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Department of Commerce Efforts to Increase U.S. Competitiveness, Business Investment and Job Growth

Interviewer: Lauri J. Fitz-Pegado, Partner, The Livingston Group
Interviewee: Rebecca Blank, Acting U.S. Secretary of Commerce
October 1, 2012



LAURI FITZ-PEGADO: Good afternoon and welcome.

I will first ask you to please completely turn off all of your devices, your electronic devices, to avoid interference with the sound system. And this meeting is on the record.

I am Lauri Fitz-Pegado. It's a pleasure to be here this afternoon.

We're pleased to hear from one of the administration's top voices in the areas of manufacturing, innovation and increased U.S. business investment, the last of which will be the focus of her remarks this afternoon.

As the acting secretary of commerce, Dr. Rebecca Blank oversees a number of our nation's most crucial federal agencies which provide the essential foundation for business growth and job creation.

The Commerce Department will always have a very special place for me, for many reasons. My dad retired from one of its agencies, the National Oceanic and Atmospheric Administration. I worked in the International Trade Administration, and I lost many friends and colleagues, including my good friend then-Commerce Secretary Ron Brown, while they were on a trade mission to Bosnia and Croatia. I see some of those friends who worked with me at Commerce here today, and I welcome you as well.

Dr. Blank led the Economic(s) and Statistics Administration before becoming deputy secretary and now acting -- twice, not once. Perhaps this perspective from the ranks of the agency has led to her having a desire and doing a great job of traveling around the country, meeting with business owners, workers, students and others, and talking about the crucial investments we need to make not just to create jobs now but also to ensure America's long-term growth and competitiveness.

Dr. Blank, it's a pleasure have you here at the Council on Foreign Relations. I look forward to your comments and our discussion. And everyone please join me in welcoming Rebecca Blank. (Applause.)

ACTING SECRETARY REBECCA BLANK: Thank you very much, Lauri. It is a treat to share the stage with a Commerce alumni and a trade expert.

Wherever I go, I always run into alumni from the Commerce Department. They are everywhere. And I know there are a whole bunch of you out there who have worked at Commerce.

I also want to thank the Council on Foreign Relations for inviting me and for setting up this event. I'm really looking forward to this conversation, which is on a topic that we've done a lot of thinking and a lot of work on inside the department.

So we've come a long way since the economic free fall that we were experiencing in 2008. At that point we were losing about 750,000 jobs a month. That was late 2008, the first month of 2009. I was in Milwaukee a couple of weeks ago, and 750,000 jcobs a month is essentially the population of Milwaukee -- losing that many jobs every month.

We have now created 5.1 million new jobs over the past 30 months, since the economy turned around. We've experienced nearly three years of stable economic growth, but we know that there is still work to do. Growth has been steady, but it's slower than anyone in this room would like. Unemployment has fallen substantially, but it is still too high.

The good news is that all the growth forecasts for the next two years suggest this recovery will speed up, particularly now that the housing market is showing very clear signs of recovery.

That means we've reached a moment where we can't just worry about what's going to happen next week, next month or next year. If we care about our nation's long-term competitiveness, we have to be thinking about the policies that are going to pay off over the next several years, over the next several decades.

I've spent a lot of time at Commerce thinking about -- and talking to a whole variety of groups and experts about -- America's long-term competitiveness. Today I want to talk about one topic that I think is crucial to our competitiveness, namely, increasing the level of business investment in the United States.

Now, business investment can occur in many sectors, but I'm going to focus particularly on manufacturing because outsourcing and lost manufacturing jobs in the U.S. has been such a major public concern over the last several decades.

As you may know, manufacturing has been one of the bright spots of the economic recovery. Manufacturing has grown faster than the overall economy over the last couple of years, and we've had the creation of a half million new jobs since 2009 in manufacturing. Now, that's a real turnaround. If you look at the manufacturing job picture through the first decade to 2009 of the 2000s, we actually lost 6 million manufacturing jobs. And more than half of those were lost before we went into the Great Recession. I mean, we just had a steady downward trend in manufacturing jobs that just happened for that whole decade. So seeing this turnaround is actually exciting and promising.

America's going to have to retain and strengthen its manufacturing base only if we are going to be the global place-to-be for high-end and advanced manufacturing, that is, manufacturing that relies on high-tech new processes or makes new products. That's what is going to keep us -- keep us competitive and keep us attractive as a place to invest.

So how do we lead the world in manufacturing? There's a single-word answer to that: innovation.

The president gets that. It's why this administration has been pursuing multiple policies designed to keep the United States at the front end of research and innovation and, through that, among other things, supporting American manufacturing.

This includes working to reverse the erosion we've seen since the early 1980s in federal support for basic R&D, much of which supports our manufacturing base. President Obama set a goal of doubling federal dollars in R&D in a set of research-intensive agencies, including the National Institute for Standards and Technology, NIST, at the Department of Commerce. And we've made a good start towards that doubling, but we certainly aren't there yet.

We've launched the pilot for the National Network for Manufacturing Innovation, an effort to speed up the tech transfer process through public-private partnerships and regional collaborations, something I'd be happy to discuss during our follow-on conversation. And the president continues to advocate for investments in infrastructure as well as crucial investments in education and training to ensure that we have the skilled and flexible workforce for America's businesses, and that includes manufacturing as well.

Better infrastructure, skilled labor, and advanced research and innovation are all critical investments that build a stronger environment for manufacturers to thrive.

And a major reason that these investments are so crucial right now to build the environment in which manufacturing businesses can thrive is because I thing we're at a rather unique moment in time. I believe we have a unique opportunity to attract business investment into the United States in the immediate future, particularly in manufacturing. And I want to focus the rest of my talk today on that opportunity, why I think it's fair for -- at the particular moment, and then, you know, we'll go into a conversation about this, right?

Now, there is two things we should think about when we think about attracting business investments in the United States. First, we want U.S.-based firms to expand here at home, if they are looking at different options, to make the option they choose the United States, or, if they have plants overseas and they're looking at what they're going to do next with those plans, to potentially bring some of that manufacturing production back to the U.S., often referred to as insourcing or reshoring. We want foreign-owned firms that are looking at where to locate their next plant, their next investment, to come to America through foreign direct investment, so-called FDIs, as the economists (call it ?).

