And how to advance americas trade agenda to President Trump and the 115th congress. This is about an hour and a half. Ladies and gentlemen, please welcome the president and ceo of the u. S. Council on competitiveness, the honorable deborah wincesmith. Good morning. Welcome to the 2016 National Competitiveness forum and the u. S. Council on competitivenesss 30th anniversary. Last night, many of you were with us at the Smithsonians National museum of American History and we were so pleased and delighted to celebrate with so many friends and colleagues from around the country and the world. The councils 30th anniversary and to honor two great leaders of american competitiveness for their contributions. The secretary of Energy Ernie Moniz and the long time science adviser, john hold wren. Today we have a full and engaging day of presentations and recommendations and we hope you all will participate in the conversation. Allow me to just share a few thoughts about todays anniversary forum. In some ways, when you think of 30 years back and where we are today it is a little bit of a back to the future story, but not really. Because when you look at the threats and the challenges 30 years ago, they were very, very different from today although we were living in times of turbulence and transition. And Many Americans had tremendous anxiety about their future and it was really the vision and creativity of our founder john young who felt we needed to create a Nonpartisan Group of ceos from all sectors who would join with our University President s, labor leaders and now National Lab Leaders to develop a road map for americans prosperity and to work very closely with our government policymakers to implement that agenda. Our anniversary of course is a time of celebration, but very importantly today were going to focus on the future. We have some outstanding, exciting innovators who are going to be with us and were going to again look at what will be the path forward to enhanced growth, productivity and prosperity. We will shortly release the councils flagship clarion call for competitiveness with our recommendation. Which constitutes our strategy to the new president elect of america and the new congress that will take office in january. Were going to hear as i said from some top line innovators but were also going to have some very important discussions on new thought leadership from the council on competitiveness. Were going to hear from jim clifton the ceo of gallup about the new report that gallup and the council released earlier this week. No recovery, an analysis of the long term decline in u. S. Productivetive. Well have a fabulous luncheon talk from brand farren of the fabulous Applied Minds center in los angeles. If any of you have been there, its really a journey into the future. And then later in the day were going to talk about entrepreneurship and have a great discussion with steve case who i believe you have the book, the third wave hes given us today. I want to thank all of the members of the council for their tremendous support and participation with us on our journey. I want to thank and recognize our very generous sponsors who made last night and today possible. Lockheed martin, pepsico, united association, deere and company, deloitte, fedex, snap on, Arizona State university, the bank of america, ucla, uc san diego, whirlpool, white cap investments. I want to thank sara eisen who will join us shortly and her great team at cnbc for being our media partner today for the forum and finally thank the board and the executive committee of the council on competitiveness for all of their time and stewardship and being the host of this forum. So welcome, and we look forward to a fabulous day. Thank you. Ladies and gentlemen, joining ms. Wincesmith on stage to release the clarion call, competitiveness to the 45th president of the United States of america, please welcome the chairman and ceo of deere and company, and chairman of the u. S. Council on competitiveness, mr. Samuel allen. The vice chairman and chief scientific officer for Global Research and development of pepsico and u. S. Council on competitiveness vice chairman for industry, dr. Mehmood khan. The president of Arizona State university and u. S. Council on competitiveness University Vice charge, dr. Michael m. Crow. And coanchor of squawk on the street on cnbc, ms. Sara eisen. Hi, welcome, everyone. And thank you to our distinguished panel and im very pleased and honored to be here to kick off this exciting day. And to introduce the councils clarion call which is great way to frame the day and the conversation and is going to be their mission that will be sent directly to president elect donald trump. Here to discuss whats going to go inside, sam, if you would, as the chairman, please kick it off as far as the key priorities that you would like to mention in this clarion call. Well, i started off by saying that the president elect probably wont like his report card, so theres a lot of fs and ds. Not too many as on there. I think the important thing that were trying to highlight in the clarion call, there is a way forward, that there when you look at where the economy has been and this is really about accelerating gdp growth and that gets down into two components. That is how many workers are participating and whats the productivity that were deriving out of that . A number of the areas that were looking at in the clarion call whether it be education, which gets into really developing the workforce of the future. Whether it gets into assuring that we do start handling the debt which makes it sustainable. Whether its continuing to invest in basic r d which is important to the innovation set of this, which also drives the productivity piece. There are a number of areas there that we think are very, very important that we set a direction Going Forward. You can prioritize which ones you work on first. But all these areas are important to assure that the country is growing at a sustainable rate over a long period of time. What i love about the council in general and this panel is we have so many different backgrounds in academia represented. Mehmood, what are you looking to accomplish on behalf of the council and the clarion call . Well, you know, as im sure you see it in the clarion call, when we think about opportunity for growth theres still a lot of exciting opportunity out there. And let me just take sort of a Technology Perspective for a second. Lets start with the productivity we have had and we think about what everybody talks about as the moores law where the competitional power of microprocessors has gone to be doubling every two years or so. Its been an amazing few decades. That slowed down. One way of looking at it, the growth has been done and yet, there are exciting technologies coming around the corner that can jump start again and give us another scurve. Thats exciting because its another wave of growth. Its not just exciting from the economic point of view, but also its important from a defense point of view. As many people in this room know, the our military needs secure state of the art microelectronics. In fact, the last defense bill required the secretary of defense to make that available by 2020. So its a whole cluster of capabilities there. If we look beyond there in the more consumer industry, engineering in general, we have got the internet of things. Everybodys talking about it. Everybody is talking to experience it. If you think of the capability of sensors, Big Data Analytics and the ability for communications between devices, we are living that only at the surface right now. It will change the way that businesses operate, businesses use their labor force. The way that Companies Like mine at pepsico engage with the consumer. We have an exciting wave of this coming, this link between individuals and machines and machines with other machines. Now, another area that has generated from this as we now take internet of things, Artificial Intelligence and now link that to robotirobotics, li whats happening in manufacturing. We have seen a wave of that in manufacturing. But driverless vehicles are another example. Not only cars and automotives, but even the potential around the airplanes. Having said that, ill touch on it at the end, we have to be conscious that that means a change in our workforce. We have a very large workforce that is part of transportation. What are we going to do with that as that technology and that growth comes . And the last piece i have left to the end because thats my background and i have a lot of passion for it. Is the opportunity coming into biotechnology. If you really think about what biotechnology has done, it took 13 years and 3 billion to sequence the first human genome. Now you can do it in 24 hours, literally for about 1,000 bucks. Its going to get faster and cheaper. Whats the implications of this . Take a Technology Like crisper where scientists can go in and precisely edit a gene sequence in an organism. It has profound implications when used for good. Lets take an example. Somebody born with an inherited disorder, the ability to go into the bone marrow and change their stem cells or to go in and identify a plant variant that is more drought resistant, is pest resistant because we can select certain genes that is revolutionary. Remember we have to feed 2. 