REMARKS AS PREPARED FOR DELIVERY SANDY K. BARUAH ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - EDA REGIONAL ECONOMIC DEVELOPMENT CONFERENCE - CLEVELAND, OHIO

TUESDAY, MAY 13, 2008

AS PREPARED FOR DELIVERY

OPENING

Thank you, Professor Hill, for that kind introduction. I appreciate the opportunity to be with you today and I thank you for your attendance and applaud your commitment to advancing the art and science of economic development.

In addition to serving as a forum for best practices in 21st century economic development, this symposium is also a great venue to re-connect with the EDA team from our Chicago and Philadelphia offices. EDA’s regional offices are the “front door” of the agency, and are the ones responsible for the great reputation our agency has earned over the past 40-plus years. Please join me in applauding the good work of EDA’s Chicago and Philadelphia offices.

I would like, in particular, to recognize our outstanding regional directors here today. Robert Sawyer, the director of EDA’s Chicago region is one of the “deans” of the EDA organization and I so appreciate his dedication and professionalism over many years – Robert, thank you.

Also here today is the newest addition to the EDA regional director corps: Willie Taylor of our Philadelphia regional office. We are thrilled to have Willie back in the EDA family after a few years of service in Florida. I expect great things from this young dynamic leader.

I would also like to express my sincere gratitude to the great line-up of speakers and panelists who have joined us here in Cleveland, including former Assistant Secretary of Commerce Phillip Singerman. Phil, thank you for your public service and continued contribution to economic development.

I’m pleased to be back in Cleveland, a town I used to spend a good deal of time in. I always found Cleveland had much more to offer than some give it credit for: a world class symphony, a rejuvenated downtown, a terrific zoo and rain forest, it’s a great museum city for both children and adults and, of course, the Rock and Roll Hall of Fame.

Of course, this city – and cities across the nation – face challenges: developing a competitive edge, building a skilled workforce, working together as a region, ensuring that our companies are successful, and building vibrant and stable communities.

When we consider 21st century economic development, I believe it is useful to frame our discussions by viewing our efforts through the lens of the global, interconnected environment in which we live.

LINKING REGIONS WITH THE WORLDWIDE MARKETPLACE

If you needed proof that Tom Friedman was onto something when he said the world is flat; look no further than the evolution of open-source R&D, the growing role of sovereign wealth funds, how global economics and politics are driving gas prices, or the global implications of the current stress in credit markets – all of which re-enforce Friedman’s view of our economic geography.

In our 21st century economy, our competition is not necessarily the company next door, or city next door, or even the state next door. Our competition today comes from any person in any corner of the globe with a good education, a good idea, and a good Internet connection.

The 21st century reality is that we exist in an integrated worldwide marketplace. This is true for educators, political leaders, farmers, manufacturers, and especially economic development professionals. One of the key goals of the Economic Development Administration is to enable the economic development community to understand and take advantage of the opportunities presented by the worldwide marketplace.

This is why EDA has made linking regional economic development to the worldwide marketplace a priority, in addition to our other three priorities of:

• advancing long-term, coordinated, and collaborative regional economic development approaches;

• enhancing innovation and competitiveness; and

• supporting entrepreneurship.

While successful linkages to the worldwide marketplace are critical to our national, regional, and individual success, this can be a difficult region to discuss the implications of the worldwide marketplace. Ohio and neighboring states have experienced the brunt of the transition taking place in the global economy. It’s a transition that is having a real impact on real people. Given this reality, we must be sensitive, but we also must not shrink from reality for ignoring the realities of the 21st century is something we do at our peril.

The opportunities of the worldwide marketplace are compelling. In fact, according to the respected Financial Services Forum, America’s engagement in the worldwide marketplace benefits the American household, on average, to the tune of $10,000 annually.

Even at a time when our economic growth has slowed, U.S. exports are booming. In 2007, we saw a record $1.6 trillion in exports, up about 13% from 2006 – and exports are growing even faster in 2008 with an 18% increase over the same period last year. U.S. exports account for over 12% of our GDP, compared with only 5% forty years ago. A little known fact is that we actually “insource” more jobs than we “outsource.”

Imports to the U.S. provide lower prices and more choices for American consumers, and Foreign Direct Investment – FDI – in the United States provides 5 million U.S. jobs that pay 36% higher wages than other jobs.

Businesses in Ohio are selling their goods and services in 213 countries. Ohio exports in 2007 totaled $42 billion, up 42% from 2003 – a 42% increase in just four years. Ohio leads the nation in developing polymers, plastics, and chemicals which are in demand across the world

In the Duluth, Minnesota region, thanks in part to EDA investments, the area has transformed itself from an iron ore mining economy to one focused on leading edge aviation. Cirrus Design of Duluth, now the maker of the world’s best selling general aviation aircraft, is the city's largest manufacturer employing about 1000 people. Cirrus’ exports are booming. Many of those 1000 employees plus hundreds at local supplier firms are working on products to be sold in Europe, China, Latin America and other parts of the world.

The benefits to Americans presented by the worldwide marketplace are more important then ever when, after years of record economic growth, the economy is now growing at a slower rate than we would like. What better time to ensure that U.S. businesses, workers, and farmers have the ability to find customers in foreign markets that will help keep factories humming and people employed?

Our nation’s record with protectionist policies has not been good – despite perhaps good intentions. In 1930, Congress passed the Smoot-Hawley tariffs to reduce imports in an ill-fated effort to protect American businesses and jobs. Sure, imports were cut in half by 1933. But over that same three-year period, exports also fell by half, and unemployment skyrocketed to 25%. These trade barriers were key drivers of the Great Depression – and we should remember our history as we shape policies for the future.

