CABINET COUNCIL ON COMMERCE AND TRADE PLANNING MEETING FEBRUARY 20, 1985 - 8:45 A.M. - ROOSEVELT ROOM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87M00539R002303850003-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 22
• Document Creation Date: December 22, 2016
• Document Release Date: October 19, 2009
• Sequence Number: 3
• Publication Date: February 19, 1985
• Content Type: MEMO

Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
Date: 2/19/85 Number: 169140CA Due By:
Subject: Cabinet Council on Commerce and Trade Planning Meeting
February 20, 1985 - 8:45 A.M. - Roosevelt Room
Action FYI
ALL CABINET MEMBERS ^ ^
Vice President
State
.Treasury
Defense
Justice
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation ..
Energy
Education
Counsellor
GSA
EPA
NASA
OPM
VA
SBA
CCCT
CCFA
CCLP
There will be a Cabinet Council on Commerce and
Meeting on Wednesday, February 20, at 8:45 A.M.
Roosevelt Room.
The agenda is
on Industrial
recommendations
Competitiveness
^ Alfred H. Kingon
Cabinet Secretary
456-2823
(Ground Floor, West Wing)
Trade Planning
in the
of the President's Commission
Background papers are attached.
^ Don Clarey
^ Tom Gibson
&j Larry Herbolsheimer
Associate Director
Office of Cabinet Affairs
456-2800 (Room 129, OEOB)
CABINET AFFAIRS STAFFING MEMORAN -M 700
Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5 L 3Qo c.
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
THE WHITE HOUSE
WASHINGTON
MEMORANDUM FOR THE CABINET COUNCT_L ON
COMMERCE AND TRADE
SUBJECT: Recommendations of The President's
Commission on Industrial Competitiveness
Background
This is the third set of recommendations to be presented to
the Council from the President's Commission on Industrial
Competitiveness (PCIC). The last meetiria of the Council to
consider these items was on January 14,1985. At that time,
review was completed on sixteen PCIC recommendations covering 47
different action items (approximately half of the total).
This set of recommendations contains items dealing with
science and technology, commercializing , new technologies,
intellectual property, antitrust laws, employee/employer
relations and export controls. On March 6th, the Council is
scheduled to meet again to review all remaining recommendations
of the PCIC. A work plan showing the schedule of actions of the
.Cabinet Council Workinq Group on industrial Competitiveness and
the scheduled meetings of the Council is presented at Tab A for
your background.
As in the past, the Cabinet Council Working Group on
Industrial Competitiveness has met and reviewed each of these
recommendations. The Working Group includes representatives from
Departments of Commerce, Treasury, Labor, Justice, and
Education, the Office of Management_ and Budget, the Office of the
U.S. Trade Representative, and the Council of Economic Advisors.
Recommendations
The actual recommendations of the Commission and supportinq
papers are presented at Tab B. Each PCIC recommendation is
summarized below along with the the working Group's
recommendation for Council action.
1. The Commission recommends the creation of a cabinet-level
Department of Science and Technology. -
 The PCIC's recommendation was designed to create a symbol
which would highlight the importance of research and
technological development. It also assumed that
science and research policy-making would be improved if it
were centralized. The Working efforts Group fully supports
the objectives of the Commission. We believe, however, that
creation of a new Department of Science and Technology is
not the best way of doing this. The Science Advisor to the
President and the Office of Science and Technology Policy
are already in a position to call Presidential and public
attention to federal efforts. A new department also could
create pressure for greater federal funding; not the most
effective wavy to improve competitiveness. Rather it would
be better to improve the climate for private investment and
to rely on the market to allocate those investments. THE
WORKING GROUP RECOMMENDS THAT THE CABINET COUNCIL TAKE NO
ACTION ON THIS RECOMMENDATION.
2. The U.S. Government should make the strenathening of
intellectual property rig is at home and abroad a priority
item on t e nation policy agenda'and commit itself to
implementing a detailed strategy- designed to achieve this
goal.
The Administration has made a firm commitment to furtherinq
protections granted to holders of ,intellectual property
rights. On February 13th, for example, the Council
reiterated this view by endorsing a proposal. that the United
States should adopt the Berne Convention for stronger
protection of international copyright laws. THE WORKING
GROUP RECOMMENDS THAT THE COUNCIL REAFFIRM THE
ADMINISTRATION"S COMMITMENT TO USE AVAILABLE AUTHORITIES IN
THIS AREA TO ENHANCE INTELLECTUAL PROPERTY RIGHTS, INCLUDING
THE TRADE AND TARIFF ACT OF 19n4, AND THAT THE U.S. TRADE
REPRESENTATIVE'S OFFICE BE ENCOURAGED TO CONSIDER PLACING
INTELLECTUAL PROPERTY MATTERS AS A HIGH PRIORITY IN ITS
STRATEGY FOR A NEW ROUND OF TRADE NEGOTIATIONS.
3. The private sector, educational institutions, and the
government should initiate actions intended to improve the
use of manufacturing technoloqy and R&D for competitive
products and services for U.S. firms. Four specific action=
are proposed: a) expand support for NSF engineering
research centers, h) extend the R&D tax credit to include
manufacturing-related R&D expenses, c) federal support for
research for manufacturing automation, and d) efforts to
facilitate U.S. manufacturer's use of manufacturering
technologies.
The Working Group believes that the Commission has
identified an area that has not received the attention it
should have in the last several years. We support the
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
recommendations which encourage the private sector and
institutions to give further emphasis to manufacturing
activities. At a time of severe fiscal restraint, however,
the working Group believes that it'would be inappropriate
for the federal government to expand its support of any
specific R&D projects nor to state as a policy that any one
activity should be given priority over others of perhaps
equal importance. THE WORKING GROUP RECOMMENDS THAT THE
COUNCIL ENDORSE THE RECOGNITION OF THE IMPORTANCE OF"
MANUFACTURING RESEARCH.
