tv 2016 National Competitiveness Forum Morning Session Part 1 CSPAN January 9, 2017 6:39pm-8:01pm EST
of the national security agency, admiral mike rogers and fbi director james comey will appear before the senate intelligence committee. live at 1:00 eastern on the c-span networks. >> the presidential inauguration of donald trump is friday, january 20th. c-span will have live coverage of all the day's events and ceremonies. watch live on c-span and c-span.org and listen live on the free c-span radio app. >> next, leaders from the private sector share recommendations for the incoming trump administration on how to spur more innovation and advance trade policy. this is part of a day-long forum
hosted by the u.s. council on competitiveness. it's an hour and 20 minutes. >> ladies and gentlemen, joining miss smith onstage to release the council's clarion call, competitiveness to the 45th president of the united states of america, please welcome the chairman and ceo of deere and company and chairman of the u.s. council on competitiveness, mr. samuel allen, the vice chairman and chief scientific officer for global research and development of pepsi coand u.s. council on competitiveness vice chairman for industry, dr. mahmoud khan. the president of arizona state university and u.s. council on competitiveness university vice chairman, dr. michael m. crow and co-anchor of "squawk on the street" on cnbc, ms. sarah eisen. >> welcome, everyone. thank you to our distinguished panel. i'm very pleased and honored to be here to kick off this
exciting day and to introduce the council's clarion call which is really a great way to frame the day and the conversation and is going to be their mission that will be sent directly to president-elect donald trump. so here to discuss what's going to go inside, sam, if you would. as the chairman, please kick it off as far as the key priorities that you would like to mention in this clarion call. >> well, i would start it off by saying the president-elect probably won't like his report card. so there's a lot of fs and ds and not too many as on there. i think the important thing that we are trying to highlight in the clarion call, that there is a way forward. when you look at where the economy has been and this is really about accelerating gdp
growth, and that really gets down into two components and that is how many workers are participating and what's the productivity that we're deriving out of that. a number of the areas we are looking at in the clarion call, whether it be education which gets into really developing the work force of the future, whether it gets into assuring that we do start handling the debt which makes it sustainable, whether it's continuing to invest in basic r & d which is important to the innovation side of this which also drives the productivity piece, there are a number of areas there that we think are very very important that we set a direction going forward. you can prioritize which ones you work on first, but all these areas are important to assure that the country is growing at a sustainable rate over a long period of time. >> what i love about the council
in general and this panel is we have so many different backgrounds and industries and academia represented. mahmoud, from your perspective, what are you looking to accomplish on behalf of the council and the clarion call? >> well, you know, as i'm sure you have seen in the clarion call, when we think about opportunity for growth, there's still a lot of exciting opportunity out there and let me just take a sort of technology perspective for a second. let's start with the productivity we have had and if you think about what everybody talks about as the moore's law where the computational power of microprocessors has gone to be doubling every two years or so, it's been an amazing few decades. that's slowed down. one way of looking at it is the growth has been done, and yet there's exciting technologies coming just around the corner that can jump start again and give us another s-curve. that's exciting because it's another wave of growth and it's
not just exciting from an economic point of view but also, it's important from a defense point of view. as many people in this room know, our military needs secure state of the art microelectronics. in fact, the last defense bill required the secretary of defense to make that available by 2020. so it's a whole cluster of capabilities there. if we look beyond there in the more consumer industry, engineering in general, we have got the internet of things. everybody is talking about it, everybody is starting to experience it. if you think of the capability of sensors, big data analytics and the ability for communication between devices, we are living that only the surface right now. it's going to change the way in which businesses operate, businesses use their labor force, the way companies like mine, pepsico, engage with the consumer.
we have an exciting wave of this coming, this link between individuals and machines and machines with other machines. now, another area that is generated from this, we now take internet of things, artificial intelligence and link that to robotics, look what's happening in manufacturing. we have seen a wave of that in manufacturing. but driverless vehicles, just another example. not only cars and automotives that everybody is talking about, but even the potential around the corner of airplanes. having said that, i will touch on it at the end, we have to also be conscious that that means a change in our work force. we have a very large work force that is part of transportation. what are we going to do with that as that technology and that growth comes. the last piece i left at the end because that's my background and i have a lot of passion for it, is the opportunities coming in biotechnology. if you really think about what
biotechnology has done, it took, what, 13 years and $3 billion to sequence the first human genome. now you can do it in 24 hours, literally for about $1,000. it's going to get faster and cheaper. what's the implications of this. well, take a technology like crisper where scientists can go in very precisely edit a gene sequence in an organism, it has profound implications when used for good. let's take an example. somebody born with an inherited disorder because of a genetic mutation. the ability to go into their bone marrow and change stem cells or the ability to go in and identify a plant variant that is more drought resistant, has a higher yield, is pest resistant because we can select certain genes, that is revolutionary. we have to feed 2.5 billion more people in this planet in the next 25 years. closing on that part, i would
say lots of things, these are just examples, but one thing we have to do when we talk about technology, we cannot leave large parts of the population behind. technology has to lift everybody. as multiple stake holders we have to engage people, talk, discuss, agree on what's good for society, then invest behind it. i'm very excited what the potential is for technology. that's what our collar ron call is all about. >> it will be on you to train the generation on all of these technological advances. from your perspective, what are you hoping to accomplish this year? >> first thing to point out, this is a tremendous country. we have been tremendously competitive for decade after decade. we have done things that are unbelievable when you look at the annals of human history. but what we have come to as a point where we are having difficulty right now managing
the forces that are required to be as competitive as possible. there's really three things at work. one is the overwhelming force of creative destruction where every new idea replaces a previous idea. every new configuration, new system, replaces a previous configuration or system. in that, if the citizenry is not capable of making those adjustments, more and more of them will fall back. while we will have fantastic achievements in some sectors we will have generally a weakening competitive position in our overall economy which is the case now versus the previous decades and we will have a very negative set of impacts in terms of people being left behind. what's happening now is that we haven't matured enough, our eye is not on the ball and what's happened is changes are so fast that rather than taking three generations for a change to be implemented there's five major changes in a single person's life.
