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Remarks at National Academies of Science MEP Conference

Thursday, October 11, 2012

Acting Secretary of Commerce Rebecca Blank
Remarks at National Academies of Science MEP Conference

Thank you, Dr. Wessner and Dr. Shapira. And thank you to our hosts–the National Academies and its Board on Science, Technology, and Economic Policy.

It’s great to be with everyone here today. Thank you all for the work you are doing to analyze and support crucial programs like the Manufacturing Extension Partnership. I look forward to your final report next year.

As you may know, manufacturing has been a particularly bright spot as our economy has grown over the past three years. After a decade in which we lost 6 million manufacturing jobs, we’ve now added back nearly half-a-million in the past 31 months.

Also, manufacturing output is up 20 percent since 2009… and U.S. exports of manufactured goods increased by 39 percent in that same time–reaching a record $1.3 trillion last year.

It’s clear that we continue to need to identify, develop, and implement good policies and programs in manufacturing–not just for the sake of creating more jobs next month or next year, but for the sake of our long-term competitiveness and prosperity over the next several decades.

So our question today is this: How do we ensure that America retains its leading role in the global economy, and that manufacturing continues to be an important component of U.S. growth and competitiveness?

In a word, the answer is innovation.

As we’ve watched the U.S. economy step up to compete in a tougher global environment, it’s increasingly clear that there is a powerful link between America’s ability to make things and our ability to innovate.

Economic researchers suggest that innovation accounts for about two-thirds of economic growth since World War II through increases in productivity that, in turn, lead to rising incomes.

If we want to stay at the front-end of innovation, we have to have production located nearby–here at home.

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–as I will discuss later.

And the importance of innovation to manufacturing is clear. Seventy percent of our private sector R&D is funded by manufacturing, and about 70 percent of our manufacturers rely on patents to protect their innovations.

Furthermore, manufacturing jobs are good jobs. Manufacturing jobs have 17 percent higher wages and benefits than non-manufacturing jobs.

And, of course, manufacturing doesn’t just support production jobs…it also supports non-manufacturing jobs up and down the supply chain. 

So, what are we doing at the Department of Commerce to support manufacturing?

Much of the work of the Commerce Department involves providing public goods that create an environment in which businesses–including manufacturing–can thrive.  This includes everything from reporting credible economic data, to supporting a Foreign Commercial Service that helps small and medium companies export, to operating the national weather service, to the operations of NIST that works with the private sector to establish measurement and production standards.

In fact, you may have heard on Tuesday that one of our NIST scientists just won the Nobel Prize in physics –Dr. David Wineland at our lab in Boulder, Colorado.  His work to observe quantum particles without destroying them could lead to extremely accurate clocks and extremely fast computers.  I thought that I would be the best congratulatory phone call that Dr. Wineland got on Tuesday, but the President himself called him from Air Force One to congratulate him.

And beyond the work that happens every day at places like NIST, we also act as catalyst to promote certain types of economic activities, using our convening power or our ability to provide seed funding to bring together public-private coalitions around economic development or technology transfer.

This morning, let me provide three concrete examples of what we are doing at Commerce to strengthen America’s competitiveness and innovation in manufacturing:

  • MEP, a program that has worked for many years,
  • the National Network for Manufacturing Innovation, which was launched this past summer,
  • and the Advanced Manufacturing Jobs and Innovation Accelerator grants, which we just announced two days ago.

For nearly 25 years, our Manufacturing Extension Partnership has funded centers around the country. We have them in every state.

They work with small- and medium-sized manufacturers who face certain growing pains and technological problems. We put those entrepreneurs and business owners in touch with scientists, engineers, and other experts who can help solve those problems.  Our affiliates also help these businesses break into global supply chains, find new export opportunities, and, ultimately, provide better, more innovative products to their customers.

A quick story.  A few years ago, a company called Lifeloc Technologies in Colorado came to our MEP affiliate in that state. Lifeloc makes breathalyzers. At that time, they had 24 employees and $4.2 million in sales.

They wanted to reduce costs, improve their product development process, bring back some manufacturing from overseas, and increase their exports–no small task.

But people like you who are familiar with MEP won’t be surprised to hear that they got results. In just two years, exports went up 60%, they reduced costs by $200,000, sales nearly doubled ($8 million) and–perhaps most important–they hired six more people.

MEP is a smart, targeted program that works for our job creators in the manufacturing sector, and it works well. 

I’ll leave it to Pat Gallagher and Roger Kilmer to go into more detail on MEP today. For example, I know they are rolling out new strategies for what they call our Next-Generation MEP.

Suffice it to say that we will continue to support this important program–and, again, thank you for the work you are doing in this area.

Now let’s shift to a more recent effort that the Commerce Department launched with a pilot this past summer–the National Network for Manufacturing Innovation.

There’s an ongoing concern that research institutions often don’t pursue ideas that could have real applications to new products. Those with innovative ideas often don’t pursue them, due to lack of funding or lack of a good business plan. In short, too many game-changing ideas weren’t making it from the lab to the market. 

Investing more in basic research isn’t enough. That’s why President Obama proposed the NNMI.

The idea is to set up 15 institutes around the country, each of which brings together a regional coalition of research centers and universities with manufacturers and local tech transfer groups.  Together, they’ll collaborate on the most promising research areas and speed the tech transfer process. 