4. American mans ement should use available incentive
mec anisms to reward employees and '.back performance. The
federal government should augment these incentives by
eliminating as a tax preference item the sprea between
exercise price and market value for the exercise of
incentive stock options, remove the annual $100,000 ceiling
on ISO's and delete the rule requiring ISO's be exercised in
sequentia order.
The Working Group recognizes the objective
of this
recommendation and supports its intent.
It
believes that
the Council should endorse the concept
that
American
management should hn more creative and
more
aggressive in
using incentive mechanisms. The group
does
not, however,
endorse specific tax changes because they run counter to the
Administration's efforts to reform and simplify taxes as
well as having the potential of a significant budgetary
impact. Members of the Working, Group also expressed concern
that federal action in response to this recommendation not
be presented in a way which could he interpreted as inter-
fering with collective bargaining practices. THE WORKING
GROUP RECOMMENDS NO FURTHER AC^_I_ON,BY THE COUNCIL.
5. To facilitate the delivery of employee training by the
employer the federal government should a) pursue
macroeconomic strategies designed to maintain economic
growth and reduce employment, b) strive to achieve balanced
tax treatment of employee investments in physical and human
capital, c) strengthen the ability of educational
institutions to provide customized training programs, and d)
remove tax disincentives for individuals being trained
through employer-financed educational programs.
The Working Group believes that the thrust of this objective
is consistent with current Administration policies. Many
efforts are underway to foster economic growth, to reduce
unemployment, and to reform tax policy. The tone of this
recommendation, for example, is consistent with the Joint
Partnership and Training Act in which the federal government
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
works closely with the private sector. The Working Group
also agrees with the objective that the tax system should
not provide a disincentive to individuals being, trained in
employer-financed educational programs. As future reforms
to the tax code are considered, the federal government
should move in this direction so that incentives for both
training and capital investment can be aligned. THE WORKING
GROUP RECOMMENDS NO FURTHER ACTION ON THIS RECOMMENDATION.
6. To increase dialogue among ernment, industry, and labor,
a a small ite House sta ovs ou be established to study
and advise the President on competitive dynamics, b)
membership and charters of current advisory committees
should be reviewed and changed to enhance their
effectiveness to address competitive issues, c the review
of these advisory committees should address the desirability
of expanding the charter to include domestic economic issues
affecting competitiveness.
The Working Group believes that a new White House office to
advise the President on competitive dynamics is unnecessary.
A number of organizations currently exist in the Office of
Management and Budget, the Office of Science and Technology
Policy, the Council of Economic Advisors, as well as in the
White House staff itself which are aware of competitive
issues. THE WORKING GROUP RECOMMENDS NO ACTION ON THIS
RECOMM.ENDAT ION .
The Working Group supports items b. and c however. There are
currently at least 115 advisory committees in the Depart-
ments of Commerce, Labor, Treasury, and USTR. The group
believes that this recommendation should be expanded to
cover all agencies. For example, the Department of
Education has a ma-ior advisory group called the Council on
Vocational Education. THE WORKING. GROUP RECOMMENDS, THEN,
THAT THE COUNCIL ADOPT RECOMMENDATIONS b AND c AND ENCOURAGE
THE AGENCIES TO IMPLEMENT THIS AS CHARTERS AND APPOINTMENTS
COME UP FOR REVIEW.
-. U.S. antitrust policy should be reformed by a) modifying
Section 7 of the Clayton Act to recognize efficiency gains
from business combinations, b) seek legislation restricting
treble damage liability to specific cases, and c) create
procedures under which interested government agencies
participate with the Department of Justice in setting
antitrust policy and reviewing specific antitrust cases.
The Working Group was split.on item a. A number of agencies
believe that revision of Section 7 of the Clayton Act is
unnecessary because both Justice and the FTC already follow
guidelines that reflect the reality of global competition
and reflect efficiency gains from business combinations.
 Proposing changes to the Clayton Act might also open the
door to a total revision of the Act. Other agencies,
however, believe quite strongly that the Clayton Act should
be revised. The Department of Commerce is preparing draft
legislation to do this. THE WORKING GROUP RECOMMENDS THAT
THE CABINET COUNCIL TAKE NO ACTION,AT THIS TIME. RATHER,
THE COUNCIL SHOULD AWAIT THE PREPARATION OF A RECOMMENDATION
BY THE DEPARTMENT dF COMMERCE FOR LATER DECISION BY THE
CABINET COUNCIL.
The Working Group supports the Commission's recommendation
to seek a restriction for treble damage liability. We
believe that it should be done, but that tine is needed to
gather public support as well as develop a specific proposal
to deal with this. THE WORKING GROUP RECOMMENDS THAT THE
CABINET COUNCIL DESIGNATE THE DEPARTMENT OF JUSTICE AS THE
LEAD AGENCY TO WORK WITH OTHER FEDERAL AGENCIES AS WELL AS
THE PRIVATE SECTOR TO DEVELOP A PROPOSAL FOR LATER CABINET
COUNCIL REVIEW AND DECISION.
The Working Group supports the objective of the Commission's
recommendation that there should he greater interagency
involvement in development of antitrust policy. The group
was split on the appropriate interagency role in individual
enforcement decisions. which must'not give the appearance
of political manipulation. Therefore, THE WORKING GROUP
RECOMMENDS THAT THE CABINET COUNCIL ENDORSE THE OBJECTIVE OF
THE COMMISSION'S RECOMMENDATION BUT BELIEVES THAT NO FORMAL
SYSTEM SHOULD RE CREATED. Rather, THE COUNCIL SHOULD
ENCOURAGE THE DEPARTMENT OF JUSTICE TO SEER CONSULTATION
FROM AFFECTED AGENCIES AS APPROPRIATE.
