REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - U.S. INDIAN AMERICAN CHAMBER OF COMMERCE 2ND ANNUAL CONVENTION - WASHINGTON, DC

20061012

AS PREPARED FOR DELIVERY

Introduction by KV Kumar, National Chairman, U.S. Indian American Chamber of Commerce

Thank you, Mr. Kumar, for that kind introduction. It’s an honor to represent President Bush here this evening to discuss the relationship between two of the world’s greatest democracies – the United States and India.

President Bush appreciates the great contribution that Indian Americans make to the American economy and society, and he is committed to strengthening the strong and growing relationship between the United States and India. As you know, President Bush visited New Dehli in March of this year, and I was honored to be with President Bush when he welcomed Prime Minister Singh for an official visit to the White House in July 2005.

It is my pleasure to continue to discuss the U.S.-India relationship this evening, with this distinguished audience.

This evening, I’d like to put the important U.S.-India relationship into the context of economic competitiveness. Our nation – all nations – are asking the question: “what does it take to be competitive in the 21st Century economy?” In my humble opinion, I suggest that it takes the ability to adapt to and capitalize on what I like to call the 5 “new realities” of the 21st Century economy.

So, this evening, with your permission, I’d like to address three topics:

First, lay out the economic snapshot of how the United States is fairing in the worldwide marketplace.

Second, describe these 5 “new realities” of our 21st Century economy as I see them from my chair at the Commerce Department.

And finally, I’d like to comment on the success and the future of the relationship between the U.S. and India.

THE NATIONAL ECONOMIC CONTEXT

Let me begin with our national economic performance today. Despite the terror attacks of 2001, corporate scandals, the bursting of the Internet bubble, devastating natural disasters, a global war on terror, and recent high gas prices – our economy is resilient and strong.

We have had job growth from 37 consecutive months, with about 2 million new jobs created in the last year. For those of you keeping score at home, that’s over 6.6 million new American jobs since August 2003.

The national unemployment rate dipped last month to 4.6%, which many economists say is essentially full employment, and is lower than where we were at the time of the 2001 terror attacks.

Over the first half of this year, the U.S. economy grew at a more than 4% rate – faster than any other major industrialized country. Our growth rate is almost twice that of any E.U. nation and private sector forecasters expect solid levels of growth to continue for the rest of this year and into 2007.

Real, inflation adjusted after tax incomes have increased about 15% since January 2001.

More Americans own their own their own home than ever before – about 70% – which is a key economic driver.

The stock market just today recorded an all-time high. Exports are up 12% this year over last year. And hot off the press this morning from the Commerce Department – U.S. exports in August rose over 2% to a record of more than $122 billion. We are on track this year to record our nation’s largest volume of exports ever, more than $1.3 trillion.

Inflation and interest rates remain in check and near historic lows.

The Conference Board reports that consumer confidence is up as Americans are now paying 74 cents less per gallon for gasoline since August, and the L.A. Times reported recently that a majority of Americans believe that our economy is on the right track.

And despite returning over $1 trillion to American taxpayers as part of President Bush’s tax cuts, tax revenues are up 12% in 2006, and this country will beat President Bush’s 2004 pledge to cut the deficit in half by 2009 by 3 years.

So, there is a lot of positive economic news out there, and while the bulk of the credit goes to American workers and businesses, I know that the pro-active steps President Bush has taken have put our economy on the right path.

THE FIVE NEW REALITIES

I’d like to add to this context by summarizing what I have learned traveling the country the past five years representing President Bush before audiences interested in economic development. As we move into the 21st Century, I believe there are 5 new realities of our new economy.

New Reality #1: While perhaps the most obvious, it’s the most important, which is that we are truly in a Global Economy, or as New York Times columnist Tom Friedman says, the world is flat. In the new flat, global economy, competition is not just from the firm down the road, our competition comes from any person in any corner of the globe with a good education, a good idea, and a good Internet connection.

I know they promised you there’d be no math this evening, but I have a little globalization pop quiz for you: Which of the following cars is more “American:” the Ford Mustang, the Toyota Siena mini-van, or the Pontiac GTO?

