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81–935 2013

AMERICAN COMPETITIVENESS WORLDWIDE: 

IMPACTS ON SMALL BUSINESSES AND 

ENTREPRENEURS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECOMOMIC GROWTH, TAX AND 

CAPITAL ACCESS 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

JULY 9, 2013 

Small Business Committee Document Number 113–028 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

BLAINE LUETKEMER, Missouri 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JAIME HERRERA BEUTLER, Washington 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

DAVID SCHWEIKERT, Arizona 

KERRY BENTIVOLIO, Michigan 

CHRIS COLLINS, New York 

TOM RICE, South Carolina 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

YVETTE CLARKE, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRAD SCHNEIDER, Illinois 

RON BARBER, Arizona 

ANN McLANE KUSTER, New Hampshire 

PATRICK MURPHY, Florida 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Tom Rice .......................................................................................................... 1 

Hon. Judy Chu ......................................................................................................... 2 

WITNESSES 

Professor Michael Porter, Institute for Strategy and Competitiveness, Harvard Business School, Boston, MA ..................................................................... 5 

Mr. James McConeghy, Chief Financial Officer, Chobani, Norwich, NY ........... 7 

Mr. Smyth McKissick, Chief Executive Officer, Alice Manufacturing Co, Inc., 

Easley, SC, testifying on behalf of the National Council of Textile Organizations ....................................................................................................................... 9 

Dr. Cynthia McIntyre, Senior Vice President, Council on Competitiveness, 

Washington, DC ................................................................................................... 11 

APPENDIX 

Prepared Statements: 

Professor Michael Porter, Institute for Strategy and Competitiveness, 

Harvard Business School, Boston, MA ........................................................ 28 

Mr. James McConeghy, Chief Financial Officer, Chobani, Norwich, NY .... 82 

Mr. Smyth McKissick, Chief Executive Officer, Alice Manufacturing Co, 

Inc., Easley, SC, testifying on behalf of the National Council of Textile 

Organizations ................................................................................................ 85 

Dr. Cynthia McIntyre, Senior Vice President, Council on Competitiveness, 

Washington, DC ............................................................................................ 93 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

None. 

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(1) 

AMERICAN COMPETITIVENESS WORLDWIDE: 

IMPACTS ON SMALL BUSINESSES AND ENTREPRENEURS 

TUESDAY, JULY 9, 2013 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON ECONOMIC GROWTH, TAX AND

CAPITAL ACCESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 1:00 p.m., in Room 

2360, Rayburn House Office Building. Hon. Tom Rice [chairman of 

the subcommittee] presiding. 

Present: Representatives Rice, Chabot, King, Coffman, Mulvaney, 

Hanna, Chu, Payne, and Schneider. 

Chairman RICE. Good afternoon. At this time I would like to call 

to order the Subcommittee on Economic Growth, Tax, and Capital 

Access of the Small Business Committee. 

Today’s hearing covers a topic which I believe is of the utmost 

importance—in fact, I think there is nothing more important—and 

that is restoring America’s competitiveness. For decades, America 

was the world’s place to do business. We had the best education, 

quality of life, workforce, access to capital, infrastructure, and economic markets, but in the last 50 years that has changed. We have 

watched as millions of American jobs have moved overseas. It is 

not necessarily that we have regressed, but our competitors worldwide have improved. We must change the attitude that we are the 

only game in town and improve our competitive standing in the 

world if we want to reverse this trend. We cannot maintain the 

world’s highest tax rate and regulatory burden and expect job creators to return. 

A nation’s competitiveness is primarily based on its firms’ abilities to compete across global markets, while at the same time raising the standard of living for all citizens. I was sent to Washington 

to work on solutions that will boost our economy and create jobs 

for all Americans, and restoring our competitiveness is necessary 

for achieving both. 

To ensure competitiveness, America’s broad economic policy must 

focus on helping businesses increase long-term productivity. This 

means promoting policies that give our firms the ability to be the 

best in the world, such as reducing onerous regulations. Fortunately, this afternoon, we have Dr. Michael Porter, who has extensively studied this issue of competitiveness and has eight broad 

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2 

policy changes he believes will allow our nation to experience substantial economic growth. 

It is important to note the impact of these policies will have on 

small firms. For example, as a tax attorney, I know the challenges 

faced by small businesses in trying to figure out the nation’s complex tax code. The Committee on Small Business has previously 

held hearings on the burdens of this and reforming the tax code 

will go a long way in helping America’s small businesses. However, 

a complex tax code is but one part of the burden. As we will hear 

today, a holistic approach is necessary to truly ensure that companies are able to be competitive. As we all know, a diet is nothing 

without exercise, and while one will help, to be successful you must 

do both. Competitiveness is the same way. One is good, but to restore America’s competitive edge, we must combine various factors 

until we have created an atmosphere that propels our businesses 

to the top. 

Additionally, while Congress must work together at the federal 

level to create policies, it is important to remember that the businesses themselves can lead the way in their local communities. For 

example, throughout many parts of the United States, area employers are working with community colleges to develop curricula that 

would allow the companies to hire local students with requisite 

skills, such as advanced manufacturing. This sort of initiative is 

necessary, and I applaud these efforts. We need companies who are 

aware of the challenges in their industry to, whenever possible, 

take steps to address those concerns. 

Today’s witnesses truly understand both the challenges and conditions necessary to restore America’s competitiveness, and I thank 

you all for being here. I look forward to your testimony. The road 

to reviving our country’s competitive edge in an increasingly global 

economy will take hard work but is work I am committed to. I now 

yield to my Ranking Member Chu for her opening remarks. 

Ms. Chu. Hold on one second. We have been called for votes, obviously, but if you want to go ahead and make your open, or do you 

want to wait until we come back? 

Ms. CHU. Why do we not wait until we come back. Then we 

might have more peace of mind here. 

Chairman RICE. As you can see, we have 11 minutes before we 

are supposed to—before the first vote ends, so we are going to have 

to recess this hearing. We will be back here in about, I would say, 

20 minutes. Thank you. 

[Recess] 

Chairman RICE. We will call the meeting back to order. 

I was walking back over with Congressman Mulvaney and he 

was so disappointed he missed my opening statement, he wanted 

me to do it again. But I said no, I am going to decline. 

So at this time I yield to Ranking Member Chu to give her opening statement. 

Ms. CHU. Well, thank you so much, Mr. Chair. 

Good morning. Well, actually, it is good afternoon, now. Today’s 

hearing will provide insights into U.S. competitiveness and what 

we, as policymakers, need to do to keep America one step ahead 

of this rapidly changing world. Professor Michael Porter and his 

team at the Harvard Business School have spent years studying 

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3 

this topic, and today, Professor Porter will share the insights that 

they put forward in their study, ‘‘Restoring U.S. Competitiveness.’’ 

Among the suggestions we will hear are about the need to reform 

our tax code and fix our immigration system. I look forward to exploring each of the witnesses’ recommendations on how we can 

make America more competitive. 

American competitiveness is so fundamental to what makes this 

country great. The United States continues to be the world’s largest economy with a gross domestic product of nearly $15 trillion, 

followed far behind by China at only $7 trillion. We continue to be 

the world’s largest manufacturer. Our military’s power and technological capabilities are rivaled by no other country on earth. In my 

own state of California we have Silicon Valley and Hollywood, the 

world’s leaders in technology and entertainment industries. 

Small businesses are central to achieving this high level of innovation. Research has found that small firms are much more likely 

to develop emerging technologies than are large firms. Although 

small firms accounted for only 8 percent of patents granted, they 

counted for 24 percent of the patents in the top 100 emerging clusters. Ensuring that small firms have the tools and resources they 

need to continue this work is critical to not just their own success 

but also for America’s leadership in the global economy. 

In recent years, however, both small and large businesses are 

struggling to recover from the recession, and experts worry that as 

a result, America is losing ground on competitiveness. Americans 

wages have been stagnant for years. Our roads, bridges, and ports 

are crumbling. Our immigration system is broken. And scholars 

and experts worry that the U.S. is falling behind on manufacturing, education, infrastructure, and innovation. 

Today, we will hear experts share with the Committee a variety 

of policy recommendations on how to make America the leader in 

global competitiveness. One of those key issues is improving the 

tax code. I certainly agree that we need tax reform to make the 

code simpler. I would ask, however, that we keep in mind a recent 

study by the Government Accountability Office which found that 

most American profitable companies only pay a fraction of the 

taxes they owe under the official corporate rate of 35 percent. 

When they take into account deductions and legal loopholes, American corporations paid a 12.6 percent tax rate on corporate profits. 

So as we engage in a conversation about tax reform, we must ensure that corporations do pay their fair share and that our country’s middle class and small businesses do not end up carrying the 

tax burden. 

Corporate tax reform could also have a significant impact on 

small business by eliminating the deductions that small businesses 

care about the most. So as we start having a conversation about 

corporate tax reform, we need to ensure that small businesses are 

not negatively affected. 

One of the policy recommendations that we will hear about today 

offered by Professor Porter concerns the importance of reforming 

our immigration system by allowing high-skilled individuals who 

study in American universities to stay and work in this country. 

Indeed, immigration reform is vital to maintaining American competitiveness. Immigrants have made extraordinary contributions to 

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America, including iconic successes like Intel, Google, Yahoo, and 

eBay, which were started by immigrants in the Silicon Valley. In 

fact, it is the world’s hub of innovation where immigrants helped 

found half of all technology and engineering companies, many 

which began as small startups. 

I would point out, however, that we will not be able to attract 

the best and brightest if those with employment-based visas cannot 

live and work in the U.S. with their families at their sides. That 

is why fixing the family-based visa system is also critical to fixing 

America’s competitiveness. In fact, immigrants are twice as likely 

to start up businesses as native-borns and there are many who 

have come to the U.S. through the family visa system. Comprehensive immigration reform is a key issue in Congress right now and 

it is my hope that we will be able to reach a bipartisan agreement 

that will put us back on track to restoring America’s competitiveness. 

With this in mind, I am looking forward to today’s hearing which 

will provide insights into what our country needs to do to remain 

the most competitive nation in the world. Thank you, Chairman 

Rice, for convening this hearing, and I yield back. 

Chairman RICE. Thank you, Ranking Member Chu. 

If additional members have an opening statement prepared, I 

ask that they submit it for the record. 

I would also like to take a moment to explain the timing lights 

for you. You will each have five minutes to deliver your testimony. 

The light will start out as green. When you have one minute remaining, the light will turn yellow. Finally, it will turn red at the 

end of your five minutes. We will be a little liberal on that. 

I ask that you try to keep to that time limit, but we will be a 

little lenient if you are close to finishing. 

At this time we would like to go ahead and proceed with the witnesses. We will start out with Professor Michael Porter. 

Michael Eugene Porter received a BSE with high honors in aerospace and mechanical engineering from Princeton University, 

where he was elected Phi Beta Kappa and Tau Beta Pi. He received an MBA with high distinction from Harvard Business 

School, where he was a George F. Baker Scholar, and a Ph.D. in 

Business Economics from Harvard University. Professor Porter is 

the Bishop William Lawrence University Professor at Harvard 

Business School located in Cambridge, Massachusetts, and he also 

leads the Institute for Strategy and Competitiveness. Professor 

Porter is widely regarded as an expert in competitiveness and economic development and generally recognized as the father of the 

modern strategy field. Most recently, in February, Professor Porter, 

along with his colleagues at Harvard’s Institute for Strategy and 

Competitiveness, released a study which examines America’s business environment and recommends actions that can be taken at the 

federal level to restore competitiveness. 

Thank you for being here today, Professor Porter. You have five 

minutes. You may begin. 

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STATEMENTS OF MICHAEL PORTER, PROFESSOR, HARVARD 

BUSINESS SCHOOL; JIM MCCONEGHY, CHIEF EXECUTIVE OFFICER, CHOBANI; SMYTH MCKISSICK, CEO, ALICE MANUFACTURING COMPANY; CYNTHIA MCINTYRE, SENIOR VICE 

PRESIDENT, COUNCIL ON COMPETITIVENESS. 