Now, I'm very optimistic we're going to see substantial increases in both of these areas over the next several years. I in my travels spend a lot of time talking to CEOs and talking to business owners. And one of the questions that I almost always ask them is, where are you thinking about making your next investment? What are you thinking about, right? Are you going to make it -- when you're going to make it, where is it going to be? And again and again, particularly in the last six to nine months, I am hearing both overseas and in the U.S. people saying, well, the U.S. is where we have to be. It is the place where everyone's going right now. This is consistent with a study released by the Boston Consulting Group just a week ago today where they also point to this particular trend and say that business investment in the U.S. really has an enormous potential to grow in the next several years.

Now, business leaders, when you say, why the U.S., list a number of reasons as to why this country looks so attractive for business investment right now. The first thing almost all of them list, particularly in manufacturing, is the energy outlook in the U.S. This is crucial for companies that rely on energy for production, including foreign-based manufacturers, which have accounted for the largest proportion, about 40 percent, of all FDI flow into the United States over the last three years.

We will be meeting more than half of our oil needs with domestic production by 2014, leading to more stable and lower costs of oil. In addition, we've seen a very dramatic 14-fold increase in natural gas production from shale in recent years. For example, from just 2009 to 2011, Pennsylvania quadrupled its natural gas production. So it's no surprise our natural gas prices overall have dropped fourfold just since June of 2008. This provides us with an enormous advantage as our natural gas costs drop relative to other countries. For example, right now natural gas in the U.S. costs about one-quarter of the price in Europe.

Finally, many alternative energy sources, as you know, are reaching the tipping point in terms of cost-benefit, in part due to the fact that we've doubled the generation of many renewable energy sources since 2008. So the energy outlook is a highly important aspect of why U.S. investment.

Secondly, the U.S. is gaining a stronger competitive edge in labor, in both costs and in productivity. In recent years wages have gone up and the middle class have grown in many of those rapidly developing countries who have been strong competitors with the U.S. for investment. In China, for instance, the labor cost advantages of being in China, particularly in the cities, which is where a lot of people were locating, have diminished really substantially over the last several years. And again, there's really a much-discussed BCG report on this that came out about a year ago really projecting out the fact that the -- you know, if you're looking at labor cost comparisons between China and the U.S., if you take any sort of shipping into account, it's beginning to look like a wash in the next several years, as opposed to a major advantage to China.

At the same time, U.S. manufacturing workers are producing about 9 percent more each hour than they did before the recession. It's notable we're now seeing increasing investment flows from Asia to the U.S. Asia accounted for less than 4 percent of the entire world's business investment in the U.S. in 2009. It now accounts for more than 20 percent.

A third major reason why the U.S. is becoming a more attractive investment location is because other developed countries' economies have been looking less robust. And you know this story as well. After the global slowdown, this administration took hard steps to put our financial sector and our economy on a stronger footing, and many observers believe that our banks have restructured more fully than in other countries and our recovery is stronger and more stable.

In contrast, the eurozone remains in crisis. If you had told me a year ago in the summer when we were first talking about, you know, so this emerging crisis in the eurozone, we'd still be talking about it with the same degree of unsettlement almost a year and a half later, I would have said, no, you know, this is going to get settled. It hasn't been settled. The IMF projects a decline in growth this year, with only .7 percent growth in 2013. Elsewhere, growth is also slowing, in countries like China and India.

So I could keep going. The list of reasons that CEOs give me when I sort of say, why the U.S., is longer. We have a strong rule of law and a good regulatory environment. People mention intellectual property protection. Our patent system, housed at the Census -- at the Commerce Department is only getting better due to the America Invents Act that is a piece of legislation passed a year ago in September that we are working with to modernize our patent office. Overall, the U.S. ranks fourth of 183 economies in the World Bank's ease of doing business index. And not -- you know, last but certainly not least, we have the best universities in the world, producing graduates that drive entrepreneurship and speed innovation in our private sector.

Finally, we have the largest consumer-driven economy in the world. On Tuesday I was at the Virginia Beach plant of STIHL, a German-based company that makes outdoor power equipment like chainsaws and lawn edgers. They've expanded their presence in Virginia Beach in recent years, in fact, in the last two years were going to do a major plant expansion, looked at locations around the world and decided that Virginia Beach was the place to be. They've built this huge new facility there, hired 50 more workers, largely due to strong demand from U.S. customers.

More than ever before, companies need to be near their customers to respond to their changing tastes and demand, and changing technology, changing shipping costs also make this important. Consumer spending is growing here in the U.S. at a moderate but a steady pace. And if the president's middle-class tax cuts go through, we will ensure that it continues to grow.

Overall, domestically, it's difficult to track the increased number of U.S. businesses that are engaging in some form of insourcing. You know, I've actually tried to go back and look at the data and see, well, what do the data say? I mean, I have this impression from talking with people (what ?) can I actually see out there in census data or other sorts of data. We just don't collect the information in a way that lets us measure insourcing or reshoring.

In January the president held a summit with about 20 U.S. businesses that are bringing jobs back to America. And this year, if you -- one thing I had my people do is look through major U.S. newspapers over the last couple of months, and they very quickly came up with literally dozens of stories, just in the feature stories, typically about manufacturers, both U.S. and foreign-based, choosing to make their products in America.

So I admit, I'm an economist. I can't give you the hard numbers on reshoring. But I can sure tell you it's what everyone's talking about. It's a little easier to measure growth in foreign direct investment, foreign-owned firms investing here. We do collect that data. Unfortunately, we collect it with quite a bit of a lag; our last data is 2011. FDI flows into businesses in the U.S. have jumped from 144 billion (dollars) in 2009 to 227 (billion dollars) in 2011. The U.S. already attracts about one-fifth of all of the FDI flows coming out of other countries, and, you know, those are numbers that we would like to see increase as we look past 2012 and 2013.

