"Building a More Competitive America" - Remarks to the Greater Houston Partnership

Houston, Texas
April 19, 2006

** As Prepared for Delivery**

Thank you, Jeff. We appreciate all your good work and the support of the Partnership.

The Chamber's relationship with Jeff goes back several years when he worked in the governor's office and partnered with our trade education program, TradeRoots, to promote the benefits of global trade and investment to Texas.

Jeff's predecessor, Jim Kollaer, was a longtime member of the U.S. Chamber board of directors.

We're very pleased to have somebody with Jeff's strong leadership and vision to strengthen what already is a very close relationship shared by our organizations.

I applaud the Partnership for its aggressive, strategic 10-year plan to develop Houston into a global business magnet.

With a world class port, a strong high-tech base, and a highly educated and skilled workforce, you have every reason to believe that Houston is capable of becoming a bigger player in the global economy.

I understand that the previous strategic plan was formulated 15 years ago.

Just think how the economic landscape has changed since then. The Internet was still a few years away from reaching the masses. By today's standards, the spread of information and ideas was a snail's pace.

Some industries that are critical to the success of your strategic plan - nanotechnology and biotech, to name a couple - were hardly known or in stages of infancy.

Fifteen years ago, we worried that Japan and Germany would overtake us and dominate the global economy. Today, we're urging those countries to fix their slumping economies while we fend off intense competition from China and India.

All of this is to say that Houston has more opportunities to succeed today - but it also faces more challenges.

You aren't just competing against Chicago, New York, Los Angeles, San Francisco and all other U.S. cities for jobs and investment. You're also up against Shanghai, Bangalore, Seoul, and other commercial centers throughout Asia and the rest of the world.

For fifty years, we've been telling these countries how to run their economies and their governments - for our own benefit, of course. We want to sell them our goods and services and build plants in their countries.

Well, now they're doing what we've told them to do, and it makes us a little nervous. They're opening their economies, embracing free markets, encouraging entrepreneurship, building critical infrastructures, competing for energy and natural resources, challenging us in third country markets, and developing and educating their workforce.

As Houston makes its push to become a top global destination for capital and industry, it must ask itself some very difficult questions.

Where are you going to find the workers you need in a high-tech economy as tens of millions of highly educated and experienced baby boomers get set to retire and there aren't enough younger workers to replace them?…And when just one-third of U.S. high school students graduate in four years?

How will your businesses be able to expand internationally when many of our lawmakers in Washington are growing increasingly skittish about free trade and foreign investment?

How will Houston improve its roads, highways, ports, and transit systems when the current federal financing mechanism is far from sufficient for meeting our future infrastructure needs?

How will your businesses gain an edge in the global marketplace when they're consistently being attacked by the trial bar?

What is the impact on business of overregulation of our capital markets and abuse at the hands of shareholder activists, labor union pension funds, and politically motivated regulators and elected officials?

And how will your economy, and the nation's, grow when domestic energy production is restricted and global demand rises?

These are the issues that will determine Houston's - and our nation's - success in the global economy. And so let me share with you the Chamber's plan for addressing each of them.

Education/Workforce/Immigration

First, we must tackle the enormous challenges surrounding the availability of qualified workers - now and in the future.

The demographics in this country are not pretty. 77 million baby boomers are getting ready to leave the workforce, and when they go, lots of brainpower and institutional knowledge will go with them.

Because of declining birthrates, there aren't enough workers to fill those vacated jobs. In a matter of just years, we will have millions more jobs than we have available workers.

And many of the workers that will be available won't have the necessary tools to compete in the global economy because our education system has failed them.

Nearly one-third of U.S. high school students fail to graduate in four years, and that percentage is much higher among minority and inner city students.

Of the students that do graduate from high school and go onto college, relatively few of them earn degrees in math, science or engineering - disciplines that are critical to innovation and U.S. competitiveness.

China graduates eight times a many engineering students as we do; India graduates about five times as many.

Business can no longer sit on the sidelines and watch our students - tomorrow's workers - fail. We have to take an active role in developing the future workforce. The Chamber is part of a coalition that has a goal of doubling the number of science and engineering graduates by the year 2015.

