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National Governors Association 7/31/89 [OA 6267] [1]
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26
19
2
6
PRESIDENTIAL ADDRESS: N.G.A./HYATT REGENCY, CHICAGO
MONDAY, JULY
31, 1989/10 A.M.
GOVERNOR BALILES ((BAA-LYLES), I WANT TO COMMEND
YOU ON THE SUCCESS OF YOUR CHAIRMANSHIP. GOVERNOR
BRANSTAD, I KNOW YOU WILL BRING YOUR CHARACTERISTIC
ENERGY AND VISION TO THE LEADERSHIP OF THE GOVERNORS
ASSOCIATION. CONGRATULATIONS.
- 2 -
I ALSO WANT TO SALUTE OUR HOST AND MY GOOD FRIEND,
JIM THOMPSON -- A GREAT GOVERNOR AND A FORMER N.G.A.
CHAIRMAN WHO HAS ROCKED THE WORLD OF ILLINOIS POLITICS
BY ANNOUNCING HE WILL NOT RUN FOR A FIFTH TERM
((AND TO THINK, JIM, THEY WERE JUST GETTING USED TO
YOU.))
AND IF I MAY, LET ME RECOGNIZE MY CHIEF OF STAFF,
ANOTHER FORMER N.G.A. CHAIRMAN, ((AND ANOTHER QUIET AND
RETIRING SOUL)), JOHN SUNUNU
- 3 -
ALSO AMONG US IS A GREAT AMERICAN AND A SON OF
ILLINOIS, ED DERWINSKI, MY GOOD FRIEND AND A FRIEND TO
AMERICAN VETERANS. AND FINALLY, LET ME SALUTE THE
SECRETARY OF TRANSPORTATION, SAM SKINNER, WHO IS DOING
SUCH AN EXCELLENT JOB IN DEVELOPING A NATIONAL
TRANSPORTATION STRATEGY.
LET US BEGIN BY ASKING: WHAT IS THE ROLE OF THE
GOVERNOR IN AMERICAN POLITICAL LIFE?
- 4 -
WELL, THE GREAT 19TH-CENTURY OBSERVER OF AMERICAN
POLITICS, ALEXIS DE TOQUEVILLE ONCE ASKED A COUNTRY
POLITICIAN THE SAME QUESTION. THE ANSWER HE GOT WAS
THIS: "THE GOVERNOR COUNTS FOR ABSOLUTELY NOTHING AND
IS PAID ONLY TWELVE HUNDRED DOLLARS." ((PAUSE))
WELL, YOU STILL CAN'T GET RICH OFF A PUBLIC SALARY.
BUT TODAY, THE OFFICE OF GOVERNOR COUNTS FOR A GREAT
DEAL. IN FACT, LEADERSHIP IN AMERICA IS INCREASINGLY
THE SUM OF YOUR EFFORTS AND YOUR VISION.
- 5 -
THAT IS WHY I AM A FEDERALIST. I WAS THERE WHEN RONALD
REAGAN ISSUED THE EXECUTIVE ORDER ON FEDERALISM; AND I
WANT YOU TO KNOW THAT I STAND BY IT.
WE BELIEVE IN FEDERALISM, AND YET, WE ARE A PEOPLE,
ONE NATION, INDIVISIBLE. JUST AS WE SHARE OUR
CHERISHED CONSTITUTION, so WE ALSO SHARE COMMON
CHALLENGES AND RESPONSIBILITIES.
- 6 -
To CURE OUR NATION OF ILLITERACY, DRUG ABUSE AND CRIME,
WE MUST ACT IN TANDEM, PRESIDENT WITH GOVERNOR, AND
GOVERNOR WITH MAYOR, UP AND DOWN THE LINE. IN SHORT,
WE MUST FIND OUR COLLECTIVE WILL AS A NATION.
THAT IS WHY I HAVE COME TO CHICAGO TO MEET WITH MY
FELLOW CHIEF EXECUTIVES. WE SHARE, AS EXECUTIVES, A
SPECIAL RESPONSIBILITY
SOME DESCRIBE IT AS A
GREAT BURDEN. BUT FOR US, IF IT IS A BURDEN, IT IS ONE
CHEERFULLY ACCEPTED.
- 7 -
To SIT WHERE THE BUCK STOPS, TO RESOLVE DISPUTES, TO
HELP THOSE IN NEED AND TO set A COURSE FOR THE FUTURE,
IS TO KNOW A SPECIAL KIND OF SATISFACTION.
IN FACT, OUR MISSIONS AS EXECUTIVES ARE so SIMILAR
THAT MANY PRESIDENTS HAVE CALLED ON YOU FOR GUIDANCE.
IT WAS TEDDY ROOSEVELT WHO CALLED THE NATION'S FIRST
CONFERENCE OF GOVERNORS -- THE FORERUNNER OF THIS
ASSOCIATION -- AT THE WHITE HOUSE.
- 8 -
HE BROUGHT THE NATION'S GOVERNORS TOGETHER TO CALL FOR
CONSERVATION, FOR AN END TO THE RECKLESS DENUDING OF
OUR FORESTS. AND THEY STARTED A TRADITION THAT WE ARE
CARRYING ON TODAY, WORKING TOGETHER AS PRESIDENT AND
GOVERNORS FOR A CLEANER ENVIRONMENT.
As YOU KNOW, I HAVE PROPOSED THE FIRST MAJOR
REVISION OF THE CLEAN AIR Act IN MORE THAN A DECADE.
- 9 -
IT SETS TOUGH STANDARDS, AND GIVES STATES AND INDUSTRY
THE FLEXIBILITY NEEDED TO REDUCE COSTS AND BREAK THE
LONG-STANDING LEGISLATIVE LOGJAM. THE POTENTIAL FOR
CONSENSUS IS THERE. THE AMERICAN PEOPLE WANT CLEAN
AIR. WE CAN WORK TOGETHER TO SEE THAT THEY GET CLEAN
AIR.
- 10 -
IT WAS ANOTHER ROOSEVELT, ALSO A GREAT GOVERNOR OF
NEW YORK BEFORE HE WAS A GREAT PRESIDENT, WHO CALLED ON
THE GOVERNORS TO HELP HIM STEM THE FINANCIAL CRISIS OF
THE GREAT DEPRESSION.
TODAY, WE DO NOT MEET IN A SPIRIT OF IMMEDIATE
CRISIS. THE NATION IS SOUND.
- 11 -
BUT THE DECLINE OF OUR EDUCATIONAL SYSTEM, THE THREAT
OF CRIME AND DRUGS, THE ECONOMIC DEPENDENCY OF so
MANY -- THESE PROBLEMS THREATEN TO ENDANGER THE VERY
LEADERSHIP POSITION OF AMERICA IN THE NEXT CENTURY.
FOR AMERICA TO REMAIN COMPETITIVE WILL REQUIRE YOUR
BEST EFFORTS, YOUR EXECUTIVE KNOW-HOW. THE ULTIMATE
CHALLENGE, AS GOVERNOR BALILES PUTS IT, IS "To BECOME
AGAIN THE YANKEE TRADERS WE ONCE WERE."
- 12 -
((TAKE NOTE, GOVERNOR CUOMO, WHEN THE GOVERNOR OF
VIRGINIA SAYS "YANKEE TRADER, HE'S REFERRING TO
CLIPPER SHIPS, NOT TO GEORGE STEINBRENNER.)) YOUR
CREATIVE RESPONSE TO OUR NATION'S COMPETITIVE POSITION
IS MORE THAN PERCEPTIVE; IT IS FORWARD-LOOKING, AN
ATTRIBUTE OF THE BEST KIND OF LEADERSHIP.
- 13 -
As YOU-KNOW, I HAVE JUST RETURNED FROM AN ECONOMIC
SUMMIT WHERE THE COMPETITIVE POSITION OF OUR NATION WAS
AN UNDERLYING THEME IN DISCUSSIONS ON THE GREAT
ECONOMIC ISSUES OF TRADE, MONETARY POLICY AND
INTERNATIONAL DEBT. BUT NO LESS IMPORTANT TO AMERICA
WAS THE START OF MY JOURNEY
IN
EASTERN AND
CENTRAL EUROPE.
- 14 -
OF COURSE, POLAND AND HUNGARY TODAY ARE NOT THE
ECONOMIC MAGNETS THAT WE FIND IN WESTERN EUROPE OR THE
PACIFIC RIM. BUT I SAW A TREMENDOUS POTENTIAL IN THE
AWAKENING SPIRIT OF THOSE LANDS.
AND THE BEAUTY OF IT IS THAT WE CAN BOOST REFORM
WITHOUT MASSIVE GOVERNMENT-TO-GOVERNMENT PROGRAMS. WE
CAN DO THE MOST GOOD, AS AMERICAN LEADERS, BY SIMPLY
FACILITATING TRADE AND INVESTMENT, BY SIMPLY OPENING
DOORS FOR OPPORTUNITY.
- 15 -
BUT TO OPEN THESE DOORS WILL REQUIRE LEADERSHIP AT
EVERY LEVEL OF GOVERNMENT. You HAVE ALREADY
ESTABLISHED A GREAT TRADITION OF SEARCHING FOR THOSE
OPPORTUNITIES ABROAD. Now I ASK YOU TO INCLUDE POLAND
AND HUNGARY ON YOUR LIST. WHILE GOVERNORS HAVE NO
FORMAL ROLE IN FOREIGN POLICY, YOU ARE BECOMING OUR
ECONOMIC ENVOYS AND AMBASSADORS OF DEMOCRACY.
- 16 -
You ARE A NEW FORCE IN RESTORING AMERICAN INTERNATIONAL
COMPETITIVENESS AND EXPANDING WORLD MARKETS FOR
AMERICAN GOODS AND SERVICES.
OF COURSE, YOUR FOCUS IS ON THE CRITICAL DOMESTIC
ISSUES. As CHIEF EXECUTIVES, WE KNOW FIRST-HAND HOW
CRUCIAL OUR SOCIAL HEALTH IS TO THE FUTURE POSITION OF
AMERICA.
A NATION IN WHICH A HALF OF OUR YOUTH IS IGNORANT
OF GEOGRAPHY, IN WHICH DRUGS ARE RAMPANT, IN WHICH A
- 17 -
SUBSTANTIAL PROPORTION OF THE POPULATION KNOWS LITTLE
HOPE -- SUCH A NATION WILL NOT LONG REMAIN COMPETITIVE.
IN THE FINAL ANALYSIS, IMPROVING OUR SCHOOLS, DRIVING
OUT DRUGS AND BRINGING HOPE AND OPPORTUNITY TO THOSE
WHO NEED IT MOST -- THESE ARE ISSUES OF OUR NATIONAL
WELL-BEING, EVEN OUR NATIONAL SECURITY.
FIRST AND FOREMOST ARE OUR CHILDREN AND THEIR
EDUCATION. WORKING TOGETHER, YOU AND I CAN RAISE THE
LEVEL OF LEARNING IN THE CLASSROOMS OF AMERICA.
- 18 -
ON APRIL 5, I SENT TO CONGRESS AN EDUCATIONAL
REFORM PACKAGE, BASED ON FOUR PRINCIPLES ROOTED IN THE
PRACTICAL EXPERIENCE OF THE STATES. To HAVE REFORM,
EXCELLENCE AND ACHIEVEMENT MUST BE RECOGNIZED AND
REWARDED. To HAVE REFORM, FEDERAL DOLLARS SHOULD BE
TARGETED TO THOSE MOST IN NEED. To HAVE REFORM, WE
NEED FLEXIBILITY AND CHOICE -- - CHOICE FOR PARENTS, AND
CHOICE FOR SCHOOLS IN THEIR SELECTION OF TEACHERS AND
PRINCIPALS.
- 19 -
FINALLY, THE ESSENCE OF REFORM IS ACCOUNTABILITY IN
EDUCATION AND REWARD FOR THOSE SCHOOLS THAT SHOW
PROGRESS.
IF IMPLEMENTED, I BELIEVE THAT THESE MEASURES WILL
RESTORE THE QUALITY OF AMERICAN EDUCATION AND REDEEM
THE FUTURE OF MILLIONS OF CHILDREN. BUT THERE IS MORE
TO BE DONE. ON JUNE 5, I ASKED THE BUSINESS COMMUNITY
TO STUDY WHAT THE PRIVATE SECTOR CAN DO TO ENERGIZE AND
SUPPORT EDUCATIONAL REFORM.
- 20 -
Now I WANT TO RENEW MY PLEDGE To ASSEMBLE THE NATION'S
GOVERNORS IN A SUMMIT, TO SHARE IDEAS AND TO EXPLORE
OPTIONS FOR EDUCATIONAL PROGRESS. ONLY TWICE BEFORE
HAVE THE GOVERNORS MET WITH THE PRESIDENT ON AN ISSUE
OF VITAL NATIONAL IMPORTANCE. Now THERE WILL BE A
THIRD SUCH CONFERENCE, AN HISTORIC MEETING ON
EDUCATION. TODAY, I INVITE YOU TO WORK WITH ME AT A
GOVERNORS' SUMMIT ON EDUCATION, TO BE HELD AT
((LOCATION)) ON SEPTEMBER 27TH AND 28TH.
- 21 -
TOGETHER, WE CAN FIND WAYS TO STRENGTHEN OUR SCHOOLS,
TO ENLARGE OPPORTUNITIES AND TO IMPROVE OUR NATION'S
EDUCATIONAL PERFORMANCE.
As CHIEF EXECUTIVES, WE ALSO SEE DRUGS AND CRIME AS
THE MOST HARROWING DOMESTIC THREAT TO THE FUTURE OF
AMERICA.
- 22 -
I PROPOSED, ON MAY 15TH, A COMMON-SENSE APPROACH TO
CRIME TO DETER THE CRIMINALS' USE OF WEAPONS, TO REFORM
THE CRIMINAL JUSTICE SYSTEM, TO ENHANCE ENFORCEMENT AND
PROSECUTION, AND TO EXPAND PRISON CAPACITY TO ENSURE
BOTH THE CERTAINTY AND SEVERITY OF PUNISHMENT. I
PROPOSE THE HIRING OF 825 NEW FEDERAL AGENTS AND STAFF;
1,600 NEW PROSECUTORS AND STAFF; AND AN ADDITIONAL ONE
BILLION DOLLARS FOR FEDERAL PRISON CONSTRUCTION.
- 23 -
I HAVE PROPOSED TOUGH NEW LAWS, INCLUDING MANDATORY
PRISON TERMS, NO DEALS WITHOUT COOPERATION AND THE
DEATH PENALTY FOR COP-KILLERS. BUT I NEED YOUR
LEADERSHIP TO SEE RESULTS. WORK WITH ME. TOUGHEN YOUR
LAWS. AND PUT THE WORST OFFENDERS BEHIND BARS. IF YOU
DO, WE WILL TAKE BACK THE STREETS. ((PAUSE))
FINALLY, AMERICA CANNOT CONTINUE TO LEAD THE WORLD
IF WE LAG IN PROVIDING OPPORTUNITY AT HOME.
- 24 -
LAST YEAR, AS YOU KNOW, CONGRESS AND THE
ADMINISTRATION ENACTED MAJOR WELFARE REFORM
LEGISLATION, THE FAMILY SUPPORT AcT OF 1988. THIS AcT
GREW OUT OF A CONSENSUS THAT THE WELL-BEING OF CHILDREN
DEPENDS ON MORE THAN MATERIAL NEEDS. CHILDREN NEED A
FAMILY ENVIRONMENT THAT ENCOURAGES SELF-SUFFICIENCY.
IN A WORD: CHARACTER.
- 25 -
WITH THIS IN MIND, I REESTABLISHED THE Low INCOME
OPPORTUNITY BOARD WITHIN THE WHITE HOUSE. AND I HAVE
ASKED THE BOARD TO ASSIST YOU IN THE COMPLEX AND TIME-
CONSUMING PROCESS OF OBTAINING FEDERAL APPROVALS FOR
EXPERIMENTS IN STATE WELFARE REFORM. So MANY
INNOVATIVE POLICIES HAVE COME FROM THE STATES. LET US
CONTINUE TO WORK TOGETHER TO KEEP YOUR ADMINISTRATIONS
FREE TO EXPERIMENT, FREE TO BE CREATIVE.
- 26 -
IN FACT, I HAVE INSTRUCTED THE DOMESTIC POLICY
COUNCIL, AND THE Low INCOME OPPORTUNITY BOARD, TO MAKE
FLEXIBILITY THE GUIDING PRINCIPLE, SO THAT STATES WILL
HAVE GREATER FREEDOM TO EXPERIMENT WITH WELFARE REFORM.
AND I AM PLEASED TO ANNOUNCE THAT THIS WEEK THE DPC
HAS COMMITTED ITSELF TO GIVE YOU GREATER ROOM TO
MANEUVER; AND TO GRANT WAIVER REQUESTS AS QUICKLY AS
POSSIBLE.
- 27 -
MANY OF OUR RESPONSIBILITIES OVERLAP IN EDUCATION,
LAW ENFORCEMENT AND WELFARE. AT TIMES, THERE HAS been
FRICTION BETWEEN THE STATES AND THE "FEDS." PERHAPS
WHAT WE NEED BETWEEN THE FEDERAL GOVERNMENT AND THE
STATES IS A FRIENDLY COMPETITION WELL KNOWN TO
CHICAGOANS.
- 28 -
HERE, ALONG THE MAJESTIC LAKEFRONT SKYLINE, THERE HAS
BEEN AN ON-GOING COMPETITION AMONG DEVELOPERS TO RETAIN
THE TITLE OF THE WORLD'S TALLEST BUILDING. ((You MIGHT
SAY THIS GIVES THE PHRASE ONE-UPMANSHIP A WHOLE NEW
MEANING.))
YET, THIS IS THE KIND OF ONE-UPMANSHIP THAT BUILDS,
NOT DESTROYS, THAT LIFTS, NOT LOWERS, THAT TAKES US ALL
A LITTLE CLOSER TO THE STARS.
- 29 -
I HAVE COMMITTED THE POWERS OF MY OFFICE TO LIFT
AMERICA -- STARTING IN THE CLASSROOMS AND THE STREETS.
WORKING TOGETHER, WE CAN ACHIEVE A NATIONAL
CONSENSUS. WORKING TOGETHER, WE CAN MAKE THE NEXT
CENTURY ANOTHER AMERICAN CENTURY.
THANK YOU, GOD BLESS YOU AND GOD BLESS AMERICA.
#
#
#
RGA
5
is not enough to win Congress. We must get down to the nuts and
bolts of politics, for we are competing against the master
mechanics of all time.
It's no coincidence that our party slipped to minority
status in the House as we became a minority in the state
legislatures. And it's no coincidence that this has remained
true. How long have the Democrats been in control of the House?
34
1-22-55
Look at my son Neil. He is thirty (age) -years-old. He has
a Sharon Smith
been married for ( (years) ) He has started a business, and he
Julub 19802
three Learnin Perce Ashlay
and ( (wife) ) now have ( (number) ) beautiful children. And there
has not been one day in the life of this grown man, this father,
when the Speakership of the House of Representatives changed
parties. Not once. And there are millions of Neils around
America, millions of men and women who have never known true two-
47-495 Joesph martin (MRSS) Jan3, 1955 (only for days cfew) S
party competition in what is supposed to be the branch of
Sept 16, 192/0
government that is closest to the people.
Today, Democrats now have a redistricting advantage in
states that compose about 90 percent of the seats in Congress.
We have got to change that, and change that soon.
To lead America in the next century, we must first make
aggressive gains at the state level in the next few years.
Critical gubernatorial and legislative races in the eight largest
states alone will determine whether Republicans will be treated
fairly in the drafting of 209 Congressional Districts.
A majority, or even a large minority, of Republicans in
state legislatures can join with you to sustain the veto of
Chicago Tribune 312 222-3232
Architechtural Editor- Paul Gapp x6180
Stanley Ziemba x3489
(wrote the articles on Sears Tower)
P.1/2
JUL 26 '89 12:40
NATIONAL
Cerald L Baliles
Revemond : Scheopacn
Governor of Virginia
Executive Director
OVERNORS
Chairman
Hall of the Starts
SSOCIATION
Terry E. Bransted
440 North Capitol Street
Governor of lowe
Washington. DC 20001-15"
Vice Chairman
Telephone (202)624-5300
Date: 26 July 1989
TELECOPIER TRANSMISSION SHEET
TO:
Christina martin
TELECOPIER NO: 456-6218
FROM:
Gerry Feinstein
TELECOPIER NO: (202) 624 -5313
TOTAL PAGES:
1+cover / cover
CONTENTS:
use of phrase "Yanbee trader"
in chairman's overview of all
America in Transition task force
IF PROBLEMS CALL:
reports(part of boiler plate message).
PHONE NO:
(202) 624- 5332
NOTE:
call me if you have any
further questions.
JUL 26 '89 12:40
P.2/2
"Whether we welcome it or
not, our domestic market is
Chairman's Overview
part of the global mar-
able to
The world is growing smaller. Fiber optic
Twenty years ago, states were bystanders
networks span the continents, linking
as international events changed the eco-
compete in those markets
remote corners of the globe. Billions of
nomic landscape. That, too, has changed.
dollars move in seconds from Milan to
Our boundaries are no longer the borders
successfully."
Tokyo to New York. Goods move across
of our states, but every corner of the
continents in a single day. An individual
globe. As Governors, we are challenged
Governor Gerald L Baliles
product may contain parts manufactured
to confront this new reality.
Virginia
in five different countries and be assem-
bled in a sixth. New markers and oppor-
State government is well-positioned to
tunities emerge almost overnight. In this
meet the challenges of the next century.
highly competitive and rapidly changing
But we must begin preparing for this transi-
environment, success belongs to those
tion. Our agenda includes a six-point offen-
who most quickly anticipate, adapt, and
sive. Specifically, we must:
respond.
Discover new and emerging markets
The international frontier is no longer
abroad for American products, to
the future a new age has arrived. The
become again the Yankee traders we
evidence abounds. A common market in
once were.
Western Europe will be finalized in 1992.
The United States and Canada are on a
Bring an international perspective to
ten-year path toward free trade. World
Our daily living- to understand foreign
output is shifting dramatically to Japan
nations and the people beyond our
and the Pacific Rim. By the beginning
borders
to learn the international
of the twenty-first century, the global
languages of business.
economic terrain will be one of large trad-
ing blocs, instead of individual countries,
Expand our research, and use our tech-
trying to maximize their growth through
nology, to create both new products
trade.
and new processes to maintain Ameri-
ca's competitive position.
As the global marketplace has emerged,
the United States' role as an economic
Capitalize on the natural advantages of
decisionmaker has changed. During the
American manufacturers and regain
1960s, when the U.S. economy was par-
competitiveness in our domestic
tially insulated from global influence, it
markets.
was possible to influence the economy by
then-traditional fiscal and monetary poli-
Improve our highways, airports, air-
cies. With the development of the Euro-
ways, and ports so we can effectively
dollar market, foreign ownership of a large
move our people across town and our
portion of the federal debt, and huge
products around the globe.
increases in foreign trade, the economic
sovereignty once enjoyed by the United
Invest in the health, education, and
States has been reduced.
training of our children so they can live
healthier and more productive lives.
This year, I have created six NGA task
forces to examine these issues that together
form the foundation for the nation's future:
wp
SATURDAY, SEPTEMBER 2, 1989
A25
"The American
R. Emmett Tyrrell Jr.
inner city is our
equivalent of
Bring
drug-ridden
Colombia.'
In the
we would not allow a bird dropping to
land on a congressman's blow-dried
Uniforms
hairdo unless the congressman de-
sired it (some might!), the govern-
ment employed fully 1,200 Capitol
police. The old Hill crawls with them.
The vast military operation now
Moreover, you can be sure that all
envisaged by the government of Co-
lombia to thwart its international drug
are highly trained. Imagine how crim-1
inals might fare in the rest of the
dealers brings to mind a thought that
District of Columbia if anything like
at first might strike you as, well,
this complement of uniformed police
somewhat goofball.
were on duty.
The thought is this: two things that
Such distinguished students of
distinguish a European city from an
crime as Ernest van den Haag and.
American city are a) there are mark-
James Q. Wilson have been arguing,
edly more uniforms to be seen on the
streets of a European city and b)
with increasing authority, that crimi-
nals generally are quite rational indi-
there is much less crime. Colombians
viduals. They commit crimes because
seem to recognize that crime in its
committing crimes is relatively risk-
most brutal forms is best dealt with
free and profitable. By raising the
by men in uniform. The Europeans
risks and lowering the profits of crime
knew this long ago.
society can reduce it.
Here in this country for many years
Now in the summer issue of the
we have been afflicted by those of a
professorial mien, lecturing us on the
public policy quarterly The Public In-
terest, John J. Dilulio Jr. contends
need to deal with the "underlying
that many of what an earlier genera-
causes of crime" so as to reduce
tion of policy analysts called the "un-
crime. Maybe Colombia, too, was af-
flicted by such criminologists. If so
derlying causes of crime" can be ame-
liorated by improved law enforcement
they are not active in Colombia's
in the inner cities. The American
present campaign against crime.
inner city is our equivalent of drug-
In Colombia criminal drug dealing
ridden Colombia.
has become so rampant that the cops
In our slums decent citizens are
have been called in and the military
victimized by criminals who make em-
too. When crime becomes as bold and
pervasive as it is in Colombia, the
ployment, education, family life-in
fact normal life-difficult and some-
counselors and therapists and other
times impossible. Dilulio prescribes
quacks who minister to the "underly"
better policing, programs that divert
ing causes of crime" are superfluous.
youth from crime and more inten-
Using force to put down violence
sively supervised probation and pa-
does seem to be a logical course of
role programs. More than three-
action, and it is heartening to see that
quarters of those 3 million or more
federal drug czar William Bennett has
Americans under correctional super-
put law enforcement at the center of
vision are on probation or parole. An
our national campaign against drugs.
astonishing number of them return to
When, back in the hopeful days of
prey on the inner cities in which a
the 1960s, the reformers spoke of the
parole officer may have 300 of these
"underlying causes of crime," they
felons to supervise. Supervision
at
had in mind poverty, joblessness, bro-
best amounts to a telephone call a
ken homes and single-parent families.
month.
Whether or not these are the causes
Dilulio's suggestions are all quite
of crime, our experience over the
sound, but let us not underestimate
years suggests that notwithstanding
the benign influence of a cop on each
all the money spent, all the programs
corner. There is nothing brutal about;
and all the social analysis, we still
this. The streets of Paris are alive
have not eliminated these underlying
with gendarmes, all in colorful uni-
causes.
forms and well-armed. Naturally the
Meanwhile, crime has gotten
crime rate in Paris is much lower than
worse, particularly in the inner cities.
the crime rate in New York. Paris is
In fact, crime is so rampant in the
called the City of Lights. In New York
inner cities that were it significantly
they steal the lights.
reduced America might well be able
©1969, King
Features
Syndicate.
Inc.
to boast of being relatively crime
free. Hence, what Colombian authori-
ties have settled on as the best way to
fight crime might also be the best way
to fight crime in our drug-ridden in-
ner cities. Bring in the uniforms.
Actually, wherever Americans are
serious about maintaining law and
order they recognize the effective-
ness of more well-trained police. In
Washington, D.C., the murder capital
of the republic, 3,855 police officers
were employed in 1988 to patrol 68
square miles. On Capitol Hill, where
The New York Times/Jim Wilson
In 1981, Eugene M. Lang offered to put 61 East Harlem youths through college if they finished high school.
He is now guiding David Nieves, Teh-Chen Mary Lee and 32 others through their college years.
East Harlem Students Clutch a College Dream
By JOSEPH BERGER
tions, he made me look at my life in a
moved to Puerto Rico. Another was
Eugene M. Lang descended like a
different way," said Aristides Alvara-
doing fine at an upstate community col-
fairy godmother into the lives of a lot of
do, now a 20-year-old junior at Rensse-
lege until, on a Christmas visit home,
poor East Harlem Cinderellas. He
laer Polytechnic Institute. "I know now
he saw his drug-addicted brother kill
promised 61 graduating sixth graders
I'm going to make it. And someday, 'I'll
himself with a gun.
at Public School 121 that he would pay
be big - real big - and pay the tuition
More than half the original 61 sixth
their way through college if they would
for my own class of Dreamers."
graders - 34 - are enrolled at least
stay in school long enough to take up
Still, East Harlem's streets can
part time in public and private col-
his offer.
thwart even the most determined.
leges.
Ten completed their sophomore
Eight years later, with Mr. Lang
Some of Mr. Lang's children - they
years on schedule. Another nine either
watching over their progress, serving
call*themselves "Dreamers" after his
graduated from high school or re-
as their advocate with school officials
"I Have a Dream" Foundation - have
and treating them to pleasant trips and
been unable to elude the traps of drugs,
Continued on Page 28, Column 4
restaurant meals, many of those chil-
crime and untimely pregnancy and ac-
THE NEW YORK
dren are starting their junior years at
cept his gift.
TIMES is available
colleges like Swarthmore and Bard.
One young man dropped out of the
for home or office
delivery in most
"Mr. Lang was one of the first people
State University of New York at Al-
major U.S. cities.
who took a personal interest in me, and
bany so he could support a teen-age sis-
Please call this toll-
through meetings and honest conversa-
free number: 1-800-
ter his mether had left behind when she
03
4
6
7
3
34
631-2509
ADVT.
SUNDAY, AUGUST 27, 1989
East Harlem Students Clutch
a Dream
Continued From Page 1
letter admitting that she was pregnant
additional
scholarships.
and needed to drop out, he wrote back:
Getting through junior high and high
"Dear, you have not let me down, and
school is the toughest part, and Mr.
ceived general equivalency diplomas.
there is nothing for me to forgive. My
Lang wants patrons not just to provide
Of those who passed up college, some
hopes for you remain as strong as ever
money but to delve into the students'
are holding jobs Mr. Lang helped them
- perhaps even more so when I read
lives, give them direction and reclaim
get.
the intelligence, maturity, faith and
them from their own missteps, just as
Eight children left the neighborhood
strength of character that I see written
vigilant parents might do.
before the program could help them,
into your letter.'
'You have to keep reinvigorating
and little is known about their
Later, he contacted her father and
them, rekindling their ambition, help-
progress. Mr. Lang describes four of
urged him not to be hard on her. The
ing them overcome immediate prob-
the 61 as "lost souls" who will probably
girl called Mr. Lang a few days later to
lems - which may be emotional, eco-
never collect on his offer. Six girls have
say, in radiant tones, that she and her
nomic, sociological - and get them
had babies, with one already the
father had just been shopping for baby
back on track,' Mr. Lang said. "If this
clothes.
were my natural child, and my child
mother of three. At least four of the
were to do this, would I say, 'The hell
boys have fathered children. One
Call to College President
with this kid'? You can't do that.
young man is in Sing Sing, though with
Mr. Lang is also not afraid to use his
''You don't just put the child on the
Mr. Lang's prodding, he is taking col-
considerable influence. One of his
track and assume that the child will not
lege courses.
protégés, a Hunter College student,
be derailed," he continued. "The
They Need to Survive'
registered for difficult courses in
chances are that the child will be de-
medieval art and the Civil War instead
railed, and you have to be there and be
"For a lot of students, college is a
of the remedial-reading classes he
sensitive and reach out and try to bring
very foreign concept," said Juan Mar-
needed. The remedial courses were
the child back on track."
tinez, a 20-year-old at Swarthmore.
closed. Learning of the situation, Mr.
Diane Sullivan Morris, a 43-year-old
"The program made it a reality, that
native Minnesotan who is president of
it's an obtainable goal, something you
Bay Linens Inc., has invited her
can do." But some people, he said, "get
adopted East Harlem sixth graders to
totally overwhelmed - they need to
'For a lot of
office, taken them out on a sailboat
survive, to make it hand to mouth, day
to learn sailing and sent them to week-
to day, and they can't expend their
energy on education."
students, college
end camps in East Hampton.
When one student, Angelo Fontanez,
Mr. Martinez, one of the program's
most outstanding students, talks of the
is a very foreign
14, was mugged at a Manhattan high
school, Ms. Morris and her class work-
difficulties he had adjusting to a quiet
er, Maria Cedeno, stepped in and ar-
suburban campus where he pined for
concept.'
ranged for a transfer to a better school.
rap music and the bustle of a big city.
Angelo now enjoys visiting the profes-
He eventually formed his own rap club.
sional photo studio of Ms. Morris's hus-
The 70-year-old Mr. Lang, who grew
Lang called Hunter's president, Dr.
band, Leonard.
up in East Harlem and made his for-
Paul LeClerc, who arranged for re-
Ms. Morris says that of the 61 chil-
tune developing new technologies into
medial courses at another City Univer-
dren she started with in 1986, 45 are
commercial ventures, says his charges
have achieved far more than they
sity branch.
still in touch with the program. Four
"It was nothing more than a parent
have dropped out of school, two have
would have without the program. In the
city's poorest neighborhoods, he con-
would have done," Mr. Lang said,
had babies and one is in an adolescent
relaxing the other day in a soft leather
detention center on drug charges.
tends, 75 percent of children never fin-
ish high school. Board of Education
armchair in his company's midtown of-
'Such Poor Preparation'
statistics, which critics say are overly
fice. "The system is amenable to help.
"The only disillusionment," she said,
rosy, indicate that dropout rates at
It takes a bum rap. But you can't get
"is that I see a lot of kids who are very
Manhattan's worst high schools are
parents involved who don't have the
bright who have had such poor prepa-
more than 40 percent.
ability to get involved."
ration in grade school that it's very dif-
Seymour Fliegel, former deputy su-
Mr. Lang has been so satisfied with
ficult to overcome. I wish we had
perintendent of School District 4 in
the program that he set up the founda-
started with them in the first grade."
East Harlem, notes that P.S. 121 has
tion to advise others who want to imi-
She said the program is important
some of the lowest achieving children
tate his gesture. Now 130 sponsors in 31
because "we're losing touch as a city
in the district. "If 50 percent of those
cities have put up a collective $40 mil-
with a whole generation of kids, and it's
kids are going to college, it's a small
lion to assure almost 9,000 youngsters
not right, and we all need to take more
miracle," he said.
that if they graduate from high school,
of an interest in that."
their hopes of a college education will
Cynics may dismiss the idea of
Met Students Regularly
be realized.
wealthy executives visiting East Har-
Patrons include James Bush, a
Still, Mr. Lang's experience suggests
lem's squalid streets as patronizing.
nephew of the President; Felix G. Ro-
that even someone with the best of in-
But Mr. Lang said that for many execu-
hatyn, chairman of the Municipal
tentions and lots of money and energy
tives, this role holds more trepidations
Assistance Corporation, who with his
must settle for less than perfect re-
than a report to their corporate boards.
wife, Elizabeth, has gone ice skating
sults.
"When you're living in a nice private
with his Lower East Side students, and
"You're dealing with a very difficult
home," he said, "it takes a bit of gump-
Reuben Mark, president of the Colgate
situation because the things that make
tion to go to a housing development,
Palmolive Company.
these kids tick tend to be even some-
walk through a hall and knock on the
what incomprehensible," Mr. Lang
Help in Their Lives
door of an apartment where one of your
said. "The conditions of life of these
Dreamers might live. Or to walk into a
Each sponsor deposits at least
children tend to change cataclysmical-
$300,000 inforannuity funds operated by
restaurant with six kids who, if they
came their own. would be chased.nut
ly, without warning. There are needs
the foundation. Annual payments
with
that require they drop out of school."
costs like the salary of a worker who
Mr. Lang has met regularly with
counsels the donts
Still, Mr. Lang said, the sponsors are
their
investment
most of his students, shepherding them
schools and arranges for tutoring. The
through the pitfalls of a ghetto adoles-
fund eventually finances tuition at a
They VO gotten something they
can't buy. the affection of a whole
cence, exhorting them to do better,
state or city college, which in New
bawling some out, forgiving others.
kids," he said. "It's a good
York City IS $1.250 a year These
To a promising girl who wrote him a
thing
attend private colleges scramble for
it makes us à better part
of the human race."
THE NEW YORK TIMES, SUNDAY, SEPTEMBER 3, 1989
25:
1,200 of the students who finish the pro-
stamps, Ms. Mahoney said.
Rhode Island Offers Scholarship Plan for Poor
gram each year would attend college
Governor DiPrete said students who
and 1,200 would go on to jobs or other
ran into legal problems or became
training programs, said Leila Maho-
pregnant should be given a chance to
PROVIDENCE, R.I., Sept. I (AP)
schools, was announced Thursday. It
Thursday by the State Board of Gover-
ney, Mr. DiPrete's senior assistant,
get back into the program if they
Rhode Islaid will offer full state-col
who is in charge of raising money for
Theater.
would involve as many as 10,000 third
nors for Higher Education.
showed willingness to continue their
lege scholaships for low-income pupils
Businesses, foundations and schools
the program.
graders a year beginning in 1991 and
studies.