five transformative things that would affect a single individual. what that means then is that we need to dramatically enhance our focus on the ball, the focus for competitiveness needs to be on the continued development of ideas. we are underfunding fundamental research, underfunding the basis from which these ideas can emerge. lots of other people are stepping up, other nation states, other parts of the world. we have sort of been stagnant and not moving at the speed we should be moving. i actually now place that as a secondary issue to the really principal issue of people and people development. we have a poorly articulated, poorly developed and very weak immigration policy on every front. the country's been built on the notion of driving ideas forward, driving the forces of creative destruction forward through immigration and the education and training of both new immigrants and citizens and so that's something that needs to be worked on and our report gives a very poor grade for our
policy in all of that. i think the thing that we are not doing that we haven't figured out is that we are arguing about super silly things right now. we are arguing about what's the role of the government in this the role of government, government has always played a role in the preparation of the workforce by investing in the next generation through schools and through universities and so forth and we've literally, literally, we're so far off the mark right now. through the mind we don't realize that everyone has to graduate from high school and if you're not graduating everyone, the entire system is a failure. they will be concentrated in nothing but income tax trans fore, so we need new ways of thinking, of moving forward, of
organizing the universities et cetera, so that we can find a way to produce individuals have the capability of being competitive themselves. competitiveness is not only a function of the national net competitive outcome. it is function of the algorithm of derivative of the individual's competitiveness. so we have far too little focus on the individual and preparing the individual to be competitive. i passed an uber test vehicle in phoenix the other day. there was no one in the front seat. it was driving. there were people in the car no one was in the front seat. i was at a meeting in morocco where someone stood up from a major technology company in the united states and said, what we need to do is replace 3 and 12 million job of people in the next 10 years by people displaced latest changes of
computational technology, artificial intelligence and decision making systems. are we prepared to do that? he said, no, we just need a tax system to give them money so they have something to eat. well, that's nuts. we need competitive individuals clustered together, advanced through lifelong education, who can continue to be competitive at higher and higher and faster rates of change and that's the algorithm we need to figure out and we haven't figured out. >> debra, how do you tackle some of those challenges and goals and turn them into reality? >> well, i think one of the most important things about the council's clarion call, we've been issuing this for a number of years is we recognize there's not one silver bullet. this is an integrated system. and if we can really make progress in partnership with public policy leaders, congress, leaders in this room with sectors, we can tackle some of these." we really have to look at this going forward all front.
yes, we can get corporate tax rate down to a level comparable to competitors. finally a recommendation we've been calling for many, many years is move to territorial tax and get $2.6 trillion that's overseas back into the u.s. at an appropriate tax level. we can make progress also on some of the issues around our regulatory burdens. but the things my colleagues have been talking about, these are our competitive advantages. so i think the message i really want to convey is let's get our house in order on the things we can do that put us right now at a disadvantage to our global competitors around tax and the debt and regulation and just turbo charge on these competitive advantages around the technology transformation and the people in america. >> i wonder if improved growth
outlook referring to and some of the pro growth policies that are set to come in action, the stock market at a record high helps tackle some of these more structural issues. in other words, if the growth is the medicine that's been missing over the last few years, which has made it so hard to prioritize some of the issues you're talking about. >> i think it certainly will be an enabler of bringing people together. i think some of the stimulus that's being talked about, that does not create long-term sustainable growth. what it certainly does is turbo charges in the short-term. and when growth is stimulated in the short-term, that makes it a little easier for everybody to come together and say, okay, how do we work together on this long-term problem, ones we've been talking about. i think the important thing for people to recognize, though, is, i mean, you can change the tax rates, do all those things, that
will drive a spurt in the economy but you have to change productivity equation long-term if you want loan-term sustainable growth. so it will be very important, and that's where the council can help, i think, in making sure everyone is focused, okay, how do we tackle the big problems, things like what michael has talked about while we are experiencing this near term stimulus that's brought about by the changes that are sure to come with the next administration. >> i was just going to emphasize, look, i touched and talked about the exciting opportunities of technology. i want to come back to what i ended with. if we don't deploy all of this exciting opportunity in a manner that lifts everybody, then we're going to have a worsening of where we are today. looking at it purely from food industry perspective, 50 to 60 million americans today that live on subsidized food, food stamps one way or the other.
that's about one in five americans today. if that part of the population is not given -- not just financial means and subsidies but meaningful work, people don't just want to be given a hand out. i don't care if it's government or private sector they want to be engaged participating in society, having a voice but also contributing. that's part of what we are as human beings in any society. i don't care where you are. that needs to be focused on. it can't be done by any one sector alone. what the council is doing is pointing out gaps and proposing real pathways forward of how multiple stakeholders, everyone in the room working together. i think that's an important point michael is raising. technology is an enabler, it's not a destination. >> where do you find that countries are outfront on this, michael, globally looking around the world as we look to a loss of competitiveness as you described it? who do you think our chief competitors or rivals we need to follow?