We are also putting a spotlight on the quality of state education systems. Later this year, we will issue a report card on the shape of our educational system based on state by state performance. Our intention is to recognize the high performers and encourage the low performers to improve their standing.

But a better educated and highly skilled home-grown workforce doesn't solve the numbers problem. Plain and simple, our economy cannot grow to its potential without more workers from other places.

Comprehensive immigration reform that enforces our immigration and border security laws but which also gives immigrants an opportunity to come here and fill jobs for which there aren't enough Americans is absolutely vital to our future economic success.

Undocumented workers already here contributing to our economy must be given the opportunity to earn legal status if they pay a fine, follow the rules, and learn English.

If this country were to round up and deport the estimated 7 million undocumented workers who get up each day and go to work and pay taxes, it would be the loudest sucking sound you've ever heard.

Despite the collapse of a bipartisan agreement in the Senate on comprehensive reform earlier this month, we are optimistic about the future.

We're learning that many members of the House of Representatives are beginning to realize that turning 11 million illegal immigrants - and those that provide them assistance - into felons is a bad idea. And so we are continuing to press for a comprehensive solution.

Globalization/Trade

The fear we see being spread by anti-immigration advocates is also seen in the national dialogue about foreign trade and investment. Never was this more clearly demonstrated than with the Dubai ports deal.

Some members of Congress just couldn't resist the opportunity to try to appear tough on security and take a few shots at the president while doing so.

Never mind that our government agencies have and will always be in charge of port security.

Never mind that the United Arab Emirates has been a strong ally in the war on terror, and that we already entrust the Dubai company in question to move U.S. military personnel and material in the Middle East.

Foreign-owned companies support nearly 5.3 million jobs directly and many million more indirectly, and they have more than $1.5 trillion invested here.

We must remain open to outside investment - as long as it does not pose a legitimate security threat - and ensure that our competitors remain open to us. We have to push for more free trade agreements and ensure that they are fair and enforced.

The issue of fairness is one that will need to be broached with Chinese President Hu Jintao tomorrow in Washington.

It's in everyone's best interest for the United States to engage China. Our companies have much to gain from its growing economy and its 1.3 billion consumers.

Though we must encourage China to move down the path of openness, we must at the same time clearly and candidly state our expectations of it, and act with purpose and conviction when it doesn't meet those expectations.

China has not progressed as quickly as we would like when it comes to open markets, currency valuation, and intellectual property protection. However, the best way to bring about greater progress is through further engagement - not isolation or punitive measures.

There's a growing national presence that prescribes isolation, protectionism, and sanctions in response to globalization.

Despite one of the best economies we've ever had, many people feel insecure, and there are plenty of politicians, media and interest groups eager to exploit this insecurity.

What gets lost is how everyday average Americans benefit from global engagement. It's easy to take a picture of a padlocked plant to demonstrate what some claim are the downsides of globalization - it's harder to demonstrate the many ways in which the country benefits.

That's what the Chamber is in the process of trying to do. We are preparing a booklet that will lay out all the facts - with a minimum of spin and rhetoric - so that in one place, people, the press, and especially Congress can see the many ways in which Americans do benefit from global engagement. We hope to share this document with you in the next few months.

Infrastructure

To continue to compete in the global trading system, we had better have a transportation infrastructure capable of handling a growing number of goods and people. But today's reality and the future don't look promising - especially with regards to our surface transportation system.

Federal highway trust fund revenues and those collected by the states fall far short of what is needed to improve or even maintain existing infrastructure.

How bad is the problem? Current revenues fall $23 billion short annually of the cost of just maintaining our roads and transit systems from now until 2030.

If we have any intention of improving our roads, bridges and transit systems, revenues will fall $1 trillion short.

And so we need to be thinking about alternative financing mechanisms.

Indexing the motor fuel tax to inflation, implementing a vehicle mile tax, expanding the use of tolling, and encouraging public-private partnerships in the construction of roads are all ideas that deserve to be studied.

Implementing these strategies will require policymakers at all levels of government to confront some very difficult decisions, but they must be made for our economy to continue to grow and be competitive.

Energy

Let me move to energy - an issue very important to Houston.

As our economy continues to grow, it will consume greater and greater quantities of energy. Twenty years from now, the United States will require a third more energy than it uses today - even with continued improvements in efficiency.