5 billion more people on this planet in the next 25 years. In closing on that part, i would say, look these are just examples but one thing we have to do. When were talking about technology, we cannot leave large parts of the population behind. Technology has to lift everybody. And as multiple stakeholders, we have got to engage people. Talk. Discuss. Agree on whats good for society. And then invest behind. But im very excited about the technology and thats what our clairian call is calling out. So from your perspective, what are your hoping to accomplish this year . I think the first thing to point out is that, you know, this is a tremendous country, we have been tremendously competitive for decade after decade. We have done things that are unbelievable. When you look at the annals of human history. But what we have come to is a point where were having difficulty right now managing the forces that are required to be as competitive as possible. So theres really three things at work. One is the overwhelming force of destruction, every system replaces a previous configuration or system and in that if the citizenry is not capable of making those adjustments, then more and more of them will fall back and while well have fantastic achievements in some sectors well have generally weakening Competitive Position in our overall economy which is the case now versus the previous decades. And well have a very negative set of impacts in terms of people being left behind. So whats happening now is that we havent matured enough our eye is not on the ball. Whats happened is these rates have changed as we just heard. Theyre so fast that rather taking three generations for a change to be implemented, theres five major changes in a single persons life. Five transformative things that would affect the single individual. What that means then is that we need to dramatically enhance our focus on the ball. The focus for competitiveness needs to be on the continued development of ideas, were underfunding fundamental research, were underfunding from which the ideas can emerge. Other people are stepping up, other parts of the world. We have been stagnanted a not moving at the speed we should be moving. I place that as a secondary issue to the really principal issue of people and people development. We have a poorly articulated, poorly developed and very weak immigration policy on every front. The countrys been built on the notion of driving ideas forward. Driving the forces of Creative Destruction forward and the education and training of new immigrants and citizens and thats something that needs to be worked on in our report, and it gives a very poor grade for our policy and all that. And i think the thing that were not doing that we havent figured out is were arguing about super silly things right now. Were arguing about whats the role of the government in this, and whats the role of the government in that . The government has always played a role in the preparation of the workforce. By investing in the next generation through schools and through universities and so forth. We have literally literally were so far off the mark right now. Were so far off having our eye on the ball, not from the resources that are being allocated but through the mindset. We dont realize that everyone has to graduate from high school. If youre not graduating everyone the entire system is failure. Because those people will not be employable. They will become wards of the state. They will be concentrated in nothing but income tax transfers to the individuals so we need new schools, new ways of thinking, new ways of moving forward and new ways of organizing universities, et cetera so that we can find a way to actually produce individuals who have the capability of being competitive themselves. Competitiveness is not only a function of the national net competitive outcome. It is a function of the derivative of the individuals competitiveness. So we have far too little focus on the individual and preparing the individual to be competitive. I passed the uber test vehicle in phoenix the other day. There was no one in the first in the front seat. It was driving. There were people in the car. No one was in the front seat. I was at a meeting in morocco a couple of weeks ago that a guy stood up from a Major Technology company in the United States, he says we need to replace between 3 and 10 million jobs of the people that will be displaced by the Artificial Intelligence and the Decision Making systems. Are we prepared to do that . No, we just need a tax system to give them money so they can eat. Well, thats nuts. Need competitive individuals, clustered together and advanced through life long education who can continue to be competitive at higher and higher and faster and faster rates of change. And thats the algorithm we need to figure out. We havent figured it out. Deborah, how do you tackle the challenges and the goals and turn them into reality . I think one of the most important things about the councils clarion call and we have been issuing this for a number of years is that we recognized theres not one silver bullet. This is an integrated system. If we can really make progress in partnership with our Public Policy leaders, with congress, but really with the leaders in this room from all of these sectors, we can begin to tackle some of these. But we have to look at this and Going Forward on all fronts. Yes, we can get, you know, our Corporate Tax rate down to a level comparable with our competitors. I think finally a recommendation we have been calling for many, many years is get the 2. 6 trillion thats overseas back into the u. S. With an appropriate tax level. We can make progress also on some of the issues around our regulatory burdens. But the things my colleagues have been talking about, these are our competitive advantages. So i think the message i really want to convey is, lets get our house in order on the things we could do that put us right now at a disadvantage to our global competitors around tax and the debt and regulation. And just turbo charge on these competitive advantages around the technology transformation, and the people in america. I wonder, sam, if the improved Growth Outlook that deborah was referring to and some of the progrowth policies, the stock market at a record high, helps to tackle the more structural issues. If the growth is the medicine thats been missing, is what makes it so hard to prioritize some of the issues youre talking about. I think that it certainly is it will be an enabler of bringing people together. I think some of the stimulus that sustainable growth. What it certainly does is turbo charges in the shortterm. And when growth is stimulated in the shortterm, that makes it a little easier for everybody to come together and say, okay, how do we Work Together on this longterm problem, ones weve been talking about. I think the important thing for people to recognize, though, is, i mean, you can change the tax rates, do all those things, that will drive a spurt in the economy but you have to change productivity equation longterm if you want longterm sustainable growth. So it will be very important, and thats where the council can help, i think, in making