REMARKS AS PREPARED FOR DELIVERY SANDY K. BARUAH ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - THE UNIVERSITY OF MICHIGAN – ANN ARBOR, MICHIGAN - THE ROLE OF ENGAGED UNIVERSITIES IN ECONOMIC TRANSFORMATION

MONDAY, OCTOBER 15, 2007

AS PREPARED FOR DELIVERY

Introduction

Thank you, Cynthia, for that kind introduction, and for the invitation to be in Ann Arbor today. I’m pleased to be here this morning on behalf of President Bush to discuss how the Federal Government is promoting the role of universities as a key component of our national competitiveness. It’s great to be back on the campus of one of the world’s finest universities and to share a stage with such luminaries as Norm Augustine, Chuck Vest, and Chairman John Dingell.

This morning, I would like to share three things:

1. How the Federal Government is responding to the challenge set forth in the Rising Above the Gathering Storm Report;

2. How the U.S. Department of Commerce is supporting university-led innovation and economic development; and,

3. Some thoughts on the broader competitive context in which all we operate.

1. Post Gathering Storm Report

The Rising Above the Gathering Storm report is an important clarion call that highlighted the need for action now on American competitiveness. The Bush Administration supports the broad findings of the Rising Above the Gathering Storm report, and I am pleased that the Bush Administration has taken decisive, proactive action – unlike any other previous Administration – to focus on the issue of competitiveness.

President Bush is the first president to put the issue of American competitiveness on the national agenda. He’s the first president to specifically discuss the issue of competitiveness in a State of the Union Address. More importantly, however, President Bush announced the American Competitiveness Initiative – the “ACI”.

The ACI called for doubling the Federal commitment to basic research in the physical sciences – the type of high-end, leading-edge research that the private sector cannot and should not be expected to do. The commitment of the American Competitiveness Initiative will put the Federal commitment to leading-edge research at the same level – on a percentage basis – it was during the 1960s Apollo program.

This August, President Bush realized many parts of the ACI when he signed into law the America COMPETES Act.

The America COMPETES Act significantly bolsters support for the National Science Foundation, the Office of Science in the Department of Energy, and the National Institute of Standards and Technology at the Department of Commerce. With this funding, the U.S. government will support research in critical areas such as nanotechnology, supercomputing, and alternative energy sources.

2. U.S. Department of Commerce

The implications of the Rising Above the Gathering Storm report goes beyond the ACI and the America COMPETES Act. Numerous Federal programs have recast themselves to tackle the pressing issue of competitiveness. For example, we have transformed the Economic Development Administration, into a market-facing entity focused on answering the “What’s Next” question for our economy and regional innovation.

We have developed and communicated clear policy criteria to promote three priorities:

1. Support collaborative regional economic development approaches;

2. Encourage entrepreneurship; and,

3. Answer the “what’s next” question by supporting innovation and competitiveness.

In addition to this new policy and investment focus, we have revamped some of our long-standing programs. For example, we have transformed our University Center program into a competitive format to ensure we are supporting leading edge thinking. This program provides the support needed to make the incredible resources available at America’s premier educational institutions available to public and private entities interested in advancing the art and science of innovation-led economic development.

One such example is the University of Michigan’s Center for Economic Diversification. This Center, under the leadership of Dr. Larry Molnar, is partnering with organizations like David Cole’s Center for Automotive Research to work with both the auto industry and auto-dependent communities to make them more competitive. Last month, I was able to visit first-hand the work the University of Michigan and the Economic Development Administration is accomplishing together – and I am gratified with our shared progress.

EDA’s work with universities is not limited to our University Center program. As the Federal Government’s venture capitalist for innovative economic development, some of our best investments support university-led initiatives.

Under the leadership of Governor Hoeven, North Dakota has partnered with universities and the private sector to transform their economy. Through these efforts, North Dakota has reversed a long trend of out-migration, now has an unemployment rate well below the national average, and is out-pacing the nation in both new jobs created and per capita income gains.

An example of how the Department of Commerce is supporting North Dakota’s efforts is our partnership with the University of North Dakota’s Center of Excellence for Life Sciences and Advanced Technologies. This campus research park leverages research in viral diseases and high-tech engineering encompassing a regional industry cluster stretching from the Great Plains to Winnipeg, Canada.

The center is just one of a statewide network of Centers of Excellence creating new economy jobs in North Dakota. North Dakota, in my opinion, is an excellent example of strong State leadership, successfully utilizing the assets of universities, partnering with the private sector, leveraging Federal programs, and focusing on key challenges that have yielded specific, tangible, and impressive results. If you are looking for a model, you don’t have to look further than North Dakota.

3. The Broader Context

The broader context of our discussion today is how to better utilize universities to advance innovation. The Organization for Economic Cooperation and Development – the OECD – recently reported that there are four key roles for universities:

1. Anchors of regional innovation systems;

2. Providers of lifelong learning opportunities;

3. Partners in regional governance; and,

4. Promoters of sustainable development strategies.

The OECD concluded that there is no one model for the successful engaged university. I think that’s a good thing, as the role of the engaged university depends on the needs of the region, its resources, and the business environment.

