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"Restoring America's Competitiveness--And Our Energy Security", Remarks by Thomas J. Donohue

Monday, May 21, 2007 - 8:00pm

"Restoring America's Competitiveness—And Our Energy Security"

Association of Washington Business Annual Spring Meeting
Remarks by Thomas J. Donohue
President and CEO, U.S. Chamber of Commerce

Spokane, Washington
May 22, 2007


Introduction

Thank you very much, Kirk [Nelson], and good evening everybody.

I'd like to begin by thanking our host chamber, now known as "Greater Spokane Inc."

My congratulations to Rich Hadley for successfully merging his organization—the Spokane Regional Chamber of Commerce—with the Spokane Area Economic Development Council to form this new association. It is a powerful voice for business in the Spokane region.

I'd also like to thank Don Brunell for inviting me.

Don is perhaps the most respected and effective business leader in the state today. He was also among the first to shepherd his organization through the U.S. Chamber's rigorous state chamber accreditation program.

His peers recognized his tremendous leadership skills and elected him chairman of the Council of State Chambers.

I'd also like to recognize Attorney General Rob McKenna. His enforcement of the law is impartial, fair, and balanced.

He is partnering with the U.S. Chamber on establishing a state task force to combat counterfeiting and intellectual property theft. We appreciate his leadership in this area.

I'd also like to recognize the numerous state senators and representatives who are joining us tonight.

And finally I'd like to congratulate, in advance, the winners of this evening's awards—especially our good Chamber member, Ed Schweitzer.

We meet at a very challenging time for our country. In the Chamber's view, foremost among these challenges is how do we ensure that America can continue to compete and lead the world in the years ahead?

Today, America's economic power, military might, and technology are unmatched by any other nation. But frankly, there is growing evidence that we are losing our competitive edge.

For the last 60 years, we've gone around the world telling other countries how to be successful. Now they're finally doing it, and we're kind of upset about it—because now they've all become competitors!

At the same time, we're busy undercutting our own competitiveness at home. Tonight, I'd like to spend a few minutes highlighting where we are falling short—and what we can do about it.

Every issue I will touch upon is important, but I'm going to move briskly through some matters so I can spend more time on a subject that's very much on my mind—and that is energy.

You see, for a long time, I couldn't decide whether this nation's approach to energy was based on stupidity or hypocrisy. I finally decided it was both!

In a few minutes, I'll tell you why. But first, let me briefly mention several other issues.


Competitiveness Issues

Human Capital

In a competitive, global, information-based, high-tech economy, people matter.

Where are we going to find the workers to run our economy and pay taxes to support all the older folks?

Where are we going to get the intellectual capital so that we can keep moving up the ladder of innovation?

77 million baby boomers are on the verge of retirement, and unemployment rates are already at near record lows. For Americans with a college degree, unemployment is less than 2%.

Although additional gains in productivity are essential, there are really only two ways to defuse the ticking demographic time bomb that threatens us—through immigration and education.

We need a commonsense, comprehensive immigration policy that is fair to employers, fair to immigrants, and supplies our economy with the needed workers in all sectors—from agriculture to services to high tech.
The White House and a bipartisan group of senators recently announced that they had reached a deal. That's a positive step, but the devil is in the details.

The Chamber has been actively involved in this process. We're going to build on that announcement, trying to win improvements, iron out particulars, and keep the many different interests in this debate focused on what's really important—securing our borders, securing needed workers, and ensuring that America lives up to its legacy as a welcoming society.

Education reform is also essential. While we have the best colleges and universities in the world, our K-12 education system, on the whole, falls tragically short.

30% of high school students don't graduate in four years; the number is 50% for minorities.

To spur debate and action, in February, the Chamber graded all 50 state education systems—and the results overall were very disturbing. I am pleased to tell you, however, that the state of Washington scored better than most.

One business leader in your state whom you may have heard of—a fellow by the name of Bill Gates—has identified inferior public education as one of the gravest threats to America's future prosperity and global leadership. He's absolutely right.

Capital Markets

We also need the best capital markets in the world.

Onerous regulations and overzealous enforcement polices are repelling foreign investors in droves.

London and Hong Kong are giving our capital markets a run for their money, literally and figuratively.

The Chamber has created a new Center to address this issue.

Its first order of business is to implement the consensus recommendations of three thoughtful studies, including one by the Chamber's own independent, bipartisan commission.


Infrastructure

We need a world-class infrastructure if we want our $13 trillion economy to continue to grow. It's required if we want to continue to lead the world in trade.

