REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - UNIVERSITY OF DAYTON, DAYTON, OHIO

FRIDAY, JUNE 2, 2006

AS PREPARED FOR DELIVERY

Introduction by Dr. Fred Pestello, Provost and Senior Vice President for Educational Affairs

Thank you, Dr. Pestello, for that kind introduction.

On behalf of President Bush and Commerce Secretary Carlos Gutierrez, it is my honor to be here today at the University of Dayton – one of America’s ten largest Catholic universities, Ohio’s largest private university, one of the most entrepreneurial and one of the nation’s leading institutions of higher learning. I very much appreciate your hard work in gathering this distinguished group, and thank you all for being here today.

Our ability to collaborate as individuals, communities, regions, and even nations is the key to success in today’s global economy. So, it’s great to see local leaders coming together here today from both the private and public sectors to discuss America’s competitiveness.

I would like to thank Dr. John Leland (Lee-lund) for the tour of the university’s impressive engineering and research facilities this morning. It is evident to me that the University of Dayton is an excellent example of the type of world-class institution that helps make America the world’s leading innovator.

As we meet here today, we have good reason to be very optimistic about the state of America as a global competitor. While the national media sometimes makes it difficult to see, the landscape is filled with positive news about the economy.

Let’s take a look at job growth: This morning, my colleagues back in Washington announced that our unemployment level is down to 4.6 %, what many economists consider full employment. We’ve created more than 5 million new jobs since October 2003. To put this in perspective, that’s more new jobs than the E.U. and Japan combined.

Our growth rate – measured by GDP – for 2005 was 3.5%, almost twice that of any E.U. nation and last quarter, our GDP was an impressive 5.3%. We’ve grown for 18 straight quarters, and our GDP per capita is the highest among all major nations.

Real, after tax incomes, have increased about 14% since January 2001 and despite $880 billion being returned to the taxpayers through the Presidents tax cuts, the Treasury Department recently reported that tax revenues have increased 11% in 2006 to the highest level in history.

More Americans own their home than ever before, about 70% - which is not only a record here in America, but far outpaces our economic competitors…and homeownership is a critical economic driver.

All this is tremendous news, but maintaining America’s leadership in the worldwide marketplace will take effort, and that’s why this afternoon I’d like to outline for you 5 “new realities” of the 21st Century economy. Then, I’ll close by describing an important Presidential initiative to maintain America’s leadership.

Let’s start with New Reality #1: While perhaps the most obvious, it is 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.

Globalization Pop Quiz: Which of following products is more “American”: a new Ford Mustang or a new Toyota Siena mini-van? … Well it depends. Of course, Ford is an American company. Toyota is not. Both products are built in America by American workers, but the Toyota mini-van contains 90% American-sourced parts, and the quintessential American Ford Mustang has about 65% American-sourced parts.

Now, I’m not telling you to buy a Toyota, but keep in mind that global firms like Toyota become more “American” everyday. Toyota operates manufacturing facilities in Texas, West Virginia, California, Indiana, and Kentucky, and employs 38,000 workers in North America. I can say the same about Ford, as they too operate across the globe and Ford is practically considered a local company in places like the U.K. and Australia.

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 US 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. To paraphrase that sage philosopher, Ferris Bueller, “Life moves pretty fast, if you don’t pay attention, you’re gonna miss it.”

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

New Reality #3: Yes, the world becomes a bit more complicated every day – but that’s a good thing – it shows the advancement of not just the American people, but civilization as a whole. Responding to this reality means we need have reached a point where the components of competitiveness can no longer be pursued separately.

This reality holds two important lessons for the local and regional level:

1st, the idea of workforce development, community development, economic development, and educational programs, occurring in separate silos can no longer be tolerated. One of the first steps to success in the 21st Century – besides acknowledging and embracing the new reality – is to begin to collaborate at the regional level. The challenges of workforce education and community and economic development must be tackled in concert – each element leveraging the other. These are important and precious resources and we must use them to full advantage.

2nd, in our new 21st Century, Tom Friedman-the World is Flat reality, we must acknowledge what we all learned on the elementary school playground, that we are stronger when we stand together than when we stand alone, and as our coaches used to say, “there is no “I” in T – E – A – M.

