Brad Smith: Next Steps for Washington's International Competitiveness
Nov. 12, 2012
Remarks by Brad Smith, Executive Vice President and General Counsel, Legal and Corporate Affairs, at the Washington Council on International Trade, Seattle, Wash., Nov. 12, 2012

BRAD SMITH: Thank you, Eric. It's great to have the opportunity to be with you this afternoon to join Congressman Smith – and I know a number of other public officials and leaders from across the region – to talk about what is obviously a very important subject.

I wanted to bring a perspective that, in part, is grounded in the technology sector and the business community. But it’s also a reflection on some of the things that I get to see in my job, not just here in Washington state, but across the country and around the world.

During the last three weeks I've had the opportunity to spend time in Argentina, in Uruguay, in Mexico and three different cities across China, meeting with government leaders, with economic development authorities and talking with university administrators, and with nonprofits. And I've had the chance to walk the assembly line in a number of different factories in consumer electronics and the computer industry in China, including the plant that is building our new Surface.

In many ways one can't help but look around the world and see what a varied place it is. But at the same time, the single most remarkable, the single most striking, thing to me is that as I travel the world, everywhere I go, people are asking the same question. They're asking: how do we compete? And in particular, they are asking: how do we develop and attract the people and the talent that will be necessary to compete effectively in the years and decades ahead?

This is as true in the most advanced cities and countries as it is in emerging markets with lower wage jobs. They are all focused on the same thing. And I therefore think it's appropriate that we start by asking this question ourselves and, in doing so, that we start by reflecting on the things that provide the strengths upon which we can build.

Around the world one hears a lot of bravado. Certainly as somebody who attended both political conventions this year, one even hears a certain amount of hyperbole about what makes our country or another country great. But as I look around the world, I actually believe that there is one objective, statistically verifiable, factor that makes the United States of America unique. In a world in which we have less than 5 percent of the planet's population, we have a population that reflects the 95 percent of the rest of the world more so than any other country.

If there is a language spoken somewhere else in the world, it is almost certainly spoken here in the United States. If there is a group of people that is talented in another part of the world, we probably have a population that has come from that place, oftentimes quite recently.

And it's not just that they come to our country. One of the things that stands out in our region is that they come to our state.

I know, because every day I go to work at a company that employs people who come here from 157 countries. And every time I get in the elevator in my building, I have no idea what language I'm going to hear spoken.

If there's one thing I've concluded, even when it comes to technology, where engineering is vital and products are the life's blood of what you create, it’s still the case that technology is fundamentally a people business. And I believe that every business in this country has fast become a people business.

It's all about whether we can create the products that the world wants, and whether we can offer the services that the world needs. One thing we should stop and really reflect upon is that when it comes to those challenges – as a company, as a state, as a country – diversity is our strength. It gives us the ability to understand customers around the world in a manner that is unmatched.

We really need to think about how to nurture that strength and develop that strength, to recognize, for example, that when there are 588 million people that live south of our border who speak Spanish and Portuguese, the fact that we have people who speak those languages is a national asset.

If we can focus not just on public policy but private sector and the civil society efforts on nurturing this diversity, we can turn this into a greater competitive advantage each and every year.

We have also seen something else. If diversity is our strength, our educational system increasingly has become something of a weakness.

We still have great strengths, to be sure. We still have a higher education system in this country that is unmatched for now. But we are showing the strains of an education system that simply is failing to keep up with the challenges of the future. And it is beginning to hit home in a way that will absolutely, in my opinion, reduce our competitiveness unless we act with a sense of urgency to address it.

I see this every day at Microsoft. As we sit here for lunch today, we have over 6,000 open and unfilled jobs. That's 19 percent more unfilled jobs than we had a year ago. We have over 3,400 open engineering jobs. And that is a 34 percent increase over the number that was unfilled a year ago. And I know full well in talking with other business leaders that we are not unique. This is true across the information technology sector.

It's actually true more broadly than that, because given the nature of automation and the importance of computerization, virtually every company in this country, at least to some degree, has become a software company. And everywhere one goes, one meets people who talk about one of their biggest challenges: finding the people with the skills they need to fill the jobs they are creating.

I can say this: if we don't solve this problem soon, jobs are going to leave this country, and they are going to go to other countries that do have the people with the skills that are necessary to fill them.

