REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - WESTERN REGIONAL SCIENCE ASSOCIATION - SANTA FE, NEW MEXICO

THURSDAY, FEBRUARY 23, 2006

(As Prepared for Delivery)

Introduction by Lay Gibson, Director, Economic Development Research Program, University of Arizona, and Board Member, WRSA

Thank you, Lay, for that kind introduction. It’s good to see you again. I appreciate your leadership at the University of Arizona, and your commitment to advancing the art and science of economic development.

On behalf of President Bush and Commerce Secretary Carlos Gutierrez, it is my honor to be here today in Santa Fe to discuss innovation-led economic development.

I am delighted to be back in the beautiful State of New Mexico. Last month, I visited the University of New Mexico’s Manufacturing Technology Training Center as well as the Sandia Science and Technology Park in Albuquerque. These are both excellent examples of the types of innovation-led economic development that are creating the higher-skill, higher-wage jobs that we are all striving for.

As we meet here today, we have good reason to be optimistic about the environment in which we do our jobs. Our economy is strong, and it is gaining steam. The U.S. is now in its fifth year of uninterrupted economic growth, with a healthy growth rate of 3.5% last year in spite of high energy prices and record-breaking storms, that we are all painfully aware of.

Real after-tax income is up nearly 8% since 2001, which is one of the reasons why retail sales last month made their biggest gain in more than four years. Homeownership is at record levels, with more minorities owning a home than ever before in our nation's history. America's unemployment rate is down to 4.7%, what many economists consider full employment. And, we've added 4.7 million new jobs over the last two-and-a-half years.

But, as President Bush said in his State of the Union Address to Congress, we cannot be complacent. Other countries – China and India come to mind – are rapidly catching up in areas where we have traditionally been strong. They are opening their markets, strengthening their financial, legal and other public institutions and making both public and private investments that are making them more competitive.

In the 21st century, change will come faster, cycle times for products and trends will accelerate, and the nations, regions, organizations, and individuals that succeed will be those best able to innovate and continually adapt.

Innovation drives our economy. Economists calculate that approximately 50% of U.S. annual GDP growth is attributed to increases in innovation. Innovation drives productivity, and a nation’s productivity directly impacts its economic growth and overall standard of living.

America is clearly the world’s leader in innovation. This country has generated more technological breakthroughs and brought them to the marketplace than any other nation.

We are still the world leader in venture capital and we are home to many of the finest research facilities and universities, like Sandia and Los Alamos. We possess one of the most open economies for trade and investment; a stable government, which is exceptionally led in my humble opinion; and a culture uniquely supportive of risk-taking, which must not be underestimated.

America has 5% of the world’s population, yet we employ one-third of the scientists and engineers, and we are the home to one-third of the world’s R&D spending. We invest more in R&D than the rest of the G7 nations combined. Nanotechnology R&D spending in America has increased 127% since 2001 – and total R&D – both public and private – comprise 2.6% of the nation’s GDP, greater than the E.U. and more than twice the level of China.

Of course, we all agree that we cannot rest on our past success. There is much more work to do to maintain our position as the world leader in innovation, especially as the nature of innovation changes. Our competitors are coming on strong, and they are hungry. A recent Wall Street Journal article noted that a World Economic Forum Survey of executives listed America #2 in competitiveness, behind Finland. While I’m not sure of what criteria the survey used, it is an indication that competitiveness is not something we can take for granted.

Our challenge today is how do we maintain our leadership role in an increasingly competitive global economy? We need to attack this challenge on a number of fronts, and President Bush has outlined our strategy in the new and ambitious American Competitiveness Initiative – the ACI. Through the ACI, the President reminds Americans that our continued economic leadership will depend on continued advances in technology.

The President’s American Competitiveness Initiative acknowledges that as the global marketplace grows and becomes more dynamic, other nations will become more technologically advanced and America will face new competition. We have a choice: We can retreat and ignore this reality, or we can do what has historically made us successful and engage with the world around us. This is a choice between hiding from the future, or helping to shape the future.

The American Competitiveness Initiative calls for $5.9 billion in Federal resources in 2007, and more than $136 billion over 10 years to increase our investments within two “competitiveness components” – R&D and human talent. The R&D component bolsters Federal funding in basic research, and the talent component addresses the growing shortage of scientists, engineers, and other technically skilled workers.