To the policy question, if we have a moment of opportunity, I don't know how long it's going to last -- two years, three years, five years? Depends a little on what happens in other countries, how our energy situation evolves, how the banks' stability and the U.S. recovery continues. You know, we got a moment of opportunity. How do we build on that? What can we do in the Department of Commerce and elsewhere in the administration to add to that momentum and to make sure that investments that come to the U.S. stay here, that we retain them, that they become sticky?

So first, the president has called on Congress to end tax breaks for companies that ship jobs overseas and instead to give tax breaks to companies that bring jobs back. That's common sense and something we should all be able to agree on.

Secondly, we're been implementing a new program at Commerce over the last about year and a half now called SelectUSA, which the president launched last year. SelectUSA's mission is to promote investment in the U.S. using the full power of the federal government.

As the former director of the U.S. and Foreign Commercial Service, Lauri will appreciate the fact that SelectUSA involves some of Commerce's most dedicated public servants: our commercial service officers around the world.

Traditionally, these staff have focused solely on helping U.S. firms export to foreign markets, but we've given them another task: We've also asked -- we've done training to help with this -- that they also help foreign investors who want information about how to invest in the U.S, who want to link up with the state and local economic development leaders to get deals done. We just finished training the FCS officers who are stationed in the top 25 foreign markets where 90 percent of America's FDI comes from.

And we can't stop there. When I was at STIHL on Tuesday, we announced yet another effort aimed at promoting U.S. investment. Make it in America is a major initiative to give American communities the help they need to attract businesses.

Through the Make it in America Challenge, the departments of Commerce and Labor are teaming up to find communities that are poised to attract major new investment but need just a little bit more help to get the deal done. So maybe a city needs a better role to -- road to an industrial site or help with cleaning up or rehabbing an industrial site. Maybe manufacturers who are looking to relocate and need better information, help and planning or technical assistance -- maybe local workers need a tailored training program at their community college to fill a particular skills gap.

Through this competition, we are asking communities around America to send us a proposal, you know, with some matching funds on their part as well, asking us for money, to say, here is what we need to move forward to attract more investment in our community. We're going to evaluate those proposals based on the ability of these communities to promote insourcing to attract FDI and, most importantly, to create good jobs. And we're going to fund the best proposals that we receive. In 2013 we're putting $40 million into this to give 15 awards. And I very much hope this is a challenge that will keep going for a number of years.

Overall, we're trying to do everything we can to give businesses both here and abroad every possible reason to believe that the smart choice is indeed to make it in America, or, as we like to say at the Department of Commerce, to build it here and sell it everywhere.

These efforts are crucial because we know that when a company builds a new factory here, the likelihood of jobs staying here long-term is very high. And that means a stronger middle class not just tomorrow but for decades to come.

So let's take full advantage of this particular moment. In the coming years we have a window of opportunity to ensure that America is home to the most innovative and dynamic businesses in the world, including our manufacturers. Let's make sure the world's business leaders, both here and abroad, know there has never been a better time to invest in the United States.

So with that, I thank you and look forward to our conversation. (Applause.)

FITZ-PEGADO: Thank you very much, Dr. Blank. I'll just start off with a couple. One has to do with your -- the National Network of Manufacturing Innovation, and if you can tell us about -- a bit more about that.

BLANK: So the president, in the State of the Union this last year, announced that he would like to set up 15 institutes as part of these -- national network for innovation. And that was obviously a request for the 2013 budget. People of this audience know the 2013 budget has not really come through; we're in an extended CR. But we did put money together to launch the first pilot project for this that we're going to learn from, and I very much hope forward (sic) to launch the additional institutes.

The pilot project we launched involves a regional collaboration of universities, small and large manufacturers and a number of local tech transfer institutes in western Pennsylvania, eastern Ohio and northern West Virginia. And this includes some of the top engineering schools in the country, between Pitt and CMU and, you know, Cleveland and Dayton.

So the idea here is that this collaboration is going to focus on issues relating to 3-D printing, additive manufacturing, all right, which is a really transformative technology that potentially has an effect for consumer goods, for manufactured products. The DOD is funding a lot of this because if additive printing actually becomes a more broadly usable technique, they don't have to stock warehouses full of spare parts up on remote bases or on ships at sea; they can simply print a spare part when they need it. I'm just -- enormous changes that this technology could bring.

It is still, in many ways, in its infancy. The point of this collaboration is that the industries will identify what are the points where they could use additional information, where they feel most constrained in terms of moving forward with additive manufacturing, and the universities will work on those projects. So the idea here is with this collaboration -- and we're putting -- I believe we're putting 30 million (dollars) in, and this collaborative group is putting 40 million (dollars) in, so this is a big investment. We want to jump-start U.S. research in additive manufacturing using this collaborative of manufacturers and research universities.

And I mean, I think it's a wonderful way in which the government can act as a catalyst to really move tech transfer forward. And the idea is that we want to identify 15 of these sorts of institutes around the country, have them select particularly new, transformative technologies. There are a whole bunch of those out there, whether we're talking about new materials or really high-end robotic sensing, which is a technique that has jumped to a whole new level recently. And you know, I'm just very excited about these opportunities and hope that this is something that we can do more than just this one pilot project but can do a whole number of these.

FITZ-PEGADO: Excellent -- (off mic).

Let's go back to the -- your discussion of investment -- inward investment. I work with two companies that are on the precipice of establishing factories, an investment, combined, of over 20 billion (dollars). And in that process, I've become more familiar with Commerce's efforts through SelectUSA, et cetera, to facilitate that. And I continuously think back upon the fact that the state relationship, state regulations, et cetera, versus federal make it very complicated for foreign -- for particularly -- any company, but a foreign company to come in and invest in the U.S. If we're encouraging that, we can train FCS officers, which is a start. I'm glad to hear that. But how does the federal government coordinate with other agencies where there are issues, often, coordinate with the state, where there are often -- there's a need for coordination? Because the FDI is not going to really happen until we work out all the kinks in the system.

BLANK: Yeah, so let me tell you a little bit about how SelectUSA is operating. And it's a year-and-a-half-old program. We're still -- you know, we're still expanding it and getting the kinks out of it.