STATEMENT OF MICHAEL PORTER 

Mr. PORTER. Thank you so much, Mr. Rice, and other members 

of the Committee, and visitors for attending today. 

We are here to talk about a topic that is anything but a sound 

bite. This is a complex topic, and I think when we approach this 

question of competitiveness we have to approach it with the understanding that there are a lot of moving pieces here. And when we 

think about it, we have to think rigorously and we have to think 

strategically. We cannot think that competitiveness can be solved 

by one magic bullet; one simple solution will solve this problem. 

This is a problem that has been building for many, many years and 

it will take us really a strategic focus to address it. 

I would like to just make five basic points in my opening statement which we can explore in more detail as the hearing proceeds. 

First point is what do we mean by competitiveness? And when 

we talk about competitiveness, competitiveness occurs when businesses based in a location, like the United States, can meet the test 

of international competition while improving the standard of living 

of the average citizen. Competitiveness is not just about businesses 

being competitive; it is also about the average worker doing well. 

We have to do those things together if we are going to be truly 

competitive. If businesses succeed by cutting wages and laying off 

people, that is not success. That is not being competitive. That is 

a sign that we are not competitive. That is a sign that we cannot 

sustain and grow the prosperity of the average citizen. 

So much of the debate about competitiveness is really clouded 

and confused by a lack of understanding of this basic truth. Republicans tend to focus on businesses doing well. Democrats tend to 

focus on the average worker doing well. But, of course, competitiveness is when we can do those things together. We are really all in 

this together. And the only way we can achieve those dual objectives is by improving productivity. We have to create the most productive business environment. If we can equip our workers to be 

productive, then they can support high wages. Then we can have 

a rising standard of living. But if we cannot be productive in America, if we cannot be at the vanguard of efficiency and productivity 

in how we do business in this country, we are simply not going to 

be able to keep up anymore because other nations around the 

world are making very rapid improvements in their business environments and the skill bases of their populations. So competitiveness is fundamentally about the question of making America productive. 

Now, the second point I would like to make is that there is really 

undeniable evidence that the U.S., as an economy, is facing a fundamental structural competitiveness problem. This is not a cyclical 

problem. This is not a recession. This is something different. 

Why do we believe that? Because all the indicators that signal 

declining competitiveness have started declining well before the 

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2008 recession. You see here a slide about job growth. The American job machine started sputtering in the 1990s. It did not start 

sputtering in 2008. The wage growth of the American households 

has been stagnant for decades. And this problem is the mother of 

all issues. If we cannot address these conditions which have allowed us to not sustain job growth and not sustain wage growth, 

if we cannot deal with these conditions and these problems, we are 

going to have rising inequality. We are going to lose our influence 

in the world. And we are not going to be able to really renew the 

American dream. This is the mother of all issues. It affects all the 

other issues. If we cannot solve the fundamental problem of 

competiveness and economic vitality and job growth and income 

growth, we are not going to have the resources to really do almost 

anything that we want to do as a country. 

Now, to address this problem, we have to address the underlying 

causes. And here is kind of a synthesis of what we found from our 

Harvard Business School research, is really kind of the balance 

sheet of the United States from the point of view of competitiveness. Luckily, we retained some profound strengths. You see those 

on the upper right hand corner. We are innovative. We are entrepreneurial. We have well-developed clusters. We have a lot of 

strengths, strengths that are powerful and profound in the modern 

global economy. 

But we have allowed some of the more basic elements of our 

business environment to erode. Our skill base is eroding. Our infrastructure is eroding. Our public education is not up to snuff. Our 

tax code is uncompetitive. Our regulations are too costly and too 

time-consuming. Our litigation and legal system is too costly and 

too time-consuming. 

As a result, although we retain key strengths, they are being 

weighed down by these growing weaknesses, while other countries 

are making rapid progress in fixing the very things that we have 

allowed to erode. 

So in order to address this problem, we have to tackle these fundamental challenges, and that leads to my fourth point. We need 

a strategy in Washington to address those things that are really on 

the critical path. And these are the eight areas that we have determined really are the most pressing issues. These do not address all 

the problems we have in American competitiveness, but they really 

get at the things that we find and we believe are really core to 

making progress over the next three to five to seven years. Immigration of highly-skilled individuals is part of the broader immigration problem, but it is the part that really matters to our competitiveness. Simplifying the corporate tax code by cutting the rate and 

ending the loopholes is something that is common sense and I 

think most people agree on. More controversial is our international 

taxation system, which is locking lots of money outside of the U.S. 

and is unique in the world, and it is not supporting really the 

growth of our businesses. There are many weaknesses in the trading system that is working against the U.S. economy. We have to 

lead the reform of that system. 

Improving infrastructure, simplifying regulation, getting on with 

the great opportunity we have in shale gas and our energy reserves. And then finally, creating a sustainable budget. None of 

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these things probably sound even remotely surprising to any of 

you. This is pure, unadulterated common sense. But these are the 

areas which we found if we could make some headway on these 

areas, not seek perfection, not seek everything everybody wants, 

but just move ahead on these areas, it will have a transformational 

impact on business confidence, on business investment, and we will 

start building momentum in this economy again. 

So let me conclude there and, of course, we can have a fulsome 

discussion of this complex topic over the coming balance of the 

hearing. Thank you, Mr. Chairman. 

Chairman RICE. Thank you, Professor Porter. 

I now yield to Representative Hanna to introduce Mr. 

McConeghy. 

Mr. HANNA. I would like to report that I am not just pleased 

to represent you here, but pleased to be a customer. And my wife. 

Today, I am honored to be here to introduce Jim McConeghy, the 

chief financial officer of Chobani, which is headquartered within 

my district in Norwich, New York. Chobani was founded by Hamdi 

Ulukaya, a Turkish immigrant to our nation who began modestly 

in 2005. It received an SBA loan to start making Greek yogurt so 

many individuals around the world enjoy today. 

Chobani has experienced rapid growth and success despite a very 

rough economy, and as I said, is a worldwide brand. Today, 

Chobani grosses $1 billion and employs over 2,500 individuals. 

Chobani’s story is uniquely American, and its success has invigorated dairy farms and communities in upstate New York where 

we are proud to call you our neighbor. 

Mr. McConeghy, I look forward to having you share Chobani’s experiences with us today. Thank you. You may begin. 

STATEMENT OF JIM MCCONEGHY 

Mr. MCCONEGHY. Thank you, Mr. Hanna, for the introduction. 

Mr. Chairman and members of the Subcommittee, thank you for 

the opportunity to testify at today’s hearing. As Congressman 

Hanna said, I am Jim McConeghy, the chief financial officer of 

Chobani. 

The Chobani story is one that could only happen in America. 

Where else could a Turkish immigrant transform a shuttered factory into a thriving food manufacturing business in just a few short 

years? 

Our story began in 2005, when with the help of a Small Business 

Administration loan, our founder, Hamdi Ulukaya, acquired a 

former Kraft plant in Central New York. Two years later, the first 

cups of Chobani rolled off the line, and today, Chobani is the number one selling brand of Greek yogurt in the country. 

In less than six years, we have grown our business from nothing 

to over a billion dollars in revenue. We have expanded our reach 

around the globe. We have invested more than 700 million dollars 

between our original manufacturing facility in New York and our 

new plant in Twin Falls, Idaho. We are no longer a startup with 

five employees but a global organization with a workforce some 

2,600 strong. It is the American dream come to life, proving that 

if you truly believe in something and work hard, anything is possible. 

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Of course, with opportunities, there are challenges for the future 

of Chobani. Chobani’s success is strongly burdened by the current 

federal regulatory and legal environment. The four most prominent 

challenges I will touch on today are the lack of an FDA standard 

of identify for Greek yogurt, geographic indicators in international 

trade, trade in dairy products with Canada, and tax return. 

First, Chobani strongly supports the establishment of a standard 

of identify for Greek yogurt. The Food and Drug Administration establishes standards of identity for various food products that reduce consumer confusion. Unfortunately, the current FDA standards of identity for yogurt are extremely outdated and do not take 

into account current manufacturing processes. The definition does 

not reflect the composition and the processes used to manufacture 

Greek yogurt, which is very different from traditional yogurt. The 

lack of a proper standard of identity for true Greek yogurt literally 

allows any product that meets one of the current FDA standard 

definitions of yogurt to be branded as Greek yogurt, regardless of 

the composition or the processes used to manufacture it. USDA’s 

Child Nutrition program routinely follows FDA’s standards of identity for products used in their programs. The lack of a standard of 

identity for true Greek yogurt makes it difficult for consumers and 

the USDA to differentiate between yogurt and Greek yogurt for 

purposes of nutrition programs, including the proper allowances for 

meat and meat alternatives in the Child Nutrition program crediting. 

FDA and Congress must recognize and address this blatant inequity in order for the rapidly emerging market for Greek yogurt 

to meet its potential without misleading consumers towards a product that is not true. An update to the 30-year-old standard is clearly in order. 

Second, we have seen an increase in challenges of the labeling 

of common food products abroad. We recently embarked on a costly 

and difficult process in England and Wales after it was incorrectly, 

in our opinion, ruled at the term ‘‘Greek’’ on our true Greek yogurt 

misled consumers into presuming that it was from Greece. The EU 

position puts common food names at great risk. If this problem is 

not dealt with soon, the EU’s aggressive actions to monopolize common food names, such as bologna, feta, and provolone, will damage 

sales of many popular food products around the globe. Arguing that 

a small group of EU producers should have an exclusive right to 

use such name is like claiming that only Italians should be able to 

use the term ‘‘pizza.’’ Protectionism is protectionism no matter how 

you couch it. 

On a third point, Chobani recently engaged in an extensive process to bring our products to Canada. This process included researching the ability to import yogurt into Canada from the United 

States and to explore making yogurt in Canada for Canadian consumers. In the case of importing yogurt, we found this to be centrally impossible as there is a 237-1/2 percent duty at the border 

for all imports into Canada. This is despite the ‘‘open borders’’ promulgated by NAFTA. 

As an alternative, we attempted to buy land and build a manufacturing facility in Canada. When this plan became visible to our 

competitors, they launched a series of actions directly against varSBREP-219 with DISTILLER

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ious Canadian government agencies and the local Chobani entity to 

stall our Canadian plants. Despite the fact that we and the Canadian government prevailed in court, all of the previous market barriers continue to exist. Accordingly, we recommend that Congress 

and the administration use the TPP umbrella to look at the closed 

borders for dairy with Canada. 

Last, we understand there are many discussions surrounding tax 

reform in the halls of government. We wholly support this effort to 

eliminate inconsistencies and the taxation of different types of US 

entities and to have a globally competitive tax system. We at 

Chobani thank you for your support of a fair and competitive business environment. 

Chairman RICE. Thank you, Mr. McConeghy. 

Next, I want to introduce Mr. Smyth McKissick. Since 1988, Mr. 

McKissick has served as the president and CEO of Alice Manufacturing Company in Easley, South Carolina. For 90 years, four generations of the McKissick family have led Alice Manufacturing 

Company. Alice is widely recognized today as a modern and successful textile company, as well as an important part of the upstate 

community. Mr. McKissick also serves as a life trustee of Clemson 

University. He has previously served as the chairman of the South 

Carolina Manufacturers Alliance, chairman of the National Council 

of Textile Organizations, co-chair of the American Manufacturing 

Trade Action Coalition, and is an independent director of People’s 

Bank Corp, Inc. He is a graduate of Clemson University, and has 

an MBA from the University of South Carolina, which is his redeeming factor. He and his wife, Martha, reside in Greenville and 

have three children. 

Mr. McKissick, welcome. 

STATEMENT OF SMYTH MCKISSICK 

Mr. MCKISSICK. Chairman Rice and members of the Subcommittee, thank you for the opportunity to be here today. 

My name is Smyth McKissick, and I am the CEO of Alice Manufacturing Company. We are a 103-year-old company located in 

Easley, South Carolina, employing 300 associates. We produce fabrics primarily for home furnishings, apparel, and health care applications. 

