Deputy Secretary's Speech

Remarks by David A. Sampson, Deputy Secretary of Commerce
National Summit on Competitiveness and Innovation
Washington, D.C.

Thank you, Governor Engler, for that very kind introduction, and welcome to all our distinguished guests this morning.

I first want to thank Congressmen Wolf, Boehlert, Ehlers, and Manzullo for their many years of strong, forward-looking leadership on technology and innovation issues. Their vision and support for this national summit is extremely important. Secretary Gutierrez and I share their belief that promoting U.S. competitiveness and innovation is one of our most important challenges.

You are a gathering of leaders with remarkable accomplishments to your credit. I want to personally thank you for your contributions to our nation and to our economy. All of you are part of a culture that makes America’s economy stronger and our country the marvel of the world. I look forward to a very stimulating morning.

Let me say at the outset that President Bush knows that the U.S. faces new competitive pressures, which are global in nature. In fact, virtually all his domestic policies - fiscal, tax, trade, education, workforce, and R&D - aim at making Americans better prepared for the global economic challenge.

As the President sees it - as do all of us in his Administration - innovation and competitiveness are the principles that drive our economy, and therefore should drive our economic policymaking.

Many of these policies will be discussed later during the breakout sessions on Technology Deployment, Education, Workforce, and R&D Funding. We look forward to your input.

To set the tone for our discussions today, I want to share a few thoughts on innovation and competitiveness: the Context, the Mindset, and the Agenda.

The Context for American Competitiveness
We start with a context in which the U.S. is in a position of strength. Our economy is the fastest growing, and job creating, major industrialized economy in the world. Despite hurricanes and higher energy prices, GDP grew a strong 4.3 percent in the third quarter. Our exports are up 11 percent over the past 12 months; last year, the U.S. exported a record $1.1 trillion.

In November, employment continued to grow at a solid pace, adding 215,000 new jobs. Payrolls increased by nearly 2 million jobs over the past 12 months, and nearly 4.5 million since May 2003.

We must build on this strength. There is no reason for complacency. We face many challenges. President Bush will continue to lay a strong foundation for the long-term competitiveness of the U.S. economy.

The Mindset for Innovation
Some people are concerned that America has peaked, that our best days are behind us. They argue that other nations are turning up the heat, getting more competitive by imitating U.S. strengths, opening up their markets, enacting new fiscal reforms and investing in their educational systems. True, other nations are adapting at various paces and with uneven degrees of market openness – but I believe America has a unique mindset for innovation.

Clearly, America still has the best entrepreneurs on the planet. In the latest sign that investment in new technologies continues (including communications, networking and semiconductors), U.S. market valuations for venture-capital start-ups hit a four-year high in the third quarter, the Wall Street Journal reported last week.

But I am worried about a growing risk aversion. Too often, Washington creates a culture that demonizes failure. Would today’s political environment sustain high risk programs such as Apollo? As long as we “incentivize” risk-takers, we’ll be okay. We must create an environment where failure is not fatal. Paul Galvin - who founded Motorola in 1928 and overcame a string of short-run failures to become an icon of American innovation - may have said it best: "Do not fear mistakes. Wisdom is often born of such mistakes. You will know failure. Determine now to acquire the confidence required to overcome it."

So, while we are not, and must not be complacent, I say never bet against America. Bet on American entrepreneurs. Bet on our two-hundred-year history as innovators. They can compete with any nation the way we always have: by being on the frontier of innovation.

And there are compelling reasons to believe the American economy continues to lead the way in innovation in the 21st century economy. A recent study shows that as much as three-quarters (75 percent) of the value of publicly traded U.S. companies - some $5 trillion - is derived from “intangible” assets, namely ideas and innovation. That’s up from 40 percent in the 1980s.

In short, innovation and new ideas remain the driving force behind our economic might. Innovation is part of our cultural heritage as a nation. You might say it’s in our DNA. And our challenge - all of us here today - is to make certain we continue to lead the way.

The Agenda for Innovation
The federal government needs to address the long-term economic challenges if we are going to create an innovation “ecosystem.” And it has to be an aggressive, far-reaching agenda.

The nation’s education system must prepare a new generation of American workers to fill the jobs of the 21st century. Government must modernize and strengthen education and training programs.

We need to address rising costs for energy and health care, which are a drag on economic competitiveness. The U.S. has achieved significant innovations in energy efficiency, for example, which rose nearly 50 percent over the past 30 years. Over the past decade, economic growth averaged 3.2 percent per year, while energy consumption grew only 1.2 percent. So clearly, innovation has strengthened our economic competitiveness with respect to energy.

But today’s higher energy prices could stall progress. And so we must continue to press the frontiers on energy and the recently enacted energy bill is a major step forward.

We need innovation in the area of health care. The U.S. must have a health care system that puts patients in charge of decisions, offers greater choice, and allows workers to control their own health care. Today’s rapidly rising health care expenses impose huge costs, jeopardizing not only our quality of life, but the competitiveness of our companies.

We must also confront the need for innovation as we recognize the long-term problems facing our entitlement programs. The experiences of Europe and elsewhere show that failure to control entitlement spending can undermine economic competitiveness.

We need to continue opening foreign markets to American goods and services. Isolating ourselves from the global economy will neither spur innovation, nor enhance U.S. competitiveness.

We must insist on fair trade, which is why we are aggressively enforcing intellectual property rights (IPR) around the globe. With a level playing field, American brands and ingenuity can compete and win against any other nation.

Finally, perhaps the most important item on the innovation agenda is a steady stream of R&D investment. For fiscal year 2006, President Bush sought a total federal R&D budget of $132.3 billion, an increase of $733 million over last year’s record budget, and a 45 percent increase compared to FY 2001’s $91.3 billion.

The budget allocates 13.6 percent of total discretionary spending for R&D. That is the highest percentage of discretionary spending dedicated to R&D since the Apollo space program.

Conclusion
Today’s summit is to be a conversation, a serious dialogue about how America should tackle these greatest economic challenges in the 21st century: innovation and competitiveness. I look forward to a very lively discussion and to working with you on these vital issues.

President Bush is working to ensure that America remains the best place in the world to do business, and the best place to innovate and to invest.

Seeing all of you here today renews my optimism in America and in the ability of our lawmakers, scientists, entrepreneurs, workers, and companies to work together to keep our economy the center of innovation and the engine of global economic growth and opportunity that it is today.

Thank you.