The world’s 20 biggest economies are meeting in the Chinese city of Huangzou on 4 and 5 September. They account for two-thirds (64%) of the global population but as much as 80% of GDP and 92% of spending on research and development (R&D) worldwide, according to the UNESCO Science Report. When it comes to private knowledge creation, the domination is even stronger: 94% of patents granted by the US Patent and Trademark Office stem from G20 countries.
Although the number of researchers has increased worldwide since 2009, the G20’s share has shrunk by less than one percentage point. Of the 7.76 million researchers worldwide, 6.74 million live in G20 countries, equivalent to 87% of the total.
The G20 continues to dominate both GDP and research. However, within the G20, the playing field has levelled out somewhat, with China having increased its share of research spending by 42% to 19.6% of the total and the Republic of Korea by 22% to 4.4%. This has caused the world shares of many high-income G20...
The world’s 20 biggest economies are meeting in the Chinese city of Huangzou on 4 and 5 September. They account for two-thirds (64%) of the global population but as much as 80% of GDP and 92% of spending on research and development (R&D) worldwide, according to the UNESCO Science Report. When it comes to private knowledge creation, the domination is even stronger: 94% of patents granted by the US Patent and Trademark Office stem from G20 countries.
Although the number of researchers has increased worldwide since 2009, the G20’s share has shrunk by less than one percentage point. Of the 7.76 million researchers worldwide, 6.74 million live in G20 countries, equivalent to 87% of the total.
The G20 continues to dominate both GDP and research. However, within the G20, the playing field has levelled out somewhat, with China having increased its share of research spending by 42% to 19.6% of the total and the Republic of Korea by 22% to 4.4%. This has caused the world shares of many high-income G20 countries to contract, as in Australia, Canada, France, Germany, Japan, Italy, Russian Federation, the UK and USA.
The progression of GDP over this period reflects a similar trend. Whereas high-income G20 countries saw their world shares of GDP contract between 2009 and 2013, China’s share grew to 16.1% of the total.
Overall, research spending in high-income countries progressed faster than GDP in the years following the global and financial crisis of 2008–2009. A drop in public spending on research in high-income countries as a result of austerity budgets was compensated by sustained business spending.
Meanwhile, developing countries with strong primary industries, such as Argentina, Ethiopia, Kenya, Mali and Mexico, were able to use strong growth fuelled by the commodities boom to boost their own level of public commitment to research. A number of emerging economies also increased their research spending over this period, such as Malaysia and Turkey.
All five BRICS countries are G20 members. They experienced contrasting trends between 2009 and 2013. In the Russian Federation, where technology-based start-ups remain uncommon, government funding of civil-purpose R&D rose steadily but industrial investment remained modest, despite government efforts to stimulate business innovation. In China, public and business funding of R&D rose in tandem, whereas, in South Africa, the rise in public spending on R&D could not compensate for the sharp drop in private-sector R&D. In Brazil and India, the situation was reversed, with business spending rising faster than government commitment to R&D. However, the UNESCO Science Report observed the 2008 crisis had had a negative impact on innovation in Brazil, with all Brazilian firms surveyed in 2013 reporting a drop in this activity since 2008. The report went on to predict that ‘this trend will most likely affect [research] spending if the Brazilian economic slowdown persists’. A year later, both Brazil and the Russian Federation are still in recession.
Europe, USA and Japan still lead global research
The European Union (EU), Japan and USA still dominate private knowledge creation. They hold eight out of ten (83%) triadic patents – those filed with the EU, Japan and US patent offices by the same applicant for the same invention. China and the Republic of Korea together account for 8.3% of triadic patents, double their share (4.1%) in 2002. Chinese companies now account for one-fifth of global business spending on R&D, compared to just 5% in 2001.
According to the UNESCO Science Report, EU businesses tend to tend to be more heavily concentrated in R&D of medium-to-low and low intensity, in comparison to their principal competitors, the USA and Japan. Moreover, although EU-based companies accounted for 30% of total R&D spending by the world’s top 2 500 companies, only two EU-based companies figure in the top ten, both of them German and both in the automotive sector,Volkswagen and Daimler. The automotive sector represents one-quarter of R&D spending by EU companies.
