Secretary's Speech

Secretary of Commerce Carlos M. Gutierrez
IBM Forum on Global Leadership
Washington, D.C.

Nick Donofrio, thank you for that introduction. Sam Palmisano, I appreciate your leadership, not just of IBM, but for all you do to improve our nation’s public policy.

The global trading system has been transformed, and the United States has led the change. In the late 1950s supply chains began to quickly shrink distance, and innovative companies like IBM helped the world think differently.

The vision became clear 25 years ago when China, Russia and India began to participate in the global economy. Today, barriers to trade are being lowered, and more companies are doing more innovating. There is more competition to create value quicker than ever before. Companies like IBM have recognized this reality and are not only reacting to it, but shaping it.

Today there has been a fundamental shift in the value chain from producing the most merchandise as cheaply as possible to those who can capitalize on great ideas using the globally integrated pathways we have developed. And America remains a leader in a world transformed.

As promising as this future can be—global enterprise creating value, jobs and prosperity at a faster rate than ever before—there are those who would like to backtrack and become isolationist. One of the big challenges of our time is to prevent that from happening.

Many today ask who will be the winners in such an environment. I challenge that premise. A winner implies that there is a loser. Free markets aren’t a zero sum game. Our economy and that of China, Britain, Mexico and others will all gain and global standards of living will grow.

While tremendous numbers of people have been pulled out of poverty in developing economies, millions more have become consumers with disposable incomes. Today the U.S. economy continues to grow with impressive results:

• Unemployment is 4.5 percent;
• More than 8.2 million jobs have been created since August 2003;
• More Americans are working this year—146 million—than ever before;
• Economy has experienced more than five years of uninterrupted economic growth.

In order to continue, we need sound domestic economic policies, a commitment to innovation, and a dedication to both immigration and open markets.

1. Domestic Policies—The most powerful force for growth, innovation, and business expansion is the establishment of economic freedom where markets are open, businesses are able to invest, and consumers have choices.

Governments can create an environment that fosters and promotes growth, helping entrepreneurs and innovators thrive. This includes:

• Improving our corporate tax system, including cutting capital gains and dividends taxes.
• Reforming healthcare to encourage innovation yet leaves decisions in the hands of patients;
• Helping every child achieve high educational standards through programs such as No Child Left Behind.
• Keeping income taxes low for every American who pays them;

2. Innovation—But there is more we can do. Like businesses, government must be responsive to changes in the marketplace. I believe we are doing this with policies that meet new frontiers created by innovation. For example:

The American Competitiveness Initiative is a comprehensive strategy that provides $136 billion over 10 years to increase investments in R+D, strengthen education, and encourage entrepreneurship and innovation.

We are transforming our relationship with energy through a commitment to energy independence and harnessing the power of the planet in a sustainable way. Reducing oil consumption by 20 percent in 10 years is the measure the President has set to define success.

Meeting this goal will require an enhanced dedication to energy innovation; however in the end we will have created a more competitive business environment.

Another important challenge is transforming how we measure economic activity to better reflect today’s economy. We know innovation has value. We also know that more than 80 percent of our economic output and employment is in services, yet we don’t measure services as well as we do trade in goods.

Sam and IBM have taken the lead in both of these areas. To help get a better grasp on innovation’s impact, I have asked Carl Schramm, who you will be hearing from later today, to chair an Advisory Committee on Measuring Innovation. Sam also sits on that committee.

I’m looking forward to their recommendations this fall, which will help us produce the data needed to make more informed policy choices.

3. Immigration—Another key to America’s success is our openness to new ideas and the people who generate them. Some of our greatest innovators have been immigrants.

Americans have won more Nobel prizes than any other nation and many of them came from elsewhere to experience the economic freedom and freedom of thought that exists here.

Our historic strength and our competitive advantage is our ability to effectively assimilate immigrants and make them into Americans who can achieve anything they desire to be. I’m a proud beneficiary of that heritage.

Immigration reform is critical to our nation’s security and success, and I am absolutely convinced that it will come. It’s too important to our nation’s future.

4. Open Markets and Trade—The final element for sustained economic growth is transformational trade policies and open markets. For the second year in a row, exports on a percentage basis have increased faster than imports. Last year was a record year for exports—more than $1.4 trillion.

Yet, this is a time of isolationist tendencies.

We have a trade policy that works. This includes:

• Using every tool at our disposal to enforce our trade laws;
• Encouraging the rule of law, including enhanced protection of intellectual property;
• Opening up new markets to trade and investment.

When American companies can compete on a level playing field and take advantage of global markets, we all benefit.

One of the best ways to open markets is through Free Trade Agreements. This Administration has implemented FTAs with 11 countries. Right now we have four pending with Congress: Peru, Colombia, Panama and Korea.

A Korea FTA will be the largest since NAFTA. It will:

• Provide greater access to American products;
• Enhance protection for intellectual property;
• Eliminate 95 percent of tariffs on consumer and industrial goods within three years;
• Diversify our economic engagement in the region.

In Latin America, there is no more immediate and tangible step we can take to encourage growth and prosperity than the three FTAs with Colombia, Panama, and Peru. They will:

• Strengthen the competitiveness of our region;
• Encourage vital reforms and the democratic institutions;
• Open markets with a GDP of nearly a quarter-trillion dollars.

FTAs contribute to developing sustainable, balanced trading relationships. Consider this: although countries with which we have FTAs make up about seven percent of world GDP, they purchase more than 42 percent of our exports.

FTAs, combined with renewed Trade Promotion Authority and success at Doha are critically important. We are asking Congress to take action on Peru this month.

It is ironic that many members of Congress want to block these FTAs, especially Colombia. To achieve approval for these FTAs we need to remind them of the spirit of the Alliance for Progress for Latin America by President John F. Kennedy in 1961. As President Kennedy said, we should seek:

“To build a hemisphere where all men can hope for a suitable standard of living and all can live out their lives in dignity and in freedom. To achieve this goal, political freedom must accompany material progress. . . a tribute to the power of the creative energies of free men and women, an example to the entire world that liberty and progress walk hand in hand.”

There is a lot to be done and more important, there is a lot worth doing. We must be prepared to accept these challenges to keep the American economy growing and American companies competitive.

Those who can spark innovation and apply it will run ahead and lead, while those who can’t will be running scared. Our nation is at its best when we are leading, internationalist, open, and engaged.

I am optimistic about our nation’s future in an increasingly competitive, interconnected and prosperous world.