Deputy Secretary's Speech

Deputy Commerce Secretary David A. Sampson
British American Business, Inc.
London, England

Good morning. I want to begin by thanking the leadership at British American Business Inc. (BABI) for organizing this breakfast. You are very gracious hosts. My visit to the U.K. and London has been wonderful, and I greatly appreciate the opportunity to visit this storied city.

Let me first note that President Bush and all of us at the U.S. Department of Commerce are committed to actively engaging our international partners. We believe that promoting the spread of liberty, democracy and free trade is the surest way to a more prosperous and peaceful world. And, to be sure, this is the lesson of history.

U.S. Economy
Back home, the President's pro-business policies are working well. There isn't an industrialized country in the world that is growing as fast as we are today. (Secretary Gutierrez says we're in a "sweet spot").

We've had 13 straight quarters of growth. Our first quarter results were excellent. Growth was running at a 5.6 percent annual rate. This follows strong 3.5 percent growth in 2005.

Over 5.4 million new jobs have been created in the last three years, thanks mainly to private industry. And the unemployment rate stood at 4.6 percent. That's lower than Canada (6.1%), Italy (7.7%), Germany (8.2%) and France (8.9%). And lower than the U.S. average for the past four decades.

And our trade sector is also doing well. Exports are up over 12 percent so far this year, and we continue to attract foreign direct investment.

U.S.-U.K.-Europe Relations
Turning to the United States and the United Kingdom, we cooperate on a wide range of political, security and economic issues, as we all know, from the global war on terrorism and security in Europe and NATO, to trade and investment.

In that cooperative context, expanding our economic ties is increasingly important. President Bush is committed to working with our friends in the UK and across Europe on opening new markets, reducing trade barriers and helping workers and businesses compete in the global economy.

We've been very successful over the last 60 years since the end of World War II in advancing that goal, overcoming great challenges, political and economic alike.

Now we face the challenges of globalization, which are forcing all of us to reassess our economic policies. We're all asking the same questions:

How do we grow and create jobs in this new 21st century reality? What is the appropriate mix for tax and spending policies? How do we deal with higher energy and health care costs? How do we respond to rising economic powers, such as China, India and Brazil?

One response to these challenges is the idea of creating a barrier-free trans-Atlantic market.

Such a market would be the next step in a progression that began with Winston Churchill's "United States of Europe" some 60 years ago.

Today the European Union is a strong alliance that grows stronger as more and more people enjoy the freedoms that democracy brings. A barrier-free, trans-Atlantic market would strengthen the E.U. And it would deepen the close ties that already exist among Europeans and Americans.

While there is still great untapped potential, the U.S.-E.U. economic relationship remains the largest--and most successful--trade and investment relationship in the world.

Every day it benefits tens of millions of consumers, producers and workers on both sides of the Atlantic. Every day some $1.8 billion goes back and forth across the Atlantic, totaling over $600 billion every year.

Still, it's only a fraction--just one-quarter--of our $3 trillion commercial relationship. Indeed, it is investment and the inter-dependence of our economies that drive trans-Atlantic commerce.

This is an important point to consider, given the rising protectionist sentiments on both sides of the Atlantic. There is an active debate on how to balance our competitive challenges and security needs at a time of unprecedented global movement of people, goods, capital and services.

We know that our prosperous relationship with Europe is the result of open trade and investment, not protectionism. We must all resolve to remain committed to free-market principles, in Europe and the world over.

In the United States, our economy remains strong and very diverse. But like Europe, we also have to reinvent ourselves to remain competitive in order to grow, and to create the private sector jobs that our workers need, and to raise living standards.

Merely maintaining the status quo is synonymous with stagnation.

Put another way, we can say that our current unparalleled success is no guarantee of future success. If we are to preserve our prominent status in the global economy, we must continue to create a pro-growth environment that:

• enhances our ability to compete globally
• champions innovation and technology, and
• helps citizens cope with the changes and complexities of globalization

U.S.-EU Economic Initiative
We've taken a fresh look at the U.S.-European economic relationship to determine if we have the right mechanisms in place to address new challenges.

During the 2005 U.S.-E.U. Summit--after a year of consultations with the private sector and other stakeholders--both U.S. and E.U. leaders agreed to work together on a core set of issues most likely to have the greatest impact on day-to-day business operations.

We created a U.S.-E.U. High Level Regulator's Forum to discuss best practices and to identify potential areas for cooperation.

We also developed a joint working group to promote strong and effective enforcement of intellectual property rights (IPR). This is a very big issue, and IP piracy alone costs American companies over $250 billion a year. And it was a key issue at the G-8 Summit in St. Petersburg, Russia last week.

We believe the new E.U.-U.S. joint action agreement to beef up IPR enforcement, in China, Russia, Asia, Latin America and the Middle East will ultimately benefit all our businesses.

Innovation
I absolutely believe that encouraging innovation is the key to competing in the 21st century. In fact, the underlying reason for our continuing economic strength in America is that we are a nation of innovators.

Today more than ever, the United States is a knowledge-based economy. As much as 75 percent of the value of publicly-traded U.S. companies is derived from "intangible" assets, namely ideas and innovation. That's up from just 40 percent in the 1980s.

But staying competitive in a global economy requires raising our aim by investing in education and R&D, by tearing down barriers to commerce and fighting protectionism. These are at the heart of President Bush's pro-growth policies.

The challenge we face as Americans and Europeans is coordinating policies that keep our economic leadership by encouraging innovation and investment in a very dynamic global economy. This is no time for complacency or withdrawal.

As you may know, Secretary Gutierrez and E.U. Commissioner Verheugen agreed recently to look at innovation in the trans-Atlantic context to complement the Lisbon Agenda and President Bush's competitiveness initiative.

This is a first. In the past we've been competitors when it comes to innovation, whether it's airplanes or farm products. But the time has come that we think about how the U.S. and the E.U. can cooperate in developing new technologies.

And we need to remember that governments don't innovate or create jobs. The private sector does that. The role of government--whether in the U.S. or the U.K., or anywhere in the E.U.--is to create the conditions for the private sector to innovate, invest, and create jobs and wealth.

Closing
In closing, let me say that what Americans can contribute most to this effort is our optimism. We are a nation of optimists and risk-takers. Throughout our history, America has relied on the ingenuity and optimism of our entrepreneurs and workers. It's in our cultural DNA.

Granted, it's sometimes messy, but it has created an environment that has provided more opportunity and more prosperity for more people than any other system of government in history.

And as an economic policy, we believe that innovation that leads to higher productivity and rising living standards is the best, if not the only sustainable competitive advantage for the 21st century.

We look forward to working with you to build that competitive advantage, both in Europe and America.

Thank you very much.