U.S. Secretary of Commerce Penny Pritzker Delivers J. Ira Harris Lecture Hosted by the University of Michigan's Gerald R. Ford School of Public Policy

Feb122016

AS PREPARED FOR DELIVERY
Friday, February 12, 2016

On February 11, 2016, U.S. Secretary of Commerce Penny Pritzker delivered a J. Ira Harris Lecture, hosted by the University of Michigan’s Gerald R. Ford School of Public Policy.

Secretary Pritzker’s lecture highlighted the goals she set out to accomplish after accepting the position of Secretary of Commerce and how the Department of Commerce has been revitalized to meet the needs of the 21st century economy through its Open for Business agendaSecretary Pritzker also discussed one of the most important aspects of the Commerce Department mission, commercial diplomacy, which is using America’s commercial power to influence policy in markets around the world.

Remarks As Prepared For Delivery

Thank you, Ira.  And thank you, Dean Collins and the University of Michigan’s Gerald R. Ford School of Public Policy for inviting me here tonight.  I am honored to be delivering the first J. Ira Harris Lecture.

Ira, you are loved, respected and appreciated by this community for all you have done on behalf of this great University. Thank you for all the scholarships you and Nicki have created and the professorships you have endowed. Thank you for your seemingly endless support of the College of Literature, Science, and the Arts; the Stephen M. Ross School of Business; the Ford School of Public Policy and the University athletics program. There is no question:  the two of you mean a great deal to the students, faculty, and supporters of the University of Michigan.

I am here today because you mean a great deal to me as well.  Ladies and gentlemen: Ira Harris has been part of my life for as long as I can remember.  He was a close friend of my father.  And, he’s been a father figure to me since I was very young.

So much so, that when my husband Bryan and I decided to renew our vows on our 25th wedding anniversary, there was only one person we wanted to officiate: Ira. He agreed in a heartbeat. There was one little detail about that day that I am sure you all will appreciate: Ira showed up for the occasion in his traditional University of Michigan robes and even his academic tam! Perfect for officiating at our wedding celebration.

I have always relied on Ira for advice and counsel. His nature is to be both cautious and analytical – without being cynical.

When I asked Ira whether I should step out of the business world and accept the honor of becoming the Secretary of Commerce, his natural instincts were on full display. A lot of people were counseling me against it.  They worried that after 27 years in the private sector, the bureaucracy and the politics would frustrate me.

Ira encouraged me to think through a couple key questions: How would a CEO Secretary be uniquely different in the role?  How would business experience and skill translate to the public policy arena?

How do you lead an agency five years into an administration … when you only have 3 ½ years left?  How do you become integral to a process that is well underway, while also putting your own stamp on the place and its priorities? How could we gain bipartisan support for that agenda?

Ira asked those questions, and then he encouraged me to take the leap.

Let me tell you what it is like to step out of your life. I had to resign from everything; every board, every business, and even my own family foundation.  It was like walking into a witness protection program!  And it was somewhat terrifying.

I thought I knew what the Department of Commerce did. But I had no real idea of its true depth and breadth. Commerce has 12 different bureaus under its umbrella.

When I say “different,” I really mean different. It’s responsible for everything from the National Oceanic and Atmospheric Administration to the International Trade Administration and from the Census Bureau to the Patent and Trademark Office.

We count both fish and people. We issue both patents and weather warnings. We negotiate trade deals and make sense of big data. In fact, every day we generate enough data in terabytes to fill two Libraries of Congress.

On my first day of work, I sat down in a conference room with the 50 people who were now my closest colleagues, and I had neither hired them nor met them. They began rattling off a set of acronyms like NTIA, BIS, PTO, ESA, ITA, EDA plus NOAA and NIST….. Less than an hour on the job, and I was already drowning in the proverbial Washington DC alphabet soup.

But attached to all those acronyms were some very serious economic policy issues and considerations that I would quickly need to master. It became clear that to be successful in my new role, I had to be “all in.” So I moved my life to our Nation’s Capital.