>> there's lots of competitors and i think the nature of competition is good. competition produces better ideas, better products, better outcomes, economic growth, economic enhancement. we've got rise of asian tigers, fantastic competition coming from some of the countries in europe. stabilization going on in some of the markets in south america. a whole new conceptualizations. back from the middle east, thing going on there, all positive, positive, positive. the problem we've got is we're the rich family in the big house down at the end of the street that everybody now looks at and says, what's going on in there? meaning there's a lot of arguing going on in that house, a lot of stuff going on. so the thing we have lost, i think, perhaps compared to others is we've baseball coasting. we've been coasting on the
investments of the past. we've been coasting on the steps of the past. we are unbelievably competitive launching missions to the moon and doing things that were going on in the 1960s and moonshot mentality and projects and achievements and all kinds of things. we can do all of that. what we haven't done is we haven't figured out yet how to help every individual to be competitive. if you live in the united states today, and you have only a high school education or less, there are nearly 25% fewer jobs for you than existed just prior to the recession. if you live in the united states today, and you're of european descent and you're a woman and you have only a high school education, your life span is going down. if you're in the bottom third of the american economy from an income perspective, 110 million people, something on that order, in that bottom third, you have no positive indicators. life span going down, educational attainment going down, incomes going down.
family stability going down. there are no positive indicators. if we don't fix that, i'm not talking about fixing it from social engineering perspective but from a competitiveness perspective. there won't be competitive enhancements in the united states. you can't have a third of your population that's noncompetitive and hope your country will be competitive and that bottom third at one point will destroy or kill everyone else. so it's something that needs to be fixed. it's not something that's going to lead to competitiveness. >> how do you do that, debra? are you more hopeful as you describe a public/private partnership that at least we're coming out of some years of gridlock in washington, d.c. theoretically we shouldn't see it as intensely as it has been over the last few years. >> well, i think we're very optimistic at the council on competitiveness because of the
people we have that are in our organization and our extended partners to really begin to tackle these very deep structural problems, but also the opportunity. i think we have to always be looking at the opportunity before us. and certainly now when i look back at the beginning of the council and during my time, we've just seen a plethora of very new innovative public/private partnerships that are not only large scale. when you think of the energy in manufacturing sectors and what we're doing there, you know, to bring together the power of universities and national labs with our large scale investments on the federal side, you know, no country in the world is doing that on the scale we are. mahmoud mentioned the potential with the next generation of electronics. i don't know if we're going to call semtech 2.0 but this is an area where we really need to bring together everyone that has a role in this to ensure we're
developing and deploying the electronics and the sensors that are going to drive all of this new change in industry. i think in terms of our engagement with policymakers, this council is very proud that we are nonpartisan. we've worked across administrations, one of the sounders of senate preparedness caucus. we're prepared to be very aggressive, to work across the aisle to really move forward on implementing the clarion call for competitiveness. it's going to take everybody in this room and really, you know, the tremendous leadership we have in the council on competitiveness to do that. >> the common theme, are people training for education,
preparing them for technology. as ceo, what would be on your wish list as you try to hire the next generation of folks who work at john deere hopefully as long as you have, more than 40 years. >> when we look at it, our wish list, there's two sets of skill sets we're looking at. we're looking at the technical skill sets that we need to have against a lot of what michael was talking about in terms of developing those individuals. but then we're looking at the human skill set that we want, the ability for people to relate to other people to work in -- because we are in a very global environment, we're looking for people that can be very inclusive, work across cultural lines, very effective in that environment. both of those are very challenging, and there's what we would say right now both areas we need to do a lot of work on, both in preparing people to work in this diverse environment as well as getting the right set of technical skill sets we need to continue to move our company forward. >> mahmoud, we're just about out of time. i wanted to just hear from you. >> just quickly to build on that, we've all heard and talk about s.t.e.m. s.t.e.m. isn't just people with phds in engineering, s.t.e.m. is
about quantitative skills. if we're going to fill this gap, we have to create a system where young people who may not have the opportunity or aspire to doing advanced technical training can get quantitative skills through our education system. there's a huge gap yet we on the industry side have difficulty recruiting and filling jobs that require quantitative skills. >> michael, can you leave with us a hopeful note? >> the hopeful note is that all of these things are solvable, understandable, doable. we deployed a math class last semester that has 40,000 students from around the country and around the world. it's called college algebra. it's not about algebra. it's a fantastic class with
intelligent tutors, personalized learning platforms, move at your own pace. if you stay with the class, you will master college algebra. if you master college algebra there's little else on a technical or quantitative side you can't comprehend and can't actually master. what we're doing is figuring out how to teach everyone how to move not some people forward, not just great athletes forward, but all athletes forward. >> i'm going to take that class, by the way. >> yes. >> i've just decided. >> in our spare time. i'm sorry that we've gone over. i know debra and the team here at the council and sam will work their very hardest. it sounds like there's a long to do list. thank you very much, our distinguished panel and thanks to awful you for being here. i know it's going to be a great day. thank you. ♪
>> well, deborah, congratulations and thank you for having gallup be a part of this important 30th anniversary and congratulations on the great contribution you've made not only only business and sfli, but to our country. so, we were asked to make a report -- talk about productivity and more specifically, about growth. i don't want to go through the report because you can read it yourself. as a matter of fact, they have a slide back with one slide. i don't think, i've never done a slide presentation before, but i've got one slide. i refer to it as my deck.
the guy who founded the company was named george gallup. an academic more than an entreprene entrepreneur. usually makes that list of 100 most influential, the real good list. not the time magazine list with chefs. but the one with george washington and franklin and that kind of thing. he had a thing, he loved democracy so much, he said it's about the wheel people, somebody should find out what that is. he'd always report that to washington not unlike the counsel. when you make policies and lead and you're wrong, the more you lead, the worse you make things.