The New York State Legislature
under a sweeping plan that will also
continuing through 2000.
will be asked to contribute the initial
But there is some doubt about
passed a Liberty Scholarships plan last
provide academic help to pupils from
Pupils would be tutored and paired
$10 million to a foundation to start the
year for lower-income students ac-
whether the parents will be quick to
anyone?
the third grade through high school,
with mentors throughout elementary
program by September 1991. The state
cepted at public or private New York
sign their children up.
Gov. Edward D. DiPrete says.
and high school. Top performers would
would be expected to contribute $3.2
"I don't think the parents that don't
Check the Theater Directory
colleges. Louisiana also has a scholar-
In return students and parents sign-
receive summer jobs where they could
million a year, bringing the fund, with
ship program for some low- and mod-
care, that they're going to even bother
for Broadway & Off-Broad-
ing up for the plan, called the Rhode Is-
serve as role models.
interest, to about $50 million after 10
erate-income students.
with this," said Jessica Ley, 12 years
land Childen's Crusade, must allow
"We really feel that if the program is
years, an aide to the Governor said.
But Rhode Island's program would
old, who is a tutor in one of this city's
way shows
every day in
state montoring of report cards, shun
successful, we may have made a funda-
Governor DiPrete also said he would
go further, by enrolling students at an
poorest neighborhoods. "Some parents
The New York Times
drugs and early pregnancy and obey
mental change in certain patterns"
be "knocking on the door of the White
early age and giving them educational
don't care, and I have a few friends
the law. The only academic require-
that contribute to students' dropping
House" to at least match the state's
and social help, Ms. Mahoney said
who have parents like that
ment is that they do not failcourses
out, said Americo W. Petrocelli, the
contribution.
Any third grader could enroll, but the
When told of the comment, Mr. Di-
The planned $50 million program,
state's higher-education commission-
The Rhode Island plan seeks to cut
program is aimed at about 3,200 who
Prete said: "I'm not so sure. I think
which is contingent on raising $10 mil-
er, who designed the program.
the dropout rate among poor students
receive subsidized hot lunches at
they might say: Thank God. Give us a
lion from burinesses, foundations and
The program was also approved
in half, to 25 percent. An estimated
school or whose families receive food
hand.'
V
A Seismic Shock for Education
Yet for some time polls have found
By Chester E. Finn Jr.
the public receptive to greater state
A poll shows
influence and stronger state-led ac-
WASHINGTON
countability measures. In 1987, some
he annual Gallup
84 percent of those surveyed agreed
T
education poll spon-
a preference
that one of the things the Federal
sored by the profes-
sional educational fra-
for national
Government should do is "require
states and local school districts to
ternity Phi Delta
Kappa often yields
standards,
meet minimum educational stand-
ards."
startling results.
curriculum.
Such changes imply greater homo-
On many issues spanning the sur-
geneity than our state-based, locally
vey's 21-year history, the public has
administered education system has
declared itself in favor of seismic
ever displayed, as well as tougher
changes in the ground rules of the
norms and consequences linked to
education system - reforms that go,
far beyond what many educators
fessionals and the incrementalism of
school results.
(and elected officials) are comfort-
recent reform efforts and, instead, re-
But in tandem with the uniformity,
able with.
write basic assumptions about how to
people favor ceding more operational
The 1989 poll, unveiled Aug. 24,
chart the course and gauge the
authority to individual principals and
amounts to a major earthquake. The
progress of the nation's schools.
giving students choices among
hoariest policy assumption of Amer-
Whether those officials have the
schools.
ican schooling - that essential deci-
courage to do so remains to be seen,
Other tremors emerge from the
sions about curriculum and stand-
but it is clear the electorate would
data. Virtually no one supports the
ards must be locally determined -
support such shifts.
universal practice of allowing young-
turns out to be another political myth.
Asked "would you favor or oppose
sters to drop out upon reaching a
In sharp contrast to a century-old
requiring the public schools in this
specified age. Forty-five percent
practice, people say they want na-
community to conform to national
would keep them in school until they
tional education standards, a national
achievement standards and goals?",
graduate, while 38 percent would
curriculum and national tests.
70 percent of Gallup's respondents
oblige them to meet "certain stand-
The temblor couldn't be more time-
were in favor, 19 percent opposed.
ards of knowledge and skill" before
ly. On Sept. 27, President Bush and
Asked "would you favor or oppose
being permitted to leave school.
the governors will gather in Char-
requiring the public schools in this
Asking one's opinion of a hypotheti-
lottesville, Va., for an education
community to use a standardized na-
cal event is not the same as confront-
"summit meeting." No. weightier
tional curriculum?", the responses
ing people with actual disruptions in
topic could be on their agenda than
were 69 percent yes, 21 percent no.
long-established patterns. Nor can we
the challenge of developing common
And asked about "requiring the
be certain the public would reward
school norms and curriculums for the
public schools in this community to
public officials who take such initia-
whole country - and a testing-and-
use standardized national testing pro-
tives.
(Voter participation rates in
accountability system by which we
grams to measure the academic
local school board elections are
can know over time whether those
achievement of students?", the re-
norms are being met.
sults were 77 percent affirmative,
scarcely encouraging.)
Many educators would surely balk,
only 14 percent negative.
But alarmed by the drab perform-:
for they would be protective of their
In every instance, people with chil-
ance of schools, despite years of mar-
autonomy, the decentralization of to-
dren enrolled in the public schools
ginal reforms, parents and taxpayers
day's system and the degree to which
were even more enthusiastic about
seem ready for profound changes.
its results are blurred and its employ-
these changes than. adults with no
The participants at the education
ees spared from consequences.
youngsters in school.
summit meeting would do well to
But Gallup's data suggest that it
This doesn't mean citizens want
heed the Gallup data. Helping guide
may be timely for elected officials to
Federal officials to run their schools.
the public to where it says it wants to
set aside the conservatism of the pro-
As recently as two years ago, survey
go is not a bad definition of leader-
data showed 39 percent wanting
ship. Besides, when the territory is
Chester E. Finn Jr., professor of
Washington to have "less influence
covered with decrepit old structures,
education and public policy at Van-
on improving the local- public
an earthquake may be the only way to
a
derbilt University, is director of the
schools (while 37 percent favored
clear the ground for new construc-
Educational Excellence Network.
"more influence").
tion.
Words To Ponder Parade mag 9/3/89
Scott Metca JISMU MetcalfISMU
James Lehrer at SMU commencement: A diploma "does not mean you are educated"
rom the many
and thus a lifelong hunger for
F
commencement
more-more ideas, more
addresses we've heard
information, more good
and read this year, we
thoughts, more challenges, more
submit for your
of everything
attention the following excerpt
"I must tell you that some of
from an address by James
the dumbest people know went
Lehrer. He is the Lehrer of The
to great, prestigious colleges
MacNeil/Lehrer NewsHour on
and universities like SMU They
PBS-TV, and he gave his talk
walked across a stage as you
on May 20 at Southern
are going to do, with diplomas
Methodist University in Dallas:
in their hot little hands,
"I urge you to please keep in
pronounced themselves well-
mind what the diploma you are
educated and proceeded to
about to receive does not
never read another book,
mean. It does not mean you
entertain another fresh idea or
are educated. Quite the
tax their minds in any way
contrary. It means, Ihope, that
beyond what was minimally
you have been opened up to a
required to make a living or
perpetual state of ignorance
make it socially, or both."
New School Term in Chicago
Puts Parents in Seat of Power
By ISABEL WILKERSON
Special to The New York Times
CHICAGO, Sept. 2 - With the start of
Seventy percent of Chicago public
the new school year, Chicago will begin
school students are from families
what education experts say is the most
below the poverty level, and in the low-
radical attempt in this country to re-
income communities there is a sense
vamp a big-city school system by shift-
that more is at stake than just schools.
ing power almost overnight from
Parents who live in a housing project
downtown bureaucrats to parents and
on Chicago's South Side took notes like
community people at each of the city's
schoolchildren at a seminar on school
600 schools.
change this week.
Each school will be run by a parent-
"These local school council elections,
led council with the far-reaching au-
as disarrayed as they may be, are
thority now held by the Board of
going to be more important to us than
Education. The councils, to be chosen
the election of Harold Washington,"
in elections next month, will have the
Salim Al-Nurridin, a community or-
power to approve budgets, make
ganizer, told the group, referring to the
recommendations on books and curric-
late Mayor whose 1983 election galva-
ulums and assign and dismiss princi-
nized the city's black voters. "This is
pals.
about restructuring our community
The change, intended to streamline
the nation's third-largest school dis-
Continued on Page 26, Column 1
trict after New York and Los Angeles,
grew out of deep frustration over a
school system described in 1987 by Wil-
liam J. Bennett, then Secretary of
Education, as the nation's worst.
All over the city, people are now
bracing for the transfer of power. Offi-
cials are polishing plans for elections
for the 6,000 council slots, and trying to
prevent vote fraud on Election Day and
infighting afterward.
Into the Political System
Dozens of community groups are
trying to educate parents, many of
them school dropouts bewildered by
their new responsibilities, and to get
them to run for council seats. Leaders
of black and Hispanic neighborhoods
are waging a get-out-the-vote cam-
paign to bring disaffected minority
residents into the political system.
Continued From Page 1
from the ground up."
Several other districts, including
New York and Dade County, Fla., have
tried decentralization. New York is
divided into 32 community school dis-
tricts, and Dade County has conferred
greater authority to individual schools
on a limited basis. But no other decen-
tralization effort has been as far-reach-
ing and as quickly done as Chicago's.
'Absolutely Precedent-Breaking'
"This is the biggest change in Amer-
ican school control since the 1900's,"
said Michael Kirst, a professor of
education at Stanford University who
has written several books on school
governance. "It is the most drastic
change in any school system I can
think of. It is absolutely precedent-
breaking."
The trend in other districts has been
to transfer power to principals rather
than directly to parents, said Chester
E. Finn Jr., a professor of education
and public policy at Vanderbilt Univer-
sity and a former Assistant Secretary
of Education under Mr. Bennett.
"To take an entire system, convert it
to civilian control and insist that this
happen everywhere at once makes Chi-
The New York Times Agins
cago unique in the country," said Pro-
Salim Al-Nurridin, a community organizer in Ghicago, who told par-
fessor Finn. "Nobody anywhere in this
country has conferred this kind of au-
ents in a housing project, "These local school council elections, as disar-
thority on a lay board."
rayed as they may be, are going to be more important to us than the
The effort to overturn Chicago's top-
election of Harold Washington
heavy bureaucracy came after Mr.
Bennett denounced the 410,000-student
school system, where the dropout rate
is 45 percent and the average test score
The change is
cils will turn into unmanageable fief-
doms led by people with little knowl-
of students in nearly half the schools
edge of education. One principal said
was in the bottom 1 percent in the na-
probably the
flatly, "I don't feel a group of parents
tion in 1987.
should be allowed to run the school."
"You've got close to educational
boldest ever in a
Bruce Berndt, president of the Chi-
meltdown here," Mr. Bennett said.
cago Principals' Association, said
big-city system.
change was happening too fast. "We
The Legislature Acts
are literally learning how to swim by
After months of lobbying by an un-
being thrown into the pool," he said.
likely coalition of business leaders,
One fear, he said, is that principals
education advocates and parents in all
hire another under a four-year
con-
will have to spend more time politick-
income brackets, the Illinois Legisla-
tract.
ing than administering: "You've got to
ture settled on legislation last year that
The changes in the school system are
win seven votes to get hired," Mr.
streamlined the central office and gave
expected to create a weaker role for
Berndt said. "You could get 120 per-
more authority to principals in hiring
the superintendent and the Board of
cent on your evaluation and not get re-
staff. Most important, it made parental
Education and thus leave Mayor Rich-
hired because they want somebody's
control the centerpiece.
ard M. Daley as the leading voice on
brother-in-law."
The councils will be made up of six
school policy. The changes will
un-
Nowhere but Up?
parents, two community residents with
doubtedly figure prominently in
the
no children in the school and two teach-
1991 mayoral campaign.
Indeed, Professor Finn said, "some.
parents will make uneven, inconsistent
ers, all elected to two-year terms. The
While taking away millions from its
and even foolish décisions.' But he
principal will sit on the board but will
budget, the law did leave the Board of
added, "There's nowhere to go but up."
have no say on his appointment or dis-
Education a key lever over the coun-
missal, a decision that will require
Now community groups are using
cils: The board can close a school if
a
training sessions to educate parents. At
seven votes. Not only will lay people
council fails in its duties. The
law
a workshop from a housing project on
outnumber professional educators, but
leaves the superintendent with admin-
the South Side, Florence Cox, a parent
each council will be headed by a parent
istrative duties as set by the board.
leader and trainer, passed out charts of
as well.
The law abolishes the lifetime tenure
Board Keeps a Key Function
the Board of Education hierarchy and
maps of the school districts. Many par-
of Chicago principals. Earlier this
Advocates of change say an
all-
ents had barely finished the eighth
week, Judge Robert Sklodowski of
powerful, distant bureaucracy
was
Cook County Circuit Court, calling Chi-
grade, she said, and more than once
crippling the schools. "There was no
she had to suspend the session' par-
cago "an educational wasteland,"
accountability," said Dr. Donald
ents could find one of the five sheets
ruled against a group of principals who
Moore, executive director of Designs
she passed out.
sought to keep their tenure. So when
for Change, an education research
and
Mrs. Cox started with the basics, tell-
the principals come up for reappoint-
advocacy group in Chicago.
The
ing parents that they should not get rid
ment, half in June 1990 and the other
change, he said, "gives people with the
of a principal just because they did not
half in June 1991, depending on the re-
greatest stake in the schools a bigger
like him, that they should not go into
sults of a lottery, each council will de-
say in how they're run."
the schools looking only for things to
cide whether to keep the principal or to
Critics fear that the parent-led
doun-
criticize.
Parents Taking Seat of Power in Chicago Schools
Campaigning is likely to be espe-
"Now that you'll be elected public of-
cially intense in Hispanic areas, where
ficials, you'll be responsible to the peo-
community leaders are hóping to gal-
ple who elected you," Mrs. Cox said. "If
vanize people now out of the political
somebody wants a copy of the minutes,
system because of language barriers
you have to give them one. And you
or lack of citizenship. To vote for the
can't have secret meetings. If you walk
parent and resident seats in the school
home together and stand under a street
council elections requires only that the
light talking, that's a meeting, people.
voter be 18 or older and live in the com-
You can't do that."
munity or have a child at the school.
Serious Campaigns Ahead
"This is going to be the largest ex-
Mae Frances Lyons, who lives at the
periment in grass-roots democracy the
Prairie Courts housing project on the
country has ever seen," said Dan Solis,
South Side, came in wanting to run for
executive director of United Neighbor-
à parent seat at Drake Elementary
hood Organization, a Hispanic com-
School. But she was not certain after
munity group here. "We have a com-
hearing what the job entailed. "This is
munity with a large number of people.
mind boggling," said Mrs. Lyons, who
who are not citizens, who have been in-
dropped out of high school in the 10th
timidated for years because their Eng-
grade. "I think I'd better back off from
lish wasn't that good, who are now sud-
this."
denly able to leapfrog into the system
In some communities, parents and
into positions with real power."
residents are gearing up to campaign
What happens in Chicago could
as if they were running for mayor.
transform not only disenchanted mi-
"This is going to be a serious, no-kid-
nority neighborhoods but also public
ding, no-jive campaign," said Mr. Al-
education in general, experts say.
Nurridin, the community organizer ral-
"It's a bold experiment," Professor
lying South Side residents.
Kirst said. "If it fails, there will be very
little interest anywhere else., If it
works, it will be a beacon for the coun-
try.'
Services of Mead Data Central
PAGE
2
4TH STORY of Level 1 printed in FULL format.
Copyright (c) 1989 The Washington Post
August 14, 1989, Monday, Final Edition
SECTION: FIRST SECTION; PAGE A16; FOREIGN JOURNAL
LENGTH: 982 words
HEADLINE: Beijing-Bound on the Yalu Limited
BYLINE: Peter Maass, Special to The Washington Post
DATELINE: BEIJING
BODY:
The overnight train from Pyongyang to Beijing is no Orient Express. The food
is just adequate and the scenery less than spectacular, but the $ 50 fare is a
bargain for a half-day's journey between communism's stark Stalinist past and
its tenuous chaotic present.
Like many other things in North Korea -- one of the communist world's most
isolated nations -- the train is old but well preserved. The mahogany walls of
the dining car are a bit scratched and greasy, but so is the faded picture of
President Kim II Sung, who stares down at the diners like a plump proprietor.
The meals --- fish cakes, chicken, a few fried potatoes - are standard Third
World transport cuisine, tasteless but filling. It is a sweltering day, and
although the car has no air-conditioning or fans, the windows are sealed shut.
The trip begins at Pyongyang's central railroad station, a concrete-slab
edifice topped by another portrait of President Kim - this one giant size -
the only ruler North Koreans have known since their country was founded in 1948.
As women in traditional dress wave goodbye, the dark-green passenger cars leave
behind the bland, scrub-brush clean North Korean capital and head northwest
along the Korea Bay toward the Yalu River, the placid muddy boundary with
China and a generation-old symbol to many Americans of the frustrations of the
Korean War.
The foreign passengers comprise a cast of characters suitable to an Agatha
Christie whodunit. There is the Korean-American who was reunited in Pyongyang
with family members cut off by the war for more than a generation. There is a
Chinese cloud seeder who was in Pyongyang to ensure that rain did not spoil a
massive international youth festival there. There is a young blond Finn who
spent five months in Pyongyang helping organize the festival.
"I feel like I just finished boot camp," the Finn says wearily.
For the most part, they will pass the trip in moderate comfort in
well-cushioned, four-person sleeping compartments. A short step into the next
car, however, is a giant leap into the primitive. Here, North Koreans making
local trips ride on hard benches in a tube of institutional olive-drab. Some
passengers are stripped to their undershirts in the stifling car, as a hot dusty
breeze whips through open windows. A couple of men play Go, leaning intently
over the gameboard. Two soldiers sit in a corner, leaning heavily on their AK-47
assault rifles.
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(c) 1989 The Washington Post, August 14, 1989
The landscape that flickers by is unchanging and, for the most part,
unappealing. The thin soil of northwestern Korea returns little for backbreaking
labor. Well into summer, the corn is runty, and the rice fields will provide
skimpy harvests in the fall. The rocky hillsides bear only sparse vegetation ---
perhaps an indication of the region's harsh winters or a lingering result of
massive deforestation during the Korean War.
Most of the buildings that rise up out of the mottled countryside are
unpainted four- and five-story concrete boxes, and they fade quickly into the
background as the train clatters northward. There are few single-family
farmhouses, virtually no people to be seen and only one or two motor vehicles on
the asphalt and dirt roads that run alongside the tracks.
Several times the train stops briefly at stations presided over by the
obligatory portrait of President Kim. His presence at each depot is even more
dependable than the punishing summer sun -- the latter vanishes at night, but
Kim is always there, gazing down into the darkness at passing trains.
Then suddenly we are at the Yalu, crossing a kilometer-long railroad bridge
with the deep, dark river swirling below. It was at the Yalu that U.S. troops
halted in their pursuit of North Korean forces in the fall of 1950, and it was
across the Yalu that hundreds of thousands of Chinese Communist troops
counterattacked to relieve their North Korean allies, driving the Americans
halfway back down the peninsula in a bitter winter campaign.
For the rest of the war, Chinese and North Korean troops were steadily
supplied across the river, while the U.S. command was forbidden to attack the
northern half of the bridges or the Manchurian "sanctuary" on the other side.
On this trip, a handful of Americans among the train passengers, most too
young to have any memory of the Korean War, cluster at the windows and click
away with cameras at one of the bloody conflict's chief landmarks.
Passport and customs formalities at the North Korean border town of Sinuiju
are efficient and perfunctory. Not so in China, where officials confiscate a
passenger's videotape cassette but return it after some discussion. They
apparently fear it may be footage of the massacre of demonstrators in Beijing's
Tiananmen Square, although it is unclear how they could think it might be
smuggled in from North Korea, which has imposed an even firmer blackout
on
information about the demonstrations than China.
The scenic difference between North Korea and China becomes clear as the
train rolls into the Chinese border town of Dandong. North Korea is swept clean
from Panmunjom in the south to Sinuiju in the north -- dirt and disorder, it
seems, are as absent as dissent. China may be the opposite.
Dandong, like many Chinese cities, is grimy and clogged with energetic people
and a mishmash of buildings thrown up seemingly with little forethought. There
are many privately farmed plots of land scattered over the countryside. It has a
lived-in feel that is absent in stark North Korea.
But the heavily armed troops at the Beijing station demonstrate a strong
similarity between the two countries -- both depend on brute force to govern.
The two regimes are a bit like the professional cloud seeder on the train, in
that they also attempt to control powerful natural forces. But they might wish
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(c) 1989 The Washington Post, August 14, 1989
for greater success than his. It poured during the Pyongyang festival's closing
ceremony.
GRAPHIC: MAP, LARRY FOGEL
TYPE: FOREIGN NEWS
SUBJECT: RAILWAY TRANSPORTATION; CHINA, PEOPLES REPUBLIC; KOREA, NORTH
ORGANIZATION: YALU RIVER
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NATIONAL
Hall of the States
444 North Capitol Street
GOVERNORS
Washington, D.C. 20001-1572
Telephone (202) 624-5300
ASSOCIATION
FEBRUARY 13, 1989 (06-89)
Contact: Rae Young Bond, 202/624-5330
INVESTING IN CHILDREN IS A TOP A PRIORITY FOR GOVERNORS;
STATE PROGRAMS ARE ENSURING CHILDREN ARE HEALTHY, SAFE, EDUCATED
WASHINGTON, D.C. - One of the top priorities on governors'
agendas this year is investing in programs for children to ensure
that they are healthy, safe, and well-educated. Today's children
follow Footster flow
will shape the future, and so governors are taking steps now to
help those children become productive, literate, and well-trained
adults who can lead the country into the 21st century.
"How we support our children is the most important decision we
will ever make," said New York Gov. Mario M. Cuomo. "Our children
are the future foundation of our economy
and we must reach
them early in their lives to make a difference."
Many of the governors' 1989 state of the state addresses and
budget recommendations focus on an agenda for children: the
expansion of prenatal and infant care to low-income women and
children; the availability of quality, affordable day care; an
increase in youth services; the improvement or initiation of early
childhood education programs; and a toughening of laws for child
support enforcement and penalties for child abusers. Many
governors recognize the importance of taking early measures to
prevent a child from later becoming a school dropout, drug abuser,
pregnant teenager, or criminal.
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Idaho Gov. Cecil D. Andrus, who allocated 90 percent of new state dollars
to programs that will improve the education, health, and safety of the state's
children, noted that "it's a pay now or pay later situation."
Nevada Gov. Bob Miller said his highest priority as governor "is to all
the children in our state.
When this legislative session adjourns, I
sincerely hope we will be able to go back to our children and say, 'We have
made a difference, we have helped you prepare for the future, we have improved
your quality of life. "
The governors' commitment to children also is reflected in a major new
report that links prevention-oriented youth programs with America's
international competitiveness (see accompanying story).
Infant/Children's Health. To ensure that children get a healthy start,
governors are strengthening maternal and child health services and allocating
state funds to expand Medicaid coverage and federal nutrition programs so more
women and children can be reached. Missouri Gov. John Ashcroft declared his
health agenda for 1989 "the most ambitious in Missouri history" and announced
his new Healthy Beginnings program that will expand Medicaid coverage of
low-income women and children by covering children up to age 4, broadening
nutrition programs, and increasing funds by $13 million for Women, Infant, and
Children's Nutrition (WIC), a federal program that provides food to low-income
mothers and children.
Oklahoma Gov. Henry Bellmon's priority this year is "allocating resources
to help bring about a more supportive environment in which children can grow
up safe, one in which they receive the health care they need." He included a
$44.6 million increase in the health department's budget to expand WIC
funding and prenatal and infant care, enhance early intervention services for
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children with disabilities, and provide full funding for immunization for
children.
In Delaware, Gov. Michael N. Castle has expanded Medicaid to cover
pregnant women and children to age 3 with incomes up to 100 percent of the
poverty level. Washington Gov. Booth Gardner has proposed the First Steps
initiative that focuses on maternity care for poor women and children up to 8
years of age.
Mississippi Gov. Ray Mabus, who has broadened Medicaid coverage for
expectant mothers and children, said that "each percentage point in infant
mortality represents human tragedy and heartache, lives unfulfilled, and
future leaders lost." Rhode Island Gov. Edward D. DiPrete's 1989 "Year of
Family Health" will take a special look at children's health issues, beginning
with expansion of a program called RIte Start, an innovative project aimed at
helping disadvantaged pregnant women deliver healthier babies. "In just its
first year, RIte Start has helped nearly 800 mothers obtain proper prenatal
delivery and postpartum care, and as a result, Rhode Island now enjoys the
lowest infant mortality rate in the country," said Gov. DiPrete.
South Carolina Gov. Carroll A. Campbell Jr. is launching a statewide
assault on infant mortality through a coordinated effort with Blue Cross/Blue
Shield and a Columbia television station to educate pregnant women about the
need for prenatal medical care. He also has appropriated $900,000 of state
funds to implement an NGA initiative that would expand Medicaid coverage for
poor pregnant mothers and children from age 1 to 2. "It is not only the right
thing to do, it is the fiscally responsible thing to do because this program
cuts later medical costs," said Gov. Campbell.
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"Our families are our most precious asset and our children our most
critical investment," said Kansas Gov. Mike Hayden, who last year appointed a
Governor's Commission on Children and Families; based on their report, Gov.
Hayden has recommended expansion of the Maternal and Infant Program, which
serves low-income families by providing free prenatal care for qualified
expectant mothers and well-baby checkups for infants up to one year and the
Healthy Start Program, which helps new parents with prenatal care, infant
health care, and healthy parenting techniques.
Child Care. Child care is rapidly advancing as the most pressing issues
on the children's agenda. Many governors have made significant increases in
state funding for child care. Pennsylvania Gov. Robert P. Casey has increased
child care to $36 million, "the largest amount ever." Wisconsin Gov. Tommy G.
Thompson increased state appropriations for child care by 169 percent -- a
total increase of $13 million -- during the last two years, saying that a
strong investment in child care provides an avenue of opportunity for single
parents, especially young mothers, to break the cycle of dependency." In
Vermont, funding for child care has grown from $1.7 million in 1984 to $5.4
million in 1989. "Because I believe these dollars help many families step out
of poverty, I will recommend that this appropriation be increased by 24
percent next year, to $6.7 million," said Gov. Madeleine M. Kunin.
Many governors see the need for expansion of quality child care to all
sectors of the population as essential for economic growth. Gov. Campbell has
called for a cooperative declaration that affordable child care be a right for
working women. "This is purely an economic issue," said Gov. Campbell. "I.ack
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of affordable day care constitutes one of the greatest obstacles to expanding
opportunities for working women
It further denies business and
industry a source of productive employees and denies the state potential tax
revenue."
Alabama Gov. Guy Hunt, who declared 1989 "The Year of the Child," has
called for a spirit of cooperation between government and the private sector
on issues of day care, and has asked for continued funding for "new plans to
get business more involved with the state's efforts to make life better for
our children."
Gov. Campbell, like many governors, believes the state should play a role
in educating the private sector and encouraging companies to provide or
support day care. Gov. Hayden has endorsed a Day Care Business Tax Credit
that would create a special tax incentive for businesses that provide their
employees with various forms of child care assistance (such as offering child
care at or near the work site; offering flexible benefit plans that feature
child care as an employee benefit; or contracting with local child care
centers for special employee discounts).
Many governors are using the strategy of establishing "model" day care
programs for state own employees to promote employer-sponsored child care in
the private industry. New Jersey Gov. Thomas H. Kean has created three child
womens used,
ssere.
care centers for state employees, and recognizing that parents prefer to use
smaller, more intimate setting for day care for their children, he has
proposed a new state effort to create up to 60 "mini child care centers" in
churches, public housing projects, and private homes, each serving 6 to 35
children. "There are some people who would brush this off as a 'women's
issue.' But child care is a family issue and an economic development issue."
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Gov. Mabus also has proposed legislation for pilot projects for quality
child care for state employees near their work, as well as extended day
programs through schools. He also has instituted a first-in-the-nation Child
Care Information Network that is provided through 76 state employment offices.
Colorado Gov. Roy Romer appointed a First Impressions Task Force to focus on
early childhood issues and help guide state decisions, develop a state
network for children and family resources and referrals, increase public
awareness, and spur the involvement of business and civic leaders in family
issues, such as day care.
"One of the barriers facing businesses that wish to offer more day care or
other dependent care support for their employees is the lack of information
and technical assistance," said Gov. Cuomo. To respond to this need, Gov.
Cuomo has proposed the creation of a Clearinghouse on Work and Family within
the state's economic development department.
Governors also are utilizing day care providers as a means for offering
readiness programs. North Carolina Gov. James G. Martin has called for $2
million for pre-kindergarten developmental day care for at-risk 4-year olds,
saying that "in addition to programs to reduce dropout rates, we must
find
better ways to prepare 4-year-olds to 'drop-in' when they get to kindergarten
and first grade."
Early Childhood Education. Many governors, like Gov. Martin, are
directing new dollars toward specific programs that enhance or institute early
childhood education, particularly for at-risk children. In Vermont, every
child has the opportunity to attend kindergarten, and Gov. Kunin has put new
emphasis on the benefits of early education through an initiative that
provides $1.5 million in grants to local communities to establish programs for
at-risk 3- and 4-year-olds.
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Hawaii Gov. John Waihee has set a goal to guarantee early childhood
education for all of Hawaii's children by the year 2000 and has asked the
lieutenant governor to head a special child care/ early childhood education
cabinet to continue work with the appropriate public and private agencies
toward this goal.
In Arkansas, Gov. Bill Clinton's Home Instruction Program for Preschool
Youngsters (HIPPY) is one of the state's most successful programs designed to
prepare children for the first grade. HIPPY teaches parents how to improve
the learning skills of their 4- and 5-year-old children at home by reading and
playing learning games each day. As of September 1988, 1500 families in 21
counties were participating in the HIPPY program and Gov. Clinton noted that
Arkansas "has the lowest dropout rate in the South."
Gov. Castle recognizes that many of the problems that young people face --
drug abuse, teen pregnancy, dropping out of school - have their roots in the
preschool years, and is "recommending that we triple our spending
...
to
implement a statewide, district-by-district strategy to assist children at
risk" through meaningful after-school and summer programs.
Ohio Gov. Richard F. Celeste, through his Education 2000 Commission, has
initiated or strengthened a number of programs that will provide early
childhood education, particularly to those who are disadvantaged, and will
expand educational opportunities to gifted students by providing significant
summer experiences. Over the next two years Ohio plans to create 30,000 new
child care slots, some as part of Education 2000. In
addition,
$300,000
in
state funds will be spent to expand licensing and to develop new day care
slots.
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Youth Services. Governors also are seeking ways to shift children's
services to the community level to encourage family and local involvement.
"We must choose
a trail that leads from the community to the capitol
instead of the other way around," said Oregon Gov. Neil Goldschmidt,
emphasizing that the children's agenda must be viewed not as a state
government program, but as a way of helping communities to help families.
North Dakota Gov. George A. Sinner's office and the Children's Services
Coordinating Committee have received a $3.75 million grant over a five-year
period from the Annie E. Casey Foundation to help finance an effort to avoid
out-of-home placements of children and adolescents. The Children's Services
Coordinating Committee was established in 1987 with the goal of moving state
programs for children at risk toward a community-based, coordinated network of
services. As a result, 1,156 children were placed in foster homes last year.
Gov. Miller has proposed a Children's Resources Bureau under control of the
director of the human resources department to bring together Nevada's services
with one intake and referral point for families of multi-problem, emotionally
disturbed children. "Today, children needing help are too often shuffled from
agency to agency. They are tested, interviewed, and delayed
This is
just plain unacceptable," said Gov. Miller.
Other governors are calling for interagency cooperation to provide a wider
range of youth services, particularly for those at risk. Gov. Ashcroft has
proposed a Caring Communities program that will respond to the needs of
at-risk youth through a joint effort by the departments of social services,
health, education, and mental health, with the goal of helping troubled youth
receive treatment and intervention while remaining in their own homes,
communities, and schools, with meaningful involvement of parents and community
leaders.
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Maine Gov. John R. McKernan's budget includes $3 million in new funding
for programs aimed at older, at-risk children, allowing for more casework for
troubled youth, more referral options, better foster care, and expanded
efforts at parent-teen communications.
In South Carolina, Gov. Campbell has established a council to address
problems of at-risk youth that includes representatives from all human
services agencies, the general assembly, major education groups. A report
from them is expected by July 1.
Virginia Gov. Gerald L. Baliles has called for an integrated, multi-agency
approach to providing early childhood development services and has recommended
that a Department of Youth be established by July 1990 to give children the
priority they deserve. "Where poverty endures there are doctors, plumbers,
lawyers, business leaders, engineers, mechanics, teachers, and workers of all
descriptions," said Gov. Baliles, "But you haven't met them yet -because they
only exist as potential. They are children, a living potential too often
being wasted."
Declaring that for many young people today, "youth is a season of despair,
disillusionment, and alienation," New Jersey Gov. Thomas H. Kean has created
an innovative program that moves beyond the traditional avenues of solving the
problems of troubled youth. The New Jersey School-Based Youth Services
Program is a $6 million joint effort between the departments of human
services, education, health, and labor that for the first time brings
comprehensive services to teenagers in the public schools. At least one site
located in every county, each providing mental health and family counseling,
health and substance abuse services, and employment counseling and training
services.
This "one-stop shopping" method has already served 17,000 and in full
operation, it is expected to reach 38,000 young people a year. Describing
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this combined effort between educators and human service professionals, Gov.
Kean said that New Jersey schools "cannot easily teach children who are
emotionally distraught, pregnant, or hooked on drugs -- children who
see
no
hope for a rewarding career."
Child Protection. Governors are focusing on developing new and better
methods for identifying children in danger of abuse or neglect and are
stiffening child abuse laws and instituting stiffer penalties. Pennsylvania
Gov. Robert Casey has asked the legislature to overhaul the state's child
abuse laws to protect more children, with earlier and more effective
intervention where abuse is suspected; and better training, higher pay, and
tougher professional standards for child abuse case workers. He also has
allocated $5 million for child abuse prevention, marking the "first time ever
that state funds were specifically earmarked to fight child abuse."
In Delaware, payment for foster care homes that care for abused and
neglected children has been increased by up to 100 percent of the federal
standard. In Idaho, Gov. Andrus is planning for a coordinated statewide
effort to fight child abuse and has proposed the formation of a Child Abuse
Resource Center to help communities combat child abuse at the local level and
to provide specialized assistance and support to the individual needs of
victims of child abuse. The resource center would draw on the cooperative
effort of law enforcement, health and welfare, and prosecuting officials to
help find treatment for all victims, develop regional investigative teams for
child abuse cases to ensure prosecution of offenders and protect the child
from unnecessary multiple interviews, and work with schools to develop child
prevention education programs. "We can pay in advance to provide child abuse
protection and treatment, or we can pay later if an abused child becomes an
abusing adult and
ends up as a nonproductive resident of a county jail."
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NATIONAL
Hall of the States
444 North Capitol Street
GOVERNORS
Washington, D.C. 20001-1572
ASSOCIATION
Telephone (202) 624-5300
EMBARGOED UNTIL 11:30 a.m. (EST)
FEBRUARY 25, 1989
(13-89)
Contact: Rae Young Bond, 202/624-5330
GOVERNORS CALL FOR NATIONAL COMMITMENT TO INTERNATIONAL EDUCATION
WASHINGTON, D.C. -- The nation's governors today released a major
report that calls international education a critical ingredient in
the nation's ability to be competitive in the world and outlines
steps states can take to help citizens of all ages -- from the
smallest child to corporate executives -- learn more about the
world around them.
"More than ever before, our national security -- indeed, world
stability as a whole - depends on our understanding of and
communication with other countries," said New Jersey Gov. Thomas
H. Kean, chairman of the NGA Task Force on International
Education, which produced the report. "If we are to reap
continued prosperity and security in the 21st century, we must
plant the seeds of international education today."
The other members of the task force are Hawaii Gov. John Waihee
and Minnesota Gov. Rudy Perpich.
The Task Force on International Education is one of six task
forces developed as part of NGA's "America in Transition: The
International Frontier" initiative. Launched by Virginia Gov.
