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Kirkpatrick: Next I will be interviewing Nilmini Rubin on a very critical topic, a big picture topic, which is really more national: How do we keep the United States competitive? And a lot of the things that we have been hearing today already are deeply pertinent to this. Nilmini is senior advisor for global economic competitiveness of the House Foreign Affairs Committee, where she leads the technology, trade, finance, and energy legislation work.
She has had a very eminent career in Washington, even though she’s quite young, working at the White House, at the National Security Council, with the Senate Foreign Relations Committee, the Treasury Department, Federal Reserve Bank. And I think you will find she has a very strong and interesting perspective on where the U.S. opportunities lie in relation to other countries.
So I think I’m now mic’d up properly. Am I? Yes, I am. So Nilmini, come join me.
I know you have a strong view on what is possible. Can the U.S. stay competitive? What should we be thinking of as a priority as we see nationally countries around the world really redoubling their own focus on making jobs, building wealth, and selling things to the world?
Rubin: Well, I absolutely think that the U.S. can remain competitive and grow our competitiveness. We have some of the most amazing natural resources and most amazing talented people, and we have growing emerging competitive advantages. I think the previous panel talked a little bit about energy—and it is a really powerful transformational change in the U.S.—reduction in energy costs here. It’s attracting more foreign companies to manufacture in the United States, it’s making our manufacturing more attractive.
One example is, BMW is coming to Washington State, where electricity is six times cheaper than they could get in Germany, and building a plant, a $100 million plant, there. So I think we have a lot of advantage in the U.S.
Kirkpatrick: I know we have a lot of perspectives. Why don’t you tell us about that.
Rubin: I think one of the best ways we can increase jobs is to increase our exports. We have 317 million people in the United States. There are 7.9 billion people in Earth. That means 90 percent of the consumers are outside the U.S. If we think about growing businesses with just a U.S. focus, we are really missing the people who are there to buy our products. So I firmly believe that focusing on exports and focusing at the beginning as a creation of the company on this wider growth and market is really absolutely fundamental.
One way we are doing that, a free trade agreement with U.S. and EU is something that is under negotiation, or more of a free trade deal with Asia on the trans‑Pacific partnership. So we are trying to push in Washington on trade deals, and we also have different export promotion groups in the U.S. Government. They are available on export.gov. We have this alphabet soup of different things that can help companies access markets. Because it is really confusing dealing with all the regulatory issues in exporting.
Kirkpatrick: Give us some statistics that we discussed about how many U.S. companies actually do export. The scale of the opportunity is really shocking when you lay it out.
Rubin: So the United States exports 17 percent of our GDP. That is similar to Rwanda and Tajikistan.
Kirkpatrick: Hmm. We’re right up there with Tajikistan.
Rubin: We’re right up there. In contrast with Germany, their export to GDP ratio is 52 percent.
Kirkpatrick: We’re 17, they’re 52.
Rubin: Right. And less than 1 percent of the 30 million companies in the United States export. And 60 percent of that 1 percent export to only one country. So we just have a massive incentive for increasing our exports.
Kirkpatrick: I think that’s a perspective that maybe is not intuitive in Detroit where the auto industry has had a very global view from the beginning almost, certainly many decades.
Rubin: Detroit is one of the leading areas. Out of all the areas of the U.S., Detroit region is the fourth largest exporter from the U.S. to other parts of the world.
Kirkpatrick: Okay, don’t congratulate yourselves too much here. Okay, the auto industry we know is rebounding, a lot of strength there, but how does a small company think more intelligently about creating markets outside the U.S.? Which clearly is an opportunity, if only 1 percent of the companies are doing it.
Rubin: One of the easiest ways to do that is to start out on the Internet. So you are initially being accessible to the rest of the world. Fifty-eight percent of U.S. businesses are on the Web—that even have a website, and less, about 58 percent, have e‑commerce‑enabled Web sites. So as people think about how to grow their business from the beginning, if they think about being on the net, e‑commerce, people can buy from them easily around the world, that’s a great way for them to start. In the U.S. market, about 78 percent of Americans have access to the Internet. But if you look at the rest of the world, there’s a lot more people coming on and a lot more people, consumers, who will be able to buy our products.