what a wonderful mission. i was thinking about how that applied to right now. are we in a recovery? because it's in a debate a. i don't think i should say this in front of this group, but i didn't know what product was. i know what gdp is and i have some opinions about that. i know that 2.5% is a lot better than where we are now. i know we need 2.5% to break ooechbl with the amount of costs we have. when you're 1.7, you're slowly going broke. if you said what's the right amount of gdp to have, i don't think this board should like like this. i don't know what the right number is is. can you go up to eight?
have 9%? something where you, what do you need? >> the biggest moment in the history of human development was between 1850 and 1950 and the united states of america we just kind of overwhelmed the world and now we're 25% of all the money. here's a good question. what was gdp during the time series? you know what the answer is? three and three quarters. think how small those differences are. we said how do we boom over ten years or something like that. how do you go broke? you have a time series of about like we do now. 1.5 or 1.7. but you have to be somewhere about above 2.5%. which i didn't know that. the next thing i learned was that gdp is not the best method and p you take a population of
economists, whoever it is. they said gdp per capita, i didn't know that. thinking maybe it would be gdp per worker if you get too many to drop out, you have to do gdp for the whole population because people at home, good for them, there's a lot of people that should be at home. they use the economy, too, so do babies. that's the number gal lap and the counsel and my team chose to use. we went back 50 years. we determined that was the single best metric determine if we're in a recovery.
-- look t up the word. i found an ar kl on every single page that referred to the recovery. so i looked up recovery. it means you've been sick and you're getting better. you wouldn't think i'd have to look that up, but i did. and kind of get your hands off the wheel and tweak it and keep nudging it in this right direction.
if we are in decline, that means you got to shake everything up. that means you need a turn-around. you see the difference? but harkens back to you better get your premises right because if we're wrong about that, the more we lead, the more we ruin the country. so here's my deck. my one slide deck. this is 50 years of gdp per capita in the united states. can you look at that and see a recovery? i wrote down three quotes that i just -- you can find them
anywhere you want. this one's from the "wall street journal." the guy's name is eric. i won't say his name but i read him before. the u.s. economy appears to be growing at its fastest pace in two years. i don't know what he sees but i guess you can say it. i think you can go through like the radio salesman, you probably can find one little blip between one quarter and another. i don't know. here's one from i wouldn't say his name, from raymond jones, the investment banking company in new york. growth is a lot stronger than it looks. i don't know what that means. but where do you find growth that's stronger than it looks on there? this one's interesting. this is my last one. have you ever heard of confirmation bias? guy got a nobel prize for this. when you make a decision or come to a conclusion, what he figured
out was only 30% is based on fact and 70% is based on emotion. he's actually a psychologist. only psychologist to get a nobel prize in economics about six or seven years ago. confirmation bias is that you only -- you look for facts that confirm what you want to believe. but you wonder how often we get into that, whether it's, mario, you and i were talking about the media tried to find facts, not picking on the media, all of us did it, i did it, too, why only hillary can win, why brexit will never work, why the electorate in colombia will never vote for the treaty. that kind of thought dominates our thinking. we are always in a fight with that 70%. this one is really an important one. this was we are seeing definite
evidence, i don't know if my senior editor's here in the room but i don't think there is anything called definite evidence. you either have evidence or you don't have evidence. anyway, we are seeing definite evidence like convince me, this is the time i really mean it, it's evidence, the economy is expanding more strongly. definite evidence. who do you think said that one? do you know? that's janet yellen. she's working on my 70%, too. we are not in a recovery. it helps me when i can reduce things to kind of their simplest form but if we were a company and this was a shareholders meeting i would be reporting to you that our sales or $18
trillion, we have 100 million full-time employees, 50 million part-time employees and debt of $20 trillion going to $30 trillion, and we have revenue that's increasing at a decreasing rate and our revenue is down to about $1.7 and i can finish the line to where it's zero. you want some of that stock? the next thing i would tell you is that i got some good news for you. that is that food's cheaper than it's ever been before so when i was a kid, it was almost twice as much. that's some good news. transportation and gas. but we have three expenses that are totally out of control. $18 trillion in sales, $20 trillion in debt. we have three line items that are booming out of control. know what they are? we need to know.
education, we all know health care, we all know housing. i see in the clarion call that i think we know those pretty well. remember, there are some real basics you need to know as shareholders, too. one of them is with health care, we spend twice what other comparable countries spend on health care per person. we spend twice as much as england, canada, france, germany. two times as much. next thing you need to know is that they all live longer than we do. you don't like to hear that. that doesn't work well into the confirmation bias. that one doesn't fit neatly in there. the great american health care system. it makes you wonder a little bit so canadians live three years longer, french live three years longer, we spend twice as much. it makes you -- makes me wonder if the more they spend on us, the faster they kill us.
you read this? you can hardly believe it. you got to google it to believe it. i was wondering how many people were killed in hospitals. we worry about soldiers. i don't know, i think the single digits in war over the last ten years. you read the new england journal of medicine how many people were killed in hospitals last year? put a number in your mind. google it. their answer is 100,000. it's dangerous to be in baghdad, afghanistan. you want to go a place you're really in danger? get into a hospital. they maimed a million. just saying. johns hopkins put their number out and said 250,000 but you wonder when you have an expense item that's that out of control and has that little success, do you really need lean or do you need total disruption?