sure everyone is focused, okay, how do we tackle the big problems, things like what michael has talked about while we are experiencing this near term stimulus thats brought about by the changes that are sure to come with the next administration. I was just going to emphasize, look, i touched and talked about the exciting opportunities of technology. I want to come back to what i ended with. If we dont deploy all of this exciting opportunity in a manner that lifts everybody, then were going to have a worsening of where we are today. Looking at it purely from Food Industry perspective, 50 to 60 million americans today that live on subsidized food, food stamps one way or the other. Thats about one in five americans today. If that part of the population is not given not just financial means and subsidies but meaningful work, people dont just want to be given a hand out. I dont care if its government or private sector they want to be engaged in society, parping in society, having a voice but also contributing. Thats part of what we are as human beings in any society. I dont care where you are. That needs to be focused on. It cant be done by any one sector alone. What the council is doing is pointing out gaps and proposing real pathways forward of how multiple stakeholders, everyone in the room working together. To change that. I do have an important point that michael was raising. Technology is an enabler, its not a destination. Where do you find that countries are out front on this, michael . Globally looking around the world, as we look to a loss of competitiveness, as you described it . Who do you think our chief competitors or rivals we need to watch and follow. Theres lots of competitors and i think the nature of competition is good. Competition produces better ideas, better products, better outcomes, Economic Growth, economic enhancement. Weve got rise of asian tigers, weve gone fantastic competition coming from some of the countries in europe. Stabilization going on in some of the markets in south america. A whole new conceptualization. I am just back from a trip to the middle east, things going on there, happening there that are unbelievable, all positive, positive, positive. The problem weve got is were the rich family in the big house down at the end of the street that everybody now looks at and says, whats going on in there . Meaning theres a lot of arguing going on in that house, a lot of stuff going on. So the thing we have lost, i think, perhaps compared to others is that weve been coasting. Weve been coasting on the investments of the past. Weve been coasting on the systems of the past. We were unbelievably competitive launching missions to the moon and doing the things that were going on in the 1960s and the moonshot mentality and projects and achievement and all kinds of things. We can do that, but we havent figured out how to help every individual how to be competitive. If you live in the United States today, and you have only a High School Education or less, there are nearly 25 fewer jobs for you than existed just prior to the recession. If you live in the United States today, and youre of european descent and youre a woman and you have only a High School Education, your life span is going down. If youre in the bottom third of the American Economy from an income perspective, 110 Million People, something on that order, in that bottom third, you have no positive indicators. Life span going down, Educational Attainment going down, incomes going down. Family stability going down. There are no positive indicators. If we dont fix that, im not talking about fixing it from social engineering perspective im talking about fixing it from a competitiveness perspective. There wont be competitive enhancements in the United States. You cant have a third of your population thats noncompetitive and hope your country will be competitive and that bottom third will at one point either destroy or kill everyone else. So its something that needs to be fixed. Its not something thats going to lead to competitiveness. How do you do that, deborah . Are you more hopeful as you describe the Public Private partnership that at least were coming out of some years of gridlock in washington, d. C. Theoretically we shouldnt see it as intensely as it has been over the last few years. Well, i think were very optimistic at the council on competitiveness because of the people we have that are in our organization and our extended partners to really begin to tackle these very deep structural problems, but also the opportunity. I think we have to always be looking at the opportunity before us. And certainly now when i look back at the beginning of the council and during my time, weve just seen a plethora of very new innovative Public Private partnerships that are not only large scale. When you think of the energy in manufacturing sectors and what were doing there, you know, to bring together the power of universities and National Labs with our Large Scale Investments on the federal side, you know, no country in the world is doing that on the scale we are. Mehmood mentioned the potential with the next generation of electronics. I dont know if were going to call it semitech 2. 0, but this is an area where we really need to bring together everyone that has a role in this to insure that were developing and deploying the electronics and the sensors that are going to drive all of this new change in industry. I think in terms of our engagement with policymakers, this council is very proud that we are nonpartisan. Weve worked across administrations, one of the founders of the Senate Competitiveness clause, were prepared to be very aggressive to work across the aisle to really move forward on implementing the clarion call for competitiveness. Its going to take everybody in this room and really, you know, the tremendous leadership we have in the council on competitiveness to do that. It sounds like the common theme is it all comes down to people, our people training, education, preparing them for technology. As ceo, what would be on your wish list as you try to hire the next generation of folks who work at john deere hopefully as long as you have, more than 40 years. When we look at it, our wish list, theres two sets of skill sets were looking at. Were looking at the technical skill sets that we need to have against a lot of what michael was talking about in terms of developing those individuals. But then were looking at the human skill set that we want, the ability for people to relate to other people, to work in because we are in a very global environment. Were looking for people that can be very inclusive, work across cultural lines, very effective in that environment. Both of those are very challenging, and theres what we would say right now both areas we need to do a lot of work on, both in preparing people to work in this diverse environment as well as getting the right set of technical skill sets we need to continue to move our company forward. Mehmood, if you were just about out of time, but i wanted to hear from you on this as well. From mexico. Just quickly to build on that, weve all heard and talk about s. T. E. M. S. T. E. M. Isnt just people with ph. D. S and degrees in engineering or medicine or whatever. S. T. E. M. Is about quantitative skills. If were going to fill this gap, we have to create a system where young people who may not have the opportunity or aspire to doing advanced Technical Training can get quantitative skills through our education system. Theres a huge gap yet we on the industry side have difficulty recruiting and filling jobs that require quantitative skills. Michael, can you leave with us a hopeful note . The hopeful note is that all of these things are solvable, theyre all understandable, theyre all doable. We deployed a math class last semester that has 40,000 students from around the country and around the world. Its called college algebra. Its not about algebra. Its a fantastic class with intelligent tutors, personalized learning platforms, move at your own pace. If you stay with the class, you will Master College algebra. If you Master College algebra theres little else on a technical or quantitative side you cant comprehend and cant actually master. What were doing is figuring out how to teach everyone