REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH , ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT EDA DEVELOPMENT SYMPOSIUM FOR THE CHICAGO AND DENVER REGIONS KANSAS CITY, MISSOURI

WEDNESDAY, SEPTEMBER 26, 2007

AS PREPARED FOR DELIVERY

Introduction by Dr. Mark Drabenstott, Director, Center for Regional Competitiveness, Rural Policy Research Institute, University of Missouri, Columbia

Thank you, Mark, for that kind introduction, and thank you for serving as facilitator today.

I’ve had the pleasure of knowing Mark Drabenstott for several years now, and working with him both here in the U.S. and overseas representing the U.S., and I have come to appreciate him as one of America’s truly certified smart people and a tremendous human being. As the head of the U.S. delegation to the Organization for Economic Cooperation and Development’s Territorial Development Policy Committee, I am particularly proud that Mark was elected the Chairman of the Territorial Development Policy Committee – the first American to chair this prestigious post. Thank you, Mark, for your leadership.

I would like to acknowledge the National Association of Regional Councils and the International Economic Development Council and their teams for all of their hard work in developing this symposium. I’m grateful for their partnership with EDA in hosting 5 such symposia across the nation in the past year.

And of course, thanks to you all for being here and for your commitment to making your economic regions more prosperous.

In addition to providing world-class best practices for promoting entrepreneurship, this symposium is also a great venue for economic development practitioners to re-connect with the EDA team from our Denver and Chicago regional offices. And let me just take a moment to applaud the tremendous work of the EDA staff across the nation. Our EDA staff are the “front door” of the agency and are the ones responsible for the great work our agency has done for 40-plus years. I thank you for your hard work and dedication.

I am particularly pleased with our theme of the day; Entrepreneurship – which is the engine for economic growth.

As we consider strategies for advancing entrepreneurship a little context can be helpful. I would like to help frame our discussions here today by, first, providing a snapshot of the national economic environment and priorities, and then discuss the environment in which we all are working.

OUR ECONOMY IS STRONG AND GETTING STRONGER

Looking at the national economic context, we have good reason to be optimistic. Our economy is strong. Our national unemployment level is at a low 4.6 %, which most economists say is lower than the full employment rate, and the economy has created over 8 million new jobs since August 2003. Wages are rising, and productivity is strong.

The American economy grew at 4% in the second quarter of 2007, and we’ve had nearly 6 years of uninterrupted economic growth. All this shows that we have a very resilient, diversified, and flexible economy.

EXPORT GROWTH

One of the key reasons for America’s economic strength is the growth in U.S. exports – a reflection of our nation’s ability to succeed in the 21st Century world-wide marketplace.

U.S. exports have increased by 11% over 2006. And the trade deficit has narrowed nearly 8% or $30 billion compared to the same period in 2006.

Nationwide, exports are growing more than twice as fast as imports, which is a strong indication that our workers and businesses are successfully competing in the worldwide marketplace.

This is important, because the jobs associated with exports have higher wages than other jobs, which helps drive our national prosperity.

That’s why it is important to open worldwide markets to U.S. goods and services. A key tool to accomplish this is the Free Trade Agreement – FTAs.

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 16 countries with 4 more under consideration.

FTAs help our companies, farmers, manufacturers and workers sell American goods and services to new markets around the world.

The critical role exports play in our economy highlights the importance of the Free Trade Agreements the President is pursuing with Columbia, Panama, Peru and South Korea. These FTAs will provide U.S. companies, farmers, manufacturers and workers access to over 100 million consumers in emerging markets across the globe – representing a combined GDP of over $1 trillion.

So, thanks – at least in part – to our strong export performance, it is clear that the American economy is resilient and strong. This is good news not just for the nation, but for your regions as well – because a strong, growing national economy allows economic regions and individuals to tap into this expanding economic pie and share in our national prosperity. It takes both smart national policies and forward-thinking regional action in order for economic growth to occur.

THE 5 NEW REALITIES OF 21ST CENTURY ECONOMIC DEVELOPMENT

So, with a strong national economic foundation and the realization that our economy is interconnected with the rest of the world, what is the environment in which our regional economies will encounter in the 21st Century?

For economic development professionals, I believe that there are 5 realities of the 21st Century we must understand and respond to

Having just mentioned America’s strong export performance, let’s begin with New Reality #1 of the 21st Century economy: While perhaps the most obvious, it’s also the most important; and it’s the 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 marketplace, 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.

While our competition is indeed global, with global competition comes opportunities for global partnerships – opportunities to expand our markets and increase our competitiveness. With 95% of potential customers for American products outside the United States, this reality becomes more important every passing day. And the economic development agenda must include helping the businesses in our regions increase their profitability by expanding into new international markets.

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 only 7 years for the Internet to reach that same milestone. Imagine how quickly we will adopt the next big thing.

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.

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 these components of competitiveness must be tackled in concert.

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 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 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 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 should actively be engaged as full partners in strategies for economic growth.

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 nation can maintain its edge in innovation, it will grow and 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. And the challenge will not go away by ignoring the reality or by closing off America to the rest of the world.

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 and nonprofit sectors as it is in the private sector – and when we talk about the private sector we are talking about entrepreneurship.

ENTREPRENEURSHIP

Innovation and entrepreneurship go hand in hand. Entrepreneurs are the engine for America’s economic growth, and innovation as the fuel for that engine.

One advantage America has in the 21st century economy is our pride as an entrepreneurial nation – stories in which people start out with nothing more than hard work and a good idea and become wealthy beyond their dreams are commonplace. But entrepreneurship is such a part of the landscape of America, it’s easy to overlook, but is too critical to overlook.

Growth-oriented entrepreneurs lead the American economy in innovation – small firms innovate more than large ones do, producing about 13 times more patents per employee than larger firms.

Furthermore, small businesses provide approximately 75% of the net new jobs added to the American economy, and represent over 99% of all our employers. The growth in our economy is in very large part due to entrepreneurs – that’s where the job growth is coming from…it’s not from the big companies.

I believe the strategy for the United States in competing in the 21st Century is built around the following equation:

Entrepreneurship drives innovation…

Innovation drives productivity…

Productivity drives higher wages and higher standards of living.

And a higher standard of living for more of our citizens is a goal that we all share.

As critical as Entrepreneurship is to our economic prosperity and maintaining our competitive and innovative edge, it also presents a very real challenge for Government. How does the public sector – responsible for taxpayer dollars – play a positive, pro-active role in supporting Entrepreneurship?

This is a critical question because there is no consensus on how to answer it. Entrepreneurship is an inherently risky proposition. Government, however, is generally risk adverse. No Government official wants to see a headline in the local newspaper that reads, “County Invests $100K in Failed Nuclear Powered Shower Cap Factory.”

Losing money is a thing in Government…and while not exactly encouraged in the private sector, it is part of the landscape…that’s why they call it risk capital.

It is our job as economic development professionals to be the bridge between the public and private sectors – to create solutions that work for both sectors. For it is the economic development professional that is in the critical position of being at the nexus of business and government. You are in the unique position of being able to speak the language of both the Government official, and the business person. You are uniquely positioned to play the role of marriage counselor.

This is difficult and important work, and I applaud your efforts to advance the art and science of economic development.

I am confident that through our discussions today – led by one, if not the world’s foremost authority on Entrepreneurship – Dr. Carl Schramm – we will come up with some ideas that answer that pressing question of how the public sector can effectively support the critical life line of the American economy, the Entrepreneur.

Thank you for joining us.

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