The reality is that 95% of the potential customers for American businesses live in a country not called America. The vast majority of our customers – current and potential – live outside of our borders.

As economic developers, it is important to realize that the jobs associated with exporting industries pay better than non-export related jobs, and what’s more important to economic development than creating higher-skill, higher-wage jobs?

The more the economic development community can do to help the companies in our regions – big and small – understand, adapt, and succeed in the worldwide marketplace, the more prosperous we will be at a national, regional, and individual level.

FREE TRADE AGREEMENTS

That’s why Free Trade Agreements – FTAs – are so important to us as economic developers. When President Bush took office, we had Free Trade Agreements with just 3 countries – Israel, Canada and Mexico. Today, we have free trade agreements with 15 countries with 3 more pending Congressional approval.

FTAs help our companies, farmers, manufacturers, and workers gain access to new markets around the world; the 95% of our customers that don’t call America home.

This is especially important as we realize that other countries are negotiating their own free trade agreements with our trading partners:

• The European Union has at least 15 FTAs in place and is negotiating many more;

• China has at least six trade agreements and is negotiating a dozen more;

• India is negotiating a special trade relationship with Korea;

• Japan is negotiating with Korea and India.

• Chile has trade agreements that cover 58 countries and is negotiating more.

This is the competitive landscape we face. The world is becoming more interlinked everyday. We can participate – compete and win – or pretend it does not exist.

Part of our job as economic developers is to help our local elected leaders, educational institutions, partners in workforce development, and especially the businesses in our regions understand and take advantage of these Free Trade Agreements.

COLOMBIAN FREE TRADE AGREEMENT

Currently, the Congress is considering the U.S. – Colombia Free Trade Agreement. Today, there are more than 9,000 American companies, most of them small and medium-sized, that export to Colombia. Approving the Colombia FTA will help these and scores of other companies increase their sales and add higher-skill, higher-wage jobs here at home.

The recent unprecedented move by the Speaker of the House to change the long-standing rules for consideration of Free Trade Agreements was a disappointment, because without this agreement, fewer American businesses will be able to access this growing market. If Colombians don't buy our tractors, they'll buy them from Japan. If they don't buy our high-tech equipment, they'll buy it from China.

What’s interesting about the debate over the Colombia FTA is that we already have free trade between the United States and Colombia, but it’s one-way free trade. Since the 1990s, Congress has voted routinely and overwhelmingly to open the U.S. market to duty-free Colombian imports.

Keep these numbers in mind: 92, 16, 365. No, unfortunately, these are not tonight’s winning lottery numbers, but they are interesting.

92 is the percentage of imports from Colombia that currently enter the United States completely duty free. 16 is the number of years it has been since Congress first approved preferential treatment for Colombian imports as a way to reduce poverty, promote democracy, and fight the drug trade. And 365 is the number of Members of Congress from both sides of the aisle who voted for these one-way preferences the last time they were up for renewal.

Many would have you believe that we’ve embarked into some uncharted territory here, but what the Colombia FTA does is to level the playing field for U.S. companies.

EDA REAUTHORIZATION

FTAs are an important tool for regional economic development efforts as we connect with the changing worldwide marketplace. As regions continually evolve and innovate to meet the demands and capitalize on the opportunities that the worldwide marketplace offers, so must government, at all levels, adapt its approach to fit the changing times of the 21st century. One way to do this is by making government programs more flexible.

I’m proud that EDA has continually tried new ideas to be innovative and more flexible. While we haven’t always succeeded, I’m proud that EDA has been thinking of new and better ways to do things and to adapt our programs to the demands of the 21st century.

But there is one thing I know we all agree on: the reauthorization of EDA. As you know, the Administration has submitted legislation to Congress to reauthorize EDA through 2013, and that this legislation includes some new provisions that answer the calls that you have made for greater flexibility and more local control of your economic development efforts.

Our reauthorization bill includes:

• Improvements to EDA’s Revolving Loan Fund program. We heard your concerns and we will ask Congress for authority to provide RLF operators the flexibility to allow the sale of assets and accumulated capital in accordance with a strategic re-use plan.

• You wanted greater local control of your Public Works investments, and we will ask the Congress for authority for greater flexibility to allow the sale of EDA-funded physical property prior to the end of the current 20-year “useful life” in order to be more responsive to local economic conditions.

We have crafted this legislation, we hope, in a manner that will garner broad support from the economic development community and both political parties. It is essentially an “EDA is working well, let’s keep it going” reauthorization proposal.

I am proud that EDA is adapting to keep pace with the changes of 21st century, and I look forward to working with Congress to pass this legislation to secure EDA’s future as the Federal economic development entity focused on “what’s next.”

CLOSING

Economic development in the 21st century has moved beyond the city vs. city, county vs. county, and even state vs. state smokestack-chasing exercise of the last generation. Today, it’s about growing your regional assets. It’s about integrating into the worldwide marketplace. It’s about developing a competitive edge. It’s about fostering innovation. It’s about answering the “what’s next” question.

Like everything else in the 21st century, economic development is getting more complex and more international. I am proud to be leading EDA at a time when the agency and its partners are looking beyond the usual suspects of economic development and are instead looking to the opportunities that our 21st century worldwide marketplace presents. Thank you for being part of this important effort, and thank you for being here today.

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