So we are way behind every one of our competitor countries on this. I mean, every other nation in the world that's, you know, a major industrialized exporting nation also has a national organization that promotes investment in that country. We've never done that in the U.S., and we've not done that for two reasons. One, we've always thought, well, the U.S. is always going to be at the front end of the world economy, so why should we have to promote this; they're going to come here to us without us working at it, but we also haven't done it because we have this complex federalist system in which the states and localities are the ones who have to actually sign the deals and, you know, make the final arrangements. And so there's a large network of state and local economic development organizations that do this within their region, and there's never been a national group, all right?

So this is us trying to actually, in a very small way, catch up with the rest of the world, right, and a piece of this is training our Foreign Commercial Service officers to be our eyes and ears and our help out there in the world.

The other piece of it is working here in the United States, so that if a company is here, working any particular location with a state or local organization, and it hits problems that relate to federal government permitting or federal governments regs, which of course the states and localities can't solve, we have created an interagency council that is meeting regularly with all of the major departments that are likely to be, you know, on the front lines of a reg that you might hit if you were doing economic development. And we have pretty senior people in each of these places who are on call; that if we get a call from a state economic development group saying, I'm trying to do a deal with someone for -- you know, whether it's a hundred million (dollars) or 20 billion (dollars) -- and we have this particular problem; can we get some help, the issue isn't here that we're going to loosen the regs or anything, but what we are going to do is try to get someone from that agency who works on those issues to work closely with the company to figure out what they don't understand, what they need to do, to make sure that they put in whatever permit requests they have, to do them accurately, to do them in timely manner and, you know, give them that sort of consulting advice, which often is, particularly for foreign companies, very hard to figure out the system of state/local/federal.

So we are working on exactly that type of interagency coordination.

FITZ-PEGADO: All right. (Inaudible.)

Let's open it up. May I ask you to please stand, state your name and affiliation, and we have someone who's passing the mic around. Right here. Yes, ma'am.

QUESTIONER: I'm Mitzi Wertheim with the Naval Postgraduate School, but I was lucky enough to join the Federal Systems Division of IBM in 1981, when we were going through this process of becoming a service organization. But I spent a lot of time at the up-front part of manufacturing.

It seems to me we have a number of issues. One is, as we basically computerize our manufacturing, that gets rid of a lot of jobs. But what I really wanted to ask you about was a meeting I went to yesterday at the Hamilton Project which was about education, K through 12. And as you're talking about working through these universities, I would urge you to have the universities work with the high schools and junior high schools to get kids interested in manufacturing.

When I was at IBM, universities weren't teaching manufacturing, and we were actually giving $20 million to schools to set up departments of manufacturing. So it's always been sort of a stepchild academically, and it seems to me you want to make it one of those really top jobs that people -- kids ought to want to get into.

BLANK: Yes. So you know, manufacturing has been considered the old economy, right, for a number of years, if not decades, now, and it's -- one of the complaints that I hear from manufacturing companies is that, you know, MBAs, for instance, you know, have no interest whatsoever in going to work for a manufacturing company. They sometimes have difficulty hiring the talent that they need.

You know, I -- I've actually suggested to organizations like NAM that what they need to be doing is, you know, doing a public promotional campaign, particularly in schools, about the advantages of, you know, manufacturing.

And you know, I was out at the IMTF show at McCormick Place in Chicago -- this is the largest manufacturing technology show in the world, a huge -- it's huge -- and spent about an hour on the floor, looking at a collaborative manufacturing project, looking at several additive manufacturing projects, looking at a number of things, and you know, you walk away from that and it's very clear that this is not old line/old economy -- you know, manufacturing on the cutting edge of where we are going in the future. And you know, it's really exciting, in a whole lot of ways.

So I -- this is a message that clearly the manufacturing industry, working with our -- you know, it's one reason to do these collaborations. I think the word will get out, the more that you have some of these collaborations between manufacturing industries and universities, you know, and then, in turn, as you know, a lot of manufacturers -- we're not just talking about high-end research jobs coming out of, you know, Ph.D.s; we're talking about manufacturers who need to form collaboratives with communities -- in a number of cases, with high schools -- to create the sort of flexible skilled workforce that they need on the shop floor.

FITZ-PEGADO: The gentleman in the back.

QUESTIONER: Yes. My name's Bill Lane. I'm with Caterpillar. And as you know, Madam Secretary, you know, we're one of the biggest manufacturers and one of the most successful exporters. And we very much appreciate the focus on manufacturing. And, you know, you hit on a lot of very good points.

But there is one issue which I would like to tease a little bit. And that deals with the fact that Caterpillar, you know, being one of the biggest exporters, we have a lot of factories in the United States, but we also have factories outside the United States. And what we have found is in every market where we have invested, we have seen our exports soar. So if you try to segregate the overseas investments from the U.S. factories, you're -- it could very easily be counterproductive. And at least in our case, are we unique, or do you see this at Commerce, that when a company invests overseas, their U.S. exports go up?

BLANK: So I know the data, particularly for companies that invest in the U.S. And, you know, companies that come to -- you know, investments in the U.S. also increase U.S. exports, right, because oftentimes companies that are making global choices about where to be are not just in one market, they're in multiple markets. And once they decide where they're going to locate, they then use that as a center to serve a number of markets, not just the one that they're in.

So it's one of the reasons why I am such a strong proponent of investment in the United States is that on the one hand, it serves the U.S. consumer market, it provides jobs and growth here; on the other hand, it also increases our exports. And, you know, I would much rather have companies in the United States, build it here and sell it everywhere, exporting overseas, than have those jobs overseas, sending them back here so that we're importing them into the U.S. But, you know, I'm secretary of commerce; you'd expect me to say that. (Chuckles.)

FITZ-PEGADO (?): Right here in the middle.

QUESTIONER: Hi. I'm Nelson Cunningham at McLarty Associates. And during the Obama transition, I was privileged to run the transition for Ex-Im, OPIC and TDA.

And one of the questions we were asked to look at then was, what sort of combination or reorganization should we do in the trade sector? The answer then was very clear: In the middle of a crisis, are you kidding? What we want to do is get these agencies working as fast as possible and not spend a lot of time moving boxes around. So the answer then was clearly no.