8. Export control should be enhanced by a) ensuring that
national security export controls are consistently applied
by COCOM members, b) seeking a COCOM goal to eliminate
intra-COCOM controls within five years, c) use foreign
policy controls only after applvina systematic diplomatic
remedies, d) develop the ca ability to seek a multilateral
consensus among potential. suppliers, and e) stream ine
existing licensing for all export control.
The Working Group, with minor reservations, supports this
recommendation. We agree that there must be increased
cooperation among the COCOM nations and that export control
should be consistently applied. Member nation enforcement
practices should also he upgraded.-The federal government
cannot, however, ensure compliance and implementation of
such a complex program, although we should seek it as an
objective. Item c is supportive of current practices to
explore other alternati'res to further U.S. foreign policy
before applying export controls.
Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
 Finally, items d and e are consistent with current
Department of Commerce efforts to improve the effectiveness
of export administration. THE WORKING GROUP RECOMMENDS THAT
THE COUNCIL APPROVE THESE ITEMS AS CONSISTENT WITH, AND
SUPPORTIVE OF, CURRENT ADMINISTRATIVE EFFORTS.
9. Federal olicv dealin with competitiveness should take note
of the significant. role played by state and local govern-
ments as well as entrepreneurs and improve the exchange of
i eas.
The Working Group believes that the Commission has
recognized an important aspect of American competitiveness.
A number of departments have actions underway to meet the
.objective of this recommendation. The group also noted that
both American Express and the Chemical Bank have already
begun to respond to the Commission by printing the PCIC
studies of this area for private distribution. THE WORKING
GROUP RECOMMENDS THAT THE COUNCIL ADOPT THIS RECOMMENDATION.
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
CCCT WORK SCHEDULE FOR PCIC RECOMMENDATIONS
2/5 2/8 2/13 2/15 2/20 2/27 3/6 3/13 3/20 4/3
Summarize agency positions on November -
recommendations and send to Working Group
Summarize agency positions on December
recommendations and send to Working Group
Working Group meets to develop position
for CCCT on November recommendations
CCCT memorandum on November recommendations
is prepared
Working Group meets to develop position for
CCCT on December recommendations
Minutes reflecting CCCT decision on November
recommendations are distributed
CCCT memorandum on December recommendations
is prepared
Minutes reflecting CCCT decision on December
recommendations are distributed
CCCT Report to the President on the PCIC
is prepared
Eximbank Chairman Draper to prepare report
on mixed credit financing Ito be scheduled)
Undersecretaries Wallis and Olmer to meet on
Embassies' export strategies
CCCT meets to review followup reports related to
recommendations on the Export-Import Bank and on
U.S. Embassies' export promotion strategies
Legend: Action already completed
Action scheduled . Z2~1
 r,
Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
John A. Young
Chairman
MEMORANDUM TO ~CABINET COUNCIL ON COMMERCE AND TRADE
FROM: % _JOHN YOUNG
SUBJECT: Y` COMMISSION RECOMMENDATIONS
Attached are nine recommendations approved by the Commission
on October 23-24 in Dallas, Texas, for CCCT consideration.
? Department of Science and Technology
? Protection of Intellectual Property Rights
? Commercializing New Technologies through Improved
Manufacturing
? Employee Incentives
? Workforce Skills
? Dialogue Among Government, Industry and Labor
? U.S. Antitrust Policy
? Export Controls and Competitiveness
? State and Local Government Initiatives and
Entrepreneurship
The back-up issue papers and supporting documentation for each
recommendation are contained in the attached briefing bbeck.
Two additional recommendations from the Dallas meeting are
undergoing final review. They cover:
? Health and Safety Regulations and Technological
Innovation Needs
? Trade and Investment Policy
 Approved For Release 2009/10/19: CIA-RDP87M00539R002303850003-5
PROM= NATIONAL INrERESIS AND POLIO FOR
RESEARCH AND TECHNOECGICAL INNOVATION I A
NEW DE PARTME24T OF St312JCE AND TEZ3WIOGY
The role of science and technology in our lives and institutions is
enormous and growing. We live in a world whose economy is driven by the
introduction and use of technologies, and the progress of American
industrymeasured in terms of industrial competitiveness-and the strength
of the American economy are paced by how well our nation advances and uses
science and technology. Today science and technology are truly the
underpinnings of our national well-being, and nearly every national policy
either affects or is affected by science and technology.
The U.S. is the largest supporter of science and technology in the world,
and a central feature of that support is the multiplicity of government
roles - performer, manager, stimulus, fonder, and policymaker. Yet within
the federal government there is no operational focus for this critical
element in our future. Science and technology need a higher level of
attention, greater predictability of support, more coherent policies, and
better long-range planning to enhance the caipetitive status of our nation.
For these reasons, the Committee recommends the creation of a Cabinet-level
Department of Science and Technology. Such a Department would transform
the current, fragmented formulation of policies for science and technology
into one that would be far more effective in meeting long-term national
goals. It would also improve the effectiveness with which government,
industry, and academia interact in the process,of researching, developing,
and commercializing technology.
The Secretary of Science and Technology would be the rajor spokesman within
the government on science and technology issues. In effect, this position
would be the highest science and technology post in the government and the
Department would become one where the President and other Cabinet members
can turn for advice on science and technical issues. This Department
would coordinate with other departments the functions that have significant
responsibilities related to science and technology, and would help to
develop links to scientists outside of government.
The new Department of Science and Technology would ensure a national
science and technology base strong enough to-meet the competition that
confronts both industry and government. It would:
* Make clear the importance of science and technology at a time when
technological innovation is the key to enhanced U.S. industrial
competitiveness.
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
* Establish an authoritative cabinet-level voice within government to
deal with the interactions between emerging issues and their science
and technology curponents.
* Improve the management of federal R&D in labs and agencies under
direct jurisdiction of the Department of Science and Technology.