Gerald L. Baliles when he became NGA chairman last summer, the
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initiative is moving on two fronts: understanding and meeting the challenges
of the international economy, and finding ways to regain domestic markets,
improve U.S. infrastructure, and invest in America's children.
The other five task forces are looking at children, domestic markets,
foreign markets, research and technology, and transportation infrastructure.
Gov. Baliles believes that the way the nation responds to these challenges
throughout this "decade of decision" will determine its readiness to compete
effectively on the international frontier.
Announcing the initiative in August, Gov. Baliles said that America's
governors were already on the front lines preparing the United States for the
21st century. "Governors have led the movement to reform education, to help
the disadvantaged become self-sufficient, and to revitalize state economies,"
he said. "Now, governors will work together to help shape a strategy for
America in a highly competitive international arena."
Recommendations for States
The report of the Task Force on International Education highlights
innovative and successful curricula, classes, and projects and calls for a
national commitment to international education, involving state agencies, all
levels of education, and the private sector. The report recommends that
governors develop strategic plans for international education at the
elementary, secondary, and postsecondary levels; create coalitions of
education, business, and government; promote the alignment of curriculum,
instruction, and assessment; and remain responsive to the changing needs in
international education.
Governors can and should take the lead in creating an international focus
in the U.S. education system, according to the report. Working with a broad
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coalition involving teachers, school administrators, university presidents,
college faculty, and the business community, Governors and states can build
upon their accomplishments in leading education reform to expand international
education for children, youth, and adults in all settings.
The report recommends the following objectives for state action:
International education must become part of the basic education of
all students.
More students must gain proficiency in foreign languages.
Teachers must know more about international issues.
Schools and teachers need to know of the wealth of resources and
materials, other than textbooks, that are available for international
education.
All graduates of colleges and universities must be knowledgeable
about the broader world and conversant in another language.
Business and community support of international education should be
increased.
The business community must have access to international education,
particularly information about export markets, trade regulations, and
overseas cultures.
Other Conclusions
Like the NGA Task Force on Children, which released its report on Feb. 16,
the Task Force on International Education emphasizes that the United States
cannot compete beyond its borders unless it becomes competitive within its
borders. The new report suggests that the United States is not well-prepared
for international trade because its citizens do not know the languages, the
cultures, or the geographic characteristics of the nation's competitors.
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Page 4
The report includes evidence that the United States is lacking an
international focus: a large proportion of American students and adults are
unaware of the most basic facts about world geography or international events;
fewer than 5 percent of U.S. college students graduate with fluency in a
second language; and teachers lack adequate international preparation.
In educating students, the report states, the languages, cultures, values,
traditions, and even the location of other nations are often ignored. Schools
and universities reflect the same lack of global understanding that pervades
the nation from government and business leaders to school children.
However, the report contains several examples of state programs that
provide an international focus in schools and other settings, and notes that
some of these programs could be important components of a comprehensive
strategy.
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Copies of the Report of the Task Force on International Education are
available for $10.95 each, prepaid, from the NGA Publications Office, 444
North Capitol Street, Suite 250, Washington, D.C. 20001.
Oct. 7 / Administration of Ronald Reagan, 1986
that the bill accords special treatment to a
gional centers, without a demonstrated
at the airport, I got
specific institution and does not require se-
need for a Federal role in this area.
Texas Ranger asked
lection on a competitive basis. Selecting re-
Finally, I note that Title I of the bill
[Laughter]
cipients competitively helps to ensure that
would unnecessarily extend two SBA pilot
But, ladies and ger
the taxpayers' money is spent on projects
programs. The goal of the pilot procure-
see so many of you
that address an acknowledged need and
ment program can be accomplished under
afternoon, and I wa
demonstrate the greatest promise of suc-
existing authorities. The extension of the
for inviting me to sp
cess. Legislative provisions that accord spe-
surety bond waiver program provided in
you this evening. Ar
cial treatment to certain applicants or, as
that I consider mys
Title I has proved unnecessary, as no waiv-
here, identify the sole recipient of assist-
ers have been requested since the program
each of you, both fo
ance are particularly objectionable. I am
was first authorized in 1978.
you're doing out in
concerned also that the Institute, proposed
the help you've give
as a "regional demonstration center," would
RONALD REAGAN
ing here in Washin
set an undesirable precedent for the non-
The White House,
your chairman, John
competitive establishment of additional re-
shire, to your vice
October 7, 1986.
New Jersey, and to
chairman Dick Thc
nia. To all of them
tions on a job well
Statement on the Death of Hal Wallis
Alexander of Tenr
October 7, 1986
chairman of the Na
ciation, you have e
Nancy and I were deeply saddened to
your leadership, esp
for excellence were an inspiration to all of
cently announced e
learn of Hal Wallis' death. He was a gifted
us who had the privilege to work with Hal.
But if I could, to
and dedicated artist, who gave the world
Hal Wallis was a special friend who we will
moment or two t
some of our greatest films.
miss. We extend our deepest sympathy to
taken up by this ye
His talent, professionalism, and instinct
his family.
second stage of the
first we need to be
just what it is that's
stage of the revolut
Remarks at the Republican Governors Association Dinner
changes we've be
October 7, 1986
policy-themselves
tant-changes like
the more limited I
It's an honor to speak to the Republican
and the Texan took the-no real damage to
ernment that have
Governors Association-all the more so be-
the cars-and the Texan took the New
now of economic
cause I used to be a member myself. One of
Hampshirite out and said if he needed a lift
ation of more thar
the aspects of these meetings that I used to
he'd give him a lift. He said, "Well, let me
and changes like t
enjoy most was the sense of diversity-the
show you our place down here." So, they
tional defenses ano
distances between our States, the different
got in the car, and he started. And he drove
America's world r
outlooks in our people, even the regional
him past some longhorn cattle, and then he
freedom. But bey
accents. Come to think of it, this sort of
showed him how high the corn grew and
seems to me that
diversity reminds me of a story. You'll dis-
finally ended up bragging about the size of
and more lasting h
cover when you get to be my age that quite
the ranch itself. He said, "Just imagine, you
expectations, a cha
a few things remind you of a story. [Laugh-
know," he says, "I can start in the morning
American people
ter]
and drive all day-one side of my ranch-
itself. As one colur
Seems that a farmer from John Sununu's
and I never get to the other side." The
about all that has
State of New Hampshire was visiting a
New Hampshirite says, "Yup. I got an old
ministration first to
rancher in Bill Clements' State of Texas.
pickup truck just like that." [Laughter] I
completely altered
And he was driving down the highway, and
don't mean to tell jokes at the expense of
been called the CO
there was a Texan driving on the highway.
the State of Texas; it's just that what hap-
versation.
And there was an accident, and they collid-
pened when I flew to Dallas in July still has
Now, this becor
ed., Well, they got to talking then a little bit,
me a little annoyed. Air Force One landed
look at the recor
1340
Administration of Ronald Reagan, 1986 / Oct. 7
demonstrated
at the airport, I got off the plane, and a
example, the idea of any major tax reform
area.
Texas Ranger asked to see my passport.
was considered outlandish, maverick. But
I of the bill
[Laughter]
today we've not only seen our 1981 tax cut
two SBA pilot
But, ladies and gentlemen, it was good to
take effect, we've seen the passage of the
pilot procure-
see so many of you in the Oval Office this
most sweeping and dramatic tax reform in
plished under
afternoon, and I want to thank you again
decades. A recent headline in the Washing-
tension of the
for inviting me to spend a few minutes with
ton Post told the story: "The Impossible
n provided in
you this evening. And I want you to know
Became the Inevitable." Consider aid to
ry, as no waiv-
that I consider myself deeply indebted to
anti-Communist insurgencies. When we
e the program
each of you, both for the wonderful work
took office, fashionable opinion in Washing-
you're doing out in your States and to all
ton still centered on the notion of contain-
the help you've given to those of us work-
ment, or merely attempting to slow the
ALD REAGAN
ing here in Washington. Special thanks to
Soviet advance. Well, the idea that we
your chairman, John Sununu of New Hamp-
should actually offer help to those attempt-
shire, to your vice chairman Tom Kean of
ing to reverse that advance seemed out-
New Jersey, and to your immediate past
landish, a deviation from established and
chairman Dick Thornburgh of Pennsylva-
comfortable patterns of thought. Yet today
nia. To all of them, I can say congratula-
we see our country firmly on the side of
tions on a job well done. And to Lamar
freedom fighters in Afghanistan, Africa, and
Alexander of Tennessee, immediate past
Cambodia. El Salvador is safely in the free-
chairman of the National Governors' Asso-
dom family. When we first got here every-
ciation, you have everyone's gratitude for
one was talking as if it was Vietnam-Get
ration to all of
your leadership, especially on the NGA's re-
out of El Salvador-and now there's a
work with Hal.
cently announced education initiative.
But if I could, tonight, I'd like to take a
healthy democracy there. Grenada has been
d who we will
moment or two to consider the theme
finally saved. And, yes, aid will soon go to
st sympathy to
taken up by this year's RGA idea book: the
the freedom fighters in Nicaragua.
second stage of the revolution. Of course,
Of course I could go on discussing nation-
first we need to be as clear as we can about
al policy-our strategic defense initiative, in
just what it is that's taken place in the first
particular, that represents another dramatic
stage of the revolution. There are the many
change, a quantum leap, if you will, in the
r
changes we've been able to effect in
very way we think about defending our
policy-themselves tremendously impor-
country. But I want to focus, instead, for a
tant-changes like the lower tax rates and
moment on all that this first stage of our
the more limited role of the Federal Gov-
revolution has meant to you in your States.
real damage to
ernment that have led to some 46 months
From the first, our administration took the
took the New
now of economic growth and to the cre-
concept of federalism seriously. You
he needed a lift
ation of more than 11½ million new jobs,
couldn't put a Governor back here in this
I, "Well, let me
and changes like the rebuilding of our na-
job that he wouldn't take it seriously. That's
here." So, they
tional defenses and the firm reassertion of
the greatest strength and source of freedom
d. And he drove
America's world role on behalf of human
in our nation: that we are a federation of
tle, and then he
freedom. But beyond the policy itself, it
sovereign States. For example, we reduced
corn grew and
seems to me that something still deeper
a large number of complicated programs
bout the size of
and more lasting has taken place: a shift in
involving the States into a much smaller
ist imagine, you
expectations, a change in the very way the
number of block grants, and that whittled
in the morning
American people think about government
down an awful lot of expensive Federal
of my ranch—
itself. As one columnist put it: The key fact
overhead. We shifted certain programs
ther side." The
about all that has happened since our ad-
from Federal to State management. And we
ip. I got an old
ministration first took office is that we have
instituted a new openness toward the
[Laughter] I
completely altered the terms of what has
States. This openness is especially visible in
the expense of
been called the contemporary political con-
the contributions that so many of you have
that what hap-
versation.
made to the studies we're now finishing on
S in July still has
Now, this becomes clear in even a brief
federalism, the American family, and low-
rce One landed
look at the record. When we started, for
income assistance. Still more recently, of
1341
Oct. 7 / Administration of Ronald Reagan, 1986
course, many of you have taken a strong
munities and neighborhoods." So it is that
But that's just V
lead in your States in the national crusade
yet another fundamental, long-lasting, and
come down to: CC
against drug abuse.
dramatic change has taken place. Power has
tests that will hel
Now, it's true that in the early days many
stopped flowing to Washington and begun
ica for our childre
of you faced difficulties as we cut back Fed-
to flow back where it belongs: to the States.
dren. So, I pledge
eral financing of State affairs. And believe
Even though this change is already un-
there's anything
me I know what you were going through,
derway, most of stage one of our revolution
just let us know. I
because I've been there. But overall, these
has taken place here in Washington, as
house races are
3 and more years of economic expansion
we've continued to limit the scope of the
whether or not fr
have put our States and cities alike in good
Federal Government. Now it's time for re-
expanded by brin
economic shape. And in the large cities that
sources, initiatives, and public attention to
demand special attention from so many of
the people, about
you, a recent study by the Urban Institute
shift back to the States still more definitely,
to the people th
still more dramatically-in other words, to
dare, and the fr
concluded that budgets are by and large in
alter the balance of power permanently in
Americans, are S
good condition. Now, I wish I could say the
favor of levels of government that are
friends, it's on to
same thing about Washington. [Laughter]
Indeed, the study found, as early as the end
closer to the people. This is stage two of our
Now, for the b
revolution. And, yes, this means setting
for Governor who
of 1982, the Nation's cities were financially
better off than they had been at any time
aside liberal, Democratic Governors, fixed
and have not yet
during the 1970's.
by choice and habit alike in their depend-
to tell you a little
And as we've limited government here in
ency upon Washington-setting them aside
when you first ste
Washington, you in the statehouses have
for Republican Governors, Governors of
California, I inhe
energy and new ideas. You know, just last
Governor a State
been taking the lead on matters that are
important to your own people. In Indiana
month I campaigned in Detroit for Bill
a shape as the ]
we've seen merit pay for State employees.
Lucas, one of the most impressive men I've
In North Carolina we've seen the Year of
ever met and, as you know, our candidate
the Child, a sweeping initiative to protect
for Governor of Michigan. Later that day I
children from kidnaping, neglect, and other
campaigned in Omaha for Kay Orr, one of
Informal Exc.
abuses. We've seen the teacher career
the five Republican women running for
ladder in Tennessee and New Jersey's alter-
Governor this year. And I couldn't help but
October 8, 198
nate route for teacher training, a program
think that those two stops demonstrated
that allows certain highly motivated college
perhaps more clearly than anything else
The President.
graduates to teach even if they haven't had
ever could: Today it's the GOP that's the
like to say-a lit
the traditional training. We've seen job pro-
party of ideas, the party of the future, the
days into the fisc
grams in Oregon, New Hampshire, Illinois,
party of opportunity for all.
budget. We had
and elsewhere. And we've seen tax incen-
Now, this year we have an historic
a few days while
tives used to promote economic growth in
chance to win back a majority of state-
debate. That expi
programs like Pennsylvania's economic revi-
houses for the first time since 1968, to carry
and the Governn
talization tax credit.
the revolution more decisively out of Wash-
don't think that
The Christian Science Monitor put it this
ington and into the country. And although
short-term contin
way: "Decentralization of power
could
the media seems to have a near fixation on
is time that we h
be one of the most long-lasting effects of"
the U.S. Senate, there can be no doubt that
it is time that th
my Presidency. Well, you were always
what happens in the statehouses is of equal,
that budget thing
ready and willing to go that route. It was
if not greater, importance. Just the other
ment and nationa
just Washington, for a long time, that
day, Dick Wirthlin-you know our poll-
hands now on the
thought its main goal should be to try and
ster-made a remark that I believe sums it
debate and to I
make the States into administration districts
up: "Changes in the States can endure
Union. And I thin
of the Federal Government. Then they ran
longer than almost anything that happens
should be that it i
into a bunch of Governors that didn't agree.
in Washington." And he said, "I'm playing
budget, and a bi
And a recent statement by Dick Thorn-
this one for my grandchildren." And as he
financial situation
burgh and John Sununu put it like this:
is for many of you, Dick Wirthlin is for me
in their views on
"Washington has changed
but an even
sort of like that stockbrokerage firm you've
national security.
bigger change is going on right now in the
heard about on television: When he talks, I
Q. Will you be
States
in the cities, in America's com-
listen. [Laughter]
promise at all?
1342
Administration of Ronald Reagan, 1986 / Oct. 8
So it is that
But that's just what this year's State races
And every day it seems someone would
ong-lasting, and
come down to: contests for the future, con-
stand in front of my desk saying they'd
lace. Power has
tests that will help shape our life in Amer-
found a new problem. And this went on
;ton and begun
ica for our children and our children's chil-
until I was getting a little harried. And then
(S: to the States.
dren. So, I pledge my full commitment. If
one day on the way to the office I had the
is already un-
there's anything at all we can do to help,
radio on in the car, and it was a disc jockey
our revolution
just let us know. For in the end, these state-
on. And out of the clear blue sky, he said-
Washington, as
house races are about freedom, about
and I fell for him-he said, "Every man
e scope of the
whether or not freedom in America will be
should take unto himself a wife, because
it's time for re-
expanded by bringing government closer to
sooner or later something is bound to
lic attention to
the people, about whether or not we give
happen that you can't blame on the Gover-
nore definitely,
to the people the freedom to dream, to
nor.' [Laughter]
other words, to
dare, and the freedom to which they, as
Well, thank you, and God bless you all.
permanently in
Americans, are so richly entitled. So, my
And believe me, I'm looking forward to
ment that are
friends, it's on to stage two.
that majority of Republican Governors, be-
tage two of our
Now, for the benefit of those candidates
cause I know that I'll be a lot more comfort-
means setting
for Governor who are here in the audience
able back here. See, I'm outnumbered right
overnors, fixed
and have not yet been Governors, I'd like
now, and I'd like it the other way around.
their depend-
to tell you a little bit about what it's all like
Thanks again.
ing them aside
when you first step in there. I remember in
Governors of
California, I inherited from a Democratic
Note: The President spoke at 7:20 p.m. in
know, just last
Governor a State that was in almost as bad
the Vista Ballroom at the Vista Internation-
Detroit for Bill
a shape as the Federal Government was.
al Hotel.
essive men I've
our candidate
ater that day I
.ay Orr, one of
Informal Exchange With Reporters on the Budget
n running for
uldn't help but
October 8, 1986
demonstrated
anything else
The President. I have one thing I would
The President. What?
COP that's the
like to say-a little statement. We are 8
Q. Are you willing to compromise at all
the future, the
days into the fiscal year. We do not have a
on putting off these amendments until early
budget. We had a continuing resolution for
next year?
'e an historic
a few days while the Congress continued to
The President. And what good would that
ority of state-
debate. That expires as of midnight tonight,
do? The man I'm talking to across the table
1968, to carry
and the Government has no funds. Now, I
would know that all he has to do is wait and
ly out of Wash-
don't think that we should go for another
the Congress will help him do their work.
And although
short-term continuing resolution. I think it
Q. You really want to scrap SALT II? It
ear fixation on
is time that we have a budget, and I think
means that much to you?
no doubt that
it is time that the Congress does not tie to
The President. I want a budget, which I
ises is of equal,
that budget things having to do with arma-
haven't had since I've been here.
Just the other
ment and national security that will tie my
Q. You asked them about this yesterday.
now our poll-
hands now on the eve of going to Iceland to
The President. What?
believe sums it
debate and to negotiate with the Soviet
Q. You made this request yesterday.
S can endure
Union. And I think the message to Congress
What did they [congressional leaders] say?
that happens
should be that it is high time that we have a
The President. Let me say I did not get a
I, "I'm playing
budget, and a budget that deals with the
firm answer.
en." And as he
financial situation and does not try to bring
Q. Mr. President, was there any U.S. in-
thlin is for me
in their views on international relations and
volvement in this flight over Nicaragua-
ge firm you've
national security.
carrying the arms-any involvement what-
hen he talks, I
Q. Will you be able to get them to com-
soever?
promise at all?
The President. I'm glad you asked. Abso-
1343
AMERICA IN TRANSITION
The International Frontier
Report of the Task Force
on Research and Technology
The National Governors' Association,
founded in 1908 as the National Gover-
nors' Conference, is the instrument
through which the nation's Governors
NATIONA
GOVERN
ASSOCIATI
Hall of the States in Washington, I
The association serves as a vehicle I
sharing knowledge of innovative pro
among the states and provides tech
assistance and consultant services to
Governors on a wide range of manage
and policy issues. The Center for P
Research serves the Governors by u
taking demonstration projects and pr
ing anticipatory research on import:
policy issues.
AMERICA IN TRANSITION
The International Frontier
Report of the Task Force
on Research and Technology
Contents
Chairman's Overview
iv
Foreword
vi
The Challenge
2
The Context
6
Critical Issues
12
The State Role
20
State Action Agenda
24
Publication design by Wayne Pederson.
Photo credits:
Courtesy of National Aeronautics and Space Administration
(cover, p. 10)
Courtesy of Ford Motor Company (pp. 9, 32)
Courtesy of Agricultural Research Service, U.S. Department
of Agriculture (p. 13)
Courtesy of National Science Foundation (p. 24)
Courtesy of AT&T Bell Laboratories (pp. 27, 28)
Joel Freid (p. 31)
(See page 36 for photo captions.)
ISBN 1-55877-046-1
Copyright 1989 by the National Governors' Association,
444 North Capitol Street, Washington, D.C. 20001-1572.
All rights reserved.
Printed in the United States of America.
"Our ability to compete inter-
nationally faces unprece-
Chairman's Overview
dented challenge from
Foreword
abroad. Our world leader-
ship is at stake, and so is
our ability to provide for our
people the standard of liv-
ing and opportunities to
which they aspire."
John A. Young, as chairman of
the President's Commission on
Industrial Competitiveness in
Global Competition: The New Reality
"Whatever the new frontiers
in scientific exploration, the
Chairman's Overview
development and commer-
cialization of new discover-
ies must be factored into the
equation. The goal is to turn
The world is growing smaller. Fiber optic
Twenty years ago, states were bystanders
networks span the continents, linking
as international events changed the eco-
ideas into products. States
remote corners of the globe. Billions of
nomic landscape. That, too, has changed.
dollars move in seconds from Milan to
Our boundaries are no longer the borders
can take the lead in helping
Tokyo to New York. Goods move across
of our states, but every corner of the
continents in a single day. An individual
globe. As Governors, we are challenged
turn the fruits of today's
product may contain parts manufactured
to confront this new reality.
in five different countries and be assem-
research into exportable
bled in a sixth. New markets and oppor-
State government is well-positioned to
tunities emerge almost overnight. In this
meet the challenges of the next century.
products and services."
competitive and rapidly changing envi-
But we must begin preparing for this transi-
ronment, success belongs to those who
tion. Our agenda includes a six-point offen-
Governor Gerald L. Baliles
can anticipate, adapt, and respond quickly.
sive. Specifically, we must:
Virginia
The international frontier is no longer
Discover new and emerging markets
the future a new age has arrived. The
abroad for American products, to
evidence abounds. A common market in
become again the Yankee traders we
Western Europe will be finalized in 1992.
once were.
The United States and Canada are on a
ten-year path toward free trade. World
Bring an international perspective to
output is shifting dramatically to Japan
our daily living - to understand foreign
and the Pacific Rim. And, in an attempt
nations and the people beyond our
to encourage trade and foreign invest-
borders
to learn the international
ment, the People's Republic of China and
language of business.
the Soviet Union are experimenting with
capitalism. By the beginning of the twenty-
Expand our research, and use our tech-
first century, the economic terrain will be
nology, to create both new products
one of large trading blocs, instead of indi-
and new processes to maintain Ameri-
vidual countries, trying to maximize their
ca's competitive position.
growth through trade.
Capitalize on the natural advantages of
As the global marketplace has emerged,
American manufacturers and regain
the United States' role as an economic
competitiveness in our domestic markets.
decisionmaker has changed. During the
1960s when the U.S. economy was par-
Improve our highways, airports, air-
tially insulated from global influence, it
ways, and ports SO we can move our
was possible to influence the economy by
people across town and our products
then-traditional fiscal and monetary poli-
around the globe.
cies. With the development of the Euro-
dollar market, foreign ownership of a large
Invest in the health, education, and
portion of the federal debt, and huge
training of our children SO they can live
increases in foreign trade, the economic
healthier and more productive lives.
sovereignty once enjoyed by the United
States has been reduced.
This year, I have created six NGA task
forces to examine these issues that together
form the foundation for the nation's future:
iv
foreign markets, international education,
This report will demonstrate a need for
research and technology, domestic mar-
action, spur debate, and help encourage
kets, transportation infrastructure, and
the formation of a commercialization strat-
children.
egy. Historically, American economic suc-
cess has been rooted in the imaginative
This is the fourth of the six reports. It
works of the mind and hand. In the past,
centers on an issue of crucial importance
we have translated scientific discoveries,
to America's future competitiveness: our
innovations, and ideas into economic
ability to commercialize technology more
opportunities. It is time to do SO again.
rapidly than our competitors.
In the months ahead, the nation's Gover-
It all comes down to supporting, secur-
nors will continue their work, releasing
ing, and maintaining scientific leadership
recommendations on topics ranging from
and technological preeminence. The sci-
how to finance our aging infrastructure to
entific research community can identify
how to regain our domestic markets. Gov-
any number of potentially rewarding
ernors may not agree on every recom-
projects - a supercollider particle acceler-
mendation made in the reports, but we
ator, a biology program to map the human
have reached some clear conclusions.
genome, a satellite study of the global
environment, a permanent space station,
Together, these reports should serve as a
or manned exploration of Mars.
guide, outlining the steps Governors and
their states can take to lead the nation
Whatever the new frontiers in scientific
into the twenty-first century. a road map
exploration, the development and com-
for an America in Transition.
mercialization of new discoveries must be
factored into the equation. Capturing the
full potential of emerging technologies
will require the commitment of govern-
ment, universities, and thousands of
private businesses.
Gerald L. Baliles
Governor of Virginia
The goal is to turn ideas into products.
Chairman, National Governors' Association
We must be willing to put our research
and development resources into those areas
with the greatest commercial promise and
to transform our business and academic
strategies to take advantage of rapid
advances in technology. States can take
the lead in helping turn the fruits of today's
research into exportable products and
services.
V
policy goals, teaming up with other
and landed men on the moon-we now
states to initiate such programs as
must act to rekindle our innovative and
regional product development centers,
entrepreneurial spirit and develop a
and providing entrepreneurship train-
successful commercialization capacity.
ing and assistance through the state
university system. States should help
develop a world-class workforce by
improving technology literacy in both
schools and the workplace; offering
Governor John R. McKernan Jr., Maine
incentives for math and science stu-
Chairman, NGA Task Force on Research
dents; retaining top science and engi-
and Technology
neering faculty; and providing continuing
education opportunities for corporate
Members of the Task Force
managers, scientists, and engineers.
States can help businesses develop new
products by enhancing seed capital
Ray Romer
programs, expanding advanced tech-
nology and industrial research centers,
Governor Roy Romer, Colorado
and strengthening incentives for
university-industry collaboration.
Tray & Buansted
Develop products for the interna-
tional marketplace. In helping develop
Governor Terry E. Branstad, Iowa
better manufacturing processes, states
can do the following: establish flexible
manufacturing centers and networks;
direct higher education institutions to
James A.Martin
reform business administration and
Governor James G. Martin, North
engineering programs to emphasize
Carolina
manufacturing and production man-
agement; and establish Governors'
award programs for excellence in manu-
Wihand 2. Crleste
facturing. Awards serve as an incentive
for quality achievement and heighten
Governor Richard F. Celeste, Ohio
public and media awareness of tech-
nology's importance.
Just as the United States built a public
education system that created the most
skilled and productive labor force in the
world; just as we built an interstate high-
way system and transportation network
to move raw materials and finished goods
to their markets inexpensively; just as we
built a research and development capacity
that harnessed nuclear energy, developed
the transistor and the integrated circuit,
viii
"Global competition has cre-
ated new ground rules for
technology. The keys to suc-
The Challenge
cess are speed and team-
work. We've been too slow,
too fragmented, too uncoor-
dinated, and too adversarial.
We must become faster,
more focused, more compre-
hensive, and more collabo-
rative. And this means a new,
more active partnership with
government."
Admiral B.R. Inman, Chairman and
CEO, Westmark Systems, Inc.
and former CEO of Microelectronics
and Computer Technology Corporation
ceramics-now used for sports equipment
The United States must make a national
and automobile engine production-can
commitment to capture the economic
rapidly advance into the construction
potential of these and other technologies.
industry and the manufacture of industrial
Our future position in the world and our
equipment. The development of digital
national standard of living depend upon
compatibility in televisions, telephones,
it. The nation that develops the most
radios, recordings, and movies will link
effective research and technology strategy
all of these products with computers, revo-
will lead the world into the twenty-first
lutionizing these industries.
century.
Figure
3
U.S. Share of Selected High
Technology Exports, 1984
(Among major industrialized countries)
Aircraft and Parts
Office, Computing, and
Accounting Machines
Engines, Turbines and Parts
(excluding gasoline engines)
Professional and Scientific
Instruments
Drugs and Medicines
Plastic Materials and
Synthetic Resins
Industrial Inorganic Chemicals
Guided Missiles and Spacecraft
Communications Equipment and
Electronic Components
Ordnance and Accessories
Percentage 10
20
30
40
50
60
70
80
90
100
Note: Categories represent 10 highest ranking industries in
research and development spending as a percentage of output.
Source: U.S. Department of Commerce, International Trade
Administration, Office of Trade and Investment Analysis, 1989.
4
"The continued economic
progress of the United States
demands that we maintain
The Context
and improve our international
competitiveness. Our ability
to do that depends on the
full development of our
human resource potential,
promotion of scientific and
technological progress,
removal of barriers to inno-
vation, careful assessment
of any governmentally
imposed burdens on the free
economic system, and
removal of domestic barri-
ers to the flow of goods and
services."
President George Bush, announcing
the creation of the White House
Council on Competitiveness,
April 1989
"If you're the only contender
in the race, you can stroll
The Context
across the finish line with
your new product. For years
the United States was in that
For most of our history, economic strength
electronics equipment, professional and
position. America often is
was based largely on access to natural
scientific instruments, and office and
still the first out of the start-
resources, inexpensive transportation, scale
accounting machines. This dramatic
of production, and size of market. In each
change is partly the result of these
of these areas, the United States had
ing gate with an idea, but
countries' committing more than 2.8 per-
advantages over its foreign competitors
cent of their GNP to civilian research
we have to do better at com-
and thus controlled the world economy.
and development, while the United States
spends only about 1.7 percent.
The U.S. dominance of world markets in
pleting the race to commer-
the 1950s and 1960s also stemmed from
Japan and Western Europe do not present
cialization-and winning it."
the condition of economic competitors
the only challenges to our economic future
who were reconstructing after the war, as
and standard of living. The "Four Tigers
well as America's worldwide leadership in
Governor James G. Martin
of East Asia" - Hong Kong, Singapore,
North Carolina
science and technology, which resulted
South Korea, and Taiwan-also have
from large investments in research.
started to challenge our leadership. Their
economies have achieved almost unprece-
Today, however, the U.S. market is about
dented growth in some high technology
25 percent of the world market, com-
product areas by adapting new technol-
pared with nearly 60 percent at the end
ogy, developing a talented scientific and
of World War II. Today more products
engineering workforce, and streamlining
are created from man-made materials
manufacturing processes.
that require manufacturing know-how
rather than plentiful natural resources.
The story of the videocassette recorder
Today our competitors have thriving
epitomizes the United States' failure in
economies. The world has changed and
the development of technology-related
we must change with it.
products. Ampex, a U.S. corporation,
invented the videotape recorder, but sold
Recapturing our role as a world leader,
its patents to Japan's Sony after it was
particularly in research and technology,
unable to develop a marketable product.
requires prompt and decisive action. It
By shifting from tapes to cassettes and
requires an appreciation of the competi-
designing a machine that could manufac-
tion the United States faces in commer-
ture video recording heads at a reasonable
cializing technology. It requires a grasp of
price, the Japanese developed a product
how commercial product development has
that revolutionized the television and film
changed and an understanding of the
industries. In 1987 Japan manufactured
players and their roles in the commercial-
more than 72 percent of all videocassette
ization process. Finally, it requires a
recorders; the United States produced
vision of the potential impact of today's
less than 1 percent.
emerging technologies.
Similar stories can be told about stereo
Our trading partners, especially Germany
sound equipment and phonographs. The
and Japan, have dramatically increased
United States was at one time a major
their technology-intensive exports over
exporter of each of these products; today
the last decade. Japanese products are
we export almost none. Our competitors
now beginning to dominate the market in
found a way around our vast lead in
three major areas: communications and
6
technology by focusing their attention
Figure
4
Total R&D Spending as a
on developing products for important
Percentage of GNP
world markets.
Percentage
3.0
Today in consumer electronics an area
United States
once dominated by American firms the
2.5
United Kingdom
top ten worldwide companies (by dollars
of sale) include only two U.S. firms: IBM
2.0
and General Electric. Of the other com-
France
panies, six are Japanese and two are
1.5
Japan
Western European.
West Germany
1.0
Leadership in the global economy now is
associated with the ability to translate the
.5
latest advances in research and technol-
ogy into products for consumer markets.
0
Future economic strength will be linked
1962 '63 '64 '65 '66 '67 '68 '69 '70 '71 '72 '73 '74 '75
'76
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to this ability to "commercialize" research
and technology.
Source: National Science Foundation, Science Indicators.
The Commercialization Process
During the glory days of U.S. high tech-
Figure
5
Nondefense R&D Spending as a
nology dominance, the commercialization
Percentage of GNP
process was straightforward and clear: it
Percentage
was driven by research. Scientists and
researchers worked in laboratories and
3.0
Japan
when their discoveries seemed useful to
an industry, that industry-automobile,
steel, textile-would adopt the change.
2.5
West Germany
America was the world's manufacturer.
There was no significant competition.
Universities trained U.S. engineers and
2.0
United States
scientists, and the government supported
academic research and financed scientific
advances in areas such as aerospace, com-
1.5
United Kingdom
France
puters, and nuclear power.
Today there is a new model. A focus on
1.0
the market and a continual and open com-
munication system between all participants
in the process are key ingredients, accord-
5
ing to the Council on Competitiveness'
latest study, Picking Up the Pace:
0
1972
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'74
'75
'76
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'78
'79
'80
'81
'82
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'84
'85
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'87
Note: Figures reflect national R&D expenditures, excluding
Source: National Science Foundation, Science Indicators.
government funds for defense.
7
"Technology is not a 'thing,'
but a dynamic process
involving the application of
knowledge, resources, and
technique to problem solv-
ing. It is not simple or neat,
nor does it happen only
in one way. Technology
emerges not only from the
laboratory and university, but
also from the manufacturing
process. Often technology is
born on the factory floor."
Lewis B. Kaden, as chairman
of the Cuomo Commission on
Trade and Competitiveness, in
The Cuomo Commission Report, 1988
ment of new and popular products. High-
The Japanese have developed the Linear
definition television alone is estimated to
Motor Car, a train levitated by supercon-
create a market of $40 billion by the year
ducting magnets, that has reached speeds
2007. Compact disc players with the
above 320 mph, fast enough to replace
capacity to record will likely create a
commuter airlines. U.S. biotechnology
worldwide market, and could displace
firms have genetically engineered corn
audio cassette recorders.
plants resistant to a wide range of pests,
which could reduce the pesticides needed
Telecommunications products and services
to guarantee a healthy crop. The frontiers
are projected to account for more than 10
of science continue to expand.
percent of world GNP by the year 2000,
according to the U.S. Department of Com-
Just as countries with gold once led the
merce. The market for ceramics, $4 bil-
world, followed in turn by countries with
lion in 1980, is expected to grow by at
plentiful natural resources and inexpensive
least 10 percent each year through the
energy, the twenty-first century will dawn
1990s.
with countries successful in technology
commercialization leading the way.
10
"Military research during
World War II led to the jet
Critical Issues
engine, computers, and
nuclear power. Today,
however, 97 percent of
military R&D spending goes
not for basic science that
can yield a spectrum of ben-
efits, but for weapons devel-
opment and testing-work
that does little of use in the
civilian sector. Such military
spending has helped the
United States maintain its
global market share in
military-intensive areas such
as aircraft, guided missiles,
and spacecraft, even as the
country lost its competitive-
ness in civilian technology
markets."
