Secretary's Speech

Secretary of Commerce Carlos M. Gutierrez
Remarks to the Detroit Economic Club
Detroit, Michigan

Good afternoon. Thank you. I’m pleased to be back at the Detroit Economic Club. Today, I want to talk about energy, our environment and trade, and how addressing these issues in the right way will encourage innovation, strengthen our economy and create jobs.

Let me first say a few words about our overall economy. Recent jobs reports have been disappointing. And though our economy is still growing, it is slower than we would like.

The bipartisan economic stimulus plan is starting to have an impact and came at the right time. We expect the stimulus to help the economy as the year progresses. But there are other steps we need to take:

• We need to make the historic tax cuts permanent;
• We need to pass pending free trade agreements; and
• Congress needs to allow for more environmentally-responsible oil exploration to expand production.

Energy prices are the top pocket book issue for the American people—and our reliance on foreign oil is one of our most serious national security concerns. Last year, 40 percent of our trade imbalance was due to our “oil deficit.”

Energy consumption is soaring globally. It is projected to increase by 50 percent from 2005 to 2030. The supply of oil has not kept up with global demand. The president has outlined specific steps that Congress can take to expand American production and increase supply:

First, we must increase access to the Outer Continental Shelf, which could produce enough oil to match America's current production for almost 10 years.

Second, we should tap into the potential of oil shale. One major deposit in the Rocky Mountain West alone would equal current annual oil imports for more than 100 years.

Third, we should expand American oil production by permitting exploration in northern Alaska. This could produce an estimated 10 billion barrels of oil—roughly the equivalent of two decades of Saudi Arabian imports.

Fourth, we need to expand and enhance our refining capacity.

These steps would bring us closer to energy security and have a positive effect on prices by signaling to the markets that we are taking action to expand supply. Additionally, this will create good, high-paying jobs for Americans.

And, we can ensure that development is well regulated and environmentally responsible—we don’t have the same control in other countries.

While Congress has previously opposed these efforts—today’s gas prices should make them reconsider. We should be willing to do what we’re asking of other countries.

But we also need to diversify our sources. Take nuclear power, for example. The last construction permit for a currently operating nuclear reactor in the United States was approved in 1978.

We get roughly 20 percent of our electricity from nuclear, while France gets more than 80 percent.

Building new nuclear power plants will boost our economy. This high-tech industry spurs innovation, has large trade and investment potential, can assure the retention of high-skilled U.S. manufacturing capacity, and can create or sustain tens of thousands of jobs.

There are other alternative energy sources—wind, natural gas, biofuels and clean coal, for example. Each must be a part of meeting our nation’s energy needs.

Getting the energy challenge right means developing more of our own diverse sources. Getting the energy challenge wrong is to slap windfall taxes on our oil companies that would reduce investment in supply or increase prices because of higher costs.

Meeting these energy challenges can help foster prosperity both here and around the world by encouraging innovation in the development of clean and efficient technologies.

For example, Michigan-based United Solar Ovonics is a local solar technology company that is expanding. Its new plant will have 400 new jobs and will produce enough solar-powered equipment every year to power 48,000 homes.

Manufacturing will continue to drive innovation throughout our economy—whether it is in more traditional sectors, or in newer “green” industries, such as the production of wind turbines or solar panels.

That’s why the President’s focus on increasing economic competitiveness, while enhancing energy security, and confronting global climate change is the right way to move forward. It’s not a matter of choosing between the three, the real challenge is doing all three.

Since 2001, the federal government has spent $37 billion on climate change related activities, including $18 billion on research, development and deployment of efficient energy and clean energy technologies.

At the same time, the President is leading a global effort to devise a new international climate change framework that includes the developed world and the developing world. Developing countries such as China and India must be part of any effective international agreement.

Leaving out developing countries from an agreement will lead to the movement of manufacturing jobs and industries from the developed world to areas with fewer restrictions.

The U.S. has led the world in software, biotechnology and telecommunications—and if we get our policies right, we can lead the world in the new frontier of clean energy technology.

The Commerce Department has led several clean energy missions abroad to encourage green exports, and will be leading missions to China and India this fall. In Seoul, I saw a clean energy city bus powered with technology developed in the U.S.—that’s the global economy in action.

Getting clean energy right means encouraging innovation as we protect our environment and improve our energy security. Getting clean energy wrong would undermine American economic growth.