• The Pontiac is actually Australian (GM’s Holden).

• The Ford and the Toyota are both built here in America, but the Mustang has about 60% American parts content and the Toyota has about 90% American part content.

So, yes, our competition is indeed global, but with global competition comes opportunities for global partnerships – opportunities to expand our markets and increase our competitiveness. And, with 95% of potential customers for American products outside the United States, this reality becomes more important every passing day.

New Reality #2: Competition is intense, and the pace of change will continue to accelerate. It took 55 years for the automobile to spread to one-quarter of the U.S. population. It took 35 years for the telephone to do the same thing. The personal computer accomplished the same level of market penetration in 16 years, 13 years for the cell phone and only 7 years for the Internet.

There are good jobs that exist today that we couldn’t even dream up two years ago: Podcast manager…Blog writer…I-Pod accessory manufacturer…Satellite radio host.

Even the nature of innovation itself is changing: Innovation is becoming multidisciplinary as different technologies converge to create new fields that didn’t even exist a few decades ago. People smarter than me debate where bioinformatics or nanotechnology will take us, but all agree that they will become major drivers of the U.S. economy.

This new reality where cycle times for products and ideas continue to shrink will require all institutions – public, private, educational, and non-profit – to continually adapt and change. Those that don’t are at risk. Those that do have the opportunity for reward.

Time is a master with no mercy. As leaders, we are all responsible for adapting and evolving our organizations to meet the challenges that time will bring. This is difficult, because with today’s rapid pace of change, change is often necessary before people are ready to embrace it – which is a particular challenge for governments at all levels.

New Reality #3: Yes, the world becomes a bit more complicated every day. In order to respond to this increased complexity, we must realize that we have reached a point where the components of competitiveness can no longer be pursued separately. Just as technologies are converging to create new fields of innovation, so are the components of competitiveness merging to shape economic growth in the 21st Century. This reality holds two important lessons for the local and regional level:

First, the idea of workforce development, community development, economic development, and educational programs occurring in separate silos can no longer be tolerated.

The interconnected challenges of workforce, education, community and economic development must be tackled in concert – with each element leveraging the other. The resources available for each competitiveness component are important and precious, and we must use them to their full advantage.

Second, in our new 21st Century, Tom Friedman-the-world-is-flat reality, we must acknowledge what we all learned on the school playgrounds of our youth, that we are stronger when we stand together than when we stand alone.

We need to look beyond traditional political jurisdictions – the city boundary, the county line, even the division between States – and work together. Because the competitiveness of America’s companies is in large part tied to the competitiveness of the economic regions in which they do business.

New Reality #4: Public-Private partnerships becomes more critical every day. While governments at all levels and non-profit institutions can be important players, let’s not forget that the private sector is the most important element of any successful economic development strategy. Unless the private sector is ready, willing and able to invest in a community, economic growth simply will not occur, regardless of how much government spends. The private sector should have not just a seat at the table, but should be actively engaged as full partners in strategies for economic growth.

The private sector should be helping to shape – within the parameters of public accountability, of course – the development strategies that will lead to more higher-skill, higher-wage jobs.

The 5th Reality is that America is positioned to win in the 21st Century. This nation has never encountered a challenge it has not met. We are the most competitive, productive, and innovative country the world has ever known:

• The U.S. has just 5% of the world’s population, but 40% of global wealth;

• The U.S. employs fully one-third of the world’s scientists and engineers and accounts for 40% of global R&D spending;

And…

• America continues to be the country of choice for millions across the globe who are seeking learning and economic opportunity. And we are the most important market on the planet.

And as I stated earlier in my remarks, the fundamentals of our economy are sound.

What will help us keep our edge is innovation – innovation focused on increasing the competitiveness of American workers, American businesses, American schools, and key American institutions, including government. At the end of the day, innovation is our only possible sustainable competitive advantage.

THE U.S.-INDIA RELATIONSHIP

So, these are five of the new realities of the 21st Century as I see them. Perhaps the most relevant of these new realities for our discussion this evening is #1: that we are living in a flat, global economy that offers opportunities for global partnerships. Because one of America’s most important such partnerships is with India, and I’d like to offer a few thoughts on this powerful partnership.