Washington state is a microcosm of the challenges we face in this area. You have capacity and maintenance issues with seaports, highways, bridges, rail lines, and airports.

The problem is we don't have the will to build badly needed improvements, and we don't have the political courage to decide how to pay for them.

The public and our elected officials need a wake-up call. The Chamber has begun a major national grassroots effort to sound this alarm, and we need your help.

By rallying infrastructure users, we will force policymakers to make this issue a top priority.

Progress takes years of lead time to achieve. If we don't act soon, we will find that the wheels of American commerce and mobility have simply shut down.


Global Engagement

If America is going to remain competitive in the world, we must be fully engaged in the global economy. We must fight those who want to retreat to the failed policies of protectionism and isolationism.

Remember, one-third of our economy is tied to global trade. If we close off our markets to other countries, they have plenty of other trading partners to choose from.

We must pursue the Doha Round, renew the president's fast track negotiating authority, pass additional trade agreements, and insist that all agreements are strictly enforced.

Above all, we must re-educate the people and policymakers about the importance of trade and foreign investment. The Chamber has a major initiative to do that.

No country ever succeeded by building a wall around itself, and we've got to replace fear with the facts about global engagement.


Legal Reform

We've also got a legal system that has been sucking the vitality out of American companies. The Chamber has made solid progress in fighting the class action and mass action trial lawyers, but we have a long way to go.

Among our many priorities is legal reform. We are in a big fight to end legal extortion, whereby trial lawyers—often in concert with government prosecutors and attorneys general—team up to attack good companies and force them into huge settlements.

America's Energy Challenge

There are other issues challenging our economic competitiveness and prosperity, such as health care, pensions, and entitlements.

I'd be happy to discuss any of these. But before taking your questions, allow me to spend just a few minutes on energy.

Energy is the single most important physical resource underpinning America's economic competitiveness, our national security, and our free, mobile way of life.

Yet despite its fundamental importance, we don't have a comprehensive energy policy.

Instead, Washington, D.C., the states, and local governments have created a patchwork quilt of conflicting and overlapping laws and regulations. Such policies are sometimes well-intentioned, but all too often they are based on ignorance, complacency, fear, and even hypocrisy.

It seems few Americans have focused on where our fuel and power really come from, or the fact that our energy needs continue to grow.

They don't understand that the rest of the world is now competing with us for energy, or that we have put our nation at risk by locking away the vast resources of our own nation.

We have neglected the vast energy infrastructure that for years has seamlessly provided us with affordable fuel and power.

Everyone wants cheap gas and low-cost electricity, as long as it is not produced, refined, generated, or transported anywhere near their own backyards.

And now, with the emergence of climate change as a major issue, we face the risk of digging our country into an even deeper hole when it comes to potentially crippling restrictions on our ability to acquire, produce, and use energy.

In the face of confusing signals from the public, many elected officials have, unfortunately, chosen posturing and pandering over serious policymaking.

How many times have you heard politicians call for "energy independence"? Would it surprise you to learn that many of these same politicians consistently refuse to allow greater domestic energy development?

At the Chamber, we have been leading on energy and related environmental issues for years. Yet recently, we have decided that these issues are of such over-riding importance, that we have to do even more.

And so, modeled after our successful approach in legal reform, we have just created the U.S. Chamber Institute for 21st Century Energy.

We have hired the former Supreme Allied Commander of NATO and Commandant of the Marine Corps to lead it—General Jim Jones.

The goals of our new Energy Institute are clear and simple.

We must begin by educating the public and policymakers about a set of fundamental, fact-based energy realities that face our nation—realities that no serious person can deny. Then, we must build a consensus for serious action that addresses those realities.

What are these fact-based realities?

First, Americans must recognize that without a growing and diverse supply of affordable energy, our nation will not be able to grow, compete, or lead in a changing world.

Greater energy efficiency is absolutely critical. We've already made serious strides. In the last 25 years, our economy has grown by 110%, while our energy consumption has grown by just 24%.

But the reality is that even with greater efficiency, energy demand in the United States is going to grow by up to one-third in the next 25 years.
Second, we face enormous competitive pressures across the globe for energy resources. While our domestic demand will grow by one-third between now and 2030, global demand will grow by 70%!

Not only are we competing for resources, but many places from which we import our oil are unstable or unfriendly to America. And the global energy supply chain is itself an enticing target for terrorists.

All of this means that energy is a matter of profound national security.

The third reality is that we have tremendous untapped resources at home. In fact, neither our country nor the world is anywhere close to running out of coal, oil, or gas.

Many would be surprised to learn that this nation does NOT import most of its energy. Two-thirds of it comes from domestic sources.

