacturing community through collaborative activities and information sharing 

and through its Web resource, InterNano. And there is also at the 

NSF a nanomanufacturing program, which administers mainly individual-investigator and small-team grants. There are other programs at the NSF, including SBIR/STTR [Small Business Innovation Research/Small Business Technology Transfer] and the 

Nanoelectronics Research Initiative, that also support 

nanomanufacturing research, but as a subcomponent only. The 

NSF nanomanufacturing programs are currently funded at a level 

of $22 million from the NNI. This low level severely limits the impact and the speed that such activities could have on the Nation’s 

competitiveness and economy. 

What else should be done? Strengthening the activities to build 

a robust manufacturing workforce. This is at all levels, but especially at the technical community college level. Another is to 

strengthen nanomanufacturing research development and education by adding the support for university-industry manufacturing 

test beds and pilot projects. The close involvement of industry in 

identifying fundamental research targets is critical. We also need 

more activities based on 21st century manufacturing research in 

general, and we also need to strengthen the activities of the National Nanomanufacturing Network through facilities, staff and 

scope. 

In terms of the Federal Government, there is not currently 

enough U.S. activity in process development combined with tool 

and instrumentation development. Designing and building future 

generations of scalable manufacturing tools enable us to get our return on investment. Roll-to-roll manufacturing, TIP-based [Technology Innovation Program, NIST] nanomanufacturing and others 

are low-hanging fruit. There is not enough support for 

nanoinformatics. There should be a stronger emphasis on standards development. And in terms of the industry’s role, I would have 

to say that in the NNI, the industry has played an important role. 

The semiconductor industry, the chemical industry, the forest and 

paper industry have all provided valuable input. Now the Industrial Research Institute and its member companies are working to 

try to develop a program with the NSF for industry-inspired fundamental research. 

In terms of the nanotechnology’s transition effectively to manufacturers, this has occurred in some but not in all cases. One barrier to successful technology transition is the cultural mismatch between the priorities between fundamental researchers and manufacturing experts. 

Lastly, in terms of coordination and prioritization, supporting 

manufacturing innovation overall should be a priority for the Federal Government. 

In conclusion, to leverage resources effectively, the Federal Government should consider the creation of a serious interagency initiative focused on manufacturing innovation. As I have already emphasized several times, a vibrant national manufacturing enterprise system rich in innovation requires a culture in which industry, academia and government work closely together. Thank you. 
33

[The prepared statement of Dr. Tuominen follows:]

PREPARED STATEMENT OF MARK TUOMINEN

I thank the committee for the opportunity to discuss innovation and manufacturing. It is an honor to be here and speak directly and plainly about this vitally 

important topic. 

Innovation is the raw fuel of the American economy. Manufacturing is the engine. 

I speak to you today on behalf of the National Nanomanufacturing Network. 

Nanomanufacturing is the use of new techniques and tools that generate and manipulate nanomaterials for reproducible commercial-scale manufacturing. As I will 

discuss today, research and development (R&D) in nanomanufacturing exemplifies 

what we must pursue in 21st century manufacturing innovation. The National 

Nanomanufacturing Network (NNN), funded by the National Science Foundation 

(NSF), operates as an open-access network of centers, leaders, experts, and stakeholders from the nanomanufacturing research, development and education community. The network’s mission is to serve as a catalyst to advance nanomanufacturing 

in the U.S. by facilitating collaboration, roadmapping, and prioritization activities 

on critical enabling areas of nanomanufacturing, and by information sharing 

through its nanomanufacturing database and information resource, InterNano. The 

NNN includes a core of four contributing NSF Nanoscale Science and Engineering 

Centers focused specifically on nanomanufacturing, as well as nanomanufacturing 

centers from the Department of Energy (DOE) and the National Institute for Standards and Technology (NIST), and many other contributors from academia, industry 

and government. More details about the ongoing activities of the NNN are described 

below. My comments today are the distillation of ideas from many experts who contribute to NNN activities.

Nanotechnology Research and Nanomanufacturing 

The U.S. investment in nanotechnology through the National Nanotechnology Initiative has resulted in enormous advancements in our ability to make, control and 

utilize nanomaterials whose characteristic features are 1–100 nanometers. The last 

ten years in nanotechnology has been a period of dramatic discovery and exploration. Brilliant scientists and engineers from interdisciplinary teams have created 

proof-of-concept demonstrations with high performance nanoscale materials and devices. These results are now beginning to impact just about every commercial product sector, including, at the very least, electronics, materials, health, transportation, 

consumer care products and, especially, energy. However, making transition from 

proof-of-concept demonstration, to prototype, to manufacturing pilot, to full-scale 

manufacturing is not trivial. This is especially true in the case of an emergent field 

like nanotechnology, where, in most cases, we cannot simply adapt old designs of 

production tools for these new methods. Manufacturing brings to bear a new range 

of issues: process development and modeling, scale-up, metrology, process control, 

tooling, workforce, safety, and supply chain. Ultimately, these issues have to be addressed because, without manufacturing, there are no products. Perhaps more than 

any other previous activity, nanomanufacturing requires close cooperative efforts between industry, academia and government. Since a considerable amount of the Federal funding in nanotechnology has supported research at universities and government labs, many of the new fundamental discoveries have occurred at those places. 

Yet product development and manufacturing traditionally occur in industry. For the 

U.S. to take full economic and societal advantage of the many nanotechnology 

breakthoughs it has fostered, the Federal Government needs to help build and support a culture that strives to develop leading-edge manufacturing capabilities 

through close collaboration of industry, academia and government. Creating a culture that thrives on manufacturing excellence is a challenge, but at the same time, 

an enormous opportunity.
34

Strides in Nanomanufacturing R&D 

Nanomanufacturing R&D is focused on the creation of new processes and tools to 

produce and utilize nanomaterials at a commercially-relevant scale. Nanoscience research has resulted in the discovery and development of new techniques to make 

and manipulate nanomaterials that are so out-of-the box and revolutionary that it 

is difficult for the manufacturing community to quickly reposition and take advantage. A few recent examples include:

• The production of carbon-nanotube-based transparent conducting electrodes—

replaces indium tin oxide for displays and solar cells, during a time when the 

worldwide indium resources are becoming increasingly scarce.

• The use of diblock copolymers for nanoscale patterning—utilization of molecular self-assembly for magnetic data storage, electronics, energy conversion 

and energy storage applications.

• Self-alignment processes—utilizing natural molecular interactions for device 

integration at the nanoscale and enabling low cost roll-to-roll manufacturing 

processes.

• Plasmonic lithography—producing nanostructures with smaller critical dimensions by using surface plasmons to circumvent the diffraction effects that 

limit conventional optical lithography.

• Scalable processes for the production of carbon nanotubes and graphene—impacting many applications from electronics to structural materials to thermal 

management materials.

• Synthetic processes producing monodisperse nanoparticles with designer surface ligands—impacting many applications from efficient lighting to solar 

cells to disease diagnosis and therapy.

More examples are discussed at the end of this written testimony. The key point 

here is that nanomanufacturing introduces many new disruptive, rather than evolutionary, process technologies. In most cases, these innovations were not on any industrial roadmap. As a consequence, there are gaps in the value chain—such as the 

lack of availability of suitable production scale tools, feedstock suppliers and trained 

workforce—that hinder commercial implementation. The companies, and nations, 

that figure out how to manufacture products from these recent innovations will reap 

the greatest benefits. It is both a challenge and an opportunity.

A Strategic Long View of Nanomanufacturing 

The Nation needs to embrace a strategic long view to advance manufacturing 

science and engineering. The fast progress we observe in nanomanufacturing R&D 

serves as an important reminder. It is a reminder that we must continue to inno-
35

1 ‘‘The National Nanotechnology Initiative: Research and Development Leading to a Revolution in Technology and Industry: Supplement to the President’s FY 2011 Budget,’’ Subcommittee 

of Nanoscale Science, Engineering, and Technology (NSET), Committee on Technology, National 

Science and Technology Council. Available from the National Nanotechnology Coordination Office (NNCO), www.nano.gov

vate in manufacturing, that manufacturing holds many yet unsolved challenges, 

that manufacturing is an area that needs continual research, and that we must 

train and sustain a workforce driven to continue advancing our national capabilities 

in manufacturing. This can only be accomplished effectively with strong public-private partnerships with equally vested industry, academic and government stakeholders. To complement the recent strides in fundamental research, pre-competitive 

joint-development projects are needed to take promising nanomanufacturing processes to scalable manufacturing. If well managed and adequately supported, manufacturing prototype and pilot projects will create critical knowledge to help enable 

the considerably expensive jump to full-scale manufacturing. This includes process 

development and modeling, application prototyping, tool design and development, 

manufacturing informatics, sustainable manufacturing design and manufacturingby-design method development. Doing so will translate into numerous societal benefits including jobs, economic security, intellectual progress and sustainability.

Nanomanufacturing Support by the National Nanotechnology Initiative 

The Federal Government has steadily ramped up its support in 

nanomanufacturing R&D in the National Nanotechnology Initiative (NNI) funding 01. In total, the NNI’s actual nanomanufacturing funding level was $75.6M (4.4% 

of NNI total) in 2009, with an added $28.5M (5.5%) of 2009 ARRA funding. The estimated funding is $96.7M (5.4%) in 2010 and proposed funding is $101.4M (5.7%) 

in the 2011 budget request. Historically, the NSF, NIST and DOD were the early 

leaders in creating funding programs to address the distinct issues associated with 

nanomanufacturing. Now DOE, NIH and other agencies have joined suit, recognizing the essential role that nanomanufacturing plays in progress. Advancing manufacturing in the U.S. is a mission and should be increasingly supported, with longterm strategic management, by the mission-based agencies. NIOSH has made substantial efforts to provide guidance on controls for nanomanufacturing worker safety, and the EPA has a growing base of activities in nanoparticle environmental, 

health and safety. The topic of Sustainable Nanomanufacturing is one of three NNI 

Nanotechnology Signature Initiatives planned for the 2011 budget. This initiative, 

which involves contributing efforts by NIST, NSF, DOE, EPA and NIH, at a level 

of $23M, will focus on the long-term development of flexible ‘‘bottom up’’ 

nanomanufacturing methods that can be applied broadly to applications including, 

solar energy harvesting, communications and computation, waste heat management 

and recovery, and energy storage. 

Now, after this rather long introduction, I will address the specific questions 

posed by the committee. 

What is the National Science Foundation (NSF) doing to foster innovation in manufacturing through research and development in 

nanomanufacturing? In your opinion, are NSF’s current research programs 

sufficient? If not, why not?

Ultimately, it is my opinion that the NSF has some well-designed programs supporting nanomanufacturing, it is primarily the low overall level of support which 

limits the impact and speed that such activities could have on the Nation’s competitiveness and economy. 

The NSF is placing a growing emphasis on nanomanufacturing R&D, with $22.4M 

(5.4% of NSF NNI share) estimated in 2010 from the National Nanotechnology Initiative budget and proposing $32.2 (8.0%) in 2011. Currently NSF supports 

nanomanufacturing R&D within the following listed programs or activities. The first 

three are specifically focused on nanomanufacturing, whereas the others contain 

only a subcomponent of activity on nanomanufacturing.

• Four Nanoscale Science and Engineering Centers (NSECs) specifically dedicated to nanomanufacturing:

Æ Center for Hierarchical Manufacturing (CHM)—University of Massachusetts at Amherst and partner institutions; CHM is also the administrative hub of the National Nanomanufacturing Network

Æ Center for High-Rate Nanomanufacturing (CHN)—Northeastern University and partner institutions
36

Æ Center for Scalable and Integrated NanoManufacturing (SINAM)—University of California Berkeley and partner institutions

Æ Center for Nanoscale Chemical-Electrical-Mechanical Manufacturing Systems (Nano-CEMMS)—University of Illinois Urbana Champaign and 

partner institutions

• The National Nanomanufacturing Network—collaborative activities and information sharing among a network of U.S. centers, experts and stakeholders, 

including the four NSECs listed above;

• The Nanomanufacturing program within the NSF Engineering Directorate;

• SBIR/STTR program, for small companies, frequently working in collaboration with universities;

• The Nanoelectronics Research Initiative (NRI)—a program cooperatively 

funded with the Semiconductor Research Corporation, research based on fundamental research needs of the semiconductor device manufacturers, all large 

companies;

• The GOALI program for joint university-industry projects;

• NSF manufacturing research programs, generically, within the Engineering 

Directorate, some of which have nanomanufacturing relevance;

The proposed 2011 NSF investment plans to emphasize several program topics 

that will have substantial nanomanufacturing impact:

1) New tools for measuring and restructuring matter for production purposes;

2) Hierarchical manufacturing of nanosystems by assembling nanoscale components into new architectures and fundamentally new products;

3) Manufacturing by design by using new computer principles, computer simulations, and nanoinformatics;

4) Hybrid nanomanufacturing, including nanobiotechnology and nanostructured 

catalysts.

One overall goal for 2011 is to strengthen support across the National 

Nanomanufacturing Network in order to advance innovation and to implement research results through partnerships with industry, medical institutions and other 

government agencies. In my opinion, the NNN effort should be strengthened and expanded significantly to provide the physical and intellectual infrastructure needed 

to spur industrial nanomanufacturing. This includes new centers on complementary 

nanomanufacturing themes and stepping up the support to existing 

nanomanufacturing centers to provide shared-use facilities and professional staff 

specifically dedicated to nanomanufacturing development with industry partners. As 

identified in NNN roadmapping workshops, rapid progress could be made by 

strengthening R&D activity, in a set of well-chosen, well-focused manufacturing test 

bed development projects involving close university-industry collaborations. 

Overall, more co-funded projects are needed to enable universities and industry 

to work collaboratively on advanced nanomanufacturing issues. The NRI program, 

listed above, accomplishes this to a limited degree, but only in the nanoelectronics 

area. More analogous efforts are needed for other industry areas, including materials, energy, health, communications, and others. One new program currently 

under development to take steps in this direction is the ‘‘Industry Inspired Fundamental Research’’ (IFR) program. This is a joint effort between the NSF and 28 

member companies of the Industrial Research Institute (IRI). These are mainly 

large companies. The emphasis here is to develop co-funded fundamental research 

projects at universities on focused scientific topics that will have a direct impact on 

the success of American industry. This partnership model should serve to simultaneously train the future workforce and advance knowledge that can be directly implemented in industry. If well managed and amply funded, it should prove to be successful. In such case, its funding should be augmented. 

It is often stated that the most effective way to transfer new technology from universities to industry is by way of people. Graduating students who carry with them 

the ideas developed in an environment rich with research activities, innovation culture, and a genuine understanding of industry needs are ideally suited to quickly 

transform ideas into products in industry. Student involvement in university-industry projects will have a significant impact on the speed by which new innovations 

can be implemented in industry. 

I would like to emphasize an important and relevant observation: From their inception in the late 1990s, NSF nanotech funding program solicitations for group and 

center research projects required that research be performed by interdisciplinary 

teams. Looking back, this was a visionary strategy. It is my opinion that, over time, 
37

this emphasis on interdisciplinary research transformed U.S. science and research 

in a substantially beneficial way, since almost all the great advancements in 

nanotechnology have occurred due to the synergy between distinct, but complementary, disciplines. One may argue that without such a required push, there would 

have been far less progress in nanotechnology overall. The notion of interdisciplinary ‘‘boundary spanners’’ as catalyst for innovation is well known, and in the recent nanotechnology progress we have observed this in action. We see from this recent experiment that suitable incentives can transform research effectiveness. 

Are there areas of nanomanufacturing research and development that 

are not currently being addressed by the Federal Government that should 

be addressed?

Currently, there is not enough support for tool and instrumentation development, 

in the form of longer-term continuing projects. Without the development of manufacturing tools that enable the utilization of new nanomanufacturing processes, we cannot benefit from the huge research investment already made in nanotechnology research. This type of research is best done through jointly-funded industry-university 

projects, so that the manufacturing science learned can be directly implemented in 

a new wave of process tools. For example, there are several nanomanufacturing 

processes that could be implemented in a roll-to-roll platform to substantially lower 

the production cost. The knowledge gained and the tools developed here could be 

leveraged into several distinct product areas including batteries, solar cells, water 

filtration membranes and many other technologies. The same is true for a variety 

of other emergent processing methods. 

There is currently not enough support for nanoinformatics, where 

cyberinfrastructure, data mining tools, modeling tools, and automated data gathering are utilized to accelerate progress in discovery, development, design and manufacturing. Nanoinformatics will be a critical factor in cost- and time-efficient design 

of nanomanufacturing processes and products. Associated with this is the collection 

and curation of data that manufacturers can use for evaluation and design. There 

should be more support for pilot projects that advance nanoinformatics. 

There should be a stronger emphasis and support for the development of international documentary standards and standard reference materials for metrology and 

tool calibration. Nanomaterials certification standards, nanomanufacturing process 

specification language (PSL) standards, and reference standards for 

nanomanufacturing process control are vital. Standards will impact 

nanomanufacturing capabilities in environments ranging from the single production 

facility to the global supply chain network. 

In general, there are not enough funding opportunities for industry and academia 

to work together collaboratively to pilot new manufacturing methods based on promising laboratory discoveries. By getting valuable test data, the industrial engineers 

can make go/no-go decisions and design for scale up, and university scientists and 

engineers can gain new knowledge regarding the underlying fundamentals. To be 

effective and serious, it is important that for such projects to be successful, all the 

stakeholders must have ‘‘skin in the game’’ and co-invest in the project. I am 

shocked by the stark comparison I see when observing the close industry-university 

ties in countries like Ireland, Japan and China. In other countries such as these, 

I have seen the equivalent of technical community college students, Ph.D. students 

and industry scientists all working together under the same roof. We have very few 

examples like this in the U.S., but that can change if we create a favorable environment. Proximity and shared mindsets matter significantly, especially with regards 

to closing the cultural gaps that currently exist between community colleges, universities, and industry in the U.S. 

