Remarks
Robert D. Hormats
Under Secretary for Economic Growth, Energy, and the Environment
Washington, DC
November 15, 2012


Good evening. I’m very pleased to be able to host you here tonight on the eve of your inaugural National Competitiveness Forum.

As tonight’s distinguished honorees – Senator Dick Lugar and Senator Jeff Bingaman -- know and have emphasized over the course of their remarkable careers, American prosperity is directly related to American competitiveness.

As we enter the second decade of the 21st century, the single most important factor determining America’s capability to sustain a robust foreign and national security policy abroad will be our capability to sustain a strong economy and a dynamic society at home. Put more directly, if America is to remain strong abroad its economy and society must be strong at home. We must address internal economic challenges successfully if we are to address external foreign policy and national security challenges successfully.

Economic strength and social dynamism turn primarily on domestic factors such as:

  • strengthening our educational system and broadening its benefits,
  • putting our economy on a sound financial footing,
  • ensuring that we attract and retain the best, brightest, most talented and most creative people from around the world,
  • strengthening American infrastructure,
  • and boosting research and development.

But there are also many ways in which our international economic policy can contribute to these goals as well, because our economy is increasingly affected by opportunities, events and challenges in the global economy. Specifically I’ll discuss this evening what the State Department is doing to help American firms and workers to compete overseas.

The State Department must be able to demonstrate to American businesses, workers, farmers, and innovators that what we do in this Department and in our Embassies around the world clearly and directly benefits them at home.

There is a clear understanding in the building and in our posts abroad that it must be a core diplomatic mission of the Department to assist our companies and workers to sustain and accelerate our economic renewal at home. It must also be a top priority to enhance American economic leadership in the world so that the global economy works better, is more open, balanced, and is based on agreed rules and norms.

The most visible manifestations of this work have been our energetic commercial advocacy on behalf of U.S. firms.

Probably the single most important thing the State Department can do to enhance the competitiveness of U.S. firms is to help create international conditions that provide growing opportunities for our companies for trade and a level playing field for investment.

Our activities in this area include:

  • pressing countries to improve enforceability of contracts, protection of trade secrets and respect for intellectual property rights;
  • negotiating Bilateral Investment Treaties;
  • supporting Commerce and USTR in reducing barriers to trade;
  • and combatting state-led market distortions and unfair trade practices in third countries.

A central objective is ensuring competitive neutrality. In many countries, state-owned enterprises receive substantial subsidies or other benefits that give them unfair advantages over other companies.

But there is growing evidence that such support in countries such as China also drains large sums of money from the nation’s treasuries and hurt their own private companies. More broadly, they distort competitiveness in their own markets. So we are not without potential allies.

Opening doors and leveling the playing field are essential to enable American firms to compete on an equal basis. In addition to being second to none in the quality of goods and services they offer, American firms are unparalleled in their corporate social responsibility. And, they bring the allure and benefits of the “American Brand.”

Let me elaborate.

The “American brand” features the United States as an incubator of creative goods and services, and a generator of highly entrepreneurial and innovative companies. Many of our companies spread their best practices through their products, trade partnerships and investments around the world. They are good at attracting the very best ideas and talent from all corners. A great many American companies excel at establishing global supply, innovation, marketing and distribution networks.

Strong business values are also synonymous with the “American brand.” For America’s most respected companies – many of which are represented in this distinguished audience -- profitability and doing the right thing go hand in hand. This means adhering to the law; operating in an ethical manner; transparency; and accountability to customers, shareholders and society.

It also means high internal standards and compliance with regulatory and safety requirements, so that those who do business with them and consumers around the world can have confidence in the quality of American goods and services. Countries with American companies operating on their soil know them to be good local citizens: paying and treating their employees well, offering health and education services to workers where these are lacking, promoting volunteerism, and engaging in responsible environmental practices.

This relates directly to competitiveness, because corporate social responsibility gives firms an edge. Consumers today not only want great products, they also want to feel good about the firms whose products and services they buy and about the conditions under which those products are made.

Consumers also are becoming more demanding of quality – and this is certainly true in emerging markets. As their middle classes grow, they want high quality products. They want the best technology, foods they can trust, drugs that are safe, clothes and shoes that are not counterfeit, and information that connects them with the rest of the world.