Judith B. Reppy
Cornell University economist at
American Association for the
Advancement of Sciences meeting,
January 1989
"The increasingly competi-
tive global marketplace
Critical Issues
demands constant product
refinements. We must learn
to do better even those things
we now do very well. Our
The opportunities presented by emerging
Today, fiber optics and computer circuitry
technologies make the need for action
are being integrated into a broad cross-
long-standing leadership in
doubly critical. The United States must
section of business and other activities,
revitalize existing industries to benefit from
with even more potential for innovations
health sciences and biotech-
the approaches to innovation and manu-
and applications. Still further in the future,
facturing that have worked for our com-
other emerging technologies have the
nology is one area where
petitors. We also must push more
potential to revolutionize the way we live.
aggressively toward discovery and imple-
What are some of these emerging tech-
an already strong founda-
mentation of these new technologies.
nologies and what role could they play in
restructuring U.S. industries? Following
tion can support a rich set
It is time to unleash the creative energies
are some technologies most frequently
of the American people and rekindle an
cited as holding promising applications.
of opportunities for the
entrepreneurial spirit to meet these chal-
lenges. There are barriers in our path, but
Space Technology. The world already
future."
by overcoming them the nation stands to
has benefited from a number of prod-
benefit. Doing SO will strengthen our ability
ucts derived from space program
to compete and succeed in world markets
research and development, including
Governor Terry E. Branstad
lowa
as emerging technologies are incorporated
miniaturized batteries for pacemakers
into every industry.
and watches, heat-reflective material to
insulate shock patients, and new
Emerging Technologies
approaches to treating and recycling
wastewater. But even more profound
Throughout time, "each technological
innovations may be in store. Planet and
innovation has met a critical need while
space exploration technologies and dis-
creating the demand and the opportunity
coveries aid environmental, meteoro-
for the next breakthrough," says Trevor I.
logical, and geological endeavors, and
Williams, author of The History of Inven-
have implications for materials research
tion. Technology continues to shape mod-
and communications. The ability to
ern society, and some innovations bring
use the zero-gravity conditions of space
revolutionary change.
for sustained periods may make it pos-
sible to produce new materials that can-
Harnessing electricity brought light to the
not be produced on earth. Space-grown
world and powered much of the Indus-
crystals could accelerate the design of
trial Revolution. The telephone was the
new pharmaceuticals or synthetic vac-
vanguard of a host of communications
cines. Containerless processing of
products and services that provide the
materials eliminates contamination
foundation for economic, political, and
problems and permits production of
social activity. Jet aircraft have brought
special glasses and fiber optics useful in
even the most remote points of the globe
high-energy laser applications and super-
within comfortable reach. Television has
conducting ceramics. Sustained micro-
had a profound effect on activities as diverse
gravity aids the suspension of materials,
as medical diagnosis and the conduct of
which could lead to the creation of new
foreign policy.
super-pure metals with greater strength
and improved physical properties.
12
Superconductivity. Prototype super-
facilities for space launches. This gives
conducting magnets have been devel-
our competitors access to space in
oped that cost about one-fifth as much
order to conduct research and develop-
to operate as conventional magnets; new
ment in the full array of space products
low-temperature superconductivity gen-
and processes.
erators can produce 25 horsepower per
pound compared to only 2 horsepower
Eight countries-Australia, Austria,
per pound for conventional generators;
France, Germany, Japan, Netherlands,
and new microprocessors can operate
Sweden, and the United Kingdom-
twenty-five times faster than comparable
have made biotechnology an established
silicon chips and use only 0.5 percent as
research and development or industrial
much power. Eventually, superconduc-
priority. The United States has yet to
tivity could make it possible to develop
identify official priorities for industrial
low-loss electric transmission systems,
biotechnology research and
high-speed computers, and other forms
development.
of magnetic technologies such as metal
sorting, purifying, and recycling.
Only one U.S.-owned company pro-
duces television sets, and some of its
In addition, polymer plastics and ceram-
plants are not located in the United
ics have electronic and structural uses as
States. Without that manufacturing
alternatives to metal, yet take less energy
base, we may be shut out of the high-
to make and are immune to corrosion.
definition television market altogether.
Polymers' enormous ability to absorb
Sony will soon offer a complete line
Biotechnology. Experiments in genetic
energy and vibrations makes them useful
of high-definition television equip-
engineering hold the promise for agri-
in robot arms, tennis rackets, and auto-
ment, including video cameras and
cultural, medical, and pharmaceutical
mobile bodies. Ceramics can be used to
recorders, monitors, display and trans-
products unimagined a generation ago.
make engines more lightweight and fuel-
fer systems, and post-production equip-
They would cost less than the products
efficient, to make cutting tools tougher
ment. Fiber-optic cable, currently used
they replace, be safer and more effec-
and more precise, and as bone and joint
primarily by telephone companies in
tive than those currently available, and
replacements.
this country, is ideal for transmitting
could virtually alleviate world problems
high-definition television signals. Japan
such as malnutrition, energy produc-
These and technologies such as robotics,
has already announced construction of
tion, disease, and pollution.
artificial intelligence, and microelectron-
a fiber-optic and satellite-based net-
ics could immensely affect our economic
work to distribute high-definition tele-
High-Definition Television. In the
future. Innovations and products derived
vision services to ten Japanese cities
very near future, this new technology
from these technologies could mean tre-
within three years.
could render an entire generation of
mendous commercial opportunities for the
home video and studio equipment tech-
United States, but only if it is willing to
In analyzing U.S. efforts in supercon-
nologically obsolete, as it opens up
mobilize its resources. In a number of
ductivity, the Congressional Office of
new dimensions and opportunities in
areas, there is evidence that we are
Technology Assessment noted that the
video imaging for medical and defense
already losing ground.
financial criteria that drive decision-
purposes. It has been estimated that
making in American corporations work
high-definition television could result
Twenty-five years ago, only the United
against a technology like superconduc-
in as much as $200 billion in economic
States and the Soviet Union had the
tivity that has uncertain prospects and
activity and create 180,000 new jobs
capacity to travel to space. Today, at
delayed profits. The short-term view
over the next several decades.
least ten countries have established
fostered by U.S. financial markets could
put American companies behind the
13
Japanese within two or three years- if
the situation is very different. The
Figure
7
Federal R&D Spending by Purpose
they are not already behind. Japanese
United States spent 1.7 percent of its
firms are much more aggressive in
GNP on nondefense research and
studying possible applications of super-
development in 1987, compared with
conductivity. Their companies have
2.6 percent in West Germany and
more people working on the topic,
2.8 percent in Japan. Both countries
many of them applications-oriented
have been ahead of the United States
engineers and business planners who
on this measure since the 1960s.
can convert discoveries into products
Throughout the 1980s, they have seen
for the marketplace.
their nondefense research and devel-
opment rise as a percentage of GNP
The opportunities created by these emerg-
faster than that of the United States.
ing technologies are plentiful, far-reaching,
and largely still within our grasp. How-
Of the total $60 billion federal research
ever, with each passing day, with each
and development budget in 1988,
action not taken, the gap between the
68 percent went for national defense,
promise and the reality widens. Too often,
compared with 49 percent in 1978.
opportunities slip through our fingers and
Defense projects have become increas-
into the hands of our major international
ingly specialized and less likely to
competitors.
provide support for broader commercial
technology development and applica-
Barriers to Success
tion. Because this work is based on the
concept of "the best product regardless
The barriers to developing these technol-
of price," it fails to deliver cost-
1968
ogies are apparent when one considers
efficient spin-offs for industry.
Defense 52%
the way ideas are converted into success-
Health 6%
ful products. Doing this as effectively as
Smaller U.S. corporations that have
Space 27%
our competitors is central to gaining a
relied heavily on the results of federal
General Science 3%
share of the world market in many prod-
research and development activities have
Energy 4%
Natural Resources and Environment 2%
uct areas.
suffered as the federal emphasis has
Other 7%
shifted to more specialized defense
Research and Development
projects.
Research and development, where the
U.S. industry is outspent by its com-
commercialization process begins, is the
petitors. Japanese industry spending for
cornerstone of competitiveness in emerg-
research and development represents
ing technologies. This is also the area
1.9 percent of GNP, compared with
where the United States in the past has
only 1.3 percent for U.S. industry,
enjoyed its greatest competitive advan-
much of which is concentrated among
tage. At any level of comparison, today we
our largest industrial corporations.
are at a disadvantage.
The results of this change in the relative
The United States spends more money
level of research spending are already
on total research and development activ-
showing.
ities than any other country. However,
in commercially applicable research,
Note: Figures may not total 100 percent due to rounding.
Source: National Science Foundation, Science Indicators.
14
Figure
8
Number of States Supporting Science &
Technology Initiatives, Fiscal 1988
Defense 49%
Technology Office/
Health 11%
Board/Commission
Space 11%
General Science 4%
Technology/Managerial
Energy 12%
Assistance
Natural Resources and Environment 3%
Other 8%
Technology/Research
Centers
Technology Transfer
Research Grants
Incubators
Research Parks
Venture Capital
Seed Capital
Technical Training
Equity/Royalty
Programs
0
5
10
15
20
25
30
35
40
Defense 68%
Health 12%
Space 6%
General Science 4%
Energy 4%
Natural Resources and Environment 2%
Note: For description of state technology programs, see page 22.
Other 5%
Source: Minnesota Department of Trade and Economic
Development, State Technology Programs in the United
States, 1988.
Between 1975 and 1987, the share of
Figure
9
Company-Funded R&D as a Percentage
U.S. patents granted to foreigners rose
Of GNP, U.S. V. Japan
from 35 percent to 46.6 percent, with
Percentage
the Japanese share more than doubling.
2.5
General Electric, which for twenty-five
years had been the annual recipient of
2.0
the greatest number of U.S. patents,
slipped to number four in 1987, sur-
Japan
passed by Canon, Hitachi, and Toshiba.
1.5
In a number of key product areas, U.S.
inventors are granted a lesser share of
United States
1.0
U.S. patents than Japanese or German
inventors. These include primary
metals, aircraft, and motor vehicles.
0.5
New Product Development
0
The actual development of full-scale mod-
1965
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'69
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18.
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els of new products is the most expensive
Note: Japanese industrial R&D is more than 98 percent company-funded.
portion of the commercialization process,
Source: National Science Foundation, The Science and Technology Resources of Japan: A Comparison with the
requiring both long-term investment and
United States, June 1988.
the highest risk of capital. Our competitors
Figure
10
U.S. Patents Granted by Country of Inventor
often establish consortia to spread this risk,
and they utilize their strengths in state-of-
the-art manufacturing techniques to deliver
Number of patents in thousands
a well-designed and engineered product.
80
They also benefit from having a more
technologically literate workforce with
70
superior math and science skills and sig-
nificantly more engineers per capita.
60
U.S. industry's focus today is short term-
50
United States
the quarterly profit and loss statement.
Rather than viewing long-term investments
40
in product development and improved
manufacturing processes as assets, the
30
financial markets consider them as
expenses.
20
United Kingdom
France
Japan
"Merger mania" preoccupies many major
10
West Germany
U.S. firms. Press reports on takeovers far
outnumber reports on successful solutions
0
to manufacturing problems or technolog-
1972
'73
'74
'75
'76
'77
'78
'79
'80
'81
'82
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'84
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'86
'87
ical advances. These pressures only drive
Note: U.S. patent counts for 1979 are unreliable because Patent and Trademark Office did not have enough money
management's attention further from the
in that year to print all approved patents.
Source: U.S. Department of Commerce, U.S. Patent and Trademark Office, "Technology Assessment and Forecast
Report: All Technologies Report, 1963-1987," March 1988.
16
critical goal of creating new products, and
Figure
11
Scientists and Engineers
hinder greater investment in research and
Engaged in R&D
development. The National Science
Per 10,000 labor force population
Foundation's annual Survey of Industrial
80
Research and Development showed that
United States
out of the 200 companies that account for
60
90 percent of U.S. industrial research and
development, twenty-four companies
Japan
40
involved in mergers or leveraged buyouts
West Germany
reduced their research and development
20
expenditures by 5.3 percent between 1986
and 1987, while the remaining compa-
0
nies experienced an increase of 5.4 percent.
1965
'66
'67
'68
'69
'70
'71
'72
'73
'74
'75
'76
'77
'78
'79
'80
'81
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'84
'85
'86
Note: Figures include all scientists and engineers engaged in R&D on a full-time equivalent basis, except those
The difficulties associated with establish-
for Japan, whose data include persons primarily employed in R&D.
ing cooperative ventures with other
Source: National Science Foundation, Science Indicators.
companies-antitrust uncertainties, tax
treatment, and corporate structure and
Figure
12
Industrial Scientists and Engineers Engaged
control-have limited the chance for U.S.
in R&D per 10,000 Employees for Selected
firms to share risks more efficiently.
Manufacturing Industries, 1986ᵃ
Sematech, the recently established joint
Japan
industry consortium to find improved pro-
United States
cesses for manufacturing semiconductor
chips and the Microelectronics and Com-
puter Technology Corporation Project
All Manufacturing
(MCC) are two exceptions that illustrate
the potential in joint industry efforts.
Chemicals
In addition, the failure of U.S. companies
Ceramics
to profit from earlier discoveries due to
Iron and Steel
the inability to enforce international patents
adds to the risk of product development.
Non-ferrous Metals
Corning, which discovered fiber optics,
lost the major share of profit on its
General
discovery after investing more than
Machineryb
$200 million in research.
Electrical
Machineryb
The quality of the workforce will remain
Motor Vehicles
an issue in the next century unless deci-
sive action is taken. The United States
0
100
200
300
400
500
600
700
800
900
faces a very serious shortage of engineers.
The National Science Foundation indi-
cates that between 1989 and 2010, the
Notes: a. Number of U.S. scientists and engineers are in full-time equivalents; Japanese are total numbers of
nation will fall short by more than
scientists and engineers engaged in R&D.
700,000 - of the expected demand by
b. These categories are not comparable for the United States and Japan because they represent different SIC
product groupings. The U.S. category for general machinery includes computers, whereas computers are classified
industry and academia for degreed
under electrical machinery in Japan.
scientists and engineers.
Source: National Science Foundation, The Science and Technology Resources of Japan: A Comparison with the
United States, June 1988.
17
Figure
13
Distribution of Costs for Development and
that once a product is being manufac-
Introduction of New Products and Processes
tured, its successor must already be in the
late design stages. This demands flexible
manufacturing facilities, regular retrain-
ing of workers, and close cooperation
between design and manufacturing divi-
sions to assure efficient crossovers to new
Percentage of Total Project Cost
products.
Japanese Companies
Research, Development, and Design 21%
Success in incorporating emerging tech-
Prototype or Pilot Plant 16%
Tooling and Equipment 44%
nologies also demands a broad, stable,
Manufacturing Start-Up 10%
and efficient manufacturing capacity that
Marketing Start-Up 8%
can provide the materials, the trained work-
ers, and the machinery required to manu-
facture the new products. The loss of
U.S. Companies
manufacturing capacity in certain indus-
Research, Development, and Design 26%
tries can seriously hamper future product
Prototype or Pilot Plant 17%
Tooling and Equipment 23%
development.
Manufacturing Start-Up 17%
Marketing Start-Up 17%
Yet, a survey of European executives
involved in industry, trade, banking, and
Note: Figures may not total 100 percent due to rounding.
investment ranked the United States
Notes: Survey figures are from 1985 for 50 matched pairs of U.S. and Japanese firms. In the category "prototype
twelfth overall in its production
or pilot plant," for cases of product development, the costs include investments in pilot plants.
techniques, behind such countries as
Source: Congressional Office of Technology Assessment, Commercializing High-Temperature Superconductivity, June 1988.
Japan (No. 1), Sweden (No. 2), Switzer-
land (No. 3), Germany (No. 4), and Fin-
The United States has critical shortages
gies are integrated into businesses, con-
land (No. 5).
of qualified teachers in key science areas.
tinuing education will be needed to
The National Science Foundation esti-
understand the opportunities these dis-
Unfortunately, many U.S. business adminis-
mates that 60,000 math and science
coveries offer.
tration programs focus more on financial
teachers in U.S. secondary schools are not
management than on management of the
fully qualified, and that an additional 30,000
Manufacturing
manufacturing process or management of
secondary school math and science teach-
the entire production process. This lack
ers will be needed by 1995. In addition, in
Manufacturing is essential to realizing the
of familiarity with manufacturing engi-
1985 8.8 percent (or about 1,300) of all
full potential of the commercialization pro-
neering results in less flexibility and
university engineering faculty positions
cess. Without adequate capacity in manu-
creativity when analyzing proposed pro-
were vacant, a situation that will get worse
facturing, much of the information needed
duction costs, and poses greater difficul-
as the faculty recruited in the 1950s in
for the design of a product is lost. Fur-
ties for product design, which must work
response to the launch of Sputnik retire
ther, when research is market-driven, the
within a narrower set of constraints.
during the next ten years.
manufacturing process is the place where
changes can be made quickly, resulting in
If the United States' goal is to lead in
The continuing acceleration of scientific
either a more successful product or greater
emerging technologies, that goal demands
discoveries and technological advancement
reductions in cost.
immediate and decisive action by both
requires that education be viewed as a
the private and public sectors. America
continuing process for scientists and engi-
In today's markets especially for
needs a national commitment to move
neers, as well as for industry-both labor
technology-related products lives
forward into the future more aggressively.
and management. As emerging technolo-
are so short (an average of six months)
18
"Some states, and some Gov-
ernors, have been able to
The State Role
integrate universities, indus-
tries, and state policies in a
package of technological
innovation and competition
that is quite impressive. It
shows a greater awareness
of the way the world is going
than you find in many places
in Washington. It's where the
action is in many key
sectors."
Frank Press, President
National Academy of Sciences
"In the states, a new con-
sensus is already forming,
The State Role
with a new state commit-
ment to research. This real-
ity may be the most
important development in
The ability of the United States to increase
educating future scientists and engineers,
technology-intensive exports in the
both through education policies at every
science policy in the 1980s.
twenty-first century will depend on the
level and the resources they invest in
effectiveness of both federal and state pol-
schools and universities.
For the first time, state leg-
icy. State policies operate within the
framework of federal policies that signif-
Governors are in a unique position to
islators and citizens are join-
icantly affect business decisions in research
focus attention on the need to improve
and development, investment, intellectual
the United States' ability to commercial-
property rights, and international trade.
ize new scientific discoveries. In state after
ing scientists and engineers
Because of this influence, defining the
state, Governors have forged partnerships
to support long-term
state role requires an initial discussion of
with the private sector to spur economic
federal responsibilities.
development. State governments work
research. Even more signifi-
closely with the business community and
Federal dollars and priorities propel much
are in a position to influence business
of both civilian and national defense
cant, perhaps, is that states
decisions and to operate as brokers to
research and development, and federal anti-
bring together the creators and users of
are cooperating with each
trust regulations affect the ability of firms
new technologies.
to enter into joint research agreements.
other in these efforts."
Federal tax policies encourage- or
The recognition that states needed to take a
discourage-investment in new product
more aggressive role in promoting com-
development, and federal patent and intel-
Governor Richard F. Celeste
mercialization came about in the early
Ohio
lectual property right protections deter-
1980s when several states hit hardest by
mine whether U.S. firms will benefit from
the 1982 recession notably Michi-
their discoveries. The federal government
gan, Ohio, and Pennsylvania reassessed
has constitutional responsibility for inter-
their state policies. In fiscal 1988, forty-
national trade agreements, such as the
four states spent $550 million on their
General Agreement on Tariffs and Trade
applied research and technology activities.
(GATT), that set quotas and tariffs on high
A variety of innovative programs - includ-
technology products. Finally, the federal
ing research consortia, seed and venture
government must approve exports of
capital funds, incubators, endowed univer-
many high technology goods because of
sity chairs, technology fellowships, and
their national defense sensitivity. The
equipment subsidies - were developed to
federal government drives public invest-
build on existing strengths and to capitalize
ment, as well as the overall tax, legal, and
on research already occurring at univer-
international regulatory framework for
sities, colleges, and federal laboratories.
technology development and export in
These new programs include efforts to
the United States.
stimulate research, introduce technology
into firms, support capital acquisition,
While the federal role in science and tech-
improve management, and determine
nology includes substantial support for
overall state technology policy.
long-term basic research, states have
focused greater attention on applied
State support for applied research and the
research and development. State technol-
establishment of advanced technology cen-
ogy and economic development programs
ters is encouraging more market-driven
have encouraged greater commercializa-
research and is influencing the relation-
tion of new products and processes. And
ships between university researchers and
states have the primary responsibility for
20
14
State Spending on Science and
Technology Initiatives, Fiscal 1988
Technology/Research Centers 41.2%
Research Grants 27.3%
Technology Transfer 8.3%
Research Parks/Incubators 6.7%
Seed Capital 4.0%
Venture Capital 2.8%
Technical/Managerial Assistance 2.0%
Other Technology Programs 7.7%
Note: For description of state technology programs, see page 22.
Source: Minnesota Department of Trade and Economic
Development, State Technology Programs in the United
States, 1988.
industry representatives. Newinstitutions
facilities at fifty of the nation's largest
have been established to provide early seed
universities, state funds are the primary
capital to projects that have commercial
support in the majority of colleges and
potential. Support structures have been
universities, where the vast majority of
established to help technological innova-
industry's engineers are trained. States
tors and entrepreneurs translate research
also invest directly in research, and per-
into new products.
form educational assessments.
Governors also have led the new wave of
States have built an impressive track record
education reform in the United States.
in technology development and commer-
They are promoting programs to require
cialization that will contribute substantially
additional teacher training in basic sci-
to reasserting America's future leadership
ence and mathematics and are establishing
in technology.
new highly competitive scientific second-
ary schools. Further, this education reform
stresses more performance measurement,
greater accountability, and more parental
choice in schools. In higher education,
states again play a major role.
States provide the principal funding for
research facilities. While the National
Science Foundation supports research
21
Descriptions of State Technology
Incubators. Incubator facilities provide below-market rates
Programs
for office and lab space for start-up companies. In addition,
these facilities offer shared support for clerical, reception,
and computer services. Once a company has progressed to
Technology Offices. These include boards, commissions,
a specified development level, it is expected to leave the
authorities, or offices that oversee or coordinate state tech-
incubator in order to allow the facility to accommodate new
nology initiatives. The most common type of structure is a
start-up companies. Incubator facilities are usually located
public/private partnership of representatives from private firms,
in or near advanced technology centers and commercial
academia, and state government. Technology offices may
research parks.
operate as independent public agencies or private nonprofit
corporations. The duties and responsibilities of technology
Research Parks. Research parks are planned groupings of
offices range from the administration of multi-million dollar
technology companies, often near universities, that encour-
technology centers to information dissemination and advisory
age university/private partnerships. They draw industry to a
services.
particular location and provide incubator facilities and ser-
vices that encourage the development of new businesses.
Technical/Managerial Assistance. Technical or managerial
Generally, states provide initial capital with the requirement
assistance programs assist in the development of business
that future funds come from private sources.
plans and marketing strategies, advise firms on personnel,
accounting, and legal matters, and identify sources of financ-
Seed/Venture Capital. Seed and venture capital programs
ing. Professionals also evaluate product lines and manufac-
provide risk financing to early-stage companies that are unable
turing processes, assist in the use of state-of-the-art design
to secure funds from traditional sources. Funding is provided to
and manufacturing tools, and identify special expertise at
start-up companies whose projects have commercial and/or
universities and other research centers.
job creation potential. Seed capital is provided to companies
that have yet to develop a marketable product. Venture capital
Technology/Research Centers. These centers, also known
financing is available to developing companies with estab-
as "Advanced Technology Centers" or "Centers of Excellence,"
lished business plans and commercially feasible projects.
are usually located at universities or affiliated with them.
They strive to increase cooperation between academic institu-
Technical Training. Realizing the significance of a skilled
tions and state-based industries. These centers generally con-
workforce for attracting high technology businesses, states
centrate on a particular field of research that draws on the
offer various training programs. States either sponsor pro-
strengths of a university and/or the major industries in the
grams through an institute for higher learning or provide finan-
state. Technology or research centers assist in the creation
cial assistance to private companies to implement their own
of new firms through the development and enhancement of
training programs.
products and processes, attracting new industries to the state,
and enhancing the competitiveness of existing industries
Equity/Royalty Investment. States with equity or royalty
through the application of advanced technology processes
investment programs provide risk capital to new start-up busi-
or products.
nesses and developing firms. Funding is generally available
to companies with commercially feasible products and pro-
Technology Transfer. Technology transfer programs facili-
cesses. Typically, funds are used as working capital for land
tate the transmission of new technologies from the labora-
and equipment purchases, organizational expenses, and
tory to the private sector. These technologies can become
research and development efforts. Equity investments pro-
the impetus for the creation of new businesses, the intro-
vide the state with a share by ownership in the financial
duction of new product lines for established firms, or the
success of the firm. Royalty investments require a repayment
revitalization of mature industries. Technology transfer is
to the state based either on a dollar amount per unit sold
achieved through information exchange and active outreach
or a percentage of gross or net revenues.
programs that seek users for existing and newly developed
technologies.
Research Grants. Research grants are usually made to uni-
versities based on joint proposals from the university and a
private sector sponsor. Most often, these grants require a
certain level of matching funds from the private sector. Grant
approval usually depends on its potential for economic devel-
opment and future job creation.
Source: Minnesota Department of Trade and Economic
Development. State Technology Programs in the United
States, 1988.
22
"Rather than target specific
industries or products, most
states are targeting
State Action Agenda
processes: technological
innovation, capital formation,
new business formation,
the commercialization of
research, and the adoption
of new manufacturing tech-
nologies. They are not trying
to plan economic activity, but
to quicken the pace of inno-
vation, to sharpen our abil-
ity to bring new ideas to
market, to increase the tech-
nological sophistication with
which we manufacture."
David Osborne, in
Laboratories of Democracy
"We have no way of know-
ing what new problems will
State Action Agenda
appear tomorrow, or next
year. But we can be certain
that we will still need more
knowledge to cope with
Expanding research and development
Emerging technologies have the potential
efforts, converting ideas into new prod-
to restructure some industries and to spawn
ucts, and manufacturing those products
others. Governors can help assure that
these problems. In an uncer-
for the international marketplace are essen-
governments at all levels thoroughly under-
tial for success. The United States must
stand the opportunities and issues, and
tain world, knowledge-
act decisively in each of these areas to be
can take appropriate steps to remove
a viable leader in the international arena.
roadblocks and provide incentives.
along with the scientists and
Capturing the potential of emerging tech-
nologies through commercialization will
Expanding Research and Development
engineers who produce
help assure continued U.S. economic
it-is our most important
strength into the next century.
Meeting the technology needs of U.S.
business begins with maintaining a strong
resource. In an increasingly
Governors play a pivotal role in forging
and broad research base. Science provides
partnerships among business, academia,
the fertile ground on which commercially
technological world, many
and government that can create strategies
viable innovations grow and flourish. But
to reverse the decline in high technology
preeminence in research does not auto-
more of our leaders in indus-
exports. Such partnerships can define the
matically lead to technological and com-
steps needed to secure a world market
mercial success. In the increasingly
try, in government, and in
share for a wide range of emerging tech-
competitive environment of the interna-
nology applications, despite unprecedented
tional economy, the United States must
academia must have tech-
international competition.
learn to use its research strengths to cre-
ate commercial advantages. Government
nical training if we are to
control events."
Erich Bloch, Director
National Science Foundation
TSM
100
GND
24
"If we cannot promote the
growth of wider understand-
ing of the world view of
science and technology, we
endanger not only our own
and industry must focus on development,
of leading foreign scientific journals and
while retaining a strong foundation in basic
other materials, especially in strategic
abstract enterprises, but even
research.
emerging technology areas. This would
increase U.S. business access to tech-
the essence of democracy.
OBJECTIVE: Direct more public and
nological discoveries outside the United
For the necessities of eco-
private resources toward market-driven
States.
research and development.
Just as government should focus more on
nomics will eventually
The U.S. government provides the fund-
commercial technology research, so should
ing for about half of all research and devel-
enforce a social division into
industry. While the private sector is the
opment in the country, directly affecting
largest contributor to U.S. applied research
the total U.S. effort. Because of its
islands of the trained who
and development efforts, it still spends
fundamental role, the following steps are
much less of its research and develop-
recommended for federal action.
ment budget on process innovations than
understand enough to devise
do foreign corporations. Although research
Commercial Focus. Federal research
and development is not treated as an asset
and operate an increasingly
and development spending should
by U.S. business accounting principles, it
provide a better balance between com-
is critical to the long-term economic future
complex technology, with a
mercially viable technology and nar-
of both industry and the nation.
rowly focused classified defense research.
sea of onlookers-bemused,
National security is appropriately a pre-
State governments have taken the lead in
eminent federal concern. However, eco-
responding to America's research and
indifferent, and even hostile."
nomic security is essential, too, and
development needs. Since the early 1980s,
attention should be paid to defense
more than forty states have initiated
Philip Morrison, Professor of
Physics, Massachusetts Institute
research and development that has the
programs to support applied research by
of Technology and host, PBS science
potential for commercialization. For
industry and universities. States are
series, "Ring of Truth"
instance, the U.S. Department of
working collectively at both the national
Defense recently used research funds
and regional levels to address common
to support development of U.S. capac-
problems and share ideas and innovative
ity in high-definition television and to
practices to encourage market-driven
support work by the Sematech pro-
research.
gram involving the semiconductor
industry.
As further steps, states should:
Federal Laboratories. Technological
Establish long-term direct support for
and scientific discoveries made in fed-
commercially applicable research
eral laboratories still are not readily
through advanced technology centers
available to U.S. industries. The fed-
and applied research grants. More than
eral government should take further
half the states already have established
steps to make this research more acces-
competitive grant programs, such as
sible to business and to work with the
the one operated by Virginia's Center
states to speed the transfer of technol-
for Innovative Technology. This pro-
ogy to commercial uses.
gram awards funds on a competitive
basis to colleges and universities to fund
International Scientific Journals. In
research with commercial potential.
addition, the federal government should
step up its support for the translation
25
"High tech is indeed the
leading edge, but there can-
not be an edge without a
knife. There cannot be a via-
ble high-tech sector by itself
Requiring matching funds from indus-
States can:
any more than there can be
try and including joint industry-
university panels to direct projects helps
Sponsor international exchange pro-
a healthy brain in a dead
ensure that the efforts are market-driven.
grams for scientists and engineers. North
Carolina, for example, has established
body. There must be an econ-
Support business research consortia
an exchange program in cooperation
aimed at achieving technological
with a West German state to allow
omy full of innovators and
advances for strategic industries. The
scientists and engineers from North-
Microelectronics Center of North Caro-
Rhine Westphalia to conduct collabo-
entrepreneurs, with entrepre-
lina brings together universities and affil-
rative research with scientists and
iated private firms to conduct research
engineers in North Carolina.
neurial vision and entrepre-
and development in microelectronics.
New Jersey and Michigan, among other
Negotiate joint technology agreements
neurial values, with access
states, support similar efforts in
with other countries. Maine has an
biotechnology.
agreement with the Research and Pro-
to venture capital, and filled
ductivity Center in New Brunswick,
Provide incentives for collaborative
Canada, in which Maine's small firms
with entrepreneurial vigor."
industry-university research to promote
can purchase engineering and design
closer relationships between the two
services on a fee-for-service basis. Such
Peter F. Drucker,
and to encourage more state-of-the-art
agreements are particularly important
Innovation and Entrepreneurship
research projects for students and fac-
for small firms to get access to public
ulty. These projects also would direct a
domain research typically found in
greater portion of university research
advanced technology centers.
funds into market-driven research pro-
jects. Through Colorado's Advanced
In Virginia, the Governor signed a
Technology Institute, the state has estab-
cooperative agreement with a French
lished four Centers of Excellence, which
association of more than 7,000 small
bring together universities and private
businesses to exchange technology and
businesses to conduct research in spe-
capital through joint ventures with
cific technological areas. Technologies
Virginia businesses. The state will
targeted for development include
support the formation of strategic
advanced materials, optoelectronic com-
alliances between French and Virginia-
puting systems, artificial intelligence, and
based small and medium-sized com-
biotechnology.
panies. Ohio and the state of Parana in
Brazil have entered into an agreement
OBJECTIVE: Expand international coop-
to provide for scientific and technolog-
eration efforts.
ical cooperation. Goals of the agree-
ment include exchanging researchers,
Scientific discoveries and technological
conducting joint research, and sharing
development know no national bound-
information on technology transfer
aries. Any nation that presumes it can
methods.
stand alone in research will soon find itself
trailing rather than leading. Governors
should take the lead in their states to
promote international cooperation and
collaboration.
26
Use overseas offices to keep state busi-
nesses informed of technological
advances made outside the United
States. As of 1988, forty-one states had
established 133 foreign trade offices that
can provide a direct link between indus-
try, universities, and foreign trading part-
ners. By strengthening linkages between
technology programs and trade pro-
grams, Governors can make both pro-
grams more effective.
Converting New Ideas Into New Products
Central to success with emerging tech-
nologies is moving ideas rapidly from con-
cept to products suitable for manufacture
and sale. Only countries that commit to
this expensive, long-term process will be
well-positioned to capture significant world
market shares of products derived from
new technologies.
OBJECTIVE: Improve the climate for
long-term investment and innovation.
As in research and development, the fed-
eral government bears the greatest respon-
sibility. A number of U.S. policies do not
address the realities of the new global
economy by failing to recognize the
market-driven model of innovation. These
policies are often inconsistent and create
uncertainty and economic risk in the pri-
vate sector, which hinders U.S. industry
from taking a longer-term view of invest-
ment in developing new products.
Because of its fundamental policy role,
the federal government should address
some of these risks:
Antitrust Policy. Revise antitrust laws to
promote rather than hinder the collab-
orative research and development
needed for success in today's world
markets.
Tax Policy. Revise federal tax laws to
Team up with other states to foster
Inform students and small business lead-
reward corporate investment in research
regional and state-to-state initiatives.
ers about the commercialization pro-
and development, and protect these
States can pool their resources, for exam-
cess and entrepreneurial opportunities.
incentives over a reasonable period of
ple, to promote shared use of a regional
Courses, seminars, and conferences in
time. For example, a reliable tax credit
supercomputer or an interactive tele-
the college and university system can
on research and development is a
communications network. Such collabo-
provide a forum for discussing the link
strong incentive for long-term invest-
ration can provide innovators in those
between entrepreneurship and techno-
ment in development projects.
states with higher quality research and
logical innovation to stimulate interest
development tools.
in pursuing the development of inno-
International Agreements. Negotiate
vative products.
agreements that provide guidance for
Governors of the six New England
international technology exchange and
states passed a resolution to establish a
OBJECTIVE: Create a world-class
access, and facilitate patent procure-
New England Technology Advisory
workforce.
ment and product commercialization.
Council that will coordinate resources
The recent U.S.-Japan technology
to address issues of regional importance
Leadership in the new global economy
agreement offers a bilateral framework
involving technological research, devel-
requires that American workers be tech-
for cooperation in research and tech-
opment and commercialization. The
nologically literate, imaginative, and adapt-
nology development. Adequate enforce-
NGA Working Group on State Initia-
able to rapid change. It also requires more
ment of international intellectual
tives in Applied Research, made up of
scientists, engineers, mathematicians, tech-
property rights agreements also is
Governors' science and technology
nicians, and computer specialists in the
needed to ensure that U.S. corpora-
advisers, has met regularly to exchange
workforce. A large contingent of highly
tions secure a fair return on their prod-
information and discuss the implications
skilled, technology-oriented workers is a
uct development costs. Multilateral
of national and international develop-
critical asset in the commercialization of
negotiations underway to update the
ments on state programs.
new technologies.
General Agreements on Tariffs and
Trade are attempting to address this
issue for the ninety-six GATT countries.
States can do their own part in encourag-
ing innovation. States should:
Direct Governors' technology task
forces or commissions to develop a stra-
tegic investment plan for science and
technology. Membership on these task
forces can be drawn from education,
government, and a broad cross-section
of industry. Their guidance can better
focus and more effectively leverage state
program funds. In Vermont, the Gov-
ernor created by executive order a
Governor's Advisory Council on Tech-
nology. The council is developing a
strategy both to help existing business
adopt new technologies and to aid
emerging industries that offer opportu-
nities for the application of technology.
28
"The world is rapidly chang-
ing. To prepare our children
for the future we must edu-
cate critical thinkers who
can adapt to change in
As traditional stewards of the nation's edu-
and communications skills. Other areas
an increasingly competitive
cation and training system, states must
for emphasis might include computer-
take steps to address both long-term aca-
aided design and manufacturing
environment."
demic needs as well as short-term
(CAD/CAM), and manufacturing
requirements.
technology.
Governor Roy Romer
Colorado
States should:
The Center for Productivity, Innovation
and Technology at Chattanooga State
Raise math and science skills at the
Technical Community College is one
K-12 level to enable students to com-
such program. The center trains two-
pete with the children of our foreign
year degree students in state-of-the-art
trading partners. In addition, states can
technologies and retains workers and
incorporate information about the role
consultants to industries seeking to
of technology in today's society through-
adopt new technologies. The center
out the K-12 curriculum. The perva-
houses a prototype automated factory
sive influence and importance of
as well as an automated CAD/CAM
technology can be emphasized in the
center. The factory includes completely
teaching of almost any subject, includ-
automated flexible manufacturing cells,
ing history, English, music, civics, and
various kinds of robots, and quality
health, as well as the physical, life, and
control units. At six of its technical
social sciences.
colleges, South Carolina has created
centers focused on advanced machine
Meet existing and expected demand for
tool technology, microelectronics,
science and math teachers and engi-
computer applications, water quality,
neers. Actions include increasing schol-
and robotics.
arships in science and engineering,
providing forgivable educational loans
Utilize the resources of the state's col-
to students who agree to become math
leges and universities to provide
and science teachers, and promoting
advanced technology and science
an increase in the number of women
courses at business sites for corporate
and minorities who pursue science and
managers, scientists, engineers, and
engineering degrees.
workers.