The United States and India are two great nations that share a commitment to freedom and a belief that democracy provides the best path to a more hopeful, prosperous, and peaceful future for all people. Because of our shared values, the relationship between our two countries has never been stronger. We're working together to make our nations more secure, deliver a better life to our citizens, and advance the cause of peace and freedom throughout the world.

The ties that bind us are enriched by 2 million persons of Indian origin that call America home. These citizens contribute tremendously to America's vitality, and I’m proud to include my parents among these successful Indian-Americans. Indian Americans are leaders in business, medicine, science, engineering, academics, technology, and other fields. And the United States is a better place because of the 80,000 students who come here from India each year to study in our universities.

Our two nations are also bound by common economic interests. Our trading and investment partnership has grown dramatically in recent years, which brings greater prosperity and opportunity to citizens of both our countries. India is the world’s fastest growing free-market democracy, presenting lucrative opportunities for all types of businesses – and ensuring that the U.S. Indian American Chamber of Commerce will be well utilized and relied upon in the years to come.

With a population of over 1 billion and an economy growing at 8% annually, India is an increasingly critical global economic factor, a prime location for investment, a platform for technology development, and a market of interest to American companies.

In the past 25 years, trade between the U.S. and India has increased more than ten-fold from $2.7 billion to more than $30 billion this year. U.S. exports to India have nearly doubled in the last three years from $4 billion in 2002 to nearly $8 billion in 2005. Also important to note is that Indian imports to the U.S. increased over 20% from 2004 to 2005, demonstrating that both sides of this trade relationship are winners.

In terms of investment, the Department of Commerce’s U.S. Commercial Service Office in India reports unprecedented interest by American companies this year. For the first half of 2006, our Indian offices helped close $2.6 billion in export deals for U.S. companies in India. That's more than the total for all of 2005 . In addition to Federal efforts, individual states are sending official delegations to India to expand commercial relationships – just recently, state delegations from Michigan, Iowa, Illinois and Rhode Island have visited India.

My colleague, Under Secretary of Commerce for International Trade Frank Lavin recently announced that the Commerce Department’s upcoming business development mission to India in November will be the largest ever led by the Federal government. The International Trade Administration has already accepted the applications of 94 companies for participation in the November mission. This precedent-setting initiative will serve as the capstone of a year of successful activities conducted under the auspices of the U.S.-India Commercial Dialogue, honoring the commitment of President Bush and Indian Prime Minister Singh to revitalize bi-lateral trade discussions.

It is clear that the U.S.-India relationship is a key priority for President Bush and the U.S. Department of Commerce. But the responsibility to make the relationship work – and work better – is all of ours. It’s not just the American and Indian governments. It’s the private sector. It’s the non-profit institutions. It’s our educational institutions. While I pledge that the Department of Commerce will do our part, we are all responsible for this important relationship.

And the Indian American community is doing its part. The community has organized itself to build a powerful voice. As Karl Rove mentioned to leaders of the Indian American community last month , the Indian American community coalesced around a critical economic and national security issue – the India Civil Nuclear Agreement. This shows how powerful grassroots efforts can be when they are well-organized and use their resources properly. Your community is being heard, not just on this one issue but on many, and I applaud you on your success in building a voice for the Indian American community.

President Bush and Prime Minister Singh have set the bar high for an expanded relationship between the United States and India. I think the stage they set will help both countries create an architecture by which we can overcome the challenges that are inevitable in any bi-lateral relationship, and create even more opportunities for both countries.

As President Bush said during his visit to New Dehli this past March, “Our two great democracies are now united by opportunities that can lift our people, and by threats that can bring down all our progress. The United States and India, separated by half the globe, are closer than ever before, and the partnership between our free nations has the power to transform the world."

On behalf of President Bush and Commerce Secretary Carlos Gutierrez it has been my distinct pleasure to be here this evening. Thank you for your commitment to enhancing the important relationship between the two great nations of the United States and India.

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