Since then the president undertook a process over the last year and a half to take a look at the question. Now a proposal was put before Congress. In a second term, should that come to pass, what would you expect to be the process that the administration might follow in terms of looking at how to give our exporters and our international companies the right kind of government support internationally, whether it's a reorganization or other improvements to the system?

BLANK: Yeah. So as you note, the president put a proposal on the table about a year ago, I think it was October of last year, laying out a proposed reorganization of a number of agencies, which I essentially -- you know, sort of the Commerce Department is at the core of it, and it included bringing all of the trade agencies together in one place -- Ex-Im, OPIC, the USTR -- together with, you know, all of the Commerce agencies. It included creating a data agency that had both Census, BEA and BLS in it. It included creating an innovation agency that had the USPTO and NIST and a number of other smaller agencies together with it. And then there was an economic development group there that had EDA I think at the core together with some other economic development programs. So, you know, I -- you know, there is many things to like about that particular organization proposal.

Should we be privileged to have a second term, I suspect, you know, that the president will do what he proposed at -- you know, a year ago, which is that he will ask Congress to give him reorganization authority, which is something that every president up to Ronald Reagan had for about four or five decades, and then this authority lapsed, and so it has to be renewed, which would give him the ability to propose the reorganization to the Congress that has to be voted on pretty much an up-and-down vote, OK?

So if indeed we would, in a second term, be successful at getting reorganization authority, I believe that there will be a major effort to bring a reorganization of Commerce forward that is great for a lot of these other agencies (in ?). And, you know, it -- at some level, I mean, it doesn't make sense to have your trade promotion group over here and your trade financing group over there and you don't have the sort of coordination around prioritization and markets and -- you know, we do that informally, we meet regularly, but it's just not the same as if you're all under the same umbrella. So Im quite a strong supporter of, you know, trying to do some of this reorganization in the trade area. The question is -- you know, we will know after the election, is this something that actually looks likely in the Congress?

FITZ-PEGADO: In the back, please?

QUESTIONER: Yeah. Seth Wheeler, from the Federal Reserve. You touched on reshoring of technology jobs and manufacturing jobs. In the popular press, the narrative is spun on high-tech manufacturing, though one of the big bottlenecks is high-end engineers and Ph.D.s, with two of the identified challenges being we're not producing enough top-end engineers and Ph.D.s, and then we're not -- because of visa and immigration issues, not keeping enough of them here. Thoughts on policy priorities for the -- both the Commerce Department and the federal government more generally?

BLANK: Yeah, so I mean, the concern about the so-called STEM jobs -- science, technology, engineering and mathematics, when we expand it beyond just engineers alone -- there's a big public debate. I've done a lot of speaking and work on some of the STEM stuff, and I'm always amazed when I go out and talk about STEM how many people are in the room. I mean, this is actually a hot topic right now, OK.

And you know, the challenge that we have in front of us is that the U.S. does not produce as many STEM graduates out of its college graduates as many other countries. I think about 16 percent of all our college graduates have STEM degrees, whereas if you go to a country like South Korea or Germany, the percentage is somewhere between 25 (percent) and 30 percent. And you know, if you believe that innovation is the way in which we're going to make a new and competitive economy in the U.S., you've got to have a very solid group of STEM workers because they are often quite central to those sorts of innovation processes. So, you know, that's the challenge.

The good news here is the U.S. actually has a better opportunity to increase STEM workers, if we are serious about it, than many other countries, all right. And there are two ways in which we need to do this.

First of all, we do need to change our visa laws. And the president has proposed -- many, many groups have talked about the need to allow students who come from overseas, study and graduate from U.S. universities, you know, potentially in STEM areas, and who get job offers from U.S. companies to -- so-called "stapling" -- staple a green card onto their diploma so they can stay here and use those skills here in the United States. We shouldn't make it hard for those graduates to stay in the U.S., OK. And you know, we can substantially increase our STEM workforce very quickly as a result of that. OK, that's one answer.

The second answer, which is a little bit more long-term, is we also have to work harder at growing our native-born population. And you know, here again, in some sense, it's easy and it's not easy. You know, there are more than half of the population that basically enter STEM at a much lower rate than the rest of the population, and this is women, who are -- enter STEM at less than half the rate of men, and historically disadvantaged populations, particularly blacks and Hispanics, way under-represented in the STEM field.

So going back and thinking about what is it that we do or don't do in science and math and technology education not just in our elementary and schools but in our families and our whole culture that makes, you know, these sorts of jobs uninteresting, particularly to women -- you know, this is the issue that I've been working on -- it's a fascinating question. It's not true in all other cultures. It's clearly not anything innate to gender, because you go to some countries, and you see women graduating at the same or higher rate in STEM than men.

So I mean, it's this set of questions here, and I'm quite convinced they are both educational-system-related questions. So President Obama has proposed to put more money into STEM education. He has worked very closely with the private sector, creating a public-private partnership to fund training and -- both the hiring of additional science and math teachers in elementary and secondary school and the retraining of existing teachers. You know, and then you've got to talk about the whole upper end of providing funds through NSF and other things for people in this.

But it's also clearly a cultural issue of what messages do our kids get, and how do they get them. I mean, I have said -- and my staff sitting here will wince when I say this, but you know, what we really need is a couple of good movies and TV shows. You know, with all the steamy sex that goes on, I mean, instead of being in a law firm, they ought to be in a lab, or they ought to be in a mathematics department, or they ought to be in an engineering program. (Laughter.) You know -- and you know, and we ought to let people see, you know, those occupations, you know, as well as seeing, you know, the lawyers who are always -- (inaudible) -- these shows. And you know -- and you know, that cultural piece matters. I mean, you just don't see these occupations in our popular culture in the way that we see other occupations. And you know, those are things we can work on. We can do a better job on that. (Laughter.)

FITZ-PEGADO: Right there in the front, yeah.

QUESTIONER: Thank you. My name is Clayton Swisher. I'm with Al Jazeera. And I'd like to ask you particularly about my home state of Michigan, having just returned there for a family visit. It continues to have some of the highest unemployment in America until now, and the city of Detroit is particularly hard-hit, as I'm sure you know. What sort of initiatives does the Obama administration have in mind for Michigan's economy as it seeks to move from an automotive manufacturing specialty to other innovative arenas?