how to move not some people forward, not just great athletes forward, but all athletes forward. Im going to take that class, by the way. Yes. Ive just decided. In our spare time. Im sorry that weve gone over. I know deborah and the team here at the council and sam will work their very hardest. It sounds like theres a long todo list. Thank you very much, our distinguished panel and thanks to awful you for being here. I know its going to be a great day. Thank you. [ applause ] ladies and gentlemen, releasing key findings from the new u. S. Council on competitiveness report, no recovery, please welcome the chairman and ceo of gallup, mr. Jim clifton. Well, deborah, congratulations and thank you for having gallup be a part of this important 30th anniversary and congratulations on the great contribution youve made not only in business and industry, but also to our country. So, we were asked to make a report talk about productivity and more specifically, about growth. And were going to hand the report out in just a minute. I dont want to go through the report because you can read it yourself. As a matter of fact, they have a slide deck with one slide. I dont think, ive never done a slide presentation before, but ive got one slide. I do refer to it as my deck. I want to take a little bit of a different angle on it, kind of a leadership angle on what we have done. The guy who founded our company was a guy named after george gallup, who was an academic more than he was an entrepreneur. Usually makes that list of 100 most influential, the real good list. Not the Time Magazine list with chefs and all that kind of stuff. But the one with George Washington and franklin and that kind of thing. He had a thing, he loved democracy so much, he said if democrat is about the will of the people, somebody should find out what the will is. Hed always report that to washington not unlike the council, to make a clarion call, because what he said was if youre wrong, this is what he worried about. If youre wrong about the will of the people, when you make policies and you lead and youre wrong about that premise, the more you lead, the worse you make things. But what a wonderful what a wonderful mission. I was thinking about how that applied to right now. And about growth. Because let me just ask you. Are we in a recovery . Because its a debate. I dont think i should say this in front of this group, but i didnt actually know what productivity was. I know what gdp is and i have some opinions about that. I know that 2. 5 is a lot better than where we are now. At about 1. 5 or 1. 7 . I know we need 2. 5 to break even with the amount of costs we have. When youre 1. 7, youre slowly going broke. I also looked into, did you know, between 18 if you say whats the right amount of gdp to have, i dont think this board should be blank like this. I dont know what the right number is. Can you go up to eight . Have 9 . Something where you, what do you need . The biggest moment in the history of Human Development in the last few years is between 1850 and 1950 in the United States of america, we just kind of overwhelmed the world and now were 25 of all the money. Heres a good question. What was gdp during the time series . You know what the answer is . Three and three quarters. Think how small those differences are. Three and three quarters. You say how do we boom and dominate economically, the answer is three and three quarters over a time period of ten years. How do you go broke . You have a time series of about like we do now. 1. 5 or 1. 7. But you have to be somewhere about above 2. 5 . Which i didnt know that. The next thing i learned was that gdp is not the best method and if you take a population of economists, both right leaning, modera moderate, left leaning, whatever it is, they say the best measure is actually gdp per capita. I didnt know that. I started thinking, maybe it would be gdp per worker would be good. You cant do that because you have fewer people in the workforce, so if you get too many dropouts, you have it inflated. You have to do gdp for the whole population, because people at home, good for them, theres lot of people who should be home, but they use the economy, too. So do babies. The best number you can use, and so thats the number that gallup and the council and then my team of economists chose to use. We went back 50 years. We determined that was the single best metric to determine if were in a recovery. Now remember, if were in a recovery, i looked the word up. I was on a flight back from frankfurt, i was thinking about this. The way they bring you the newspapers. I had the financial times, the wall street journal, the International New york times. I found an article in every single paper on the front page that referred to americas recovery. That seems like a very important article to me, so i looked up recovery. It means that you have been sick and youre getting better. Youre recovering. Thats what it means. You wouldnt think i would have to look that up, but i did. Going back to dr. Gallups point, if we are in a recovery, that suggests totally different activities than if we are not in a recovery. If were in a recovery, it suggests everything is going well and to kind of get your hands off the wheel and tweak it a little bit and keep nudging it in that right direction. If we are in decline, that means you got to shake everything up. That means you need a turnaround. You need turnaround, you see the difference . But harkens back to you better get your premises right because if were wrong about that, the more we lead, the more we ruin the country. So heres my deck. My oneslide deck. This is 50 years of gdp per capita in the United States. Can you look at that and see a recovery . I wrote down three quotes that i just you can find them anywhere you want. This ones from the wall street journal. The guys name is eric. I wont say the rest of his name, but i read him before. Heres what he said. The u. S. Economy appears to be growing at its fastest pace in two years. I dont know what he sees but i guess you can say it. I think you can go through like the radio salesman, you probably can find one little blip between one quarter and another. I dont know. Heres one from i wouldnt say his name, from raymond jones, the Investment Banking company in new york. Growth is a lot stronger than it looks. I dont know what that means. But where do you find growth thats stronger than it looks on there . This ones interesting. This is my last one. Have you ever heard of confirmation bias . Guy got a nobel prize for this. When you make a decision or come to a conclusion, what he figured out was only 30 is based on fact and 70 is based on emotion. Hes actually a psychologist. Only psychologist to get a nobel prize in economics about six or seven years ago. Confirmation bias is that you only you look for facts that confirm what you want to believe. But you wonder how often we get into that, whether its, mario, you and i were talking about the media tried to find facts, not picking on the media, all of us did it, i did it, too, why only hillary can win, why brexit will never work, why the electorate in colombia will never vote for the farc treaty. Nobody saw arab spring coming because that 70 dominates all of our thinking. Were always in a fight with that 70 . This one is really an important one. This was we are seeing definite evidence, i dont know if my senior editors here in the room but i dont think there is anything called definite evidence. You either have evidence or you dont have evidence. Anyway, we are seeing definite evidence like convince me, this is the time i really mean it, its evidence, the economy is expanding more strongly. Definite evidence. Who do you think said that one . Do you know . Thats janet yellen. Shes working on my 70 , too. We are not in a recovery. It helps me when i can reduce things to kind of their simplest form but if we were a company and this was a Shareholders Meeting i would be reporting to you that our sales are 18 trillion. We have 100 million fulltime employees. We have gift million parttime employees. And we have debt of 20 trillion, going to 30 trillion. And we have revenue thats increasing at a decreasing rate, and our revenue is down to about 1. 