Over the years, we and other U.S. textile manufacturers have 

consistently invested in the most technologically advanced equipment, continuing education, and technical training. In fact, the 

U.S. textile industry has been a world leader in innovation, developing biological resistant factors, wrinkle-free fabrics, and sophisticated fabrics for military and industrial applications. The U.S. textile industry is the third largest exporter of textile products in the 

world. We ship nearly $23 billion worth of textile and apparel products to over 170 countries and our product industry employs over 

half a million people. 

Our industry is experiencing a resurgence, and we have invested 

over $3 billion in new technology, machinery, and manufacturing 

facilities since 2010. This positive trend could be further bolstered 

by sound U.S. trade policy, especially as our government negotiates 

the terms of the Trans-Pacific Partnership or TPP. TPP is the largest free trade agreement since NAFTA. Our country, as you will 

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know, is negotiating with 11 other nations, including Viet Nam. 

U.S. manufacturing jobs are at stake, and it is critical that our negotiators get this trade agreement right. 

Prior to the Asian currency crisis, the U.S. textile industry was 

thriving. Overnight, as foreign currency values sank, the U.S. market was flooded with imported goods. These devaluations allowed 

our foreign competitors to gain a huge pricing advantage; thus, the 

U.S. textile supply chain was decimated. Our industry was cut in 

half and thousands upon thousands of U.S. textile jobs were lost 

in the process. 

At Alice Manufacturing Company, we realize we had to quickly 

establish a new business model in order to survive. We employ two 

primary strategies in our company. The first was a direct sale to 

retail whereby our company became a virtual vertical home textile 

supplier. Our second strategy was our optimization of our NAFTA 

and CAFTA partnerships. Alice partnered directly with manufacturers in Mexico and Central America, and this allowed for the 

opening of new markets for our fabrics. Our business is growing as 

a result of these new strategies. 

NAFTA and CAFTA are so beneficial to the U.S. textile industry 

because of three critically important provisions. The first is a yarn 

forward rule of origin. The second are fair market access provisions, and finally, strict customs enforcement. Yarn forward has 

been instrumental in the creation of nearly $25 billion of two-way 

trade between the industry and our free trade agreement partners. 

It is critically important to maintain yarn forward and fair market 

access principles in the TPP. If not, the TPP could become the single greatest threat to the U.S. textile industry since the Asian currency crisis. 

Our industry’s principle concern with the TPP is the participation of Viet Nam, a nonmarket economy. The government of Viet 

Nam heavily subsidizes its textile and apparent sector. We must 

have counterbalancing measures such as long tariff phase outs for 

sensitive products and strict customs rules and enforcement to 

deter illegal trade. While our government continues to negotiate for 

yarn forward in the TPP, the Vietnamese government are opposed 

to yarn forward. They are looking for a single transformation rule 

of origin. Vietnam wants to import goods from China and export 

those goods to the United States duty free. This would put over 

500,000 U.S. textile jobs at risk. More than 75 percent of the apparel produced in Vietnam today uses fabrics and other textile imports from China. The total projected job loss in the U.S. after 10 

years of a single transformation rule is over 530,000. The total projected job loss in the Western Hemisphere is two million. 

Another major concern of the U.S. domestic textile industry is 

that nonmarket export-driven countries have been known to use 

currency manipulation to create artificial competitive advantages 

in the marketplace. Currency manipulation clearly distorts true 

competitiveness. It can quickly negate the intent of trade agreements and it can cause serious job loss. Currency manipulation is 

the antithesis of the principles of free trade and this practice must 

be addressed in the TPP. 

In conclusion, a poorly negotiated TPP will cause widespread job 

losses in the United States and the Western Hemisphere. I am 

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here today to urge you to endorse the textile and apparel trading 

rules in the TPP that are cornerstones of every major free trade 

agreement since NAFTA. You can take action by signing onto the 

Coble-McHenry-Pascrell Dear Colleague Letter to the USTR. 

I would like to thank you Subcommittee members who have already agreed to sign this important letter, including you, Mr. 

Chairman, and thank you all for the opportunity to be here this 

afternoon. Thank you very much. 

Chairman RICE. Thank you very much, Mr. McKissick. 

I will now yield to Ranking Member Chu to introduce our last 

witness. 

Ms. CHU. Yes. It is my pleasure to introduce Dr. Cynthia R. 

McIntyre. Dr. McIntyre is senior vice president at the Council on 

Competitiveness. During the last five years, she has led the High 

Performance Computing Initiative that promotes the use of HPC in 

the private sector for greater economic return and competitive advantage. As a result of these efforts, the council was asked by the 

White House in 2010 to create and lead a public-private partnership to help small- and medium-size (SME) manufacturers use this 

type of modeling and simulation. Since its inception, several of 

these enterprises have seen improvement to their product development process and bottom-line sales projections. Dr. McIntyre holds 

a Ph.D. in physics from the Massachusetts Institute of Technology. 

STATEMENT OF CYNTHIA MCINTYRE 

Ms. MCINTYRE. Chairman Rice, Ranking Member Chu, and 

other distinguished members on the Subcommittee, thank you for 

having me here today. My name is Dr. Cynthia McIntyre and I am 

a senior vice president at the Council on Competitiveness, a nonpartisan, nongovernmental organization composed of CEOs, labor 

leaders, university presidents, and national laboratory directors 

working together to keep America competitive and Americans prosperous. 

It is an honor to share with you a public-private partnership 

with which the Council on Competitiveness has been heavily involved since its inception, the National Digital Engineering and 

Manufacturing Consortia. This pilot public-private partnership connecting small- and medium-sizes manufacturers with high-performance computing via modeling and simulation, is currently wrapping 

up its pilot phase in the Midwest. Research by the Council on Competitiveness presents powerful evidence of the capacity of high-performance computing, also known as HPC, to drive innovation and 

make U.S. companies and the nation more competitive. Indeed, for 

those who have adopted it, HPC represents a crucial edge that can 

build and sustain competitive advantage through innovative product design, production techniques, cost savings, improved time-tomarket cycles, and overall quality. 

However, Council research has also shown that many U.S. companies are stuck on the desktop, not able to take full advantage of 

HPC, while still others, including many suppliers to U.S. tier one 

companies, have limited, if any, computational R&D capacity. 

Through additional research, the Council determined that publicprivate sector collaboration is the best and most effective means for 

quickly advancing HPC and manufacturing. 

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Next, the Council and selected original equipment manufacturers 

developed a Midwestern Regional Pilot Program as a public-private 

partnership with the U.S. Federal Government. The pilot program 

is aimed at improving competitiveness and innovation in smalland medium-size enterprises in the U.S. manufacturing supply 

chain. The ultimate outcome of the pilot program will be a workforce with enhanced technical skills, improved product quality, better customization of products, and job retention and growth. With 

these principles as goals, the National Digital Engineering and 

Manufacturing Consortium, known as NDEMC, was born. NDEMC 

brokers and promotes collaborative relationships that will sustain 

the growth of American manufacturing through job creation and 

enhanced competitiveness. NDEMC provides modeling simulation 

and analytics, education, and training, access to high performance 

computing, and access to software as a service to small- and medium-size manufacturers. These services will be available through 

a distributed application to make U.S. SMEs more competitive in 

the global marketplace. 

A great example of how NDEMC has positively impacted U.S. 

companies is the case of Jeco Plastic Products, LLC, a small, custom-mold manufacturer of large, complex, and high-tolerance products with a plant in the Indianapolis area. And this is plastic material. Jeco’s custom base includes large U.S. and international original equipment manufacturers in the automotive, aerospace, printing, and defense industries. To take advantage of a monumental 

opportunity to secure a large OEM account, Jeco Plastic Products 

required high-performance computing to perform tasks that inhouse software that they had could not accomplish. Jeco joined the 

NDEMC program to gain education, training, experience, access to 

university expertise, software, and hardware to successfully compete against large foreign competitors. By employing HPC through 

NDEMC, Jeco earned a multi-year contract with a large German 

automotive company, increasing American exports and keeping 

people employed. In fact, due to increased production demand from 

their large client, Jeco is expected to increase payroll and hire 15 

advanced manufacturing workers during the next few years. Jeco’s 

size is about 35 people all total. So they are looking to hire 15 

more. 

Currently, the NDEMC pilot program is wrapping up its federal 

funding and the Council on Competitiveness and other key 

NDEMC stakeholders are working to move NDEMC from a publicprivate partnership to a nonprofit entity which would be the conduit for new partnerships, including new public-private partnerships across the United States which will continue to work together 

to sustain America’s manufacturing competitiveness. The EPA and 

its partners will study the economic impact of technology-based innovation infrastructure towards boosting the long-term job capacity 

and competitiveness of U.S. manufacturing and industry. 

Thank you, and I look forward to your questions. 

Chairman RICE. Thank you, Dr. McIntyre, for being here. 

So now comes a time when you are on the hot seat. We get to 

ask questions. 

I am going to use my time to allow Professor Porter to complete 

his presentation. Professor Porter. 

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Mr. PORTER. We need to equip the U.S. Congress with Harvard 

Business School-style name cards. We will transfer that technology. 

I need to put this on. It is probably best off the record anyway. 

So thank you, Mr. Chairman. I would like to take a few more 

minutes to complete some of the remarks that I was hoping to 

make earlier in the short time, but also I think reflect on the comments we have just heard. Because I think what we just heard is 

actually a wonderful series of case studies in both the problems 

and the solutions that I talked about earlier. 

Now, again, going back to this slide, I want to emphasize, and 

we heard this in the testimony, there is a lot of strengths in America. We have a lot of innovation, a lot of technology, a lot of new 

business models, a lot of path breaking companies, and we heard 

about the transformation of Alice. We heard about the Chobani 

story. Look at the amazing things that we can do. Look at the 

amazing strengths that we have in this country that are in many 

ways unique in the world, and still unique in the world despite the 

effort of many other countries to catch up in these areas. 

But net-net, the cold hard truth is we are not generating jobs at 

a reasonable rate. This has been going on now for well over a decade and so we have this chronic job issue. We do not have an attractive enough business environment to generate enough investment to create enough jobs. We have great stories but net-net we 

are not creating jobs fast enough. 

In terms of incomes, people with high skill and Ph.D.s are doing 

great. That is not the real problem. The problem is really the middle. It is that great middle. The people without unique skills, without Ph.D.s, how can we create an environment where they can 

prosper, where their incomes can rise? Instead, we are in an environment where inequality is growing and that is creating all kinds 

of stresses and strains in our society. 

When we look at the problems that are holding us back, it is not 

the lack of innovation. It is not the lack of top management. It is 

not the lack of excellent, high-end education. It is these things in 

the lower left. It is these basics. It is having an efficient, simple, 

responsive regulatory system. Listen to Mr. McConeghy’s commentary about the FDA and getting a regulation updated after 30 

years to deal with the changes in the marketplace. Look at the cost 

of that. The company is doing okay, but think of how much better 

it could do if we had more responsive regulation, more pragmatic 

that did not slow things down and add unnecessary cost. Look at 

the examples of how the trading system has not * we have not 

taken the leadership and not been forceful in really making sure 

that the trading system works for America like it works for other 

countries. There was a time when we did not have to worry about 

that. We were so strong that we could simply not worry about 

trade barriers and subsidies and restrictions on U.S. goods in Canada, but those days are over. Other nations have caught up, so 

trade is again one of the areas that I spoke about in my eight recommendations. 

Mr. McConeghy also talked about the fundamental need for tax 

reform. This is the number one thing that we hear in business. 

Just give us a reasonable corporate tax rate. We will give up on 

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not have the highest corporate rate in the OECD and expect to be 

able to invest and renew our activities in America. Again, another 

one of our eight recommendations. 

The weaknesses that we see in that lower left-hand corner actually have a disproportionate negative impact on small business. Big 

businesses can deal with this stuff. They have the legal departments. They have the tax minimization departments. They have 

multinational operations where they can kind of mitigate the effect 

of the unproductive American business environment, but small 

businesses who are basically in America, they are the most affected. We cannot help small businesses by passing new subsidies 

for small businesses to try to offset the fundamental weaknesses in 

the business environment. That is a loser’s game. We have been 

trying to do that but it is not working. We have to fix the basic 

circumstances in our business environment that are leading to the 

anemic job growth, the lack of income growth, and the lack of economic growth in our economy. 