BLANK: So let me answer that in two ways. First of all, you've got to talk about how we retain a strong, competitive U.S. automobile industry. And you know, this administration, I'm very proud of the steps that they took a couple of years ago to save the U.S. automobile industry and make sure we had a competitive industry in this country. I think there are a number of reasons why you want that to be true. And of course, that not only saved the jobs at GM and at Chrysler but in a very large supply chain, which is quite crucial to this country's economy.

Secondly, you know, in terms of, again, keeping automobiles here, we've, I think, taken a number of very important steps to make sure that we have a level playing field for our automobile industry relative to other countries. So for instance, just a week ago the U.S. Department of Commerce, through its International Trade Administration, announced the results of a very long-term effort to look at problems of subsidized auto parts and automobiles coming out of China and to bring a case to the WTO, basically to file a preliminary intent about this and say that we have found evidence of unfair subsidies and that we're going to fight those subsidies. So making sure that we have a competitive automobile industry is very important for Detroit and for Michigan, and I think that's step number one.

Step number two goes to all of the other things we've been talking about. I lived in Michigan for eight years before coming here, and one of the conversations I was also -- often involved in as an economist -- I was dean at the policy school at the University of Michigan there, and we often talked about how do you diversify the Michigan economy. Well, what does Michigan have? Michigan has high-skilled engineers, high-skill design people, you know, folks that right now are employed, or not employed, by the automotive industry, but you know, who really do have a set of skills that are quite useful on a range of topics.

So this whole discussion about how do you make sure we have a set of STEM-related skilled workforce and how do you deploy that workforce in a strong and competitive manufacturing environment, which may be autos or may be something else, you know, goes right to the center of what does Michigan then have to do to use those resources, you know, not just in the automobile industry but to diversify into some of these other high-tech advanced manufacturing industries, because it does have those resources that are there.

And I'll give a last answer for Michigan as well, which may not be Detroit, but it's the rest of Michigan. Michigan has more coastline than any other state other than Alaska. If you live in Michigan, you know this. If you don't, no one ever knows it. And travel and tourism is incredibly important to Michigan. So travel and tourism is one of the strongest export areas of the last two years. Many people don't realize that when foreigners come to the United States and buy our goods and services, they travel here as tourists or businesspeople, that's an export. You know, it's foreigners buying U.S. goods and services.

So, you know, one of the things we're doing in the administration is really trying to grow foreign travel into the U.S. and travel and tourism. And we -- the president announced this last spring a national strategy for travel and tourism. The Department of Interior and the Department of Commerce are working on a partnership to implement that. We've made huge visa changes. We're showing a huge decline (sic) in tourist visas coming out of some of these rapidly growing countries like Brazil. State Department's been a great partner in this one, and that is also something that is going to help a lot of economies that we should get included.

FITZ-PEGADO: Right here.

QUESTIONER: Irving Williamson with the U.S. International Trade Commission. This Tuesday I was in a plant, and the plant manager was talking -- you know, in any manufacturing process, there's a lot of high-technology equipment. And he was pointing out that soldiers who have sort of maintained this equipment are excellent hires and that he had a lot of them in his plant because they could maintain all the equipment because they've been doing it in rougher circumstances. So I was wondering what kind of additional programs you might be thinking about to getting groups that maybe are not really taking advantage of the manufacturing growth and ways of bringing more folks in like this.

And then the other question is the relationship between services and manufacturing, because a lot of the processes and things that make -- you know, that you can sell a product are logistics, marketing, finance, all that. So I was just wondering about, in your conversation, do -- and given the high percentage of services jobs, do we need to talk more about the synergy between services and manufacturing?

BLANK: So let me first address the veterans question, which is a great question. One of the opportunities that -- you know, with large numbers of veterans coming out and looking for jobs should be the manufacturing sector, given the skills that they acquire when they're in the military. You're absolutely right about that.

So, you know, one of the things that I know the Department of Education and Labor have been working together on is the question of how do -- and Veterans Affairs as well -- how do people who come out with certain types of military training certify themselves, you know, in a -- in a civilian workforce as having certain skills, right, because employers have no idea, if you say, this is the job I was doing at the military, by and large, what that means you know or don't know. If you come out and say, I've just been in these courses in the community college, they know that. So this cross-certification question is a great question, and it's one that, you know, there's some very good work being done on to try to open up more opportunities more (evenly ?) for veterans who come out with certain skills. And many of those are some of these manufacturing equipment-related skills.

The question of synergies between manufacturing and services, I think, is very important. And when I -- you know, I talk about manufacturing because it's -- you know, there's reasons right now to be talking about it. But you know, as you say, manufacturing is not just things. Any manufacturing company puts an enormous amount of money into services. That might be design services, engineering services, architectural services, logistics and transportation. You know, there's a lot of -- you know, the manufacturing sector, like many other sectors, is just very closely interrelated with the rest of the economy. So when you grow manufacturing jobs, you grow a lot of other jobs.

It's one of the reasons why the multiplier, to use economics language, out of manufacturing is actually a little bit higher than it is out of the service sector, because it's -- it generates a lot of other use of other parts of the economy and therefore generates more jobs.

And you know, that's not -- you know, you want to grow the whole economy. I don't want any of my comments today to indicate we should all focus on manufacturing and nothing else. That's obviously not true. But we do have a moment of opportunity with manufacturing, and in growing manufacturing, we will help the rest of the economy as well.

FITZ-PEGADO: Please. Right here in front.

QUESTIONER: Hi. I'm Anna Schneider with Volkswagen Group of America, another U.S. manufacturer.


QUESTIONER: And I had a question about your motto: Build it here and sell it everywhere. In some cases, that's easier said than done. We're taking full advantage of the U.S.-Korea Free Trade Agreement, but I was wondering what your thoughts were on launching a U.S.-EU FTA agreement.

BLANK: Yeah. So those of you from the Department of Commerce who have been involved in this before know that, you know, trade agreements take many years, right? This is -- this is not something you do quickly or easily. And you know, there's obviously enormous interest on the part of the Department of Commerce in trying to open up as many markets as possible.