7 . And i can finish the line to where its zero. Do you want some of that stock . The next thing i would tell you is that i got some good news for you. That is that foods cheaper than its ever been before so when i was a kid, it was almost twice as much. Thats some good news. Transportation and gas. But we have three expenses that are totally out of control. 18 trillion in sales, 20 trillion in debt. We have three line items that are booming out of control. Know what they are . We need to know. Education, we all know health care, we all know housing. I see in the clarion call that i think we know those pretty well. Remember, there are some real basics you need to know as shareholders, too. One of them is with health care, we spend twice what other comparable countries spend on health care per person. We spend twice as much as england, canada, france, germany. Two times as much. Next thing you need to know is that they all live longer than we do. You dont like to hear that. That doesnt work well into the confirmation bias. That one doesnt fit neatly in there. The Great American health care system. It makes you wonder a little bit. So canadians live three years longer, french live three years longer than us. We spend twice as much. It makes you makes me wonder the more they spend on it, the faster they kill us. You read this . You can hardly believe it. You got to google it to believe it. I did. I was wondering how many people were killed in hospitals. We worry about soldiers. I know this is general. I know the admirals are here. I dont know. I think the Single Digits in war over the last ten years. You read the new england journal of medicine how many people were killed in hospitals last year . Put a number in your mind. Google it. Their answer is 100,000. Its dangerous to be in baghdad, afghanistan. You want to go a place youre really in danger . Get into a hospital. They maimed a million. Just saying. Johns hopkins put their number out and said 250,000 but you wonder when you have an expense item thats that out of control and has that little success, do you really need lean or do you need total disruption . Another one that our analyst found was education. I dont need to go on and on about that, but you know its booming. It has many other implications to the amount of debt that boomers have. Boomers are going to be wonderful workers. They are really different. I saw a conversation on squawkbox this morning and they were talking about are millennials different than any other generation. They said no, no different, just younger. They came to a conclusion but that fits again, theres your confirmation bias. It fits the line they needed. Im going to tell you, tell me if this makes them different. They dont have babies. That seems to make them quite a bit different. This is the first year where the white man is going to be smaller. They are causing the white man to be extinct. That seems like a real big one to me. They also have the lowest marriage rate since the history of our company. When i was a kid, the Great American dream was to own a house. Not so much with them. Home ownership is the lowests its ever been. We have just been wrong about that american dream, but it changes almost everything. They dont change diapers anymore. They have pets so they buy expensive dog food. If you have stock in pet food its going through the roof. The changes are extraordinary. Yet we are wrong about them. It kind of bothered me i was watching squawkbox, i said i thought, i wonder if everybody goes away with that confirmation bias and do their jobs wrong because they concluded the wrong thing there, because they did. I looked up their ratings. They have 100,000 people watching. I dont know if thats a big or small number but i know its about the same of a Michigan Home game. That would be a crowd about that big. Bingo. But they are very important people. Thats the point. I dont care if theres a million, but theyre very important people. They go out, they have the wrong thing. But theres one real important thing in there that has to do with education. Baby boomers will be very good workers. Heres one big difference between my generation and the generation before. The generation before, baby boomers produced jillions of baby. The other thing they did is started a whole bunch of new companies. The other thing millenials dont do besides not having babies is they also dont start companies. That needs to be fixed somehow. But education is probably not doing that because what we have done is when we ask them where they are right now, they are in a whole different state of mind than my group because what, saddled with debt. The other thing is when you ask about you think there will be money, if you ask me do you think there will be money for retirement, i say yeah. How about for your kids . I think there will be some for my kids. How about your grandkids . I know there wont be. Now those kids will become aware of that. So if you take education, take housing, take health care, it may not be as simple. Its more complicated in how they fit into all the decisions we make, the clarion call we make, because all of them seem to be tied somehow to growth. Im trying to i have been trying to stretch my thinking since we started this project because i keep getting surprised so much but if you said what did you figure out and the report i think will be, maybe its coming out now. Thats why im not doing the report. You can read yourself. Im trying to make reckless remarks here. But so we know we need more growth and i can say this to this group because my business is selling innovation. But when we say how do you fix our gdp and this problem, we know we need to get the pie growing. So you say when are you going to do to get the pie growing . Know what our answer is . We have all concluded the same thing. We did it with our own confirmation bias and were wrong. We think its just innovation. So we just keep building up innovation. We spend hundreds of billions of dollars on innovation. Read the wall street journal yesterday or the day before, and we have a Record Number of patents. I mean, since 2000, its just boomed. Innovation, we are blowing it through the roof. So how are we doing with new companies . The lowest its ever been. We just keep booming because somebody told Us Innovation creates companies. We dont consider it. We dont consider the other side of it. Maybe it doesnt. Of course its a big part of it. I will just throw this out to you. What if innovation has no value whatsoever unless its in the presence of a customer . We dont think of that. What about innovation has no value at all until it has a Business Model that works . Its the story thats kind of unbelievable but you all know who vince cerf is . What a great guy. He and bob khan got packets to fly through fiber optics and that was the internet. They were the Wright Brothers or something. He told me this story at dinner. Its got to be true because its not complimentary to one of the most important americans ever. He already built that thing so we could send signals around and all that. A guy came over from the u. S. Senate who loved technology and said to him let me see that thing. Vince showed it to him. He went, thats the greatest thing ive ever seen in my entire life. Can i go back to senate and pass a bill and throw it out to commerce and see what they can do with it . What a conversation. You know what vince said back to him . Fine with me but i dont see what value it will have to business. Its a lot bigger conversation than watson come here, i need you or whatever. Know who the senator was . Huh . Yeah. Im the only guy in the world that tells a nice story about al gore, i think. Think if al gore hadnt come over. Maybe he knew that. Maybe he knew that that innovation had no value at all. What about 100 billion for that . Until you have customers, boom, we got an explosion out of it. Maybe when we build institutions of innovation, somebody better raise their hand, say its not making the pie any bigger, not fixing that right there. What fixes it is when somebody actually starts a business. Theres been about 26 Million Companies that actually only six million of the six million, four million of them have only 1. 