Now, who needs to take action here? Well, I think what we found 

through our Harvard Business School project is all the stakeholders need to act. There is a lot that business can do. You heard 

Dr. McIntyre’s description of a very innovative public-private partnership where businesses are actually playing a major role in really improving skills and in improving technology and seeding other 

small companies. So business can do a lot, and we have been working all across the country to mobilize and inform business to take 

a more forceful role back in America again. Many businesses kind 

of lost the understanding that they really had to invest in improving America’s business environment. There is a lot they should be 

doing. 

States and local regions and cities have a lot to do. All across the 

country we see all kinds of innovative efforts at the state level— 

in South Carolina, in Tennessee, and state after state in which I 

work where government and business are working collaboratively 

together to deal with the problems that can be dealt with at the 

state and local level. 

But the real sticking point now, the thing that is fundamentally 

driving the poor performance of our economy, is right here in 

Washington. This is where we are not making progress. This is the 

one place in our society where we do not see progress. And where 

do we need to make that progress? We need to make that progress 

in those—that small set of things that is really on the critical path. 

Again, we can make our patent system better, but that is not the 

problem. We have got a lot of patents. We can improve our R&D 

spending. We should, but that is not the critical constraint. There 

is a lot of things that we can improve, and there is somebody in 

this town and some interest groups that are arguing that that is 

the most important issue, but actually, the reality is that the most 

important issues are the things that are staring at us right on that 

screen, in that lower left-hand corner. And if we move to my last 

slide with those eight areas, it is these eight areas that when we 

engage with business and we survey thousands of companies and 

we scour the economy looking for what is really going on here, it 

is these eight areas that are the sticking points that would unlock 

that resurgence of progress, that sense of optimism, that confidence 

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in the business community and among other stakeholders that 

America was actually in business again. 

The high-skilled immigration is a pressing constraint. We have 

thousands of jobs that we cannot fill today. That does not mean we 

should not train Americans, but we need to take some steps today 

to get onboard with what has been a great American strength, 

which is getting people to come to this country that can really contribute to our economy. 

The corporate tax code, again, we are not talking about a windfall to corporations; we are talking about just bringing the corporate tax rate down to a reasonable level, and the price of that 

is going to be to eliminate a lot of these loopholes. It is time to do 

that deal now. Our alumni are overwhelmingly willing to do that 

deal. 

The international tax system, we do not need to seek perfection 

here but right now the idea that if you bring money back in the 

U.S. you should pay the highest tax rate in the OECD. Nobody is 

going to bring money back to the U.S. just pragmatically. So we 

have got to find a compromise, a way of changing that international taxation system so that it is hopefully fair for the country 

but also fair for business. 

The trading system we just heard about, there are a lot of distortions there that did not matter to us when we were dominant but 

they matter now and they are really stalling the ability to create 

jobs and grow incomes. 

Regulatory costs, we need good regulation. We need high standards. We need safe products, but we do not need to spend years 

and years and years and years on process and delay and expense 

to get there. Let us do it a better way. 

Logistics and transportation. We have got to be efficient in moving goods and services around; otherwise, it is going to make it 

even harder to pay higher wages to workers, and so on. We have 

got to deal with these areas. 

Now, the challenge is that to make progress on these common 

sense areas, we sometimes get caught up in trying to be perfect 

and do everything at once. And I think what we have deemed now 

more than everything else is to start making some progress on 

these things where we can, get some momentum, and then I think 

you are going to find that there is a steamroller that can restart. 

This American machine, this American competitive machine that 

we have, these strengths that we have are sitting there and they 

can be unleashed, but we have got to start the ball rolling in Washington. I think this is the critical constraint. 

So let me stop there, Mr. Chairman. And I know some of the 

things I have said are controversial, but I think we all have to be 

honest and realistic about where we stand. We are a nonpartisan 

institution. We are just about trying to help you and all of us understand what is really going on and hopefully this is something 

that can start to build from this Committee on this day in this 

meeting and these discussions to a much wider process of really 

pragmatically moving ahead on some of the things that are holding 

our country back. 

Chairman RICE. Well, I appreciate your comments, Professor 

Porter. I hear people on both sides of the aisle talking about many, 

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if not all of these things frequently. It is just we do not seem to 

make progress on them, and one of the reasons I wanted you here 

was to see if you could help nudge us in that direction. 

I am going to yield now to Ranking Member Chu for her questions. 

Ms. CHU. Dr. McIntyre, you talked about the NDEMC system, 

the National Digital Engineering and Manufacturing Consortium, 

which was bringing cutting-edge technologies such as modeling, 

simulation, and analytical tools to small- and medium-size businesses that would otherwise not have access to them. In introducing these suite of services, what challenges are you facing in 

getting small companies to adopt these new tools? Do they need 

specialized personnel? Do the employees have the capability to use 

them? And also, what are the costs of these services? 

Ms. MCINTYRE. Thank you so much for the question. 

There are challenges that the small- and medium-size manufacturers face even with our assistance to use these tools. I think the 

biggest problem for them is not having the in-house expertise oftentimes to understand how to use the tools, the benefit of the 

tools, even though these tools can help solve some of the problems 

that they are facing. We oftentimes say that if we gave them all 

the HPC equipment and all the software that they needed for free, 

it probably would just sit in a closet because there is no person 

there who could actually use those tools. So getting them connected 

to the right expertise and we go to the university so we are trusted 

sources, and couple them to the university so that they can act as 

educators, trainers, and consultants to help them use those tools. 

So it is a very time-intensive process working with them to make 

sure that they have the expertise that they need. 

Ms. CHU. And the cost? 

Ms. MCINTYRE. And the cost right now, there is no cost to them 

in the pilot. The federal dollars and the OEM dollars cover that 

cost at this time. We are looking at making it affordable, trying to 

understand what that price point should be. We have had some of 

the SMEs come back a second and a third time and volunteer to 

pay, so we are moving towards a pay per service, but right now in 

this pilot it is a free cost to them, no money out, but they must 

dedicate human resources in order to do it. 

Ms. CHU. Thank you. 

Mr. McConeghy, your story about Chobani Yogurt is certainly 

most impressive. And you mentioned that Mr. Ulukaya, the founder of Chobani Yogurt used an SBA loan to purchase the commercial 

real estate that became the first Chobani factory. The SBA provides capital to companies that are unable to secure conventional 

financing. Why did the founder choose to obtain a SBA loan over 

conventional financing? 

Mr. MCCONEGHY. Frankly, I think it was the most cost-effective and it was available. He is an entrepreneur at heart. He started the business fundamentally with nothing and when you are an 

entrepreneur, capital is everything to just get started. And so the 

SBA program just was a very cost-effective program. He worked 

with his bankers at the time, Key Bank, and they introduced him 

to the program and made it work. There is not a lot of seed capital 

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available for virtually what is a startup unless you have it yourself. 

So the SBA program was very helpful. 

Ms. CHU. Thank you. 

Professor Porter, nearly two decades ago you formulated the Porter Hypothesis, which proposed that strong environmental regulations can actually spur efficiency and innovation and lead to improvements in competitiveness. Can you share with this Committee 

your theory and how we can improve competitiveness by having 

high standards? 

Mr. PORTER. Well, thank you, Ms. Chu, for that question. 

The conventional wisdom about environmental regulation historically has been that, frankly, environmental regulation inevitably 

would raise cost because if you had to be cleaner that would be 

costly. What we have learned from decades of research is actually 

that environmental impact is costly; that is if you are dumping materials or not using resources effectively, you are actually wasting 

money. And the Porter Hypothesis was really based on this insight 

which grew out of the early work that I did on competitiveness. I 

found that some of the countries that had the highest environmental performance were actually the most efficient because they 

used energy better, they used resources better, they used water 

better, they did not waste resources, they did not dump material; 

they recycled it. And so that was an insight that I think was radical but now has become widely accepted in the business community. And so business is now radically transforming the way it does 

business, the way it runs its supply chains, to try to minimize 

logistical waste and minimize energy use and so forth. 

Now, how do you achieve high environmental performance? Well, 

one of the ways you do that is you set high standards—standards 

for energy, standards for quality, and providing those standards 

are set in a sophisticated way, those standards can be very, very 

positive. High standards are a good thing. The countries with high 

standards usually do well in the effective industries. But the big 

risk is twofold. First of all, there is a difference between the standards and how you actually implement the standards. And you want 

to have very high standards but you want to implement the standards in a very efficient and very timely and very nonintrusive way. 

And the other thing about the standards is you want to make sure 

the standards are about outcomes, not about the methods you use. 

So, for example, if you tell a company to deal with the water issue, 

they have to clean up the water with a particular technology, that 

actually is going to add cost. But if you tell the company, well, you 

need to improve your water use, you figure it out and we will just 

measure whether you achieve it or not, then that stimulates innovation. 

So the debate we are having on regulation frankly is a little bit 

of a silly debate. We are debating whether regulation is good or 

bad. That is a completely silly debate. We need regulation because 

if we do not have regulation, we have bad outcomes. The real debate ought to be about do we have efficient regulation or inefficient 

regulation. There is really no debate to have there. And that is 

what I am saying and that is what our recommendation is; that we 

need to rethink the way we go about regulation. That does not 

mean reducing the standards; that means reducing the time delays. 

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That means catching up with 30-year-old process technology 

changes in the yogurt industry. 

At this moment, we are driving our medical device industry to 

Europe because the FDA is so slow in implementing new standards 

for medical devices, that medical device companies are just saying, 

look, we cannot wait. We are going to go to Europe. The European 

standards are just as high as the American standards but they just 

go about it in a more efficient way. So our challenge in America 

on regulation—in environmental regulation and other kinds of regulation—is to keep our high standards but go about applying those 

standards in a very, very cost-effective way. That is the challenge. 

And unfortunately, it is not easy. You cannot just pass one law and 

you are done. You have to go area by area by area but we have 

not yet found a mechanism to do that effectively in this country so 

far. Hopefully, we will. Hopefully, we can come out of this period 

we are in right now raising the level of debate and really understanding what the real issues are and working constructively on 

the things that we all care about, which is creating a business environment where companies can thrive, where people can hire more 

workers, where we can export more, and not thinking that it is a 

contest between business versus the worker, and not thinking it is 

a contest between wealthy people and poor people, but it is really 

a contest to be productive. 

Ms. CHU. And so Professor Porter, you mentioned that there are 

certain countries that have high standards, but is there a country 

that has high standards and also regulations that are manageable? 

Mr. PORTER. Well, you know, I think one country that I think 

is sort of an interesting model for us to consider in America is Germany. I mean, Germany has very high wages, which they have 

been able to sustain and they have very high levels of employment. 

Germany has quite high standards in many areas, but the way 

they go about applying those, implementing those standards is 

much more pragmatic, much less intrusive, and that would be true 

in a number of other European countries as well. If we look to a 

country like China, that is not what we aspire to. They have low 

standards. It is polluted. The air is horrible. People are getting 

sick, so that is not where we are going. We do not want to be like 

that. That is not going to make us competitive. We want high 

standards but we want to be pragmatic and efficient and timely in 

how we apply those standards. And in order to do that we are 

going to have to have a much more trusting dialogue between the 

private sector and the public sector in setting these standards and 

we are going to have to create new processes and methods for actually setting these standards really sector by sector, industry by industry. That has been very hard for us to achieve historically over 

the last 10 or 20 years. 

Ms. CHU. Very interesting. Thank you, Professor Porter. And I 

yield back. 

Chairman RICE. To Mr. Hanna. 

Mr. HANNA. Thank you. 

Dr. McIntyre, Mr. McConeghy, and Mr. McKissick, do you agree 

or disagree with Mr. Porter’s statements here today? 

Mr. MCCONEGHY. I agree. 

Mr. MCKISSICK. I agree. 

