Two seemingly disparate elements — the technological divergence of the US and China, and the financial shock of the loss of international student revenue to Australia’s universities — are converging to undercut Australia’s ability to independently generate new technologies, advance science and maintain our defence forces’ regional technological lead.
A clear lesson from the pandemic is we require an integrated and whole-of-government national security strategy, then the critical importance of science and technology, how we fund it and the role it plays in our economic prosperity and defence should be at its heart.
For several decades, successive Australian governments have taken advantage of the efficiencies that globalisation provided in terms of research and development. International travel, instant communication and the liberalisation of the scientific, technology and research communities have allowed the rapid growth of lucrative international student revenue for Australian universities and, subsequently, the cross-subsidisation of domestic research activity.
Across a decade this allowed consecutive Australian governments to reduce national R&D spending.
For instance, total Australian research spending as a share of gross domestic product fell to 1.79 per cent in 2017-18, down from a historical high of 2.25 per cent in 2008-09. Both numbers are far below the OECD average of 2.37 per cent. Similar below-average results can be found in Australian business investment in R&D.
While we pioneered multiple scientific advances and technologies that have had global impact, a laissez-faire approach to R&D spending — the basis of technological capability — has cemented the country as a relative taker of new technology rather than an exporter. Even as R&D contributes to economic growth, helps to advance a sovereign and advanced defence force and builds national resilience, Australians largely have become used to technological change as something that happens to us rather than by us as agents of innovation.
Australia has been able to get away with this approach, as Australian National University scholar Lesley Seebeck has argued, for as long as technological development was “strategically neutral”.
But Australia’s decrease in national R&D funding has occurred even as the global landscape has become more competitive and volatile.
Critically, the source of much of Australia’s defence and national security intellectual property and capability — the US — has found its traditional technological dominance challenged as its global share of R&D spending fell from 40 per cent in 2000 to 27.9 per cent in 2015.
Even more important, the centre of global innovation and research spending has shifted to Australia’s region while Canberra’s policy has remained static. In 2015, for example, R&D investment in East and Southeast Asia accounted for 40.3 per cent of worldwide total, while North America’s was 27.9 per cent and Europe 21.6 per cent.
Part of the US response to a more competitive global innovation environment has been to crack down on China’s systematic IP theft. New powers have been granted to screen foreign investment in Silicon Valley’s start-up community, expanded dual-use technology export controls are being rolled out and the Justice Department has embarked on a countrywide campaign to prosecute IP theft, espionage and enforce existing disclosure laws.
With the COVID-19 pandemic exposing the overreliance of the US on supply chains originating in China for critical medical supplies and other products, this process is set only to accelerate.
The US Congress is likely to revisit legislation introduced last year such as the China Technology Transfer Control Act of 2019. The act essentially would grant the administration the power to block US government research funding flowing to third parties also collaborating on projects with Chinese entities. The act specifically names technologies associated with Beijing’s Made in China 2025 industrial policy but also encompasses agricultural machinery, locomotives, advanced construction equipment and civil aircraft.
Australian universities engaging in research projects with both US and Chinese government funders could be caught up if the draft legislation were to progress.
As the source of much of Australia’s R&D and technology development, our universities likely could have weathered this trend towards a more geopolitically fractured research landscape, if not for the freefall in international student funding.
A report from Universities Australia last month forecasts a potential $2.5bn shortfall in international student fees because of COVID-19 travel restrictions. As both government policy and universities have used the growth in high-fee-paying international students to cross-subsidise research in recent decades, our R&D base is particularly exposed.
At present, there is no national strategy or vision encompassing all the different ways Australia’s technology and scientific system intersects with geopolitics, how that may affect how it is to be funded and what it is we want it to do.
Countries in our region may provide examples for Australia. South Korea stands out as a nation that has applied a national strategy and industrial policy to its R&D capacity with notable success. In 1999 South Korea published a national scientific and R&D strategy with a vision to build the country into a technological powerhouse by 2025. Updated every five years, it has been a highly successful industrial policy that has led to long-term results.
Seoul has increased its GDP expenditure on R&D from 2.21 per cent in 2000 to 4.52 per cent in 2018, one of the highest in the OECD. South Korea also has the second-highest research intensity measurement in the OECD, behind only Israel, with many firms in South Korea spending a significant amount of their budgets on research activity.
While South Korea may not be the perfect comparison — Australia does not have the equivalent of its large industrial conglomerates, or chaebols — long-term planning has aided South Korea in establishing some technological resilience. Its investment in R&D has allowed it to chart its own path in critical technologies such as artificial intelligence and 5G.
Building an R&D industrial policy that takes into account the changing nature of the global scientific ecosystem, the interlinkages between national security, civilian R&D and national resilience across the long term would better prepare Australia for a more contested technological world.