4 employees, only two million businesses, thats getting smaller. See, we keep working on innovation while the part that actually fires it and creates customers and creates gdp and gdp per capita, thats getting smaller. Yeah, we keep working on this because that fits our confirmation bias. I think im going to end it with this point. I think this will make sense. Heres where you have hope. If you are an engineer, you look for solutions where you find variation. So these terrible numbers arent consistent across the country. So you have some states that are probably never turning themselves around. I dont know what you do with illinois or california. They are so under water. Then you have states that make a profit. Floridas killing it. I was just out in wyoming and theyre printing money out there. I dont know whats going on. See the variation . I get a kick out of tennessee because thats a good one for researchers. Obviously in the same country so you got all the same laws, same state so you got the same governor, all the legislation and all that, but you got two cities in there with very different outcomes. Ones memphis and ones nashville. Memphis is really struggling. Nashvilles killing it. But what it does, it gives you hope but leaders of these communities, especially by cities i think even more by states, can change the outcome of america. I noticed that somebody turned our story into obamas failure or Something Like that. If you look at that line, you know what conclusion you could have thats way outside of confirmation bias . You could ask yourself how much does the president really change the country. Because obamas line is bad, so is bushs. You go clear back to where theres really a big lift, reagan had a big lift, went down a little bit. Of course, you get the recession, then clinton came back a little bit. I just throw this out to you. Because you know when we say things arent going well we say we need a new president. That ones no good. Bush is no good. That one didnt work either. Now lets go clear out and try this one. Im just wondering, there might be more solutions from the leadership of america. Maybe 10,000 of us, maybe 100,000 of us, than there is with the president. But thank you again for all that you do. Congratulations on the 30 years. Thank you very much. Presenting his views on u. S. Leadership in the global economy, and the ways open trade and an improved tax policy will help keep the u. S. Competitive while creating opportunity at home and abroad, please welcome our morning keynote speaker, the chairman and ceo of fedex, mr. Fred smith. Good morning, everyone. Thank you for having me here today. That was an important presentation by jim clifton a minute ago with a lot of very sobering information. Before i get started on my remarks, let me first congratulate president elect trump and Vice President elect pence. I think the caliber of the cabinet nominees to date is quite reassuring given the many economic challenges that the United States faces today. Our economy has been growing too slowly, as the presentation just before us certainly underscored. Our National Debt has increased from 63 to 105 of gdp just since 2007. The u. S. Now owes, again, as jim mentioned a moment ago, almost 20 trillion and this is projected to grow. Federal investment is at the lowest level since the late 1940s as a percentage of gdp. Net Business Investment is subdued. Infrastructure is deteriorating. Protectionist tendencies are increasing here and abroad and the Election Results certainly show that too many people feel theyre being left behind. Some blame these problems on trade, but the facts indicate otherwise. History shows clearly people have always wanted to travel and trade and today that desire is stronger than ever. With our constantly growing Digital Economy anyone with a mobile phone can reach new markets in nanoseconds, funneling digital connectivity into more buying power, more Economic Growth and a higher standard of living. Fedex is at the nexus of global trade. We move 12 million shipments every day, serving 220 countries and territories so we see the value of trade every day. In fact, although as jim said, were not up to par with our friends in nashville, the largest clearance port of entry in the United States of america is the memphis airport where our fedex super hub is located. We at fedex are passionate about supporting trade and we consider all fedex jobs to be trade jobs. We have over 450,000 team Members Around the world who help enable the supply chains of companies from the United States to uganda, from singapore to south africa. We know that trade means more markets and greater opportunities for u. S. Companies, especially small and medium businesses which comprise about 97 of u. S. Exporters. Based on what weve seen over the past 40 years at fedex and beyond that from 20th century history, we know several things to be true. Centrally planned government directed economies simply dont work. They cant sustain growth, they cant respond quickly to changing market conditions, they innovate more slowly and they dont attract much foreign investment. Look at whats happened in socialist venezuela, when the price of oil, venezuelas main export was at an all time high the government used revenues to fund massive social programs without investing to diversify its economy. When oil prices dropped the country had to discontinue most of those social programs and could not even afford to import basics such as milk and eggs. Grocery stores shelves stood empty and citizens stand in lines to get basic food rations. Protectionism doesnt work, either. A wall street journal article examined the impact of brazil and argentinas protectionest policies based on high tariffs and promotion of Domestic Production over imports. Such policies have indeed created factory jobs, but theyve come at great cost to consumers who pay higher prices for goods and to taxpayers who foot the bill for the subsidies. The article notes taken together these measures essentially transfer wealth from society at large to a Smaller Group of workers. A december 2nd article in the New York Times did an excellent job describing Global Supply chains and u. S. Manufacturings dependence on imported content. The article discussed the reduced competitiveness u. S. Manufacturing firms would experience if the prices of their inputs were to rise because of new tariffs. We have the best example of protectionism from our own history. The devastating smoot hawley act of 1930 raised tariffs on more than 20,000 items. This contributed to a 66 decline in world trade from 1929 to 1934. This misguided act of congress ignited the great depression. In 1934 with the leadership of secretary of state cordell hall, good tennesseean Franklin Roosevelt overturned the smoot hawley act and established the trade policy the United States has pursued ever since, one of competitive open markets. History has shown repeatedly that free market economies create human opportunity. The postwar general agreement on trade and tariffs or gatt which sought to reduce tariffs and other trade barriers was a decisive factor in the postwar growth of the United States which became the richest country in the world. U. S. Trade policy was also a major factor in the recovery of japan, germany and other devastated countries. Trade certainly got its fair share of attention in the recent president ial campaign, but much of what was said is inaccurate and id like to set the record straight. First, trade is good for and absolutely essential to american prosperity. Trade is a twoway street in which both imports and exports are vital. Keep in mind that the u. S. Exports goods and services. In 2015 the United States exported more than 750 billion in services. We also import products for other countries, imports secure materials needed to create American Products and imports give our families more choices and lower prices. From 1960 to 2015 trade rose as a percentage of u. S. Economic activity according to the world bank from 9 to 28 . Even though we are the Worlds Largest economy 80 of worlds purchasing power and 95 of its consumers lie outside the United States. Our farmers rely on foreign markets to remain financially strong. In fact, onethird of all American Farmland is planted for exports. American manufacturers depend on foreign markets with about 25 of all manufacturing jobs in this country being