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Mr. HANNA. All yeses. Me, too. 

All of this being said, I want to ask you a few things. You are 

familiar with a gentleman, Michael Spence. 

Mr. PORTER. Michael Spence is one of my coauthors. 

Mr. HANNA. I am glad to hear that. Someone I enjoy and his 

belief in tradable goods. 

The middle class is shrinking, incomes are down, taxpayers are 

not there because they are simply not making enough money. A 

couple things. What is the future like if we stay on the path we 

are on? Because you have already indicated in your statement that 

we are way behind in the sense that we have taken, I guess, some 

things for granted and the rest of the world is passing us by, doing 

exactly what we do, but doing it in many ways as well. STEM education, there is much talk about science, technology, engineering, 

and math. Mr. Spence is particularly written about that a great 

deal. And how we can change the dynamic. I mean, I have read 

what you wrote here but what you say is so poignant to me and 

it is something everybody I think in this Congress should hear said 

as beautifully as you have said it. I would also like to give a little 

more time to talk about maybe Michael Spence’s work and what 

you think about his thesis in terms of tradable, value-added, highly-intellectual properties being that place that the rest of the world 

goes to because we cannot make what we used to make as well and 

be who we want to be, which is a thriving middle class who once 

again become taxpayers and kind of live that ‘‘American dream.’’ 

Mr. PORTER. Well, thank you for that question. Mike Spence 

and I are dear old friends and I am very proud of him for his tremendous contribution. 

The point he makes about traded and nontraded is something I 

actually skipped earlier and it grows also out of the work I have 

done. When you look at an economy like the United States, there 

are really two economies there. One is the local economy, and there 

are a certain number of industries that are really existing to serve 

the needs of the population living in California or America. So let 

us take health care. The health care industry is not a traded industry. It is a local industry. Health care services are provided to the 

people who live near the health care provider. The same is true 

with retailing. The same is true with housing and real estate. 

There is a big local economy. In fact, about two-thirds of all the 

jobs are local. They are not traded. They are serving the local region. 

The other one-third of the jobs are traded. Those are in industries like automobiles where we not only serve the local market but 

we also serve the international or global market in that particular 

field. Those are traded goods. The local economy is very important 

and it accounts for a lot of jobs, but the real driver of prosperity 

in an economy is the traded economy. It is our ability to compete 

in those fields where we can specialize in areas where we are really 

unique and we can then expand and grow those industries and 

serve the world. So Hollywood is a great example. We serve the 

world in video entertainment and movies. That is a traded good. 

Software. We are a global player in that traded industry, and those 

industries serve the world. They do not just serve the United 

States. 

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Now, the stunning statistic, Mr. Hanna, is over the last 20 years 

of the jobs that America has created, zero net jobs have been created in the traded economy. Zero. And I think Mike Spence, 

through his work, really came to the same conclusion. All the jobs 

that we have created over the last 20 years, net jobs, have been 

in the local economy. 

Mr. HANNA. He calls it service-oriented. 

Mr. PORTER. And it is service-oriented. It is some goods but 

mostly service-oriented. And so this is just a further sign that 

something is broken here, that we have not created enough of an 

effective enough business environment so that that traded work 

where we have to compete can actually be successfully done competitively here. So I think it really reinforces the point that I am 

making. 

Now, the point you made about the middle class is a profound 

point. In America, the problem we are having is not with the people who have high levels of skill and high levels of education. They 

are doing actually quite well. The global economy is a net plus for 

them. The problem is the people that have a high school degree 

that do not have special skills. They are very dependent on the 

competitiveness of our business environment. If we have a crummy 

business environment, then the person with just average skill, that 

job is going to go because you can get that job done cheaper somewhere else. 

So what we have to do is we have to have such an efficient business environment that people without really unique high-level 

skills can be employed and be productive in America. And that is 

where we really lost out. And that is putting us on a profoundly 

dangerous course because if upper income people do well—usually 

because they have really high and unique skills—and the middle 

and lower income people do poorly and we have a growing divide, 

it just tears our society apart. And it erodes the support for business. And so it starts leading to policies that really work against 

business and then that just makes it worse and worse and worse 

and worse. So what we have got to do is we have got to get this 

flywheel reversed and moving in the other direction. If we can improve our business environment, there will be more investment 

here. Not only will the high skilled people do well but the middle 

skill people. You know, Apple was a brilliant, innovative company 

but they made nothing in America. So we did not get all the benefits of that innovation because we did not have a competitive 

enough business environment so that they could make anything in 

America cost-effectively. But what if we had a better business environment? Then we would not only get Apple’s brilliance and innovation and patents, but we would also get a lot of manufacturing 

opportunities that would spawn off of those innovative companies. 

So this is kind of the fix that we are in. The good news is that 

the really, really hard stuff, the hardest thing that we have to fix 

is K-12 or public education. Finally, after decades of work I think 

there are some bright signs there. We are working on that. The 

reason we did not put it on our list is because it is really not fundamentally a federal issue, but these other areas, these eight 

areas, we can fix those areas. They are not rocket science and there 

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is a lot of common ground. And the question is how do we get 

enough weight and energy behind this to actually get it done. 

Mr. HANNA. Thank you. 

Chairman RICE. Mr. Payne. 

Mr. PAYNE. Thank you, Mr. Chairman. 

This has really been an extraordinary panel in terms of your testimony. And you know that when two or three of your questions 

have been answered before you ask them. So I would like to thank 

you for that. 

Mr. Porter, in your submitted presentation you also identified 

the need to responsibly develop the American shale gas and oil reserves. With the similar environmental concerns as oil drilling, do 

you agree that the fracking should undergo the same amount of 

regulation or at least improve regulations such as measuring and 

reporting air pollution and minimizing water use and improving 

well casing and cementing? 

Mr. PORTER. Mr. Payne, thank you for that question. 

Everybody needs to know that the great windfall that we have 

got in America is the shale oil and gas. It is transformational. It 

is going to allow us to do things in America with a competitive advantage that we could have never dreamed of before. It is going to 

allow us to over time diminish our need to import oil which has 

been a massive part of our negative trade balance for decades. So 

it is a windfall. 

It does not come easily because there are legitimate environmental issues that have to be addressed. That said, there are rapid 

improvements in technology, and if we put in place the right kind 

of regulatory framework that requires reporting and inventory and 

best practices in terms of technology and utilization of water and 

aquifers and so forth, I am confident from everything I know and 

from all we have studied that we can develop this resource in a 

very responsible way that will adequately protect our environment. 

Again, if we approach the regulatory process pragmatically and 

with common sense, without emotion, without extreme positions. 

I know a number of the companies in the field and, for example, 

Baker Hughes is one of our great American oil field service companies. They have come up with breakthrough technologies to minimize water use to reduce the risk of some of the environmental impacts. So the innovation machine in America is working but we 

need an overall regulatory framework here. I am confident we can 

put one in place but yet we do not have one now and that has created a lot of uncertainty about whether this resource can be developed, how it can be developed, whether we should export gas or 

not, and right now we are kind of stuck in that terrible situation 

where we have got a great asset but really we are not moving forward in putting it into production. 

Mr. PAYNE. And to the rest of the panel, each one of you, if you 

could just address the impact that the education system has had 

on your sectors, and do you have recommendations to address the 

negative impacts? 

Ms. MCINTYRE. Thank you for that question. 

As far as science and engineering, education in the U.S., we certainly have excellent universities and are doing quite well there. 

The pipeline for students going into science and engineering is a 

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concern that we, in fact, are able to produce a number of engineers 

and scientists that we need in order for the innovation stream to 

come forward at this point. For high performance computing, it is 

a real challenge. The expertise that I talked about not having for 

small- and medium-size manufacturers, there are not a lot of people migrating towards education that would help them to learn how 

to use high performance computing. So we need a way of getting 

younger people to understand the benefits of using this type of 

computing technology and the education that should undergird the 

use of that technology. But there are universities now looking at 

how can we do this, how can we educate the professionals now to 

use these tools. 

Mr. MCCONEGHY. Congressman, thank you. 

I guess I would offer two things. Certainly, we were founded by 

an immigrant to the country, and having good common sense immigration, certainly educating foreign students in our fine universities and then inviting them to leave probably does not sound real 

smart to a guy like me. 

Secondarily, business has to cooperate with universities to drive 

practical education and certainly, we have worked with a number 

of the colleges in our area in New York State and with our recent 

move to Idaho around manufacturing techniques and technologies, 

and I would say both of those things I would put at the top of the 

list. Immigration, certainly starting with those students that are 

here studying and inviting them to stay, not inviting them to leave, 

and clearly business has to work with the institutions in this area. 

Mr. MCKISSICK. Thank you, Congressman Payne. 

In the northwestern corner of South Carolina, we are quite 

blessed because we have an outstanding K-12 system in our community. However, I would say South Carolina’s single greatest 

problem is K-12 and clearly we must make improvements there if 

we are to advance as a state. 

Regarding technical training, South Carolina is incredibly 

blessed to have an outstanding technical education system, and 

frankly, when Senator Ernest F. Hollings was the governor of 

South Carolina in the early ‘60s, he led an effort to really drive 

great investment in technical training, and it has been growing and 

thriving and changing with industry needs and changing as our 

economic dynamics have changed ever since. So that is quite a 

positive for us. Higher ed in South Carolina is terrific, especially 

in the region that I live. And I am biased. I am a Clemson University fan. But I do not think there is any doubt but that we must 

focus on K-12 in our state and in our country. 

Mr. PAYNE. Mr. Porter, any thoughts? 

Mr. PORTER. Well, I think the panel has made excellent contributions, and I have little to add. I would add a few points. 

I think at the university level, the U.S. historically had more 

university graduates as a percentage of the workforce than any 

other country. Today, we are way back in the pack, so I think we 

still have a higher education issue, and the issue there is more accessibility and affordability, and also the issue of getting people 

into the STEM pipeline as Dr. McIntyre was talking about. There 

are some excellent efforts in that area; we can do better. 

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There is a critical need in the middle skill area. Lots of promising efforts, including South Carolina. The K-12 problem is a profound problem and that is probably the subject for a whole another 

discussion, but Harvard Business School is working with the Gates 

Foundation and Boston Consulting Group to do kind of a comprehensive assessment of what we have learned about improving 

K-12 education. There are a lot of success stories and we would 

love to share that work with you as it rolls out. 

Mr. PAYNE. Thank you, Mr. Chairman. I yield back. 

Chairman RICE. I am going to ask one more question which is 

going to open it up to another round if anybody else does, but this 

is the most important thing to me as far as I am concerned. Our 

American competitiveness in jobs is the most important thing. If 

we can make progress on this front, if we can get it resolved, I 

think it solves a lot of other problems. 

Mr. McKissick, I want to ask you—could you put that slide back 

up, the slide that was up earlier about the quadrants? 

Mr. McKissick, do you know what your effective tax rate is at 

your company? 

Mr. MCKISSICK. Yes. Ours is in the high 30 percent range. 

Chairman RICE. You had mentioned earlier—I am an ex-lawyer 

by trade and they say never ask a question if you know the answer, 

but I do not know the answer to this and I am treading on dangerous ground here. 

You said earlier that you worked with partnerships with people 

in Mexico to do part of your manufacturing. Was the effect of that 

to get a lower tax rate in Mexico at any point? 

Mr. MCKISSICK. No. It was more about partnering with companies that had state-of-the-art technology and a desire to be best in 

class. 

Chairman RICE. Right. 

Mr. MCKISSICK. And it was also to create a new outlet for our 

fabrics. And in Mexico, unlike most NAFTA models, most NAFTA 

models are such that you do a level of production in Mexico and 

it comes back to the U.S. market. Not in our case. In our case, our 

fabrics stay in Mexico. We spin yards. We weave fabrics. Those fabrics are finished in Mexico, cut and sewn in Mexico. Outstanding 

designs are applied to those fabrics, and they have got an incredible distribution system that goes to the Mexican consumer. So to 

me it is a wonderful example of how NAFTA should work. 

