REMARKS AS PREPARED FOR DELIVERY - BEN ERULKAR DEPUTY ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - PACIFIC NORTHWEST ECONOMIC REGIONS - 17TH ANNUAL SUMMIT - ANCHORAGE, ALASKA

WEDNESDAY, JULY 25, 2007

AS PREPARED FOR DELIVERY

“The Five New Realities of Economic Development in the 21st Century”

Introduction by: Washington State Representative Glenn Anderson.

SLIDE 1: Cover Slide
OPENING

Thank you, Representative Anderson, for that kind introduction. It is a pleasure to be in the beautiful State of Alaska today, and I’d like to thank PNWER (PIN-wuhr) President Jim Kenyon; Executive Director Matt Morrison, incoming President George Eskridge, Vice President Senator Lesil McGuire and the entire PNWER organization for extending to me the invitation to be here today.

SLIDE 2: EDA’s Mission
I’m going to begin by looking at EDA’s mission, since all of my comments this morning derive from it in one way or another. At EDA we spent a good deal of internal time in early 2004 to develop this mission, and over time I have come to believe that this mission was groundbreaking -- note the central focus on the words “innovation,” “competitiveness,” “regions,” and “worldwide economy.” At the time, of course, these terms were not common to the U.S. economic vocabulary, but as you know in recent years they have become central to our national conversation about the economic future of our country. So imagine my delight and admiration to discover that PNWER has been espousing and acting upon these principles since 1991 – truly pioneer stuff, and I congratulate you for your foresight and vision in bringing them to life. If one key to establishing and maintaining economic competitiveness is to figure out “what’s next,” then PNWER has been ahead of the game for a long time.

I’m not going to spend much time talking this morning about what EDA does –I’ve listed the website prominently, and I invite you to peruse it at your leisure. Our work in making partnership-based investments for planning, research, technical assistance, revolving loan funds and infrastructure construction is well-documented there. Suffice it to say in this forum that EDA is proud of our partnerships with the States and regions of the Pacific Northwest (Alaska, Idaho, Montana, Oregon and Washington), in which EDA has invested over $272 million in 596 projects since 2001, including our funding of PNWER’s Research & Development Network. These investments have created and saved more than 39,000 jobs and have generated more than $3 billion in private investment.

Instead, I’m going to speak more generally about some of the observations we’ve made in the course of working with economic regions throughout the country, all with reference to fulfillment of this mission. Before I begin, however, I’d like to direct some comments specifically to my Canadian colleagues in the audience.

First, I speak this morning with deep and abiding respect for the immense relationship between Canada and the United States. We conduct the world’s largest bilateral trade relationship, with total merchandise trade (exports and imports) exceeding $499.3 billion in 2005. We share the world’s longest border, and Canada is the number one supplier of energy to the United States. The sheer scale of this historic relationship makes the words of President John F. Kennedy as applicable today as when he spoke them decades ago: “Geography has made us neighbors. History has made us friends. Economics has made us partners. And necessity has made us allies. Those whom nature hath so joined together, let no man put asunder.” Second, since I am a U.S. Citizen working for the U.S. Government, my frame of reference for economic development is obviously a U.S. perspective. I have, however, had the pleasure through the Organization for Economic Cooperation and Development to meet and work with my colleagues in Canada Economic Development, and we have found that our views on economic development are similar if not identical in many key respects. So while the statistics you hear today may be from the U.S. database, I hope you will find the principles I discuss to be equally applicable to the Canadian economic development agenda.

Third and finally, what you really need to know for me to establish my Canadian bona fides is that I am half-Canadian by birth, born in Philadelphia to a lovely Torontonian whose Welsh Canadian blood still courses fiercely through her veins. Do the math on this one – I’m a Philadelphian who came of age in the mid-70s with a Canadian Mum. So, if you need answers to whether or not Bobby Clarke and the Broad Street Bullies were ultimately good for hockey, or whether it should be illegal for the Stanley Cup to reside anywhere below, say, the 38th parallel, or whether Tim Horton’s beats out Dunkin’ Donuts simply because of the Maple Leafs connection, then I am the guy you need to talk to.

But let’s talk – at least until the Q&A session -- about economic development. PNWER’s goal – and the goal of this summit – is to help the Pacific Northwest region succeed in today’s competitive global climate. As EDA has worked with regions and communities throughout the United States, we have come to believe there are 5 New Realities for economic development in the 21st Century global economy. I’d like to share them with you not in the hope that it will answer all the pressing questions, or that you’ll even agree with me, but rather as a way to frame our discussion.

SLIDE 3: We Are Truly in a Global Economy
THE FIVE NEW REALITIES
Let’s begin with New Reality #1 of the 21st Century economy: While perhaps the most obvious, it’s the most important, which is that we are truly in a Global Economy. The importance of this goes well beyond the realization that the world is flat – it’s a simple but core truth that we are economically stronger when we participate fully in the worldwide economy. 95 percent of the world’s consumers are located outside of U.S. borders, and U.S. jobs linked to exports pay an estimated 13 to 18 percent more. Over the past year, U.S. exports have increased at more than twice the rate of imports, and as President Bush has pursued free trade agreements with our trading partners, U.S. exports have grown twice as fast to partners who signed free trade agreements with the U.S. between 2001 and 2005 over growth in other markets.