Establish incentives to retain highly
OBJECTIVE: Strengthen the effectiveness
competent faculty. For example, a state
of business in new product development.
can set up endowed chairs and profes-
sorships in engineering, mathematics,
Government policy changes can do only
and life and physical sciences.
SO much. Ultimately, business must
respond to the challenges posed by inter-
Design new programs emphasizing
national competition. Both the current
technological literacy to meet the
growth of U.S. imports and the revolu-
needs of today's-and tomorrow's-
tion in worldwide manufacturing demand
workforce. Workplaces of the future
will require even stronger computer
29
"In today's international
economy, virtually all
aspects of the commercial-
ization process have become
globalized. For U.S. compa-
nies, this means that they
an appropriate response from U.S. busi-
industrial resource center program is
nesses. They must make the kinds of struc-
designed to help Pennsylvania com-
must become as much 'hunt-
tural and policy changes that permit
panies identify and implement new
maximum flexibility and communication
technologies. Nine centers have been
ers and gatherers' of tech-
throughout every step of the commercial-
established to assist small and medium-
ization process. But states can take steps
sized manufacturers. Through the
nology as they are
to help businesses get started.
statewide Virginia Community College
system, ten directors of economic and
"
States should:
generators
technology development help Virginia
businesses apply research to new prod-
Provide financing through seed capital
Council on Competitiveness,
uct development.
Picking Up the Pace
programs that support the development
of commercial ideas, feasibility testing,
Encourage close collaboration between
and prototype development. Ohio's Edi-
university and industry for joint pro-
son Seed Development Fund provides
jects to develop new products. To pro-
capital both for early-stage research and
mote the chances of success, business
for the development of a product, pro-
must be required to invest along with
cess, or system for commercialization,
the state and must participate in man-
or for a demonstration prototype. In
aging the effort. California's recently
1983, Iowa established the Iowa Prod-
established competitive technology pro-
uct Development Corporation. The
gram requires matching funds, includes
corporation helps innovators that need
a board of business leaders and leading
risk capital to bring a new product or
scientists, and focuses on projects hold-
process to the market. In its first few
ing the most commercial promise.
years, the corporation created more
than 300 new jobs by investing approx-
Manufacturing Products for the
imately $3 million in new ventures.
International Marketplace
Use advanced technology or industrial
As a new product is being developed, atten-
resource centers to disseminate techni-
tion also must be given to the process for
cal assistance and information. These
producing it quickly and economically,
centers should provide services cover-
without sacrificing quality. It is essential
ing the entire commercialization pro-
that products and processes be developed
cess, from patent procurement to
concurrently. As technological advances
product design to market information.
and consumer preferences dictate changes
Where feasible, states can pool resources
in product design, the accompanying man-
to fund these centers.
ufacturing process must be able to adapt
as well.
Illinois has established sixteen technol-
ogy commercialization centers through-
It is likely that many new innovations will
out the state. These centers directly
rely on the capacity of the existing manu-
assist entrepreneurs in such specific areas
facturing base. Only by retaining exper-
as research, feasibility studies, proto-
tise in manufacturing and a viable
type development, product testing,
manufacturing capacity can the United
financing, production, and marketing.
States expect to successfully manage the
Pennsylvania's $30 million, three-year
commercialization process.
30
OBJECTIVE: Develop faster, more flexi-
ble manufacturing processes.
States can:
Establish flexible manufacturing cen-
ters. These centers provide a single
location for training and actual manu-
facturing capacity with state-of-the-art
procedures. Michigan's Industrial Tech-
nology Institute offers a flexible
inspection and assembly laboratory
designed to assist firms in every step
of product design and manufacturing.
Foster flexible manufacturing networks.
These networks are contractual arrange-
ments among groups of companies that
can respond to changing production
and
schedules and requirements. Maine is
setting up a network designed to foster
collaborative production between small
firms-which can result in the ability
Conclusion
The United States must act now to build
to quickly manufacture high quality fin-
and shape the future. Making the most of
ished products for international markets.
The race is on. The competition is tough.
its traditional strengths, America can con-
Opportunities abound. To excel in this
fidently and successfully meet the eco-
Direct colleges and universities to review
contest requires leadership at home. The
nomic challenges and opportunities that
and revise business administration and
federal government must exert its leader-
lie ahead.
engineering programs. These disciplines
ship and bring together all of the players
should include sufficient manufactur-
to develop a national approach to this
ing training, with an emphasis on pro-
challenge. A national commitment on the
duction management. Oregon State
part of industry, academia, and govern-
University and the University of Mas-
ment is central to realizing the nation's
sachusetts, for example, have established
full potential in research and technology.
graduate programs in manufacturing
engineering.
As chief executives, Governors can use
their leadership and policymaking abili-
Establish Governors' award programs
ties to help the United States become
for excellence in manufacturing.
more successful in developing new prod-
Improved efficiency, quality control, and
ucts and manufacturing techniques, and
the development of improved processes
capturing the potential of emerging tech-
could be rewarded, providing an incen-
nologies. Already, Governors are taking
tive for excellence and focusing public
steps to establish pioneering programs and
and media attention on the value of
focus national attention on the impor-
quality manufacturing.
tance of research and technology to the
nation's economy.
31
"There is a Japanese prov-
erb that says it is far easier
to recover from military
defeat than from economic
conquest. Japan's expe-
rience in recent years is
certainly an example of the
first part of the proverb. We
must make a national com-
mitment to ensure our
economic competitiveness
in world markets or we may
suffer an economic con-
quest from which we may
never recover."
Governor John R. McKernan Jr.
Maine
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February 1986.
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superconductor will remain suspended or levitated.
Page 28. Hair-thin strands of ultrapure glass today carry
voice, data, and video signals in the form of digital laser
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Page 31. Engineer working at Interact 3000 series work
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Page 32. A modern automotive assembly line.
36
AMERICA IN TRANSITION
The International Frontier
Report of the Task Force
on Foreign Markets
NATIONAL
GOVERNOR
ASSOCIATION
Hall of the States in Washington, D.C.
The association serves as a vehicle for
sharing knowledge of innovative program
among the states and provides technical
assistance and consultant services to
Governors on a wide range of managemer
and policy issues. The Center for Policy
Research serves the Governors by unde
taking demonstration projects and provid
ing anticipatory research on important
policy issues.
AMERICA IN TRANSITION
The International Frontier
Report of the Task Force
on Foreign Markets
1000
1000
STATE
1
BANK OF NICER
CED
BANCO DE MEXIC
N1
UNITED
BANCOLCENTRAL april 1958
VERIGES 1 RIKS
- "" my lub
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Gantnot
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DEFISTHE MARK
PASSPORT
BANK NEGARA MALAYSI
SATU
RINGGIT
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THE
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CINQUEMILA
OF ISRAEL
United States
of America
4094
Contents
Chairman's Overview
iv
Foreword
vi
The Challenge
2
The Context
6
Critical Issues
10
The State Role
22
State Action Agenda
26
Publication design by Wayne Pederson.
Photo credits:
Paul Kennedy (cover)
Michael D. Feinstein (p. 22)
Courtesy, U.S. Department of Commerce (pp. 24, 26)
Clemens Kalischer (p. 33)
ISBN 1-55877-043-7
Copyright 1989 by the National Governors' Association,
444 North Capitol Street, Washington, D.C. 20001-1572.
All rights reserved.
Printed in the United States of America.
Chairman's Overview
Foreword
"The emerging markets
throughout the world pre-
Chairman's Overview
sent new challenges for
businesses, for govern-
ments, and for state trade
activities. These markets
The world is growing smaller. Fiber optic
Twenty years ago, states were bystanders
networks span the continents, linking
as international events changed the eco-
also present opportunities
remote corners of the globe. Billions of
nomic landscape. That, too, has changed.
dollars move in seconds from Milan to
Our boundaries are no longer the borders
beyond our borders for trade
Tokyo to New York. Goods move across
of our states, but every corner of the
continents in a single day. An individual
globe. As Governors, we are challenged
that will bring new pros-
product may contain parts manufactured
to confront this new reality.
in five different countries and be assembled
perity and economic vitality
in a sixth. New markets and opportuni-
State government is well-positioned to
ties emerge almost overnight. In this
meet the challenges of the next century.
to our states."
competitive and rapidly changing environ-
But we must begin preparing for this tran-
ment, success belongs to those who can
sition. Our agenda includes a six-point
anticipate, adapt, and respond quickly.
offensive. Specifically, we must:
Governor Gerald L. Baliles
Virginia
The international frontier is no longer the
Discover new and emerging markets
future- new age has arrived. The evidence
abroad for American products, to
abounds. A common market in Western
become again the Yankee traders we
Europe will be finalized in 1992. The
once were.
United States and Canada are on a ten-
year path toward free trade. World out-
Bring an international perspective to
put is shifting dramatically to Japan and
our daily living-to understand foreign
the Pacific Rim. And, in an attempt to
nations and the people beyond our
encourage trade and foreign investment,
borders
to learn the international
the People's Republic of China and the
language of business.
Soviet Union are experimenting with
capitalism. By the beginning of the 21st
Expand our research, and use our tech-
century, the economic terrain will be one
nology, to create both new products and
of large trading blocs, instead of indi-
new processes to maintain America's
vidual countries, trying to maximize their
competitive position.
growth through trade.
Capitalize on the natural advantages of
As the global marketplace has emerged,
American manufacturers and regain
the United States' role as an economic
competitiveness in our domestic markets.
decisionmaker has changed. During the
1960s, when the U.S. economy was par-
Improve our highways, airports, air-
tially insulated from global influence, it
ways, and ports so we can move our
was possible to influence the economy by
people across town and our products
then-traditional fiscal and monetary poli-
around the globe.
cies. With the development of the Euro-
dollar market, foreign ownership of a large
Invest in the health, education, and
portion of the federal debt, and huge
training of our children SO they can live
increases in foreign trade, the economic
healthier and more productive lives.
sovereignty once enjoyed by the United
States has been reduced.
This year, I have created six NGA task
forces to examine these issues that together
form the foundation for the nation's
iv
future: foreign markets, international
opportunities beyond our borders for
education, research and technology,
trade that will bring new prosperity and
domestic markets, transportation infra-
economic vitality to our states.
structure, and children.
Commerce and the development of
This is the third of the six reports. It
nations go hand in hand. From the emer-
explores a subject crucial to our success-
gence of the great Mediterranean trading
ful participation in the new world econ-
centers to the discovery of an all-water
omy-penetrating foreign markets.
route to India to the first transoceanic
flights, great nations have developed as
Today, the facts of life for every American
their international trade has developed.
Governor are that nations are interde-
pendent; change is constant; and the
In the months ahead, the nation's Gover-
states are vulnerable to economic events
nors will continue their work, releasing
that once were very remote.
recommendations on topics ranging from
how to finance our aging infrastructure
The era of sheltered industries and self-
to how to develop new technologies. Gov-
sufficient national economies has ended.
ernors may not agree on every recommen-
American firms and workers in all the
dation made in the reports, but we have
states are exposed to competition as never
reached some clear conclusions.
before. This new global economy respects
no national boundaries. Since the 1950s
Together, these reports should serve as a
the U.S. percentage of world exports has
guide, outlining the steps Governors and
dropped by nearly one-third. Trade deficits
their states can take to lead the nation into
have been tenacious. Competition is fierce.
the 21st century. a road map for an
America in Transition.
We cannot afford to be constrained by dis-
tance, culture, or language. To meet this
competition we must develop a new way
of thinking about our economic potential.
Ceraid L. Balile
We can do something about this
Gerald L. Baliles
competition.
Governor of Virginia
Chairman, National Governors' Association
We can cultivate an export culture. We can
develop programs that identify markets.
We can encourage producers and suppli-
ers to look for customers anywhere they
can find them-even when the customer
lives on the other side of the world.
The emerging markets throughout the
world present new challenges for busi-
nesses, for governments, and for state trade
activities. These markets also present
"The future will require state
leadership to shape and
Foreword
coordinate an effective
trade promotion strategy
that responds to the diver-
sity in the world market-
The post World War II era has ended.
exports to the rest of the world totaled
Our challenge is to take advantage of the
$34.7 billion. In 1988, exports totaled
place. Only then can we
opportunities this presents.
$322.2 billion. And yet, even at these
levels, American exports have failed to
successfully confront the
After World War II this country pro-
keep pace with foreign imports. Trade
duced while the rest of the world recon-
deficits have ballooned to unprecedented
challenges and seize the
structed and purchased. It was a period of
levels. Foreign investment earnings now
fantastic growth. American businesses grew
rival and, some economists assert, will
opportunities that lie
along with the largest consumer market
soon surpass American investment earn-
in the world own. They invested in
ings overseas.
beyond our borders."
research and development, designed new
products for emerging markets, and pro-
It is time to get back into the race. We
duced goods at less cost than most for-
must succeed in overseas markets as well
Governor Ray Mabus
Mississippi
eign firms. They sold products in a world
as foreign nations have prospered in ours.
market free from meaningful competition.
It is time to face up to the complexities of
international trade and see that for every
Looking back on that age, David
challenge a commensurate opportunity
Halberstam comments: "We were rich in
exists.
a world that was poor. We mistook an
historical accident and believed it was a
If we are to make a commitment to
permanent condition.
The playing field
international trade-finding new markets,
is for the first time even. It took thirty to
developing new products-our strategy
forty years after World War II for other
must be both realistic and innovative. We
nations to catch up with us. No longer,"
must start with a clear assessment of
Mr. Halberstam concludes, "do we auto-
where we are:
matically set the pace."
The American position has changed.
In the aftermath of war, America sought
The United States is now a leading
an economically renewed Europe and
world trader, not the leading world
Japan-strong, productive democracies.
trader.
But our success in this endeavor exposed
American firms and workers to foreign
Economic sovereignty has eroded.
competition both at home and in overseas
Our economy, like the rest of the
markets.
world, now responds rapidly to changes
in the economies of other nations.
Our competition comes from all types of
Joint decisionmaking on economic and
economic systems from the export-driven
monetary policies is becoming a reality.
economies of the newly industrialized
countries to the nonmarket economies
Trading blocs are on the horizon.
of the socialist countries, to the free
The trend toward trading blocs, includ-
market economies of the industrialized
ing Europe 1992 and the U.S.-Canada
world.
Free Trade Agreement, may be a har-
binger of new bilateral and plurilateral
In the past two decades, international
trading partnerships around the world.
trade has increased dramatically, but not
always in America's favor. In 1968, U.S.
vi
World output is shifting. It is shifting
Elevate trade to a top priority within
toward the Pacific Rim countries.
the state by raising public awareness
Meanwhile, huge international debt
of the connections between international
has stymied countries in other parts of
markets and the state's economy,
May Mabus
the world that seemed on the verge of
appointing a cabinet-level trade official
accelerated growth.
to direct and coordinate the state plan,
Governor Ray Mabus, Mississippi
improving international education, and
Chairman, NGA Task Force on Foreign
The rules of the game are changing.
recognizing successful export efforts.
Markets
The eighth round of negotiations to
update the General Agreement on
Boost export activity within the state
Members of the Task Force
Tariffs and Trade is now underway. It
by providing information and brokering
will address agriculture, services, non-
services for financing, market opportu-
tariff barriers, intellectual property
nities, and technology; establishing
rights, and investment-all of which
mentoring programs; and getting new
Guy Hunt
are critical in today's international
and existing exporters to promote ser-
Governor Guy Hunt, Alabama
marketplace.
vices, undertake joint ventures, pack-
age complementary products and
The rate of technological change is
services, and develop new products.
accelerating. The pace has quickened.
It is now possible to interact in the
Develop new markets and relation-
Governor William A. O'Neill, Connecticut
world marketplace as quickly and
ships beyond our borders by pooling
easily as in our own.
resources with other states, monitoring
opportunities in the European Com-
Tray&Buanstal Tray
It is true that the federal government sets
munity and other changes in the inter-
the rules of trade. We are provided a
national trading system, strengthening
Governor Terry E. Branstad, Iowa
framework through GATT, trade legisla-
cultural exchange, hosting international
tion, and various bilateral and multilateral
business representatives, building a net-
agreements. But in the end, our success
work of international alumni of the
depends upon decisions made by thou-
state's colleges and universities, track-
sands of individual corporations and busi-
ing business opportunities linked to
ness people. And state governments are in
Governor Michael S. Dukakis,
foreign aid, and stimulating foreign
Massachusetts
a position to help.
demand for American products.
But state governments, like businesses,
While extraordinary growth and innova-
cannot hope to position themselves in the
tion have characterized state international
Jaya.Orr
international marketplace without a well-
programs in the last two decades, the
conceived and aggressive trade plan.
future demands more.
Governor Kay A. Orr, Nebraska
A state plan must begin with a rigorous
assessment of current trade efforts and
The future will require state leadership to
state trade barriers. The state plan also
shape and coordinate an effective trade
should address ways to achieve the fol-
promotion strategy that responds to the
BOOTH QURONER
lowing goals.
diversity in the world marketplace. Only
Governor Booth Gardner, Washington
then can we successfully confront the
challenges and seize the opportunities
that lie beyond our borders.
vii
The Challenge
"Turning problems into
opportunities is an Ameri-
can tradition. The challenges
The Challenge
presented by today's inter-
national market should be
approached no differently.
The world has changed and so has Amer-
Essentially, this country produced while
ica's position in it. The United States
the rest of the world reconstructed and
Through the solutions we
cannot afford to stand still, because stand-
purchased. It was a period of fantastic
ing still means losing ground. We must
growth. American businesses grew along
find, our economy should
act now to respond to-and take advan-
with the largest consumer market in the
tage of-the dynamic world economy.
world-their own.
grow and become stronger."
This is a new challenge for the United
U.S. firms invested in research and devel-
Governor Booth Gardner
States. But Americans have always had the
opment, designed new products for emerg-
Washington
determination and ingenuity to confront
ing markets, and produced goods at less
new frontiers. Such strengths helped make
cost than most foreign firms. They com-
the nation the leading world economy, a
peted fiercely with each other, but gave
position held unchallenged for four
little thought to the possibility of foreign
decades.
competition. Content with their domestic
customers, most did not consider foreign
From the end of World War II through
markets at all. Even today, most U.S. com-
the early 1970s, the U.S. position domi-
panies do not venture beyond our bor-
nated international trade negotiations and
ders. In this regard, not much has changed.
drove global market conditions. There
was no U.S. export strategy; none was
What has changed is that consumers
needed. "Competitiveness" was not an
worldwide can choose from an array of
issue. America's preeminent position in
products and services in an increasingly
the world was taken for granted.
integrated marketplace. American preem-
Figure
1
Trends in Absolute Growth, 1972-1986
Values in thousands of dollars
per manufacturing employee
32
30
U.S.A.
28
26
Other Summit 7
24
West Germany
22
20
Japan
18
16
14
'72
'73
'74
'75
'76
'77
'78
'79
'80
'81
'82
'83
'84
'85
'86
Source: Council on Competitiveness, "Competitiveness
Note: Other Summit 7 include Canada, France, Italy, and
Index," June 1988.
the United Kingdom.
2
inence is challenged by a growing num-
of the international export market has
ber of competitors from around the globe.
dropped 30 percent since the 1950s. Ameri-
can basic industry has lost nearly half of
The competition comes from all types of
the global market share it commanded
economic systems - from the export-driven
twenty years ago.
economies of the newly industrialized
countries and the developing nations. It
The effects of these developments at home
comes from the nonmarket economies of
are evident. Real economic growth
the socialist countries and from the free
dropped from nearly 4 percent in the
market economies of the industrialized
1960s to 2.6 percent in the 1980s. Real
world. The majority of world commerce
hourly wages peaked in 1973 and have
is conducted by countries with principles
declined by 10 percent during the last
and practices much different from our
fifteen years.
own.
The world market in which the United
Virtually no sector is exempt. From wheat
States must compete is now increas-
to computers, from automobiles to bank-
ingly complicated, unpredictable, inter-
ing services, the United States faces major
dependent, and extremely competitive. But
challenges.
the dramatic growth in the number of
competitors also means a corresponding
The U.S. trade balance has swung dra-
increase in potential foreign markets.
matically from a small surplus in 1981 to a
These markets present opportunities to
$118 billion deficit in 1988. The U.S. share
export U.S. goods and services.
2
U.S. Merchandise Exports, Imports,
and Deficit, 1978-1987
Values in billions of dollars
450
400
Imports
350
300
250
Deficit
200
Exports
150
100
50
0
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
Source: U.S. Department of Commerce, United States
Trade: Performance in 1987, June 1988, p. 13.
3
Figure
3
U.S. Trade Position in High
What those opportunities call for, how-
Technology, 1980-1987
ever, is a new way of thinking. It is not
Values in billions of dollars
enough, as it once was, to have an efficient
production process and a marketing plan.
30
25
American business people must develop a
20
keen understanding of the trade rules,
15
languages, politics, and economic systems
10
of foreign countries. They must be pre-
5
pared to respond to differing consumer
0
tastes and cultural demands. They must
5
1980
1981
1982
1983
1984
1985
1987
place a premium on the ability to antici-
1986
pate and adapt quickly to both market
and technological changes.
Source: The National Science Foundation, 1988.
Competing successfully in the interna-
Figure
4
Total World Trade: Exports
tional marketplace requires that a national
export strategy be devised. It is not enough
Values in trillions of dollars
to rely on traditional markets and prod-
ucts. New markets for existing products
2.4
must be developed, and new products and
services for existing markets must be
1.8
created.
1.2
It is not enough to prod new exporters
into action. Existing exporters must be
0.6
pushed to do more-both to expand their
trade volume and to diversify their trade
0.0
1970
1975
1980
1985
1987
relationships.
Source: Coopers & Lybrand, 1989 Economic Report-
Worldwide, p. 11.
The clear imperative for the United States
is to increase exports to foreign markets.
Figure
5
Exports Lead Growth, 1955-1987
America has the resources, technology,
and labor force to compete. But it requires
Annual rate increase in real GDP
a national commitment to succeed and an
and exports in OECD countries
GDP growth rate
effective strategy to reach beyond our bor-
Percent
Export growth rate
ders. The time to act is now.
10
8
6
4
2
0
1956-60
1961-65
1966-70
1971-75
1976-80
1981-87
Source: U.S. Agency for International Development,
Development and the National Interest, 1989, p. 49.
4
"The future well-being of
Nebraskan farmers, bankers,
The Context
and business people
depends on how well we
adjust to the changing nature
of America's position in the
world marketplace. Adjust-
ing means making a greater
effort to forge new trade
initiatives and devise bold
approaches. We not only
must work harder, we must
work smarter to develop
new and expanded markets
in this fiercely competitive
environment."
Governor Kay A. Orr
Nebraska
"The health and vitality of
an open international trad-
The Context
ing order will be impor-
tantly dependent over time
upon the willingness of gov-
ernments of large trading
Making a commitment to international
America has a stake in the economic health
trade - finding new markets, developing
of its major trading partners and can ben-
countries to reach some real-
new products - must begin with a realis-
efit from the larger markets that result
tic vision of the world marketplace.
from healthy economies. Thus, the ero-
istic collective judgments
sion of U.S. economic sovereignty comes
The vision must recognize and build upon
with opportunities as well as problems.
the trends that define the international
about the broadly appropri-
frontier.
Trading Blocs Are on the Horizon
ate level of exchange rates.
The American Position Has Changed
Trading blocs, comprising several coun-
Those judgments will, in
tries with consistent trade policies, have
No longer does the United States hold
begun to emerge. International attention
turn, need to influence the
unchallenged leadership in technology,
has focused on EC 1992, the plan for the
manufacturing, finance, and transporta-
twelve countries in the European Com-
design and implementation
tion. The United States used its post-war
munity to fully integrate their economic
productive capacity to rebuild the west-
markets by 1992.
of domestic policies if
ern European and Japanese economies and
to support economic development of many
The EC 1992 program will affect world
Third World and Pacific Rim countries.
they are to be meaningful
trade, but precisely how is subject to much
This contributed to an unprecedented
speculation. Will it result in a "fortress
and durable."
expansion in world output and rise in the
Europe," with a perimeter of protection-
world standard of living. It is only natural
ism to keep overseas competition at bay?
for U.S. leadership to be challenged.
Paul Volcker, former Federal Reserve
Board chairman, on the occasion of
Or will it invigorate the European econ-
the 40th anniversary of the General
America is now a leading world trader,
omy and lead to additional trade and
Agreement on Tariffs and Trade,
not the leading world trader. While the
investment opportunities?
reported in The Wall Street Journal,
United States still leads the world in
November 28, 1988
scientific and technological advances,
The U.S.-Canada Free Trade Agreement
other areas are contested by Europe,
could move both nations toward a more
Japan, and other countries. There are still
integrated market over the next ten years.
plenty of opportunities. The difference is
Under the agreement, all tariffs and quo-
that the United States must now look and
tas will be eliminated between the United
compete for them.
States and Canada, its largest trading part-
ner, by 1999.
Economic Sovereignty Has Eroded
The Soviet bloc countries are now mak-
The United States no longer enjoys the
ing plans to more fully enter the world
economic sovereignty it once maintained.
market as an extension of "perestroika."
Its economy, like the rest of the world, is
The addition of these nonmarket econo-
now inextricably intertwined with others
mies as full partners in the international
in the global marketplace. The value of
marketplace will take time and pose many
the U.S. dollar relative to most other cur-
political and economic challenges. But the
rencies is determined in conjunction with
size of this market and the breadth of its
six other major industrialized countries.
needs make this development impossible
These major economic powers are mov-
to ignore.
ing toward joint decisions on U.S. and
world interest rates.
6
Figure
6
U.S. Share of World Exports and Imports,
The Rules of the Game Are Changing
1961-1987
Percent
The General Agreement on Tariffs and
Trade (GATT) is forty-one years old.
24
Intended to cover tariffs and quotas on
22
manufactured goods, GATT did not
address the proliferation of non-tariff meas-
20
ures restricting trade in products and
18
services or the complexity of trade pat-
terns or relationships that have emerged.
16
GATT was devised to govern a world
U.S. Import Share
14
trading system that no longer exists; today
less than 7 percent of global economic
12
activity is covered by GATT rules.
10
U.S. Export Share
The eighth round of GATT negotiations
8
was still ongoing in April 1989 and pro-
6
posals were being discussed to include
'61
'63
'65
'67
'69
'71
'73
'75
'77
'79
'81
'83
'85
'87
key areas such as agriculture, services, and
intellectual property rights. If GATT can-
Source: U.S. Department of Commerce, United States
not be updated, countries are certain to
Trade: Performance in 1987, June 1988, p. 3.
accelerate the movement toward bilateral
and plurilateral agreements. The conse-
These trends may be harbingers of new
mies of Western Europe and North Amer-
quences for free trade and world eco-
trading relationships around the world.
ica grew at an annual rate of less than
nomic growth are uncertain.
Already the United States is exploring the
4 percent over the past five years.
feasibility of bilateral free trade agree-
The Rate of Technological Change Is
ments with Mexico, Japan, Korea, Tai-
Countries in other parts of the world that
Accelerating
wan, and the Association of Southeast
seemed on the verge of strong economic
Asian Nations. Geography, culture, and
growth have been stymied by debt. Brazil
Billions of dollars can now be debited and
economic necessity may lead other
owes interest on $124 billion in outstand-
credited across continents within seconds.
nations down the same path.
ing debt, while Nigeria faces a $29 billion
Stocks can be traded at any time day or
debt. Most Latin American and African
night in London, Paris, New York,
World Output Is Shifting
countries continue to face these and other
or Tokyo. Some high-valued specialty
obstacles to growth. The world financial
products can be ordered and delivered
The shift of world output toward the
community is working to solve the debt
across continents in twenty-four hours.
Pacific Rim started with Japan, whose econ-
question. One thing is clear: until this
omy has grown an average of about
problem is resolved, these nations cannot
The time from design to final product
4.5 percent annually for the past five
make necessary investments and fulfill
has been shortened as firms accelerate
years. Next came the "Four Tigers of East
their potential as producers and con-
schedules to meet emerging demands.
Asia" - Hong Kong, Singapore, South
sumers. Over the long run, these coun-
Computer-aided manufacturing permits
Korea, and Taiwan. In 1987, their econo-
tries could represent significant markets
assembly lines to be adapted rapidly to
mies grew between 8 percent and 14 per-
for U.S. products and services.
create new products.
cent in real terms. Malaysia and Thailand
are now poised for economic expansion
and the next tier of Pacific Rim countries
is on the rise. In comparison, the econo-
7
The pace of technological change has
Figure
8
Growth Rates in the Pacific Rim
quickened. Technological advances have
Average annual percent change, 1973-1986
generated new information, additional
Increase in per capita GNP
products, and quicker response times. They
have reduced decision times and increased
Percent
flexibility. Success belongs to those with
6
the agility to anticipate and adapt quickly
to both technological and market changes.
4
2
0
U.S.
Japan
China
Hong Kong
Singapore
S.Korea
Source: Newsweek, February 22, 1988, p. 44.
Figure
7
World Trading Blocs
Soviet Union
Canada
Eastern Europe
European Community
#
United States
0
D
0
8
Critical Issues:
Review of World Trade
"An additional 440,000 jobs
were created by the 1986-
Critical Issues:
1987 growth in U.S. exports.
Review of World Trade
Additional sharp export
growth in 1988 created a
similarly large number of
The United States' trading relationships
World business services trade also contin-
span the four corners of the world. Nearly
ued its growth in 1987. About one-fifth as
200 countries traded with the United States
new U.S. jobs. While some
large as world merchandise trade, the level
in 1988 and U.S. exports grew more rap-
reached $516 billion in 1987.
of the new jobs are in
idly in 1988 than in any year since 1979.
Exports totaled $322 billion in 1988, 27
Manufactures exports accounted for almost
agriculture, most of the
percent above the 1987 level. The export
80 percent of total U.S. exports in 1988,
expansion was broadly based, with exports
or $255 billion. In 1987 business services
increased employment is in
to all major world areas increasing: to
exports reached $59.4 billion, a 14.8 per-
Europe by 26 percent, to Japan by 34
cent increase over 1986, but the U.S.
manufacturing and service
percent, to Canada by 16 percent, to devel-
surplus in services trade has declined
oping countries by 31 percent, and to the
since 1981.
industries."
newly industrialized economies of East
Asia - Hong Kong, Singapore, South
Increasingly, nearly all business is con-
Korea, and Taiwan - by 48 percent.
ducted on a global basis. In the future,
U.S. Department of Commerce, 1989
Industrial Outlook
Despite the large number of countries
successful companies will need to under-
with which the United States does busi-
stand their industry internationally and
ness, ten countries accounted for two-
implement strategic plans to establish and
thirds of total U.S. merchandise trade
maintain a world market position. The
(see Table 1).
firms that succeed will be those that rec-
ognize the strategic importance of key
The growth of world merchandise trade
world market areas and the global nature
continued its five-year rise in 1987,
of markets and production.
reaching $2.5 trillion - in volume terms, a
nearly 4 percent increase over 1986 levels
(see Figures 9, 10).
Table
1
Ten Top U.S. Trading Partners in 1988
Domestic & Foreign Exports, f.a.s.;
General Imports, c.i.f.
Values in billions of dollars
Exports
Imports
Percent
Percent
of 1988
of 1988
Country
1987
1988
Exports
Country
1987
1988
Imports
Canada
$59,814
$69,233
21.6
Japan
$88,074
93,168
20.3
Japan
28,249
37,732
11.8
Canada
71,510
81,434
17.7
Mexico
14,582
20,643
6.4
West Germany
28,028
27,421
6.0
United Kingdom
14,114
18,404
5.7
Taiwan
26,406
26,256
5.7
West Germany
11,748
14,331
4.5
Mexico
20,520
23,545
5.1
Taiwan
7,413
12,131
3.8
South Korea
17,991
21,209
4.6
South Korea
8,099
11,290
3.5
United Kingdom
17,998
18,740
4.1
Netherlands
8,217
10,095
3.2
France
11,177
12,689
2.8
France
7,943
10,086
3.1
Italy
11,698
12,277
2.7
Belgium/
6,189
7,405
2.3
Hong Kong
10,490
10,810
2.4
Luxembourg
65.9
71.4
Source: U.S. Department of Commerce, United States Trade:
Performance in 1987, June 1988, p. 35. Updated March 1989.
10
Figure
9
World Merchandise and Business Service
Traditional Markets/Developed
Exports, 1980-1987
Merchandise
Economies. Changing market condi-
Values in billions of dollars
Business Services
tions will challenge relationships the
United States has with well-established
2500
trading partners-Canada, Europe,
2250
and Japan. The European Community
2000
(EC), whose members are among the
1750
United States' oldest and most estab-
1500
lished trading partners, will serve as an
1250
example of a traditional market for
1000
U.S. products. The integration of the
750
European Community's internal mar-
500
ket will require America to look at old
250
friends in new ways.
0
1980
1981
1982
1983
1984
1985
1986
1987
Source: U.S. Department of Commerce, United States
Newly Industrializing Economies.
Trade: Performance in 1987, June 1988, p. 2.
Several countries are becoming major
Figure
10
new trading partners. The fast-growing,
Change in World Merchandise
newly industrialized East Asian econo-
Trade Volume, 1980-1988
mies of Hong Kong, Singapore, South
Percent
Korea, and Taiwan will offer new trade
10
opportunities and require new market
approaches.
7.5
Developing Economies. Newly
5
emerging markets in Latin America,
Africa, and Southeast Asia represent
2.5
the commercial frontiers of the inter-
national economy. Trading with the
0
diverse nations of India, Indonesia, and
Thailand presents some common prob-
-2.5
lems, but these countries nevertheless
represent significant market opportu-
-5
nities for U.S. firms.
1980
1981
1982
1983
1984
1985
1986
1987
1988
Source: U.S. Department of Commerce, United States Trade:
Nonmarket Economies. In centrally
Performance in 1987, June 1988, p. 2. Updated March 1989.
planned economies, market forces are
not significant because the national gov-
Four types of world economies or mar-
Rather, they represent groups of diverse
ernment controls virtually all means of
kets effectively illustrate the diverse mar-
countries that may have similar economic
production and distribution and is
kets that U.S. exporters face: traditional
and political structures or are at similar
responsible for all trade relations. Recent
markets, newly industrialized economies,
stages of development. These examples,
trends in the Soviet Union, Eastern
developing economies, and nonmarket
although not comprehensive, demonstrate
Europe, and China bode well for
economies. These broad categories only
a range of challenges and opportunities
increased trade, but these countries pose
roughly correspond to geographic regions.
confronting U.S. exporters.
special challenges for the American
exporter.
11
Developed Economies: The European
While European nations are a traditional
Figure
11
European Community
Community
destination for U.S. exports, changes
underway in the European Community
Despite the increasing level of trade with
could represent significant new trade
In 1988, U.S. exports to the European Community rose 25
a broader array of countries, the United
opportunities for U.S. businesses. In 1985,
percent with the U.S. trade balance improving with
States' biggest trading partners are among
the Commission of the European Com-
almost all EC member countries.
its oldest: Canada, Japan, and the Euro-
munities outlined a plan to integrate the
U.S.-EC trade amounted to about $165 billion in 1988,
pean Community.
economies of the twelve member coun-
with 24 percent of all U.S. exports going to EC members.
tries by 1992. The plan consists of almost
Well-established trading relationships
300 recommended directives that, if
More than 80 percent of U.S. trade with the European
complement other political, institutional,
adopted, would reduce or eliminate many
Community is in manufactures. The portion of agricultural
and socioeconomic ties that bind the
barriers to trade within the European
exports to the region has declined from 16 percent of the
total in 1980 to 10 percent in 1988.
United States to other developed nations.
Community.
These relationships are being challenged
by the growing complexity and changing
Challenges
nature of the world economy-and by
internal changes within the countries
Transition to Unified Internal Market.
themselves.
Although 1992 is the target date for com-
pletion of the internal market, some direc-
The United States is embarking on a
tives are already in place. The remaining
major new relationship with its closest
regulations will be implemented and
neighbor and largest single trading part-
phased in over the next three years. The
ner. The U.S.-Canada Free Trade Agree-
challenge for U.S. businesses will be to
ment, which phases out tariffs and many
keep abreast of changes and to interpret
other trade barriers over the next ten
policy directives on standards, require-
ing packaging labels and instructions in
years, serves as a model for future bilat-
ments, and trade prospects. The reduc-
local languages and modifying products
eral and multilateral negotiations. As
tion of overlapping or conflicting
to accommodate cultural preferences are
implementation begins, American com-
regulations and procedures will present
among the changes that can make prod-
panies are gearing up to take full advan-
important commercial opportunities for
ucts more marketable. Accurate and
tage of the trade opportunities inherent
U.S. businesses. However, it will also mean
detailed market research is essential to
in this new trade relationship with an old
that their European counterparts will be
identify these needs.
partner.
more competitive both in Europe and
around the world.