* Coordinate the management of federal R&D and science and technology
policy with other federal research organizations not under the
jurisdiction of the Department of Science and Technology.
* Provide comprehensive evaluation and analysis for the President
regarding science and technology policies -- including funding,
regulation, protection of intellectual property, and tax incentives
- of all departments and government agencies that can have an impact
on science, innovation, and competitiveness.
The primary missions of the Department within the government would be to:
* Ensure effective funding for R&D to promote research and
technological innovation in goverment and the nation.
* Develop long-term strategic plans to build the science and technology
base in support of research, development, and technological
innovation in government, industry, and academia.
* Analyze and promote policies throughout government that would better
address the needs of scientific and technical research, innovation,
and development.
.In pursuit of those missions the Department would place hich priority on
the support of basic research across the broad, often unpredictable,
spectrum of topics that have potential long-term benefit to the nation. It
is particularly important for the United States, to e.72=race as a fundamental
objective the enhancement of industrial competitiveness. To help meet that
goal, wherever appropriate the Department should specifically apply two
criteria in the management of R&D:
* Emphasize programs that will increase the pool of scientists and
engineers needed by industry.
* Emphasize programs with potential to produce technologies of generic
importance to industry and governmrent.
 TJ RaW E DC STRIAL COMPETITIVENESS, THE COMMISSION RECOMMENDS THAT
THE U.S. Gmdlmw MAKE THE STRDfl1HENING OF I1PrfdL 1[VAL PROPERTY RIGHTS
AT HOME AND ABROAD A PRIORITY ITEM ON THE NATION'S POLICY AGENDA, AND,
TOGETHER WITH INDUSTRY, COMMIT ITSELF TO IMPLEMENTING A DETAILED STRATEGY
OF ACTIONS DESIGNED '0 ACHIEVE THIS GOAT.*
* The detailed strategy encompasses, but goes beyond, the four specific
recommendations on intellectual property approved previously by PCIC.
 NEW Z lNDL GGIESS THROUGH IMPROVED PU A FACIVRING
BECAUSE OF INATTENTION IN MANY U.S. ORGANIZATICL.'S OVER THE LAST GENERATION,
THE ABILITY TO USE MANUFACTURING TECHNOLOGIES FOR COMPETITIVE ADVANTAGE
OVER FOREIGN FIRMS HAS BECOME ONE OF THE WEAKEST PERFORMING AREAS, AS
MEASURED BY RELATIVE PRODUCTIVITY GROWTH, TECHNOLOGICAL INNOVATION, AND
APPLICATIONS OF ROBOTS AND AUTOMATION TUCHNIQUES. IT IS RECOMMENDED THAT
THE PRIVATE SECTOR, EDUCATIONAL INSTITUTIONS, AND GOVERNMENT INITIATE
ACTIONS INTENDED TO IMPROVE THE DEVELOPMENT AND USE OF MANUFACTURING
TECHNOLOGIES TO TRANSFORM R&D RESULTS INTO COMPETITIVE PRODUCTS AND
SERVICES FOR U.S. FIRMS.
RlDCOb2 ED ACTIONS FOR PRIVATE ORGANIZATIONS ARE:
o ALL INDUSTRIAL FIRMS MUST GIVE INCREASED MANAGEMENT ATTENTION TO THE
NEED TO IMPROVE THEIR MANUFACTURING CAPABILITIES -- BY INCREASING
PRODUCTIVITY, BY PROMOTING TECHNOLOGICAL INNOVATION, BY IMPROVING
QUALITY, BY MODERNIZING PRODUCTION FACILITIES, AND BY ORGANIZING
INTERNAL FUNCTIONS TO REDUCE TIME AND RESOURCES RDUUIRED IN TAKING A NEW
PRODUCT DESIGN TO COMMERCIAL PRODUCTION.
o MONEY MANAGERS, BAtKAS, ACCOUNTANTS, STOC3C:DLDERS, AND BUSINESS LEADERS
SHOULD BE CHALLENGED TO DE-EMPHASIZE SIMPLE, SHORT-TERM FINANCIAL
MEASURES, AND INSTEAD TO DEVELOP AND UT IT IZE PERPORMA'C MEASURES MORE
CONSISTENT WITH LONG-RANGE COMPETITIVENESS AND PROFITABILITY.
o INDUSTRY SHOULD INCREASE ITS SUPPORT FOR l::It-25L Y- .T~CSTRI AND JOINT
INDUSTRY COOPERATIVE RESEARCH ACTIVITIES THAT MEET THEIR SPECIFIC
TECHNOLOGY NEEDS WITH THE OBJECTIVE OF REDUCING TII GAP BETWEEN THE
DEVELOPMENT AND APPLICATION OF NEW TECF_:OLDGIES AND MANUFACTURING
PROCESS.
RDL IDED ACTIONS FOR EDUCATIONAL ORGANIZATIONS ARE:
o UNIVERSITIES, INDUSTRY AND GOVEIETMINT MUST WORK TOGETHER TO IMPROVE B'7iH.
THE QUALITY AND QUANTITY OF MANUFACTURING-RELATED EDUCATION GIVEN BY
BOTH ENGINEERING AND BUSINESS SCHOOLS.
o INITIATE (WITH INDUSTRY AND GOVERNM I SUPPORT) RESEARCH TO INCREASE OUR
UNDERSTANDING OF THE MAtiAGE_vJN ' OF TECl-:.NOLOCICAL L'ZVO\e.TION AND IMPROVED
METHODS OF ANALYZLNG RELATIONSHIPS BE1'vT .`'.A.NcACTtRL"NG AND R&D IN ORDER
TO AID POLICY DEVELOPMENT IN THIS COMPLsE C AREA.