Chairman RICE. All right. Let me ask you this. You are in the 

high 30s tax rate here in the United States. Ireland is 13. Would 

you be more competitive at a 13 percent tax rate worldwide? 

Mr. MCKISSICK. Well, absolutely. And you ask, well, what do 

you do with the money. Well, it goes right back into plants. I mean, 

that is seed capital. If you are a private company, and we are, that 

is seed capital to grow your business. So there is absolutely no 

question but that you can buy new technologies. You can get better 

in everything you do. 

Chairman RICE. If we cannot get our ports dug out for all of our 

environmental regulations it takes so long to work through and as 

a result of that you pay 10 percent more in transportation costs 

than your competitors worldwide, are you more or less competitive 

as a result of that? 

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Mr. MCKISSICK. There is no doubt that Charleston Harbor is 

a competitive advantage to every manufacturer in South Carolina. 

You know, if you look at the resources of our wonderful state, 

Charleston Harbor has a huge advantage and it is critically important that that harbor be dredged to be able to access so the biggest 

of ships can come in there and ship product in and ship product 

out. 

Chairman RICE. And if we close down all of our coal plants and 

the price of our utilities go up 20 percent, are you more or less competitive worldwide? 

Mr. MCKISSICK. Well, I agree with Dr. Porter in that one of the 

phenomenal advantages we have in this country are the cost of energy, especially if you are a manufacturer like ours. We use a lot 

of compressed air. That is what we do. When you spin yarn and 

weave fabrics, you use a lot of compressed air. We have got such 

a leg up on our foreign competitors on our utility costs. We have 

got one of the best utilities I think on the planet that services our 

area, Duke Energy. They are fantastic. But if we do not understand 

the criticality, the critical importance, the role that they play in our 

economy, we are going to hurt ourselves. They are laying the golden egg, and I think we have got to protect that and we have got 

to leverage our energy resources. 

Chairman RICE. Mr. McConeghy, I am going to ask you the 

same questions. 

Mr. MCCONEGHY. Okay. 

Chairman RICE. Do you know your effective tax rate? 

Mr. MCCONEGHY. I do know our effective tax rate. 

Chairman RICE. What is it? 

Mr. MCCONEGHY. Our effective tax rate is very low, basically, 

because of the significant investments that our founder has chosen 

to make in factories where the bonus depreciation has knocked a 

lot of income off our books in the short term. But over the long 

term—it is just a timing question for us. We are actually a sub Scorporation, so I expect our tax rate will be in the high 30 percent 

in the very near future. 

Chairman RICE. All right. And you talked about operations in 

Canada, and I was not sure if you continued with that. Did you actually complete the new facility in Canada? 

Mr. MCKISSICK. We did not complete it because of the barriers 

that we found fundamentally in the trade system that protected 

the Canadian dairy industry. 

Chairman RICE. Do you have any other operations offshore? 

Mr. MCKISSICK. Our international headquarters is based in 

Amsterdam, and we own a business in Australia, and we are exporting product from the United States to the U.K. at this time. 

Chairman RICE. Do you produce product in Amsterdam? 

Mr. MCKISSICK. We produce product in Australia only at this 

time and the U.S. 

Chairman RICE. Why is your international headquarters in Amsterdam? 

Mr. MCKISSICK. It is the best place to set up an international 

business? 

Chairman RICE. Why? 

Mr. MCKISSICK. Because of the taxes. 

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Chairman RICE. Okay. 

If we cannot get our ports dug out, if it takes 14 years to get permission to dig out the Miami port and as a result transportation 

costs to the United States are 10 to 20 percent higher than other 

places in the world, does that hurt or help your competitiveness 

worldwide? 

Mr. MCKISSICK. I think it is pretty straightforward. It hurts. 

Right? You know, for us we know that cost is an important factor. 

Most of our product actually comes from the U.S. obviously with 

dairy being our number one input. We actually recently on-shored 

some manufacturing because of the logistics costs. We actually took 

manufacturing from Central and South America and brought it 

back to the United States because of costs. So we pay close attention to costs, as all business people do all the time. And it is critical 

that we do it effectively, that we do not just run over the environment. Nobody thinks that that is the way to go. Dr. Porter is absolutely right. 

We have had a situation in New York recently. We want to bring 

some cutting-edge technology and we have spoken to the folks in 

the New York government. We said, ‘‘Hey, we want to do this, but 

we are going to generate a lot more water. It is very clean but it 

is above the quantities.’’ And they said, ‘‘Hey, we can help with 

that so long as it is clean.’’ That type of change in headset is critical; not just to have arbitrary standards because that change will 

drive our costs down and make us much more competitive. 

Chairman RICE. Thank you, sir. 

Mr. Porter, I just want to say do you have anything to add to 

that? 

Mr. PORTER. Well, you know, I think on the corporate tax issue 

this is the number one issue that we heard from the thousands and 

thousands of business people that we surveyed—give us a more 

reasonable corporate tax structure that is more in line with other 

countries. We will not then have to play all these complicated 

games to try to figure out how to move activities and minimize 

taxes by being complicated. We have great American companies 

with headquarters in Switzerland—world headquarters in Switzerland right now, and every time I see that it makes me want to cry 

because that is simply happening because we are just too far out 

of line. If we could bring down that rate to let us call it a median 

level. It does not have to be low, it does not have to be Ireland, just 

a median level, and then do the trade of eliminating a lot of the 

deductions and special deals that have been made over the years, 

I think business is ready to do that deal. And I think a lot of people 

would breathe a big sigh of relief if we could move in that direction. 

Now, how to deal with the territorial system is much more complicated. I think there is room for compromise. I am not a purist. 

Jumping to a pure territorial system now may not be feasible. Let 

us find movement in that direction that will make progress. Again, 

the system we have now is the one that is creating all this complexity and tax shifting and transferred pricing. We have created 

that ourselves. That did not happen as an act of God. We created 

this complex world that we live in now from a tax point of view, 

and I think most business people now have understood that that 

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is just not the way to go. It is not good for business. The question 

is can we move in the right direction? Can we be pragmatic? 

We also, Chairman, surveyed the general public about competitiveness—a sample of the general public, 1,000 members of the 

public, a very carefully selected sample to be unbiased in every possible way. And their number one, of all the eight things on the list 

that I have that you have seen earlier, of all the eight things, the 

one that had the most support from the general public was corporate tax reform. Because I think intuitively these people understood that the current system is not working for America. 

Chairman RICE. I want to ask one more question and then I will 

shut up. 

Go back to that other slide. At the top right, things where we are 

strong and improving—universities, entrepreneurship, firm management, property rights, clusters, innovation, capital markets— 

most all those things are in the realm of the private sector. Not all, 

but almost every one of them; right? 

Mr. PORTER. A lot of them. 

Chairman RICE. Those are the things we are doing great at. Bottom left, things we are not doing well. First, tell me where this section of quadrants came from. How did you derive this? 

Mr. PORTER. Well, this quadrant came from—we have done two 

large-scale surveys of all Harvard Business School alumni, and 

those alumni are in general in relatively senior management positions, and they are actually spread over the world. So this is a mixture of what our alumni living in Germany think and our alumni 

living in America think. And this simply tabulates the survey data 

from our alumni. 

Chairman RICE. Okay. So is this like 35 people or is it 100 people? 

Mr. PORTER. This is more than 10,000 people. We have done it 

twice and gotten basically the same answer twice. 

Chairman RICE. All right. So top right, private sector, doing 

pretty good. 

Mr. PORTER. Right. 

Chairman RICE. Bottom left, legal framework, regulation, tax 

code, macro policy, political system. 

Mr. PORTER. That is pretty much sitting right around us where 

we are speaking now. 

Chairman RICE. Thank you, sir. 

Ms. Chu. 

Ms. CHU. Well, I just have one question, which is that one of the 

pilots—and this is for Dr. McIntyre—one of the policy recommendations put forward by your council, the Council on Competitiveness, 

is to ensure lower cost, easy access to high quality education, and 

training for all Americans. And on July 1st, the student loan rates 

doubled from 3.4 to 6.8 percent for over seven million students. 

What impact will this have on students who already face high education costs? And how could this possibly affect the American labor 

force? 

Ms. MCINTYRE. The increase in the rate to pay back loans is 

going to have an effect on time to degree completion for students, 

many of whom have to work in order to sustain themselves. They 

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may not take out as large a loan in order to go to school, and so 

they will have to work more. So it could impact time to degree. 

It is going to have an impact on those who are able to go to college or to universities or even two-year colleges because of not 

being as affordable as it used to be. So it is a concern. I think we 

will see some of those effects I think sooner rather than later in 

terms of the number of loans. And then decisions will be made because of that. 

Ms. CHU. Thank you. I yield back. 

Chairman RICE. Mr. Hanna. 

Mr. HANNA. No. 

Chairman RICE. I want to thank our witnesses for their testimony and participation today. As we have heard today, restoring 

America’s competitiveness is imperative to our country’s well-being. 

I am encouraged by the firms who have managed to remain competitive despite the obstacles and changes needed that are clearly 

outlined by our witnesses. As I stated at the outset, I am committed to reviving our nation’s competitive edge and will continue 

to work toward that goal. The real-life experiences shared by the 

businesses and solutions proposed by economic experts who are 

dedicated to our nation’s long-term success will help our nation’s 

political leaders better understand our current environment and 

make wiser choices for the future. 

I ask unanimous consent that the members have five legislative 

days to submit statements and supporting materials for the record. 

Without objection, so ordered. 

Thank you very much, panel, for being here. This is the best 

panel I have had since I have been in Congress. I have truly enjoyed it. These are really fundamental things that we need to work 

on and I appreciate so much your time. The hearing is now adjourned. 

[Whereupon, at 3:17 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

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"Restoring U.s. Competitiveness" 

Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business Schoo! 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

House Committee on Small Business 

United States House of Representatives 

Restoring u.s. Competitiveness 

Michael E. Porter 

Bishop William Lawrence University Professor 

Harvard Business School 

July 9,2013 

Washington, DC 
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"Restoring U.S. Competitiveness" 

Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

Contents 

Executive Summary ............................................................................................................................ 3 

Harvard Business School's U.S. Competitiveness Project: Overview ..................................................... 6 

U.S. Competitiveness Project: Highlights .................................................................................................. 7 

Future Agenda: Taking Ideas to Action ................................................................................................... 10 

Profile: Michael E. Porter ................................................................................................................. 12 

HBS Research and Reports on U.S. Competitiveness .......................................................................... 34 

2 
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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business Schoo! 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

Executive Summary 

WHAT IS COMPETITIVENESS? 

A country such as the United States is competitive if the companies operating there can 

compete successfully in the global economy while simultaneously raising living standards for 

the average American. 

To be competitive over time, the United States requires a business environment that 

enables businesses and citizens to be highly productive over the long run. 

Increasing productivity over the long run should be the central goal of economic 

policy. 

THE U.S. IS FACING A LONG-TERM STRUCTURAL PROBLEM 

The United States is facing a long term competitiveness problem, not just a cyclical downturn. 

The challenge is competitiveness, not jobs per se. 

A number of disturbing trends emerged well before the Great Recession, pointing to 

a structural problem. 

The American jobs machine began sputtering well before the Great Recession. 

Industries exposed to international competition saw almost no job growth in the 

1990s and 2000s. 

The U.S. labor force participation rate peaked in 1997, stagnated and started to fall 

in 2001. It has fallen to a level not seen since the early 1980s. 

Real household income began stagnating well before the Great Recession. 

Since 2008, the United States has fallen in all competitiveness and business rankings, 

relative to the rest of the world. 

AMERICA'S CORE STRENGTHS 

HBS research shows that the United States retains a series of core strengths to build upon. 

These include: 

Entrepreneurship: The United States offers a vibrant environment for 

entrepreneurship, such as by providing access to capital for high-quality ideas, ease 

of setting up new businesses and a lack of stigma for failure. 

Innovation: The country's innovation infrastructure remains strong with high-quality 

scientific research institutions and the availability of scientists and engineers. 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July9,2013 

Universities: The country has many high-quality universities with strong linkages to 

the private sector. 