Opportunities
Japan is the largest single supplier to the
U.S. market. In the last twenty years, Japan
Aggressive Competition in an Estab-
The EC 1992 program will create a uni-
has become the second largest economy
lished Market. Because of fierce compe-
fied $4.5 trillion market of 320 million
in the noncommunist world. The com-
tition in the European market, there are
consumers, in which goods, services, cap-
bined GNP of the United States and Japan
high standards for quality of products and
ital, and people will move across national
totals about 35 percent of world output;
services. Aggressive selling techniques are
borders as easily as they do across state
U.S.-Japanese trade grew to $131 billion
required, with emphasis on quality, service,
borders in the United States. The single
in 1988. As Japan adjusts to its position as
and price. American businesses must be per-
internal market is expected to add 5 per-
a world leader, substantial progress has
sistent, consistent, responsive, and reli-
cent, about $260 billion, to the European
been made by the United States to improve
able in order to obtain a competitive edge.
Community's gross domestic product; this
access to its markets. But Japan remains a
would stimulate increased demand for
special challenge for U.S. exporters.
Product Adaptation and Packaging. Suc-
imports. The lower value of the dollar
cessful marketing means adapting existing
also makes U.S. goods and services even
products to the European market. Print-
more attractive to European buyers.
12
Denmark
Ireland
Netherlands
Federal
United Kingdom
Republic
of Germany
Belgium
Luxembourg
France
Italy
Portugal
Spain
Greece
Figure
12
U.S. Trade with European Community,
1981-1987
Values in billions of dollars
Other
Manufactures
80
70
60
Exports
50
Imports
40
30
20
10
0
1981
1982
1983
1984
1985
1986
1987
Source: U.S. Department of Commerce, United States Trade:
Performance in 1987, June 1988, p. 43.
13
Newly Industrializing Economies: Hong
Hong Kong, Singapore, South Korea, and Figure
14
East Asian-NICs
Kong, Singapore, South Korea, Taiwan
Taiwan. Known as the "Four Tigers of
Asia," they are fierce competitors both in
While world markets are still dominated
the U.S. domestic market and in other
U.S. manufactures exports to these countries totaled
by the United States, Japan, and Europe,
countries. A strong partnership of gov-
more than $26 billion in 1988.
many other countries are making their
ernment and business has helped these
presence felt. These newly industrializing
countries obtain major market shares by
In 1988, U.S. exports increased by more than 49 percent.
However, U.S. imports were almost twice as large as
countries have largely achieved their eco-
targeting key industries and aggressively
exports. The U.S. deficit with them grew to $32 billion.
nomic development through a successful
advancing exports. What is particularly
These four countries accounted for about 23 percent of
strategy of increasing manufactured
striking about their success is that some
the 1988 U.S. trade deficit.
exports. They have developed their man-
of these countries were considered poor
ufacturing and export capacity to the extent
developing nations as recently as ten
that they not only are becoming increas-
years ago.
ingly competitive in the global market-
place, but often represent large and
Challenges
growing markets.
Tariff and Non-Tariff Barriers. The
The challenges and opportunities posed
government-industry relationship in Korea
by newly industrializing economies are
and Taiwan has been successful in achiev-
illustrated in four East Asian economies:
ing its export goals, in part because it also
Figure
13
U.S. Trade with East Asian NICs,
1981-1987
Values in billions of dollars
Other
Manufactures
60
50
40
30
Imports
20
Exports
10
0
1981
1982
1983
1984
1985
1986
1987
Source: U.S. Department of Commerce, United States Trade:
Performance in 1987, June 1988, p. 39.
14
Oo
protects domestic industries. Along with
South Korea
tariffs, these countries impose non-tariff
barriers to their markets. This makes it
difficult for American firms even to enter
the market, let alone compete with native
companies. Although substantial progress
has been made, continued negotiations to
address these non-tariff barriers will be
required if Americans want to compete in
the Korean and Taiwanese markets.
Weak Protection of Intellectual Prop-
erty Rights. Protection of intellectual
property rights includes patents, copy-
rights, and trademarks. In many coun-
tries, inadequate enforcement of laws
regarding intellectual property rights often
Taiwan
does not prevent others from pirating
works or inventions of authors, inventors,
Hong Kong
or trademark owners. Problems range from
the unlawful copying of motion pictures
and records to the illegal manufacturing
of patented pharmaceuticals, chemicals,
and biotechnologies. Counterfeiting and
piracy mean lost export sales for U.S. firms.
Opportunities
These export-driven economies are becom-
ing prosperous and represent major mar-
ket opportunities. U.S. exports to these
countries are expected to continue to
increase.
After 1996, Hong Kong will cease to be a
British Crown Colony and will revert back
to the People's Republic of China. Already
0
an entry point for trade, Hong Kong will
offer further opportunities for expanded
Singapore
trade and financial dealings with China.
Singapore hopes to establish itself as a
financial and technical service center for
medium-sized companies involved with
international trade in the Far East. This
objective could pose special export oppor-
tunities for U.S. service industries.
15
Developing Economies
Challenges
Figure
16
The Developing World
Developing countries contain half of the
Import Protection. Many developing
world's 5 billion people and purchased
countries use highly restrictive barriers to
The "NICs of the '90s'' include Brazil, Chile, Costa Rica,
33 percent of U.S. exports in 1988.
protect and stimulate domestic industries.
Malaysia, Thailand, and, perhaps, Kenya, Senegal, and
However, these "hot-house" efforts often
Uruguay. They are already markets for a range of consumer
The upper-income populations of devel-
have resulted in waste and inefficient use
goods as well as sophisticated capital equipment and
services.
oping countries often are overlooked.
of scarce human and capital resources.
However, the top 10 percent of the popu-
More and more developing countries are
The least developed nations include Bangladesh, Bolivia,
lation in developing countries represents
learning that open market strategies and
Chad, Ethiopia, Haiti, Mali, Nepal, Niger, and Somalia.
a rapidly growing market of 250 million
the discipline and efficient use of foreign
Most of their purchases abroad are funded by develop-
ment loans and grants; therefore, doing business involves
people, a population equal to that of the
competition have advantages. American
a three-way relationship between a U.S. firm, the pur-
United States. Moreover, many of the rural
exporters who have competitive products
chasing country, and a national or international financial
poor are moving into the cities and are
are well-positioned to gain a foothold
assistance agency.
becoming active consumers and produ-
in these potentially receptive, rapidly
cers in the world market.
expanding markets.
The middle-income countries include Colombia, Egypt,
India, Mexico, Morocco, Nigeria, and Pakistan. These
countries exhibit elements of both markets, but often
The developing world is anything but
Debt Burden. The Third World is deep
also have strict import barriers to protect fledgling
monolithic. It includes many relatively
in debt to the rich nations of the world,
industries. Their accelerating growth and rising
poor, least developed countries, a grow-
owing about $1.3 trillion in 1988. Approx-
productivity have great promise.
ing number of middle-income countries,
imately $165 billion is required each year
and several countries poised on the brink
to service the debt-about the same as
of sustainable growth and affluence, ready
the amount of annual foreign assistance
to join the ranks of newly industrializing
and private investment provided by all
countries. Each kind of developing nation
governments and firms in the richer half
represents a different kind of market, and
of the world. International commercial
each requires a different marketing
banks and other private lenders carry about
strategy.
47 percent of the debt; the balance is car-
ried by official lending institutions.
Figure
15
U.S. Exports-Where They Go
Value in billions of dollars
70
60
50
40
30
20
10
0
Japan
Western Europe
Developing and Newly
Industrialized Countries
Source: U.S. Agency for International Development,
Note: Statistics for first ten months of 1987.
U.S. AID Highlights, vol. 5, no. 3 (summer 1988).
16
Developing Countries
(Least developed countries are shown in boldface.)
Afghanistan
Central African Republic
Grenada
Lesotho
Papua New Guinea
Algeria
Chad
Guatemala
Liberia
Paraguay
Angola
Chile
Guinea
Libya
Peru
Antigua and Barbuda
China
Guinea-Bissau
Madagascar
Philippines
Argentina
Colombia
Guyana
Malawi
Qatar
The Bahamas
Comoros
Haiti
Malaysia
Rwanda
Bahrain
Congo
Honduras
Maldives
St. Christopher
Bangladesh
Costa Rica
Hong Kong
Mali
and Nevis
Barbados
Cuba
India
Malta
St. Lucia
Belize
Cyprus
Indonesia
Mauritania
St. Vincent and
Benin
Djibouti
Iran
Mauritius
the Grenadines
Bhutan
Dominica
Iraq
Mexico
Sao Tome and
Bolivia
Dominican Republic
Ivory Coast
Morocco
Principe
Botswana
Ecuador
Jamaica
Mozambique
Saudi Arabia
Brazil
Egypt
Jordan
Nauru
Senegal
Brunei
Equatorial Guinea
Kenya
Nepal
Seychelles
Burkina
El Salvador
Kiribati
Nicaragua
Sierra Leone
Burma
Ethiopia
North Korea
Niger
Singapore
Burundi
Fiji
South Korea
Nigeria
Solomon Islands
Cambodia
Gabon
Kuwait
Oman
Somalia
Cameroon
The Gambia
Laos
Pakistan
Sri Lanka
Cape Verde
Ghana
Lebanon
Panama
Sudan
Source: U.S. Department of State, 1985.
17
As debt drops to manageable levels, eco-
other international organizations. These
Figure
The Nonmarket Economies
nomic growth will be restored and Amer-
swaps provide a way for American firms
ican export prospects will expand. To work
to find local partners, become familiar
their way out of debt, Third World nations
with local markets, and invest for future
Soviet Union. U.S. exports to the Soviet Union reached
must export, and from 1980 to 1987 the
growth. Swaps also are a positive way to
$2.8 billion in 1988. Although trade with the Soviet Union
United States absorbed almost $15 billion
deal with protectionism.
represented 0.4 percent of total U.S. trade in 1988, it
provided a $2 billion trade surplus.
of additional manufactured exports from
Third World debtors. By comparison, the
In countries where debt is held largely by
Eastern Europe. In 1988, the United States imported ($1.7
European Community absorbed about
international donor agencies, schemes such
billion) almost twice what it exported ($882 million) to
$5 billion, and Third World manufactured
as debt-for-nature swaps have been used.
the six countries of Eastern Europe: Bulgaria, Czechoslo-
exports to Japan increased by only $436
The concept of debt for nature involves
vakia, East Germany, Hungary, Poland, and Romania.
Bulgaria is the only country in the region with which the
million over the 1980-1987 period. Dol-
forgiving loans and debts to nations that
United States ran a surplus.
lars earned through exports go both to
use comparable local resources to address
reducing debts and to restoring imports
severe natural resource problems, such as
China. U.S. exports to China reached $5.0 billion in 1988.
of products that can further fuel their
flooding and loss of forests, to clean up
The U.S. $3.4 billion deficit with China in 1987 rose to
development.
drinking water supplies, or to improve
$4.3 billion in 1988.
waste disposal and recycling. These envi-
Lack of Foreign Exchange. Many
ronmental and human problems have
Third World countries have difficulty
global as well as local consequences. By
obtaining the hard currency needed to
easing the debt burden for countries that
purchase American goods the conventional
invest in environmental and natural
way. But American exporters can gain
resource management, richer countries
access by countertrade, working with
help their own citizens as well. These
American firms that import from these
efforts also create new markets for the
countries to barter goods.
services and products of American firms
with expertise in these areas.
Opportunities
Development Assistance and Trade
Market Size. No firm that ignores this
Liberalization. Most developing coun-
market can pretend to have a global per-
tries receive foreign economic assistance.
spective. Exporters must be willing to learn
These loans and grants finance a range of
about the diverse cultures, needs, and
goods and services that developing coun-
potential of these markets. Becoming active
tries could not otherwise afford but that
often requires patience, a willingness to
are essential to their growth. Assistance
make long-term investments, and resource-
programs such as those of the U.S. Agency
fulness to overcome unfamiliar obstacles.
for International Development, the World
The opportunities are as vast and varied
Bank, and regional development banks
as the developing countries themselves.
help U.S. exporters who want to export
products purchased with development
Debt Conversion. Solutions to Third
assistance funds. There are even programs
World debt will take time and will be
designed to encourage participation of
complex, but can create new opportuni-
small and minority-owned businesses.
ties for American firms. For example, in
Firms that have sold goods purchased with
countries where debt is largely held by
assistance funds find that importing coun-
commercial banks, debt-for-equity swaps
tries often return to purchase more prod-
have been proposed, often with help from
ucts on commercial terms.
the United States, the World Bank, and
18
Nonmarket Economies: Soviet Union,
Eastern Europe, China
Centrally planned or nonmarket econo-
Soviet Union
mies are seeking expanded trade activity
with the rest of the world. These econo-
mies represent potentially vast markets
for consumer and other capital goods.
Eastern Europe
But because they function outside tradi-
tional market forces, they pose particular
challenges for American businesses. While
China
most are taking steps to decentralize and
streamline their international trade sys-
tems, the governments can inhibit trading
relations. Because the currencies of these
countries are not traded on the open mar-
ket (that is, not subject to exchange), they
often must obtain needed goods through
barter (countertrade).
Challenges
Foreign Exchange Controls. The cur-
rencies of these countries are not subject
to exchange on the world market and
thus have no value outside their national
boundaries. Therefore, these countries
must use a "hard currency," such as gold
or a traded currency (e.g., dollars or
Marks), to purchase goods from the West.
Facing external debt and a lack of avail-
able hard currency, most of these coun-
tries have controls that restrict use of hard
currency, thus effectively limiting the entry
of foreign products into the domestic
market.
Countertrade. Due to a lack of hard
currency, many countries require West-
ern companies to obtain counterpurchase
commitments in lieu of cash transactions.
Often, nonmarket economies-and most
developing countries-exchange local
products and raw materials for Western
goods because they do not have adequate
hard currency reserves. Countertrade may
19
Figure
18
U.S. Trade with Centrally Planned
Opportunities
Economies, 1981-1987
Values in billions of dollars
While there is still some uncertainty about
Other CPEs
the future of economic restructuring in
China (Mainland)
the Soviet Union and Eastern Europe,
these countries and China continue with
10
Exports
economic reforms to facilitate trade and
countertrade arrangements. Efforts at
8
reform are intended, among other things,
to reorganize banking, improve produc-
6
Imports
tivity and export quality, and grapple with
exchange and debt problems.
4
It is likely that the drive to modernize
2
industry in these countries will increase
their demand for Western products and
0
1981
1982
1983
1984
1985
1986
1987
processes. Therefore, these reforms could
Source: U.S. Department of Commerce, United States Trade:
represent long-term opportunities for U.S.
Performance in 1987, June 1988, p. 45.
firms. In addition, most of these countries
are promoting joint ventures with West-
take the form of barter (bilateral trade
can firms, especially smaller companies,
ern partners.
without money) or counterpurchase,
will need technical and information assis-
whereby the initial exporter agrees to find
tance if they want to establish a position
Traditional American exports to the Soviet
a third party who will buy the nonmarket
in these market areas.
Union and Eastern Europe have been
country's goods.
largely agricultural. While tremendous
U.S. Export Controls. The U.S. national
challenges remain for American exporters,
Coordinating the activities of a number
security export licensing system is designed
some long-term prospects exist for ser-
of diverse parties in a counterpurchase
to prevent the export of strategically sen-
vices and manufactured products. China's
agreement can be difficult. In general,
sitive and militarily significant technology
real GNP increased 9.4 percent in 1987,
most American firms are unfamiliar with
and goods to communist bloc countries.
indicating impressive growth for its
the exigencies of countertrade, and thus
The licensing process is lengthy and frus-
economy.
would prefer to avoid its use. But barter
trating for the American exporter, despite
and countertrade remain a feature of
a number of improvements. The 1988
Conclusion
trading relationships with nonmarket
omnibus trade bill called for further
economies.
changes, including requirements that rec-
Each market area is unique. Trade strate-
ognize widespread foreign availability of
gies must be diverse and flexible to meet
Trade Policy Uncertainties. While these
many controlled items and liberalization
the needs of individual markets. States
economies continue to seek trading oppor-
of controls on exports to China. Export
can help businesses be more sensitive to
tunities with the rest of the world, they
control requirements have broad implica-
these market differences and respond
often lack a well-established trade infra-
tions for U.S. trade generally, but of course
appropriately to the challenges and
structure that facilitates transactions. In
they directly affect trade with centrally
opportunities they face. The following
many cases the systems of commercial
planned economies. Recent Soviet requests
sections will highlight state actions to
law in these countries are new, untested,
for greater access to Western technology
help companies venture beyond our
and subject to interpretation. Questions
will have an impact on the future debate
borders.
arise concerning labor laws, management
on U.S. export administration.
practices, and profit repatriation. Ameri-
20
"To survive and prosper,
Alabama must reach out to
The State Role
international markets. As
Governor, I take seriously
my responsibility to help
Alabamians export their
goods and services. That's
why I instructed the state's
overseas offices to begin
actively seeking markets,
and why I personally
have worked to develop
new trading relationships
with officials in other
countries, particularly in
the Pacific Rim."
Governor Guy Hunt
Alabama
"While the federal govern-
ment sets the rules on trade,
The State Role
success in developing and
expanding foreign markets
depends on the decisions
of thousands of corporations
For twenty years, Governors have led
States operate within an overall national
efforts to guide and stimulate economic
economic and foreign policy framework
and business people. State
development and job creation in their
established by the federal government. The
states. By the early 1980s, this activism
government negotiates international agree-
governments are positioned
extended beyond state and national
ments, sets tariffs, defines national mone-
borders.
tary and fiscal policy, provides international
to help."
development assistance, and applies
This activism has challenged Americans
national security considerations to trade
to change their way of thinking-from
activities.
Governor Gerald L. Baliles
Virginia
how children are educated to how prod-
ucts are designed.
While the federal government sets the
rules on trade, success in developing and
Most states have trade programs that serve
expanding foreign markets depends on
as catalysts and brokers in the interna-
the decisions of thousands of corpora-
tional arena. They promote joint ventures
tions and business people. State govern-
and seek foreign investment. States pro-
ments are positioned to help.
vide technical assistance-from seminars
on the "how tos" of trade, to individual
Over the past two decades, there has been
exporter counseling, to dissemination of
extraordinary growth and innovation in
specific trade leads.
the states' international programs. The
future demands more. State leadership is
Forty-one states maintain offices in
required to shape and coordinate an effec-
twenty-four different countries. Seventeen
tive trade strategy that responds to the
states have export finance programs; oth-
diversity within the world marketplace.
ers provide information on non-state
Only then can the United States success-
sources of financing.
fully confront the challenges and seize the
opportunities that lie beyond its borders.
States promote international tourism with
its positive influence on America's trade
balance. States promote international travel
to the United States through state adver-
tising campaigns and tourism missions.
Governors are personally involved in these
efforts, making eighty-seven trips abroad
3
in 1987 alone. These trips-in tandem
with other state efforts-have helped posi-
tion their states in world trade.
Governors also have played a leading role
in the resurgence of international educa-
tion in this country. Foreign language
enrollments are up, and more than half of
the states take part in the National Geo-
graphic Society's Geographic Alliance pro-
gram, an in-service training program for
teachers.
22
19
Selected State Trade Activities
Number of foreign offices
Governor's International Advisory
2
Committee
Operational financing program
International joint ventures
$
$
0
1
I
$
I
1
2
2
I
8
0
3
$
5
2
1
0
4
$
4
$
2
$
2
2
3
$
2
3
$
0
6
6
$
2
$
4
2
0
2
$
$
3
$
3
2
5
3
$
$
$
2
2
I
4
0
5
$
3
2
1
0
$
4
5
4
2
4
$
$
4
0
2
2
$
0
Source: National Governors' Association, 1989.
23
"It is time to get back into
the race. We must succeed
in overseas markets as well
as foreign nations have
prospered in ours. It is time
to face up to the complex-
ities of international trade
and see that for every
еаеиах
challenge a commensurate
FRACALLY
opportunity exists."
Governor Ray Mabus
Mississippi
"It's time to get serious about
trade. The opportunities
beyond our borders are
State Action Agenda
many, but we must work
hard to realize them. Gover-
nors can build ties to other
parts of the world and help
exporters gain access to
new markets."
Governor Ray Mabus
Mississippi
"Like any good football team,
we can't sit on our lead. We
must begin an all-out cam-
State Action Agenda
paign to encourage exports
by our companies. We'll con-
tinue to nurture the spirit of
Trade does not just happen. It takes a
concerted, well-considered plan of action
innovation. We'llworkclosely
to connect a supply of goods on one side
of the world and a market on the other.
with our small and medium-
Like businesses, states must take a strate-
sized businesses to help
gic view of world markets. Just as com-
mercial companies must respond to
them find new markets. In
diversity in the world marketplace, states
must mobilize the diverse resources within
the 1990s the newly unified
the state to provide a coordinated, respon-
sive trade network.
European Community will
What follows are concrete suggestions on
provide the next frontier for
how states can help connect goods, mar-
kets, and the state's businesses.
Massachusetts' products.
OBJECTIVE: Develop a plan to position
We must and will move to
the state in foreign markets.
trade promotion efforts and assess the
impact of any state trade barriers.
seize that opportunity."
The time is right for states to design,
build consensus for, and execute a state-
In Maryland, the Governor's World Trade
Governor Michael S. Dukakis
wide strategic trade plan. Governors
Efforts Commission, composed of public
Massachusetts
should:
and private sector representatives, recom-
mended the establishment of the state's
Enlist full participation from state gov-
international division as a "one-stop shop"
ernment, business, and academic lead-
for businesses involved in international
ers who have expertise in international
trade and commerce. Located in Mary-
matters. Governors can provide the
land's World Trade Center in Baltimore,
leadership and policy direction needed
this office offers a full complement of
to bring together public and private
state resources to Maryland businesses
leaders. Officials from state trade, edu-
wishing to identify commercial, market-
cation, agriculture, and commerce
ing, and trade opportunities in the inter-
departments, overseas offices, colleges
national arena.
and universities, port authorities, and
the legislature should be enlisted
As recommended by the Virginia Inter-
from the public sector. Business people
national Trade Commission, Virginia con-
active in international affairs, including
solidated state trade development activities
international lawyers and bankers,
under the direction of a new entity, the
should be drawn from the private
Virginia World Trade Council. The coun-
sector. Governors can use this team of
cil is composed of four citizen members
experts to design statewide plans. But
appointed by the Governor and five agency
before developing the plan itself, the
directors from the State Council of Higher
team must review the state's current
Education, the Virginia Port Authority,
26
and the Departments of Education, Agri-
Massachusetts has embarked on an aggres-
OBJECTIVE: Elevate trade to a top
culture and Consumer Services, and World
sive initiative, "Export 90s," to help small
priority in the state.
Trade. The council establishes an annual
and medium-sized companies realize their
comprehensive and coordinated trade strat-
full export potential. A policy review panel
Every citizen, company, and institution
egy for the commonwealth, including tar-
is visiting exporting and nonexporting com-
must understand the importance of
gets for increased trade activity and
panies across the state to identify their
strengthening American international
accountability measures for participating
needs as they enter foreign markets. The
competitiveness. The effort must be
agencies.
panel will assess relevant national and inter-
sparked by individual commitment and
national issues and help develop a com-
energy as well as by coordinated, well-
Review existing state efforts to pro-
prehensive plan for aiding Massachusetts
planned, and supportive government
mote trade, joint ventures, and other
businesses.
initiatives.
economic links to foreign markets. In
evaluating current efforts, the team of
To better promote Alabama's goods and
Giving trade a higher profile throughout
experts might ask such questions as:
services, the Governor consolidated the
the state is the first part of a strategic
state's trade operation with the Interna-
plan that must be related integrally to
- Does the state's international trade
tional Investment Division of the Ala-
other priorities, including economic
program fit within the broader eco-
bama Development Office. He also
development, education, and competi-
nomic development goals of the state?
charged the five overseas offices with pro-
tiveness. To accomplish this goal, Gov-
Conversely, do the state's economic
moting trade in addition to investment,
ernors can consider the following
development goals adequately
tourism, and the port of Mobile.
actions.
acknowledge the importance of trade?
- Are efforts focused primarily on
Assess whether the state is doing any-
Convince other state leaders and the
recruiting foreign investments or do
thing that has a negative impact on its
public of the importance of foreign
they also seek to help local firms enter
trade potential. Identifying international
markets to the state's economy.
foreign markets? Are state trade and
and federal obstacles to expanding con-
investment staff working closely
tacts with foreign markets tells only
Governors can use their position and
together toward coordinated
part of the story. Governors should
visibility to lead a public education effort
objectives?
ensure that the state's policies and objec-
that stresses the importance of finding
- Have sectors where the state has a
tives and those of a strategic plan are
new markets and justifies the long-term
special advantage been identified?
not in conflict, and take steps to miti-
investment in education and marketing
- Are locally based firms working
gate the effects of any state trade
research that this will entail.
aggressively to develop a presence in
barriers.
overseas markets, through exports,
Governors can sponsor briefings for
joint ventures, and licensing agree-
Having gathered the facts, the team of
members of their cabinets, legislatures,
ments? Has the state identified its
experts can consider highly creative
leading members of the business com-
exporters?
strategies that draw on existing state
munity, and others who may not be
- Are universities, banks, and the busi-
programs. The team should be charged
directly involved with trade, or sensi-
ness service sector actively helping
by the Governor with shaping and coor-
tive to its importance. Eventually this
firms develop their overseas activities?
dinating an effective, comprehensive
could create a pool of state ambassa-
- Is there enough cooperation with
market penetration strategy. Such a
dors to travel on behalf of the state and
federal officials?
strategy will be unique to each state,
advocate state international trade efforts.
- Is the state identifying and incorpo-
taking into account different needs and
rating innovative ideas and practices
resources.
A Governor's state of the state address
developed by other states or countries?
and budget message can include a state-
ment on the state's international trade
position. These can be used to propose
27
"For the first time in nearly
a decade, lowans and all
Americans can capitalize on
the export opportunities
offered by foreign markets.
Now is the time for exporters
and justify new efforts to enhance that
States can increase the international per-
position. In this way, a Governor can
spective of their students by improving
of commodities or durable
provide high visibility to trade, while
cultural awareness, language training,
educating legislators and citizens about
and teacher training, and by encourag-
goods to realize increased
the role of trade in the overall economy.
ing the private sector to work more
closely with schools and universities
profits by enhancing their
Nebraska's International Trade Diplomats
to improve international education.
Program recruits groups participating in
International education is critical to
export activities."
a state college/university travel program
developing a better understanding of
to deliver information on behalf of the
potential customers. A successful sales-
state to overseas locations they will be
man will understand a customer's
Governor Terry E. Branstad
lowa
visiting. Designated diplomats attend ori-
language, living conditions, needs, and
entation meetings where they receive
desires.
assignments and promotional materials.
Participants spend a short period of time
New Jersey recently used state funds to
away from their scheduled tour to visit
establish a Center for International Busi-
U.S. embassies, consulates, commercial
ness Education, which is administered by
attaches, and other key officials. In addi-
Rutgers University. The center will serve
tion, Nebraska encourages the diplomats
as a resource for and sponsor of instruc-
to distribute tourism packets promoting
tional programs in international business
international travel to Nebraska to travel
and foreign languages and cultures. It will
agencies.
provide an information clearinghouse for
international education and export/import
Appoint a senior-level official to carry
assistance throughout the state.
out the state's strategy.
Recognize success.
Once a strategy has been designed and
agreed to by a team of experts, Gover-
A Governor's award for excellence in
nors will need to put someone in charge
exporting or for quality products or
of seeing it through. A "trade czar"
services not only serves as an incentive
would oversee the implementation of a
for exporting, but also raises public
statewide trade plan. Appointing some-
awareness and reinforces the message
one with trade responsibility to a high-
that trade is a top priority for the state.
level post, possibly at a cabinet level,
promotes visibility while ensuring coor-
OBJECTIVE: Boost export activity within
dination of statewide efforts.
the state.
Build a firm foundation throughout the
Ultimately each company must make its
education system.
own export decisions. But when jobs and
economic growth are at stake, states also
In order to work and compete in a
have a vital role to play in boosting
global economy, a good grasp of geog-
export activity.
raphy and languages is crucial. Steps
are needed to create a new generation
States should target not only potential
of knowledgeable business leaders ded-
exporters, but also infrequent exporters
icated to competing in the international
that could increase both the frequency
marketplace.
and the value of their shipments abroad.
28
They also can expand the number and
Establish a "mentoring" program so
Massachusetts and Israel signed a joint
type of markets with which they do
experienced exporters can help others.
accord to encourage cooperation on inno-
business.
vative projects relating to trade and tourism.
States provide technical assistance to
In less than one year, the Massachusetts-
For smaller companies, the focus should
new-to-export firms. But there is noth-
Israel Exchange has fostered about thirty
be on finding market niches, not on
ing like first-hand experience-especially
trade and joint venture projects. From
market dominance.
in more unfamiliar market areas to
this model, several states, including Cali-
help a company learn the exporting
fornia, Florida, Maryland, Michigan, New
Market research for best export
process. States can encourage current
Jersey, Texas, Virginia, and Wisconsin, have
prospects-especially federal government
exporters to share nonproprietary infor-
developed similar programs with Israel.
trade leads-often is oriented heavily
mation and help match them to less-
toward the "big ticket" sectors where a
experienced firms.
Ohio and the Hubei Province of China
few large companies are active. States
have crafted a six-point science and tech-
must dig deeper to find manageable
Promote the development of joint
nology agreement that will carry out spe-
export opportunities for smaller and
ventures with overseas companies.
cial research and technology development
medium-sized businesses.
work and exchange experts and informa-
Joint venture promotion combines tra-
tion in the fields of laser processing and
State activities could include the following.
ditional components of state interna-
laser welding, new polymer material and
tional programs-export promotion and
its use, computerized manufacturing tech-
Help firms with complementary prod-
investment attraction - to form an
nology, biotechnology, agriculture, ani-
ucts and services to work together and
approach uniquely suited to a global
mal husbandry technology, technology
package their approach to overseas
economy where enterprises draw
markets, and technology transfer.
markets.
resources from around the world, with-
out regard to national boundaries.
A sister state joint venture project between
States can help companies that already
Because states are a one-stop source of
Japan's Hyogo Prefecture and the state of
export goods work out coat-tail arrange-
information about firms within their
Washington is currently under develop-
ments with smaller companies that offer
jurisdiction, they play an important role
ment. The proposed 170-unit housing
complementary, noncompetitive prod-
in bringing about successful partner-
development project, called Washington
ucts or services. Both firms benefit
ships. As interest in joint ventures
Village, will be built in Hyogo Prefecture
because they can offer more compre-
grows, states can expect continued and
with American construction techniques and
hensive service to customers. Mean-
increased demand for their match-
Washington state wood products.
while, the small companies gain
making services.
experience with and exposure to the
Design programs to promote services
export market. Examples of cooperative
New York's Joint Venture/Acquisition Pro-
as well as manufactured goods.
exporting include contracts for shipping
gram has been operating for more than
boxes and containers, equipment
four years. Through this program, the
States rarely measure the contribution
maintenance, and spare parts and
state can accommodate foreign investments
of services exports to their economies.
supplies. Cooperative agreements also
by companies interested in investing but
States should identify markets for
can include training to operate the
not in establishing operations in the United
technical expertise as readily as those
exported equipment.
States. In cooperation with the state's
for commodities and manufactured
regional offices and various local develop-
goods. In this way they can help
Export trading companies facilitate
ment organizations, New York can match
service industries participate in export
smaller exporters' access to new mar-
the state's manufacturers with the over-
programs.
kets. States can help smaller companies
seas investors.
establish or join export trading compa-
Because there is no international frame-
nies or find other ways to ease their
work governing services trade, service
entry into unfamiliar markets.
industries often face formidable
29
"On a recent joint trade mis-
sion to the Far East, Gover-
nors Clinton, Roemer, and I
learned first hand that pool-
ing our resources and work-
ing together is the most
challenges in foreign markets. State
encouraging commercial lenders to
programs may need to be modified to
provide necessary services. Whatever
effective way to expand our
accommodate the special information
method a state chooses, confronting
and technical assistance needs of export-
the problems of export finance is essen-
presence in foreign markets.
ing service firms.
tial to a state's strategic trade plan.
Alabama was one of the first states to
Foreign officials responded
The Minnesota Export Finance Author-
make a specific and concentrated effort to
ity, established in 1983, was the first state
much more positively to us
identify service sector companies and
export finance agency in the country. It
include them in the state export database,
provides pre-export working capital loans
as a team."
trade missions, catalog sales, and other
for small and medium-sized businesses, as
promotional activities.
well as post-export financing assistance.
Governor Ray Mabus
Mississippi
Determine the export potential of
Initiated in 1985, the California Export
unusual products and services.
Finance Program, like Minnesota's pro-
gram, backs only transactions that would
Export promotion is more than con-
not otherwise receive support from com-
vincing businesses to sell their existing
mercial banks. A key component of the
product lines overseas. Often products
California initiative is to encourage com-
in plentiful supply, or even by-products
mercial banks to become more receptive
of state economic activity, are market-
to the financing needs of small and
able overseas. States can use their knowl-
medium-sized exporters, by sponsoring
edge of overseas markets to help
seminars and other educational activities.
exporters sell by-products or surpluses
to international partners.
Colorado International Capital is a new
public-private venture that provides
Mississippi discovered great interest and
preshipment financing to Colorado
acceptance in the Soviet Union for catfish
exporters.
and is actively developing that market.
The Indiana Export Authority offers fixed
Virginia, noting that chicken feet is a
interest rates lower than those generally
delicacy in the Far East, arranged for its
available in the private sector, with quali-
chicken processing plants to stop dis-
fied exporters able to borrow up to 90
carding the feet and export them to
percent of the value of each export
Hong Kong.
transaction.
Encourage the state's higher education
Assist firms in locating financial assis-
system to help exporters.
tance for export transactions.
University and college business pro-
Firms have cited the lack of export
grams are a good source of free export
financing as one of the biggest barriers
counseling. Teams of graduate students
to their export activity. States can
can research foreign markets for small
establish their own export finance
and medium-sized companies that lack
programs, including direct lending and
the resources to hire an export man-
loan guarantee programs, or they can
ager or sift through market data. In
serve as an information clearinghouse,
30
return, these students get hands-on
Utilize technology to improve the effi-
The Washington State Business Assistance
experience developing their marketing
ciency of promotion efforts.
Center provides trade leads through an
skills by conducting market research in
electronic bulletin board. Smaller firms
designing export strategies.
Telecommunications and other tech-
that do not have established networks of
nologies make it almost as easy to con-
world trade contacts can access the
States can expand ongoing university
duct trade around the globe as it is
information by computer link.
and college programs and ensure that
around town. States also can incorpo-
these initiatives are part of a statewide
rate technological advances in commu-
OBJECTIVE: Develop new markets and
strategy.
nication into their own plans and
relationships beyond our borders.
programs.
The Alabama International Trade Center,
Most current state trade promotion efforts
affiliated with the University of Alabama
Video productions are a good way to
are directed toward well-established mar-
in Tuscaloosa, gave export assistance to
reach many people and communicate
ket areas. An effective state trade plan
approximately forty companies during
complicated information. States can
should take a more strategic view of the
1979, its first year. Last year, it provided
describe their trade programs and
world and all its markets. Due to political,
assistance to almost 350 companies.
resources on videotape and loan them
economic, and other changes, these mar-
to businesses throughout the state. A
kets are continually evolving and none
The international marketing program
state overseas office director is perceived
should be overlooked. Individual coun-
managed by the Virginia Department of
as more accessible if a business person
tries should be viewed not only as mar-
World Trade matches graduate students
has "met" him or her on tape. For best
kets themselves but also as entry points to
in international business with businesses
effect, videotapes used in trade shows
a region.
seeking to develop first-time international
are subtitled in foreign languages.
marketing plans.