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
o THE FEDERAL GovERNMFNP SHOULD EXPAND SUPPORT FOR MANUFACTURING-RELATED
ACTIVITIES IN UNIVERSITIES THROUGH SUCH ACTIONS AS EXPANDING NSF
ENGINEERING RE I CENIVE S THAT FOCUS ON MANUFACTURING RESEARCH.
o IN ORDER TO PROVIDE THE FUNDS NECESSARY FOR U.S. FIRMS TO BRING THE
FRUITS OF R&D 70 MARKET, TIE R&D TAX CREDIT SHOULD BE STRENGI4?NED AND
CLARIFIED TO INCLUDE EXPENSES INVOLVED IN DE'VELCPING AND IMPLEMENTING
INNOVATIVE MANUFACTURING PROCESSES, MACHII=, AND FACILITIES.
o AGGRESSIVE FEDERAL SUPPORT IS NEEDED FOR RESEARCH AND ASSISTANCE WITH
INTERFACE AND DATA EXCHANGE STANDARDS FOR MANUFACTURING AUTOMATION.
o FEDERAL AGENCIES SHOULD UNDERTAKE SPECIAL EFFORTS TO FACILITATE U.S.
MANUFACTURERS GENERALLY TO MAKE USE OF':ADVANCED MANUFACTURING
TECHNOLOGIES DEVELOPED BY THOSE AGENCIES FOR THEIR OWN MISSIONS.
 RE0744 bMATICNS
TO ACHIEVE INCREASED PRODUCTIVITY AND IMPROVED QUALITY, FIRMS NEED THE
MAXIMUM COMMITMENT OF THEIR EMPLOYEES AT EVERY LEVEL. SUCH COMMITMENT
CANNOT BE EXACTED; RATHER, IT IS THE CONSEQUENCE OF EMPLOYMENT SECURITY,
THE COOPERATION ACHIEVED BETWEEN MANAGEMENT AND LABOR, AND POSITIVE
INCENTIVES TO EMPLOYEES WHICH REINFORCE INDIVIDUAL EXCELI.FNCE.
1) AMERICAN MANAGEMENT IS URGED TO MAKE USE OF THE BROAD ARRAY OF
INCENTIVE MECHANISMS AVAILABLE TO IT TO REWARD THE EFFORT OF
INDIVIDUAL EMPLOYEES AND TO STRENGTHEN, THE LINKAGE BETWEEN PAY AND
PERFORMANCE. AMONG THESE ARE COMPENSATION PLANS, SUCH AS GAINS'HARING
AND PROFITSHARING, WHICH LINK INDIVIDUAL PAY WITH THE SUCCESS OF THE
FIRM, AND EQUITY OWNERSHIP PROGRAMS, SUCH AS INCENTIVE STOCK OPTIONS
(ISOs) AND EMPLOYEE STOCK OWNERSHIP PLANS (ESOPs); WHICH ENHANCE THE
INDIVIDUAL'S STAKE IN THE FIRM'S LONG-TERM SUCCESS THOUGH EMPLOYEE
STOCK OWNERSHIP. INCENTIVES SHOULD BE. APPLIED WITH SENSITIVITY TO
THEIR IMPACT ON TrE MOTIVATION AND MORALE OF ALL EMPLOYEES.
2) WITH RESPECT TO INCENTIVE STOCK OPTIONS, PUBLIC POLICY CHANGES
ARE NEEDED TO AUGMENT THEIR USEFULNESS AS A MECHANISM FOR
IMPROVING EMPLOYEE PRODUCTIVITY. SPECIFICALLY, CONGRESS SHOULD ACT
70: A) AMEND SECTION 57(A) OF THE TlC'ER'~AL RE4EIv'UE CODE TO ELIMINATE
AS A TAX PREFERENCE ITEM THE SPREAD BETWEEN EXERCISE PRICE AND FAIR
MARKET VALUE THAT EXISTS AT THE TIME OF EXERCISING ISOs; B) AMEND
SECTION 422A OF THE CODE TO REMOVE THE CEILING LIMITING THE GRANTING
OF ISOs TO AN AGGREGATE VALUE OF LESS THAN $100,000 IN ANY ONE YEAR;
AND C) AMEND SECTION 422A OF THE CODE TO DELETE THE RULE REQUIRING
ISOs TO BE EXERCISED IN SEQUENTIAL ORDER. ADDITIONALLY, CURRENT
ACCOUNTING TREATME'N'T OF ISOs SHOULD BE PRESERVED.
Approved For Release 2009/10/19 : CIA-RDP87M00539ROO2303850003-5
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
ATICN
EMPLOYEE TRAINING IS A CDRNERSTONE OF ANY POLICY AIMED AT MAINTAINING
INDUSTRIAL COMPETITIVENESS. IT PROVIDES THE PRIMARY VEHICLE FOR UPGRADING
THE SKILLS OF THE WORKFORCE-AN EFFORT CRITICAL TO CONTINUED ECONOMIC
VIABILITY AT A TIME WHEN THE U.S. ECONOMY IS UNDERGOING STRUCTURAL SHIFTS
AND TECHNOLOGY IS CHANGING THE WAY WE WORK. ?HILE MLLC'H EMPHASIS HAS BEEN
PLACED ON THE MODERNIZATION OF PLANT AND EQUIPMMT TO ENHANCE PRODUCTIVITY,
THESE EFFORTS MUST BE ACCOMPANIED BY SIMILAR UPGRADING OF HUMAN RESOURCES
IF LONG-TERM GAINS IN PRODUCTIVITY ARE TO BE REALIZED.