another one that our analyst found was education. you know it's booming. it has many other implications to the amount of debt that boomers have. boomers are going to be wonderful workers. they are really different. i saw a conversation on squawkbox this morning and they were talking about are millenials different than any other generations. they said no, no different, just younger. they came to a conclusion but that fits again, there's your confirmation bias. it fits the line they needed. i'm going to tell you, tell me if this makes them different. they don't have babies. that seems to make them quite a bit different. this is the first year where the white man is going to be smaller. they are causing the white man
to be extinct that. seems like a big one to me. they also have the lowest marriage rate since the history of our company. when i was a kid, the great american dream was to own a house. not so much with them. home ownership is the lowest's the ever been. we have just been wrong about that but it changes almost everything. they don't change diapers anymore. they have pets so they buy expensive dog food. if you have stock in pet food it's going through the roof. the changes are extraordinary. yet we are wrong about them. it kind of bothered me i was watching squawkbox, i said i wonder if everybody goes away with that confirmation bias and do their jobs wrong because they concluded the wrong thing, because they did. i looked up their ratings. they have 100,000 people watching. i don't know if that's a big or
small number but i know it's about the same of a michigan home game. that would be a crowd about that big. bingo. but they are very important people. that's the point. they are very important people. they go out, they have the wrong thing. but there's one real important thing in there that has to do with education. baby boomers will be very good workers. here's one big difference between my generation before. the generation before, baby boomers produced jillions of baby. the other thing they did is started a whole bunch of new companies. the other thing millenials don't do besides not having babies is they also don't start companies. that needs to be fixed somehow. but education is probably not doing that because what we have done is when we ask them where they are right now, they are in a whole different state of mind than my group because what, saddled with debt. the other thing is when you ask about you think there will be money, if you ask me do you
think there will be money for retirement, i say yeah. how about for your kids. i think there will be some for my kids. how about your grandkids? i know there won't be. now those kids will become aware of that. so if you take education, take housing, take health care, it may not be as simple. it's more complicated in how they fit into all the decisions we make, the clarion call we make, because all of them seem to be tied somehow to growth. i'm trying to -- i have been trying to stretch my thinking since we started this project because i keep getting surprised so much but if you said what did you figure out and the report i think will be, maybe it's coming out now. that's why i'm not doing the report. you can read yourself. i'm trying to make reckless remarks here.
but so we know we need more growth and i can say this to this group because my business is selling innovation. but when we say how do you fix our gdp and this problem, we know we need to get the pie growing. so you say when are you going to do to get the pie growing? know what our answer is? we have all concluded the same thing. we did it with our own confirmation bias and we're wrong. we think it's just innovation. so we just keep building up innovation. we spend hundreds of billions of dollars on innovation. read the "wall street journal" yesterday or the day before, and we have a record number of patents. i mean, since 2000, it's just boomed. innovation, we are blowing it through the roof. so how are we doing with new companies? the lowest it's ever been. we just keep booming because somebody told us innovation creates companies. we don't consider it. we don't consider the other side of it. maybe it doesn't. of course it's a big part of it. i will just throw this out to you. what if innovation has no value whatsoever unless it's in the
presence of a customer? we don't think of that. what about innovation has no value at all until it has a business model that works? it's the story that's kind of unbelievable but you all know who vince cerf is? what a great guy. he and bob kahn got -- they were the wright brothers or something. he told me this story at dinner. it's got to be true because it's not complimentary to one of the most important americans ever. he already built that thing so we could send signals around and all that. a guy came over from the u.s. senate who loved technology and said to him let me see that thing. vince showed it to him. he said that's the greatest thing i have seen in my life. can i go back to senate and pass a bill and throw it out to commerce and see what they can
do with it. what a conversation. you know what vince said back to him? fine with me but i don't see what value it will have to business. it's a lot bigger conversation than watson come here, i need your whatever. know who the senator was? huh? yeah. i'm the only guy in the world that tells a nice story about al gore, i think. think if al gore hadn't -- maybe he knew that. maybe he knew that that innovation had no value at all. what about $100 billion for that? until you have customers, boom, we got an explosion out of it. maybe when we build institutions of innovation, somebody better raise their hand, say it's not making the pie any bigger, not fixing that right there. what fixes it is when somebody actually starts a business. there's been about 26 million companies that actually only six million of the six million, four million of them have only 1.4
employees, only two million businesses, that's getting smaller. see, we keep working on innovation while the part that actually fires it and creates customers and creates gdp and gdp per capita, that's getting smaller. yeah, we keep working on this because that fits our confirmation bias. i think i'm going to end it with this point. i think this will make sense. here's where you have hope. if you are an engineer, you look for solutions where you find variation. so these terrible numbers aren't consistent across the country. so you have some states that are probably never turning themselves around. i don't know what you do with illinois or california. they are so under water. then you have states that make a profit. florida's killing it.
see the variation? i get a kick out of tennessee because that's a good one for researchers. obviously in the same country so you got all the same laws, same state so you got the same governor, all the legislation and all that, but you got two cities in there with very different outcomes. one's memphis and one's nashville. memphis is really struggling. nashville's killing it. but what it does, it gives you hope but leaders of these
communities, especially by cities i think even more by states, can change the outcome of america. i noticed that somebody turned our story into obama's failure or something like that. if you look at that line, you know what conclusion you could have that's way outside of confirmation bias? you could ask yourself how much does the president really change the country. because obama's line is bad, so is bush's. you go clear back to where there's really a big lift, reagan had a big lift, went down a little bit. of course, you get the recession, then clinton came back a little bit. i just throw this out to you. because you know when we say things aren't going well we say we need a new president. that one's no good. bush is no good. that one didn't work either. now let's go clear out and try this one. i'm just wondering, there might
be more solutions from the leadership of america. maybe 10,000 of us, maybe 100,000 of us, than there is with the president. but thank you again for all that you do. congratulations on the 30 years. thank you very much. >> presenting his views on u.s. leadership in the global economy, and the ways open trade and an improved tax policy will help keep the u.s. competitive while creating opportunity at home and abroad, please welcome our morning keynote speaker, the chairman and ceo of fedex, mr. fred smith. >> good morning, everyone. thank you for having me here today. that was an important presentation. a lot of very sobering information. i think the caliber is quite reassuring give b the many
economic challenges that the united states faces today. economy has been growing too slow. our national debt has increased to 105% of gdp since 2007. the u.s. now owes, again, as jim mentioned a moment ago, almost $20 trillion and this is projected to grow. federal investment is at the lowest level since the late 1940s as a percentage of gdp. net business investment is subdued. infrastructure is deteriorating. protectionist tendencies are increasing here and abroad and the election results certainly show that too many people feel they're being left behind. some blame these problems on trade, but the facts indicate otherwise.