Finding new markets takes work. State
New York uses video presentations about
trade officials will need to develop greater
Working in cooperation with the North
state firms and their products in its trade
expertise in unfamiliar market areas. States
Carolina Community College system,
show exhibits. Eight- to ten-minute
can provide initial assistance to exporters
which consists of fifty-eight facilities, the
videotapes on each participating company
by offering state-specific information and
North Carolina Department of Commerce
contain footage of the equipment or prod-
by linking them with basic information
presents "Trade Days" videotapes every
uct in action, unusual applications, the
sources in the federal government. Once
three months for export companies. The
manufacturing process, the key people
new markets have been identified as suit-
videotape is shown on the same day and
involved in the company, and their inter-
able for a concerted state effort, states can
at the same time throughout the system
est in finding an overseas partner or
initiate the following actions.
and is designed to orient new-to-export
customer.
companies to the international arena.
Pool state resources for trade and tour-
Massachusetts signed an agreement with
ism promotion.
The Impact Center at Washington State
India to establish "tradeports" that will
University applies science and technology
substantially advance communications
Governors want to learn about new
to problems facing the state's agricultural
between the United States and India. The
market opportunities. But this devel-
exporters in international markets. It pro-
Indo-American Tradeport will provide a
opmental work is expensive and long-
vides information about foreign markets,
direct video, data, and voice communica-
term. Even in this competitive arena,
consumers, distribution channels, and trad-
tion link between the two countries and
there is room for cooperation. Ways
ing systems; helps solve economic, social,
promote Massachusetts technologies and
can to be found to share these start-up
or technical problems that impede export
services to Indian partners.
costs.
of specific products or processes; and helps
develop new products for overseas markets.
31
"We cannot be satisfied as
mere custodians of the pres-
ent. New markets are out
there if we persevere. We
must establish an expanded
foundation of strong, flexi-
Pooling state resources is tremendously
more benefits may be gained by all the
effective for states that have worked
states involved. By sharing costs and per-
ble trading relationships
together to promote trade and tourism
sonnel, they can increase their services to
in the international marketplace. This
businesses interested in pursuing export
upon which our successors
approach saves state dollars, increases
opportunities. The council is now study-
opportunities for companies, reduces
ing the feasibility of establishing a joint
demands on U.S. embassies abroad, and
office in Canada.
can build a brighter future."
increases the impact in overseas mar-
kets. States should increase their coop-
The Southeast Tourism Society is a
Governor William A. O'Neill
Connecticut
erative export promotion ventures.
recently developed pilot program for state
tourism promotion offices that focuses on
In Brussels, Tokyo, and other world
the needs of local tourism efforts within
commercial capitals, directors of state
Alabama, Florida, Georgia, Louisiana, Mis-
overseas offices should be asked to pro-
sissippi, North Carolina, Tennessee, and
pose cooperative projects. Joint market
Virginia. The society recently initiated an
research initiatives or reporting are pos-
international program.
sible activities. In addition, state offices
abroad should suggest ways to increase
New England USA is a nonprofit, pri-
the visibility of state export promotion
vate sector organization established to pro-
initiatives. Other possible options
mote the six New England states as a
include a stronger joint program to
region offering major vacation, recreation,
promote conferences with business and
and meeting destinations. Working in
government leaders or official affilia-
cooperation with state agencies and mem-
tion of the offices with the National
ber businesses, this organization serves as
Governors' Association or the U.S.
a clearinghouse for information about the
Department of Commerce.
region to vacationers and business travel-
ers both in the United States and abroad.
The Governors of Arkansas, Louisiana,
and Mississippi signed cooperative agree-
Identify and target opportunities inher-
ments in 1988 to promote economic devel-
ent in major changes to the interna-
opment and international trade as a way
tional trading system.
of improving the quality of life in the
three-state region. The International
The U.S.-Canada Free Trade Agree-
Cooperation Initiative calls for the three
ment. Europe 1992. Latin American
states to form working partnerships with
debt. The opening of China, and pos-
other countries in the areas of interna-
sibly the Soviet Union and Eastern
tional trade, industry, technology, com-
Europe. The growth of the Four Tigers
merce, culture, and tourism.
of East Asia and other newly industri-
alizing economies. These key changes
The Mid-South Trade Council, whose
to the international trading system
members are the international trade devel-
offer new opportunities for American
opment agencies of Alabama, Arkansas,
business.
Kentucky, Louisiana, Mississippi, Tennes-
see, and the World Trade Center in New
States can help businesses take advan-
Orleans, recognizes that by combining the
tage of opportunities by disseminating
products and services of an entire region,
accurate and timely information
32
obtained from the U.S. Departments
Personal contacts are an essential part
kets in the Soviet Far East. Oregon organ-
of State and Commerce, the state offices
of trade. Many states are still getting to
ized a trade mission there in 1987. Alaska
overseas, and representatives of other
know their potential trading partners
organized a trade mission in October 1988
governments.
around the world through sister state
that led to a sister state agreement with
relationships, trade missions, and over-
Khabarovsk, a territory north of Vladi-
The Connecticut World Trade Associa-
seas offices.
vostok. A number of Washington firms
tion is a private, nonprofit, membership-
already are selling products in the region.
based organization dedicated to educating
Ohio has located an office in Lagos,
Connecticut's businesses on the interna-
Nigeria, to begin linking Ohio businesses
Oklahoma identified India as a potential
tional marketplace. The association
with the largest market in Africa. This
user of its products. Largely supported by
recently sponsored a forum, where panel-
office also serves as a base for contact with
the private sector, Oklahoma's trade pro-
ists led discussions on Europe 1992. Also
other countries in the region.
gram with India includes swapping trade
planned are briefings on the Pacific Rim,
delegations and a joint venture with an
the Middle East, the Caribbean, Latin
To encourage increased participation in
Indian university community. To date,
America, and other regions.
overseas trade shows and trade missions,
Oklahoma has sold more than $300 mil-
Iowa provides financial assistance that reim-
lion in products to India.
Strengthen cultural and other exchanges,
burses some of the costs incurred by Iowa
especially with developing countries.
firms. The Export Trade Assistance Pro-
Coordinate a Governor-led trade mis-
gram covers up to 75 percent of expenses,
sion or exchange to a new market area,
A country with an import profile match-
or $5,000 per event. Results thus far have
either independently or with other
ing the state's exports may be enhanced
been impressive - 66 participants with
states.
by a sister state relationship. Or, com-
more than $20 million in sales.
mercial and cultural exchanges can be
Personal contacts between Governors
selected that reflect the state's ethnic
Several of the Pacific Northwest states
and senior government officials can be
make-up.
have undertaken activities to develop mar-
especially important to opening doors
in new market areas. In many cultures
of the developing world, personal and
cultural exchanges often precede
business ties.
States should work, perhaps collectively,
to develop relationships with new trad-
ing partners. This requires a long-term
commitment of time and resources.
Governors may find that the personal
contacts made in an initial trip are more
valuable in the long run than in the
first few months after they return.
Host foreign business people in the
states.
States can work with local businesses
to court foreign businesses more assid-
uously. This is particularly valuable in
following up state business participa-
33
tion in trade fairs and visits abroad. By
colleges and universities. Through plant
growing middle class. The Indian
hosting prime prospects back in the
visits and discussions with exporters
theater is a good place to promote
states, giving them "keys to the state,"
arranged by the state, students learn about
familiarity with U.S. consumer goods
and arranging visits to local businesses'
Iowa products and services available in
and services. Australia, Canada,
headquarters, states can help convert
the world market. Since the program's
England, France, Italy, Japan, Mexico,
initial contacts into customers and part-
inception, more than fifty-five Iowa
and the Soviet Union also have strong
ners. Such foreign business people often
manufacturers have benefited from the
motion picture industries and are
will come at their own expense and are
perspective of 225 foreign students from
important markets for American exports.
accustomed in their own cultures to
thirty-five countries.
the personal introductions state offi-
States should investigate market oppor-
cials can provide.
Identify and promote opportunities
tunities with third-country firms that
associated with foreign aid programs.
could use American products or ser-
Use alumni of local universities to help
vices. For example, Japanese-owned
open doors.
Foreign aid financial and technical-
hotels around the world often rely on
will continue to be important in the
supplies and hotel management ser-
More than 200,000 new international
developing world. States can do much
vices from the United States, especially
students come to the United States
to help local businesses land contracts
when the hotels cater to Western
yearly, largely to state secondary schools,
to supply products and services through
clientele.
colleges, and universities. For these stu-
U.S. and multilateral development assis-
dents, America becomes their classroom
tance programs. With state government
Conclusion
and state and local communities become
help, businesses and farmers could cap-
their temporary homes. Over the last
ture a larger share of the multilateral
"Business as usual" just is not enough
twenty-five years, more than 5 million
foreign assistance flowing from the
anymore. As the world gets smaller, state
foreign students have returned home
World Bank and the regional banks for
initiatives must become more far-reaching.
with direct exposure to American tastes,
Latin America, Asia, and Africa. This
The competition has gotten tougher, but
products, and ways of life. Many have
requires states to collect and dissemi-
American companies are in a good posi-
assumed influential positions in gov-
nate information to local businesses
tion as long as they act promptly.
ernment, business, or academia.
about multilateral contracting oppor-
tunities for products and services.
A statewide strategic trade plan, devel-
International student alumni of U.S.
oped at a Governor's behest, can help
schools, colleges, and universities can
Stimulate foreign demand for Ameri-
keep things moving.
open doors for visiting state officials
can products.
and business representatives. They are
A successful state trade strategy enables
active consumers interested in freer trade
Instead of just pushing U.S. products
everyone to work toward the goals of
and broader markets that will offer them
into foreign markets, states should work
making trade a top priority, expanding
access at competitive prices to prod-
on ways to encourage foreign countries
export activity at home, and targeting mar-
ucts they used in the United States.
to pull them in. There is a great demand
kets abroad. Each plan will be different,
Here, then, is an opportunity for state
for some American products in world
uniquely suited to a state's resources and
governments to work with their educa-
markets, particularly where American
needs.
tional systems to cultivate new trade,
culture is popular.
investment, business, and tourism ties
Governors should take immediate steps
through foreign students.
For example, state film offices could
to develop such a plan. The changing
encourage foreign filmmakers to use
international trading system, and our posi-
Businesses in Iowa gain a better under-
more locations in the United States in
tion in it, demand a strategic response.
standing of the international arena by meet-
their films. India has the largest movie
The challenges are real. The opportuni-
ing with foreign students attending Iowa
industry in the world and a large and
ties are great. The stakes are high. The
time is now.
34
Works Consulted
Works Consulted
Bonker, Don. America's Trade Crisis: The
National Governors' Association. States
Making of the U.S. Trade Deficit. Boston,
in the International Economy: A Report to the
Mass.: Houghton Mifflin Company, 1988.
77th Annual NGA Meeting. Washington,
D.C.: National Governors' Association,
Choate, Pat, and J.K. Linger. The High-
1985.
Flex Society: Shaping America's Economic
Future. New York: Alfred A. Knopf, 1986.
Office of the U.S. Trade Representative.
1987 National Trade Estimate Report on For-
Choate, Pat, and Juyne Linger. "Tailored
eign Trade Barriers. Washington, D.C.:
Trade: Dealing with the World As It Is."
Office of U.S. Trade Representative, U.S.
Harvard Business Review, vol. 66, no. 1
Department of Agriculture, U.S. Depart-
(January-February 1988).
ment of Commerce, 1987.
Coopers & Lybrand. 1989 Annual Report
Southern Growth Policies Board. The New
on the Worldwide Economic and Business Cli-
Southern Export Markets: Annual Meeting
mate. Washington, D.C.: Coopers &
Proceedings. Research Triangle Park, N.C.:
Lybrand, 1989.
Southern Growth Policies Board, 1988.
Congressional Research Service. The Euro-
U.S. Department of Commerce, Interna-
pean Community's 1992 Plan: An Overview
tional Trade Administration. United States
of the Proposed Single Market. Washing-
Trade Performance in 1987. Washington,
ton, D.C.: Congressional Research Ser-
D.C.: U.S. Department of Commerce,
vice, Sept. 21, 1988.
1988.
Council on Competitiveness. Competitive-
U.S. Department of Commerce, Interna-
ness Index. Washington, D.C.: Council on
tional Trade Administration. "U.S. Trade
Competitiveness, June 1988.
Outlook." Business America, April 25, 1988.
Kennedy, Paul. The Rise and Fall of the
U.S. Department of State. Atlas of United
Great Powers: Economic Change and Mili-
States Foreign Relations. Washington, D.C.:
tary Conflict from 1500 to 2000. New York:
U.S. Department of State, 1985.
Random House, 1987.
The World Bank. World Development Report
National Governors' Association. Making
1988. New York: Oxford University Press,
America Work: Jobs, Growth and Competi-
1988.
tiveness. Washington, D.C.: National Gov-
ernors' Association, 1987.
The World Bank. World Development Report
1987. New York: Oxford University Press,
National Governors' Association. New
1987.
Governors' Program Brief: International Trade.
Washington, D.C.: National Governors'
Association, 1989.
36
AMERICA IN TRANSITION
The International Frontier
Report of the Task Force
on Domestic Markets
The National Governors' Association,
founded in 1908 as the National Gover-
nors' Conference, is the instrument
through which the nation's Governors
NATIONAL
GOVERNO
ASSOCIATION
The association serves as a vehicle for
sharing knowledge of innovative program
among the states and provides technical
assistance and consultant services to
Governors on a wide range of managemer
and policy issues. The Center for Policy
Research serves the Governors by unde
taking demonstration projects and provid
ing anticipatory research on important
policy issues.
AMERICA IN TRANSITION
The International Frontier
Report of the Task Force
on Domestic Markets
Contents
Chairman's Overview
iv
Foreword
vi
The Challenge
2
The Context
6
Critical Issues
12
The State Role
18
State Action Agenda
20
Publication design by Wayne Pederson.
Photo credits:
Courtesy of FMC Corporation (cover, p. 26)
Courtesy of General Motors Corporation (p. 10)
Courtesy of Westinghouse Electric Corporation (p. 15)
Courtesy of Monsanto Company (p. 16)
Courtesy of GM Hughes Electronics Corporation (p. 22)
Courtesy of The Boeing Company (p. 25)
ISBN 1-55877-048-8
Copyright 1989 by the National Governors' Association,
444 North Capitol Street, Washington, D.C. 20001-1572.
All rights reserved.
Printed in the United States of America.
Chairman's Overview
Foreword
"Whether we welcome it or
not, our domestic market is
Chairman's Overview
now part of the global mar-
ket, and the central question
is whether our businesses
The world is growing smaller. Fiber optic
Twenty years ago, states were bystanders
and people will be able to
networks span the continents, linking
as international events changed the eco-
remote corners of the globe. Billions of
nomic landscape. That, too, has changed.
compete in those markets
dollars move in seconds from Milan to
Our boundaries are no longer the borders
Tokyo to New York. Goods move across
of our states, but every corner of the
successfully."
continents in a single day. An individual
globe. As Governors, we are challenged
product may contain parts manufactured
to confront this new reality.
Governor Gerald L. Baliles
in five different countries and be assem-
Virginia
bled in a sixth. New markets and oppor-
State government is well-positioned to
tunities emerge almost overnight. In this
meet the challenges of the next century.
highly competitive and rapidly changing
But we must begin preparing for this transi-
environment, success belongs to those
tion. Our agenda includes a six-point offen-
who most quickly anticipate, adapt, and
sive. Specifically, we must:
respond.
Discover new and emerging markets
The international frontier is no longer
abroad for American products, to
the future a new age has arrived. The
become again the Yankee traders we
evidence abounds. A common market in
once were.
Western Europe will be finalized in 1992.
The United States and Canada are on a
Bring an international perspective to
ten-year path toward free trade. World
our daily living- to understand foreign
output is shifting dramatically to Japan
nations and the people beyond our
and the Pacific Rim. By the beginning
borders
to learn the international
of the twenty-first century, the global
languages of business.
economic terrain will be one of large trad-
ing blocs, instead of individual countries,
Expand our research, and use our tech-
trying to maximize their growth through
nology, to create both new products
trade.
and new processes to maintain Ameri-
ca's competitive position.
As the global marketplace has emerged,
the United States' role as an economic
Capitalize on the natural advantages of
decisionmaker has changed. During the
American manufacturers and regain
1960s, when the U.S. economy was par-
competitiveness in our domestic
tially insulated from global influence, it
markets.
was possible to influence the economy by
then-traditional fiscal and monetary poli-
Improve our highways, airports, air-
cies. With the development of the Euro-
ways, and ports SO we can effectively
dollar market, foreign ownership of a large
move our people across town and our
portion of the federal debt, and huge
products around the globe.
increases in foreign trade, the economic
sovereignty once enjoyed by the United
Invest in the health, education, and
States has been reduced.
training of our children SO they can live
healthier and more productive lives.
This year, I have created six NGA task
forces to examine these issues that together
form the foundation for the nation's future:
iv
foreign markets, international education,
lower priced labor is not as important as
research and technology, domestic mar-
better trained labor. The availability of
kets, transportation infrastructure, and
capital financing for firms competing for
children.
domestic markets may depend increasingly
upon innovative brokering arrangements
This is the fifth of the six reports. It arose
undertaken by states. A commitment to
from a general concern that the proud
quality, innovation, productivity, and
tradition of the "Yankee trader" was slip-
flexibility are the marks of the new Yan-
ping unnoticed and unremarked into his-
kee traders. The states must enhance what
tory. America seemed to be losing its ability
the task force calls their "competitive
to sell to itself. While it is critical to Amer-
capacity" if these traders are going to
ica's economic future to remain competi-
compete effectively, especially in their own
tive in foreign markets, it is at the same
markets.
time essential that we do not irretrievably
lose a significant share of our own
The nation's Governors are continuing
markets.
their work, releasing recommendations on
topics ranging from how to finance our
As this report points out, when the Ameri-
aging infrastructure to how to help our
can marketplace was virtually the only
children live healthier and more produc-
game in town, it did not matter if capital
tive lives. Governors may not agree on
financing was expensive or if the domes-
every recommendation made in the
tic workforce was not the best trained. For
reports, but we have reached some clear
the most part, no domestic industry had
conclusions.
to concern itself with alternative sources
of financing or labor.
Together, these reports should serve as a
guide, outlining the steps Governors and
But as America has entered the global
their states can take to lead the nation
marketplace, the "domestic" labor pool
into the twenty-first century. a road map
has come to include the workers of Korea,
for an America in Transition.
Brazil, Italy, and Egypt, for example.
Financing can be secured from banks in
Japan, England, or West Germany as eas-
ily as it can from New York, Los Ange-
les, or St. Louis. So the domestic labor
Gerald L. Baliles
force and our working conditions must
Governor of Virginia
compare favorably with training and con-
Chairman, National Governors' Association
ditions around the world. If the cost of
capital is too high in Pittsburgh, Little
Rock, or Tacoma, local entrepreneurs may
find their firms bought out by banks in
Singapore or Amsterdam.
What the states must do to help domestic
companies retain and then retake a large
share of the American markets has
changed as the conditions of the market-
place have changed. Now, in many cases,
V
"The most effective way to
create competitive capacity
Foreword
is through investments
which improve the amount
and quality of the resources
America is now part of a global economy
same goods, using existing manufactur-
which businesses need to
SO pervasive that U.S. firms must compete
ing technology, at a fraction of the cost.
with the goods and services of foreign
Only by using the latest technology and
succeed."
nations even for its domestic marketplace.
skilled workers to create new products
The loss of 29 percent of domestic auto
or by improving the quality and low-
Governor James J. Blanchard
sales to imports, the nearly total domina-
ering the costs of existing products can
Michigan
tion of our consumer electronics market
a developed nation like the United
by foreign companies, and the growing
States reclaim old markets and build
penetration of foreign financial and real
new ones.
estate interests in the United States rep-
resents a direct challenge to our standard
The state strategies discussed in this report
of living. Indeed, calls for a coherent
center on the need for the United States
national strategy to counter this interna-
to be a high-tech, high-skill producer to
tional invasion of our domestic market-
create the areas of comparative advantage
place have become commonplace.
that can fuel a rising standard of living.
While the debate continues over how
Second, the recent experience of the
America can restore its position of world
states has demonstrated that our busi-
economic leadership, the nation's Gover-
nesses require a "competitive enter-
nors have acted. Confronted with factory
prise system" to succeed in an era of
closings and mounting economic disloca-
growing foreign competition. An enter-
tion and turbulence, Governors have
prise system includes the full set of
looked beyond political ideologies to find
factors or inputs that a business requires
new ways to compete successfully both at
to produce globally competitive goods
home and abroad.
and services. Available technologies,
productive capacities of the local
Over the past decade, the experiences of
workforce, access to competitively
the states, especially those with industries
priced capital, adequate public infra-
hardest hit by foreign competition, have
structure, and appropriate governmental
led to three broad conclusions on Amer-
regulations are key components of the
ican efforts to regain lost economic lead-
enterprise system.
ership and the role of government in such
efforts.
These factors of production mattered when
American industry dominated our domestic
First, in an international economy,
market, but they didn't affect market share.
industries in which we have a compara-
Then, industry did not have to be as con-
tive advantage are key to achieving a
cerned about these factors because the
rising standard of living. With new
principal competitors were American, and
transportation and communication tech-
all had to operate from the same enter-
nologies linking remote corners of the
prise system. The competitive playing field
world, nearly all goods and services can
was at least level.
be produced wherever in the world they
can be made best at the lowest cost. For
All that changed with the rapid interna-
the United States, this has meant the
tionalization of the economy during the
loss of markets both at home and
1980s. For the first time, the quality of the
abroad to nations that can produce the
enterprise system could alter a firm's com-
vi
petitive prospects. Indeed, if basic commu-
ment interference in markets must be
In summary, the United States is under
nity resources-workforce, technology, and
avoided, a laissez faire philosophy of
competitive duress in the new world econ-
capital-were sufficiently inferior to those
government robs the community of a
omy. Our businesses and people are
of competitors elsewhere in the world, a
valuable instrument that could organize
demanding a new set of resources and
firm might find itself out of the race.
the resources necessary for competitive
opportunities from the community so they
success. At the same time, a competitive
can survive and succeed in this new eco-
As a result, the economic strategies of
enterprise system is too expensive to be
nomic environment. This means new roles
Governors have focused on strengthening
"bought" and administered through the
for government seeking to respond to these
the elements of the enterprise system that
traditional government command of
demands.
are especially important to local indus-
resources.
tries. These initiatives will continue to be
These are the new realities and challenges
the cornerstone of state economic devel-
State economic initiatives highlighted in
Governors have struggled to meet over
opment strategies into the 1990s. What is
this report demonstrate that Governors
the past decade. Much has been learned
urgently needed now is a federal strategy
have moved to cast state government in a
and much more will have to be done if
to deal with the deficiencies in the Ameri-
new role as broker and catalyst. Instead of
America is to defend its domestic markets
can enterprise system that can best be
ignoring the lack of technology and
and its place as a world economic leader
addressed at the national level.
research capacities in their states or trying
in the decade ahead. This is a report on
to remedy the problem exclusively with
what we have learned. We hope it will
Third, the role of government in busi-
massive infusions of public funds, states
inform debate and policy development as
ness development has been changing
are trying to promote new relationships
the United States meets the challenges
as states have moved to ensure the exis-
between businesses and research universi-
of the new international frontier.
tence of an enterprise system that allows
ties. Instead of disregarding growing skill
companies and people to use new tech-
gaps that threaten the ability of local indus-
nologies and skills to compete. Instead,
tries to introduce new technology or trying
up until the last decade, when the con-
to remedy the problem with huge public
James blankard
tinental market was the nearly exclu-
subsidies to business to cover retraining
Governor James J. Blanchard, Michigan
sive domain of U.S. enterprises, political
costs, states are encouraging partnerships
Chairman, NGA Task Force on Domes-
debate focused on the size of govern-
among businesses, community colleges,
tic Markets
ment. Some argued for letting the mar-
and public schools to develop new curric-
kets work their magic with minimal
ula and teaching techniques to better pre-
Members of the Task Force
government interference. Others called
pare current and future workers. Instead
for a more active government role to
of accepting the lack of innovation capital
fill market gaps. In a domestic econ-
in many states or trying to remedy the
omy unchallenged by outsiders, both
problem by funding public agencies to
Schaefor
approaches could work if practiced in
make direct loans to high-risk business
Governor William Donald Schaefer,
moderation.
enterprises, states are trying to increase
Maryland
the flow of private capital into higher risk
However, in a world economy where busi-
niches by sharing risks and returns.
ness requires a competitive enterprise sys-
tem for success, and an individual's
Jan asharoft
economic security demands access to edu-
Governor John Ashcroft, Missouri
cation and skills, Governors have found
that neither of the traditional government
models quite fit. While excessive govern-
Governor Tommy Thompson, Wisconsin
vii
"For two decades, the 'Made
in America' label has been
vanishing as overseas
The Challenge
manufacturers dominate
entire industries."
Timothy Schellhardt and Carol
Hymowitz, The Wall Street Journal,
May 2, 1989
"While states cannot do
much to control the world
economy, they can do a great
The Challenge
deal to ensure that Ameri-
can firms are adaptable,
technologically innovative,
The United States has lost its competitive
Of every dollar they spend, Americans
edge. U.S. business has suffered a major
spend 27 cents on imports.
loss in market share at home as well as
and competitive with the
abroad. The enormous U.S. market is a
U.S. merchandise imports have soared
firms of any other nation."
major prize in a global economic contest,
from $257 billion in 1980 to $460 bil-
a prize that nations all over the world
lion in 1988 - a 179 percent increase.
strive to win. Too often uncompetitive
Governor John Ashcroft
Missouri
with our rivals in productivity, price, and
Foreign nations supply 29 percent of
sometimes even quality, U.S. business has
our automobiles and 95 percent of our
ceded much home ground to overseas
consumer electronic goods.
producers. The trend must be reversed.
Recapturing a significant share of the
Japanese and European firms supply 18
domestic market is a critical step to improv-
percent of U.S. banking and insurance
ing the long-term health of the U.S.
industry services.
economy.
The obvious success of foreign importers
U.S. consumers make up the world's larg-
raises basic questions about the competi-
est unified market. Valued at $5 trillion
tiveness of U.S. industry in U.S. markets.
annually, it is an attractive target for any
Notwithstanding the sharp drop in the
nation's exports. The developed and newly
value of the dollar, many foreign produc-
industrialized nations of the world have
ers are still marketing products at com-
taken aim at this bull's-eye, choosing export
petitive prices. Further, these same foreign
strategies that are widely varied and fre-
competitors often get new goods to mar-
quently successful. Consider the follow-
ket faster than U.S. firms, giving them an
ing statistics:
edge in the race for U.S. markets.
Figure
1
U.S. Exports and Imports as a Percentage of GNP,
1950-1986
Percentage of GNP in constant 1982 dollars
Exports
Imports
20
15
10
5
0
1950
1955
1960
1965
1970
1975
1980
1986
Source: Congressional Office of Technology Assessment,
Technology and the American Economic Transition: Choices
for the Future, p. 18.
2
The eroding domestic strength of U.S.
Productivity and investment in new tech-
The payoff could be dramatic. Between
business highlights several problems in
nologies and processes have been grow-
1982 and 1987 the import share of total
the relationship between business, gov-
ing slowly. As a result, U.S. products too
U.S. consumption (excluding oil) rose from
ernment, and labor. On the whole, U.S.
often fall behind imports in terms of quality
14 percent to about 27 percent. More than
business has been paying more attention
and cost. A shocking statistic dramatizes
5 million additional jobs would exist in
to short-term profits than long-term invest-
the problem. According to "The Push for
the United States today if import penetra-
ments. Not enough time or capital has
Quality," a 1987 report by Business Week
tion had been kept to the 1982 level.
been invested in increasing productivity
magazine, 25 percent of all labor expended
or improving design and quality. For its
in American factories goes to fixing mis-
Meeting this challenge requires a joint
part, the federal government has been
takes made earlier in the production pro-
partnership between government and the
slow to act on the budget deficit and to
cess. This reduces our efficiency compared
private sector. State government can and
invest more money in commercial appli-
to our competitors. The average Japanese
must play a critical role. States are
cations of research and technology or in
auto assembly plant turns out about half
uniquely situated to build "competitive
public investment. From 1980 to 1987, per
as many defects as do plants in either
capacity" by fostering a better educated
capita federal spending on education and
North America or Europe. Reorganizing
workforce, more responsive capital, and
training (in constant dollars) fell 42 per-
U.S. industrial processes to eliminate mis-
a strong program of applied research.
cent; on civilian research and develop-
takes would improve quality and reduce
These resources are the foundation for
ment, 30 percent; and on transportation
costs.
business efforts to increase productivity
systems, 17 percent. And according to the
and to improve the quality and design of
National Assessment of Educational Prog-
Our economy cannot prosper if we con-
goods and services. Restoring competitive-
ress, the skill level of new entrants to the
tinue to be overwhelmed by imports. A
ness to America's businesses, workers, and
American workforce has been declining.
key challenge is to regain a significant
communities requires more than managing
Too few Americans have the educational
share of our current markets while
exchange rates or negotiating trade agree-
and technical skills they need.
responding quickly to emerging markets.
ments. Although they are important, these
traditional tools must be linked to ground-
floor developments in schools and com-
rigure
2
Number of Jobs Foregone Because of Imports of
munity colleges, in research laboratories
Manufactured Products in 1984
and universities, and in financial insti-
In Thousands of Jobs
tutions and other community resources.
Natural Resources
Increasing competitive capacity means rais-
ing the quality of our educational system
Construction
to raise the skills of our workforce; mov-
Low-Wage Manufacturing
ing capital to firms and new goods to
market; and translating research into tech-
Medium-Wage Manufacturing
nology and technology into goods. In some
High-Wage Manufacturing
instances, such as improving basic educa-
tion, a state can act directly. In others,
Transport and Trade
such as encouraging the flow of risk capi-
tal or more commercial research at uni-
Transactions
versities, the state must create incentives
Personal Services
or opportunities for private action. But
Social Services
competitiveness must begin at the ground
level.
0
500
1000
1500
2000
2500
Source: Congressional Office of Technology Assessment,
The nation's Governors are keenly aware
Technology and the American Economic Transition: Choices
of the threat to state, regional, and
for the Future, p. 32.
3
"The U.S. trade deficit is
mostly a deficit in the trade
in manufactured goods. Of
the $161 billion current
account deficit in 1987, 85
Figure
3
percent was in manufactur-
Imports as a Percentage of Sales in the U.S.
for Selected Major Industries, 1972 and 1985
ing trade. The growing U.S.
1972
1985
service sector cannot gener-
40
ate sufficient trade to offset
35
continuing deficits in manu-
30
25
factured goods trade."
20
Congressional Office of Technology
15
Assessment, Paying the Bill: Manufac-
turing and America's Trade Deficit, 1988
10
5
0
Chemicals
Steel
Apparel
Autos
Appliances
Note: Appliances include domestic appliances, radios, and
TV sets.
Source: U.S. Department of Commerce. Reprinted from The
Technological Dimensions of International Competitiveness:
A Report to the Council of the National Academy of Engi-
neering, 1988, p. 17.
national economic prosperity. During the
such capacity. Harvard Professor Robert
past decade, many have used innovative
B. Reich notes that, "States have led the
approaches to economic development,
way in reforming basic education, devising
working hand in hand with state leaders
methods of retraining older and disadvan-
in business, labor, education, and local
taged workers, designing ways to finance
government to respond to economic
start-up businesses that may be too risky
opportunities and problems.
for venture capitalists but promise large
social returns, 'incubating' small business,
Promoting and nurturing economic
pushing technology out from research lab-
growth is an area where state and local
oratories, and creating a range of partner-
governments have experience and can con-
ships between public, private, and not-
tinue to make progress. In the 1990s, the
for-profit sectors aimed at stimulating local
primary economic challenge for states will
and regional economic development." The
be to develop the new competitive capac-
challenge is to more fully pursue these and
ity their businesses require and encourage
other new strategies to enhance the abil-
a more cooperative and interactive rela-
ity of U.S. businesses to compete and win
tionship between business and the public
the domestic market and markets beyond
and private resources that will generate
our borders.
4
"The governments of other
major industrialized coun-
tries place greater emphasis
on focusing R&D efforts in
areas believed to be impor-
The Context
tant to economic develop-
ment. One estimate suggests
that, at most, only about 10
percent of federal R&D is
relevant to the technical
needs of industry."
Council on Competitiveness, Picking
Up the Pace, 1988
"Our ability to compete
internationally faces unprec-
The Context
edented challenge from
abroad. Our world leader-
ship is at stake and SO is our
Large-scale international competition in
nesses from around the globe have taken
ability to provide for our
the U.S. domestic market became a fact of
aim at the U.S. market. Foreign businesses
life during the 1980s and will remain SO as
have taken advantage of opportunities and
people the standard of living
we approach the twenty-first century. In
amenities offered by the United States and
fact, 70 percent of all American-made
have shrewdly adapted their marketing
and opportunities to which
products now compete with imports. On
practices to maximize sales here. They
one hand, foreign producers target the
have learned our language, studied our
they aspire."
U.S. market because it is both attractive
habits, and conducted polls to identify
and accessible. On the other hand, slower
tastes and preferences. They have antici-
President's Commission of Industrial
U.S. productivity growth compared with
pated and adapted to change. As a result,
Competitiveness, Global Competition:
The New Reality, 1985
a number of our trading partners has
they have succeeded.
undermined our capacity to compete. At
the same time, international developments
International Competitors
ensure continued strong competition from
foreign firms in the years ahead.
To compete successfully, U.S. industry must
learn to adapt quickly to changes in the
Table
1
U.S. Merchandise Exports and Imports,
international sphere. Developments now
underway promise to significantly alter
1987
competition in our markets at home and
In millions of 1987 dollars
abroad.
Industry
Exports
Imports
Agricultural Products
$ 18,985
$ 16,033
In the years ahead, our traditional trading
Raw Materials
5,613
37,081
partners-Canada, Europe, and Japan-
Construction
0
0
Light Manufacturing I
13,281
58,887
will compete more fiercely for the U.S.
Light Manufacturing II
25,737
33,621
market. Recently, the United States and
Chemicals and Related Products
32,717
30,916
Canada signed a free trade agreement that
Machinery and Heavy Manufactures
72,324
103,062
phases out tariffs and many other trade
Electronics and Telecommunications
39,490
56,057
barriers over the next ten years. This will
Transportation Equipment
44,719
88,426
Total Manufacturing
228,268
370,968
promote and intensify competition between
Total
252,866
424,082
the two countries.
Note: Sum of entries may not equal totals due to rounding.
In 1992, the European Economic Com-
Source: Faye Duchin and Glenn-Marie Lange, Economic
munity (EEC) will become a single, uni-
Policy Institute, Trading Away Jobs: The Effects of the U.S.
fied market, removing many barriers that
Merchandise Trade Deficit on Employment, p. 16.
once existed among European countries.
The EEC will begin trading as a bloc and
The U.S. Market
facilitate the intra-European flow of capi-
tal and technology, making Europe an
With more than 200 million consumers,
even stronger competitor in the U.S. mar-
the United States is one of the largest uni-
ket. Japan is and will likely remain our
fied markets in the world. Our people
toughest competitor in the foreseeable
share a common language and enjoy mod-
future. The Japanese have become famous
ern and efficient transportation and
for their ability to quickly turn technolog-
communications systems, which facilitate
ical advances into profitable commodi-
the movement of goods to market. More-
ties and anticipate rather than react to
over, the nation is one of the world's most
affluent. It is small wonder, then, that busi-
6
4
Largest U.S. Trade Deficits by Country, 1987
In billions of dollars
Mexico
Italy
Hong Kong
South Korea
Canada
West Germany
Taiwan
Japan
0
10
20
30
40
50
60
Source: Congressional Office of Technology Assessment,
Paying the Bill: Manufacturing and America's Trade Deficit, p. 3.
changing consumer demands. For exam-
Raising Productivity
ple, they have emerged as strong competi-
tors in the field of supercomputers, an area
Imports from newly industrializing coun-
once dominated by the United States.
tries might not have as great an advantage
if U.S. productivity grew more quickly.
Newly industrializing countries (NICs) are
U.S. productivity is growing more slowly
driving their economies with exports and
than that of many of our competitors,
have emerged as new competitors for U.S.
reflecting to some extent a lower rate of
industry. The "Four Tigers" of Asia- -
capital investment and a declining skill
Hong Kong, Singapore, South Korea, and
level in the workforce. From 1977 to
Taiwan-have been particularly success-
1987, for example, Japanese productivity
ful with their strategy of producing high-
increased by more than 70 percent, while
quality, technologically advanced products
U.S. productivity increased 32 percent.
at low cost to gain a competitive advan-
tage in several industries. U.S. imports
Quality and New Product Development
from these and other NICs such as Bra-
zil, Malaysia, and Mexico have grown an
Quality and the ability to develop new,
average of 11 percent per year since 1960.
well-designed products are other areas in
Forecasts indicate an acceleration of this
which the United States is lagging behind
trend; U.S. imports from NICs may rep-
other countries. A recent Gallup poll
resent 29 percent of total imports in 1995,
showed that only 48 percent of consum-
up from 19 percent in 1988.
ers rate American-made products highly,
down from 51 percent three years ago.