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.

Pooling resources and developing unified regional development strategies that capitalize on those resources are perhaps the most important steps State and local entities can take to better compete in the world-wide marketplace.

New Reality #4: Collaboration with the private sector becomes more critical every day. While governments at all levels, educational institutions, 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 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 the development of workforce and economic development strategies.

Educational institutions – including high school and community colleges – should be working hand-in-hand with business to ensure that there are sufficient local folks with the right skills for the job environment of today, and tomorrow.

Biotechnology may be the hot, sexy, new industry everyone is talking about, but if your region’s strength is in transportation logistics, advanced manufacturing or new energy technologies, your workforce development strategies had better be focused on those industries.

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 days of “if we build it, they will come” are gone.

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 US has just 5% of the world’s population, but 40% of global wealth.

• The US 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 looking for learning and economic opportunity and we are the most important market on the planet.

Maintaining our competitive edge, however, will not simply just happen. We need to work together and work seriously in order to maintain our competitive advantage.

And at the end of the day, our ability innovate is our – and every other – country’s only possible sustainable competitive advantage. It’s not location. It’s not cost of doing business. It’s not even technology. All those factors will continually shift in a dynamic world-wide economy – but if we maintain our edge in our ability to innovate, America will continue to lead the world in growth and opportunity.

This challenge is why President Bush proposed the American Competitiveness Initiative, which is a bold plan to:

• Double Federal funding for basic Research & Development;

• Make permanent the private sector R&D tax credit;

• Improve math and science skills in our schools;

• Triple the number of workers getting job training; and

• Attract and retain the world's best and brightest people for the benefit of American enterprise.

The Department of Commerce will be supporting the ACI in several ways. Certainly, the Secretary and I will urge the Congress to make the R&D tax credit permanent, as over two-thirds of all R&D investment comes from the private sector…and we need more of it.

The President’s plan which will double the Federal funding for basic R&D research includes a 24% increase for Commerce’s National Institute of Standards and Technology (NIST) for core laboratory programs.

This will allow the certified smart folks at NIST – who have won three Nobel Prizes in recent years – to advance research in promising fields that will lead to the break-though innovations of tomorrow.

The overall commitment the President is calling for will bring Federal R&D investment to the same percentage of the Federal budget as during the Apollo Space program.

Along with other Commerce bureaus, the Economic Development Administration will play an important role supporting the ACI. And to help us accomplish this, the President has proposed a $47 million increase for EDA in 2007, which we hope the Congress will honor.

These additional resources will help EDA execute more development projects across America that address our three primary funding priorities, which include:

• Supporting long-term, coordinated and collaborative regional economic development approaches.

• Supporting innovation and competitiveness, and

• Encouraging entrepreneurship.

There are some great examples of initiatives here in the Dayton region and throughout Ohio that align well with EDA’s priorities, one of which is right here:

• The University of Dayton Research Institute, which has conducted $1.2 billion of sponsored research over the last 50 years and did $70 million in cutting-edge research in 2005, is leading the way in developing the Dayton Regional Technology Commercialization Network – a central agency for regional technology commercialization. This is a great model for exploiting UDRI’s research assets as universities are looked to more and more as the “honest broker” for collaborative technology commercialization;

• Another Ohio – while not Dayton – example: …. just last month, EDA invested $700,000 in Cleveland State University to help establish a “clean room” that will assist manufacturers in the area and help with the expansion of small- and medium-sized companies in the fields of instruments, controls, and electronics.

So, these are some of the “new realities” of the 21st Century economy:

• We are in a global economy.

• The pace of change will continue to accelerate.

• The components of competitiveness can no longer be pursued separately.

• Partnership with the private sector is critical.

• And America can and will win in the Global marketplace.

These are some of the factors we must consider as we work to ensure that America retains its lead in innovation, competitiveness, and prosperity – and how, through the American Competitiveness Initiative, the Federal Government can take pro-active action to help ensure America’s competitive advantage for today, tomorrow, and the generations to follow.

On behalf of the President of the United States, it has been my great pleasure to be with you today. I applaud your efforts to prepare the Dayton region for the challenge and opportunity of the 21st Century.

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