history shows clearly people have always wanted to travel and trade and today that desire is stronger than ever. with our constantly growing digital economy anyone with a mobile phone can reach new markets in nanoseconds, funneling digital connectivity into more buying power, more economic growth and a higher standard of living. >> fedex is at the nexus of global trade. we move 12 million shipments every day, serving 220 countries and territories so we see the value of trade every day. in fact, as jim said we are not up to par with our friends in nashville, the largest clearance port of entry in the united states of america is the memphis
airport where our fedex super hub is located. we at fedex are passionate about supporting trade and we consider all fedex jobs to be trade jobs. we have over 450,000 team members around the world who help enable the supply chains of companies from the united states to uganda, from singapore to south africa. we know that trade means more markets and greater opportunities for u.s. companies, especially small and medium businesses which comprise about 97% of u.s. exporters. based on what we've seen over the past 40 years at fedex and beyond that from 20th century history we know several things to be true. centrally planned government directed economies simply don't work. they can't sustain growth, they can't respond quickly to changing market conditions, they innovate more slowly and they
don't attract much foreign investment. look at what's happened in socialist venezuela, when the price of oil, venezuela's main export was at an all time high the government used revenues to fund massive social programs without investing to diversify its economy. when oil prices dropped the country had to discontinue most of those social programs and could not even afford to import basics such as milk and eggs. grocery stores shelves stood empty and citizens stand in lines to get basic food rations. protectionism doesn't work, either. a "wall street journal" article examined the effect of brazil and argentina's protectionist over imports. such policies have indeed created factory jobs, but they've come at great cost to consumers who pay higher prices for goods and to taxpayers who foot the bill for the subsidies. the article notes taken together
these measures essentially transfer wealth from society at large to a smaller group of workers. a december 2nd article in the "new york times" did an excellent job describing global supply chains and u.s. manufacturing's dependence on imported content. the article discussed the reduced competitiveness u.s. manufacturing firms would experience if the prices of their inputs were to rise because of new tariffs. we have the best example of protectionism from our own history. the devastating smoot/hawley act of 1930 raised tariffs on more than 20,000 items. this contributed to a 66% decline in world trade from 1929
to 1934. this misguided act of congress ignited the great depression. in 1934 with the leadership of secretary of state cordell hall, good tennesseean franklin roosevelt overturned the smoot/hawley act and established the trade policy the united states has pursued ever since, one of competitive open markets. history has shown repeatedly that free market economies create human opportunity. the postwar general agreement on trade and tariffs or gatt which sought to reduce tariffs and other trade barriers was a decisive factor in the post-war growth of the united states which became the richest country in the world. u.s. trade policy was also a major factor in the recovery of japan, germany and other devastated countries. trade certainly got its fair share of attention in the recent
presidential campaign, but much of what was said is inaccurate and i'd like to set the record straight. first, trade is good for and absolutely essential to american prosperity. trade is a two-way street in which both imports and exports are vital. keep in mind that the u.s. exports goods and services. in 2015 the united states exported more than 750 billion in services. we also import products for other countries, imports secure materials needed to create american products and imports give our families more choices and lower prices. from 1960 to 2015 trade rose as a percentage of u.s. economic activity according to the world bank from 9% to 28%. even though we are the world's largest economy 80% of world's purchasing power and 95% of its consumers lie outside the united states. our farmers rely on foreign markets to remain financially
strong. in fact, one-third of all american farmland is planted for exports. american manufacturers depend on foreign markets with about 25% of all manufacturing jobs in this country being supported by exports. overall trade supports over 40 million u.s. jobs or more than one in five in our nation. tens of thousands of those jobs are at fedex. trade-related jobs pay an average of about 18% more than non-trade-related jobs and in general trade has added more than $13,000 a year in purchasing power for the average american household. a second fact about trade, market access and e-commerce are changing the nature of trade. thanks to the internet and global logistics services offered by fedex and others, e-commerce is booming.
worldwide retail e-commerce sales are approaching $2 trillion and are projected to exceed $4 trillion by 2020. while much of this is domestic trade cross-border e-commerce will unlock even more growth potential for companies of all sizes especially small and medium-size companies. let me just give you one great example of this just up the road. fedex customer ora jean technologies in rockville maryland, they develop dna clones used for research. starting with eight employees in 1996 they now employee 80 in the united states and approximately 500 worldwide. their network of international distributors reaches more than 35 countries. fact number three, the u.s. wins when we enter free trade agreements.