The development of new manufacturing education curricula should be an integral 

part of such activities, with the natural involvement of industrial engineering programs. There should be a strong emphasis on innovation education and manufacturing engineering principles. The principles underlying both continue to evolve, especially considering the complexities of a new field such as nanomanufacturing. We 

need the education and research in science-based manufacturing process-property 

models, scale-up principles, design-of-experiment methods, data-rich statistical techniques and design-for-manufacturing methods. These all contribute to manufacturing excellence as measured by quality, cost, process reproducibility, property optimization, process flexibility and extensibility. 

What role does the manufacturing industry play in shaping the Federal 

Government’s nanomanufacturing research and development agenda? In 

your opinion, are Federal Government programs focused on 

nanomanufacturing responsive to the needs of the manufacturing industry 

and other stakeholders? If not, why not?
38

I will mostly defer to my industrial colleagues on this issue, but from my 

nanotechnology perspective, there have been several valuable industry inputs toward the development of the National Nanotechnology Initiative priorities. The 

semiconductor industry (through the SIA and the SRC) helped to identify areas of 

priority for integrated circuit chip manufacturers. Similarly the Council for Chemical Research and the American Forest & Paper Association provided input for 

nanotechnology priorities through the development of their respective 2020 roadmaps. 

As discussed above, the companies of the Industrial Research Institute (IRI) are 

working with the NSF to create an Industry-inspired Fundamental Research program to jointly fund research driven by industry needs. This program could fund 

‘‘collaboratory’’ style university research projects focused on tackling scientific problems that would advance future generations of manufacturing capabilities. More 

joint interactions of this type would be desirable. Fast ‘‘skunkworks’’-style projects 

and facilities, co-funded by the Federal Government and industry, would result in 

test data that would advance the development of new manufacturing capabilities. 

In the case of nanomanufacturing, the centers already established by research agencies could be leveraged for this purpose. 

The NIST Technology Innovation Program (TIP) is one good example in which industry and universities can work together towards the development of 

nanomanufacturing processes and techniques. The Department of Energy’s Energy 

Efficiency and Renewable Energy (EERE) nanotechnology program, similarly has 

projects based on an industry need: the creation of better materials for energy efficiency and more energy efficient nanomanufacturing processes for sustainable manufacturing. Augmenting both TIP and EERE would be beneficial. 

Lastly one should not neglect the support and involvement of the small and medium sized companies. The SBIR/STTR programs are one mechanism, but it is important that these companies also have the opportunity to benefit from all of the 

programs discussed above. Small companies are rich with innovative ideas, but they 

often lack the manufacturing experience and resources possessed by large companies. Small-company/large-company partnerships can be very beneficial to success. 

Are nanotechnologies developed through federally-funded research and 

development being transitioned effectively to use by manufacturers? If not, 

why not?

In some, but not all, cases. One barrier to successful technology transition is the 

huge ‘‘impedance mismatch’’ in priorities between fundamental researchers and 

manufacturing experts. The best ways to improve this is to incentivize a change in 

the culture and support innovation education. As observed in the impact of the NSF 

requirement for interdisciplinary team research in nanotechnology over the last decade, we see that that mindsets can be changed, and rather quickly, over a period 

of only a few years. To do so requires the right incentives. Funding of projects with 

requirements for university-industry partnership, innovation education, or smallcompany/large-company partnerships, are all activities that over time, emphasize 

new priorities that change mindsets in beneficial ways. 

Another barrier to success is the lack of sufficient data to make informed go/nogo decisions for the implementation of new technologies. Too many of the breakthroughs are only at the proof-of-concept level. When there is far too much uncertainty in the properties, performance and reproducibility of a new nanomaterial or 

property, it is an enormous economic risk to jump in with both feet. Supporting the 

development of the most promising nanotechnologies, in the form of pilot projects 

or manufacturing test beds, can produce reliable test data and build confidence for 

further investment and development. 

In your opinion, is there a need for better coordination and prioritization 

of federally-funded manufacturing research and development?

Supporting manufacturing innovation overall should be a priority for the Federal 

Government. Why? Countries that do not manufacture products are poor, typically. 

We do not want to head in that direction. With home-grown U.S. research breakthroughs, such as those in nanotechnology, we have a rich foundation of innovations 

from which we can build manufacturing excellence. Better coordination for manufacturing R&D is needed, indeed, but it can be built upon existing or emerging programs that are already successful, but underfunded. In the case of 

nanomanufacturing, the National Nanomanufacturing Network and industrial organizations that the NNN works with (eg. IRI, SRC, AF&PA) can assist the process 

substantially, since these organizations have already started roadmapping activities 

with key stakeholders and have identified priority activities that represent the ‘‘low 

hanging fruit’’ as well as long view strategic action that can advance U.S. manufacturing. In the case of nanomanufacturing, each research agency already has engaged in manufacturing R&D prioritization at some level, as discussed in a few ex-
39

amples mentioned above. For manufacturing in general, it is important to have a 

complementary set of roadmapping exercises, some tightly focused on specific 

themes and some broad, so as to identify the needs, challenges, opportunities and 

desired outcomes. As is currently the case in nanomanufacturing, through such 

roadmapping efforts the key priorities will emerge. To leverage resources efficiently, 

the Federal Government should consider the creation of an interagency initiative focused on manufacturing innovation. As I have already emphasized several times, a 

vibrant national manufacturing enterprise system, rich in innovation, requires synergistic participation of industry, academia and government.

More Information on the National Nanomanufacturing Network

The mission of the National Nanomanufacturing Network (NNN) is to serve as 

a catalyst for progress in nanomanufacturing in the U.S., through the facilitation 

and promotion of nanomanufacturing workshops, roadmapping, inter-institutional 

collaborations, technology transition, test beds, and information exchange services. 

The NNN operates as an open-access network of centers, leaders, experts, and 

stakeholders from the nanomanufacturing research, development and education 

community. It is a partnership among academia, industry and government that is 

built to foster and serve nanomanufacturing communities of practice. The core foundation of the NNN consists of the four NSF nanomanufacturing NSECs—the Center 

for Hierarchical Manufacturing (CHM), the Center for High-Rate 

Nanomanufacturing (CHN), the Center for Scalable and Integrated 

NanoManufacturing (SINAM), and the Center for Nanoscale Chemical-ElectricalMechanical Manufacturing Systems (Nano-CEMMS)—as well as the DOE Center for 

Integrated Nanotechnologies (CINT) at Sandia National Laboratories and the NIST 

Center for Nanoscale Science and Technology (CNST) and other affiliations. 

InterNano is the information arm of the NNN—a digital library clearinghouse of 

timely information on nanomanufacturing and a web platform for collaboration. It 

should be noted that each center described above is funded independently. The NSF 

funding for the NNN’s cooperation and information sharing activities is provided as 

a portion of the grant for the Center for Hierarchical Manufacturing. 

The NNN functions as part electronic resource, part community of practice, and 

part network of experts working on the development of nanomanufacturing. The 

NNN has made key progress in launching and establishing an effective mechanism 

for information sharing (InterNano), facilitating and organizing workshops and 

events with topical focus on critical and emerging nanomanufacturing issues, facilitating and contributing to critical areas of informatics, standards, education and 

workforce training, and further providing an open platform for archiving information where stakeholders can contribute or access relevant information specific to 

their needs in the area of nanomanufacturing. Subject to available funding resources, the NNN has a vision of providing the following activities to support 

nanomanufacturing R&D:

• Facilitate collaborative R&D activities that support the development of 

nanomanufacturing systems through pilot projects and test beds with industry partnership

• A complementary portfolio of nanomanufacturing education and training activities.

• Share and disseminate best practices (process implementation, tech transfer, 

EHS, supply chain)

• Leading or assisting technology visioning and roadmapping activities via 

workshops and working groups, symposia, and summits on 

nanomanufacturing themes.

• Guide the development, implementation and growth of the InterNano 

nanomanufacturing information clearinghouse via broad-based informatics.

• Economic analysis of emerging nanomanufacturing activities.

• Federated nanoinformatics efforts linking materials, process, and application 

databases.
40

More Information on the Centers Affiliated with the NNN 

The collection of centers represented by the NNN provides a complementary portfolio of nanomanufacturing process technologies. Detailed information can be found 

at www.internano.org and at each center’s website. 

The Center for Hierarchical Manufacturing (CHM) led by the University of 

Massachusetts Amherst provides methods that use self-assembling diblock copolymers and complementary nanomanufacturing process to control structure from the 

nanoscale to the macroscale. The center develops processing techniques and modeling methods for nanomanufacturing both in batch and roll-to-roll production formats. These processes have significant impact for the low-cost production of data 

storage media, nanoelectronics, batteries, solar cells, water filters and communications. The CHM is also the administrative hub of the National Nanomanufacturing 

Network. 

The NSF Center for Nanoscale Chemical-Electrical-Mechanical Manufacturing (Nano-CEMMS) headquartered at the University of Illinois concentrates on 

developing innovative processes that function in ambient (as opposed to high vacuum processes) conditions, are well suited to large-area formats, and with material 

sets not usually associated with microelectronics. Nano-CEMMS has developed a 

manufacturing platform that exploits efficient nano-fluidic and ionic transport phenomena to realize a whole new class of products such as semi-transparent flexible 

solar collectors, flexible-stretchable solid-state lighting and bio-compatible electronics. 

The NSF Center for High-Rate Nanomanufacturing (CHN) headquartered at 

Northeastern University provides methods for fast large scale directed assembly and 

transfer of nanostructures, including carbon nanotubes as on chip wiring interconnects, transparent flexible electronics using carbon nanotubes, wafer-level templatefree assembly, and custom made nanostructured carbons of various forms. The CHM 

also works on the development of best practice guidelines to limit exposures to 

nanomaterials and fast toxicity screening methods. 

The NSF Center for Scalable and Integrated Nanomanufacturing (SINAM) 

led by the University of California Berkeley has developed tools and techniques for 

plasmonic nanolithography, which provides a high throughput route to pattern 

nanostuctures having feature sizes below 22 nm. This technology is relevant to 

semiconductor device manufacturing and other application areas. 

The DOE Center for Integrated Nanotechnologies (CINT) at Sandia National 

Laboratory has developed and deployed the Discovery PlatformTM. These platforms 

are modular micro-laboratories designed and batch fabricated by CINT to allow easy 

integration of nanomaterials into microscale structures. They allow easy connections, a range of diagnostic and experimental measurement conditions, and a degree 

of standardization and reproducibility in nanoscale measurements. Sandia also is 

home to the National Institute for Nano-Engineering (NINE)—a Public-Private 

Partnership formed to develop the next generation of technical innovation leaders 

for the U.S., employing the national strategy of the America COMPETES Act. 

The NIST Center for Nanoscale Science and Technology (CNST) supports 

the development of nanotechnology from discovery to production. The Center provides this support through a research program that develops innovative nanoscale 

measurement and fabrication capabilities, and is accessible via collaboration with 

CNST scientists and a national nanofabrication facility, the NanoFab, which is a 

shared-use R&D facility with a suite of tools and processes for nanomanufacturing 

research.

BIOGRAPHY FOR MARK TUOMINEN

Professor Mark Tuominen is the Director of the National Nanomanufacturing 

Network, Co-Director of the NSF Center for Hierarchical Manufacturing and a Professor in Physics at the University of Massachusetts Amherst. He was raised on a 

dairy farm in northern Minnesota, worked as logger, in sheet metal manufacturing 

in a small company, in manufacturing scale-up for a large multinational company, 

and ultimately, in academia as a scientist and educator. Mark has a bachelor’s degree in Chemical Engineering (1986) and a Ph.D. in Condensed Matter Physics 

(1990), both from the University of Minnesota. His current research includes 

nanomanufacturing R&D, magnetism, nanoscale charge transport, and energy devices. He currently serves as a U.S. delegate to the ISO TC–229 Committee on 

Nanotechnologies and as leader of the ISO nanomanufacturing terminology project.

Chairman GORDON. Thank you. And Mr. Crews is recognized. 
41

STATEMENT OF WAYNE CREWS, VICE PRESIDENT FOR POLICY 

AND DIRECTOR OF TECHNOLOGY STUDIES, COMPETITIVE 

ENTERPRISE INSTITUTE 

Mr. CREWS. Good morning, Mr. Chairman. I appreciate the opportunity to appear. 

I am a strong advocate of these new technologies but I do want 

to sound a few warnings today. When it comes to our economy, 

where are we going and why are we in this hand basket? We want 

to make things in the United States, and create jobs, but mired in 

recession, what is the national government’s role in manufacturing 

a more robust manufacturing economy? 

First, we must avoid fostering a declaration of dependence on the 

part of America’s most crucial frontier industries. Second, we must 

avoid having the government steer while the market rows. Worthy 

knowledge and ideas are too widely dispersed for that. 

The need to deregulate this economy shouts at us, and I will say 

a little bit about that in a few moments. Basically you don’t need 

to tell the grass to grow, you just need to take the rock off it. America’s real wealth is yet to be created, but to fulfill that optimism 

requires recognizing the limitations of politically driven R&D. 

Overly aggressive taxpayer funding of science and manufacturing 

research can be incompatible with a lightly regulated future. For 

one, Federal science fosters conflicts over public access to data, the 

merits of basic versus applied research, government versus industry science, and intellectual-property disputes. For another, politics 

has trouble with tradeoffs. When will it be nanotech, or biotech, or 

fuel cells in the hydrogen economy, or robotics, or bioengineered 

gills so we can live in the ocean. Meanwhile, the science not created by the political redirection of resources remains unseen. It 

wasn’t the power to tax and dispense that made the United States 

leapfrog the world’s economies in only 100 years. 

So simply a warning: subsidies can mean subprime technology 

policy for many reasons. Number one, government steering can create artificial booms. Number two, government funding comes with 

strings attached. Number three, political failure can overwhelm 

market failure and basic research. Number four, politicians can’t 

choose rationally, present company excepted, of course. The latest 

conceit is yesterday’s FCC [Federal Communications Commission] 

national broadband plan, which in a way is ‘cap and trade’ for 

telecom. Number five, taxpayer funding sometimes wrongly fosters 

a view of technology as a zero-sum global race, but commerce and 

trade are not like war. Moreover, subsidies don’t alter the ratio of 

GDP spent on research and development. Number six, taxpayer 

funding can create a glut of the wrong kinds of technology graduates. Number seven, taxpayer funding creates pressures for poor 

intellectual-property outcomes, like too much compulsory licensing. 

Number eight, taxpayer funding can undermine safety, because 

‘‘undiscovery’’ of even the riskiest science is unlikely, but market 

disciplines like liability and insurance need to evolve alongside. 

So what do we do? Well, doing something is more than just 

spending money. The COMPETES Act may pull together a few billion dollars for a lot of very worthy projects, but the real gains 

come if we liberate to stimulate, if we work on separating state and 

economics. 
42

First, avoid picking technological favorites. Rather than trying to 

improve speeds by picking the particular R&D horses to run 

around the racetrack, improve the business and regulatory environment so all can go faster, and let jockeys keep more of their earnings. 

Second, allow freer trade in skilled labor. Bright foreign workers 

want to stay in the United States and create jobs after graduating 

here. That is a better way to address the global competitiveness 

issue. 

Third, avoid safety regulation that makes us less safe. Many 

frontier technologies like nanotech make our environment far 

cleaner. Emphasizing the hazards of these new technologies overlooks the hazards of stagnation. 

Fourth, liberalize capital markets. Post-Enron, Sarbanes-Oxley 

regulation has distressed smaller companies severely. Exempt 

firms with smaller market capitalizations. 

Fifth, privatize. During the 1990s it was proposed that commercial aspects of Federal labs be offered to the industries they benefit 

or by allowing employees, research employees, to buy them out. 

Sixth, award prizes rather than grants, which is something that 

is in the COMPETES Act that should be explored more. 

Seventh, liberalize the infrastructure supporting American commerce and manufacturing. Tearing down the regulatory silos that 

artificially separate our great network industries, like electricity 

and telecom and transportation, has enormous potential for creating wealth in the United States. 

Eighth, relax predatory and anti-consumer antitrust. Markets require competition, but sometimes collusion is merely a partial 

merger instead of a full one. In other words, constraining productive firms in ways the market never intended hobbles entire industry sectors and undermines the wealth creation itself at times. 

Finally, deal with regulation generally. Sixty agencies issue 4,000 regulations a year, costing over $1 trillion and some 70,000 

Federal Register pages. So implement a bipartisan regulatory reduction commission, sunset regulations, have Congressional approval for controversial rules, more flexibility for smaller businesses, points of order for unfunded mandates, and a basic regulatory report card on the state of regulation that accompanies the 

Federal budget. 

I will close there, and I thank the Chair for your attention. 

[The prepared statement of Mr. Crews follows:]

PREPARED STATEMENT OF WAYNE CREWS

Separation of State and Economics: A 21st Century American Manufacturing Stimulus Package 

Everyone agrees we still want to make a lot of stuff in the United States of America and create jobs. So what are the prerequisites for prosperity? Mired in recession 

now, how do we ‘‘manufacture’ a robust American manufacturing economy? 

For starters, we avoid fostering a ‘‘Declaration of Dependence’’ on the part of 

America’s most crucial frontier industries. 

The purpose of this hearing (‘‘The Future of Manufacturing: What is the Role of 

the Federal Government in Supporting Innovation by U.S. Manufacturers?’’) is to 

examine ‘‘the need to adopt innovative technologies and processes’’ and assess the 

National Government’s role. 

The positive message is that most of America’s wealth has not been created yet. 