PRECISELY HOW TECHNOLOGY AND STRUCTURAL CHANGES, WILL AFFECT HOW AMERICANS
WORK AND AT WHAT THEY WORK IS YET TO BE DISCOVERED. WHAT IS CERTAIN IS
THAT INSTITUTIONS AND INDIVIDUALS WILL BE REQUIRED TO BE INCREASINGLY
ADAPTABLE. THE INSTITUTIONS THROUGH WHICH THIS CAN BE ACCOMPLISHED ARE
LARGELY IN PLACE. EMPLOYERS, DIRECTLY AND INDIRrI'LY THROUGH OUTSIDE
EDUCATIONAL INSTITUTIONS, PROVIDE MORE JOB-RELATED ADULT EDUCATION THAN ANY
MIER SECTOR. PUBLIC POLICY, TO FACILITATE'THE DELIVERY OF TRAINING BY
EMPLOYERS, SHOULD:
1) PURSUE MACROECONOMIC STRATEGIES DESIGNED TO MAINTAIN ECONOMIC
EXPANSION AND REDUCE U LOYMENT. EMPLOYEE TRAINING IS HIGHLY
REACTIVE TO ECONOMIC CYCLES; WHEN THE ErtoMY IS SLOW, EMPLOYERS
HAVE LITTLE INCENTIVE TO INVEST IN THE DEVELOPM IT OF THEIR HUMAN
RESOURCES, TENDING INSTEAD TO IN.'VFST IN LA3OR-SAVING DEVICES TO
CUT COSTS. REDUCED UNEMPLOYMENT AND EXPANTDM DEMAND WILL RESULT
IN AUGMENTED EMPLOYER INVESTMENT IN TRAINING. SIMILARLY,
INDIVIDUALS WILL HAVE INCENTIVE TO INVEST IN THEIR OWN
TRAINING,AS THE OPPORTUNITIES FOR INCREASED WAGES AND GREATER
OCCUPATIONAL MOBILITY DERIVED FROM SL-! TRAINING ARE INCREASED
BY EXPANDING DEMAND.
2) STRIVE TO ACHIEVE BAIAN= TAX TREATTIE n OF D''IPLOYER INVESTMENTS
IN PHYSICAL AND HUMAN CAPITAL. PROPOSALIS FOR TAX RESTRUCTURING
SHOULD BE EVALUATED WITH RESPECT TO =R IMPACT ON CREATING
INCENTIVES OR DISINCENTIVES FOR INVESTMENT IN' TRAINING. EMPHASIS
ON PHYSICAL CAPITAL INVESTMENT ALONE IS NOT ENOUGH. COMPARABLE
HUMAN CAPITAL INVESTMENT INCENTIVES MUST BE AVAILABLE TO ASSURE
LANG-TERM PRODUCTIVITY GROWTH AND AVOID JOB LOSS.
3) STRF QI12N THE CAPACITY OF VOCATIONAL EDUCATION TNSTITUTIC25 AND
COMMUNITY COLLEGES TO PROVIDE CUSTOMIZED TRAINING PTOOAAME FOR
EMPLOYERS, PARTICULARLY FOR SMA 1. FIRMS LACKING IN,SxsE TRAINING-
PERSONNEL. WHILE THERE ARE MANY VOCATICL:AI, TECrfJICAL INSTITUTES
AND COMMUNITY COLLECFS WHICH PROVIDE E.M.PLOYER-SPECIFIC TRAINING,
THE EFFECTIVENESS OF THESE INSTITUTIONS IN DOING SO IS HAMPERED
BY: A) LACK OF INFORMATION ON EMERGING OCCUPATIONAL SKILLS
DEMANDED BY EMPLOYERS AND TRAN'SIATIOIN OF THIS INTO CURRICULA
WHICH ARE RESPONSIVE TO EMPLOYERS' NEEDS; B) INADEQUATE
RESOURCES FOR POSTSECONDARY PROGRAMS,, MAKING IT DIFFICULT FOR
INSTITUTIONS TO ATTRACT INSTRUCTORS QUALIFIED TO TEACH IN
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
TECHNICAL AND SCIENCE FIELDS; AND C) LACK OF UP-TO-DATE EQUIPMENT
FOR TRAINING.
TO ADDRESS THE PROBLEM OF INADEQUATE. INFORMATION CONCERNING
EMPLOYERS' TRAINING NEEDS, THE COMMISSION ENDORSES THE
ESTABLISHMENT OF TECHNICAL COMMITTEES COMPRISED OF REPRESENTATIVES
OF EMPLOYERS, LABOR. AND PROFESSIONAL AND TRADE ASSOCIATIONS, AS
PROVIDED IN THE RECENT REAUTHORIZATION OF THE FEDERAL VOCATIONAL
EDUCATION ACT. THE PURPOSE OF THESE COMMITTEES IS TO GUIDE THE
DEVELOPMENT OF CURRICULA IN SPECIFIC OCCUPATIONS TO ASSURE THAT
VOCATIONAL PROGRAMS ARE RESPONSIVE TO THE TRAINING NEEDS OF
EMPLOYERS.
TO RESPOND TO THE CHANGING DEMOGRAPHICS OF THE POPULATION AND THE
TRENDS CREATING INCREASING DEMAND FOR TRAINING AND RETRAINING OF
ADULTS, GREATER EMPHASIS SHOULD BE PLACED BY THE VOCATIONAL
EDUCATION ACT ON POSI''SEcoNDAR' VOCATIONAL EDUCATION. THE CURRENT
20 PERCENT SET-ASIDE FOR POSTSECONDARY VOCATIONAL EXPENDITURES
SHOULD BE INCREASED TO REFLECT MORE CLOSELY THE PROPORTION OF
INDIVIDUALS ENROLLED IN VOCATIONAL AND TRAINING PROGRAMS AT THE
POSTSECONDARY LEVEL.. INCREASED SUPPORT FOR POSTSECONDARY
PROGRAMS SHOULD ENHANCE THE CAPACITY OF THESE INSTITUTIONS TO
OBTAIN QUALIFIED FACULTY AND PROVIDE SERVICES WHICH ARE MORE
RESPONSIVE TO THE CUSTOMIZED NEEDS OF INDUSTRY. THIS INCREASED
EMPHASIS ON POSTSE ARY PROGRAMS SHOULD BE ACCOMPANIED BY
A PROPORTIONATE REDUCTION IN . FEDERAL SUPPORT FOR SE,RY-LEVEL
PROGRAMS, REFLECTING THE STRONG STATE SUPPORT FOR THE LATTER AND
DECZ.INING DEMAND RESULTING FROM THE AGING OF THE POPULATION.
