REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - LAKE HAVASU CITY, ARIZONA

WEDNESDAY, JUNE 7, 2006

AS PREPARED FOR DELIVERY

Introduction by Martha Bennett, Chair, Lake Havasu City Partnership for Economic Development

Thank you, Martha, for that kind introduction. On behalf of President Bush and Commerce Secretary Carlos Gutierrez, it is my pleasure to be here today in beautiful Lake Havasu City.

I would like to thank the members of the North River Economic Region for the invitation to be here today, and special thanks to Gary Kellogg and his fine team at the Lake Havasu City Partnership for Economic Development for coordinating today’s events. I thoroughly enjoyed the Business Park visit and boat tour around the Island this morning, which, aside from being fun, were a strong illustration of the area’s progress in strengthening the regional economy.

It’s great to see local leaders coming together here today from both the private and public sectors. This gathering is a testament to the ability of the people of the North River region to collaborate, which, in the 21st Century global economy, will be the key to success for individuals, communities, regions, and even nations. Thank you for coming.

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: Our unemployment level just dropped to 4.6%. This is where we were prior to the 9-11 terror attacks in 2001, and represents a level of employment that many economists consider full employment.

We’ve created more than 2 million jobs in the past year and over 5 million new jobs since August 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 returning $880 billion to American taxpayers as part of President Bush’s tax cuts, the Treasury Department recently reported that tax revenues are up 11% in 2006 and are at 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.

Here is a 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. Even the American muscle car has gone 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.

The global marketplace affords the American consumer choice and cost savings that are unprecedented in any nation’s history and has led to a standard of living that is the envy of the world.

Of course, Lake Havasu City was an early adopter in the global economy, evidenced by your importation of the London Bridge – that’s what I call globalization.

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.

This new reality where cycle times for products and ideas continues 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 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:

First, 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.

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, 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 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. Mohave Community College’s Small Business Development Center – a partnership between the U.S. Small Business Administration, the State of Arizona, and the College – is a good example of how a community college can focus its curriculum on the needs of regional industry.

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. Factors such as these 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, we 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 doubles the Federal funding for basic R&D research, and 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 breakthough 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.

And right here in this region is a good example of the type of investment EDA likes to make:

• The Lake Havasu City Business Park, which I toured this morning, is a facility that EDA supported by making an investment of $1.8 million. This Federal investment will help spark innovation and entrepreneurial activity and we anticipate over 1,100 new jobs to be created and about $150 million in private investment to result.

So, these are 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 North River Economic Region for the challenge and opportunity of the 21st Century.

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