But to fulfill that optimism, recognizing limitations of politically driven research 

and development compared to what capital markets and economic liberalization can 
43

1 Iain Murray, ‘‘The Nationalization of Basic Science: Overzealous Attempts to ‘‘Protect’’ Scientific Integrity will Damage American Science as a Whole,’’ CEI OnPoint No. 100, July 21, 

2005. http://cei.org/pdf/4696.pdf.

achieve is vital. Most politicians defend a significant, even pivotal, governmental 

role. I say instead that when it comes to the creation of knowledge wealth itself, 

that’s a worrisome stance and better alternatives exist. 

To go overboard in enshrining Washington predominance in terms of ‘‘America 

COMPETES Act’’ and ‘‘Recovery and Reinvestment Act’’-style spending in a sense 

is taking the easy way out. The latter in particular shirked genuine duties as the 

Nation endured economic upheaval. Instead, there’s difficult, important actual work 

for Washington to do. At this vulnerable stage of business, economic, and American 

history, Washington can’t spend money on technology education, science and manufacturing and think it’s done any of the work required to reinvigorate manufacturing. 

The America COMPETES Act you might reauthorize should be different in kind, 

not degree. It is now a vehicle for subsidizing various popular education and technology ventures; it instead should removing accumulated impediments to innovation: it should ‘‘liberate to stimulate.’’

‘‘COMPETE’’ing Visions:

Let’s Avoid Having Government Steer While the Market Rows 

The America COMPETES Act is bipartisan, but fifteen years ago the tone was different; Congress sought to reduce government with sweeping proposals like 

privatizing national labs and curbing business and corporate welfare. Ironically, The 

National Nanotechnology Initiative signed by President Bush directed about a third 

of funding to the very Energy Department slated for abolition in 1995. 

Aggressive taxpayer funding of scientific and manufacturing research is not compatible with a future of optimally and lightly regulated science and manufacturing 

specifically, or with limited government generally. 

Moreover there are opportunity costs—tradeoffs. Politics cannot determine optimal research portfolios: Why nanotech instead of biotech, or space travel, or bioengineering gills so we can live in the oceans? Or fuel cells and the hydrogen economy? All such rifts are impervious to political resolution. And that’s good. 

No political party is immune from exacerbating distortions created by politicized 

science, as politicians channel Federal dollars back home regardless of scientific 

merit. In a sense, the debate over science policy and where to allocate taxpayer resources isn’t one over science policy as such; rather, it’s over problems of allocating 

the spoils artificially created when government (an institution with the power to 

tax) gets involved in the very production of knowledge itself (and seducing industry), 

rather than in merely protecting rights in the property that knowledge makes possible. Further, we want to avoid politicized situations like ‘‘junk science,’’ 

‘‘climategate,’’ bubbles created by governmental investment, the undermining of 

freedom of ‘‘research speech’’ (or of its corollary, withholding one’s speech/research). 

Today, we see examples of artificially created conflicts rooted in governmental 

science policy. These disputes include disagreements over:

• The fundamental merit of basic vs. applied research

• The impact of private vs. public funding on discovery and well-being

• The alleged objectivity of government vs. ‘‘industry’’ science and the chastisement of industry science in the marketplace of ideas

• Potential confusions over the ownership or intellectual property status of federally funded discoveries (for example does the Genome belong in the public 

domain, or are components patentable?)

• Related information commons vs. proprietary views of information; that is, 

the ‘‘information wants to be free’’ ethic that permeates Internet policy but 

can threaten scientific endeavors

• Public access to scientific data upon which regulations are based

• The right to not fund science with which one disagrees

• Purported (but often exaggerated) conflicts of interest among federally funded 

scientists 1

We need at least some consideration of rising above or stepping outside such 

seemingly irresolvable policy conflicts. Indeed, there are lessons from other non-scientific areas—such as entertainment intellectual property, financial and privacy de-
44

bates, and the media ownership debate (where many presume that information can 

be ‘‘monopolized’’)—that have implications for the science policy debate. 

Disconnecting science from the technological gains to mankind in the name of 

‘‘basic’’ research can become a misguided passion. Science is likely to advance 

human welfare and remain most relevant to mankind if it is pulled into being by 

the actual needs of humanity, including practical ones. There are also stories to tell 

about how practical R&D led to general ‘‘truths’’ with wider application. Many are 

aware how the attempt to solve problems in microwave transmission led to discovery of the cosmic f background radiation, helping validate the big bang. 

To advance science and manufacturing, it’s right for the committee to ask what 

the Federal Government should be doing; but rather than run with the implied invitation to propose spending on scientific endeavors (obviously Washington can’t fund 

them all), Congress should ‘‘liberate to stimulate’’ rather than try to steer research 

and investment in particular directions. The national government’s role in actually 

fostering ‘‘knowledge wealth’’ is properly limited, but it’s role in liberalizing the 

American economy so that others can foster that wealth is of the utmost importance. 

I’ll probably stand alone in suggesting to you that for the most part, in civil society, ‘‘science’’ is not properly a public policy issue. What fosters fundamental scientific and in turn manufacturing wealth? What made the newborn United States 

lurch ahead of all the world’s economies in only 100 years, including Great Britain? 

Not the power of taxation and dispensation. The nature of the relationship of the 

state to free enterprise hasn’t changed because our economy has become high-tech. 

And getting policy right now is arguably more important now than at America’s 

founding; free enterprise is even more crucial to tomorrow’s scientific and information wealth than to the paper clips and widgets of yesteryear. 

Markets maximize output in tangible products and intangible services. But what 

we forget is that markets maximize the production of useful information economywide—including scientific information. It’s important for Washington to recognize 

free markets in knowledge-creation as the source of true and more objective ‘‘information wealth’’ and the resulting advances in manufacturing. 

In asking about fostering innovation, we’re really talking about what conditions 

create a better business environment whether we’re talking about tangible manufacturing on the other hand the creation of knowledge underlying it. 

Anyone can propose a smorgasbord of subsidies to add to the ones already contained in the COMPETE Act; but that shouldn’t necessarily be regarded as promotion of science and technology. There’s also a bit of the broken window fallacy 

here: not seen is the science not created by the redirection of resources to this or 

that temporarily favored project or field. Bolstering manufacturing and science requires vigorous competition among ideas for funding, not a Scientific New Deal. Nor 

is it optimal for sciences and applications to proceed walled off apart from one another in an appropriations environment; that undermines the swirling competition, 

cooperation, and ‘‘co-opetition’’ needed for the U.S. economy to surge and to stand 

up against overseas competition. 

So what is the national government’s proper role in manufacturing? Promote it? 

Constrain it? Or leave it alone? 

The national government can’t be the supercompliant superprovider in an increasingly complex society with tacit knowledge dispersed in countless ways; your outcome-oriented interventions, as opposed to liberalizations that leave outcomes up to 

the free choices of others, will produce prominent successes, but fail taken as a 

whole. Interventions, subsidies and regulations create an economy made up of suboptimal commercial entities that don’t resemble what they would under free enterprise, and that cannot function as the job engines needed now. 

Basically, you don’t need to tell the grass to grow, just take the rock off of it. Following the next section on some specific hazards of government steering the market, 

I’ll point to some of the rocks to move; that is, alternative approaches to advancing 

science and manufacturing that you should implement.

Why Subsidies and Steering Can Mean ‘‘Sub-Prime’’ Technology Policy

Government Steering can create artificial booms 

Vigorous calls for government research seem in part a reaction to the tech market 

downturn and the harshness of America’s recession. But one lesson of the telecom 

meltdown is that government can contribute to the inflation of artificial technology 

bubbles; we are at risk of a similar ‘‘green technology’’ bubble or conversely inefficiencies right now. For example, Spain’s King Juan Carlos University released find-
45

2 ‘‘The Big Wind Power Cover-Up,’’ Investor’s Business Daily, March 12, 2010. http://

www.investors.com/NewsAndAnalysis/Article.aspx?id=527214 3 Eisenhower’s Farewell Address to the Nation. http://mcadams.posc.mu.edu/ike.htm.

ings that each ‘‘green job’’ created by the Spanish wind industry cost 4 other jobs 

elsewhere. 2

In another sector, policies may be teeing up another real estate bubble as well. 

A brand new National Broadband Plan will distort evolution in the crucial field of 

communications. Forthcoming technologies should be products of capitalism, not 

central planning, government-favored R&D, and pork barrel. That helps discipline 

excess. We don’t want a scientific world of researchers chasing politically favored fads 

and steering their grant requests according to politics, whether biofuels, alleged energy conservation, materials conservation, smart grids, politically favored medical 

research, or whatever. Eisenhower warned in his 1961 Farewell Address of the risks 

of researchers designing proposals to link politically fashionable themes. It should 

worry us that:

public policy could itself become the captive of a scientific-technological elite 

. . . Partly because of the huge costs involved, a government contract becomes 

virtually a substitute for intellectual curiosity . . . The prospect of domination 

of the nation’s scholars by Federal employment, project allocations, and the 

power of money is ever present—and is gravely to be regarded.3

Government funding comes with strings attached 

Washington passed the bipartisan 21st Century Nanotech Research and Development Act in 2003 to provide nearly $4 billion to establish numerous research grants 

for nanotechnology initiatives, set up nanotechnology agencies, programs, subsidies, 

and steer students toward nanotechnology research. Anti-nanotech groups were already lined up in opposition, but Federal agencies are positioning themselves to regulate risks of nanotech, not necessarily to the good. 

Still another government/business funded report, called ‘‘Nanotechnology: a UK 

industry View’’ reaches yet again the same conclusions about nanotechnology as the 

ones that appear occasionally like the U.S. Environmental Protection Agency’s 

‘‘Nanotechnology White Paper’’ or the Food and Drug Administration’s 

‘‘Nanotechnology’’. Such reports uniformly call for open-ended role for political bodies to govern otherwise private endeavors in frontier sciences like nanotechnology. 

The reports say—brace for it—that governments should fund nanotechnology and 

study (endlessly) nanotechnology’s risks; and that they should then regulate the 

technology’s undefined and unknown risks besides. Since the business parties can 

become so dependent on political funding, they go along, cut off from envisioning 

an alternative approaches either to funding or managing hazards. 

Fundamentally, we face the choice of treating frontier manufacturing research, 

development and production like software and essentially leaving them alone, or of 

treating them like medical research such that they are regulated at every stage by 

an entity like the Food and Drug Administration (which may not necessarily foster 

safety). 

Unfortunately, the approach of government steering while the market rows is opposite from the way software is produced and marketed, and assures that there will 

never be a ‘‘Bill Gates of nanotechnology’’ as CEI’s Fred Smith often puts it. That 

is, if every new nanotechnology advance faces FDA medical-device-style hurdles, 

this is an industry that cannot begin to reach its potential. Naturally we must defend against risks (and this report will cover approaches shortly), but the strings 

attached to American frontier sciences’ practical applications may move our entrepreneurs overseas, assuming overseas markets don’t overtake ours first.

Political failure overwhelms ‘‘market failure’’ in basic research investment 

The intellectual case for taxpayer funding of science and favored manufacturing 

is based on the market failure argument. Supposedly research creates value not easily captured, and rivals can free ride. Some also suggest an investment payback period intolerably distant for market entrepreneurs. The market, it is argued, will 

under-invest. Of course, everything about competitive rivalry is geared toward compressing that discovery-to-deployment phase. 

Part of the problem here is a false dichotomy between basic and applied research. 

Regardless, price signals are needed to allocate scarce R&D resources to challenges 

that, if overcome, would most reward innovators, advance human needs, and maximize the rate of technological progress and job creation. The absence of a residual 

claimant who can garner windfall returns undermines the political appropriations 
46

4http://www.pcworld.com/businesscenter/article/191438/fccs¥national¥broadband¥plan¥

whats¥in¥it.html 5 Alex Nowrasteh, ‘‘Let Immigrants Power America’s Scientific Progress,’’ Detroit News, December 2, 2009. 6 Auren Hoffman, ‘‘To Grow a Company, You Need to Be Good at Killing Things,’’ Summation, 

February 21, 2010. http://blog.summation.net/2010/02/to-grow-a-company-you-need-to-be-goodat-killing-things.html. 

environment, but private investors can rationally invest in a range of low probability projects, counting on the profits from the rare success to offset the many failures (somewhat like the music business). 

Besides, Teflon, Tang and Velcro did not spin off from NASA. Memory foam did 

though.

Politicians can’t choose rationally (no offense) 

Except when a local earmark or pork-barrel project is at stake, almost any politician will admit that government has no innate ability to pick among competing 

technologies, particularly using taxpayer money. And government plans operate on 

an election timeline that doesn’t conform to market needs; A current example, the 

Federal Communications Commission’s ‘‘National Broadband Plan’’ was presented to 

Congress March 16, 2010, but it has little chance of going anywhere this year,4 yet 

creates damaging uncertainty in the industry about what will or won’t happen. 

Making America’s precious scientific and manufacturing resources subordinate to 

such a process is sub-prime public policy to say the least. 

Politicians cannot assign rational priorities to the endless parade of ‘‘significant’’ 

projects, thus will select popular ones benefiting local constituencies; just note the 

continuing funding of new libraries in the digital age (as opposed to just handing 

out wireless-enabled laptops), new Post Offices, elements of the just-noted National 

Broadband Plan, the Nanotech Initiative, recent jockeying over tech programs for 

rural small businesses, and so on and on. Scientific merit may be underwhelming, 

but the rhetoric of science and technology are assured. 

The hazards of a government appropriations process and the accompanying beehive of lobbying for sub-optimal projects are numerous. And expensive. Consider the 

Superconducting Supercollider. Or the Space Station (recently called ‘‘scientifically 

worthless’’). In the space program, entrenched contractors and legislators from 

flight-center districts enjoy cost overruns, and lobby against cheaper unmanned 

flights. An ethic of revolutionizing space flight becomes unthinkable, and is a lesson 

for future technology implementation.

International competition is not zero sum 

Sometimes politicians will bolster the market failure argument and urge national 

government investment by characterizing technology as a race against other nations 

that we stand to lose. 

Experience suggests foreign investments like supersonic airliners and before-itstime high definition TV can be turkeys as easily as some U.S. domestic boondoggles. 

But more importantly, we all benefit globally when countries find more efficient 

ways of producing some good or service. Viewing such gains as losses is to revert 

to the old mercantilist idea that international trade and commerce are like war. 

Besides, a better way to deal with this particular concern of overseas competitors 

is for our policy to allow more of the world’s best and brightest to become American 

citizens and entrepreneurs. As CEI analyst Alex Nowrasteh put it in a recent Detroit News column, ‘‘Either businesses will move to the talent or the talent will move 

to where the opportunities are. What movement occurs depends on immigration, 

trade, and other regulatory regimes. Generally, all else remaining equal, it is far 

cheaper and more beneficial to all concerned when talent moves toward opportunities.’’ 5

Taxpayer Funding Misdirects Resources 

Markets have to be good at killing bad projects as well as creating new ones to 

prosper,6 but appropriations processes are less capable of systematic pruning. The 

problem with government science is that virtually all interested parties seek to grow 

government rather than pull the plug on exhausted ill-considered projects, from tiny 

ones to the gargantuan like the space station, shuttle or the supercollider. The result is higher taxation and dollars directed to multiplying unchosen ends. Science 

resembles any other rent-seeking interest in this respect. In an examination of testimony before congressional panels, nearly all ask for more money, not less, and the 

ratio was hundreds seeking growth to one asking for less government. 
47

7See, for example, Terence Kealey, ‘‘End Government Science Funding,’’ Cato Institute, April 

11, 1997. http://www.cato.org/pub¥display.php?pub¥id=6168.

Expansion of government-funded science doesn’t help anyway if the metric is the 

proportion of a nation’s GDP devoted to R&D. Research by scientist Terence Kealey 

suggests both that the private sector funds basic research out of competitive necessity in a global economy, and that total R&D expenditures tend to correlate to GDP 

rather than to particular national policies.7 That is, where government R&D is low, 

the private sector simply invests more. Higher GDP begets higher R&D, in other 

words. Substitution and tradeoffs mean taxpayers gain little from increased political 

R&D, and may lose a lot because of the inefficiencies, sub-par policy and anti-competitive political choices. (See Appendix I for a summary of some of Kealey’s findings and other bullets about government science funding.) 

Taxpayer funding can create a glut of or the wrong kind of graduates 

The COMPETE legislation is not alone in proposing higher numbers of technology 

graduates; another is the recent cybersecurity legislation. But if the market needs 

them, higher salaries will draw people to the application-specific training actually 

required. Creating a premature government-sponsored glut of Ph.D.s in this or that 

technological field is not the same as actually advancing useful knowledge sought 

in the marketplace. America’s companies don’t need Ph.D.s as such, they need 

knowledge, which in the Internet age materializes in ways unrelated to brick and 

mortar universities’ offerings or to subsidies. It also appears that government funding may have potentially detrimental impacts on scientists’ salaries (Appendix I).

Taxpayer funding artificially complicates intellectual property disputes 

Other complications involve patent ownership disputes between university and 

corporate collaborators over who controls future profits, the rights of taxpayers to 

the spoils, and access to research results or data for competitors or the public. Examples are disputes over the ownership status of genetic discoveries or basic molecular information, the current controversy over access to source data underlying predictions of global warming models (so-called ‘‘climate-gate’’). Pharmaceuticals routinely face compulsory licensing threats globally. Taxpayer funding as such assures 

similar vulnerability for other frontier sciences. 