FINALLY, TO ALLEVIATE THE SHORTAGE OF UP-TO-DATE INSTRUCTIONAL
EQUIPMENT, STATES SHOULD BE ENCOURAGED, TO ESTABLISH DIJIPMEhT
POOLS FOR THE SHARING OF EQUIPMENT AMONG INSTITUTIONS. THIS
WOULD PROVIDE ACCESS TO STATE-OF-THE-ARP EQUIPMENT OTHERWISE NOT
AFFORDABLE BY INDIVIDUAL INSTITUTIONS AND, DUE TO ECONOMIES OF
SCALE,- ENABLE STATES TO TURN OVER OBSOLESCING EQUIPMENT MORE
QUICKLY THAN COULD INDIVIDUAL INSTITUTIONS. THE SECRETARY OF
EDUCATION IS ENCOURAGED TO MAKE COMPETITIVE GRANTS TO STATES FOR
THIS PURPOSE, UNDER AUTHORITY GRANTED HIM IN THE RECENT
REAUTHORIZATION OF THE VOCATIONAL EDUCATION ACT. ADDITIONALLY,
WHERE POSSIBLE, EMPLOYERS FOR WHOM CUSTOMIZED TRAINING IS BEING
PROVIDED SHOULD BE ENCOURAGED TO LOAN EQUIPMENT FOR TRAINING TO
THE INSTITUTION INVOLVED.
4) EXTEND PERMANENTLY SECTION 127 OF THE INTERNAL REVENUE CODE TO
REMOVE TAX DISINCENTIVES FOR INDIVIDUALS BEING TRAINED THROUGH
EMPLOYER-FINANCED EDUCATION PROGRAMS. RECENTLY RE-ENACTED
THROUGH 1985, SECTION 127 PROVIDES THAT THE VALUE OF
EMPLOYER-FINANCED EDUCATION AID (TUITION, BOOKS, FEES) IS NOT
INCLUDABLE IN EMPLOYEE INCOME. WITHOUT THIS PROVISION, ALL
EDUCATION AND TRAINING EXPENDITURES ARE TAXABLE TO THE
INDIVIDUAL EMPLOYEE, UNLESS DEEMED TO BE'"JOB-RELATED" (DEFINED AS
TRAINING WHICH MAINTAINS OR IMPROVES, THE SKILLS USED IN AN
EXISTING TRADE OR BUSINESS OR WHICH IS REQUIRED BY THE
INDIVIDUAL'S EMPLOYER AS A CONDITION OF CONTINUED EMPLOYMENT).
TRAINING WHICH IS "JOB-RELATED," BUT WHICH ALSO QUALIFIES THE
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
INDIVIDUAL FOR A NEW TRADE OR BUSINESS IS NON-DEDUCTIBLE.
WITHOUT SECTION 127, THERE IS A MAJOR DISINCENTIVE TO INDIVIDUALS
SEEKING TO UPGRADE SKILLS OR ENHANCE OCCUPATIONAL MOBILITY
THROUGH COURSES FINANCED By THEIR EMPLOYERS.
IN ADDITION TO PUBLIC POLICY CHANGES, FMPiOYnG ARE MXCURAGED 10
TAKE A MORE SYSTEMATIC APPROACH TO THEIR TRAINING ACTIVITIES AND TREAT
M'E24 AS ANY OTHER MAJOR > INE4S ACTIVITY. IN SO DOING, IT IS LIXELY
THAT EMPLOYER-PROVIDED TRAINING WILL BECOME , LESS REACTIVE AND MORE
FULLY INTEGRATED INTO THE ONGOING PLANNING AND OPERATION OF THE FIRM.
EMPLOYERS ARE URGED TO ASSESS THE NATURE OF THEIR TRAINING EFFORTS, TO
MAKE USE OF NEW TRAINING TECHNOLOGIES WHERE POSSIBLE, AND TO GIVE
PARTICULAR ATTENTION TO THE QUALITY AND EFFECTIVENESS OF TRAINING FOR
FIRST-LINE SUPERVISORS.
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
INCREASING EFFECTIVE DIAUX= AMOW GOVE R*2,W, nM Sri r,
AND LABOR
THE COMMISSION BELIEVES THAT EFFECTIVE MECHANISMS FOR DEVELOPING CONSENSUS
AMONG KEY SECTORS OF SOCIETY ARE NECESSARY IF THE U.S. IS TO RESPOND
EXPEDITIOUSLY TO THE COMPETITIVE CHALLENGES 0Dt' ONTING IT. THE ABILITY OF
THE POLITICAL DECISION-MAKING PROCESS TO ADDRESS MAJOR ECONOMIC PROBLEMS IS
IMPEDED BY DYSFUNCTIONAL CONFLICT AMONG THE VERY SECTORS WHOSE COOPERATION
IS NECESSARY IF THOSE PROBLEMS ARE TO BE RESOLVED. CITIZENS ADVISORY
COMMITTEES COULD PROVIDE STRUCTURES WHICH WOULD ENABLE A COMMON PERCEPTION
OF THE FACTS TO BE DEVELOPED, IMPLICIT TRADEOFFS AMONG POLICY OPTIONS TO BE
MADE EXPLICIT, AND COUNTER-PRODUCTIVE CONFLICT 'N BE?MINIMIZED.