u.s. has free trade agreements in place with only 20 of our trading partners. contrary to public perception, the united states enjoys a surplus with those trading partners in manufacturing and has global surpluses in services and agriculture. according to the department of commerce our 20 free trade partners buy nearly half of all u.s. exports. on a per capita basis these 20 countries buy 13 times as many goods and services as other countries. that's because free trade agreements remove barriers to our goods and services and make our exports more competitive. these free trade agreements are the solution to trade deficits, not the problem. american workers and businesses need agreements like the trans-pacific partnership. it's an important step toward
achieving free trade agreements between the u.s. and 11 other countries in the pacific rim. we're 100% behind tpp. this recently negotiated agreement will unlock portrayed opportunities with these other fast growing tpp countries. tpp represents more than 480 million potential customers for u.s. businesses. the agreement would eliminate 18,000 tariffs on u.s. made products, thus increasing global demand for america -- american made goods. it will spur greater investment in the united states, which correlates directly to new jobs here. our strong recommendation to the incoming trump administration is not to abandon tpp, but to improve it towards full free
trade which president-elect trump supports, with these countries. there was also a great deal of negative talk about nafta during the election campaign, but, in fact, nafta is the linchpin of our current economic competitiveness. here is what nafta does, it eases trade among 450 million people in the united states and our trading partners, canada and mexico. nafta trade more than quadrupled in 20 years which boosted the economies of all three countries. nafta has made the united states the centerpiece of a huge north american production platform. nearly 14 million u.s. jobs depend on trade with canada and mexico. economist gary huffbauer estimates that nafta makes the united states about $127 billion richer every year and u.s. private sector jobs have increased by more than 29 million, a 32% rise since nafta began. of course nafta was written in the 1990s and the nature of
trade has changed substantially, mostly due to the internet and the digital economy. modern trade agreements like tpp address 21st century trade issues such as e-commerce, cross border data flows, state owned enterprises, small businesses and global supply chains. all these improvements plus others in the areas of labor and environment are included in tpp. if president-elect trump wants to improve nafta, we recommend he start with these types of provisions, many of which have already been agreed to by mexico and canada as part of tpp. the new administration may also want to address the advantage that mexican exporters receive through the rebate of value-added taxes or vat on all their exports to the united states. we don't have similar rebates on corporate taxes paid on u.s.-made goods and this puts our exports at a serious disadvantage. while nafta could be updated and strengthened as noted withdrawal is another matter entirely. there are a myriad of reasons why that would be catastrophic for the u.s. economy but the main one is the nature of
american supply chains. few people understand how nafta has woven the productive capacity of north america into one integrated platform. the united states, canada and mexico make so many things together. 40% of the value of mexico's exports to the united states is u.s. content. the auto industry is a great example. it's been said that the average american car crosses the u.s./canadian border seven times during it's production. a november 10th "wall street journal" article cited an example in which a seat had parts from four u.s. states and four mexican locations. nafta makes the u.s. one of the most attractive manufacturing locations in the world because of value-added productivity of both canada and mexico in one integrated north american supply chain. if we could complete freed trade agreements with asia and europe the u.s. could, in fact, become the undisputed champion in
manufacturing once again. withdrawal from nafta would have massive repercussions, thousands of u.s. companies would have to ship their supply chains at great cost and disruption to their businesses. americans should understand that pulling out of nafta does not ensure that production in mexico would come back to the united states. in fact, it's possible that many u.s. manufacturers would either find suppliers in other countries or use mexican production to export to other markets because mexico has 40 plus free trade agreements, double our level. we've talked about tpp and nafta, but we haven't mentioned the huge economy that is part of neither of those agreements, china.
u.s./china relationship is the most consequential global relationship of the 21st century. it comprises the two largest economies in the world, two economies that are highly interdependent. we have numerous common interests and challenges and many of the toughest global issues cannot be solved without sign know u.s. cooperation. for years the bedroom of our relationship has been based on
three principals, first that china's rise is good for the united states, second that both countries must work together where we have common objectives and third we must manage our differences carefully so they don't spiral out of control. those three principles are still valid and should continue to govern our relationship going forward. both sides, however, have to acknowledge that attitudes in the united states are changing towards globalization, international trade and china itself. let's look at these changing attitudes crystallizing in the minds of american business leaders, policymakers and the public who elect them. no one can reasonably deny that china's joining the wto has brought about enormous benefits
for china and overall the rest of the world. having china inside the global rules-based system will always be preferable to having them outside it. china's wto membership has brought great benefits and opportunities for consumers and companies around the world, including fedex. it's also propelled dramatic economic growth and change in china. let me know that fedex strongly advocated china's entry into the wto, it was the right call then and it still is today. but it's important to note there are tradeoffs and maybe people here have been hurt by china's economic rise, especially in the manufacturing sector. when we talk about the manufacturing issue it's important to note that not all our problems can be claimed on china. much of the u.s. decline in manufacturing employment is due to automation and productivity improvements. even so u.s. manufacturing output was more than $2 trillion in 2015.
we make things today with fewer people and that will continue into the future. in addition it's important to note our trade deficit with china is really a trade deficit with asia and the vast network of asian supply chains into china. even if we imposed massive tariffs on china much of their production would simply shift to other asian markets such as vietnam. tariffs on china will not bring back large numbers of low value added manufacturing jobs. training our workforce for the future and reforming our tax code will grow high paying manufacturing jobs here in a truly open trade regime. protectionism will reduce them. but let me be clear, there are legitimate concerns about chinese mercantilist policies that promote domestic companies there and their industries while restricting foreign competition. a list of troubling chinese economic and trade policies includes the indigenous innovation initiative, support of national champions, massive
investment in state-owned companies, intellectual property violations including cyber espionage and forced technology transfer. fedex has experienced protectionist policies in asia firsthand so i know of what i speak. both gentleman panned and china tried to deny fedex our commercial rights. japan and china did this trying to protect potential domestic competitors. many other western companies have faced similar forms of protectionism. prime minister abe in japan and prime minister xi in china are well aware of their own economic challenges due to protectionism in their country. this is why prime minister abe has taken a strong stance in favor of tpp against significant domestic opposition in japan. in the same vain president xi has strongly supported a more open and dynamic chinese economy with a more consumer driven gdp.