Another important factor in meeting America’s economic challenges is education and retraining to meet the needs of the new economy.

Unemployment for Americans without a high school diploma is 8.7 percent—the latest Michigan data show that figure is much higher here at 13.6 percent.

However, unemployment for those with at least a bachelor’s degree nationwide is a low 2.3 percent, with the latest Michigan figure being 2.7 percent.

Just as there is competition for capital investment between countries—there is competition within countries among states and regions. An educated workforce is key to remaining competitive globally—and nationally.

Free Trade Agreements are also critical for competitiveness. President Bush has implemented FTAs with 11 countries, and our trade surplus with those countries has grown from $3.8 billion in 2000, to $21.0 billion in 2007.

NAFTA is an example of why FTAs work. Canada and Mexico are our first and second largest export markets, where goods exports totaled $385 billion last year—they’re also Michigan’s top two markets.

• U.S. real GDP has grown 54 percent since NAFTA.
• Manufacturing output grew just two percent a year in the 14 years before NAFTA. It grew 3.7 percent per year in the 14 years after NAFTA.
• In the 14 years before NAFTA, unemployment was 7.1 percent. In the 14 years after, it’s 5.1 percent.
• From 1993 to 2007, trade among NAFTA nations more than tripled, from $297 billion to $930 billion and will likely hit $1 trillion this year. And NAFTA has integrated supply chains, computer systems and business models in North America.

Quitting NAFTA would devastate our economy—and adversely impact Michigan.

Consider these statistics:

• In 2007, Michigan’s merchandise exports to NAFTA were $13.0 billion above 1993—an increase of 72 percent.
• Between 1993 and 2007, real per capita personal income in Michigan increased by 24 percent.
• Export-supported jobs linked to manufacturing account for an estimated 6.4 percent of Michigan's private-sector employment.
• Nearly one-quarter of all manufacturing workers in Michigan depend on exports for their jobs.

There are three FTAs pending—with Colombia, Panama and South Korea—that would give American companies and workers greater access to 100 million consumers.

Last year, Michigan merchandise exports to Korea totaled $627 million. That was an increase of 72 percent since 2003. An FTA with Korea would level the playing field and provide U.S. automotive exporters a competitive advantage in gaining access to the Korean market. Congress should pass each of the pending FTAs.

Today, the Commerce Department is releasing new metro export data. For the first half of 2007, the Detroit metro area was the fifth largest export market in the U.S. with sales totaling $24.3 billion.

Most of those exports were to FTA countries, with $18.2 billion headed to Canada and Mexico, and $71 million to Central America and the Dominican Republic.

Exports continue to be one of the bright spots in our economy. Last year, the U.S. exported a record $1.6 trillion. May export success builds on the early 2008 momentum. U.S. exports increased by 18.2 percent to $768 billion year-to-date (through May) over 2007.

And exports are key to manufacturing success:

• In 2007, manufactured goods exports were the highest in history, accounting for 53 percent of total U.S. goods and services exports.
• Manufacturing productivity has increased every year over the past decade—and, it was up 3.6 percent in the first quarter of 2008 from the fourth quarter of last year.
• With less than five percent of the global population, the U.S. produces more than 20 percent of world manufactured goods—the largest output in the world.

The debate about closing vs. opening markets has been going on for decades. American presidents from Franklin Roosevelt to Bill Clinton to George W. Bush have known that trade drives economic growth and boosts jobs.

Getting trade right means access to more markets and fewer barriers. Getting it wrong means taking a time-out, retreating from the global economy and letting others take the lead.

Let me just close by saying that Michigan needs a strategy to increase investment, both foreign and domestic, retain talent, and grow manufacturing jobs through exports.

Getting it right is what I saw earlier today in Oakland County where innovation is flourishing, companies are growing and people are earning a good living for their families. Getting it wrong means anti-business policies of high taxes, cumbersome regulation and inflexible labor forces. We must recognize that business is the solution…not the problem.

Nationally, we have the opportunity to get it right—on energy, our environment, manufacturing and trade. Getting it right demands that we stay open to new ideas for powering our economy, open to innovations that will help us meet climate change challenges, and open to new markets that will grow our manufacturing base and our economy.

In times of difficulty, times of change, nations often react by throwing up barriers and withdrawing. This strategy has not worked in the past—and it most certainly won’t work in the 21st century.

America leads the global economy—leaders make tough choices. We have the opportunity to make those tough choices the right ones. Thank you.