India, only 11 percent of Indians have Internet access. And not only will more people have more access to Internet, but they will have a more ubiquitous way; they will have it on their hand‑helds or their tablets or their PCs, and it’s a great opportunity.
Kirkpatrick: You mean there will be more and more ways to sell using technology on a global basis. But to turn your statistic around, 42 percent of American businesses don’t have any Web presence, you are saying.
Kirkpatrick: Which is kind of amazing. That would be like if 42 percent of you didn’t have a smart phone, which I think is probably not the case.
You know, we have heard a lot about education. You are a competitiveness expert and you think a lot about these issues. How serious do you think the U.S. education and training deficit is as we are trying to prepare people for the economy that’s emerging?
Rubin: I think that the training deficit is really apparent in the structural unemployment numbers. So if you look at who is unemployed, it’s not this—it’s not—I guess some people use the word peanut butter—it’s not across the board. It is certain groups of people that are unemployed for long periods of time. So I think rather than thinking about these across‑the‑board changes on education, which can be helpful, if we are really thinking about unemployment, we need to be thinking about how do we address the people who are lower‑skilled, who maybe have a high school—maybe don’t even have high school—education, who are the main component of the unemployment.
Because the number of people with college degrees that are unemployed is very small. You know, there’s, overall, it’s 7.3 percent unemployment in the U.S., 8.8 percent in this area—in Detroit it is 8.8. That means 11.3 million people are unemployed in the United States.
Kirkpatrick: And seeking work. And there’s the 1 percent that have given it up too.
Rubin: So I think we need to be very focused on how we addressed the training. I was very heartened, I think, by some of the issues that Governor Snyder pointed out by talking about not just training but helping people get to work and really thinking holistically about why people are unemployed.
Kirkpatrick: Now, you work in Washington, and I don’t think most of us in this room have a very positive view of what Washington is capable of doing at the moment in addressing issues like that. What’s your view—even something as basic as what you just said, directing resources more in the areas where unemployment is concentrated and offering kind of creative new services to remediate unemployment, can we reasonably look to Congress to move forward on some of these kinds of things?
Rubin: I think that Congress has a very important role.
Kirkpatrick: I’m not here to beat you up. I would love to beat up a lot of Representatives of Congress, but not you.
Rubin: And I think that there is potential, and I think you are seeing more bipartisanship growing.
Kirkpatrick: You do really?
Rubin: I think that the thing is, when you are green, no one covers it. No offense.
Kirkpatrick: You work for another rational Republican like the one that was sitting here before. Okay, good. Keep going.
Rubin: Yes. I think there are the small bills that get through, or the letters that we’ll push on the administration to do things that will come up in a bipartisan way. Honestly, those things never get covered.
Our committee, the House Foreign Affairs Committee, passed out two pieces of legislation recently on export commission and competitiveness, and I don’t think there was a single article about it. There was strong bipartisan support, and they saved the taxpayers money. They consolidated some things that were being done, and one part of the government brought them together, created the strategy; and you know, it was like a pin dropping in the forest.
Kirkpatrick: Okay, you said something to me which I don’t think is a political comment, but I am curious for you to explain a little bit. You said people in Washington are working in an 18th century system to address 21st century challenges. What do you mean by that?
Rubin: Well, I mean our system was designed to be slow, and it was designed by people who had a very different perspective. And you know, before we even had like air travel, so it was people who were expected to be together in one area, working towards certain issues. And now, you know, you have members going back to their districts, we’re all disconnected in a lot of ways, even though we have more connection with technology, but we are not one little community. And we have a lot of rules that might have made sense when they were created, but they’re hard to manage.
Kirkpatrick: So can we change that?
Rubin: I think it’s hard to change our system, but I think that it’s a matter, I think, of educating ourselves, and the people who want to change the system, exactly how it works. So instead of saying just Washington is broken, you have to think about, well, how is this system supposed to work, and let’s make it work for us.
Kirkpatrick: So you are not somebody who thinks that we have such a dysfunctional government that we can’t improve competitiveness, coming from Washington?
Kirkpatrick: You are another one of these optimists in a way that’s even more counterintuitive than we technology believers.