unfortunately progress to those ends in china has been slow as increased support of debt for state-owned enterprises. the growth in the last 20 years has been remarkable, china is now approaching the outer limit of investment and export-led mercantilist growth. china will not be able to take the next more difficult step to transitioning to a higher income country while still a state-run economy. china need only look at what's happened inpoon. its mercantilist approach for so many years gradually slowed its economic growth almost to a halt. that's why ja upon now avidly embraces tpp. a steenable culture of innovation does not grow through
government know fee national nor through state supported acquisition of foreign technologies, brands and businesses, while keeping one's own economy closed. instead, chai into needs to pull back from state ownership, reduce regulations and move towards becoming a true free marketle is. here are three recommendations for china regarding the incoming trump administration. one, make the u.s./china relationship a top priority to avoid a downward spiral in economic and commercial relations that would harm millions of people. the peterson institute has modeled the impact on the u.s. economy from a full blown trade war with china and mexico the results are not pretty. it would throw the u.s. in recession and cost us close to amillion jobs. the president of both countries must commit to maintaining the relationship as we work through our differences.
we need to focus on exports to china than restricting chinese imports. we need more trade, not less. this requires the trump administration to address chinese and u.s. policies that inhibit u.s. exports. of course we must be addressed, prepared to address situations where china or other countries export to the u.s. in violation of trade rules. the trump administration has an extensive away of tools to acquire. the u.s. should not ignore the services sector. export services jobs pay wages that average 20% higher than the united states average. the u.s. enjoys a trade surplus of over $250 billion. private services account for about 68% of our gdp but only
about 50% in china since so many important service sectors are closed. 7 opening these service markets will help china achieve its objective moving from an ervegs ported based economy to a more consumption based gdp. the bilateral investment treaty that the u.s. is negotiating with china could give the trump administration its first opportunity to get a better bilateral agreement and help china achieve its internal market for foreign goals. third we need to enforce our trade afwreemts and address policies that penalize the u.s. economy and our workers. as a u.s. has been the primary architect of a rules based system since franklin roosevelt's administration. it's important to recognize blanket terrorists imposed across the board are not the
right response. such tariffs will erode support for the rules based system and unleash a wave of protectionist retaliation around the world. china should understand that under a trump administration will be stronger and more rapid consequences for closed door commercial practices. how china reacts will be important, all the while we support president xi's stated commitment to a more open chinese economy. we hope the trump administration will take another look at tpp and realize not only its benefits to the united states, but also the consequences if an improved version is not approved. tpp is the bull work against current chinese practices and china is aggressively moving forward if its own trade agreement in the region, the rcep or regional comprehensive
economic partnership. many tpp countries have said without tpp they have no choice but to move closer to rcep. we urge the trump administration to put a stamp on a revised tpp by addressing any concerns it sees and making any additional improvements to promote trade rather than restrict it. we also hope other existing trade negotiations can be picked up and strengthened under the trump administration. the two most important of these are the trade and services agreement or tsa and the transatlantic trade and investment partnership or ttip with the eu. trade facilitation should be another priority. we've been promoting this for years. the wto trade facilitation agreement has now been ratified by 102 countries and needs only eight more to come into effect and this will reduce customs and
administrative cost by up to 14% which is significantly more than the average global tariff. finally the trade promotion authority or tpa congress passed the u.s. has a comparative trade advantage. we need to lean into those opportunities rather than to walk away from them. it's important to recognize the u.s. success in the world economy depends on three other changes. first, we have got to overhaul our corporate tax code. our 35% korpd tax rate is one of the highest in the world and is inconsistently applied across industries. in addition, the united states and chile are the only two, the only two major economy with the worldwide tax system.
we tax companies anywhere in the world making our goods more expensive overseas and our companies less competitive. this combined with a lower corporate rate will resolve many of the disadvantages i've talked about today and that were so central to the recent presidential election. it will equal more investment and higher investment means more better paying u.s. jobs for american workers. second, we must train our workers for the innovative jobs of tomorrow. a mckenzie study noted in a few years employers worldwide could face a shortage of 85 million high and medium skilled workers. we should strengthen our trade adjustment and assistant programs for provide for retraining of workers impact by
a global trade in automation. large number of those jobs will stay in the you will stay in the united states. and third we must improve our infrastructure. unless we make improvements we'll lack the capacity to handle a growing economy and the global supply chains that support it. our federal and state governments must work for modernizing infrastructure for maximum competitiveness. trade has made america great, and expanding trade has been a bipartisan pursuit for over 80 years. the failure to continue to do so would be a severe mistake with enormo enormous kons fences for america and for the world. thank you.
[ applause ] >> ladies and gentlemen, please join us in the foyer for coffee and refreshments. programming will resume promptly at 10:20 a.m. >> c-span, where history unfolds daily. in 1979 c-span was created as a public service by america's cable television companies and is brought to you today by your cable or satellite provider. >> c-span's "washington journal" live every day with news and policy issues that impact you. coming up tuesday morning, house armed services committee member congressman bradley byrne of alabama on the nomination of senator jeff sessions to the office of attorney general and he'll talk about republican plans to make significant changes to the affordable care act. then house foreign affairs committee member congressman brad sherman of california on the issues facing the new congress, including president-elect donald trump's
presidency, and his major policy initiatives. he'll also discuss homeland security, foreign affairs issues, and the ongoing confirmation hearings in the senate this week. s c-span's "washington journal" live beginning at 7:00 a.m. eastern tuesday morning. join the discussion. tonight a farewell ceremony for outgoing defense secretary ashton carter, then a look at the u.s. political system and the role of campaign finance, and later, a discussion on energy policy, and the future of global oil markets. defense secretary ashton carter was honored today as a former military farewell ceremony in arlington, virginia. the event included remarks from secretary carter and joint chiefs of staff chair general joseph dunford. this is just under an hour.