Nanotechnology, biotechnology and other ‘‘information wealth’’ fields arise against 

a backdrop of disputes in seemingly unrelated fields that nonetheless should set off 

alarms, such as the open source vs. proprietary debate surrounding software. Even 

entertainment—online music—faces calls for compulsory licensing, when digitization 

itself has undermined the very ‘‘market failures’’ that led to compulsory licenses in 

the first place. Property rights are also vulnerable in the so called ‘‘net neutrality’’ 

debate, by which some hope to outlaw proprietary business models altogether in 

favor of compulsory ‘‘openness’’ on communications networks. Taxpayer funded 

science and manufacturing are inescapably vulnerable in this environment. Congress must recognize that while we had a John Locke for the tangible property, industrial age, we regrettably lack one for today’s information and knowledge-economy 

age. 

One answer to the question raised in this hearing, ‘‘What is the Role of the Federal Government in Supporting Innovation by U.S. Manufacturers?’’ is that we urgently must legitimize the private-property status of new forms of wealth, and not 

pursue policies that delay these underlying institutional innovations.

Taxpayer funding may confront a ‘‘Regulatory Bias Problem’’

The Regulatory Bias Problem occurs when agencies’ charters encourage them to 

consider only certain risks or certain benefits. As CEI president Fred L. Smith Jr. 

has pointed out in past testimony, DOE and EPA both view energy efficiency as a 

‘‘good thing’’ rather than one of multiple product features. But a less safe energy 

efficient car may be a ‘‘bad thing.’’ Inadequate attention to research on the unintended consequences of funding and overregulation impacts technological evolution.

Substituting Government Funding For Competitive Discipline Can Undermine Safety 

Policymakers rarely can admit it, but their ‘‘safety’’ regulation can undermine 

safety. 

That’s a problem, because ‘‘undiscovery,’’ or abandoning even the riskiest scientific 

research is likely out of the question. Bans will be ignored in a global environment, 

as failed cryptography bans and spam laws and overseas (and likely domestic) efforts to clone demonstrate. 
48

8 As for the ‘‘gray goo’’ catastrophe scenario of runaway ‘‘nanobots,’’ it’s not compelling since 

in every other instance environmentalists say an organism needs an eco-system to survive. The 

scenarios are silly, and moreover there’s no shortage of proposed solutions to the problem were 

it genuine.

Government can exacerbate risks of new technologies. An appropriations environment can send technology lurching in non-market directions (again like the 

broadband plan), all subject to future political rug-pulls. Meanwhile while political 

funding comes with strings attached on the one hand, it can indemnify companies 

for the hazards they create on the other. Homeland security technologies like gas 

masks for example, can be indemnified in the event they fail. 

Free enterprise actually can do a better job regulating risk. In normal markets, 

before your nanotech company (for one example) can attract investors and get off 

the ground, disciplinary institutions like liability and insurance have to accompany 

you; One must satisfy capital markets, insurers, upstream business suppliers, horizontal business partners and institutional buyers, downstream business customers, 

investors, consumers, public and global markets. Markets and capitalism should, 

and do, bring highly risky products forth (financial instruments, electricity, new 

forms of energy, behavioral advertising, cybersecurity for sensitive-information networking, emergent low-earth-orbit space touring); but government promotion, subsidies and indemnification can short circuit the risk-mitigating disciplines that must 

emerge alongside. 

Dangerous, uninsurable ventures rightly scare off investors. But government 

domination of risky, but promising frontier research can take it out of the realm of 

insurability and an otherwise impossible appearance in the marketplace, and even 

provide immunity. The Price Andersen Act artificially limited the liability of nuclear 

power plants but meant total regulation. Would a more market-oriented development path have made nuclear power more viable over the past decades? We may 

never know. 

Today’s military and homeland security emphasis for technologies has significant 

implications for the evolution of and for the public policy stances taken new technologies. Homeland security legislation indemnifies companies from liability when 

their ‘‘security technologies’’ fail. Taken too far, liability markets in crucial areas 

may never emerge. But in a healthy marketplace, liability coverage and product certification will likely flourish contingent upon adhering to guidelines demanded by 

many stakeholders. 

We want the defensive mechanisms to emerge, as well as appropriate professional 

ethics regimes, but the way we choose to fund frontier scientific fields will impact 

safety and the prospects for competitive discipline as well as the horizon available 

to engineer counterbalancing technologies to offset any risks that emerge. Market 

‘‘regulation’’ or competitive discipline is quite demanding. If nanotechnology (for example) introduces a risk of ‘‘gray goo,’’ 8 the competitive disciplines arrayed against 

it can constitute ‘‘blue goo,’’ or a policing mechanism. Government dominance can 

give our most promising new industries an undeserved black eye, and guarantee 

counterproductive regulation and less innovation. 

Moving the Rocks So the Grass Can Grow

‘‘COMPETE’’ by Separating State and Economics 

We need an agenda for strengthening private manufacturing that offers specifics 

on separating state and economics. This includes the obvious, like systematically 

evaluating and reducing tax and regulatory burdens. It also means thinking about 

how it was that the U.S.—only 235 years old—became richer than the rest of the 

world in a historical eye-blink; and how that remarkable achievement can be sustained as other nations embrace institutions of liberty and create ever-competitive 

markets. 

‘‘Doing something’’ is not the same as just spending money. When linking research 

to human needs and promoting manufacturing wealth, capital markets trump the 

appropriations process. Interestingly, adding up the dollars in the COMPETE Act, 

seems to total perhaps a few billion. But the gains from removing barriers to private 

research could yield far greater benefits. Emphasizing spending stimulus for science 

and manufacturing has strings attached, invites rent-seeking and can have a detrimental impact on safety. Government’s proper stance is one of indifference or neutrality, since many technologies, some not in existence yet, will always compete for 

scarce investment dollars. A better approach now is to ‘‘liberate to stimulate.’’

It was noted earlier that that Congress has a far more important job to do that 

it can’t escape by sprinkling cash on the technology sector. As discussed in Still 
49

9http://cei.org/cei¥files/fm/active/0/6425.pdf

Stimulating Like It’s 1999,9 there exists a natural tendency toward recession when 

government fails to perform its ‘‘classical’’ function of ensuring that prices of materials, labor and other inputs aren’t hoisted above market clearing levels by rentseeking behavior in the economy. 

The job now is to liberalize, to perform the actual job of removing impediments 

that hobble wealth creation, in particular in science and technology. Borrowing from 

Friedrich Hayek in ‘‘The New Confusion About Planning,’’ the issue is not whether 

industry has to be regulated, or ‘‘planned.’’ Rather, the question is who will do that 

planning; the right approach is to unleash competitive discipline. Suggestions follow.

First, Avoid Picking Favorites Among Technologies 

As CEI’s Fred Smith points out, in the Federal R&D sweepstakes, bolstering 

promising technologies has been compared to efforts to improve the speed records 

at a racetrack by picking the R&D horses to run. However the condition of the track 

and the rewards available also matter. Faster speeds might also be had by improving the track, the business and regulatory environment, and by letting jockeys keep 

more of their earnings. 

The government-picking-technologies model undermines economic liberty, innovation, wealth creation, ‘‘national competitiveness’’ (the ever-present rationale for government R&D) and consumer benefits, and is itself a source of risk. Many have argued that viable technology doesn’t need a subsidy, and non-viable technologies 

probably can’t be helped by one. Otherwise, we are distorting markets, creating bubbles, and teeing up future rippling recessions. Rather than picking the winning 

horses (or worse, actually being one of the horses), government’s legitimate role is 

to improve the track on which all the horses run; that means liberalizing the tax 

and regulatory environment within which entrepreneurs operate, for starters. 

Interestingly, when the Wright Brothers made their historic flight, their rival was 

Samuel Langley’s War Department-funded, ‘‘Aerodrome.’’ He was catapulting the 

thing out over the Potomac river. The Wrights ran a bike shop, but it became a state 

of the art aeronautics lab. 

Frontier scientific manufacturing fields are plainly viable on their own, moving 

forward on fronts too numerous to catalog. To approach the matter otherwise is an 

impediment.

Minimize Tax Burdens and Implement Rational Tax Policy 

Other commentators routinely address tax burdens. This report focuses instead on 

the regulatory environment, which policy more often tends to ignore. Nonetheless, 

accounting standards that treat R&D as an investment to amortize, rather than an 

immediate expense, can be a deterrent to non-governmental basic research that 

Congress should evaluate. (Tax credits would be a poor substitute because they 

amount to picking among technologies.)

Allow freer ‘‘trade’’ in skilled labor in the US 

As noted briefly before, many knowledge workers want to move to the United 

States and create companies and jobs, or want to stay after being educated here.

Avoid Safety Regulation that Makes Us Less Safe 

As Henry Miller of the Hoover Institution explained, ‘‘A regulator can approve a 

harmful product, or delay a beneficial product. Both outcomes are bad, but regulators are attacked by the media and politicians only approving a harmful product. 

Delaying beneficial ones is a non-event.’’

Biotech, nanotechnology and other frontier sciences introduce risks but can also 

mitigate them. We should care about this not merely because of the fact that wealth 

is enhanced by keeping precaution in perspective, but because the precautionary 

principle is itself a hazard; moving forward has risks, but so does stagnation. For 

example, rather than being the asbestos or ‘‘gray goo’’ of tomorrow, nanotechnology 

could be an input to make our environment cleaner. Most agency studies emphasize 

the hazards of nanotechnology; they should study the hazards of regulation and the 

hazards of government funding hobbling the industry as well. 

As described before, the drive to regulate safety isn’t only undermining wealth 

creation in frontier science and manufacturing, but also threatening the emergence 

of needed safety and disciplinary practices. It’s important to avoid safety regulation 

that either inadvertently or deliberately preempts superior competitive discipline.
50

10See Iain Murray, ‘‘A Wall of Separation Between Science and State,’’ Competitive Enterprise 

Institute, October 19, 2006. 11From Iain Murray, ‘‘Patronizing Science,’’ National Review Online’s Corner, September 24, 

2007. http://corner.nationalreview.com/post/?q=Yzg0MThlYzFlMDAlMjY0NGM2NjlhOGM2O

DQ0YzhiNjk=

Liberalize Capital Markets 

While it doesn’t enjoy the reputation for it, capitalism is among the greatest democratizing forces in the world. The corporate structure that emerged to spread risk 

in the days of sailing ships is now a system of spreading of ownership of companies 

to millions of citizens; the miracle of the fact that people unknown to one another 

can work together to create unprecedented wealth is one of the great advances of 

the millennium. 

Recent regulation in the wake of the Enron and WorldCom scandals has impacted 

smaller entities in unfavorable ways. While it did not pass late last year, the ‘‘Wall 

Street Reform and Consumer Protection Act of 2009,’’ would have rolled back at 

least one of the excesses of Sarbanes-Oxley financial regulation impacting small 

public companies. 

In a media advisory, the Biotechnology Industry Association praised two provisions: one would have permanently exempted companies with market capitalizations 

below $75 million from the SarbOx Act’s Section 404(b) internal control requirements (which the Obama administration supported along with most Republicans 

and 101 House Democrats. The other provision would require an SEC study examining SarbOx compliance costs (and benefits) for companies with floats below $700 

million and revenues under $250 million. Despite the bipartisan criticism of that 

legislation, no reforms for small business relief have yet passed. 

Nor were the relaxation provisions a part of the Chris Dodd financial reform bill 

under consideration this March, but it could be offered as an amendment.

Privatize: (Remember That?) 

One aspect of liberalization is privatization of Federal research facilities, which 

itself would remove constituencies for government funding. Of course the America 

COMPETES emphasis is on government spending rather than privatization. During 

the 1990s, it was proposed that essential military aspects of Federal labs be transferred to the Department of Defense, while commercial aspects should be privatized 

by offering them to the industries they supposedly benefit or by allowing research 

staffs to take them over via an employee buyout approach. Such options should be 

discussed more than they are.

Award ‘‘Prizes’’ for the time being 

Privatization of Federal research is a hard sell when the topic at hand is public 

funding expansion. Perhaps one approach is to forbid Federal funding for technologies that do not yet exist, and grow out of the problem. In any event, a worthy 

idea noted in the discussions surrounding the America COMPETES Act is that of 

awarding prizes, the idea being that ‘‘Payment to researchers would reward accomplishments rather than promises.’’ 10

The idea is an appropriate one to consider in transitioning to a more privately 

funded regime and will be (and is) attractive to foundations. But why did grants 

take over prizes—which used to be prevalent—in the past?

The answer appears to be the power of patronage. Research by Robin Hanson 

when he was at UC Berkeley suggests that during the 19th century, scientific 

societies that had collected money from bequests to distribute as prizes realized 

that they had much more power over the direction of scientific research if they 

distributed the money as grants instead. So they could finance favored scientists and preferred research directions, something that genuine prizes would 

not allow . . . . All of which suggests that scientific bureaucrats knew exactly 

what they were doing when they moved from prizes to grants.11

Enlarge regulatory flexibility to bolster small business 

Congress can’t manage and deal with the regulatory burden that undermines innovation if it doesn’t measure it, so should regularly consider how regulations 

mount as a small firm grows. Especially in today’s economic recession, it’s important 

to inventory all the regulations that impact a small business as it grows, and look 

hard at rollbacks (See Appendix II for a draft chart of how regulations mount as 

a firm grows.) 
51

12http://www.sba.gov/advo/r3. 13See Wayne Crews, ‘‘The Free Market Alternative to Mandatory Open Access,’’ Electricity 

Journal. 14http://www.nytimes.com/2009/05/12/business/economy/

l2antitrust.html?¥r=1&adxnnl=l&adxnnlx=1268514088-MohE/8/mpcqIAEXJNqJ1JQ. 

Relatedly, Congress could boost a more ambitious ‘‘R3’’ program (Regulatory Review and Reform) at the Small Business Administration’s Office of Advocacy 12 to 

give entrepreneurs an avenue to protest onerous rules pouring out of more than 60 

agencies. 

Avoid New Regulatory Mandates in Service and Manufacturing Sectors 

The challenge is to foster the creation of scientific and manufacturing wealth. Research and manufacturing do not happen in a vacuum, and all our communications 

and critical infrastructure impact the educational, scientific and manufacturing concerns at issue in the America COMPETES Act. To that end, Congress should avoid 

such sweeping policies as cybersecurity mandates that threaten infrastructure investment, avoid the likes of the new ‘‘National Broadband Plan,’’ and avoid ‘‘net 

neutrality’’ mandates that either inappropriately influence funding decisions or dictate business models. New health care legislation likewise will inevitably affect the 

ability of firms to invest in research.

Liberalize the Nation’s Communications Networks and Infrastructure 

Innovation like basic research itself doesn’t proceed in a vacuum; sectors inform 

and enrich one another, making it advisable to tear down regulatory silos artificially 

separating our great infrastructure industries wherever possible so that knowledge, 

ideas, products and collaboration flow more freely. 

Maximizing infrastructure wealth creation—communications, transportation, energy, electricity, water and so on—bolsters the manufacturing sector that depends 

upon it all (as well as consumer well being). Here are a few steps Washington could 

implement:

• With respect to broadband deployment, declare ‘‘net neutrality’’ permanently 

off the table; announce that proprietary networks and investments will not 

be subjected to forced sharing and price controls, only voluntary agreements 

and alliances.

• Remove exclusive franchises that make it illegal, not difficult, for firms to 

compete with incumbent electric companies. Right now, it’s illegal to run an 

extension cord across the street.13

• Establish an aggressive campaign to liberalize network and infrastructure industries, which are now artificially segregated into regulatory silos (telephone, electricity, water, sewer, cable, railroad, airline, air traffic control). 

This would create opportunities for them to work together and jointly invest 

in new power lines, fiber to the home, roads, bridges, airports, toll roads and 

more, and boost industries that depend upon them.

• Relax antitrust so that firms within and across industry sectors can combine 

and create business plans to bring capitalism and infrastructure wealth creation to the next level (described further in the following section).

• Liberalize spectrum and secondary markets in it such that wireless wealth 

is freely created apart from regulators.

Relax Counter-Productive Antitrust Laws 

President Obama has suggested a desire to boost antitrust enforcement.14 That’s 

unfortunate. Antitrust can be a highly predatory anti-business and anti-consumer 

phenomenon. 

Today, many universities and scientific centers pursue parallel research. In an alternative setup, innovators might pool efforts, and in so doing be a better target for 

VC investment with sophisticated profit sharing agreements. Such approaches may 

be hampered by government domination. 

A recent Financial Times article noted over 800 research institutes involved in 

nanotechnology in the UK alone. What this reveals is an industry crying out for consolidation into perhaps a few large-scale research enterprises. Thus, antitrust liberalization obviously might occur to observant political authorities, for example, but 

you may rest assured that it likely has not. The same government-steers-while-themarket-rows approach dominates in the U.S.; nanotech funding is spread out not 

always according to market pressures, but across dozens of congressional districts. 
52

15http://papers.ssrn.com/sol3/papers.cfm?abstract¥id=244158. 16 Rick Weiss, ‘‘NIH Bans Collaboration With Outside Companies: Policy Comes After Conflictof-Interest Inquiry,’’ Washington Post, September 24, 2004; Page A23. 

The antitrust laws remain a significant barrier to a flowering of cooperative business efforts and private R&D. It is precisely in tech industries that private standard 

setting, joint research and risk sharing arrangements are most likely to overcome 

alleged market failures in basic research output. Yet some would block such arrangements, as well as mergers among firms engaged in like research. While 

vertical mergers are accepted, this sentiment should be extended to horizontal mergers or ‘‘collusion’’ that could bolster frontier research. Markets require competition, 

sometimes merger, and sometimes merely the kind of cooperation or ‘‘partial merger’’ often miscast as damaging collusion. 

Through artificial constraints and interference, antitrust sends our great, productive firms into directions the market never intended, hobbling entire industry sectors. Antitrust vetoes market decisions and subdues enterprise by keeping it fearful. 