Clusters: There are many strong clusters-that is, geographic concentrations of 

related firms, suppliers, service providers, and supporting institutions with effective 

collaboration. 

Capital markets: The quality of capital markets remains high especially in terms of 

ease of firm access to appropriate capital and the allocation of capital to mostprofitable investments. 

Property rights: The United States enjoys high protection of physical and intellectual 

property rights and low corruption. 

SERIOUS WEAKNESSES IN THE U.S. BUSINESS ENVIRONMENT 

The United States is facing a series of severe business environment weaknesses. These 

include: 

Tax code: The national tax code is complex 

Legal framework: An inefficient legal system results in high legal costs and slow 

adjudication. 

Regulation: Ineffective and unpredictable regulations place a heavy burden on firms. 

Macroeconomic policy: The government's budgetary, interest rate and monetary 

policies are unsustainable. 

K-12 education system: The United States does not offer universal access to highquality education. The curricula do not prepare American students for productive 

work. 

Political system: The ineffectiveness of the political system was identified as the 

single greatest weakness affecting U.S. competitiveness. 

THE IMPACT ON SMAll BUSINESSES 

Small business is disproportionately disadvantaged by eroding U.S. competitiveness. 

Small business is crucial for job generation and important for income and wealth for all 

communities. 

Small businesses are disproportionately affected by weaknesses in the u.s. business 

environment. 

The recent focus on providing tax benefits and preferences for small business will be 

ineffective in the long term. 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

The best way to support small business is to improve the overall U.S. business 

environment. 

RESTORING U.S. COMPETITIVENESS 

Restoring competitiveness will require a strategic agenda involving multiple stakeholders. 

Addressing the challenge will require taking a holistic approach to competitiveness, 

not one focused on individual policy areas. 

The United States needs a national strategy to improve competitiveness. 

A strategy requires long-term, multiple-decade perspective informed by America's 

competitive position today. 

Washington has a crucial role, but so do states and regions. Policymakers have to 

ensure a healthy U.S. business environment in which companies can grow, innovate, 

prosper and improve productivity-and in the process provide rising wages and 

improving living standards to workers in America. 

Businesses can and should also playa major role in improving U.S. competitiveness. 

THE FEDERAL COMPETITIVENESS AGENDA 

Our work has identified eight strategic areas where Congress and the Administration must 

take important steps to restore competitiveness. 

The agenda 

1. Ease the immigration of highly skilled individuals. 

2. Simplify the corporate tax code. 

3. Tax overseas profits earned by American multinational only where there are earned. 

4. Aggressively address distortions and abuses in the international trading system. 

S. Simplify and streamline regulation. 

6. Improve logistical, communications and energy infrastructure. 

7. Responsibly develop American shale-gas and oil reserves. 

8. Create a sustainable federal budget, combining greater revenue and less spending. 

Each of the eight areas addresses a critical weakness, can transform America's 

economic prospects over a 3-5 year period and enjoys widespread, bipartisan 

support. 

While there are numerous other areas where improvement is possible, these eight 

areas comprise America's crucial priorities today. 

Progress in multiple areas over the next year will have a transformational impact on 

business sentiment and confidence to invest. 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

Harvard Business School's U.S. Competitiveness Project: Overview 

Harvard Business School (HBS) launched the u.s. Competitiveness Project in 2011 as a research-led, nonpartisan, multi-year effort to understand the state of u.S. competitiveness as well as the interrelated 

factors that shape and improve competitiveness. Led by Project co-chairs HBS Professor Michael E. 

Porter and Professor Jan W. Rivkin, the u.S. Competitiveness Project now engages a group of more than 

25 HBS faculty members and colleagues from other leading institutions including Harvard School of 

Education, Harvard Kennedy School, and MIT. 

The Project defines competitiveness as the ability of firms operating in the u.s. to compete successfully 

in the global economy while supporting high and rising living standards for the average American. The 

Project aspires to mobilize the business community and policymakers to address the challenges to U.s. 

competitiveness. To galvanize the business community, the Project gathers best practices and data and 

disseminates it to business leaders to help them understand the role they can and should play in 

improving U.S. competitiveness. To mobilize policymakers, the Project focuses on data and research in 

policy areas that strengthen the environment for doing business in the United States. 

HBS research on U.S. competitiveness is particularly relevant and significant for small businesses. The 

factors that strengthen U.S. competitiveness-innovation, entrepreneurship, clusters, and property 

rights-help small businesses in the U.s. flourish and prosper. The factors that weaken u.s. 

competitiveness-legal complexity, regulatory burdens, an inadequate K-12 education system, a 

gridlocked political system-cripple small businesses and stunt their growth. 

Factors that weaken or erode the state of U.S. competitiveness hit small businesses hard. The fact that 

the U.S. economy is suffering from long-term, structural issues-and not just a cyclical downturn-is of 

particular concern for small businesses. While the overall economy might show signs of a cyclical 

recovery, this is not a tide that raises all boats equally. The long-term structural issues that continue to 

beset the U.S. economy are a drag on small businesses. These negative forces hold back and curtail the 

prosperity of small businesses, and reduce their impact as potential engines of growth for the nation. 

6 
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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

U.S.l'nltnt1,pt;tl"",",,,,,,, 

HBS faculty members prioritized research and data collection that provided insights into the structural 

long-term issues besetting U.S. competitiveness. They created a definition for competitiveness and 

identified the key areas that are pertinent to strengthening the u.s. as a location for business. These 

include: innovation, manufacturing, entrepreneurship, company location choices, firm governance, local 

business ecosystems, human capital, K-12 education, fiscal policy, tax policy, capital markets, 

environmental sustainability, democracy, and international trade. Unprecedented for any business 

school, HBS has invested effort and resources in bringing the research to a wide audience of business 

leaders and policy leaders in an effort to influence the national dialogue on competitiveness and to 

provide fact-based frameworks for change. The Project outputs so far include: 

HBS CEO Summit on U.S. Competitiveness, November 2011: To engage business leaders in the issues 

surrounding u.S. competitiveness and solicit guidance for the Project's research, HBS convened a 

gathering of 100 U.s business leaders in November 2011. Many of these leaders remain engaged in U.S. 

competitiveness research and want to commit to improving U.S. competitiveness. 

"Prosperity at Risk," HBS Survey on U.S. Competitiveness. January 2012: To capture the perceptions of 

the global business community on the current state and trajectDry of U.S. competitiveness, HBS 

conducted the first ever survey Df all HBS alumni worldwide. Nearly 10,000 alumni responded, making it 

the largest research-based survey of HBS alumni in the SchDol's history. The survey was developed to 

solicit concrete, specific recommendations that policymakers and business leaders could fDllow to 

improve U.s. competitiveness. The survey report, "Prosperity at Risk" was distributed to more than 

75,000 business leaders across the country, as well as media, policymakers, civic leaders and not-forprofit leaders, 

"Restoring U.s. Competitiveness." Special Issue of Harvard Business Review, March 2012: The research 

undertaken by the scholars and practitioners contributing to the U.S. Competitiveness Project was 

published in a special issue of Harvard Business Review (HBR) devoted to U.S. cDmpetitiveness, in March 

2012. Faculty members contributed more than a dozen articles in the special issue titled "Restoring U.S. 

CDmpetitiveness." The special issue was distributed to Harvard Business Review's 203,000 subscribers 

and a projected 29,000 others through newsstand sales. Copies of the issue were also included in a 

bundled mailing sent to 11,500 HBS alumni in March 2012, and an additional 5,000 copies have been 

distributed to business and policy leaders acrDSS the country. 

"Paths Forward," a NatiDnal Campaign tD Engage Business leaders on U.S. Competitiveness (March 

20l2-Now): For the first time ever, HBS faculty as a team stepped Dutside the BDston campus tD 

promote their research to a national audience of business leaders across the U.S. Since March 2012, HBS 

has conducted seven Paths Forward events across the cDuntry. Each event was held at a major 

econDmic center of the cDuntry and convened HBS alumni, business leaders, elected Dfficials and local 

organizations. At each event, HBS faculty members presented research Dn U.S. competitiveness and 

sparked dialogue and discussiDn on cDmpetitiveness DppDrtunities and issues at the local and regiDnal 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

level. HBS has held Paths Forword events in New York, Washington D.C, Charlotte N.C., San Francisco, 

Chicago, Detroit and Boston. Nearly 3,000 people attended the events, with 30 percent in leadership 

positions such as Chairman, Chief Executive Officer, President, Executive Directors or Partner, Managing 

Director, Managing Partner, Vice-President and Founder. 

"Commitments" from Business leaders (March 2012-Now): Each Poths Forward event ends with a "call 

to action." HBS faculty members request attendees to reflect on the commitment they or their company 

can make to improve U.S. competitiveness. Designed to spur action, commitments include helping a 

local community college improve its curriculum, helping small businesses grow, building a local supply 

chain and participating in a regional cluster strategy. The list of commitments provides HBS with a 

framework for future research on specific areas of u.s. competitiveness. 

Database of Best Practices for Business to Improve Competitiveness, June 2011: HBS engaged a leading 

international consulting firm on a 12-week project in 2012 to deepen the Project's understanding of how 

companies might already be investing in improving U.S. competitiveness. HBS is building an inventory of 

efforts that companies in the U.S. are undertaking to invest in their local communities. So far, this effort 

has yielded a rich treasure trove of more than 500 potential case studies and best practices, identifying a 

large number of companies and organizations that are doing innovative, proactive work to improve skills 

(2S6 examples), upgrade supporting industries (119), support innovation and entrepreneurship (56), 

reshore business activity to the U.S. (58), bolster regional strength and participate in cluster-based 

activities (53), adopt management best practices (32), and eschew individual company lobbying to 

advocate business-wide improvements (4). 

"Competitiveness at the Crossroads," the 2012 HBS Survey on U.S. Competitiveness, February 2013: In 

September 2012, HBS conducted the second alumni survey on U.S. competitiveness. In addition, the 

survey was also administered to 1,025 members ofthe general public. The survey not only provides an 

updated view of the U.s. business environment, but also illuminates specific actions that business 

leaders and policymakers can take to improve U.s. competitiveness. For example, across the political 

spectrum, business leaders and the general public strongly called on the President and Congress to put 

the federal budget on a sustainable path, reform the corporate tax code, improve America's 

infrastructure, address distortions of the international trading system and craft a responsible framework 

for developing new energy sources. 

Influencing the national dialogue on competitiveness (January 2012-Now): HBS is investing in a national 

media and awareness campaign to promote its non-partisan data and research on u.s. competitiveness. 

The Project was featured in over 200 articles in top-tier publications including The Economist, Fortune, 

Financial Times, Wall Street Journal, Forbes, Time, Reuters, USA Today, Bloomberg Businessweek, 

Chicago Tribune, Los Angeles Times, The Huffington Post, The Washington Post and Politico. 

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Testimony by Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School 

House Committee on Smal! Business, United States House of Representatives, 

July 9, 2013 

• Professor Michael Porter and Professor Jan Rivkin collaborated on a thought-piece on the role of 

business in promoting competitiveness. The article "What Business Should Do ta Restore U.S. 

Competitiveness" was published in Fortune on October 29, 2012. 

• Professor Michael Porter and Professor Jan Rivkin also worked together to develop an eightpoint plan for policymakers to restore u.s. competitiveness. An article based on their findings 

"What Washington Must Do Now" appeared in The Economist's special issue "The World in 

2013" on November 22, 2012. 

• Over 12 television segments were broadcast on the Project on CBC, CNN, FOX, and MSNBC. 

• Research by more than a dozen HBS professors has been mentioned in top-tier articles and 

influenced the national dialogue and debates on U.S. competitiveness issues. 

• Five of the top 10 Google results of "U.S. Competitiveness" are related to the HBS U.S. 

Competitiveness Project. Seven ofthe top 10 Google video search results of "U.s. 

Competitiveness" are related to the HBS u.s. Competitiveness Project. 

• The Project website which showcases research, data and video content, has had more than 

90,000 page views. While 67 percent of the visits are from people within the U.S, nearly onethird come from outside the U.s, pointing to the global interest in the subject of U.5. 

competitiveness. 