The EU is largely absent from the arena of internet-based companies active in new and emerging forms of innovation. Eleven of the 15 largest public internet companies are US-based and the remainder are Chinese. ‘The EU’s attempts to replicate a Silicon Valley-type experience have not lived up to expectations’, observes the report. ‘The principal EU giants specializing in hardware within the digital economy (Siemens, Ericsson, Nokia) have even lost a lot of ground in the past decade in global R&D rankings. Only the German-based software and IT services company SAP has managed to join the global top 50 R&D performers’.
‘Business R&D performance in the EU has also been weighed down by the disappointing growth of R&D in sectors such as pharmaceuticals and biotechnology (0.9 % R&D growth in 2013) or technology hardware and equipment (-5.4%), which are typically R&D-intensive. Whereas the EU is almost on a par with the USA in pharmaceuticals, it trails the USA in the area of biotechnology’.
The UNESCO Science Report concludes that ‘Europe has been a major producer of new knowledge but it has performed less well in turning new ideas into commercial successful products and processes. Science and innovation face a more fragmented market than large economies comprised of only one nation state, such as the USA or Japan. The EU thus needs a common research policy to avoid duplicating research efforts in different member states’.
European companies currently need to file for patent protection in all 28 member states. The unitary patent package adopted by 25 EU members in 2013 (all but Croatia, Italy and Spain) is expected to slash procedural fees and translation costs by 85%. The unitary patent package will only apply, however, once the Agreement on a Unified Patent Court enters into force. As of 3 September 2016, only 10 of the requisite 13 countries had ratified this agreement.
One policy concern in Japan has been the transfer of technology abroad by Japanese businesses, coupled with falling foreign investment in Japan. A law enacted in November 2012 provides incentives for global corporations to relocate their research centres and Asian branches to Japan. The lower corporate tax rates, combined with a sharp depreciation of the yen and lower oil prices, have also persuaded many Japanese manufacturers to bring their factories back to Japan.
Research spending down in some G20 countries, despite commodities boom
The level of research spending has actually dropped in three high-income G20 countries which enjoyed rapid economic growth during the commodities boom, thanks largely to exports of fossil fuels and minerals. They are Australia, Canada and the Russian Federation.
In Australia, the boom in iron ore and coal has fuelled the country’s economic success for several decades. The mining sector also concentrates a sizeable share of the research budget: it accounted for 22% of business expenditure on research in 2011, equivalent to 13% of the country’s total research spending, according to the UNESCO Science Report. This sector accounted for 59% of Australian exports in 2013. Reduced demand for iron ore since 2011 from China and India, in particular, has led to cuts in spending on research both in the mining sector and in public funding for science overall.
In Canada, the share of energy-related products (oil and gas) in exports rose from 13% to over 25% between 2002 and 2012. Over the same period, Canada’s research intensity fell from 2.0% to 1.6% of GDP, particularly after 2009 when ‘federal in-house R&D became a casualty of the government’s determination to balance the budget’.
Since the beginning of the year, both the Australian and Canadian governments have made moves to reduce their dependence on fossil fuel technologies.
In the Russian Federation, ‘paradoxically, the rapid economic growth fuelled by the commodities boom between 2000 and 2008 actually weakened the motivation of enterprises to modernize and innovate… This manifested itself in a boom in imports of advanced technologies and a growing technological dependence on developed countries in certain areas, such as pharmaceuticals and high-tech medical equipment’, observed the report. In May 2014, the Russian president called for a widening of import-substitution programmes to counter this trend and cushion the blow of newly imposed trade sanctions.
Climate agreement ratified by two biggest emitters
A day before the G20 summit got under way in Huangzou, both China and the USA ratified the Paris Agreement. This brings the number of states having ratified, accepted or approved the agreement to 26, corresponding to 39% of total greenhouse gas emissions. The Paris Agreement was adopted in December 2015 at the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change. For the accord to come into effect, it must be ratified by at least 55 Parties to the Convention accounting for at least 55% of greenhouse gas emissions.