Although 66 percent of the respondents
indicated they prefer American-made prod-
ucts, compared with 61 percent in the
7
Figure
5
Average Annual Increase in Manufacturing
Labor Productivityᵃ
Average percentage increase
1960-1973
1974-1979
1980-1988 (est.)
b
Japan
c
France
West Germany
Britain
United States
0
2
4
6
8
10
Notes: a. Private sector employment, including self-employed.
b. Figures are for 1966-1973. C. Figures are for 1964-1973.
Source: Organization for Economic Cooperation and Devel-
opment, 1989.
earlier survey, the increase reflected a rise
Quality and new product development
in the number of consumers who prefer
are both related to research and the con-
goods made in the United States by
tinued development of new technology.
foreign-owned firms. While American
New manufacturing processes are vital to
firms are devoting new attention to qual-
improved quality, which often depends on
ity, still more needs to be done.
adoption of new technologies. In addi-
tion, technology is a major factor in devel-
U.S. firms also have lost their advantage
oping new products, yet the U.S. lead in
in the design and introduction of new
research and development is declining,
goods and services. American consumers
contributing to a slower rate of innova-
are often attracted to foreign products
tion. A study by the Brookings Institution
because they offer more innovative and
underscored the need for expanding "mid-
functional design. Moreover, foreign firms
dle ground" research - research that applies
often are able to develop and market new
to commercial product development.
products more quickly than their Ameri-
can competitors.
8
Figure
6
U.S. Share of Technology Markets, 1970-1987
Percentage of U.S. companies' share of domestic American market
Phonographs
Black and White TVs
Color TVs
Audio Tape Recorders
Videocassette Recorders
Automated Machining Centersᵃ
Telephone Sets
100
90
80
70
60
50
/
40
30
20
10
0
1970
1975
1980
1987
Note: a. Figures for 1970 and 1975 are estimates.
Source: Council on Competitiveness, Picking Up the Pace:
The Commercial Challenge to American Innovation, p. 15.
Although government in the United States
continues to invest heavily in research on
defense, health, and space exploration, the
U.S. share of total investment in research
is declining. Equally important, while the
development and application of new com-
mercial technologies in the United States
have traditionally been left to the private
sector, the governments of other indus-
trial nations often are playing an impor-
tant role in the commercial application of
technology.
As long as America lags behind its com-
petitors in productivity growth, workforce
skills, and the application of technology, it
will continue to lose ground in the domes-
tic market.
9
"Comparative economic
advantage has taken on new
meaning. It means human
creative power, a highly ed-
ucated workforce, organi-
zational talent, the ability
to adapt. Moreover, these
attributes are not conceived
of as natural endowments
but as qualities achieved
through public policies such
THE TODAY'S
as education, organized
research, and investment in
social overhead capital."
David Osborne, Laboratories of
Democracy, 1988
"The prime source of the
U.S. economy is neither its
Critical Issues
great stock of money, plant,
equipment, and technology
nor its abundant natural
resources and rich cropland.
Rather, it is the knowledge,
skills, wisdom, enthusiasm,
and versatility of the
American people."
Pat Choate, The High-Flex Society, 1986
"Whether it is building
stronger educational
Critical Issues
systems, developing tech-
nological innovations, or
responding to changes in
the workplace, we must
The happy marriage between U.S. con-
manufacture and movement of goods. Fed-
sumers and imported products may enjoy
eral transportation revenues must be used
never forget that helping
an extended honeymoon. A combination
now to repair the nation's decaying infra-
of factors, including increased worker pro-
structure. Moreover, federal support for
people is our highest
ductivity and the rapid application of new
research and development provides a foun-
technologies, contribute to the attraction
dation for complementary efforts at the
priority."
of Americans to foreign goods and services.
state level. This support must be main-
It is likely that foreign governments and
tained and focused better for research and
businesses will continue to devote time
development programs to grow and be
Governor William Donald Schaefer
Maryland
and resources to maintain and expand
more closely linked to the needs of
their share of the lucrative U.S. market.
business.
U.S. industry, in contrast, faces the task
of wooing back a once-captive market.
The Capacity to Compete
For the U.S. economy to grow and remain
While the national government will con-
strong, it is vital that our businesses reverse
tinue to play a critical role in encouraging
recent trends and regain a larger segment
and assisting economic development, states
of our own markets. To do so, govern-
must be prepared to play a new and more
ment and the private sector must work
aggressive role in addressing the factors
together to increase our competitive
that enhance actual capacity to compete.
capacity.
Building competitive capacity requires
states to address four important issues-
National and International Concerns
technology, the workforce, capital, and gov-
ernment services.
A number of critical issues must be
addressed. At the international level, the
Technology Development and Application
federal government must ensure that
foreign businesses compete in the U.S.
The pace and productivity of applied
market on a level playing field. Trade
research devoted to the development of
agreements must be designed SO foreign
new technologies with commercial appli-
governments are not allowed to subsidize
cations must be increased. Such efforts
the production of goods for U.S. markets.
are crucial not only in markets still dom-
Maintaining economic stability, favorable
inated by U.S. products, but also in mar-
exchange rates, and an environment con-
kets such as consumer electronics where
ducive to competition is the province of
American firms have largely been sup-
the federal government. Developing com-
planted by foreign competition. New
petitive capacity in the United States
technologies create new markets and pro-
depends, in part, on efforts to address the
vide an opportunity to improve the design
budget deficit and establish a fiscal and
and efficiency of existing products. The
monetary policy that discourages infla-
United States cannot afford to concede
tion and maintains reasonable interest rates.
future development in any area of con-
sumer demand.
The federal government must ensure con-
tinued investment in human and capital
In the short term, public universities must
infrastructure as well as federal support
be encouraged to give a higher priority to
for research and technology. A sound trans-
applied research and to strengthen the
portation system is vital for the efficient
ties between business and research uni-
12
Figure
7
Number of Employees Engaged in
versities. The rapid dissemination of new
Research and Development, 1987
technologies must be encouraged and new
Number of employees
mechanisms must be established to encour-
age closer ties between academic research
16000
and product and process development.
14000
In the longer term, the supply of engi-
12000
neers, mathematicians, and scientists who
10000
will devote their careers to applied research
8000
must be increased, and the pool of
researchers who are fluent in foreign lan-
6000
guages must be expanded and encouraged
4000
to participate in international research.
2000
Nippon Steel Corporation
0
Stronger Workforce Skills
U.S. Steel Industry
Japanese Steel Industry
The quality of the U.S. workforce must
be improved if American business is to
Note: Employees include managers, professionals, and tech-
improve quality and productivity. Too many
nical and support staff.
American workers are deficient in basic
Sources: U.S. Steel Corporation and Japan Steel Information
literacy and computational skills. Twenty
Center.
percent of the entire American workforce
may be functionally illiterate, compared
with only 1 percent of Japanese workers.
Current trends do not bode well for the
Figure
8
Total R&D Spending as a
future. Too many young people are drop-
Percentage of GNP
ping out of school or graduating without
Percentage
the skills needed for increasingly complex
entry-level jobs. The National Assessment
of Educational Progress estimates that 43
3.0
percent of Americans between the ages of
United States
2.5
United Kingdom
twenty-one and twenty-five are unsuited
to high-technology occupations because
of their inability to master directions, com-
2.0
France
municate ideas, or calculate at a level
1.5
Japan
sophisticated enough to perform well in
these areas.
West Germany
1.0
Rapid changes in the international mar-
.5
ket and in technology require a flexible
workforce that can be retrained quickly to
0
meet emerging demands. The increasing
1962 '63 '64 '65 '66 '67 '68 '69 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87
productivity of our international compet-
itors also means we need to establish a
cadre of skilled managers who can develop
Source: National Science Foundation, Science Indicators.
new approaches to designing and manag-
ing work in U.S. businesses.
13
Figure
9
Nondefense R&D Spending as a
The history of the United States as an
Percentage of GNP
industrial nation typically is written from
the two alternative perspectives of man-
Percentage
agement and labor. Today the line between
3.0
the two is less distinct, and the need for
Japan
partnership is becoming clearer. As New
York's Cuomo Commission on Trade and
2.5
West Germany
Competitiveness noted, "The way Ameri-
cans work is changing, and none too soon.
In many workplaces, the hierarchy, chain
2.0
United States
of command, and division of labor have
been replaced by a more collaborative
approach. Experiments in new ways of
1.5
United Kingdom
organizing work, both manufacturing and
France
services, have blurred the lines between
the managers, supervisors, workers, unions,
1.0
and shareholders."
Efforts to improve the workforce will need
.5
to proceed simultaneously on several lev-
els to increase cooperation between labor
and management, improve management
0
1972
'73
74
'75
'76
'77
'78
'79
'80
'81
'82
'83
'84
'85
'86
'87
training, and encourage participatory man-
agement. Building a stronger workforce
means teaching people both basic and man-
Note: Figures reflect national R&D expenditures, excluding
Source: National Science Foundation, Science Indicators.
agerial skills. Training programs must be
government funds for defense.
able to adjust rapidly to the emerging
Figure
Level of Education Required:
needs of employers. Their success can be
Current Jobs vs. New Jobs
measured through the assessment of
worker skills.
Current Jobs
New Jobs
More cooperation between management
and labor is needed. As production pro-
Less than 8 Years
cesses become more varied and complex,
workers need to act as managers at the
1-3 Years of High School
most basic level, making decisions that
affect quality and productivity on a daily
and hourly basis. New approaches to man-
4 Years of High School
agement training would foster both the
flexibility and the teamwork required to
1-3 Years of College
improve quality. Training workers and
offering them incentives to assume greater
responsibility for the finished product
4 Years of College
would maximize productivity.
Percentage 0
5
10
15
20
25
30
35
40
Source: U.S. Department of Labor, Workforce 2000: Work
and Workers for the 21st Century, June 1987.
14
Moreover, as the growth in the workforce
dures must be simplified. And state
of research and technology; and make
slows, a larger portion of the population
regulations concerning quality and con-
capital more readily available. Finally, gov-
will be called on to participate more fully
sumer safety should be examined to reduce
ernment regulations and services must have
in the job market. School dropouts, moth-
inadvertent barriers to the interstate flow
the flexibility to help U.S. firms produce
ers on welfare, and other discouraged job
of goods and services.
more marketable goods and services.
seekers must be given an opportunity to
receive the basic education and skills train-
Too often small firms are unable to make
ing that will make them attractive and
the investment needed to analyze imports
productive employees.
or to identify local markets for compo-
nents or assembly services. Without such
Improved Access to Capital
information, important business opportu-
nities may continue to be lost to foreign
U.S. firms will need capital to invest in
firms. States can take a more aggressive
the modernization of production facilities
role in brokering information and ser-
and the rapid introduction of new prod-
vices designed to identify market oppor-
ucts and services. Increasingly, the demands
tunities for domestic firms.
of international competition require the
modification of production capacity to
Streamlining government assistance can
develop more individualized products. Sim-
help increase the state's competitive capac-
ilarly emerging technologies, such as fiber
ity. When government services are frag-
optics, require a substantial investment in
mented or spread across many agencies,
new forms of infrastructure.
businesses have to work harder just to
make use of what is available. By ensuring
Although large businesses will continue
effective coordination at the state level,
to play a vital role in the growth of the
states open the way to smaller firms seek-
U.S. economy, small and newly developed
ing to obtain training, capital, and other
businesses often are the incubators of new
services, making them more efficient
products, processes, and services. The avail-
producers.
ability of capital is critical to the contin-
ued development and expansion of these
In summary, the U.S. market will con-
small or emerging businesses. Steps must
tinue to attract strong competition from
be taken to increase the flexibility of the
foreign businesses throughout the world.
capital market and to encourage new
Success will belong to those firms that
investment in higher risk enterprises.
produce high quality products at compet-
itive prices and take the lead in develop-
More Effective Government Services
ing new products and services.
U.S. firms need a supportive government
To regain and retain a larger share of the
environment to facilitate necessary regu-
domestic market, business and govern-
latory compliance and to provide access
ment must work together to establish a
to services not readily available to individ-
stable economic climate and increase the
ual firms. Where possible, complex busi-
competitive capacity of the resources avail-
ness regulations and permit requirements
able to U.S. producers. Public/private part-
must be streamlined and made more flex-
nerships must be developed to provide
ible. For example, state laws that affect
well-trained and flexible workers; ensure
interstate trucking must be better coordi-
a more effective process for the develop-
nated, and costly administrative proce-
ment, commercialization, and application
15
"Capital investment is criti-
cal to productivity, but so is
investment in people."
Business Roundtable on International
Competitiveness, American Excellence
in a World Economy, 1987
The State Role
State Action Agenda
"The cooperation among
government, business, labor,
The State Role
universities, and community
groups that can influence
economic growth in many
Much of what occurs in the domestic
cases is best undertaken at
aged partnerships between universities
market is determined at the federal level.
and businesses. Perhaps most important,
the state level."
For example, trade policy and the value of
states are serving as conduits for dispers-
the dollar are federal responsibilities. But
ing technologies among businesses, par-
states also have a large role to play in
ticularly to small entrepreneurs. Roughly
R. Scott Fosler, The New Economic
Role of American States, 1988
helping business recapture home territory.
half the states have created programs to
State and local governments directly
link academic research with entrepreneurial
provide or influence a wide variety of ser-
efforts.
vices that are critical to business efforts
to increase productivity and quality.
To fill gaps in capital markets, some states
have changed their regulations to encour-
Laying the physical foundation for eco-
age banks to take moderate investment
nomic success-highways, railroads,
risks. Others have authorized the creation
utilities- traditionally the responsibil-
of new private financial institutions that
ity of government in the United States.
specialize in lending to small and medium-
When America's economic dominance was
sized businesses. Incentives to banks for
unchallenged, governments could focus
small-business lending and partial state
on physical infrastructure for commerce.
funding for private venture capital firms
Now, however, governments must focus
are among the strategies employed.
on providing an even broader foundation-
Between 1983 and 1984, about thirty-one
one that includes a better educated
new public development funds were cre-
workforce, more flexible capital, and a
ated by state governments.
broader base of applied research. Most
states are already active in these areas. But
States have the lion's share of responsibil-
it is now necessary to recast and reorient
ity for developing the labor force. In addi-
traditional programs to focus on creating
tion to funding education in public schools,
competitive capacity.
state and local governments provide tech-
nical training through vocational schools
To help American business develop greater
and professional education through state
capacity to produce well-designed, high-
universities. They maintain job banks to
quality, low-cost goods without sacrific-
match workers with potential employers
ing worker income or well-being, many
and compensation systems for displaced
states have adopted a strategy of economic
workers.
activism. They are taking a more aggres-
sive approach to building technology,
State governments are entering a new era
capital, and skills, and are creating new
in which success in creating competitive
avenues of assistance to business. States
capacity is vital for business efforts to
have begun to focus on processes such as
recapture and retain important markets,
technological innovation, capital and busi-
both domestically and internationally. In
ness formation, commercialization of
essence, the state strategies outlined above
research, and adoption of new manufac-
build competitive capacity in the develop-
turing technologies.
ment and application of technologies, capi-
tal markets, and workforce skills-the keys
In the area of technology, states have begun
to winning back the domestic market.
to augment federal and private research
development efforts with state-funded
research in universities. Many have encour-
18
11
Number of States Supporting Science &
Technology Initiatives, Fiscal 1988
Technology Office/
Board/Commission
Technology/Managerial
Assistance
Technology/Research
Centers
Technology Transfer
Research Grants
Incubators
Research Parks
Venture Capital
Seed Capital
Technical Training
Equity/Royalty
Programs
0
5
10
15
20
25
30
35
40
Source: Minnesota Department of Trade and Economic
Development, State Technology Programs in the United
States, 1988.
"We must create a climate
in which our firms can more
State Action Agenda
easily adopt new manufac-
turing technologies and
more rapidly move innova-
A strategy to regain and retain a larger
They also must move new products to
tions into the marketplace."
share of the U.S. market for domestic
market more quickly. States can create a
producers requires action on numerous
research climate and capacity that encour-
Governor Tommy Thompson
fronts. Both the federal government and
ages and helps firms to stay on the cutting
Wisconsin
the states have roles to play. At the federal
edge of emerging technologies.
level, care must be taken to secure and
maintain equitable trading terms. Trade
OBJECTIVE: Expand the capacity for
agreements must ensure that foreign pro-
applied research and development.
ducers do not unfairly subsidize the pro-
duction of goods for the U.S. market.
American businesses that have competed
Foreign-made and domestic goods must
most successfully in domestic and world
be subject to the same quality and safety
markets often attribute their success to
standards. These measures will ensure that
having stayed at the leading edge of tech-
U.S. firms are not placed at unfair disad-
nology. Future success demands that the
vantage either here or abroad.
United States continue to develop and
encourage applied research that results in
Moreover, the federal government must
new products, services, and markets.
ensure a stable economic environment.
Business development requires a fiscal and
States can:
monetary climate that encourages invest-
ment and reduces excessive interest, infla-
Be a catalyst for new kinds of relation-
tion, and fluctuation in the value of the
ships between universities and the pri-
dollar.
vate sector.
The states, for their part, are prepared to
For example, states can fund additional
develop a new partnership with the pri-
research centers, encourage state research
vate sector that enhances our capacity to
institutions to establish consortia with the
compete - to create the foundation that
federal government and the private sector
will enable U.S. businesses to develop and
to fund applied research, or offer tax
produce attractive, high-quality products
incentives or matching grants for joint
at reasonable cost and in response to the
research projects. In 1984, Virginia
needs and preferences of the American
established the Center for Innovative
market. This "competitive capacity"
Technology (CIT), a private, nonprofit
consists of four elements: technology
corporation created by the General
development and application, stronger
Assembly. The CIT invests in high-quality
workforce skills, improved access to capital,
research with market potential at state col-
and more effective government services.
leges and universities, assists in commer-
cializing that research, and aids in the
Technology Development and Application
creation and support of technology firms
through its four research institutes and
Both the manufacturing and service indus-
seven technology development centers.
tries are being revolutionized by techno-
logical advances, and the pace of such
Michigan has established a Research Excel-
change is quickening. To be fully compet-
lence Fund, a competitive grant program
itive, many U.S. firms must be more tech-
that awards research funds to the state's
nologically innovative and quicker to adopt
universities. Awards are made annually by
new manufacturing and business practices.
the state in an application process that
20
identifies the university's long-term strat-
investment and job creation in advanced
The state of Minnesota has created a public
egy in specific technology areas and its
technology businesses. State funds match
corporation, the Greater Minnesota Cor-
plan to meet technical and economic devel-
private sector money in funding research
poration, to promote jobs and economic
opment benchmarks for the coming year.
projects.
growth through applied research, tech-
Benchmarks include external funding,
nology transfer, and product development.
technical milestones, progress in the com-
In Oklahoma, the Most Eminent Schol-
The corporation will finance applied
mercialization of research, and problem
ars Program provides challenge funding
research in partnership with private busi-
solving with business.
to help organizations raise funds for basic
nesses, colleges, and universities; establish
and applied research. Available to colleges
regional research institutes; and make direct
Wisconsin has established the Technol-
and universities, it provides two dollars
investments in new products and
ogy Development Fund to finance tech-
for every dollar of interest income on
enterprises.
nical research. The program provides
endowments and provides five-year awards
grants to consortia of businesses and higher
with a minimum of $50,000 per year.
In New Jersey, the Innovation Partner-
education institutions embarking on
ship Grants Program has been designed
research and product development that
The Ohio Board of Regents administers
to encourage academic researchers and
will provide economic benefits for the
five programs designed to expand the state's
industry to work together on immediate
state. Since 1984 the program has awarded
pool of talent in advanced technological
and specific industrial problems. Colleges
nearly $7 million to approximately fifty
fields. These include an Eminent Schol-
and universities and their faculty are eligi-
consortia, leveraging more than $18 mil-
ars Program that has established endowed
ble to receive the awards, which range
lion in private investment and creating
chairs; one-time enrichment grants for
from $25,000 to $250,000. In 1988, twenty-
more than 5,300 jobs in the process.
undergraduate programs in technological
five projects were sponsored.
sciences; Productivity Improvement Chal-
The Engineering Research Center (ERC)
lenge grants aimed at recruiting more stu-
Institutions of higher education in Texas
at the University of Maryland encourages
dents into science and technology; and
have access to two programs run by the
cooperative efforts between industry and
two grant programs designed to improve
Higher Education Coordinating Board.
University of Maryland researchers. ERC's
research capacity at Ohio's colleges and
The advanced research program is
programs-which include the provision
universities.
designed to develop basic research capa-
of on-site technical assistance, matching
bilities, while the advanced technology pro-
grants for joint research projects, and the
OBJECTIVE: Encourage technological
gram encourages applied research projects
operation of an incubator facility-help
innovation.
that have a potential for commercializa-
industry gain access to the expertise and
tion. Proposals are reviewed by external
research facilities needed to remain
Several studies have described the rela-
experts, and support is awarded on a com-
competitive.
tionship between centers of technological
petitive basis.
excellence and competitive business. Such
Increase the supply of research scien-
centers are often the engines that drive
Allow research scientists and engineers
tists and engineers available to business
economic development, job creation, and
at state institutions leeway to indulge
by expanding research and engineering
successful competition in state and regional
in a certain amount of experimentation
faculties, expanding graduate programs,
economies.
to explore new avenues of inquiry.
and establishing incentives to retain
highly competent faculty.
States can:
Provide support services for techno-
logical innovators and entrepreneurs.
Missouri's Higher Education Applied Pro-
Establish grant programs to award
jects (HEAP) program provides funding
research funds on a competitive basis
In Illinois, a statewide electronic network
for challenge grants to state colleges and
to those innovative projects that have
directory provides the names, addresses,
universities for research and applied
commercial potential.
research activities, and educational back-
projects expected to stimulate private
grounds of registered faculty, scientists,
21
and engineers. The Illinois Resource Net-
Ohio's Technology Transfer Organization
work enables business, industry, and gov-
provides Ohio businesses with direct access
ernment officials to tap the expertise of
to new technology and research through
approximately 6,000 people from more
a statewide network of technology trans-
than thirteen universities and state-based
fer agents based at two-year colleges.
national laboratories.
Create or encourage the creation of
OBJECTIVE: Assist in the transfer of
flexible manufacturing centers, which
research technology to firms producing
provide a single location for manufac-
goods and services.
turing different products, depending on
market needs, using state-of-the-art
A critical element in competitiveness is
processes.
the ability to quickly translate new research
into goods and services that will meet a
OBJECTIVE: Encourage the use of tech-
consumer need. Too often U.S. competitors
nology to improve the design and quality
take advantage of technological inno-
of American products.
vations and develop and market new prod-
ucts before U.S. firms are able to do SO.
The use of technology can significantly
affect the design and quality of manu-
States can:
factured goods and services. The best
technology must be used to produce high-
Encourage the development of tech-
quality, low-cost goods for domestic and
Create Governors' awards for excel-
nology incubator facilities.
international markets.
lence in design and manufacturing to
help raise the visibility and importance
Iowa's state incubator programs provide
States can:
of these issues.
business consulting, information on man-
agement techniques, computer facilities,
Encourage the development and use of
In Connecticut, a private group has insti-
and direct access to the expertise of uni-
computer-assisted design and computer-
tuted the Connecticut Quality Improve-
versity researchers.
assisted manufacturing facilities.
ment Award. Modeled after the Malcolm
Baldridge Award, the award recognizes
Link businesses with specific needs to
Use technology extension and other
excellence in service and manufacturing
state research-oriented institutions.
programs to make computer-assisted
firms doing business in the state.
services available to smaller businesses
Pennsylvania helps firms remain stable
and entrepreneurs who might not oth-
Stronger Workforce Skills
and competitive through the Pennsyl-
erwise have opportunities for computer-
vania Technical Assistance Program
assisted design and manufacturing.
If America's competitiveness lies in the
(PENNTAP). Available to any state busi-
better use of technology, it is imperative
ness, industry, municipality, or govern-
In Kentucky, the Bluegrass State Skills
that its workforce-including its mana-
ment agency, PENNTAP services help
Corporation provides assistance to the
gers be highly skilled and adaptable. As
business and industry overcome opera-
industrial technology departments of two
the quality of the primary factors of
tional setbacks due to engineering, scien-
universities to improve their curricula and
production-technology and labor-
tific, and technical problems.
to help industries in such areas as robot-
increase, so does productivity. As product
ics, computer-assisted design or manu-
quality increases, the costs will decrease.
Establish technical assistance, "business
facturing, and flexible manufacturing.
Also, computer-assisted design, automated
extension" services, and facilitator
processing, and flexible manufacturing
organizations to help firms identify and
use appropriate technology.
22
require greater literacy, mathematical skills,
at risk of dropping out of high school
The skills required in the workforce are
and computer skills than more traditional
skills remediation, work experience, moti-
changing rapidly. Men and women who
methods.
vation and leadership development, sup-
are currently in the workforce can expect
port systems, and transition to work or
to change jobs several times during their
OBJECTIVE: Improve literacy, quanti-
school activities. This program has served
careers. For most employees, each change
tative ability, and computer skills.
more than 2,500 students this past year
will demand new training and new skills.
and will expand to more than 4,500 stu-
In addition, as new management tech-
The first step to improving productivity
dents in the next academic year.
niques are developed, it is likely that man-
is to ensure that U.S. workers have the
agers and workers will also need training
necessary skills. The United States trails
Ensure that vocational programs pre-
in team building and other skills designed
its major competitors in scientific literacy,
pare workers who are well-educated,
to encourage independent work.
mathematics, and computer skills.
have the ability to reason and adapt,
and are trained to perform specific work
States can:
States can:
tasks.
Use state resources to better target and
Raise achievement in math, science, and
West Virginia has developed new enroll-
leverage private sector training programs
computer skills at all levels of educa-
ment and placement criteria for vocational
responsive to market needs.
tion.
education and has instituted a system to
certify that competency has been attained.
For example, the Bay State Skills Corpora-
States are well-positioned to influence the
tion in Massachusetts provides grants-in-
educational establishment to increase stan-
Develop targeted programs to address
aid to education and training institutions,
dards for these critical skills and to adopt
the remedial needs of school dropouts
matched by private sector support, to fund
other approaches, such as increasing the
and special populations such as young
skill training programs in growth
amount of time spent in school by length-
mothers on welfare.
occupations.
ening either the school day or the school
year.
Virginia established the Reducing Depen-
Target training resources to firms with
dency Through Training Program to offer
a potential for increased growth.
Develop community-based programs to
assessment, education, occupational skills
encourage adult literacy.
training, employability development, job
In Hawaii, the Aloha State Specialized
development, and supportive services to
Training Program (ASSET) is available to
Virginia has launched the Virginia Liter-
welfare recipients. The program is tar-
new and expanding businesses, particu-
acy Initiative, which utilizes regional liter-
geted at preventing the long-term welfare
larly those in high technology and growth
acy coordinating committees and the
dependency of teen mothers and enhanc-
industries.
Virginia Literacy Foundation to offer
ing the self-sufficiency of other long-term
grants and services to other community
welfare recipients.
Maryland is beginning a program called
agencies and organizations. The initiative
Partnership for Workforce Quality coor-
is aimed at improving adult literacy in the
In Missouri, four state agencies cooperate
dinated by its Department of Economic
state.
in the LearnFare Program for recipients
and Employment Development. The pro-
of Aid to Families with Dependent Chil-
gram offers assistance to business in the
Expand efforts to retain potential school
dren. The program provides educational
evaluation of training needs, the design of
dropouts in elementary and secondary
opportunities for General Educational
an appropriate curriculum, and the deliv-
school programs.
Development (GED), adult basic educa-
ery of training. The program also offers
tion, skill training, on-the-job training,
grants of up to 50 percent of the cost of
The Maryland Tomorrow program is a
and counseling.
training, which may be given to the busi-
partnership of the private industry coun-
ness or directly to the training institution.
cils and the local education agencies. The
OBJECTIVE: Assist in the development
goal of the program is to provide students
of new job skills by workers and managers.
23
Wisconsin has established the Customized
having to add new jobs. The program
Improved Access to Capital
Labor Training Fund to meet the critical
annually receives approximately $6 million
manpower needs of specific businesses
in state funds to carry out its training
Capital will not always be available where
when the training is not available through
activities.
it is most needed. Many new and small
existing federal, state, and local resources.
businesses have difficulty attracting the
The focus is on upgrading labor skills in
OBJECTIVE: Develop educational pro-
capital they need to get started, to adopt
new technologies. The goal of the fund is
grams with economic linkages.
modern manufacturing techniques, or to
to stimulate the expansion of existing busi-
move new products to market competi-
ness, to attract and create new businesses,
As the labor supply tightens and the num-
tively. States can respond with a variety of
and to retool Wisconsin's industrial base
ber of unskilled jobs continues to decline,
strategies to increase the supply of capital
by introducing new products and processes.
it is critical that educational programs be
and help target that capital to fill these
more directly tied to the needs of busi-
gaps.
Develop new approaches to training
ness. State and local programs should
designed to develop the skills needed
respond to emerging needs on a timely
OBJECTIVE: Identify specific business
for more independent work.
basis.
finance needs in the state economy.
In Arkansas, the Industrial Coordinator
States can:
Concentrating capital in large institutions
program provides customized training pro-
with rigid policies constrains the availabil-
grams specially developed for the needs
Improve the accuracy and availability
ity of capital to smaller, riskier businesses.
of state business and industry.
of labor market statistics.
Many business investment opportunities
fall between the low-risk investments pre-
Establish business assistance centers to
Many states now operate sophisticated,
ferred by banks and the higher return
provide technical and managerial assis-
computerized data banks that can rapidly
investments called for by venture capital-
tance to entrepreneurs and small firms.
match an applicant's skills, education, and
ists. The result is the loss of many sound
experience with the specific needs of
opportunities for business development
North Dakota established its Center for
employers.
and technological advancement in the
Innovation and Business Development to
domestic market.
assist entrepreneurs, small manufacturers,
Develop assessment models that meas-
and investors in bringing new products to
ure outcomes relevant to the needs and
States can:
market or in starting new firms. Univer-
requirements of potential employers.
sity resources are utilized to provide assis-
Identify specific start-up and seed capi-
tance with patent applications, product
In Michigan, the Governor's Commis-
tal needs in the state to better under-
testing, and development of business plans.
sion on Jobs and Economic Development
stand the nature and magnitude of these
designed an employability skills profile-a
needs.
Target retraining resources to firms
composite of the worker needed to meet
applying new technology to the manu-
the challenges of the changing Michigan
The Michigan Strategic Fund, a state
facturing process.
workplace as the first step in assessing
agency guided by a private sector board,
the state's job training and adult training
was established to increase the availability
Missouri has established the Missouri Cus-
programs.
of primary financing for emerging small
tomized Training Program to provide
businesses and entrepreneurs using state
funding for the retraining of existing work-
Require the development of substate
resources. The fund has pioneered the
ers made necessary by the application of
training plans in consultation with
creation of a new financial services indus-
new technology to the manufacturing pro-
expanding or developing firms.
try through its seed capital program, which
cess. This provides workers with new train-
provides up to $2 million when matched
ing and new skills and companies with an
with at least $1 million in private equity
improved productive capability, without
for financing business development costs.
24
Identify the specific needs of estab-
States can:
lished businesses for moderate- and
higher risk capital too risky for bank
Serve as the lead investor to encourage
lending, but without the promise of
the development of institutions that pro-
returns high enough to satisfy venture
vide seed or start-up capital to projects
capital firms.
meeting market tests for risk and
profitability.
Colorado has created nineteen small busi-
ness assistance centers throughout the state
The Michigan Business and Industrial
that work to improve access to capital for
Development Company Investment Pro-
small businesses. These centers pay spe-
gram makes equity investments of up to
cial attention to the needs of businesses
$2 million in each Business and Industrial
owned by women and minorities.
Development Company (BIDCO) a new
class of private financial institutions. It is
Identify distressed communities or other
estimated that the $10.25 million the pro-
areas of the state where even the most
gram has committed to the first six
promising business opportunities may
BIDCOs will produce nearly $500 mil-
have great difficulty attracting capital.
lion in business financing during the next
decade.
Connecticut established a special financ-
and attracted more than $100 million from
ing program targeted to businesses in its
the industry for investment in state
Act as a magnet to attract capital aimed
enterprise zones. The program provided
companies.
at business opportunities that require
financing for start-up and established
subsidies.
businesses with sales not exceeding
Use public investments to target spe-
$1.5 million. The program was recently
cific capital needs identified in the state.
Michigan offers a premium based on a
combined with other state financing pro-
percentage of the loan amount, matched
grams to create a single fund targeted to
For example, states can use their employee
by the lender and the loan recipient, which
distressed communities and disadvantaged
retirement system to make investment
serves as a reserve fund available to cover
entrepreneurs.
capital available to small businesses in the
losses incurred by banks on loans made
state.
under its Capital Access Program.
OBJECTIVE: Use state programs and
resources to change the behavior of pri-
Use public investments to leverage pri-
More Effective Government Services
vate capital.
vate capital.
State government must be sensitive to the
States can:
Use public resources to reduce the risks
needs of business and willing to establish
of investment that holds the promise
an ongoing relationship designed to facil-
Use public investments, regulations, and
of substantial economic and social
itate the interaction of business and gov-
incentives to encourage private capital
benefits.
ernment. In addition, state government
institutions to be more creative, open-
can assist in business development, help-
minded, and responsive to unmet capi-
OBJECTIVE: Use state resources "whole-
ing those searching for other firms with
tal needs in the state or community.
sale" to close remaining capital gaps.
requirements matching their own.
Massachusetts offered lower taxation to
State resources may be used as a catalyst
OBJECTIVE: Achieve fair, flexible imple-
insurance companies that invested in the
for developing financial institutions ori-
mentation of regulations.
Massachusetts Capital Resources Program,
ented toward serving specific capital needs
in the state economy.
Business development can be affected by
state and local regulations. Offering spe-
25
cial tax breaks or lowering environmental
OBJECTIVE: Increase the capacity of
the availability and use of skilled work-
standards can be counterproductive and
the state to serve as a broker.
ers; and
should not normally be necessary. However,
overly complex procedures can discour-
As production becomes more international,
access to capital for innovation.
age or delay business decisions.
the provision of components and produc-
tion services also becomes increasingly sub-
Businesses also rely upon government to
States can:
ject to international competition. The
provide a regulatory climate conducive to
expansion of the domestic market can be
a productive economy. While government
Work cooperatively to address inter-
enhanced by identifying opportunities to
cannot do the job alone, it can make a
state regulatory issues.
replace foreign-made components with
critical difference. To win back its own
domestically made parts.
market, the United States must develop a
Already states have taken the lead on the
playing strategy. Governors are taking the
interstate regulation of trucking. Forty
States can:
lead to ensure that states respond to this
states have simplified interstate truck
challenge, and to encourage the federal
registration by joining the International
Work to expand the availability and
government to respond as well. The deci-
Registration Plan; twelve states have
analysis of foreign import data to deter-
sions made and the steps taken may well
reduced fuel tax compliance difficulties by
mine potential markets for domestic
determine the economic viability of U.S.
participating in interstate agreements, and
substitution.
industry in the next decade and beyond.
almost all states have motor carrier
advisory committees to further streamline
Link domestic firms that currently
interstate and intrastate requirements.
import large components with domes-
tic firms that may be able to supply
Improve business-customer service
those components at a competitive rate.
through business ombudsmen, one-stop
permit services, and state business infor-
Arkansas operates a "business yellow
mation centers.
pages" to encourage such connections.
Wisconsin has established a Permit Infor-
Participate with other states in regional
mation Center to assist businesses by
markets that link businesses with other
acting as a one-stop center for information
firms with unique inputs or outputs
on permits, licenses, and other authori-
that match their own needs.
zations required to conduct business in
the state. In addition, the center works
A number of southern states support a
with regulatory agencies and businesses
waste exchange that helps firms advertise
to facilitate the permit process, resolve and
chemical waste products other firms may
avoid disputes, and mediate differences.
be able to use.
Rhode Island's Business Action Center is
a one-stop service center for small busi-
Conclusion
nesses. All state forms and applications
relating to business are available from the
For American business, success in the
center, which also provides information
domestic market is increasingly deter-
on business and industry financing, tech-
mined by several variables that can be
nical services, marketing and training.
strongly influenced by active, innovative
governments:
the development and deployment of
technology;
26
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