Within the R&D component, the ACI proposes to double the critical core physical science budgets of three agencies over 10 years: the National Science Foundation; the Department of Energy Office of Science, and the Department of Commerce National Institute for Standards and Technology. Federal commitments to R&D in the 2007 budget proposal represent 13.5% of discretionary spending – matching the level during the Apollo Space Program.

Within the talent component, the ACI calls for investments in K-12 education by training 70,000 teachers in science and math education so they can inspire students in elementary school and provide targeted assistance in middle school for students who need additional math instruction.

The ACI also seeks to recruit, train, and deploy 30,000 math, science, engineers, and technology experts from the private sector in classrooms across America to enrich math and science education.

In support of life-long learning, the ACI calls for providing Career Advancement Accounts, self-managed personal training accounts that will allow up to 800,000 workers to seek skills and education that will prepare them to take jobs of the 21st century.

The ACI also proposes immigration policy reforms designed to attract the world's best and brightest to work along side America's best and brightest in math, science, and engineering fields of research and development. These high-skilled workers not only spur innovation, but create other good jobs for more Americans – and the President is committed to doing this in a manner that protects our National security interests.

President Bush also understands that the competitiveness of our nation will increasingly depend on the competitiveness of America’s regions. With a mission dedicated to the scientific analysis of regions, the Western Regional Science Association understands very well that the key to competing successfully in a new era of worldwide competition is through regional collaboration. In order for America’s companies to be fully competitive, the regions in which they do business must be competitive as well.

My friends at the Federal Reserve Bank of Kansas City recently concluded, “Regions can develop only by exploiting their distinct economic assets, seizing unique opportunities in rapidly shifting markets, and fostering the entrepreneurs that make both happen at once.”

What the Federal Reserve Bank folks know, and what you and I know, is that in our global economy, our competition is not next-door. The areas around us are our strength, not our competitors. Regional competitiveness is simply the Tom Friedman, The World is Flat, 21st century version of what we all learned on the school playgrounds of our youth: There is no “I” in T – E – A – M and we are stronger working together than when we stand alone.

By thinking of ourselves as part of a broader economic region, we can build on our strengths to better align a critical mass of local resources to spur innovation.

The Economic Development Administration will play an important role in supporting the President’s American Competitiveness Initiative by helping to create an environment that fosters regional collaboration and coordination.

The President has proposed a $47 million increase for EDA in his 2007 budget request to Congress to focus strongly on regional competitiveness. This direction is not new – it mirrors EDA’s long-standing commitment to regional approaches – but we now have a Presidential mandate, and therefore we will re-commit ourselves to this goal.

EDA’s investments in regional strategies for economic growth will help build the capacity for innovations such as high-performance computing, next generation manufacturing, upgrading communication systems to ensure that we are all linked to the 21st century economy, and business innovations focused on new technologies and new markets.

In addition to more resources, the President has asked EDA to develop a new way to do business, making it easier for our customers to do business with us. In the 2007 Budget, EDA introduces the “Regional Development Account” that will offer all of EDA’s traditional economic development programs (Public Works, Economic Adjustment and Technical Assistance) into one unified account.

This will allow broader flexibility for our investment partners, allowing EDA to respond more quickly and flexibly to economic challenges, and provides grantees the opportunity to access EDA strategic planning, technical assistance, and infrastructure funds in a single investment application.

In addition to a strong focus on regional, collaborative approaches to economic development, EDA will focus its investment dollars on those initiatives that drive innovation and support entrepreneurship. We focus on these critical components of the economic development puzzle because of the inherent truth of the following equation:

Entrepreneurship drives innovation…

Innovation drives productivity…

Productivity drives higher wages and higher standards of living.

And as economic development professionals, a higher standard of living for more of our citizens is our ultimate goal.

I am excited about the President’s budget request for 2007, which I see as an exciting nexus of EDA’s strengths and focus and fulfilling an important national need that has broad consensus. President Bush supports the mission of EDA, and I am grateful that during his time in office he has called for increases in EDA funding and has successfully secured reauthorization for the agency.

I am also excited that, for perhaps the first time, a President highlighted in a State of the Union Address a far-reaching initiative that directly complements and bolsters the EDA mission. The President did this in his American Competitiveness Initiative, and I am looking forward to working aggressively to help implement that Initiative.

On behalf of the President and Commerce Secretary Carlos Gutierrez, thank you for your kind invitation to be here today in New Mexico. I look forward to our further discussion.

END