We cannot afford to allow that to happen.

We need to take new steps forward. And it may need to start in Washington, D.C. That's why we've proposed as a company that the nation provide new steps for immigration reform and educational investment. We need to create more visas. We need to create new green cards in high demand STEM-related fields.

And we have the opportunity to use this, not just to keep jobs in this country and fill them here but, frankly, to do something that the federal government has had a pretty hard time doing: raise money. Because the market will support higher fees for additional visas. We therefore have offered a proposal that would raise $500 million per year – $5 billion over the next decade.

We’ve suggested that this money be used to invest in efforts at the state level to improve standards in K-12; to make computer science a reality in most high schools across the country; to address the growing and urgent college completion crisis that currently afflicts our community colleges and four-year universities; and grow computer science and other high-demand disciplines in public universities. We need to take these kinds of steps if we are going to hold on to the country's technology leadership; and if we're going to grow jobs, as we have the opportunity to do.

And we need to do this not only in Washington, D.C. We need to do this in Washington state as well. As we've all seen, we cannot afford to cut spending in higher education. We need to move from a disinvestment strategy to a reinvestment strategy – a reinvestment strategy for higher education that focuses on the jobs that the state is creating, and focuses on the needs of the new and next generation that is now going to college here, as people are going to college in other parts of the country.

There is a myth in this country that too few people go to college. The problem in the United States is not that too few people go to college. It's that too few people make it through college. Seventy-three percent of the people who graduate from high school go on and start a college education. But if you look at our community colleges today, if you look at the people who enroll in a two-year certificate program, only thirty percent of them will get that two-year certificate in three years. And if you look at our four-year institutions, less than half will get that four-year degree in six years.

There's been a lot of talk this year about the problems that affect people when they graduate with so much debt. But, you know what's worse than graduating with so much debt? It’s dropping out with so much debt. And a majority of young Americans are facing that problem as we meet here today. So, at the state level we need to reinvest in higher education.

We need to take new steps, as we all know, to invest in K-12, as well. Certainly, we believe there needs to be a special focus on the common core standards, and the next generation science standards, and STEM education overall. We have some important decisions that will be made in Olympia in the next year, especially as we as a state grapple with the consequences of the State Supreme Court's decision in the McCleary case. In short, we have a lot of work to do. And we're either going to move forward, or we're going to move back.

The other thing that I think we need to focus on – and I know you talked about it this morning – is our infrastructure. This is one of the clearest things one sees when one travels the world. Because, of course, what's the first thing you see when you arrive in a new city? You see the airport. And even if you don't have a chance to see the port – as I didn't have a chance to see in Shanghai last week – I knew full well, talking to the government officials there, about the investments that they made in their port.

We clearly need to make new investments in these areas in this state, as well. I think we need to recognize that we will rise and fall, not on competition between Seattle and Tacoma, but the competition between our state and Prince Rupert, and new competition that will be affected as we compete with other ports, not just on the West Coast, but on the East Coast, and on the Gulf Coast, once the Panama Canal broadening is complete. We're going to need to invest in our ports.

We also need to focus on our airport. We could use some of the non-stop flights that fly into Vancouver today. We ought to ask ourselves what it would take to get some of those flights into Seattle, as well.

We all know we need to invest in our roads. We have started to make progress. But right now we actually are building a six-lane bridge that doesn't yet have a connection onto its four-lane highway on the west side. And we have so much more that needs to be done. It's clear that over the next four years we are going to have to find a way to come together as a region, to raise the money and make the investments that are going to be needed, to move our infrastructure forward.

I think we also have the opportunity, as we consider these issues, to adopt some new approaches when it comes to economic development. One of the really interesting things that I've seen over the last few years is something that isn't yet being written about widely. And that is the growth of the technology corridor that has arisen here in Puget Sound. Now, we are not a match for Silicon Valley. Silicon Valley remains the No. 1 technology center in the United States. But we have reached the point in the last two years where we are more than a match for every other region in the country. We are the clear No. 2. And there is not a No. 3 any longer, really, effectively nipping at our heels.

What we've created is a genuine corridor. It starts in Seattle with South Lake Union, and the Gates Foundation, and other companies in Seattle. It goes to Montlake, where the University of Washington has one of the leading research institutions on the planet. It stretches across the lake to downtown Bellevue and in Kirkland, and it goes to Redmond, where we at Microsoft have the largest single research and development center in the world. And there are more startups on the other side of us.