It also became clear that I needed some time to develop my priorities and vision for the Department. I announced that I would take 100 days to accomplish three items: first: putting the right people in the right jobs. When I took over as Secretary, about 80 percent of the leadership positions in the Office of the Secretary and 80 percent of our Senate-confirmed positions were vacant. 

Second: hearing from our stakeholders.  I went on a listening tour both within the Department and around the country. Third: We had to develop a strategy, a set of priorities. During those 100 days, we developed our Open for Business Agenda that continues to drive our work each and every day.

The phrase has two meanings: America is open for business – but also, that Commerce would be opening new markets and opportunities for American businesses around the world.  The Agenda has four pillars that encompass every task the Department of Commerce is responsible for: Trade and Investment; Innovation; Environment; and Data.

This framework gave every bureau of the Department the opportunity – and the permission – to identify where they fit within the overall plan. It clarified the direction we were headed together. And it enabled each bureau to develop individual strategies to meet their specific goals.

I also made the decision to position the Executive Office of the Secretary – my senior team and me – as the tip of an inverted pyramid. Yes, an inverted pyramid. The way I saw it: We were there to serve the department – not the other way around.

Over the past three years, our Open for Business agenda has unleashed the creativity, capacity, and power of the people within the 12 bureaus that comprise our department. Together we have begun to transform the Department of Commerce into a true Department of Business – that works with the private sector on policy development, helps firms of all sizes enter new markets, and supports the development and expansion of the digital economy.  

Tonight I would like to focus for a few minutes on one of our most exciting innovations: Commercial Diplomacy. Commercial Diplomacy uses the power of America’s business to influence policy in markets around the world.

Our world is too complex, our challenges too deep, and the players too diverse for us to depend solely on our traditional military and diplomatic tools.  In the modern world, commerce must be part of our foreign policy toolkit. It is the third leg of our national security stool.

For decades, the United States has played a unique leadership role in the world. At the end of World War II, America and its allies built a rules-based international system that promoted openness, creativity, as well as political and economic freedom.  

From the Marshall Plan to the Berlin Airlift to our intervention in the Balkans, we relied on the unquestioned military, financial, and diplomatic power of our government to strengthen our post-war system. But over the decades, the world has changed, and the tools we use to address our foreign policy challenges must change as well.

For the first time in history, we have a truly global economy. The size of the global middle class has doubled over the past decade, and will double again by 2030. Global networks connect business-to-business and business to consumers in ways that have never been possible before.  It means that every U.S. business has access to literally a world of new customers.

Like all great innovations, our vision for Commercial Diplomacy was sparked by a light bulb moment. It came at a large multi-lateral meeting 3 years ago in Asia when a senior Indonesian official approached me with a special request on behalf of his government. 

The Indonesian government wanted Apple to open a store in Jakarta and the official asked me to reach out to Tim Cook, the CEO. This was a curious request because the Indonesian government was among the countries trying to implement a Data Localization policy.

Data localization requires the storing of user data on servers physically situated in the country where the data originates. The Indonesian policy was in direct conflict with their goal of generating a new, high profile investment, given Apple’s commitment to the cloud.

Right then, it occurred to us that the voices of American commerce – with long-term-capital and world-class products and services behind them –carry immense weight around the globe.  America’s top executives could be deployed to make persuasive business cases to foreign officials about how certain public policies might be counterproductive. 

We realized that we could make the Tim Cooks of the world great partners in affecting economic policy change around the globe. This was the beginning of Commercial Diplomacy.

Fundamentally, commercial diplomacy brings business leaders to the table as advocates and emissaries, in concert with government officials, when and where our interests align. 

Now, we at the Department of Commerce are consistently engaging American executives in ways that have never been done before. We ask them to join meetings and policy dialogues, and in turn, executives with the authority to make multi-million (or even billion) dollar investment decisions detail why certain policies inhibit their investments. 

Rather than simply telling a foreign leader that a particular policy is “bad,” we are trying to show them what benefits will flow from pursing a different policy path. This is far more persuasive.  