That's because we use most of our energy to produce electricity and run our factories and businesses. Most of that power comes from coal, nuclear, domestic natural gas, and hydroelectric power—not imported oil.


And by the way, the two nations that account for the largest shares of our petroleum imports are Canada and Mexico. They make up 30% of our imports; the Middle East, 17%.

So the real issue is not so much about energy independence as it is about the fact that we have locked away vast untapped domestic energy resources … resources we can and must further develop, in an environmentally safe way, to power our growing population and economy.

This especially includes nuclear power, a sector—if fully developed—that could re-employ many of the displaced auto and other manufacturing workers who have recently lost their jobs.

The fourth reality is that diversifying our energy supply, investing in alternative sources and fuels, and achieving greater efficiency all make good sense and must be a part of any comprehensive energy strategy.

But here's the part many people don't want to hear. Even if we vigorously pursue all these avenues—and we should—it's not going to change the fact that our nation, and the world, must still rely on traditional sources such as oil, gas, and coal for decades to come.

These sources meet 86% of our energy needs today—and objective experts agree it will be the same in the year 2030.

As we know, these are the energy resources that emit the carbon dioxide believed to contribute to global warming. Figuring out how to use these fuels—while, at the same time, controlling CO2 emissions—will be one of the most difficult and contentious policy challenges of our time.

The fifth reality is that energy infrastructure is as important as the energy resources themselves. I'm talking about the refineries, pipelines, power plants, transmission lines, and the roads and sealanes that carry our fuel.

As I have said, we have neglected this infrastructure at our peril. Demand is far outpacing investment. And much of our critical energy infrastructure remains vulnerable to terror attacks and natural disasters.

Sixth and finally, however one chooses to assess the risk of climate change—whether you think it is an imminent disaster waiting to happen or a longer-term risk that can be addressed over time—it is impossible to deny that climate change is a global challenge requiring a global approach.
Within a year, China will surpass the United States as the number one emitter of greenhouse gases. India and other large, developing nations are catching up. EPA has determined that on any given day, 25 percent of the particulate matter over California has actually migrated from Asia. This same air moves the C02 that is believed to contribute to global warming.

So with these facts and realities on the table, what policies and approaches will the Chamber and our new Institute employ to build consensus and support?

To start with, we must increase the nation's energy supply from all sources—oil, gas, coal, hydro, alternative fuels and technologies, and nuclear power.

Because of existing and emerging technologies, we can develop this domestic energy more safely, cleanly, and cost-effectively than ever before.

Yet in order to make serious progress, the restrictions governing energy exploration on federally controlled lands and offshore areas must be modified in a responsible way.

Next, American technology must be applied in a massive way on a global scale.

Technologies can be developed to diversify our energy supply and to improve efficiency at home and abroad, thus easing demand.

Perhaps, most important, technology can enable us to use the traditional energy sources in a cleaner way.

For example, future "clean coal" technology will not only allow power plants to burn coal cleaner, but it will also capture and store the carbon that is left over so it does not get into the atmosphere.

Further, Americans invested almost $30 billion in the alternative energy sector in 2006 and have bought more than half a million hybrid cars.

American venture capitalists have invested seven times more on green technology than their counterparts in Europe.

Washington state has been a leader in the use of hydroelectric power, which is a main reason why your state has low CO2 emissions.

We also must expand the nation's fuel and power generation and delivery systems to meet the growing energy needs of American consumers and businesses.

This includes refineries and pipelines, our electricity grid, and our power plants.

Since 1981, both the number of refineries in the United States and their processing capacity have dropped.

While electricity demand is increasing, the construction of transmission facilities is decreasing and so is investment.

These disturbing trends defy the logic of simple common sense, and we must turn them around.

We should start by repealing policies that unnecessarily restrict the construction of new, cleaner, and more efficient refineries, pipelines, transmission lines, liquefied natural gas ports, and both coal and nuclear power plants.

Finally, we must soundly manage the issue of global climate change. That means addressing the risk on a global basis, applying technological solutions, and refraining form taking actions that would damage our country's ability to keep industries and jobs from leaving our country.


Conclusion

Ladies and gentlemen, an affordable, diverse, and secure energy supply is fundamental to our security and to the expansion of economic opportunity and prosperity for all Americans.

This energy can be secured while making further progress in the fight for environmental quality and significant contributions to the management of global warming.

How we meet the energy challenge will fundamentally define the future of our nation.

Facts and realities—not myths or fantasies—must guide us along the way.

Thank you very much. I would be happy to answer any questions.

View The Competitiveness Agenda