You know, we have two major efforts going on right now that, you know, really hold some promise. They're a ways off. Nothing's going to happen tomorrow on these. One is the whole Trans-Pacific Partnership process, in which we are discussing, I think -- going to look at Malcolm back there -- 15 other countries? Thirteen? So somewhere in that range. I should know how many countries are in the Trans-Pacific Partnership -- it's been expanding a little lately -- where we really are trying to talk about whether -- you know, what the opportunities are to reduce trade barriers in that whole area of the world, among that group of countries.

We -- the administration a little over a year ago, year and a half ago, launched the High End (sic; Level) Working Group on Jobs and Growth with the European Union, OK? And the president was very explicit when that was launched. Everything is on the table. We are willing to talk about all opportunities.

And I know because I've had conversations with people from Europe and from the EU telling me how interested in they are potentially discussing, you know, turning these conversations, which are still in a relatively preliminary stage, into something that might result in some real -- you know, more open trade agreements, right?

You know, there are a lot of sticky points in this, particularly with regard to the EU. In many ways, manufacturing is a little easier than some other areas. There are obviously real -- you know, agriculture is a sticky issue, and a lot of the services areas -- there's much higher barriers between us and a lot of the EU countries in services than there are in manufacturing. And because services to many countries feel a little bit more homegrown, ours -- you know, they -- you know, the -- there are just problems with that that we haven't quite gotten -- quite figured out completely how to negotiate away.

But I mean, my hope is, in both of these areas, that we will move forward. We may or may not be able to negotiate some sort of full trade agreement on all issues, but that shouldn't stop us from focusing on those sectors and those areas where we can move forward and then building on that.

So you know, there are processes and conversations under way, and they will take a number of years, but I am with you in hoping that they very much bear fruit.

FITZ-PEGADO: Yes. Yes, over here.

QUESTIONER: Thanks. I'm Ted Alden from the Council on Foreign Relations. A broader, kind of philosophical question which I think has been a challenge for the Commerce Department over pretty much all of its existence --

BLANK: Yeah.

QUESTIONER: -- which is, do you have any kind of systematic way to decide, evaluate which industry sectors deserve support? I mean, you know, the kind of classic example here is clean energy. Everybody can say, well, you know, clean energy's important, and yet some of the administration's efforts have probably been ill-timed in that area, and that rebounds in various ways on other efforts. I mean, you mentioned 3-D printing. I'm excited about 3-D printing.

BLANK: Yeah.

QUESTIONER: But how do we -- how do we actually know that that's commercially viable technology or that we're not, you know, 20 years too soon in dumping support into that sector? Is there any way to try to evaluate where it makes sense for government to intervene and try to help the innovation process along, and where it should stand back?

BLANK: Yeah, it's a great question, and there are couple of different ways to answer that.

First of all, I should say, you know, in part because we're facing tight budgets -- if you go back to the Commerce Department 20, 30 years ago, we we had groups of people who were analyzing basically every industry and every country out there and sort of, you know, putting out regular reports on that. We can't afford to do that anymore. We've had to prioritize.

And "prioritize" means that we are now trying to put together industry and market reports that focus on the areas that we think are high-promise, you know, that we -- you know, if you're really going to promote exports, where is your greatest return, you know, per dollar of promotion activity. And that may -- you know, some of these are industry sector-focused, some of these are specific country- or region-focused, and then of course there's a cross between those because there's, you know, some industries in some parts of the world that particularly have real promising growth.

And, you know, I wish I could say we had a return-on-investment bottom-line metric I could give you. I am very well aware, as someone who's done a lot of performance evaluation work in my past life, that we don't completely have that yet. We're working on various ways to do this.

You know, obviously, the way we currently are analyzing this right now is to look at the forecast of, you know, what sort of growth -- (so the ?) infrastructure area is an area where we think there is enormous potential, for instance, for export growth because there are a number of regions of the world that have big infrastructure growth that they are talking -- India is one of them. There are parts of eastern Europe. China is obviously another.

And we want to be out there in those markets. So we're trying to build real expertise in how do we assist U.S. exports in the infrastructure area. And that is, of course, less based on a return on investment than just looking at the market trends and, you know, what countries are saying they're going to do and what we think is going to have to happen if these countries keep growing.

But I agree with you that the performance metric is a really interesting one. We're working across a number of our agencies right now who do sort of business promotion -- our Economic Development Administration, the International Trade Administration, the Minority Business Development Administration -- trying to figure out what are the best ways to actually look at, what's the return on the dollar these places spend, right? Where do you spend your dollars most wisely, and where -- if you don't have that, you can't -- you know, again, we're in tight budget times. You can't direct your dollars very well in the right prioritized areas. And, you know, that's a hard question. There is no one right way to answer it. But there are a number of different ways to try to get at it. And we are trying to pursue some pretty serious performance evaluation metrics. So stay tuned. Come talk to me again in another year or two if I'm still around in this job. (Chuckles.) Yeah.

QUESTIONER: Hi. My name is Doug Palmer with Reuters. And early in your presentation, you talked -- said that you were optimistic that there could be a substantial increase in both foreign direct investment in the United States and U.S. companies that are investing more in the United States. In terms of foreign direct investment, I just wondered if you could talk about where do you see that coming from. Is there any particular part of the world that you think is more likely to invest in the United States? I guess I'm asking really about China. Do you see a lot of Chinese investment coming in? And what should the U.S. attitude be towards Chinese state-owned enterprises that want to invest in the United States? Should we look at them differently than other companies?

BLANK: Yeah. So I do think that we are going to see some substantial, you know, growth in European investment, in part because Europe, because of the current, you know, unsettledness -- you know, the euro area just doesn't look as good for an investment right now, and I do believe that -- you know, that some of this investment is coming from more traditional European sources, and they're going to go here rather than go to Germany or Poland or wherever -- you know, we'll see how that plays out.

Clearly, the fast-growing countries are the places where there is the most potential for increases. And I cited some numbers in my talk where we've, you know, had a substantial increase in the share of foreign direct investment in the U.S. coming from Asia in just a very short period of time. And, you know, that's not surprising.