The OECD also concluded that universities are an under utilized resource across the globe in advancing innovation. In most parts of the world, the division between the world of Ivory Tower Academia and the world of Commerce are indeed worlds apart.

While universities across the globe may be untapped resources, universities in the U.S. are far more engaged with the private sector – and that is a competitive advantage for the United States.

The link between universities and the private sector is critical – and especially critical in this region. The automotive industry is changing. While this region has suffered from closures and layoffs, the market for automobiles is strong with 16 million of these four-wheeled wonders sold annually.

This region does not suffer from lack of expertise in a critical market segment. The world is demanding the product you make right here in America’s heartland. We owe it to each other to ensure that universities are simultaneously working to increase the competitiveness of America’s auto industry, while diversifying the economic base of auto-dependent communities.

The simple fact is that it will take fewer people to make more automobiles – a dynamic not dissimilar to the transition seen in the agriculture economy of a few generations ago.

Of course, our new reality is that we do indeed live in a global marketplace. Tom Friedman of the New York Times is right…the world is flat. Our competition today comes from not necessarily the company next door, or city next door, or even the state next door. Our competition in the new flat global marketplace comes from any person, on any point of this globe with a good idea, a good education, and a good Internet connection.

This sounds a little scary. But the new global marketplace offers tremendous opportunities. For U.S. businesses, the reality is that over 95% of our potential customers don’t call America home. There’s a whole global marketplace out there for us to tap into with the right products. But to successfully access these markets with the right products, we need the right skills – and there is a skills gap in this country that we must address, and universities will play a key role in addressing this critical issue.

The global marketplace is paying off for the American consumer. According to research by the respected Financial Services Forum, the average American family income is $10,000 a year higher because of our participation in the global marketplace.

The advantages of the global marketplace are clear in the auto industry. Products by Ford, GM, and Chrysler have been made better as a result of global partnerships.

The American people understand this. When it comes to complex products, like computers, aircraft, or automobiles, the days when “American” meant one thing and “foreign” meant another thing are largely dated notions. The American people are ‘hip’ to the fact that it’s hard to determine if a U.S.-built Toyota Camry is more or less “American” than a Mexican-built Ford Fusion.

Folks I know who own the Chrysler 300-C brag that their car shares key components with the Mercedes E-Class. GM is about to re-launch rear-drive performance in the mid-price range using engineering from their Australian subsidiary, Holden.

We must learn to master – not hide from – the global marketplace. Every time America has tried to curtail our engagement and commerce with the outside world, as we did during the Smoot-Hawley tariff days, we lose.

Today our export performance is booming. U.S. exports are up 11% over last year and for the first time in recent memory; exports are rising at a faster clip than the rate of imports, narrowing our trade deficit.

When President Bush came into office, we had Free Trade Agreements with three countries: Canada, Mexico, and Israel – today we have 16. I am pleased to join the President and Secretary Gutierrez in promoting four new Free Trade Agreements: Columbia, Panama, Peru, and South Korea. These four robust and emerging markets represent a consumer base of 126 million and a combined GDP of $1.1 trillion. Taken together, these FTAs would represent America’s sixth largest trading partner.

As Mississippi Governor Haley Barbour says, I may have been born at night, but I wasn’t born last night. I know that FTA’s are controversial in some parts of our country, but the fact is that FTAs reduce barriers to U.S. goods and services, better ensure intellectual property protection, promote fairer and more transparent trading practices and government processes, and level the playing field.

The evidence shows that Free Trade Agreements work. Our trade deficit with FTA countries is substantially less than our trade deficit with the rest of the world. Since NAFTA was implemented, the exports between the U.S., Canada, and Mexico all increased, and the economies of all three countries grew significantly; the U.S. by 48%, Canada by 49%, and Mexico by 40%.

Universities, with their cutting edge research, certified smart people, status as an honest broker, and ability to think outside the box, can and must play an ever increasing role in making our companies and communities more competitive in the global marketplace.

Universities help us adapt, and that’s important because the pace of change in the 21st Century will only continue to accelerate. Think of this; it took 55 years for the automobile to reach 25% of the American marketplace…it took the Internet only 7 years to reach this same milestone. Imagine how quickly we will adopt the next big thing.

Let me conclude with a personal assurance. An assurance that I understand that it’s a lot easier to highlight a challenge than it is to do something about it. Even with the resources I have at my disposal as the head of a Federal agency, I don’t have the brainpower nor the financial resources to solve the problem.

But you have my personal assurance that the U.S. Department of Commerce and the Economic Development Administration is ready, willing, and able to roll-up its sleeves and work with the universities and economic regions of the Great Lakes region on collaborative solutions.

This is my second trip to Michigan in as many months. I’m here with EDA’s director for this region, Robert Sawyer, and we are committed to serving in what ever role is needed – to play an active convening role to help this region ask and answer the “what’s next” question. And this is above and beyond our agency’s $56 million in economic development investments we have made in Michigan since 2001.

I’ve recently met with senior officials from GM and Chrysler, and I’m looking forward to my meetings with the Ford Motor Company tomorrow as well as my discussion with Michigan economic development leaders later today.

Together, we can help answer the pressing question we all ask; what’s next.

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