REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - RIVERFRONT RESEARCH PARK ECONOMIC DEVELOPMENT ROUNDTABLE - EUGENE, OREGON

WEDNESDAY, OCTOBER 4, 2006

AS PREPARED FOR DELIVERY

Introduction by Rich Linton, Vice President for Research, University of Oregon

Thank you, Dr. Linton, for that kind introduction. It’s great to be back in Duck Country – at my alma mater, the University of Oregon. I appreciate the opportunity to be with President Dave Frohnmayer who is one of Oregon truly outstanding public servants and has guided this institution with grace, class, and success. I am also honored that Jack Roberts of the Lane Metro Council is also here today. I’ve known Jack for 20 years now and he is truly one of Oregon’s best and brightest public servants. I also want to thank Diane Wiley of the Riverfront Research Park for organizing this Roundtable discussion and I certainly appreciate all you being here.

I left the University of Oregon in 1986, just about the time this research park was being formed. If twenty years ago you would have told me that I would be heading up a Federal agency that helps support important research parks such as this across the country I certainly wouldn’t have believed them. What I have no problem believing, however, is how successful this Riverfront Research Park has become.

The University of Oregon is a world-class institution attracting some of the world’s best, brightest, creative, and innovative minds. Oregon, and the University of Oregon, is a unique confluence of culture and intelligence that is especially conducive to leading-edge research.

With 54 tenant companies and organizations, including 18 start-ups created by faculty or students – or based on O of U research – the RRP is a tremendous engine for innovation and job creation for not just the Eugene-Springfield region but for the entire State.

Your success at Riverfront Research Park illustrates that you “get it” – you understand the big picture of what it takes to succeed in a 21st Century economy, that innovation in our key to economic success and competitiveness in the world-wide marketplace.

So what is the “big picture” for economic development in the 21st Century? It’s about the ability to adapt to and capitalize on what I like to call the 5 “new realities” of the 21st Century economy.

This afternoon, I’d like to describe these new realities for you as I see them, and then move from this bigger picture into a focus on specific initiatives the Department of Commerce is working on to address these new realities.

So, with your permission, I’ll first, provide you a lay-of-the-land – put America’s current economic performance into a bit of context.

Second, I’ll 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 describe how the Commerce Department is responding to the challenge of the 21st Century.

THE NATIONAL ECONOMIC CONTEXT

As you might have heard, there’s an election coming. It’s the silly season and you’ve been hearing all sorts of things about America’s economic performance. Let me cut though the clutter and give you some hard facts.

At the National level, I’m pleased to report that the economic outlook is positive. 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.

The U.S. economy created over 128,000 new jobs in August and about 2 million new jobs in the last year – and for those of you keeping score at home, that’s about 5.7 million new jobs created since August 2003.

Our unemployment rate is 4.7%, 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 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.

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 less at the gasoline pump, and the L.A. Times reported recently that a majority of Americans believe that our economy is on the right track.

And despite returning $880 billion to American taxpayers as part of President Bush’s tax cuts, tax revenues are up 11% in 2006 over last year and the Federal Government is collecting taxes at the highest level in history.

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 – say it with me – 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 today, 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.

Of course, here in Oregon, you already know this. Thanks to Oregon’s governor in the 1980’s, Vic Atiyeh Oregon has grown into one of the top 10 States in the nation in terms of foreign exports as measured by gross state product. This is a critical competitive advantage for the State. And Oregon’s continued leadership in international trade will be one of the keys to ensuring its prosperity in the new flat global economy.

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.

Second, 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.

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;

• 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.

Now, while America is positioned to win in the 21st Century, we all agree that we cannot rest on our past success. Other countries, like China and India, are rapidly catching up in areas where we have traditionally been strong. They are opening their markets, strengthening their financial, legal and other public institutions and making both public and private investments that are making them more competitive.

AMERICAN COMPETITIVENESS INITIATIVE

To address this competitive challenge, President Bush announced the American Competitiveness Initiative. The ACI is the first Presidential initiative in over a generation that specifically and strongly focuses on the elements of our national research, innovation, and competitiveness. Here’s what the ACI will accomplish as envisioned by President Bush:

The President wants to double Federal R&D spending over the next decade to $137 billion. These increased funds will be targeted to:

• The Department of Energy’s Office of Advanced Research, which will be able to add 2,600 new researchers, construct new high-end research facilities and develop new research tools and methodologies.

• The National Science Foundation, which will be able to offer an additional 500 grants for advanced, leading-edge research and to add over 6,000 new research professionals to their roles.

• And the Department of Commerce’s National Institutes of Science and Technology (NIST). This arm of the Commerce Department will be able to add 600 more researchers, increase their partnership with national labs and research universities, and offer more grant opportunities to leading academic institutions.

To put $137 billion in perspective, that amount equals the same percentage of the Federal budget this country was spending on R&D during the Apollo Space Program of the 1960’s.

The President’s ACI also aims to ensure that our youth have the skills to do the jobs of the future and develop next-generation technologies. The ACI calls for expanding Advanced Placement programs in our nation's high schools as well as specific programs aimed at elementary and middle school students to increase the quality of math and science education and to find ways to make math and science more fun for boys and girls alike.

Another aspect of the ACI is the issue of immigration. The ACI calls for reform of our immigration laws to allow the best and brightest to come to institutions like the University of Oregon from all over the world to study, stay, and put their world-class minds to work on behalf of American innovation and competitiveness. We have heard loudly from academic institutions and businesses alike that this is a critical issue that needs to be addressed.

The goal of the President's American Competitiveness Initiative is to create the right enabling conditions, the nurturing environment in which a new golden age of innovation can flourish in the United States.

An important contributor to this new golden age of innovation will be research parks like RRP. That’s why the Federal agency I have the honor of leading, the Economic Development Administration, is placing a particular emphasis on helping to build connections between universities, national labs, and the communities within their regions.

Research universities like the U of O can be important elements of regional economic development. They expand human capital through education and training, they create knowledge, and they drive technological breakthroughs. They work to diversify regional economies by generating new industries and new jobs.

That’s why EDA has invested over $20 million since 2001 in 18 research park projects across the nation, which has leveraged over $1 billion in private sector investment.

As an example, EDA invested over $3 million in the Sandia Science and Technology Park in Albuquerque, New Mexico to help develop a 200-acre technology community that is now the focal point for an entire research corridor. The Park is adjacent to Sandia National Lab, giving tenants easy access to world-class facilities, technologies, scientists, and engineers. And Sandia is only one of the many research institutions in the immediate area. Others include the University of New Mexico, Air Force Research Lab – Phillips Site, and the Lovelace Respiratory Research Institute. And of course Los Alamos National Lab is only about an hour a way – and we’ve helped get their research park off-the-ground too.

The EDA is committed to helping America’s regions tap into the economic development assets of research parks – and I applaud what you’ve been doing here in Eugene. It’s important not just to this area, to this university, to this state, but to our national economic competitiveness as well.

Once again, I greatly appreciate the opportunity to be here at the home of my

4-and-0 Ducks. I have more than a passing interest in the University of Oregon and Oregon as a whole. My time here today has renewed my confidence in the future of this great State. Thank you for your time and hospitality.

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