That destroys the very process of wealth creation itself. The misallocation of time, 

talent and resources, and wealth destroyed over the years by antitrust, is difficult 

to envision. 

No firm is ‘‘larger’’ than the rivals, upstream suppliers, downstream business customers downstream purchasers, partners, consumers, Wall Street, advertisers, future competitors, global competitors media watchdogs, trade press, local-nationaland-global capital markets. All of these discipline behavior, arrayed against the firm 

if it misbehaves. 

Antitrust deprives the marketplace and consumers of the otherwise necessary 

competitive responses to the presumed monopolist’s actions by these entities. Such 

short-circuiting of the frenzy of large-scale free enterprise causes economic disruption on a level a single firm could never do. Other ways to discipline errant market 

behavior include reinvigorating the market’s own forces like hostile takeovers, the 

private ‘‘market for corporate control,’’ 15 that government itself in some instances 

has neutralized. 

No ‘‘monopoly’’ is as large as the government. At a time when the economy needs 

stimulus we should not distract the wealth-creating sector’s attention with artificial 

hindrances to growth rooted in smokestack era law.

Emphasize Rational Intellectual Property Policy 

Give thought to the property rights regimes best suited to sustain wealth creation. 

Government funding of research will increasingly present intellectual property dilemmas, such as calls for ‘‘open access’’ to either the data used in the conduct of 

research, or to the rights to the intellectual property underlying the fruits of the 

research, or use of the product itself. 

Industries and companies seeking government funding of their pet projects would 

best reconsider. In an era in which so much new research in frontier scientific fields 

is government funded they should pause to consider that they are undermining 

their own chances at self-protecting their intellectual property, and are creating an 

environment for global ‘‘compulsory licenses’’ of sorts. Future hearings should address alternatives to compulsory licensing, and address the hazards to monitor regarding ownership status of government funded research. Ray Kurzweil testified 

that ‘‘The golden age of nanotechnology . . . will bring us the ability to essentially 

convert software, i.e., information, directly into physical products.’’ If the product is 

the Ferrari he mentioned, we definitely want to get this policy right. 

Public funding also creates often-needless conflict of interest disputes when government scientists interact with private ones. See ‘‘NIH Bans Collaboration With 

Outside Companies’’ 16 for example. 

Public funding reintroduces the conflict between those who favor an ‘‘information 

commons,’’ and those who feel information might best remain proprietary. The ‘‘information commons’’ approach is already leading to compulsory licensing calls in entertainment—movies and music—so it’s a guarantee that open access will be demanded with respect to the genome, biotech, nanotech, pharmaceuticals, space 

science. If that occurs, even those who shun government money will not be immune 

to threats to their intellectual property. In our mixed, highly taxed and regulated 

economy, it’s easy for anyone to claim that all research is subsidized in some way, 

leading to ever more public access, and a decrease in willingness to undertake research. 

In certain respects public access to government data is appropriate (when that information is used to regulate, for example) but as a rule, that inclination is too 

sweeping, and we need to consider the broader implications; we need a different, 
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17For a related debate see James Robinson, ‘‘MPs to call for free online access to science journals,’’ July 11, 2004. http://politics.guardian.co.uk/news/story/0,9174,1258849,00.html. 

more complete vision that cuts across issues, that warns of the downside of any expectation of automatic public access to research data.17

The ethic of public access sounds appealing and it is, but there can be downsides. 

Properly construed, in the productive economy, proprietary models can serve to increase the amount of information created more than open, non-proprietary ones do. 

In the productive sphere, all government needs to do is permit open access to information for those who prefer to operate that way (consider the case of open source 

software), but leave room for other business models too. Sometimes people and companies keep ‘‘secrets,’’ and there’s nothing sinister about their doing so, and it’s ultimately good for basic research and for mankind, and others can reject their results. 

It’s one thing for policymakers to be reluctant to extend legal intellectual property 

protections; but for data and results to automatically belong in the public domain, 

to even forbid private intellectual property protection, seems to be the ultimate end 

of some points of view. (In entertainment, for example, full-blown opposition to copy 

protection technology is seen as a normal viewpoint.) 

Open access policies are, of course, almost impossible to avoid when government 

is funding the science. Transparency is critical when government is involved since 

government does not rely on voluntary arrangements. Thus, the analytic basis for, 

say, air pollution regulations should be available. In contrast, no one should be able 

to demand that a scientist disclose the recipe for Red Bull.

Sunset Regulations and Implement a Regulatory Reduction Commission 

More than 60 departments, agencies and commissions issue some 4,000 regulations a year in thousands of Federal Register pages, all of which are documented 

in Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory 

State. 

Costs of regulations run at an estimated $1.2 trillion annually. Congress should 

implement a bipartisan ‘‘Regulatory Reduction Commission’’ to survey existing rules 

and assemble a package to eliminate with a straight up-or-down vote, no amendments allowed.

Halt ‘‘Regulation Without Representation’’ by Requiring Congressional Approval for 

Major Business Regulations 

Of the 4,000 annual regulations, 100 plus are ‘‘economically significant.’’ Rather 

than the current ‘‘resolution of disapproval’’ process, these rules should require an 

expedited congressional approval before they are effective. Apart from the competitiveness and innovation issues that concern the COMPETE Act, the delegation of 

legislative power to unelected agencies has long been something needing attention. 

We should continue to challenge delegation of legislative authority from Congress 

to agencies, and at least require congressional fast-track approval before major or 

significant non-quantifiable agency-promulgated regulations take effect.

Perform Basic Deregulatory Housekeeping 

A difficulty is that the specific regulatory programs under each agency also have 

cheerleaders that make it difficult to reform. So in the meantime, freezes, purges 

and the like should be actively pursued; those can be based on gleaning better information about just what it is that the dozens of agencies are up to. 

Performing government’s proper task of liberating economic enterprise instead of 

spending stimulus requires tasks like the ‘‘move the rock’’ policies noted above; but 

also basic annual procedures, monitoring and housekeeping like the below are part 

of maintaining rational policy:

• Re-discover federalism, that is, circumscribe the Federal role regarding investment and regulatory matters best left to states and private enterprise. 

Congress should look at what Federal Government does that it could eliminate, or that states could do instead to provide a manufacturing boost.

• Improve the ethic of quantifying regulatory costs, and selecting the least-cost 

compliance method.

• Codify President Clinton’s executive order on ‘‘Regulatory Planning and 

Review′′ (E.O. 12866), or, Reagan’s E.O. 12291 which provided for more external review.

• Require OMB’s Regulatory Information Service Center to publish number of 

major and minor rules produced by each agency, and strengthen its oversight.
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• Reinstate the Regulatory Program of the U.S. Government, which formerly 

appeared routinely as a companion document to the Budget.

• Declare Federal Register notices as insufficient notice to small business

• Hold hearings to boost the scope of the Small Business Administrations’ ‘‘r3’’ 

regulatory review program.

• Lower the threshold at which a point-of-order against unfunded mandates applies.

• Implement a supermajority requirement for extraordinarily costly mandates.

• Lower the threshold for what counts as an ‘‘economically significant’’ rule, 

and improve explicit cost analysis.

• Explore, hold hearings on, and devise a limited ‘‘regulatory budget.’’

• Establish an annual Presidential address or statement on the state of regulation and its impact on productivity and GDP.

• Sunset regulations after fixed period unless explicit reauthorization is made.

• Require that agencies calculate Costs, but not benefits, which Congress 

should have considered already

• Create new categories of major rules to improve analysis

• Publish data on economic and health/safety regulations separately

• Disclose transfer, administrative and procedural regulatory costs

• Explicitly note indirect regulatory costs

• Require agencies and the OMB to: (1) Recommend rules to eliminate and (2) 

Rank rules’ effectiveness

• Create benefit yardsticks to compare agency effectiveness

Issue and Act Upon a Annual Regulatory Report Card to Accompany the Federal 

Budget 

In attempting to implement economic liberalization for the wealth creating sector, 

a ‘‘Regulatory Report Card’’ should be part of the basic housekeeping just noted.

Regulatory Report Card . . . with five-year historical tables . . .

• Total major ($100 million-plus) rules and minor rules by regulatory agency

• Numbers/percentages of rules impacting small business

• Numbers/percentages featuring numerical cost estimates

• Tallies of cost estimates, with subtotals by agencies and grand total

• Numbers and percentages failing to provide cost estimates

• Federal Register analysis: Pages, proposed and final rules by agency

• Most active rule-making agencies

• Rules that are deregulatory rather than regulatory

• Rules that affect internal agency procedures alone

• Numbers/percentages required by statute vs. rules agency discretionary rules

• Rules for which weighing costs and benefits is statutorily prohibited

• Detail on rules reviewed by the OMB, and action taken

If Taxpayers Do the Funding, Let Taxpayers Call the Shots 

Other people have goals that are just as legitimate as those with the wherewithal 

to get representation by lobbyists in Washington or to appear at a hearing. We don’t 

always hear their voices. My Cato Institute colleague Tom Miller put it best when 

asked by tech reporter about Federal nanotech funding: he said, ‘‘I suggest giving 

them nanodollars.’’

In proposing an end to the Advanced Technology Program years ago, Michael 

Gough offered a real test of taxpayer support: ‘‘Let the government give taxpayers 

who want to invest . . . a deduction from their income . . . [and] share in any profits that flow from it. That’s what taxpayers get from private investments. It’s not 

what they get [when government] takes tax money . . . and invests it in private 

enterprise.’’

In Conclusion, Compete for Real 

As sometimes noted, occasionally the problem with research isn’t market failure 

but the failure to have markets. 
55

This call for reassessment coincides with many months of recession. The bold political action and genuine leadership needed in a crisis today is different from what’s 

going on. Indeed, the political price can be too high for election-bound lawmakers 

or career politicians to entertain non-governmental recession recovery. 

As Friedrich Hayek pointed out, the politicians blamed during a bumpy transition 

to something closer to laissez-faire will be the ones who stop interest-group benefits, 

stop labor union benefits, or stop the inflation, stop the mal-investment created by 

earlier government interventions and favoritism, and so on—not the ones who started those costly processes decades ago. Instead, government proposes to spend a 

great deal of money, but leave all these interventions in place and add more besides, 

cementing a national government ‘‘role’’ in science and manufacturing. 

Real stimulus, that of comprehensive liberalization of a fettered economy, requires 

perhaps unpalatable changes in what people expect from government now that 

they’ve come to depend on what it redistributes. That’s a seemingly intractable 

problem, and I’m not sure the country can recover from it—but leadership would 

require making the attempt. So, again, political reality prevents halting the compounded economic damage that artificial stimulation and financial ‘‘bailouts to nowhere’’ promise to deliver. Political reality tends to prevent the separation of state 

and economics. 

Markets and capitalism manage risk and generate wealth; our shortfall is often 

to have too little capitalism and free enterprise, properly understood, not too much. 

Unfortunately that lesson isn’t being learned, and the ability to reinvigorate the disciplinary institutions of capitalism diminish by the day as governments assume 

greater control and powers over important economic sectors like science and technology that will be difficult, if not impossible, to wrest from them. Another Contract 

with America may or may not be welcome, but a handshake in deference to free enterprise would go a long way today.
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BIOGRAPHY FOR WAYNE CREWS

Chairman GORDON. Thank you, Mr. Crews. 

As I had mentioned earlier, but for the Members that have just 

come in, we are expecting to have votes at 11:00, which means that 

we will probably need to be leaving at 11:10 or so. For that reason, 

I am going to be stricter on the five-minute rule so that we can try 

to get through, and not impose on our witnesses to have to stay, 

and also since I made an earlier statement, I am going to waive 

my right for questions. I will wait until later and call on Dr. Baird. 

Mr. BAIRD. I thank the Chairman. I thank our distinguished 

panel. Mr. Chairman, I think this is a critical issue and I commend 

you. 

One of the things I am most impressed with is the initiative of 

your various organizations, you know, especially the chemical industry, particularly the consumer products, the work you are doing 
64

in creating jobs, creating new products, GM as well, and in 

nanotech that are environmentally friendly. I think you deserve a 

tremendous amount of credit. 

I am very intrigued by this issue, Dr. Tuominen, of an interagency approach. You know, we tend to silo a little bit and we hear 

a lot about this on this Committee. We have got NSF and NIH [National Institutes of Health], sort of the basic research, and then 

how do we scale that up? Dr. Smyth talked about MEL as a vehicle, but it tended to seem to me that, if I may paraphrase, we are 

strong on the innovation side but we are not as strong on linking 

that innovation to the actual manufacturing that is going to create 

the long-term jobs. Expand on that theme, if you would. What else 

do we need to do to make this more efficient? Dr. Tuominen and 

then any others. 

Dr. TUOMINEN. I first will mention that I am answering from the 

nanomanufacturing hat, and nanomanufacturing being a new field, 

and that the agencies are already working together in the National 

Nanotechnology Initiative, it makes it much easier. But I can say 

from where I sit, that has been a great benefit to the field, because 

we are aware of what is going on in NIST, DOE, DOD [Department 

of Defense], NSF and other agencies with regards to 

nanomanufacturing, and we see the benefits of having this global 

vision in terms of avoiding duplication, of taking advantage of 

synergies between the agencies. It is proving to be very productive. 

Mr. BAIRD. So you feel we have got some of that happening already in the interagency work on the nanotech initiative. Dr. 

Smyth or Sauers or Chakrabarti? 

Dr. SMYTH. I think I mentioned there are a number of successful 

collaborations but they are kind of like islands of excellence, such 

as the NASA robot initiative, such as some of the work that we 

have done at MEL. I think if you had a cross-agency forum, and 

not just one that created papers but one that created a strategy 

and had people who were engaged from both academia, the government and the systems perspective, both from small and large business—get a strategy, get a roadmap and start plugging in the technologies to that, because I am going to quote the wall: ‘‘Where 

there is no vision, the people perish.’’

Dr. SAUERS. And I think I will just continue the thought. P&G 

has benefited greatly from the relationships we have had with 

some of the national labs and the relationship we have with the 

Department of Energy, but we stumble upon these opportunities. 

There really isn’t a transparency of what is available and who is 

willing to work with industry, et cetera. You know, I could see 

some sort of interagency approach like that, helpful in providing 

that transparency. 

Mr. BAIRD. Mr. Chakrabarti? 

Mr. CHAKRABARTI. I am going to concur with Dr. Smyth. The 

ability to create a cross-agency approach that also takes feedback 

from both small and medium enterprise and large enterprise is 

very critical. We have excellent technological programs that are 

federally funded. We have large enterprises that have both the financial ability as well as the expertise to commercialize, and you 

have small and medium enterprises that have the willingness and 

the entrepreneurialism to take risk. Being able to bring all three 
65

of them together is a very critical challenge, but a very critical opportunity for our country. 

Mr. BAIRD. I should say, Mr. Chakrabarti, you have got two delightful children in the back there. 

There was an article in Harvard Business Review that I bring up 

a lot in this Committee, and it was about maybe five months ago 

now, about how we tend to do the innovation here and then offshore the manufacturing and then ultimately the manufacturing 

drives the innovation elsewhere and we lose our lead. What can we 

do to reduce that? 

Mr. CHAKRABARTI. I think a first step is involving the entire 

manufacturing economy in feedback when it comes to Federal research. You touch upon a very sensitive point. If you remember our 

steel industry, it is exactly what happened. We were conquered 

with our own technology built on our own soil. We don’t want to 

see that happen again. The ability to create the feedback and the 

input, it needs to be a dynamic process between industry and federally funded research. The world is changing. Our response must be 

dynamic. If we can have an agency, a cross-agency approach that 

we just talked about, along with an industry forum committee 

roundtable that provides continuous feedback on its approach and 

its programs, I think we would be much better off. 

Chairman GORDON. Thank you, Dr. Baird. 

Mrs. Biggert is recognized. Oh, I am sorry. Mr. Hall is recognized. Excuse me, Mr. Hall. 

Mr. HALL. I yield to Mrs. Biggert. 

Mrs. BIGGERT. Oh, Mr. Hall, you are so kind. I appreciate it. I 

will take advantage of it. 

Dr. Smyth and Dr. Sauers and Mr. Chakrabarti, Dr. Holdren testified before this committee a few weeks ago about how this Administration’s R&D investments will keep America competitive. However, there are many factors other than that that play into our 

competitiveness in the world, and what particular laws or regulations are increasing your company’s costs, and how is this affecting 

your ability to manufacture in the United States and invest in 

R&D? I will start with Dr. Smyth. 

Dr. SMYTH. That is basically outside my span of the ability to 

comment. I would say in terms of laws, maybe if we go to charters 

rather than laws, and talk about NIST or some of the national 

labs, what you have is a charter that focuses on technology readiness. If you had a scale from one to ten that focuses one to three. 

What we really need to do is expand that charter from three to six 

and do, for example, what Germany does with the Fraunhofer Institutes and take technology from where the concept of the product 

is ready to where you are addressing manufacturing issues, so you 

can deploy stuff at volume and at rate, because that is when you 

are going to make the economic and you are also going to make the 

environmental impacts. So it is about stretching maybe a charter 

rather than a law in the context of manufacturing technology. 

Mrs. BIGGERT. Dr. Sauers? 

Dr. SAUERS. And again, the specifics are outside my specific area 

of knowledge but just in generality again, I think we find ourselves 

more in so much uncertainty, and it is really the uncertainty that 

causes problems, the lack of predictability. And you can just see a 
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whole host of regulations today where we live in uncertainty: R&D 

tax credit, health care, those kinds of things. And I think for us to 

be most competitive, a sound, predictable, certain regulatory structure is helpful. 

Mrs. BIGGERT. Thank you. 

Mr. Chakrabarti. 