supported by exports. Overall trade supports over 40 million u. S. Jobs or more than one in five in our nation. Tens of thousands of those jobs are at fedex. Traderelated jobs pay an average of about 18 more than nontraderelated jobs and in general trade has added more than 13,000 a year in purchasing power for the average american household. A second fact about trade, Market Access and ecommerce are changing the nature of trade. Thanks to the internet and Global LogisticsServices Offered by fedex and others, ecommerce is booming. Worldwide retail ecommerce sales are approaching 2 trillion and are projected to exceed 4 trillion by 2020. While much of this is domestic tre crossborder ecommerce will unlock even more Growth Potential for companies of all sizes especially small and mediumsize companies. Let me just give you one great example of this just up the road. Fedex customer oragene technologies in rockville, maryland, they develop rna dna clones used for research. Starting with eight employees in 1996 they now employee 80 in the United States and approximately 500 worldwide. Their network of International Distributors reaches more than 35 countries. Fact number three, the u. S. Wins when we enter free trade agreements. U. S. Has free trade agreements in place with only 20 of our trading partners. Contrary to public perception, the United States enjoys a surplus with those trading partners in manufacturing and has global surpluses in services and agriculture. According to the department of commerce our 20 free trade partners buy nearly half of all u. S. Exports. On a per capita basis these 20 countries buy 13 times as many goods and services as other countries. Thats because free trade agreements remove barriers to our goods and services and make our exports more competitive. These free trade agreements are the solution to trade deficits, not the problem. American workers and businesses need agreements like the transpacific partnership. Its an important step toward achieving free trade agreements between the u. S. And 11 other countries in the pacific rim. Were 100 behind tpp. This recently negotiated agreement will unlock more trade opportunities with these fast growing tpp countries. Tpp represents more than 480 million potential customers for u. S. Businesses. The agreement would eliminate 18,000 tariffs on u. S. Made products, thus increasing Global Demand for America American made goods. It will spur greater investment in the United States, which correlates directly to new jobs here. Our strong recommendation to the Incoming Trump administration is not to abandon tpp, but to improve it towards full free trade which president elect trump supports, with these countries. There was also a great deal of negative talk about nafta during the election campaign, but, in fact, nafta is the linchpin of our current economic competitiveness. Here is what nafta does, it eases trade among 450 Million People in the United States and our trading partners, canada and mexico. Nafta trade more than quadrupled in 20 years which boosted the economies of all three countries. Nafta has made the United States the centerpiece of a huge north american production platform. Nearly 14 million u. S. Jobs depend on trade with canada and mexico. Economist Gary Huffbauer estimates that nafta makes the United States about 127 billion richer every year and u. S. Private sector jobs have increased by more than 29 million, a 32 rise since nafta began. Of course nafta was written in the 1990s and the nature of trade has changed substantially, mostly due to the internet and the Digital Economy. Modern trade agreements like tpp address 21st century trade issues such as ecommerce, cross border data flows, state owned enterprises, Small Businesses and Global Supply chains. All these improvements plus others in the areas of labor and environment are included in tpp. If president elect trump wants to improve nafta, we recommend he start with these types of provisions, many of which have already been agreed to by mexico and canada as part of tpp. The new Administration May also want to address the advantage that mexican exporters receive through the rebate of valueadded taxes or v. A. T. , on all their exports to the United States. We dont have similar rebates on Corporate Taxes paid on u. S. Made goods and this puts our exports at a serious disadvantage. While nafta could be updated and strengthened as noted withdrawal is another matter entirely. There are a myriad of reasons why that would be catastrophic for the u. S. Economy but the main one is the nature of american supply chains. Few people understand how nafta has woven the productive capacity of north america into one integrated platform. The United States, canada and mexico make so many things together. 40 of the value of mexicos exports to the United States is u. S. Content. The Auto Industry is a great example. Its been said that the average american car crosses the u. S. Canadian Border seven times during its production. A november 10th wall street journal article cited an example in which a seat had parts from four u. S. States and four mexican locations. Nafta makes the u. S. One of the most attractive manufacturing locations in the world because of valueadded productivity of both canada and mexico in one integrated north american supply chain. If we could complete free trade agreements with asia and europe, the u. S. Could, in fact, become the undisputed champion in manufacturing once again. Withdrawal from nafta would have massive repercussions, thousands of u. S. Companies would have to ship their supply chains at great cost and disruption to their businesses. Americans should understand that pulling out of nafta does not ensure that production in mexico would come back to the United States. In fact, its possible that many u. S. Manufacturers would either find suppliers in other countries or use mexican production to export to other markets because mexico has 40 plus free trade agreements, double our level. Weve talked about tpp and nafta, but we havent mentioned the huge economy that is part of neither of those agreements, china. U. S. china relationship is the most consequential global relationship of the 21st century. It comprises the two largest economies in the world, two economies that are highly interdependent. We have numerous common interests and challenges and many of the toughest global issues cannot be solved without sign know u. S. Cooperation. For years the bedroom of our relationship has been based on three principals, first that chinas rise is good for the United States, second that both countries must Work Together where we have common objectives and third we must manage our differences carefully so they dont spiral out of control. Those three principles are still valid and should continue to govern our relationship Going Forward. Both sides, however, have to acknowledge that attitudes in the United States are changing towards globalization, International Trade and china itself. Lets look at these changing attitudes crystallizing in the minds of American Business leaders, policymakers and the public who elect them. No one can reasonably deny that chinas joining the wto has brought about enormous benefits for china and overall the rest of the world. Having china inside the global rulesbased system will always be preferable to having them outside it. Chinas wto membership has brought great benefits and opportunities for consumers and companies around the world, including fedex. Its also propelled dramatic Economic Growth and change in china. Let me note that fedex strongly advocated chinas entry into the wto. It was the right call then and it still is today. But its important to note there are tradeoffs and maybe people here have been hurt by chinas economic rise, especially in the manufacturing sector. When we talk about the manufacturing issue its important to note that not all our problems can be blamed on china. Much of the u. S. Decline in manufacturing employment is due to automation and productivity improvements. Even so, u. S. Manufacturing output was more than 2 trillion in 2015. We make things today with fewer people and that will continue into the future. In addition its important to note our trade deficit with china is really a trade deficit with