1) THE PRESIDENT'S ROLE IN HELPING TO DEVELOP SUCH A CONSENSUS WOULD BE
GREATLY EXPEDITED IF HE HAD IMMEDIATE ACCESS TO RELIABLE, INDEPENDENT
DATA AND ANALYSIS. AT THE PRESENT TIME, THE PRESIDENT MUST RELY ON
AGENCIES WHOSE ADVICE MAY BE INFLUENCED BY THEIR SPECIAL INTEREST
COMMITMENTS. THEREFORE, A POSITION IN THE WHITE HOUSE (POSSIBLY IN '11?
COUNCIL OF ECONOMIC ADVISORS), SHCUTD BE CREATED WITH A SMALL STAFF OF
PROFESSIONALS TO STUDY THE COMPETITIVE DYNAMICS OF OUR ECONOMY AND
ADVISE THE PRESIDENT ON THESE MATTERS.
2) THE EXISTING ADVISORY COMMITTEES AFFILIATED WITH THE DEPARTMENTS OF
COMMERCE, LABOR AND TREASURY, AND THE OFFICE OF THE U.S. TRADE
REPRESENTATIVE OFFER A POSSIBLE BASIS: FOR THE DEVELOPMENT OF
CONSENSUS-BUILDING STRUCTURES. THE COMMISSION URGES THE PRESIDENT AND
THE CONGRESS TO DIRECT THE HEADS OF THOSE AGENCIES TO UNDERTAKE A
REVIEW OF THE COMMITTEE C21ART'FRS AMID MEMBERSHIP, AND TO RECOMMEND MEANS
OF ENHANCING THEIR EFFECTIVENESS TO ADDRESS COMPETITIVENESS ISSUES.
3) THE REVIEW OF ADVISORY COMMITTEE CHARTERS SHOULD ASSESS TEE
DESIRABILITY OF EXPANDING THE MISSION OF.T E COMMITTEES TO INCLUDE
THOSE DOMESTIC ECONOMIC ISSUES HAVING DIRECT BEARING ON
COMPETITIVENESS. ADDITIONALLY, EXPLICIT MANS OF ASSURING APFROFR ATE
COORDINATION AMONG COMMITTEES SHOULD BE DET RMINED. TO STREI~'GIHTh T.-E
REPRESENTATIVE CHARACTER OF THE COMMITTEES, IT IS URGED THAT
CONSIDERATION BE GIVEN TO EXPANDING THE ROLE OF TRADE ASSOCIATIONS,
LABOR REPRESENTATIVES, REPRESENTATIVES OF ACADEMIA, AND CIS-IER ORGANIZED
CITIZENS GROUPS IN THE MEMBERSHIP OF THE COMMITTEES. LASTLY, A REVLEI
OF THE STATUTORY AND CASE LAW GOVERNING I HE COM 4ITTt.E,S SHOULD BE MADE
WITH THE GOAL OF RECOMMENDING MEANS OF PROTECTING PUBLIC ACCESS TO TrE
COMMITTEES, WHILE PERMITTING SOME PRIVATE MEETINGS TO ENCOURAGE CANDID
DISCUSSION.
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
1. The Commission recommends that the President seek legislation
modifying Section Seven (7) of the Clayton Act and other
antitrust statutes to recognize the potential efficiency gains
from business combinations, and the reflect the reality of global
competition and global market definitions, where appropriate. In
addition, specific antitrust exemptions should be considered for
mergers and other types of business relationships which promote
national objectives (e.g., public good, rationalization).
2. The Commission recommends that the President seek legislation
restricting treble damage liability to behavior explicitly
prohibited by law (per se unlawful behavior).
3. The Commission recommends that 'the Administration create a
procedure under which interested government agencies participate
with the Department of Justice periodically in setting antitrust
policy, particularly with respect to business relationships
normally subject to antitrust scrutiny. Interested agencies
would also retain the right to intervene in specific antitrust
decisions under consideration. I
 1. The Commission recommends that where comparable products or
technologies are available from other sources, the U.S.
Government should ensure that national security export controls
are mutually agreed upon and consistently applied by all COCOM
members (Coordinating Committee for Multilateral Export Controls)
in order to be effective.
2. The Commission recommends that COCOM should establish a specific
goal of upgrading member national enforcement practices such that
all intra-COCOM controls can be eliminated within five years.
New practices could include extradition-provisions for diverters,
sharing of information regarding suspected diverters, tightened
east/west licensing and customs procedures, etc. If this is not
feasible on a multilateral basis, bilateral or plurilateral (with
a select group of other nations) negotiations should be pursued.
3. The Commission recommends that foreign policy controls should
only be used after applying all feasible diplomatic remedies..
4. The Commission recommends tht the U.S. should develop a
capability to quickly identify sources of foreign availability,
and seek multilateral consensus among potential suppliers to
restrict exports to achieve foreign policy goals. Future foreign
policy contols should only be applied after full consultation
with other potential supplying countries, and after carefully
weighing the full and certain cost to the American economy
against the potential foreign policy benefits. Finally, future
imposition of foreign policy controls should recognize the
principle of contract sanctity and refrain from extraterritorial
application except in cases of national emergency.
5. The Commission recommends that the existing licensing process for
all export controls should be significantly streamlined and
automated to provide timely responses' competitive with other
nations such as Japan, France, and the United Kingdom.
 Approved For Release 2009/10/19 : CIA-RDP87M00539R002303850003-5
PRESIDENT'S C Y21ISSION ON INDUSTRIAL COt2L'rITIVENESS
TA&( FORCE ON smw AND LOCAL O0VEId* NF 2UTIATIVES AND
The Commission takes note of the significant role state/local governments
and entrepreneurs are playing in improving the competitiveness of American
industry in world markets and, with a framework to exchange innovative
ideas, state governments should continue to exercise initiatives in this
field. Also, where appropriate, federal policy dealing with
competitiveness should take note of this role by states and the
entrepreneurial movement.