Mr. CHAKRABARTI. I am going to echo what Dr. Sauers said, but 

coming from the chemical industry, I will make two points. Regulatory compliance in the United States, the costs associated with it, 

as Mr. Chairman brought up in his opening statement, is a significant cost to chemical industry. And by its very virtue, it pulls capital dollars from other areas of investment, especially innovation. 

Secondly, the cap and trade has us very concerned. As we enter 

into a new era in environmental responsibilities, we have to be 

very careful not to increase the transaction costs associated with 

doing so. 

Mrs. BIGGERT. Thank you. 

Then Dr. Smyth, in your testimony you talk about vehicle electrification and the domestic manufacturing needs to support deployment. Do you see a need for more infrastructure capacity to 

support electric vehicles? 

Dr. SMYTH. Absolutely. I think one of my esteemed colleagues 

here talked about the infrastructure and the grid, and that is essential if we are going to develop a reasonable percentage of electric and extended-range electric vehicles. You have to have an infrastructure to plug them into, so that is very, very important. 

Mrs. BIGGERT. Then Dr. Sauers, I think you answered part of 

this, but in your testimony you mentioned that your company sets 

a goal for innovation to have at least 50 percent of all initiatives 

with at least one significant external partner. So what type of entities do you typically seek partnership with? You did mention the 

labs, but are there others that you deal with? 

Dr. SAUERS. Well, our process is to go through a consumer understanding, understanding the needs of the consumer relative to consumer products, then go through the innovation process to develop 

those products that meet those needs. We are open to partner with 

anybody that is able to bring forward to us ideas that help us accomplish that goal. So we work with small and medium enterprises, we will work with governments, national labs, anyone that 

is able to come forward. We have a website, our Connect + Develop 

website, where we put out what our needs are relative to innovation, and then we ask people to respond back to us through that 

website with their ideas. 

Mrs. BIGGERT. Thank you. I yield back. 

Chairman GORDON. Thank you, and Mr. Miller is recognized. 

Mr. MILLER. Thank you, Mr. Chairman. I am unconvinced by any 

argument that government simply needs to get out of the way and 

that innovation will come entirely from the private sector. Far too 

many of the most important innovations, including transformational technologies like DARPANET [Defense Advanced Research Projects Agency Network], have come originally from government research, and there obviously is too much at risk in some 

basic research to think that it can all be privately funded. But I 

am intrigued by the idea of prizes as encouragement to the private 
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sector. The Malcolm Baldrige awards have been remarkably effective in encouraging not just those who win the awards, but in kind 

of getting their minds around what constitutes excellence. They 

have had remarkably useful results for those companies that have 

competed for Malcolm Baldrige awards. I think Mr. Crews mentioned the idea of prizes as encouraging an entrepreneurial type of 

effort to—we aren’t going to dictate the technology, we are not 

going to pick who does it, but if you can go do this, we will give 

you a prize, and the prize can be big. And from what I have heard 

from high-tech companies in my area at the Research Triangle, 

SBIR and STTR is about as important for the imprimatur that you 

get from having those awards as it is for the money itself. 

What do each of you think about prizes? What are the limits? 

What are the values? How can they fit into the overall government 

effort, the role of government in encouraging innovation in manufacturing? 

Dr. SMYTH. I think prizes are a really interesting mechanism, 

and I think it depends very much on the type of technology you are 

trying to drive. If you look at advanced manufacturing, and you can 

go from anything from virtual down to real, where you are working 

on sensors or you are working on production lines, if you are focused on something that is more capital-intensive, I would say 

prizes would be least effective. If you are focused on something that 

is perhaps virtual, that could open up maybe basically a person 

with a laptop trying to figure out a solution, then I think it is a 

fantastic approach. 

One thing I will say is, there was a DARPA Grand Challenge 

and that was a prize that General Motors, in collaboration with 

Carnegie Mellon, won a couple years ago. It was the autonomous 

vehicle. And without going into detail, suffice to say the investment 

in producing the autonomous vehicle outweighed by orders of magnitude the individual prize, but the point that I am making was 

that prize was about developing a system. It was about developing 

a technical solution to a system on autonomous driving. There were 

maybe 100 different sensors and detectors that had to be integrated so we could understand how the vehicle could move on its 

own. Only a company, or a partnership as it was in this case of 

companies and universities, with a systems-level approach could 

achieve the end goal. 

Dr. SAUERS. First to your initial comment, I personally see great 

value in the government being involved in the R&D investment. I 

think the government is necessary, through their funding, to develop the disruptive technologies, and also plays a great role in 

education, especially the STEM program as we’re seeing today. I 

think the R&D investment by our government is really what sets 

us apart from others. 

If I think about P&G and their R&D activity, you know, we are 

driven by meeting consumer needs and will partner with those that 

help us develop the innovations that meet those needs. It is hard 

for me to necessarily see a primary role for prizes to motivate 

something like that. It is really the business application that does 

it. 

Mr. CHAKRABARTI. First of all, I agree that the government’s role 

is very important in research. I can’t talk specifically on prizes, but 
68

the concept of a competition—I will talk a little bit about the SBIR. 

I think it is a truly valuable program. It targets high-risk 

innovators and provides both the capital and, very importantly, the 

credibility they desperately need for private funding. In addition, 

the competitive nature not only helps pick the best prospects but 

readies the recipients by requiring them to think through their 

projects in a comprehensive manner, creating better quality 

projects for research. The government’s role in funding research, 

both federally funded and through the private industry, is very 

critical for the risk sharing that is necessary for transformational 

technologies for the government to assist private industry in taking 

those high-end risks for technological innovation. 

Chairman GORDON. Mr. Miller, if it is okay, before we run out 

of time, why don’t we skip over to Mr. Crews, who really raised 

this issue in the first place? 

Mr. CREWS. Okay, just quickly, I think prizes do have some 

merit. The only point I would make about it is, you do have to be 

careful about whether the end you are trying to achieve is something that ought to be a governmental role or private-sector role. 

If you need to come up with a new homeland security technology, 

a much better—you know, any kind of major technology like that 

that involves America’s ends, political ends and security ends, 

prizes make a lot of sense. They also make a lot of sense in transitional ways, of finding new ways of dealing with government investment in high-tech areas like nanotech and other areas. The 

spaceship one was a prize phenomenon, or parts of it were, same 

with the way Netflix always tries to upgrade its search system and 

things like that. There are numerous ways that they can be used 

as an alternative. You just have to be careful and make sure that 

the end is the right one, that it is something that——

Chairman GORDON. Thank you, Mr. Crews, and Dr. Ehlers is recognized. 

Mr. EHLERS. Thank you, Mr. Chairman, and I thank the panel. 

When I was elected to Congress some years ago, I never expected 

how much time I would have to be spending on manufacturing 

issues, largely because I come from a manufacturing state first of 

all, but secondly, there was little interest in the Congress in manufacturing and innovation. There was sort of this laissez-faire attitude—well, they are a business, they have got money, they can do 

the research, they will develop the products, et cetera—neglecting 

a very important role, and I have often compared the issue in manufacturing with farming and agriculture and the role that the government played in that starting with the land-grant universities 

and going forward. And most people don’t realize the money that 

we spend still today on helping farming, and I find it ironic that 

in agriculture, because of the change in mechanization and so 

forth, back in the 1880s something like 80 percent of our economy 

was in farming and employees were in farming. Today it is closer 

to two percent of the employees are employed in farming. And yet 

we continue to spend about $400 million a year as a Federal Government on the Cooperative Extension Service. Now, I am certainly 

not opposed to that. It is very useful. That is a way for the government to get its research results out quickly to the farming community, and I was amazed that Michigan State University developed 
69

something new in the labs one year and the next year the farmers 

are using it in the fields. We don’t have anything like that in manufacturing. I have spent far more time than should have been necessary on the Manufacturing Extension Partnership. It has been 

like pulling teeth every year to try to get $100 million out of the 

Congress and the President for the Manufacturing Extension Partnership, which combined with SBIR, all of those things working together really are very effective. This year we are spending $400 

million on a part of the economy that has two percent of the employees, and I have to struggle to get $100 million to go towards 

a part of the economy that has 15 percent of the workforce, namely 

manufacturing. We just don’t have our heads screwed on right here 

in the Congress, and I think in the Nation, as to the importance 

of manufacturing and the importance of the government role in innovation. I agree with Mr. Miller and his comments, this idea that 

somehow if we interfere with manufacturing we are interfering 

with the private sector, but we interfere with agriculture and we 

are not. It doesn’t make sense. So I apologize for giving a sermon 

but this is—now that I am retiring, I can act like an angry old man 

and say why didn’t you listen to me all these years. But that is one 

of our big problems. 

I do have a question that is related to this. How can we more 

effectively compete as a Nation, and what is the government’s role 

in this competing against low-wage nations? That is a major problem we face today. And I don’t see a clear path there, and I am 

wondering if any of you have any really good wisdom on how we 

can best proceed there. 

Dr. TUOMINEN. I will just make a short comment. In the new 

technologies that are promising, we have to keep them here. We 

have to set up the manufacturing base for those here and we have 

to do it posthaste, and how do we do it? We need to educate the 

workforce quickly so that there becomes a manufacturing base, so, 

for example, in nanotechnology where this is this demand for all 

these workers and they don’t exist in the United States, well, 

where do the ideas go? They go overseas. The other thing we have 

to do is create an environment for shared risk and loosen the capital markets by any mechanism possible so that all factors can help 

those companies grow here. 

Mr. EHLERS. Yes, the capital market problem I hope is a transitional problem we are having right now, but you are absolutely 

right. I have a lot of manufacturers in my district. They have firm 

orders: they cannot borrow the money to build the product. But I 

appreciate the comment you made vis-a`-vis other countries but we 

really have to concentrate on that, and the government’s role is to 

the high-risk, high-reward research but also to aid. It drives me 

out of my mind. Every year I have fought to make the R&D tax 

credit permanent because the bean counters in your companies 

don’t want to take a chance that it won’t be renewed, and so it is 

not really a factor in their thinking. If we make it permanent, it 

is there for you and I think it should be increased. 

Chairman GORDON. Thank you, Dr. Ehlers, and we are going to 

let Mr. Smith have rebuttal in just a moment, but right now we 

will go to Mr. Peters. 

Mr. PETERS. Thank you, Mr. Chairman. 
70

Dr. Smyth, a question for you. You talk in your testimony about 

the importance, certainly in the auto industry, of the auto supplier 

network, where a great deal of innovation occurs and certainly in 

the manufacturing process critical for General Motors and all of the 

Big Three. If you could maybe flesh out a little bit as to what we 

should be thinking about at the Federal level to be helping those 

auto suppliers who right now are, as you know, hanging on by their 

fingernails given where the economic situation is right now, and 

their budgets are strained for their ability to do the kind of research and development necessary for them to continue to be competitive, particularly with foreign suppliers that may be looking to 

supply to our domestic automakers. What should we be doing? 

Dr. SMYTH. Well, I think two things. The suppliers being a part 

obviously, a huge part of the relationship with USCAR, which is 

the United States Council for Automotive Research and that has 

been a big factor of it, and developing technologies—I think a lot 

of times when people talk about developing technologies in the 

automotive sector, I really think you are developing it for the 

OEMs. We talked about some of the work that we did at NIST to 

develop standards that generate into smaller companies. There is 

a lot of technology that we can develop that we will never be using 

as our core technology. I think it is about providing forums for the 

big companies to work with the small companies, but again, those 

forums, they have to be resourced. They can’t just be paper-generating, strategy-writing forums, and I think that is really essential. 

But I do think we should build on the success of consortia like 

USCAR and introduce other Federal agencies—maybe it is DOD or 

maybe it is the EPA [Environmental Protection Agency] or whatever, introduce a wider spread of government agencies, get that 

cross-agency forum and plug in supplier bodies. 

Mr. PETERS. Now, many of you have mentioned public-private 

partnerships as the model for this kind of funding, so perhaps 

there are some brief comments as to what is an ideal structure for 

that public-private partnership. Mr. Crews, you may not believe 

that there are any, and if there are, is there a model? Maybe I will 

start with you. Is there a model that we could use? 

Mr. CREWS. Well, basically we talk a lot about cross-agency consortia. I am just reminding you that whatever you do with COMPETES Act and the investment, it is still a small fraction of the 

resources that need to be freed up to get the economy going. That 

is what I think is important to point out. You have got to deregulate, you have to make it so that the foreign workers who come 

here and get educated can stay. There are a number of things like 

that, liberalizing infrastructure so tech and telecom and those 

kinds of things can move along. But in addition to considering 

cross-agency partnerships, also think about what institutions it is 

in society that are the source of wealth creation, and we know that 

is markets and the ability of capitalism to bring together people 

who don’t know one another to put resources together to create 

great wealth. So look at cross-industry consortia too. Look at what 

impact the antitrust laws might have on preventing American companies from taking free enterprise to the next level, so to speak, 

to compete on a global level. 
71

Chairman GORDON. Mr. Peters, would it okay if I went on to Mr. 

Smith now? 

Mr. PETERS. Absolutely. 

Chairman GORDON. Thank you. Mr. Smith, representing the 

rural part of our country. 

Mr. SMITH. Thank you, Mr. Chairman. I will try to be brief. A 

couple things. 

One is my concern that the inputs to manufacturing are not always subject to the marketplace and yet the output, although some 

public policy folks would like to dictate what those products are, ultimately it is still up to the consumer whether or not—and the 

marketplace whether or not to purchase vehicle A, B, C or D. And 

so I see that as unsustainable. If you might wish to comment about 

that, but perhaps even more specifically, Dr. Tuominen—with a 

last name like Smith, I am a big challenge except by those with 

a Y instead of an I. 

Dr. SMYTH. Nice catch. 

Mr. SMITH. I do—I want to talk a little bit about the Environmental, Health, and Safety program component area of the National Nanotechnology Initiative. I know it is getting a 20 percent 

increase in fiscal year 2011 after receiving a substantial increase 

in fiscal year 2010 as well. How do these increases impact funding 

for the other, and I would say equally important, six program component areas, one of which is nanomanufacturing? 

Dr. TUOMINEN. Well, with regards to nanomanufacturing, it 

hasn’t affected it at all, and in fact, I think they are complementary, that worker safety, consumer safety, environmental safety is 

a natural twin to nanomanufacturing development, and here is a 

case where in terms of the funding levels, if you look at 2009 

through the proposed 2011, both of these have grown commensurately, and that is how it should be. So I think there is good 

progress in both areas. 

Mr. SMITH. Mr. Crews, would you wish to comment? 

Mr. CREWS. So what were you implying about the input to manufacturing compared to output? 

Mr. SMITH. If you want to comment. I mean, the inputs into 

manufacturing are not always based by the marketplace or based 

on the marketplace and yet the output is. I mean, that seems to 

be not sustainable, not necessarily environmentally but economically sustainable, and how do we get around that perhaps, and 

then also how do we counter that? 

Mr. CREWS. Well, I guess there a lot of ways. In the testimony, 

I outline a lot of ways of looking at liberalizing the economy and 

looking at different particular sectors and removing regulation and 

looking at tax burdens and things of that sort, but—well, I don’t 

know. In terms of—I think it is important to restructure, you 

know, look at this in terms of, if you are going to invest federally, 

are there different ways of doing it? Maybe taxpayers could have 

some selection, some choice in what technologies they want to foster. It is just that you run into a real problem when trying to select 

technologies to invest in and what that will do in terms of how that 

steers the market and where that is going to take things. That is 

what you have to be really careful about, so while you look at general research, also look at other ways that also foster general re-
72

search that the private sector can do too. I know that the Federal 

Government has that role to play. I see it specifically in defense 

areas and things of that sort. 

But, please, I urge you to look at ways that you can deal with 

antitrust law, liberalizing infrastructure, looking at what it is that 

motivates scientists to do basic research in the first place. It is true 

that basic research can get captured, and there is always that market failure argument that the private sector doesn’t do enough, but 

it turns out that when you have unfettered global markets, companies don’t always capture their own intellectual property, their own 

resources, but they capture it from other firms who are doing it too. 

To retain scientists, you have to pay them more and you can create 

problems and disruptions in that by trying to direct things—I am 

just saying you have to be very, very, very careful about the Federal, I called it, you know, the Federal Government steering while 

the market rows. You have to be very careful about where you do 

that but at the same time that you do it, make sure that you are 

liberalizing in other areas so that if there is a way the private sector can take on that role, you let that happen because that——

Chairman GORDON. Mr. Smith, is it all right if we go to Mrs. 

Dahlkemper? 

Mr. SMITH. Thank you. 

Chairman GORDON. Mrs. Dahlkemper, sorry, but could you 

maybe have one real good question? 

Mrs. DAHLKEMPER. I will be very brief. 

I just want to reiterate what Dr. Ehlers said in terms of the 

MEPs, and I sit on the Ag Committee too so I see that from both 

sides, but I agree that the MEPs are doing a great job but the 

small manufacturers sometimes struggle with the government support programs. And Mr. Chakrabarti, could you talk a little bit 

about—you talked about a one-stop-shop approach to government 

support programs, and really how you would see that, where it 

might be housed, how you could see the Federal Government’s role 

in terms of helping our small manufacturers, small to medium? 

Mr. CHAKRABARTI. Absolutely. Small and medium enterprises 

lack the resources to evaluate the programs that can help them innovate. These business leaders and owners are wearing many hats 

every day. I speak from experience when I say the task of identifying these programs from the government is very daunting. I believe that a one-stop-shopping approach could be developed using 

the input of agencies that are responsible for the programs as well 

as a council of small and medium business leaders. The inputs of 

the various constituencies will help sharpen the efficacy of such a 

program. The cross-experience team would need to evaluate which 

agencies have the best access to the small and medium enterprises 

and specific industries in order to find the best home for the onestop shop. In other words, the ability of the chemical industry to 

access government programs may be housed in a different function 

than the ability of a nanotechnology industry company or an automotive industry company. The key is, how can we provide single 

points of contact as low in the chain as possible that have the access to the small and enterprise. 
73

Mrs. DAHLKEMPER. So basically you see this as depending on the 

industry there would a one-stop shop for that industry, not one 

stop for all manufacturing going forward? 

