During the early to mid 1960s, the United States ranked highest among these countries in terms of both R&D expenditures and R&D/GDP ratios (almost 3 percent). After 1964, however, the U.S. ratio began to decline, as Federal R&D spending for defense and space was cut back while the U.S. GDP continued to increase. At the same time the ratios in other countries notably (West) Germany and Japan-slowly increased. These divergent trends continued until the late seventies, at which point the U.S. ratio had dropped to 2.2 percent and was about equal to those in (West) Germany, the United Kingdom, and Japan (chart 8).
From the late seventies through the early eighties, the ratios in all countries were again increasing, and by 1985 had reached 2.8 percent in the United States, 2.7 percent in (West) Germany, and 2.6 percent in Japan. France and the United Kingdom reported 2.3 percent R&D/GDP ratios. Since 1985 the R&D/GDP ratios each of these industrialized countries have fluctuated within a narrow range. Japan's ratio peaked at 2.9 percent in 1990 and then dipped back to 2.8 percent in 1992. R&D in Germany also reached 2.9 percent of GDP (in 1989) but has since declined to 2.5 percent, a result-in large part-of the inclusion of data for the former East Germany in its official statistics. The R&D/GDP ratio for France first rose and has since held level at 2.4 percent, whereas the British ratio has declined slightly to 2.1 percent. As reported earlier, the U.S. ratio has trended generally downwards since 1985 as a result of declining defense R&D support.
If defense activities are excluded from the R&D figures, the United States lags the two other leading R&D performing countries in R&D spending as a portion of GDP. The nondefense R&D/GDP ratio for the United States in 1992 (2.1 percent) was considerably lower than those for Germany (2.4 percent) and Japan (2.8 percent) (chart 8). About 75 percent of the U.S. R&D effort was devoted to nondefense activities, as compared with more than 95 percent in these two countries. France and the United Kingdom, which have substantial defense R&D efforts, each reported nondefense R&D/GDP ratios closer to that of the United States-about 1.7 and 1.9 percent, respectively. The ratio for Italy was 1.3 percent in 1992.