We need to think about how to nurture this strength. And as we do so, I personally think that there's a few things we need to do in particular.

First, we have the opportunity to lead this country, as a region, in developing a strategy to attract foreign direct investment into our state. Within the next three to five years we will reach a point where we still start to read every day about Chinese companies and other Asian companies expanding into the United States. They will be opening their North American research centers somewhere. They will be opening their North American sales and support centers somewhere. Why not here? The fact is, this is an area where diversity, our diversity, absolutely is a strength.

But, when I meet with economic development officials in other parts of the world, I'm struck by the creative and broad use of tools that they are using to persuade companies to relocate. They're using economic incentives in a way that we are not. At minimum, we should open our minds to some of the tools that could find their way into our toolkit. We should think about what would make sense for our region and our state. And we should get ahead of the rest of the country in fashioning a new and innovative approach.

Second, I think we need to come together as a region. Our success is not going to come from Bellevue competing against Redmond. It will not come from the Eastside going in six different directions and Seattle staying off on its own. It will come through a coordinated approach. We need to bring ourselves together.

And third, I think we need to ask ourselves: what is it about Silicon Valley that sets itself apart from what we have in our technology corridor in Puget Sound? As I've thought about this, one conclusion among many has come front and center. Silicon Valley has a name.

One of the things I've learned over the years is that if you want to do something important, if you want to do something that people will remember, if you want to do something that people will talk about, you need to give it a name. We have the opportunity to create a branding strategy for ourselves, for our technology corridor, and come up with a name that we can market around the world. We have a product to sell. Let's give it a name that people will remember.

Finally, we need to focus on some of the new initiatives that are needed when it comes to international trade. We do have distinct competitive advantages in this state and we all know that. We see that every day across a variety of economic sectors. But, we have some new challenges we need to address, as well.

Certainly, we're seeing the risks and, to some degree, a rising tide of protectionism that is making market access – especially for services, and technology services among them – more important than ever. We need new steps to break down those barriers and ensure that we, in fact, can sell what we are creating here in countries around the world.

Second, we at Microsoft believe that it's vital that we continue to move forward in addressing the state of intellectual property protection around the world. There are many countries where we have no problem getting access to the market. We just have difficulty getting paid once we're there. And we are not unique. More and more one sees the risk of trade secret theft and patent issues, in country after country, and especially in major markets around the world.

We need to think about our supply chains and the implications for our economy of having supply chains that are so extended on a global basis. One of the groups that's really forging new thinking about this is CREATe, the Center for Responsible Enterprise And Trade. Pamela Passman, CREATe's CEO, is going to be talking at 2:00 across the hall. I'd encourage you to stop in, because it will take new and innovative thinking to really get a grasp on the supply chain issues we're facing.

And finally, we need some new initiatives to continue to enhance the trade agenda writ large. From the Trans-Pacific Partnership, to the new potential dialogue with the European Union, one thing has become perfectly clear about trade law over the years: it either moves forward or it moves backwards. And especially in a time when we have more at stake than ever, we need to move ahead.

When I put all of this together – from the diversity of our people to the educational challenges that we face, to the infrastructure and economic development opportunities we have to the trade agenda we need to address – two things become quite clear.

First, we have some big problems we need to address.

But, second, we have some huge opportunities in front of us.

We need to act with a sense of urgency if we're going to solve the problems and seize these opportunities.

November marks the end of a very long election. And as we all know, it was closely contested and even at times very hard fought in both the state and across the country. When it comes time to finally have the opportunity to turn on a TV knowing that you don't have to watch negative political ads, I think the first instinct is to just breathe a sigh of relief.

But the truth is that November marks more than the end of a long electoral season.

It offers us a new beginning as well. It gives us the opportunity to come together across party lines, across municipal lines, across state lines, and really look ahead. It gives us the chance to look to a new year. But more than that, it gives us the opportunity to create a new day. 2013 is going to be a momentous time. It is going to be a year in which important decisions will either be made or delayed. It will be a moment of truth. But, more than that, if we do our jobs well, it can be a moment to shine.

Thank you very much.

(Applause.)

END

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