Although no one at the White House or at Google will confirm it, the appointment of former Google CEO Eric Schmidt as the next US Commerce Secretary is now seen by virtually every Washington insider as a “done deal.” So much so that prominent opinion leaders inside the Beltway are already offering Mr. Schmidt advice as to how to do his job. Former Reagan Administration Commerce Department counsel Clyde Prestowitz, a friend of Mr. Schmidt’s, leads the pack:
He should begin by taking two crucial steps. The first is to reconstitute the department’s industry analysis capability. When I was there in the 1980s, Commerce industry experts had an intimate knowledge of the status, strengths, and weaknesses of every significant U.S. industry and of their foreign competitors as well. Now, if I want to know something about U.S. industries, I find the information provided by Japan’s Ministry of Economics Trade and Industry to be the best source. Or take my recent blog post on the iPhone’s supply chain. The data were largely developed by the Asian Development Bank. Schmidt shouldn’t have to rely on the Japanese or the Asian Development Bank for the analysis on which to base his new policy ideas.
The second step should be to undertake a series of meetings with the CEOs of all significant companies, foreign and domestic, making products in the United States. Of course, there is nothing wrong with service-providing companies, but Schmidt will have to get real here and he’ll have to make Obama get real. The job-killing U.S. trade deficit in goods is so large (nearly $700 billion) that there is just no way for services exports — about a third of U.S. exports — to reduce it significantly. Moreover, whereas each 100 manufacturing jobs result in the creation of 291 additional jobs for suppliers, services, etc., 100 personal/business services jobs result in the creation of only 153 additional jobs (Economic Policy Institute, Employment Multipliers, 2003). So Schmidt and the administration will need to go where the jobs are.
In these meetings, Schmidt should ask the CEOs why they are not investing more in production in the United States and what it would take to induce them to do so. He should also make clear to them that the U.S. government is very serious about driving investment in America and that companies wanting U.S. government assistance for protection of intellectual property and non-discriminatory treatment for their investments in China and elsewhere should be making a serious effort to invest in America also.
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