Now, having said that, particularly when you're talking about China, but there are other countries where this is true as well, one has to be worried about foreign security concern -- about security -- national security concerns. So there are some areas where I suspect -- you know, we -- you know, Chinese investment is very much welcomed.

And we would -- you know -- (inaudible) -- I was just meeting with the person who has recently bought AMC Theaters and is making major theater and looking at other possible investments in the whole recreational hotel, you know, leisure area -- you know, fascinating person with, you know, real ambitious plans for investment.

You know, there are other source of areas where one has to be more concerned if they look like there may be some national security implications. And we have a process inside government that does that called the CFIUS process -- I would have to stop and think what that stands for. But, you know, it does look at investments that raise any national security concerns.

And, you know, this is a both/and. We want to welcome as much investment as possible, but we do have to be cautious when there are certain countries where that investment may pose a problem for us.

FITZ-PEGADO: Yes, right here in the middle.

QUESTIONER: Hi. I'm Amanda DeBusk at Hughes Hubbard & Reed and formerly Commerce Department BXA.

BLANK: Ah, (good ?). (Chuckles.)

QUESTIONER: (Chuckles.) I have a question for you about the Export Control Reform Initiative, wondering if you could comment on what that could mean for jobs and what it might take to get that initiative across the line.

BLANK: So I'm proud of many things this administration is doing, but one of the things I'm most proud of is the efforts we've made on export control reform.

When I came in as undersecretary for economic affairs, one of the things I did early on was have lunch with the incoming undersecretary for the Bureau of Industry Standards, where -- you know, the person who runs export control reform. And over lunch he told me about this big effort that they were launching to try to basically decontrol a whole variety of products like, you know, bolts and screws that you can buy anywhere and should not be on the control list and to unify the whole process with a single application and a single computer system.

And I remember walking away from that lunch and just thinking to myself what -- good luck with that. (Laughs.) You know, glad I'm not doing that one. I'd rather do the census, right? (Laughs.)

FITZ-PEGADO: (Laughs.)


BLANK: But you know, I must say they have made enormous progress. They are -- you know, they are very close to releasing decontrol lists in certain industries. There are whole variety of licenses that are coming over from the State Department to Commerce that are less high security-sensitive, so that more things will be handled in one place but, you know, with a single process.

You know, this does take some legislation to get over the final line, and that's legislation that's going to have to pass early in the next Congress. I am very hopeful that regardless of who is in the presidency and what administration is here in the next four years, that export control reform has so much push behind it and makes so much sense and has come so far down the line and has so much support from the private sector that this is going to move forward. And you know, we've really come a long ways. We are doing this, and it's there.

So you know, again, should we be so privileged to have a second term, you know, in the next year you're going to see rolling out very substantial changes. So --

FITZ-PEGADO: I want to remind everyone --

BLANK: Yeah.

FITZ-PEGADO: -- that this meeting has been on the record.

BLANK: Yeah.

FITZ-PEGADO: And I'm going to take one more question.

BLANK: Yeah.

FITZ-PEGADO: And I think it's the lady back there.

QUESTIONER: I'm Catherine Brown from the State Department, but my question relates back to Michigan. I know somebody who lives there who thinks actually what's going to save Michigan is water.

BLANK: Yes. Yes.

QUESTIONER: And he happens to live in a small town that has a small Yoplait yogurt plant that's there only because of water. So it's not recreational, it's manufacturing and, I think, potentially, energy.

BLANK: That's right.

QUESTIONER: The poor plant has recently laid people off because upstate New York, which is also very depressed and water-rich, managed to attract a Greek yogurt place, which is the vogue thing these days.

But I didn't hear when you were talking about attracting manufacturing --

BLANK: Yeah.

QUESTIONER: -- and our energy sources a focus or a mention of water, and I -- of course it raises environmental as well as energy and other issues. So I'm wondering if water is in your manufacturing strategy.

And secondarily, when you do see situations like this, where different parts of the country are in -- similarly situated and have the same things to offer, do you have any role or do you just try and take hands off and to -- you know, do you -- putting your weight on that balance between the New Yorks had the Michigans --

BLANK: Yeah. Yeah.

QUESTIONER: -- that are both in need and both have something to offer?

BLANK: Yeah. Yeah. Let me be very clear. In SelectUSA or anything else, we are absolutely neutral on choices across states. And you know, we will consult with anyone who asks us to consult. You know, we will not get involved at a federal level of advocating foreign investment until they have made a decision that, you know, we're going to be in Indiana or we're going to be in Mexico. We're happy to advocate for that. We will not advocate for a specific location, other than just, you know, we want you to come to the U.S. If the choice is between Indiana and Michigan, I mean, we have to be absolutely neutral in the locational choices that people make within the U.S. That gets settled at the state and local level, not at the federal level. We're not in that business.

Water -- you're absolutely right -- is a very important resource. I think it's probably been less important when I talk about sort of some changes in the comparative advantage of the United States simply because, you know, the water situation of us relative to other countries hasn't changed very much. We have some areas of our country that are very water-advantaged. We have some areas of our country that are relatively water-disadvantaged. But of course that's true of a good number of other countries as well.

So you know, this is one that's quite important to individual location decisions, and it's obviously very, very important to the management of our natural resources, so that we have water resources in abundance that we need. It's not something that I think has changed the equation of who's coming here right now in the next few years, but it's one that we have to continue to pay attention to.

FITZ-PEGADO: We'd like to thank Dr. Blank.

BLANK: All right.

FITZ-PEGADO: Thank you very much. (Applause.)

BLANK: Thank you very much. Thank you all for coming.






More on This Topic


A Conversation with Rebecca Blank (Audio)

Speaker: Rebecca Blank
Presider: Lauri J. Fitz-Pegado

Acting Secretary Blank discusses policies and investments for supporting U.S. competitiveness and job growth.


A Conversation with Rebecca Blank

Speaker: Rebecca Blank
Presider: Lauri J. Fitz-Pegado

Acting Secretary Blank discusses policies and investments for supporting U.S. competitiveness and job growth.