As our vision has matured, we have observed that the overlapping interests extend beyond the U.S. government and the American business community. Irrespective of the country, people want economic freedom — the chance to earn a good living, start a business, and support a family.

Irrespective of the country, foreign governments want American companies to invest in their communities, because U.S. firms create jobs, bring leading technologies, respect the rule of law, and tend to invest for the long-term. Irrespective of the country, foreign citizens want access to American products and services. 

Interestingly enough, our government and our business community share these objectives too. We have come to appreciate that this overlap creates a tremendous but under-appreciated opportunity for our private sector and our government to work together as partners in an effort to support and shape a well-functioning, rules-based international economic order. 

Let me now spend a moment discussing how our commercial diplomacy efforts are playing out in a particularly pivotal place: Ukraine.

As we all know, Russian aggression in Ukraine has had a significant impact on the Ukrainian economy and its people with GDP declining 10 percent over the past two years. International financial institutions, the United States and our European allies have provided important financial support; but the key to sustainable economic success in Ukraine will be the market’s ability to draw private investment.

An independent, prosperous, democratic, and corruption-free Ukraine would be a global triple win: for European stability, for our own security interests – and for American businesses.

So, in September of 2014, President Obama asked me to go to Kyiv. My mission was to meet with President Poroshenko and Prime Minister Yatsenyuk and urge them to focus on critical business climate reforms, like addressing corruption, even while they were fighting a war in the east.  I decided to enlist the American business community as partners.

My message to the Ukrainian leadership was clear – without real reform, America’s business community would never fully commit to the Ukrainian market. The President and Prime Minister agreed and began to press ahead with an ambitious economic reform agenda. Within two weeks, their legislature passed a law establishing the National Anti-Corruption Bureau. 

The next step in our commercial diplomacy engagement was to convene the first-ever U.S.-Ukraine Business Forum during the summer of 2015 in Washington. Vice President Biden and Prime Minister Yatsenyuk were both in attendance. Before more than 150 Ukrainian and American business executives and government officials, the Prime Minister and Ukraine’s economic ministers provided updates on Ukraine’s path to reform.

American business leaders offered concrete recommendations on how to further improve Ukraine’s investment climate.  They outlined the constructive role they could play in supporting Ukraine’s integration into the global economy, a critical step if the country is to enjoy long-term political stability.

In October last year, I returned to Ukraine with a distinguished group of senior U.S. business leaders whose mission was to make the business case for why Ukraine should adopt a number of particular policies that would draw more trade and generate more investment.

Ultimately, the Ukrainian government committed to a roadmap that consisted of seven critical micro-economic reforms. And in the months since, the government has made progress on the roadmap.  They have begun developing a plan to address the significant value added tax refunds that they owe companies.  They have begun developing an electronic and transparent system for making large government procurements.

They have begun to cut back on their overly burdensome regulatory regime.  And they have implemented a new law that lowers their gas royalty rates to a level that is in line with international practices and encourages investment in natural gas production, which is something the country desperately needs.

Ukraine continues to face serious economic and political challenges, and their work is far from complete, but I mention this particular engagement as an example of how commercial diplomacy can work.  As with traditional diplomacy, success is generally defined by incremental but meaningful steps along these lines.   

As I said at the outset, commercial diplomacy is not a traditional tool in our toolkit. Both the government and the private sector are literally building new muscles.  American executives are not accustomed to framing the cost of often complex economic policy decisions to foreign leaders.  They are not trained as ambassadors, but many American executives are patriots and want to help effect policy changes that open more markets to America’s businesses and products. 

But 2 1/2 years is not enough.  We need to push future Presidents and their Secretaries of Commerce to invest in and cultivate this tool.  If commercial diplomacy is truly going to become the third leg of our foreign policy stool—and I believe it should—our government needs to develop mechanisms to systematically deploy American executives as emissaries and advocates with foreign governments.

I have no doubt that some may be cynical about this approach, but I do not think Ira Harris will be. Ira, once again: Happy birthday. And to the students and community of the University of Michigan let me close with this: Go Blue!

Thank you all so much.

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