SLIDE 4: Globalization Pop Quiz
Let’s put this into perspective. I have a little globalization pop quiz for you. I know that this is a bi-national conference, but since our location is in the U.S., let me ask you: Which of the following cars is the most “American” and which is the least “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 in America, but the Mustang has about 60% American parts content and the Toyota has about 90% American parts 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 most of our potential customers being outside of North America, this reality holds great promise.

As we realize that both our potential markets and our competitors rest outside the confines of the North America, we better realize that our development approaches must grow beyond the traditional notions of competing against the city or county next door for the next “smokestack” prize.

SLIDE 5: Pace of Change to Accelerate
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.

Every day it seems the gadget we bought yesterday becomes outdated as the new and improved version hits the marketplace. 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. What’s the nature of competition in today’s global economy? Competitiveness today requires three basic goods: a good education, a good idea, and a good Internet connection.

Even the nature of innovation itself is changing: Innovation is becoming multidisciplinary as different technologies converge, creating new fields. Fields that didn’t even exist just a few decades ago. People smarter than I debate where bioinformatics or nanotechnology will take us, but all agree that they will become major drivers of North American economies.

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.

SLIDE 6: Tools of Competitiveness
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 tools of competitiveness can no longer be deployed separately. Just as technologies are converging to create new fields of innovation, so are the tools 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. See the picture here? Silos are great for grain, but counterproductive for pursuing economic competitiveness.

Second, in our new 21st Century global economy, 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.

Standing together means that we need to look beyond traditional political jurisdictions – the city boundary, the county line, even the division between states and nations – and work together. Because the competitiveness of our companies is in large part tied to the competitiveness of the economic regions in which they do business.

PNWER is a great example of the type of regional collaboration that it takes to succeed in the 21st century worldwide economy. Yours is a multi-state, multi-province, international partnership to foster sustainable economic development throughout the entire Pacific Northwest region, and I commend you on your approach.

The Economic Development Administration at the U.S. Department of Commerce is actively promoting long-term, coordinated and collaborative regional economic development approaches by:

1. Making this one of our funding priorities in evaluating investment proposals, along with supporting innovation and entrepreneurship;

2. Supporting research on regional collaboration, an example of which is an excellent recent report entitled “Unlocking Rural Competitiveness: The Role of Regional Clusters” in partnership with Purdue University and the State of Indiana; and

3. The development and implementation of a practitioner-oriented curriculum to acquaint local economic development practitioners with the benefits, process, and practice of regional approaches to economic development. EDA funded the development of the curriculum in 2006, and is now soliciting applications to deliver this curriculum to practitioners across the nation.

SLIDE 7: Private-Public Partnerships
New Reality #4: Private - Public partnerships become more critical every day. While governments at all levels, universities and other non-profit institutions are 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 and participate over the long term in a community, economic growth simply will not occur, regardless of how much government spends. The private sector should not just have a seat at the table, but must actively engage 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.

SLIDE 8: Ability to Innovate
New Reality #5: At the end of the day, it is the ability to innovate that is the only possible sustainable competitive advantage in the 21st Century. It’s not location. It’s not even the cost of doing business. Factors such as these will continually shift in a dynamic worldwide economy. But if a company, a region, or a nation can maintain its edge in innovation, it will prosper.

Companies – by necessity – must continually innovate to stay one step ahead of these their global competitors, especially as the pace of change in our global marketplace continues to accelerate. If they don’t, they will cease to exist. There are no pit stops in this race.

Meanwhile, government and nonprofit leaders at all levels have the same responsibility to adapt their approach to fit the changing times. Government – by design – moves slowly, and that can be a problem in our fast-moving economy. Unless government can offer flexible and innovative programs and tools to economic regions, we risk putting these areas that we are responsible for at a competitive disadvantage in the global marketplace. Innovation is just as important in the public sector as it is in the private sector.

SLIDE 9: The “New Realities”
So, these are some of the “new realities” of 21st Century economic development:

• We are in a global economy.

• The pace of change will continue to accelerate.

• The tools of competitiveness can no longer be deployed separately.

• Partnership with the private sector is critical.

• And innovation is the only sustainable competitive advantage.

SLIDE 10: EDA Logo
We need to continually advance the art and science of innovation and competitiveness in not just the private sector of our regions, but in our own approach as well. It’s difficult and important work, and I applaud you for your unique and successful regional approach in the Pacific Northwest.

Thank you for your kind attention this morning, and, again, I thank PNWER for the invitation to be here. I’ll be happy to address any questions you may have, and for a while I’ll also be at the session following this on high tech investments.

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