In addition to China and the USA, the accord has been ratified, so far, by 24 countries accounting for a cumulative total of just over 1% of global greenhouse gases, including the Bahamas, Belize, Cameroon, Democratic People’s Republic of Korea, Fiji, Grenada, Guyana, Maldives, Mauritius, Peru, Tuvalu, the Seychelles and Somalia. In Europe, only Norway and Poland had ratified the accord as of 3 September 2016.
Diversifying the energy mix and improving energy efficiency have become major research priorities for G20 countries, the UNESCO Science Report reveals. Policies designed to foster energy security and combat environmental degradation tend to go hand in hand with concerns about climate change. In the USA, for instance, ‘consistent with the president’s overarching priorities, the most important goal of science diplomacy at the moment and in the near future [for the USA] will be to address climate change. His Climate Action Plan (2013) articulates both a domestic and international policy agenda aimed at quickly and effectively reducing greenhouse emissions’.
At the domestic level, the government has elected to use the power of the Environmental Protection Agency to regulate domestic greenhouse gas emissions, in the face of Congressional opposition. ‘The Environmental Protection Agency wishes to reduce power plants’ carbon emissions by 30% across the USA. Some states are also supporting this policy, since each state is free to fix its own emission targets’.
The government is also developing partnerships with industry. In July 2015, 13 large US companies committed to investing US$ 140 billion in low carbon emission projects, as part of the American Business Act on Climate Pledge announced by the White House.
The Obama administration has also entered into a variety of bilateral and multilateral agreements on climate change. ‘During a visit to China in November 2014, the USA agreed to reduce its own carbon emissions by 26–28% over 2005 levels by 2025’, related the report. ‘In parallel, the US and Chinese presidents issued a Joint Announcement on Climate. The details of the agreement had been ironed out by the USA–China Clean Energy Research Center. This virtual centre was established in November 2009 by President Obama and President Hu Jintao and endowed with US$ 150 million. The joint workplan foresees public–private partnerships in the areas of clean coal technology, clean vehicles, energy efficiency and energy and water’.
The UNESCO Science Report recalls that ‘China, along with India and other emerging economies, has long insisted on the principle of “common but differentiated responsibilities” in dealing with global climate change. However, for the world’s largest greenhouse gas emitter, ‘greenhouse gas emissions and rising temperatures could derail China’s path to modernity’. The report argues that, ‘by reducing its greenhouse gas emissions and cleaning up the environment, the political leadership is also likely to gain further support from the emerging middle class’.
On 19 September 2014, China’s State Council unveiled an Energy Development Strategy Action Plan (2014−2020) which promised more efficient, self-sufficient, green and innovative energy production and consumption. The plan’s long list of targets includes reducing carbon emissions by 40–50% over 2005 levels, increasing the share of non-fossil fuels in the primary energy mix from 9.8% (2013) to 15% and lowering the share of coal in the national energy mix from 66% to less than 62%.
As China burned 3.6 billion tons of coal in 2013, capping total coal consumption at roughly 4.2 billion tons, as outlined in the Action Plan, means that China can only increase its coal usage by roughly 17% by 2020 from 2013 levels. The cap also means that annual coal consumption may only grow by 3.5% or less between 2013 and 2020. To compensate for the drop in coal consumption, China plans to expand its nuclear energy production with the construction of new nuclear power stations and the development of hydropower, wind and solar energy.
‘There are several reasons for China’s emphasis on diversifying its energy mix’, explains the report. ‘In addition to environmental considerations, China is eager to reduce its reliance on foreign energy suppliers. Currently, China receives nearly 60% of its oil and over 30% of its natural gas from foreign sources. For domestic production to make up 85% of total energy consumption by 2020, China will need to increase its production of natural gas, shale gas and coalbed methane’.
The report observes that ‘the new energy action plan also calls for deepwater drilling, as well as for the development of oil and gas extraction in its neighbouring seas by undertaking both independent extraction projects and co-operative projects with foreign countries’.
Source: UNESCO Science Report: towards 2030 (published in 2015); see, in particular, the chapters on Brazil, Canada, China, the European Union, Russian Federation and USA.
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