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Remarks at Council on Foreign Relations Dialogue on Increasing U.S. Investment

Friday, September 28, 2012

Acting Commerce Secretary Rebecca Blank
Remarks at Council on Foreign Relations Dialogue on Increasing U.S. Investment

Thank you, Lauri (Fitz-Pegado). It’s a treat to share the stage with a renowned trade expert. It seems that I’m always running into alumni of the Commerce Department. I tell people to watch out–we’re everywhere.

I want to thank the Council for inviting me, and I look forward to our discussion.

We have come a long way since the economic freefall that we were experiencing in late 2008. We were losing 750,000 jobs a month.  We’ve now created 5.1 million new jobs over the past 30 months.

We’ve experienced nearly three years of stable economic growth, but we know that there’s still work to do… Growth has been steady, but slower than anyone here would like.  Unemployment has fallen substantially, but is still too high. The good news is that all the growth forecasts for the next two years suggest that this recovery will accelerate, particularly now that the housing market is showing clear signs of recovery.

That means we’ve reached a moment where we can’t think just about next month or next year.  If we care about our nation’s long-term competitiveness, we have to think about policies that will pay off over the next several years, if not the next several decades.   

I've spent a lot of time at Commerce thinking about -- and talking to various experts aboutAmerica's long-term competitiveness. Today, I want to talk about one topic that I think is crucial to our competitiveness, namely, increasing the level of business investment in the U.S. 

Business investment can occur in many sectors, but I'll focus on manufacturing, because outsourcing and lost manufacturing jobs in the U.S. has been such a major public concern over the last two decades.    

As you may know, manufacturing has been a particularly bright spot in our recoverywith over half-a-million new jobs in manufacturing since 2009. This is a real turnaround, compared to the previous decade in which we lost six million manufacturing jobs.

America will retain and strengthen its manufacturing base only if we are the global place-to-be for high-end and advanced manufacturing… that is, manufacturing that relies on high-tech new processes or that makes new products.  That’s what’s going to keep us both competitive and attractive as a place to invest.

How do we lead the world in advanced manufacturing?  In a word:  Innovation. 

The president gets it. That’s why this administration has been pursuing multiple policies designed to keep the U.S. at the front end of research and innovation…and thereby support American manufacturing.  

This includes working to reverse the erosion we’ve seen since 1980 in federal support for basic R&D, much of which supports our manufacturing base. President Obama set a goal of doubling federal dollars in R&D over five years, and we’ve made a good start on that.  

We’ve also launched the pilot for a National Network for Manufacturing Innovationan effort to speed up the tech transfer process through regional collaborations.  I’d be happy to discuss that more in our conversation.

And the president continues to advocate for investments in infrastructure as well as crucial investments in education and training to ensure that we have a skilled and flexible workforce. Better infrastructure, skilled labor, and advanced research and innovation are all critical investments that build a stronger environment for manufacturers to thrive.

And a major reason that these investments are so crucial right now is because I believe that we have a unique opportunity to attract business investment into the U.S. in the immediate future, particularly in manufacturing. I’d like to focus the rest of my time today talking about that. There are two parts to increasing business investments in the U.S.:

One: We want U.S. firms to expand here at home and bring jobs backsometimes referred to as insourcing or reshoring.  

Two: We want foreign-owned firms to locate their next plant in America through foreign direct investmentFDI. 

I’m very optimistic that we will see substantial increases in both of these areas over the next several years. In my travels both at home and abroad, I frequently ask CEOs and business owners where they are thinking of making their next investment. I’m hearing more and more of them say that the U.S. is where they have to be.

Business leaders list a number of reasons for why the U.S. looks so attractive to them right now:

  • Our energy outlook is bright. This is crucial for companies that rely on energy for production, including foreign-based manufacturers which have accounted for the largest portion – about 40% - of all FDI flow into the U.S. over the last three years.
    • We will be meeting more than half of our oil needs with domestic production by 2014, leading to more stable and lower costs for oil.
    •  In addition, we have seen a dramatic, 14-fold increase in natural gas production from shale in recent years.  For example, from just 2009 to 2011, Pennsylvania quadrupled its natural gas production. 
    • So it’s no surprise that natural gas prices overall have dropped fourfold since June 2008.  This provides us with an important advantage as our natural gas costs drop relative to other countries.  For example, right now natural gas costs in the U.S. are one-quarter of prices of Europe. 
    • Finally, many alternative energy sources are reaching the tipping point in terms of cost-benefit, in part due to the fact that we’ve doubled the generation of many renewable energy sources since 2008.
  • A second area where the U.S. is gaining a stronger competitive edge is with labor – in both costs and productivity.
    • In recent years, as wages have gone up and the middle class has grown in countries like China, the labor-cost advantages to these countries has diminished. 
    • At the same time, U.S. manufacturing workers now produce about 9 percent more each hour than they did before the recession.
    • In fact, it’s notable that we’re now seeing increasing investment flows from Asia to the U.S.  Asia accounted for less than 4% of the entire world’s business investment to the U.S. in 2009… but now it accounts for more than 20%. 
  • A third major reason why the U.S. is becoming a more attractive investment location is because other developed countries’ economies are looking less robust.
    • After the global slowdown, this Administration took hard steps to put our financial sector and our economy on a stronger footing.  Many observers believe that our banks have restructured more fully than in other countries and that our recovery is stronger and more stable.
    • In contrast, the Eurozone remains in crisis – the IMF projects a decline in growth this year and only 0.7 percent growth in 2013.   Elsewhere, growth is also slowing in countries like China and India.
  • The list of reasons that CEOs give for investing here is longer still.
    • We have a strong rule of law and a good regulatory environment.  The U.S. ranks 4th of 183 economies in the World Bank’s Ease-of-Doing Business Index.
    • The U.S. has the strongest level of intellectual property protection – and our patent system (housed at Commerce) is only getting better due to the America Invents Act.
    • We have the best universities in the world – producing graduates that drive entrepreneurship and feed innovation into our private sector.
  • And, of course, we have the largest consumer-driven economy in the world.
    • On Tuesday, I was at the Virginia plant of STIHL [steel] – the German-based company that makes chainsaws.  They have expanded their presence in Virginia Beach in recent years – and hired 50 more workers – largely due to the strong demand from U.S. consumers.
    • More than ever before, companies need to be near their customers to respond to their changing tastes and demands. 
    • Consumer spending is growing here in the U.S. at a moderate but steady pace – and if the President’s middle-class tax cuts go through – we will ensure that it continues to grow. 

Overall, domestically, it’s difficult to track the increased number of U.S. businesses that are engaging in some form of insourcing.  We don’t collect that data, but it’s clear that the trend is real. 

In January, the president held a summit with about 20 U.S. businesses that are bringing jobs back to America.  And, this year, on the pages of major U.S. newspapers, we have seen dozens of feature stories of manufacturers – both U.S. and foreign-based – that are choosing to make their products in America.

It’s a little easier to quantify the overall growth in FDI.

  • FDI flows into businesses in the U.S. have jumped from $144 billion in 2009… to $227 billion last year.  The U.S. already attracts about one-fifth of all of the FDI flows coming out of other countries – and we want to increase that.

So how do we build on these trends?

First, the president has called on Congress to end tax breaks for companies that ship jobs overseas and – instead – give relief to companies that bring jobs back.  That’s common sense.  It’s something we should all be able to agree on.

Second, we’re implementing a new program at the Commerce Department called SelectUSA, which the President launched last year.  SelectUSA’s mission is to promote investment in the U.S. using the full power of the Federal government.

As the former Director General of the U.S. and Foreign Commercial Service, Lauri will appreciate the fact that SelectUSA involves some of Commerce’s most dedicated public servants – our commercial service officers around the world.

  • Traditionally, these staff have been focused on helping U.S. firms export to foreign markets…
  • But now they’re also helping foreign investors who want information about how to invest in the U.S… and who want to link up with local and state economic development leaders to get the deals done.
  • We just finished training the FCS officers who are stationed in the top 25 foreign markets where 90% of America’s FDI comes from.

And we can’t stop there.

When I was at STIHL on Tuesday, we announced yet another effort aimed at promoting U.S. investment.  Make it in America is a major initiative to give American communities the help they need to attract businesses.

Through the Make it in America Challenge, the Departments of Commerce and Labor are teaming up to find communities that are poised to attract a major investment, but just need a little more help to get the deal done.

  • Maybe the city needs a better road to an industrial site. 
  • Maybe manufacturers looking to relocate are asking for better information and technical assistance.
  • Maybe local workers need a tailored training program to fill a particular skills gap. 

Through this competition, we will evaluate a community’s potential to use these tools and resources to promote insourcing… to attract FDI… and most importantly to create good jobs.  And we’ll fund the best proposals that we receive. 

 All in all, we plan to give up to 15 awards totaling $40 million through this Challenge.

Overall, we’re trying to do everything we can to give businesses both here and abroad every possible reason to believe that the smart choice is to Make it in America.  Or, as we like to say at the Dept of Commerce, to build it here and sell it everywhere. 

These efforts are crucial because we know that when a company builds a new factory here, the likelihood of jobs staying here long-term is very high.   And that means a stronger middle class for generations to come.

So let’s take full advantage of this moment

In the coming years, we have a window of opportunity to ensure that America is home to the most innovative and dynamic businesses in the world – including our manufacturers. 

Let’s make sure that the world’s business leaders – both here and abroad – know that there has never been a better time to invest in the United States.

Thank you.  I look forward to your questions and comments.