We recently launched the pilot for this Network with dozens of partner organizations in eastern Ohio, western Pennsylvania and northern West Virginia.

Their collective goal is to help speed the tech transfer process in 3-D printing (additive manufacturing)–a technology that allows you to build a customized product by literally printing one thin layer at a time in any sort of pattern.

This technology helps entrepreneurs print customized consumer products and machine parts, it helps doctors print medical devices and even organ models, and it has the potential to help our military make parts as needed, instead of having to stock thousands of unique pieces of equipment at sea or on remote bases.

This pilot institute will pursue a research agenda, defined by private sector needs.  It will encourage researchers and entrepreneurs to take risks, test prototypes, and, yes, hit brick walls…and get back up to try again until they finally have that “Aha!” moment.

And it’s built on a smart model.

Everyone has skin in the game–with a combined $70 million from the federal and state governments and from the manufacturing companies that stand to gain the most if this institute moves the research frontier forward.

We will be tracking this pilot closely, so we can use the lessons learned as we implement new institutes in other locations… and focused on other promising new technologies.  I’m excited about the potential for this program to make sure that the U.S. stays on the cutting edge of the latest manufacturing technologies… and we will continue to call for full funding for all 15 institutes as outlined in the President’s budget.

A third example of the Commerce Department’s leadership in this area is an announcement we just made this week with 10 winners of the Advanced Manufacturing Jobs and Innovation Accelerator Challenge.

An increasing number of studies have indicated that economic development occurs more rapidly when an area is home to regional economic clusters of synergistic industries with overlapping technological or supply chain needs. Such clusters often emerge because of the comparative advantage that a region often has in a particular set of workforce skills or research expertise or natural resources.

At the Economic Development Administration, we’ve been trying to figure out how we can best accelerate the growth of regional clusters that may already exist… but need just a little extra boost to catalyze significant regional growth.

That’s why we were so pleased to announce $20 million in grants given to support and accelerate growth in 10 locations, which were selected from a competition in which we received 55 proposals.  We have done this kind of challenge focused on economic clusters before, but this was the first time we specifically asked for proposals designed to support advanced manufacturing clusters.

The awardees will use these funds in a number of ways: researching new international markets for local businesses, providing more business development consultations, providing technical assistance with product development, mapping and developing the local supply chain, offering engineering internships, and more.

Their regions and focus areas range widely, from advanced materials and metals in Washington and Oregon, to transportation equipment in Greater Philadelphia.

Overall, our grantees estimate that these projects will help a total of nearly 650 businesses as they work to attract the capital, access the technology, and grow the skilled workforce they need to “build it here, and sell it everywhere” as we like to say at the Commerce Department.

I’ve focused on some things that we are doing at Commerce that are particularly important for manufacturing, but let me step back to the broader question of what we need to do across government to support American competitiveness. 

Earlier this year at the Commerce Department, we issued a report on three areas where the U.S. government needs to invest to ensure our long-term competitiveness. 

  1. We need increased Federal support for basic research. 
  2. With interest rates at record lows and construction crews looking for work, now is the time to invest in infrastructure. 
  3. We need to invest in education and training–especially in the STEM fields. 

If we can create national support for these types of investments, there is no question that this country can remain a global economic leader for decades to come…

And that leads me to a key point I want to make before I close: Investments in research, infrastructure, and education–combined with the support for manufacturing which I outlined–are crucial right now… because we have a unique opportunity to attract business investment into the U.S. now and in the coming years. 

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.  In addition, we’ve seen substantial increases in FDI flows into businesses in the U.S. over the past two years.

I’m optimistic that we’re going to see even more of this. 

In my travels both at home and abroad, I’m hearing more and more business leaders cite reasons that they plan to choose the U.S. for their next big investment.

  • Some cite strong domestic oil and natural gas production and our long-term energy outlook;
  • Others cite increasing labor costs abroad and increasing labor productivity here at home;
  • Still others say that our financial sector is better repaired and has found a stronger footing than elsewhere;
  • Some point to unsettled issues in Europe and the slowdown in growth in China and India;
  • And the list of reasons for investing in the U.S. goes on:
    • a strong rule of law,
    • a good regulatory environment,
    • strong intellectual property protections,
    • the best universities in the world,
    • our robust R&D base,
    • our extensive supply chains,
    • and–of course–the largest consumer-driven economy in the world.

So how do we take advantage of this moment? I’ll give three quick examples of what we can and are doing.

First, the president is calling 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 program at the Commerce Department called SelectUSA. Its mission is to promote investment in the leveraging the full resources of the Federal government.

  • For example, through SelectUSA, we just trained our foreign commercial service officers to help 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 deals done.

And third, we just announced the Make it in America Challenge.  Our goal is to find communities that are poised to attract a major investment, but just need a little more help.

  • 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.

We’ll fund up to 15 of the best proposals we receive–up to $40 million overall.

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

So, let me close by saying that the Commerce Department’s commitment to American manufacturing has never been stronger. 

We are highly-focused on putting the right tools and resources in the hands of those who work in America’s manufacturing communities… and also in the hands of people who are eager to invest more in those communities.

Now more than ever, we need America’s manufacturers to do what they do best–grow their businesses and create good jobs that provide greater economic security for our middle class.

Thank you. Have a great day of dialogue. And again, I look forward to your recommendations on this important program that will come in the months ahead.