Mr. CHAKRABARTI. Correct. 

Dr. SMYTH. Can I make a comment? 

Mrs. DAHLKEMPER. Yes. 

Dr. SMYTH. On the one-stop shopping, I think it is a great idea 

but I think it should be expanded to big plus small. I will just give 

an example. If you are looking at electrification of the vehicle and 

you are working on technologies to support that, if you are a small 

organization and if the one-stop shopping—if I am a national lab 

and my charter is, for example, a small business, then I will look 

and say, okay, there is a lot of welding involved so I may go and 

look at ultrasonic welding, and those people will work, small companies, to optimize that process. If you include large business, they 

look at a systems-level approach and they will say yes, welding is 

a great idea but you also have to invest in quality systems, you 

also have to invest in something like reversible bonding that is 

going to put welding out of business and allow us to make 

reconfigurable batteries that will be—it will be able to recycle and 

re-manufacture. So you do get a different perspective. I think the 

one-stop shopping is a fabulous idea but I don’t think it should be 

constrained to small business. 

Chairman GORDON. Thank you. If we could——

Mrs. DAHLKEMPER. Thank you. I yield back. 

Chairman GORDON. I suspect that Mr. Rohrabacher has an answer rather than a question and so do you want to give your answer quickly? 

Mr. ROHRABACHER. Thank you very much, Mr. Chairman. I 

would just like to go on the record. I am sorry, I had to rush back 

to another hearing that happened at the same time. But if we are 

going to have U.S. manufacturing be competitive, the Federal Government does have a role and the most important role is protecting 

the intellectual-property rights of those American businesses that 

will utilize technology to outcompete the foreign competition. Unfortunately, Mr. Chairman, the patent reform legislation that has 

been going through here for the last few years would have the opposite impact and make the theft of intellectual property more likely, and let me note that we also need to make sure that the limited 

research and development dollars that we are able to spend are not 

then in some way used to set up manufacturing overseas, and I 

don’t think we have taken care in that job. 

Chairman GORDON. Thank you, Mr. Rohrabacher. 

Mr. ROHRABACHER. Thank you. 

Chairman GORDON. In the future you can just say ‘‘number one’’ 

and we will put that into the record. 

Mr. Hall is recognized. 

Mr. HALL. I will probably answer mine too as I ask it. Mr. 

Chakrabarti, I noticed PMC Group has manufacturing facilities in 

France and India, and I guess my question is, what is it about 

these countries or what business climate have they created that 

make them more attractive to PMC than the United States? Now, 

let me see if I can’t answer it. Other than their low cost of labor 

and Dr. Sauers said that we regulate over here but we overregu-
74

late, which is probably true, and my suggestion there is to do away 

with the EPA or have a three-year moratorium on EPA and lawsuits. Now, if that doesn’t answer your question, we will write it 

to you again and let you give it to us in writing. 

Mr. CHAKRABARTI. I appreciate that. 

Mr. HALL. Thank you. 

Chairman GORDON. It is really unfortunate we had to hurry 

today, and I don’t mean any disrespect. We have had more what 

you might call ‘‘high-profile witnesses’’ but we haven’t had a panel 

that has addressed an issue that has been more important to us, 

I think, in trying to really save our manufacturing base here in 

this country. We are at a tipping point. I think the America COMPETES Act can help us greatly, and your input will help us do a 

better bill. So I thank you for being here. 

The record will remain open for two weeks for additional statements from Members and for answers to any follow-up questions 

the Committee may ask the witnesses. The witnesses are excused 

and the hearing is adjourned. 

[Whereupon, at 11:14 a.m., the Committee was adjourned.] 
(75)

Appendix 1: 

ANSWERS TO POST-HEARING QUESTIONS
76

ANSWERS TO POST-HEARING QUESTIONS

Responses by Dr. Len Sauers, Vice President of Global Sustainability, Procter and 

Gamble

Questions submitted by Representative Daniel Lipinski

Q1. I know that Proctor and Gamble has used high-performance computing in novel 

ways to help implement parts of its sustainability program. For instance, you 

use numerical simulation of foams, detergents, and packaging to develop products that save energy and materials and give you a competitive advantage. In 

your written testimony, you recommend increased collaboration between government and industry through the National Labs.

Q1a. Would you say that high performance computing is an area ripe for collaboration?

A1a. Yes, without question. A key focus area should be developing the Software 

that takes full advantage of the latest hardware in solving problems of interest to 

manufacturers. The commercial codes that are being used today have their origins 

in National Lab codes from 20 to 30 years ago, but these have not been updated 

to utilize efficiently the large multi-processor computer architectures that are part 

of the complex today.

Q1b. What other roles do you think the National Labs can play in helping U.S. manufacturers innovate?

A1b. At SNL, LANL, ORNL and ANL we have collaborated and worked with codes 

to better understand the physics of interest to us (as you talked about earlier in 

the question). However, these codes are academic, some would even say ‘user hostile’, and their use by non-expert, non-Ph.D.’s, that are more typical of our supplychain is not reasonable. We could see the National labs playing a role in progressing 

these codes toward a commercial offering if there were fewer barriers in the IP, 

some ‘larger scale’ ways to pay for the conversion, and a higher degree of collaboration between the Labs and the ISV’s (independent software vendors).

Q1c. Are there things we should be doing at our National Labs to take this collaboration beyond large manufacturers, to help reach smaller supply-chain manufacturers?

A1c. Why is an everyday use goods maker better connected with the Labs on sophisticated software and high performance computing then a U.S. company that 

makes its living selling high-end software that runs on high performance computing? The answer normally offered to use is that they do not perceive the market 

demand beyond the fortune 30 and do not have the scale or the risk appetite to lean 

forward to make the connection.

P&G is part of a ‘working group’ of manufacturers (Boeing, GE, Caterpillar) 

partnering with the Council on Competitiveness to promote the idea that Modeling 

and Simulation and High Performance Computing are not just for us . . . but for 

the entire supply chains that also provide us goods and services. From the smaller 

regional Engineering Service Providers, Packaging suppliers, Parts suppliers, Tool 

providers, these enterprises are currently not able to ‘afford’ using high performance 

computing. Therefore, they use it ONLY for very rough and coarse guidance . . . 

never to replace the slow and expensive learning that is the hallmark of the larger 

higher tech entities.

What role is the Council on Competitiveness playing and what role would be helpful 

for Congress? 

The Council, coupled with the ‘working group’ as described above, has been communicating very broadly to increase awareness on the role of HPC on national manufacturing competiveness and its influence on jobs and the economy. 

It has been very important to the working group, which does not contain any 

ISV’s or Computing Hardware manufacturers, that it is understood that our advocacy here is not for the Government to buy more. The working group has evolved 

out of a call to service for use to mentor and support U.S. industry to remain strong 

and competitive. 

As large multi-national companies, we for the most part have the computing hardware and software we need to innovate. However, for small to mid-sized enterprises 

and especially those in our supply chains, they appear to be stuck in a PC world 

that is not able to solve the larger, more realistic problems that replace the slow 
77

and expensive learning cycles of today. In fact, the manufactures of the working 

group do the analysis for the products or services that our suppliers provide— most 

of the time. 

Our group sees HPC like the enabling ‘roads and bridges’ of our digital age. For 

some of us, we are able to build our own roads to get around our own ‘place’—so 

to speak. The Internet has also been part of it . . . it allows data to move around, 

but move around to what—is the question we are addressing. We seem far from 

having a commercially viable infrastructure that small and mid-sized enterprises 

can utilize when they support us or their other customers. 

So, how can the congress help? Work with Industry, National Labs, Academia to 

help create the support, partnership, and creative alliances that can allow for the 

‘trans-continental railroad’ of our modern era? When built, industries will pay for 

their time and usage of the system, through usage fees, but it is something that 

they can have access to when they need it.

Background 

It is correct that Modeling & Simulation, using High Performance Computing, 

plays an important and increasingly critical role in our innovation. It is replacing 

the slow and expensive learning cycles typical of using only large scale, high speed, 

or very numerous prototypes and samples to learn. Since we are in the business of 

making and selling billions of products to billions of people every year, we must 

learn how to design and manufacture these products to meet a wide range of consumer needs from the store shelf to the landfill. Doing this with ‘physical-only’ prototypes is expensive, time consuming and ultimately limits innovation. 

One of the most important enabling capabilities changing the ‘physical only’ learning is the emergence of computers. It has changed science and engineering at least 

as much as aviation has changed travel. And it is not just the personal computer 

that everyone sees everyday . . . it is also the large computer with hundreds and 

thousands of processors that enables calculations that were not dreamed possible a 

decade ago. This has enable us to learn about a chemical reaction with a billion 

atoms, a bottle or mix tank expressed with millions of equations, or an optimization 

that finds the best formulation from thousands of choices. 

As a large multi-national company dedicated to innovation, we have invested in 

our own capability to use modeling & simulation, enabled by high-performance computing, to innovate HOW we innovate. Our relationships with Los Alamos, Sandia, 

Argonne & Oak Ridge National labs are a matter of record in the attached document. Through CRADA’s, WFO agreements, and an INCITE award, we have focused 

on software and the physics that has progressed both our interests. 

(79)

Appendix 2: 

ADDITIONAL MATERIAL FOR THE RECORD
80

1 ‘‘Petrochemicals in Consumer Products Critical to the United States Economy.’’ CMAI: January 2010. 2 Ibid. 

3http://www.armystudyguide.com/content/bm∼doc/acu-presentation.ppt 4http://www.epa.gov/ttn/chief/ap42/ch06/final/c06s06-2.pdf

5 Joyce A. Smith and Norma Pitts. ‘‘The Diaper Decision, Not a Clear Issue.’’ Ohio State University. 

WRITTEN STATEMENT FROM NATIONAL PETROCHEMICAL AND REFINERS ASSOCIATION

(NPRA) 

NPRA, the National Petrochemical and Refiners Association, appreciates the opportunity to submit testimony on ‘‘The Future of Manufacturing: What is the Role 

of the Federal Government in Supporting Innovation by U.S. Manufacturers.’’ Our 

association represents more than 450 businesses, including virtually all U.S. refiners and petrochemical manufacturers, their suppliers, and vendors. NPRA members 

supply consumers with a wide variety of products used daily in their homes and 

businesses, including fuels, lubricants, and chemicals that serve as building blocks 

for everything from plastics to clothing, medicine, and computers. NPRA’s members 

have a keen interest in the future of research and development (R&D) and manufacturing in this country, and we appreciate the opportunity to share our views on this 

topic.

I. Petrochemical Products Are Vital to Our Economy and Way of Life 

Petrochemicals, or chemicals derived from petroleum (crude oil) and natural gas, 

are the foundation for many of the products used by millions of Americans every 

day. Without petrochemicals, the standard of living we have come to know and enjoy 

would simply not exist, nor would thousands of petrochemical-based products ranging in applications from healthcare to military supplies, safety and child care products, food packaging, and even clothing. 

One of the most prominent uses of petrochemical products is in protecting the food 

we eat. Much of the food enjoyed by millions of Americans every day is made possible because of the advances in food packaging that have been made possible due 

to our products. Over 40 percent of the beverage packaging materials used in the 

U.S. are derived from petrochemicals.1 Plastic packaging makes food transportation 

much more energy efficient, since the lighter packaging allows more food to be 

transported at lower costs. Plastic jars are approximately 90 percent lighter than 

their glass counterparts and weigh 38 percent less than steel cans.2 Lighter packaging also allows for lighter loads, which decreases emissions, lowers shipping costs, 

and reduces fuel consumption. 

An often overlooked use of petrochemicals is the prominent role these products 

play in our nation’s armed forces. The United States military depends on petrochemical products to outfit American troops with top-of-the-line combat gear essential for the protection of our armed forces serving both domestically and in dangerous regions around the world. The Army Combat Uniform (ACU) worn by every 

soldier in the United States Army is made of approximately 50 percent nylon.3

Innovations in manufacturing have allowed our industry to develop advanced helmets made of petrochemical materials capable of stopping a 9-millimeter round. The 

boots used by soldiers that allow them to move easily over both desert and rocky 

terrain are composed of over 50 percent petrochemical products. Furthermore, 

Kevlar fiber, which is a flame-resistant carbon-based aromatic polyamide five times 

stronger than steel, is the main component of bullet-proof material, and has allowed 

for the development of the bullet-proof vest, which protects the wearer not only from 

ballistic threats, but from blasts and fire as well. These vests provide crucial protection not just for our military personnel, but also for police officers and other public 

servants serving in dangerous professions. 

Perhaps most significant to average Americans is the role petrochemical products 

play in the health and safety of our society. Protective clothing used by those working in hazardous or even deadly environments is almost entirely made up of petrochemical products. This includes bio-hazard suits, safety goggles, protective helmets, 

and respiratory equipment. The seat belts in every passenger motor vehicle sold in 

the United States are made pound for pound from the petrochemical precursors 

paraxylene (aromatic) and ethylene.4 Nearly a billion pounds of petrochemicals are 

used to make the approximately 22 billion diapers used annually in the United 

States.5 Surgical gowns for hospitals, many bandages for wounds, sutures, blood 

bags, sanitizing liquid, soaps, detergents, and aspirin are all mainly comprised of 

petrochemicals. Furthermore, the 35 million Americans who use dentures and the 
81

6 ‘‘Petrochemicals in Consumer Products Critical to the United States Economy.’’ CMAI: January 2010. 7 Ibid.

8 ‘‘State of the Industry: Exploring Tomorrow’s ‘‘Whys.’’’’ CMAI: March 2010. 

9 Ibid. 

10 ‘‘Petrochemicals in Consumer Products Critical to the United States Economy.’’ CMAI: January 2010. 

24 million Americans who rely on contact lenses are also reliant on the petrochemicals used to make these indispensable products.6

Petrochemicals also play a critical role in transportation and alternative energy 

innovation. Polypropylene is often used in the interior and exterior panels and 

bumpers of light vehicles, and polycarbonate is used instead of glass in relevant applications. Also, polyurethanes are used in seating cushions and ethyl vinyl acetate 

is used in wiring and cables. All of these lightweight materials are essential for 

helping vehicles to meet Corporate Average Fuel Economy (CAFE) standards without compromising vehicle safety. Every passenger motor vehicle in the United 

States uses over $1,300 in chemical products.7 Additionally, major aircraft manufacturers Airbus and Boeing both use carbon fiber-reinforced plastic wings in their aircraft. Half of the airframe of one of the most popular new domestically produced 

aircraft, the Boeing 787, is composed of carbon fiber reinforced plastic. In the development of renewable energy sources, 15 percent of wind turbine blades are derived 

from petrochemical products, as are all solar panels. 

II. Current Business Environment 

The American petrochemical industry is an essential part of this country’s economic independence and stability in the global market. Not only does our industry 

produce materials that are used in thousands of products Americans rely on in their 

daily lives, but it is also a key component of our international trading market. Our 

industry employs nearly 195,000 Americans directly with an annual average salary 

of $100,945. This industry employment number increases to more than one million 

individuals when indirect employment is considered. These are high-quality American jobs and our employees enjoy higher than average wages, good benefits, and 

a safe working environment. Furthermore, the American petrochemical industry is 

the global leader in providing the raw materials for the development of new chemicals for the international market that advance safer and more efficient manufacturing techniques. 

However, our country is at risk of losing its status as the international leader in 

this industry due to international competition and an increasingly hostile domestic 

business environment. Taxes, an increasing number of overly burdensome regulations, and a flawed domestic energy policy are adversely impacting our industry and 

allowing other countries to forge ahead of us in research and development, production, and international trade. 

In the 1990s, the North American petrochemical industry enjoyed strong demand 

growth, adding almost 50 million tons of new supply in the basic chemicals and 

plastics market. However, 2000–01 saw a steep rise in raw material prices, which 

abruptly muted this growth, and North America has lost 10 million metric tons of 

chemical production capacity over the past decade. This represents the equivalent 

of approximately fifty facilities closing 8. Furthermore, during the current economic 

recession, demand for these products in North America fell an alarming 16.2% over 

a two-year time span.9

While the capacity to produce major petrochemical products in the United States 

has stagnated since 2000 and continues to decline, new capacity is rapidly being 

added in other parts of the world.10 In recent years, China has begun to decrease 

its petrochemical imports from the United States and has expanded its own domestic production of petrochemicals to provide materials for the many consumer goods 

the country produces. Concurrently, countries in the Middle East, such as Saudi 

Arabia, Qatar, and the UAE, have begun to build their own petrochemical plants 

and have become very competitive in the international market. As a result, countries such as China that used to import many petrochemical products from the 

United States have now turned to these geographically closer, lower-cost Middle 

Eastern markets to supplement their own domestic supply. 

Due to the abrupt pace of economic advancement in developing countries, global 

demand for petrochemical products is booming and some estimates show demand increasing seven percent a year. However, the petrochemical industry in the United 

States is unable to benefit from this international increase in demand due to the 

stagnant state of our domestic industry, which allows countries like China and those 

in the Middle East to fill the increasing global demand for petrochemical products. 
82

11 Ibid. 12 Ibid. 13http://tonto.eia.doe.gov/ask/crudeoil¥faqs.asp 14 ‘‘The Tide is Turning: An Update on Structural Cost Pressures Facing U.S. Manufacturers.’’ 

National Association of Manufacturers. November 2008. p 14. 