Rubin: I guess as I look at the rest of the world, I mean we are on the Foreign Affairs Committee, so while we are all very familiar with the dysfunction in our system, there’s a lot of dysfunction around the world. And our system has a lot of advantages. And democracy is messy, because people we don’t agree with have a vote. And it can be very, very painful and difficult to work together in this convoluted system. But at the end of the day, we still have a democracy, and I think that’s something that is a great thing.
Kirkpatrick: Is that somebody over there with a question? Okay. Anybody want to make a quick comment or question? Didn’t you just ask one?
Barone: My name is Frank Barone. I live in the Washington, D.C. area also. I think we sat together on the bus coming in.
A couple of words of advice having worked in Washington, D.C. for 30 some years. A famous statement: In God we trust; all others bring data.
If you want to communicate in Washington, D.C. the governor put it forth very eloquently, it was restated again here: Please go to Washington, D.C. with, A, no chip on your shoulder, no anger in your voice, professionalism in your demeanor, and back up your proposition with a significant amount of data. Recognize you are one of many that bombard them every day. And most importantly, do not come there seeking for revenge for something that happened to you in the past. Plan on something that can be done positively going forward. Go to the subcommittees. Solicit effectively to staffers. Create papers they can read. Focus on points, and provide communications to they will. If you do that, Detroit can be very effective. Detroit has a lot of visibility in the D.C. community right now, a lot of interest, because you are only one of many that are in the same situation. So treat it professionally. Don’t be angry at it. Recognize they are human beings also. They can change, but you have to help them.
Kirkpatrick: It is encouraging that someone like you is engaged in the system too.
Kirkpatrick: Is there another comment over there?
Jefferies: Yes. I’m Daniel Jefferies with Newmind Group, and I am fascinated by the export numbers that you shared. I am curious. The growth of the service sector, how does that play into the export numbers, being that when people think about exports they mostly think about hard goods?
Rubin: Well, services are an important part of our exports, and not something that is really coming to a head, especially as we talk to Europe, about the free trade agreement, so financial services are a big part of it.
Services, every $100,000 to $250,000 in exports creates a job in the United States. It depends on what sector. So services, for every dollar in services it creates a higher number of jobs than sometimes even in some parts of manufacturing. Agriculture is actually the highest number of job creation for services. But as we move more towards services, it’s still the same story, that as we think about exporting our services it will be to our advantage.
Jefferies: Is that one of the biggest opportunities, though, services? Shall we be thinking not of sending shoes overseas but of sending software and intellectual property and other service types?
Rubin: Services are our major component of the U.S. trade. And as we think about, you know, what could we possibly sell if we are getting into a free trade agreement with a country like Vietnam, services is obviously a big component of what we can do. So we have, I think Frank mentioned, you know, kind of how to advocate in D.C., but there are a lot of groups related to services who come to educate members, to make sure that all of the agreements really do cover fairly the services component and don’t get forgotten along the way.
Kirkpatrick: And we are about to enter into a free trade agreement with Vietnam if things go right, aren’t we?
Rubin: We are in negotiations with a dozen countries, including Vietnam, Malaysia, Australia, and Mexico for the Trans‑Pacific partnership, and the round of negotiations is expected to end this year. Japan just joined, which is very exciting because it is an important market and it’s a market that had a lot of barriers to U.S. goods. So it’s an opportunity for us, but there is a risk of it slowing down in negotiations. So everyone is hopeful they will indeed end at the end of this year.
Kirkpatrick: There really hasn’t been that much movement on free trade in the last few years in the U.S., but do you see that tide shifting, that we could really move towards a lot more openness and more global agreements?
Rubin: I think that there’s a lot of pressure right now in the USTR to adjust more free trade agreements. We have 17 free trade agreements in place now. And with what’s going on with our Asian negotiations and our Europe negotiations, USTR is very stretched. “USTR” is U.S. Trade Representatives that negotiate the deals. It’s absolutely essential we negotiate these deals because it is a big opening for us.
Kirkpatrick: We’re out of time, but I am so happy you came to join us. You are somebody I really respect, and I really wish your kind of thinking to prevail in Washington.
Rubin: Thank you so much for having me.