And we're competing for limited global supplies against some very big new energy consumers, most notably China.

Over the next 15 years, the number of automobiles in China is expected to increase fivefold, helping to double China's overall demand for oil. By 2020, China is expected to import 70 percent of its oil needs, compared with 40 percent today.

Washington politicians like to have it both ways - they say we need greater domestic energy production, but then vote against production just about anywhere in the United States.

The same is of much of the public - they believe cheap energy is a natural birthright, but God forbid that a power plant be built anywhere near their home.

We have to get serious about our energy situation - we need legislation to increase refinery capacity, open up more federal land to energy exploration, and increase incentives to expand nuclear energy production - which, by the way, is an energy source many environmentalists are warming up to.

Legal Reform

While Texas is the capital of the U.S. energy industry, it also has a dubious reputation as being an attractive place for trial lawyers.

For the past five years, Chamber's Institute for Legal Reform has commissioned the Harris Poll to survey senior corporate attorneys on the legal climates of all 50 states. Texas has consistently ranked near the bottom - this year it came in at number 43.

The good news is that Texas is moving up in our rankings because of recent legal reform. The bad news is that despite the new law, the trial bar still has a lock on the courts in the Gulf Coast jurisdictions.

Nationwide, litigation drains more than $260 billion from our economy every year, creating a tort tax of nearly $900 for every person in the United States.

We need to change the legal landscape in this nation, and business needs to lead the way.

Eight years ago, business wasn't even putting up a fight against the trial bar. In 1998, the Chamber started the Institute for Legal Reform, and business got serious about restoring balance and fairness to our legal system.

The Harris Poll rankings are just one way the Chamber is challenging the trial bar and facilitating legal reform.

We're educating voters about their choices for state Supreme Court and Attorney General because these elected officials wield significant influence over the legal system.

We're spearheading a campaign to rein in the growing number of securities class action suits.

We're engaged in an effort to stop state attorneys general who are circumventing legislatures and regulatory agencies and sometimes acting like the fourth branch of government-single-handedly redefining industry practices; trying cases in the media; and threatening criminal prosecution to force settlements.

We have a comprehensive strategy to head off a new effort by trial lawyers to import foreign disputes to U.S. courts, where they can take advantage of our more permissive judicial system.

And finally, we're successfully challenging the validity of abusive lawsuits in court through our own public policy law firm, the National Chamber Litigation Center.

Give the trial bar some credit - they're shifty and persistent, and so we have to keep up the pressure.

Capital Markets

Finally, we must explore ways to make our capital markets and corporate governance system work for everyone involved - investors, management, directors, and regulators.

After Enron, some regulatory changes were certainly necessary for improving market transparency and investor confidence, and the Chamber supported them.

But there's been an overcorrection, and we're seeing the unintended consequences for our economy.

Special interest groups such as labor unions, public pension funds, trial lawyers and shareholder activists are trying to advance their agendas under the guise of corporate governance - at the expense of all shareholders.

Attorney-client privilege and work product protections are being eroded during investigations, which makes it more difficult - not less - to uncover compliance issues.

CEOs and directors are avoiding risks and playing it safe out of fear of making an honest accounting mistake.

This new enforcement environment is sucking the value out of good companies, and the Chamber is standing up to say, "enough is enough."

We are suing the SEC - and winning - on rules that go too far. We're working with the Department of Justice and the Sentencing Commission to protect basic due process rights.

And we have named an independent, high level bipartisan commission to consider the question of how to best regulate our markets in the 21st century.

We will continue to remind lawmakers, regulators, and law enforcement types that capital can and will go where it is welcome, where it is safe, and where it stands a reasonable chance to earn a return on investment.

It can move out of Texas - and out of the United States - in a flash. And with it goes innovation and creation.

Conclusion

Ladies and gentlemen, Houston has all the necessary ingredients to become the economic force that it wants to be in the future. But to realize your goals, you must stay focused on the issues I've raised today.

We have to reduce frivolous lawsuits…keep our capital markets accessible and competitive …make the necessary investments in infrastructure…take care of our energy needs… engage the international economy…and develop a workforce with the numbers, skills, and education to compete in a global, high-tech economy.

Thank you for your strong advocacy, your leadership, and your vision.