asia and the vast network of asian supply chains into china. Even if we imposed massive tariffs on china much of their production would simply shift to other asian markets such as vietnam. Tariffs on china will not bring back large numbers of low value added manufacturing jobs. Training our workforce for the future and reforming our tax code will grow high paying manufacturing jobs here in a truly open trade regime. Protectionism will reduce them. But let me be clear, there are legitimate concerns about chinese mercantilist policies that promote Domestic Companies there and their industries while restricting foreign competition. A list of troubling chinese economic and trade policies includes the indigenoUs Innovation initiative, support of national champions, massive investment in stateowned companies, intellectual property Violations IncludingCyber Espionage and forced technology transfer. Fedex has experienced protectionist policies in asia firsthand, so i know of what i speak. Both japan and china tried to deny fedex our commercial rights. Japan and china did this trying to protect potential domestic competitors. Many other western companies have faced similar forms of protectionism. Prime minister abe in japan and president xi in china are well aware of their own economic challenges due to protectionism in their country. This is why Prime Minister abe has taken a strong stance in favor of tpp against significant domestic opposition in japan. In the same vein, president xi has strongly supported a more open and dynamic chinese economy with a more consumer driven gdp. Unfortunately progress to those ends in china has been slow as evidences by increased support for stateowned enterprise. Large growth in the last 20 years has been remarkable, china is now approaching the outer limit of investment and exportled mercantilist growth. History shows china will not be able to take the next more difficult step of transitioning to an innovative higher income country while still a staterun economy. China need only look at whats happened in japan. Its mercantilist approach for so many years gradually slowed its Economic Growth almost to a halt. Thats why japan now avidly embraces tpp. A sustainable culture of innovation does not grow through government fiat, nor does it grow through state mf supported acquisition of foreign technologies, brands and businesses while keeping ones own economy closed. Instead, china needs to pull back from state ownership, reduce regulations, and move towards becoming a true free market system. Here are three recommendations regarding china for the Incoming Trump administration. One, make the u. S. china relationship a top priority to avoid a downward spiral in economic and commercial relations that would harm millions of people. This is critical. The Peterson Institute is modeled the impact on the u. S. Economy from a fullblown trade war with china and mexico. The results are not pretty. It would throw the u. S. Into a recession and cost us close to 5 million jobs. The president of both countries must commit to maintaining the relationship as we work through our differences. Second, we need to focus on an increasing u. S. Exports to china and restricting chinese imports. We need more trade not less. This requires the Trump Administration to address both chinese and u. S. Policies that inhibit u. S. Exports. Of course, we must be addressed prepared to address situations where china or other countries export to the u. S. In violation of trade rules. The Trump Administration has an extensive array of tools to apply in those situations. Equally important, the u. S. Should not ignore the services sector. Exports Services Jobs pay wages that average 20 higher than the United States average. The u. S. Enjoys a huge comparative advantage with the Services Trade surplus of over 250 billion. Private Services Account for about 68 of our gdp but only about 50 in china since so many Important Service sectors are closed. Opening these Service Markets will help china achieve its own economic objective of moving from an exportbased economy to a more consumption based gdp. The bilateral investment treaty that the u. S. Is negotiating with china could give the Trump Administration its first opportunity to get a better Bilateral Agreement and help china achieve its internal market reform goals, and third, we need to enforce our trade agreements and address policies that penalize our u. S. Workers. But of course, we must always act consistently in u. S. And wto rules, after all, the u. S. Has been the primary architect of a rules based system since Franklin Roosevelts administration. Its important to recognize blanket tariffs imposed across the board are not the right response. Such tariffs will erode support for the global rules based system and undoubtedly unleash a wave of protectionist retaliation around the world. China should understand that under a Trump Administration, there will be stronger and more rapid consequences for closeddoor commercial practices. How china reacts will be critically important. All the while, while we support president chis stated commitment to a more open chinese economy. Xchis stated commitment to a more open chinese economy. His stated commitment to a more open chinese economy. Is stated commt to a more open chinese economy. We hope the Trump Administration will take another look at tpp, its benefit to the United States and the consequences if an improved version is not approved. Tpp is the mark against current chinese practices he and china is aggressively moving forward with its own trade agreement in the region. E and china is aggressively moving forward with its own trade agreement in the region. And china is aggressively moving forward with its own trade agreement in the region. And china is aggressively moving forward with its own trade agreement in the region. The recp. Many tpp countries have said without tpp they will have no choice but to move closer to our cep. We urge the Trump Administration to put a stamp on a revised tpp by addressing any concerns it sees and making any additional improvements to promote trade rather than restrict it. We also hope that other existing trade and negotiations can be picked up and strengthened under the Trump Administration. The two most important of these are the trade and Services Agreement or tsa or Trans Atlantic Trade Partnership or ttip with the eu. Trade facilitation should be another pry important weve been promoting this for years. The wto trade agreement has been ratified by 102 countries and needs only eight more to come into effect and this will reduce customs and administrative costs by up to 14 which is significantly more than the average global tariff. And finally, i would note that trade Promotion Authority or tpa that congress recently passed has a detailed list of all of the areas where the u. S. Has a comparative trade advantage. We need to lean into those opportunities rather than to walk away from them. And finally its important to recognize that u. S. Success in the World Economy depend on three other changes. First we have simply got to overhaul our Corporate Tax code. Our tax rate is one of the highest in the world and is inconsistently applied across industries. In addition the United States and chile are the only two, only two Major Economies with a worldwide tax system. This means we tax earnings at companies anywhere in the world making our goods more expensive overseas and our Companies Less competitive. We a need a territorial system like every other advanced economy. This combined with a lower corporate rate will resolve many of the disadvantages ive talked about today and that were so essential to the recent election. A territorial system will equal more investment and that means more and bet her paying jobs for american workers. Second we must train our works for the innovative jobs of tomorrow. A mckenzie study noted that in a few years employers worldwide could face a shortage of 85 million high and medium skilled workers. So we should strengthen our trade adjustment and assistant programs to provide for retraining of workers impacted by a global trade in automation. A large number of those jobs will stay in the United States if we adopt the policies ive mentioned today. And third, we must