In 2010, Chemical Market Associates, Inc. (CMAI) analyzed the production capacity for 21 of the most commonly produced chemical products (Attachment A). From 

1999 to 2009, the United States’ production capacity for nearly every chemical has 

either decreased or remained virtually stagnant, while overall global production capacity has drastically increased.11 Unfortunately, as we are well aware, decreasing 

or stagnant product growth is not conducive to job growth in this country, but rather leads to jobs loss. Instead of focusing on expansion and research and development, the domestic petrochemical industry is simply trying to maintain its global 

competitiveness. 

III. The Future of the Domestic Petrochemical Industry 

The lack of support for research and development (R&D) is one factor hindering 

the development of the manufacturing sector in the United States. In fact, it can 

be readily observed that historically, research and development, innovation and 

higher education tend to follow the manufacturing base. Scientists from overseas 

who receive their education in the U.S. are now leaving this country in ever greater 

numbers. They are getting chemistry and engineering degrees in American schools 

and returning to countries such as China and India to work in the manufacturing 

sector. While R&D is beneficial for start-up industries or in situations where risks 

may be too high for private business ventures, a hostile business environment prevents the private-sector R&D funding necessary for long-term development of new 

technologies. 

Simply increasing R&D budgets and fostering innovation in the United States 

does not ensure that the manufacturing and production that comes about as a result 

of the R&D will occur here. Overall U.S. manufacturing, no matter what the industry, will continue to move overseas and lag behind international manufacturing 

until Congress addresses four critical issues relating to the U.S. business environment: education, taxes, over-regulation and energy costs. 

It is common knowledge that the United States’ primary and secondary education 

systems suffer from a serious science and math education deficiency. Since the 

United States has continually cut budgets for these programs, many of our brightest 

young minds find themselves considering going overseas to countries that advance 

policies to expand the manufacturing base of their economies while simultaneously 

increasing R&D budgets. Federal R&D grants that companies can apply for in the 

U.S. often come with preconditions on accepting government money, which stifles 

innovation even further. 

Another issue that plays a significant role in hindering the expansion of manufacturing in the U.S. is resource availability and volatility. The petrochemical industry 

is very energy-intensive, and relies on massive quantities of energy for production. 

U.S. manufacturers account for nearly one-third of total U.S. energy consumption. 

It is important to note that a decade ago, American manufacturers benefited from 

energy prices 30 percent lower on average than those of the United States’ major 

trading partners. Today, energy costs for U.S. manufacturers are nearly on par with 

those of their global counterparts.12 In order to manufacture petrochemical products, large quantities of feedstocks, such as oil and natural gas, also are needed. According to the Energy Information Administration, in 2006 about 331 million barrels 

of liquefied petroleum gases (LPG) and natural gas liquids (NGL) were used to 

make plastic products in the plastic materials and resins industry of the United 

States.13 Natural gas prices have been very volatile in the last decade, leading to 

great energy cost uncertainty for domestic manufacturers. While recent prospects of 

potential new shale gas resources provide hope for more reliable and hopefully more 

stable supplies of natural gas, domestic policy still limits development of natural gas 

resources. Congress is also looking at policies that could lead to significant fuel 

switching from coal to natural gas, contributing to uncertainty about future costs 

at a time when total costs already put domestic manufacturing at a disadvantage. 

Overall, in 2008, structural costs (costs of taxes, labor, energy, and raw materials) 

for U.S. manufacturers were 17.6 percent higher than major international competitors on a trade-weighted basis.14 In addition, the cost of energy and raw materials 

fluctuates significantly on a daily basis, making it very difficult for companies to financially plan for the cost of the materials that go into making their products. 

One of the largest threats to the survival of the domestic manufacturing industry 

is the regulatory uncertainty that is more prevalent in the United States than in 
83

15 ‘‘The Tide is Turning: An Update on Structural Cost Pressures Facing U.S. Manufacturers.’’ 

National Association of Manufacturers. November 2008. p 11. 

any other country in the world. In previous decades, the decision for a company to 

expand was much easier than in today’s marketplace, where companies must now 

look at not only their financial situation, but also regulatory issues and challenges 

that could arise in commissioning new projects and capital investments. Furthermore, with increasing regulations, many companies have been forced to decrease 

their R&D budgets and shift their resources to regulatory compliance. 

The recent regulatory environment limits what businesses can do and how they 

can expand in the United States as well as overseas. In 2009–10 alone, American 

businesses have faced the conceivable reality that they could be forced to comply 

with several new, burdensome, and costly governmental regulations. The past 15 

months have witnessed serious debates in Congress relating to cap-and-trade legislation, inherently safer technology mandates, regulation of greenhouse gases (GHGs) 

under the Clean Air Act and reform of the Toxic Substances Control Act, just to 

name a few. Each of these proposals could result in costly programs businesses 

would have to comply with or change their processes for, leaving American industry 

in limbo, unable to expand or invest in new projects because of the financial and 

regulatory uncertainty companies will face in the upcoming years. 

Businesses in the United States are faced with some of the most extensive government regulations in the world. Several studies have indicated that by 2004, regulatory compliance costs exceeded $160 billion annually for U.S. manufacturers—

equivalent to a 12 percent value-added tax.15 United States manufacturers pay 

some of the highest regulatory compliance costs in the world. Furthermore, individual states often enact their own regulations, creating a regulatory patchwork of 

different standards with which businesses that operate in multiple states have to 

comply. For example, one state may regulate a product as a consumer product, 

while another may regulate the same product for solely industrial use, leading to 

two entirely different standards. 

The current regulatory environment forces companies to devote significant financial resources that could otherwise be used in R&D or capital investments to compliance with regulations promulgated by the Environmental Protection Agency (EPA) 

and other government agencies. For example, polyvinyl chloride is derived from petrochemicals and is the third most widely produced plastic. It is an essential component of hoses, flooring, and roofing, and is used commonly in clothing and upholstery. In August 2009, EPA sent polyvinyl chloride manufacturers an Information 

Collection Request (ICR) to provide data so that EPA could establish emission limitations in accordance with the 40 CFR Part 63 PVC MACT rule. The cost of this 

information collection effort was initially estimated to be $32 million, entirely paid 

for by the manufacturers, simply to provide the EPA with testing information to assist in their rulemaking process. These are financial resources that otherwise could 

have gone to R&D. 

To be clear, the petrochemical industry is not advocating weakening existing environmental or safety regulations. On the contrary, our members hold public and environmental safety in the highest regard. However, the complexities, breadth and uncertainty of the current domestic regulatory environment place American manufacturers at a significant competitive disadvantage in the international marketplace. 

Congress and the Federal Government should examine the current regulatory climate and develop a framework for providing industry with more regulatory certainty to create a predictable and favorable financial environment. Such an initiative is critical to maintaining the industry that exists in this country and expanding 

our domestic manufacturing in the future. 

In addition to regulatory uncertainty, one of the most significant reasons for the 

decline of the American manufacturing industry is the burdensome tax environment 

businesses face in the United States. Tax policies make it increasingly difficult to 

compete with businesses in more favorable tax environments overseas. While the 

United States has been losing jobs, other countries such as China and those in the 

Middle East and Southeast Asia have succeeded in attracting new business development which has flourished under a more favorable tax environment. 

A PricewaterhouseCoopers survey released in 2009 showed the total tax rate of 

U.S. businesses to be 36.4 percent, the second highest corporate tax rate among the 

30 countries in the Organization for Economic Cooperation and Development 

(OECD). Furthermore, in addition to income taxes, corporations bear a wide variety 

of non-income taxes, adding $62 of tax liability for every $100 of corporate income 

taxes. These non-income taxes do not include the additional $169 of sales, excise, 
84

16http://www.pwc.com/en¥US/us/national-economic-statistics/assets/

total¥tax¥contribution.pdf 17 ‘‘The Tide is Turning: An Update on Structural Cost Pressures Facing U.S. Manufacturers.’’ 

National Association of Manufacturers. November 2008. p 13. 18http://www.pwc.com/en¥US/us/national-economic-statistics/assets/

total¥tax¥contribution.pdf

withholding, and other taxes imposed on customers and employees for every $100 

of corporate income taxes paid by survey participants.16

United States businesses are more highly taxed than those of any other country 

in the world. While other countries have been lowering their corporate tax rates in 

an attempt to grow their manufacturing industries, the United States has continued 

to increase business taxes. This has led to a tax rate discrepancy between the 

United States and other countries that increases every year. On a trade-weighted 

basis, the United States tax rate is 7.8 percent higher than its nine largest trading 

partners.17 Only Japan has imposed a higher business tax rate than the United 

States. 

Taxes are not the only fees that businesses are expected to pay to the Federal 

Government. Over the past 30 years there has been a move by the government to 

‘‘recover’’ costs it incurs to regulate business. In addition to industry’s enormous corporate taxes, companies are also expected to fund the regulatory operations through 

ever-increasing fees for everything from permitting to applications for introducing 

new chemicals into commerce. For example, the current debates over TSCA reform 

include a fee-based system similar to the one used to regulate pesticides. Advocates 

of a fee-based system tend to dismiss the argument that corporate taxes should be 

used to pay for the regulation of those entities already paying taxes. 

The United States also has one of the highest rates of labor costs in the world. 

The largest share of taxes remitted, 43.5 percent, go to employment-related taxes 

such as Social Security, pensions, and Medicare. This amounts to an average of 

$25,889 in employment-related taxes per U.S. employee, which is more than onethird of average domestic employee compensation.18

With these extraordinarily high tax rates, rather than expansion in the United 

States and investment in more research and development, domestic innovation and 

capital is forced to relocate to other countries with lower tax rates and a more favorable business environment. This allows manufacturing and the jobs that come with 

it to flourish in other countries, while manufacturing in the United States declines, 

American jobs go overseas, and our country becomes more dependent on products 

imported from abroad.

IV. Conclusion 

The American petrochemical industry is a vital source of American jobs and products that allow us to maintain and advance our way of life. The United States is 

a world leader in innovation and manufacturing technology, and there is no reason 

why our country should not remain superior in this field. The United States government must set policies that not only foster R&D, but also encourage researchers to 

remain in this country rather than go overseas. Many petrochemical production 

companies were founded in the United States and would rather operate here than 

in any other region around the world. However, in order for our industry to not only 

maintain what we have already created but to grow and capitalize on future demand increases and global economic development, the Federal Government must 

create an environment that attracts American businesses to expand their operations 

in this country and fosters innovation rather than encouraging jobs to be shipped 

overseas. 

NPRA urges Congress to consider policies to bolster the overall business environment in the United States as it examines initiatives to advance R&D. We appreciate 

having the opportunity to submit comments on this extraordinarily important topic.
85

PREPARED STATEMENT FROM REPRESENTATIVE JOHN D. DINGELL

Thank you, Mr. Chairman, for your kind invitation to submit testimony concerning the role of the Federal Government in supporting innovation by U.S. manufacturers. As the representative of Michigan’s 15th Congressional District, which 

has suffered more than most as a result of the downturn in U.S. manufacturing over 

the past decade, I believe fundamental changes in Federal policy are necessary for 

the preservation and growth of this country’s industrial base. These changes include 

not only enforcement of existing law, but also the drafting and implementation of 

new Federal initiatives, ranging from loan and tax credit programs to improvements 

in the Nation’s education system. The comprehensive nature of this approach will 

by necessity involve the participation of multiple committees of jurisdiction in the 

Congress, and I commend the Committee on Science and Technology for its continued desire to be at the forefront of this effort, as particularly evidenced by today’s 

hearing. 

Prior to any discussion of supporting innovation by U.S. manufacturers, we would 

do well to consider their current state. In years gone by, the United States was the 

world’s leading exporter of high-quality manufactured goods. According to the World 

Bank, the United States now ranks 15th in the world for the proportion of manufacturing production its companies export. For years, the manufacturing sector fostered 

the growth of the middle class in the United States. Thanks, among other things, 

to this country’s lack of a pro-manufacturing agenda, its own short-sighted trade 

agreements, and unfair practices by our trading partners, we have seen the U.S. 

trade deficit balloon at an obscene rate and domestic industrial production sink to 

dismal levels. As a result, millions of Americans, many of whom live in my District, 

no longer have the option taking a manufacturing job, something which allowed 

their parents and grandparents to make better lives for themselves and their families. 

With this in mind, I suggest the Federal Government take immediate action with 

respect to our trading partners to shore up what remains of this country’s industrial 

base. For too long, the U.S. Department of the Treasury has been reticent to cite 

countries such as Japan and China for currency manipulation in spite of evidence 

that they have used such policies to gain an unfair trade advantage vis-a`-vis the 

United States. These countries and others must not be allowed to continue this illegal and trade-distorting practice, particularly given the President’s express desire 

to double U.S. exports in five years’ time. Similarly, the Administration must do all 

within its power to open foreign markets to U.S. goods, while at the same time rigorously enforcing domestic trade laws. Failure to do so will encourage our trading 

partners to perpetuate unfair trade policies like Japan’s, which have been of particular detriment to U.S. automakers. While foreign automakers collectively account 

for less than four percent of vehicle sales in Japan thanks that country’s restrictive 

trade policies, Japanese automobile manufacturers enjoy considerable market share 

in regions around the world, most significantly in the United States, and benefit 

handsomely from the export subsidies their home country’s currency policy creates. 

While ensuring our manufacturers can compete globally, we must also make it 

easier for them to compete right here in the United States. As I have argued for 

years, healthcare reform is necessary not only because it is a fundamental right of 

all people, but also because it makes good economic sense. In the automotive industry, healthcare benefits account for a significant proportion of production costs. This 

industry traditionally has had very slim profit margins, and by enacting a national 

healthcare policy, we would improve the ability of our domestic automakers to compete on a global level. The money they would save as result of such reform could 

be re-invested in research and development to produce advanced technologies for 

more environmentally friendly vehicles, something which will be in high demand in 

the future. Moreover, to those who would oppose national healthcare on economic 

grounds, I offer the examples of Germany and Japan, both of which have had national healthcare for some years now, while at the same time maintained robust export economies. 

At the same time as leveling the playing field for U.S. manufacturers with adjustments to trade and health policy, the Federal Government must ensure the existence of a well-trained domestic workforce. In particular, I agree with President 

Obama’s call that community colleges must receive more funding. These institutions 

have traditionally led the way in the technical and vocational training essential for 

a worker’s success in the manufacturing sector, let alone the benefits a manufacturing company accrues from a well-educated labor force capable of creative and 

independent thinking. Secondary and primary schools in the United States must 

also renew emphasis on mathematics and science, much as they did in the 1950s 

at the onset of the space race. 
86

On a related note, the Federal Government can prompt innovation in the manufacturing sector by supporting public-private partnerships like those fostered under 

the Manufacturing Extension Partnership (MEP). Through a nationwide network of 

centers and specialists, MEP helps small and medium-sized manufacturers improve 

their productivity, increase their economic competitiveness, and enhance their technological capabilities. Lamentably, MEP has suffered for want of Federal funding 

over the past decade, and the amount of funds individual states have been able to 

provide MEP centers has dwindled due to budget shortfalls. Increased Federal appropriations to MEP would be an easy and straightforward way to augment this 

program’s ability to spur manufacturing innovation. 

Beyond workforce development, the Federal Government can incentivize manufacturing research and development via tax credits, grants, and loans. The Federal research and development tax credit has long provided great encouragement to manufacturers to invest in innovative new technologies and improve existing facilities. 

Sadly, this credit expired for the 14th time at the end of 2009. I believe Congress 

should act to make this tax credit permanent in order to provide a long-term incentive to manufacturers to invest in research and development. Similarly, Congress 

should enact legislation to allow companies to use their existing alternative minimum tax (AMT) credits to hire new workers and finance investments in manufacturing facilities and new equipment. Also, tax credit programs like section 48C of 

the Internal Revenue Code, which provides a 30 percent credit for investments in 

new, expanded, or re-equipped advanced energy manufacturing projects, should be 

funded for the long-term. 

As I have noted, long-term incentives are necessary to ensure U.S. manufacturers 

continue to devote substantial portions of their resources to innovation. In this time 

of recession, however, manufacturers require immediate short-term assistance in 

order to continue operations and invest in the future. Section 136 of the Energy 

Independence and Security Act of 2007, or the Advanced Technology Vehicles Manufacturing Incentive Program, is one such source of assistance. Demand for funding 

under the program is nearly double the available funds, indicating the industrial 

sector’s clear potential for innovative growth. Congress should act to double funding 

for section 136, and the House of Representatives made wonderful strides in this 

effort by passing the American Clean Energy and Security Act of 2009, which contained such a provision. 

Beyond direct loans to manufacturers from the Federal Government, I remain 

convinced more must be done to increase private lending, particularly to small and 

medium-sized manufacturers. Many manufacturers, both in my district and around 

the country, find themselves with diminished cash flow and depleted collateral. As 

a result, even where private banks have the capital to lend, many viable manufacturers are unable to qualify for the loan they need to diversify their operations into 

so-called ‘‘new economy’’ products, such as clean energy. My colleagues, Representatives Levin and Peters, and I have introduced legislation to address small and medium-manufacturers’ pressing need for private sources of capital. H.R. 4629, the 

Manufacturing Modernization and Diversification Act, provides Federal funding for 

state-run collateral support and capital access programs, building on a successful 

Michigan model that has yet to encounter a loan default. I urge that this legislation 

be included in any small business lending package the House and Senate send to 

the President for signature. 

Promoting innovation in domestic manufacturers makes economic sense for 

United States. In addition to serving as an important component of our effort to 

climb out of the current recession, Federal support for manufacturing in the longrun will ensure our economy’s foundation is built on useful goods of tangible value. 

Just as manufacturers helped Americans create better lives for themselves and propelled the United States to historically unseen levels of economic prosperity, so too 

will they again, but only if given proper, adequate, and enduring support.

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