The fact that American firms have decades of experience in making capital investments overseas is often crucial to their success in winning contracts. Proximity to customers also lets firms respond quickly to particular consumer needs and benefit from collaboration with local suppliers, partner companies, innovators and research facilities.

This brings me to the final point.

America’s economic growth depends on our capacity to innovate. My friend Robert Solow was awarded the Nobel Prize for making the connection between innovation and economic growth. He found that over 80 percent of economic growth in the United States between 1909 and 1949 can be attributed to innovation. The trend continues today.

American companies are innovative and adapt to change quickly; that’s why people in so many countries look to our companies for state of the art products and services, and why so many foreigners want to work for our innovative firms.

U.S. businesses thrive on the free flow of ideas and information with one another, universities and research institutions, and through interaction with customers and suppliers. And they are especially good at taking inventions to the market.

Innovation depends in part on invention but just as importantly on finding ways to commercialize it – and American companies are great at that. In many respects the most innovative part of the process in not always the product itself but the way it is designed, advertised, distributed, marketed and even financed.

But, increasingly invention and innovation are global. Collaboration with counterparts abroad is a growing imperative for American scientists, engineers, chemists, physicists and medical researchers.

American firms – and our inventors, entrepreneurs and other innovators – are skilled at organizing communities of innovation to combine the talents of many people in many countries. The Department of State is enabling these connections.

Our Global Entrepreneurship Program, for example, links up over 100 partners -- corporations like Google, IBM and Goldman Sachs, NGOs like the Kaufman Foundation and Endeavor, and universities like Babson, MIT and Stanford.

Our TechWomen program brings female innovators from the Middle East to the United States, where they connect with potential partners and learn about our culture and values. We lead delegations of entrepreneurs and investors to places like Egypt, Indonesia and Turkey to foster investment and partnership.

But we all face a challenge. And I will leave you with this. A recent Harvard Business School survey of 7,000 alumni defined competitiveness as the ability to compete in the global economy while supporting high living standards for average Americans.

This later point is critical.

If our economy grows and becomes more competitive while the gap in this country between the rich and poor widens, large numbers of people find themselves without work, many remain unemployed for long periods of time, and many more struggle to make a living, it will be a hollow success.

Fortunately, there are remedies for this. There are several – but a key one is education and training. A Deloitte Study last year found that there were 600,000 job openings in advanced manufacturing – and that 80 percent of manufacturers struggled to find skilled workers. Moreover, many Americans do not have the educational background to adopt, or adapt to, the new technologies we produce in this country.

Such technologies, if they were able to fully utilize them, could enable larger numbers of Americans to be more productive and better paid. And to get many jobs, the capacity to effectively utilize these new technologies is essential. Business and our high school and college systems need to get together to overcome this massive skills/training mismatch.

A divided society – with a highly frustrated portion of the population unable to find jobs or to benefit from the advances another part of society is producing or benefiting from, will not be a healthy society. And our economy will fall far below its potential.

The same Harvard Business School Survey cites large numbers of respondents pointing to America’s tax code, political system, K-12 education system, macro-economic policies, legal framework, regulations, infrastructure and workplace skills as the greatest current or emerging weakness in the U.S. business environment. Many of these were also cited as impediments to investing in the United States.

While some of these are more susceptible to change than others, we need a clear-eyed and urgent examination of the most important of them and a search for solutions. I am confident that if we better understand the challenges before us at home and abroad we as a society can successfully address them. I also have enormous confidence in our business community – its skills, its leadership, its recognition of the need for addressing the domestic jobs challenge, its understanding of the new global economy and its capacity to compete in it.

We want all of you to see the State Department as a “go-to agency.” We plan to be more and more proactive in addressing the issues and opportunities we see around the world that can support your efforts – and we will actively participate in the domestic debate to find ways to support America’s capacity and ability to compete around the world.

It is our job to make your jobs easier and enable American companies to enjoy more opportunities abroad and to create jobs for more and more Americans at home.

Thank you for your attention.

[This is a mobile copy of Remarks to the Council on Competitiveness]