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Future 

"Restoring U.S. Competitiveness" 

Testimony by Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business Schoo! 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

Ideas to Action 

HBS continues to invest in research and data collection on U.S. competitiveness. In 2013, faculty 

members seek to go deeper into "taking ideas to action." In this phase, HBS research will focus on best 

practices on the role of business in improving U.s. competitiveness. 

The six areas that HBS faculty members are currently working on are: 

The role of business in working with educators to transform K-12 education: America's K-12 education 

system is undermining our national competitiveness. To address this critical issue, HBS professors Jan 

Rivkin and Kevin Sharer and Senior Fellow Allen Grossman are partnering with the Bill & Melinda Gates 

Foundation and The Boston Consulting Group to examine how business can help educators accelerate 

change in K-12 education. The faculty members are currently working on: a survey of district leaders; a 

booklet to help business leaders better understand America's schools and why the conditions are now 

right for transformational change; and a playbook of specific ways business leaders can engage with 

educators to create fundamental and lasting change. HBS will convene a select group of business and 

education leaders in November 2013 to learn from past business efforts, help focus the business 

community on a handful of priorities and form a plan to engage more business leaders to action, in 

partnership with educators. 

The role of business in local supply chain development: The mass migration of manufacturing away 

from the United States has hampered the country's ability to innovate in cutting edge areas like flatpanel displays, advanced batteries, machine tools, precision bearings, optoelectronics, solar energy and 

wind turbines. To reverse the large-scale outsourcing of products and processes, American firms will 

need to invest in building local suppliers who can offer quality as well as scale of manufacturing. 

Professor Michael E. Porter and Professor Gary P. Pisano are collaborating on a research-led effort to 

understand the current state of local supply chain development in the United States and identify best 

practices for building strong supply chains within the United States. This effort will include identifying 

and researching case studies on American companies that have invested in building a strong and supple 

supplier base within the country. 

The role of business in closing the middle skills gap in America: With nearly 3.8 million job openings 

posted in recent times and more than 11.8 million unemployed, there is clearly a skills mismatch in 

America-especially in middle skills. Professor Joseph B. Fuller is developing a data-driven model to 

understand the middle skills gap across the United States, by geography as well as by industry. HBS is 

partnering with the international consulting firm Accenture to identify data sources, develop a national 

and regional heat map of middle skills gaps across America, and identify best practices of companies 

investing in closing the middle skills gap. The effort will also include regional pilots to bring the data to 

the country's largest middle skills employers, educators such as community colleges, as well as local and 

regional policy leaders. The goal will be to provide stakeholders within a region with all the data they 

need to work together collaboratively to close the egregious middle skills gaps in their region. 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

The role of business in infrastructure, communications and transportation: America needs to get 

moving again and that means finding smart and efficient ways to move people, goods and information. 

Professor Rosabeth Moss Kanter is spearheading research on the United States' current state and future 

needs in infrastructure, communications and transportation. This will culminate in a national summit on 

"America on the Move: 21st Century Transportation and Infrastructure." 

The role of business and labor in improving U.S. competitiveness: From 1983 to 2011, total union 

membership declined by 41 percent. Yet the percentage of unorganized workers who want 

representation has steadily increased in the last three decades. As unions struggle to adapt and 

companies and workers alike struggle to acquire the increasingly more advanced and innovative skillsets 

imperative in today's economy, research indicates that partnership between business and labor can play 

a critical role in improving U.S. competitiveness. Professor Michael E. Porter and Professor Jan W. Rivkin 

are in the early stages of investigating best practices for joint business-labor actions to enhance U.S. 

competitiveness. Most recently, they engaged AFl-CIO President Richard Trumka and his senior 

management team in discussion with 20 faculty members from Harvard Business School and the 

Massachusetts Institute ofTechnology Institute for Work and Employment, on the current state and 

trajectory of the business-labor relationship. 

The role of business in making location choices and choosing the United States: If location decisions by 

firms are a referendum on a nation's competitiveness, the United States has great cause for concern. 

The U.S. is just not winning enough location decisions that can support a healthy job growth and rising 

wages. Professor Jan Rivkin and Professor Michael Porter are taking their research on firm location 

choices further by identifying and capturing case studies on re-shoring to the U.S. By focusing on the offshoring and on-shoring experiences of small and large, multinational businesses, they will gather insights 

into the driving forces as well as challenges of locating in the U.S. The effort will seek to create a library 

of best practices and case studies on re-shoring. 

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.. Restoring U.s. Competitiveness" 

Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

Profile: Michael E. Porter 

Bishop William Lawrence University Professor, Harvard Business School 

ADDRESS 

Harvard Business School 

Soldiers Field Road 

Boston, MA 02163 

Phone: (617) 495-6309 

Fax: (617) 547-8543 

Email: mporter@hbs,edu 

EDUCATION 

Harvard University, Ph,D" 1973 (Business Economics) 

Harvard University, MBA, 1971 

Princeton University, BSE, 1969 (Aerospace and Mechanical Engineering) 

UNIVERSITY POSITIONS 

Bishop William Lawrence University Professor, Harvard University, 2000-present 

C. Roland Christensen Professor of Business Administration, Harvard University, 1990-2000 

Professor of Business Administration, Harvard University, 1982-1990 

Associate Professor of Business Administration, Harvard University, 1977-1982 

Assistant Professor of Business Administration, Harvard University, 1973-1977 

TEACHING 

Professor Porter's ideas on strategy are the foundation for modern strategy courses. and his work is taught at 

virtually every business school in the world, He speaks widely on competitive strategy, national and regional 

competitiveness, health care delivery, and related subjects to business and government leaders, 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

Professor Porter's university-wide graduate course on competitiveness and economic development, Microeconomics 

of Competitiveness, is taught at Harvard and in partnership with more than 100 other universities from every 

continent using curriculum, video content and instructor support developed at Harvard. 

Professor Porter speaks widely on health care delivery and health care reform throughout the world, with intensive 

involvement in countries including the United States, United Kingdom, Germany, and Japan. He has created and 

delivers leadership workshops for top management of health care delivery organizations in the U.S. and other 

countries. He also leads intensive courses on value-based health care delivery to advanced graduate students and 

practicing physicians in the Harvard and New England communities, and an intensive course for residents and 

fellows at Partners Health Care. 

Professor Porter created and leads the New CEO Workshop, a Harvard Business School program for newly 

appointed CEOs of multibillion dollar corporations. Given twice each year by invitation only, the workshop focuses 

on the challenges facing new CEOs in assuming leadership. The program has reached more than 150 CEOs of many 

of the world's leading companies. His Harvard Business Review article with Jay Lorsch and Nitin Nohria, 'Seven 

Surprises for New CEOs' (October 2004) describes some of the learning from this body of work. 

RESEARCH FIELDS 

Professor Porter's core field is competitive strategy for companies. His book, Competitive Strategy: Techniques for 

Analyzing Industries and Competitors, is in its 71st printing and has been translated into 20 languages. His second 

major strategy book, Competitive Advantage: Creating and Sustaining Superior Perfonnance, was published in 1985 

and is in its 43rd printing. His book On Competition (1998) includes a series of articles on strategy and competition, 

including the award-winning Harvard Business Review article 'What is Strategy?', published in 1996. An updated 

version of his article, The Five Competitive Forces That Shape Strategy: was published in early 2008, and his latest 

thinking on strategy was introduced in his 2011 article 'Creating Shared Value.' 

Competitiveness or Nations and Regions 

Professor Porter's 1990 book, The Competitive Advantage of Nations, introduced a new theory of how nations and 

regions compete and their sources of economic prosperity. Motivated by his appointment by President Ronald 

Reagan to the President's Commission on Industrial Competitiveness, the book has guided economic policy in 

countless nations and regions. Subsequent articles have expanded on the concept of clusters (geographic 

concentrations of related industries that occur in particular fields) and other aspects of the theory. 

National Competitiveness. Professor Porter has published books about national competitiveness on New 

Zealand, Canada. Sweden, Switzerland. and Japan. His book, Can Japan Compete? (2000), challenged long-held 

views about the Japanese economic miracle. 

Professor Porter chaired for several years the Global Competitiveness Report, an annual ranking of the 

competitiveness and growth prospects of more than 120 countries published by the World Economic Forum. A 

recent paper, 'Determinants of National Competitiveness' (2012) develops a comprehensive framework for 

understanding the determinants of competitiveness and tests it in a large sample of countries over the last decade. 

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Testimony by Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

Clusters. Professor Porter's ideas on clusters, first introduced in 1990, have given rise to a large body of theory 

and practice. Cluster-based economic development thinking has resulted in many hundreds of public-private cluster 

initiatives throughout the world. The article 'Clusters and Competition: New Agendas for Companies, Governments, 

and Institutions' (1999) provides a summary. Recent papers with Mercedes Delgado and Scott Stern, 'Clusters, 

Convergence, and Economic Performance' (2012) and 'Clusters and Entrepreneurship' (2010), provide statistical 

evidence of the powerful role of clusters in economic development. 

Regional Competitiveness. Professor Porter extended his work on competitiveness to sub-national regions. He 

led the Clusters oflnnovation project which examined five major U.S. regions developing new theory and 

methodologies. He created the Cluster Mapping Project at Harvard, which provides rich data on the economic 

geography of U.S. regions and clusters on a special web site. Professor Porter's methodology is the basis for 

comprehensive new data on the economic geography of the 27 countries of the European Union. The article 'The 

Economic Performance of Regions' (2003) summarizes some of the important findings from this data as does his 

recent working paper, 'Clusters, Convergence, and Economic Performance.' The U.S. Economic Development 

Administration has awarded Professor Porter's team a major grant to make the cluster mapping data and site the 

national standard. 

Innovation. Professor Porter is co-author (with Professor Scott Stern and others) of a body of work on the 

sources of innovation in national and regional economies, including 'The New Challenge to America's Prosperity: 

Findings from the Innovation Index' (1999), 'The Determinants of National Innovative Capacity' (2000), and 

'Measuring the 'Ideas' Production Function: Evidence from International Patent Output' (2000). 

Healtb Care 

Advanced Economy Health Care Delivery. Since 2001. Professor Porter has devoted considerable attention to 

research on health care competition and the strategy. organization. and measurement of health care delivery 

organizations. His book with Professor Elizabeth Teisberg. Redefining Health Care: Creating Value-Based 

Competition on Results (Harvard Business School Press, 2006), was the first comprehensive statement of his valuebased health care delivery framework. It has achieved a growing influence on thinking and practice not only in the 

United States but in numerous other countries. 

Professor Porter has published a series of other articles on health care delivery, including' A Strategy for Health 

Care Reform - Toward a Value-Based System' (New England Journal of Medicine , 2009), 'What is Value in Health 

CareT (New England Journal of Medicine , 2010) and 'Solving the Cost Problem in Health Care' (Harvard Business 

Review. 2011). He has also developed an extensive curriculum designed not only for use at Harvard but at other 

universities, medical schools, and professional education programs for health professionals around the world. The 

curriculum includes case studies of numerous health care provider organizations, health plans, and employers 

offering health benefits, along with accompanying videotapes of case protagonists. The curriculum, which allows 

rich discussion of the key concepts of value-based health care delivery and their application in actual practice, is 

being adopted by medical schools in the U.S, and elsewhere. 

Professor Porter has co-authored two monographs which describe and analyze health care systems in other advanced 

countries using the concepts of value-based health care. Each health care system offers unique lessons about policy 

and the structure, reimbursement, and measurement of care. The book on Finland (Porter, Teperi, Vuorenkoski, and 

Baron, The Finnish f fealth Care System: A J 'alue-Based Penpeetil'e, SITRA), was published in the spring of 2009. 

The German Healtheare System: A Value-Based Competition Perspective, with Dr. Clemens Guth, was published in 

2012. Professor Porter is coliaborating with health care leaders in multiple countries to put the ideas into practice. 

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Testimony by Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

Recently, Professor Porter has co-founded the International Consortium for Health Outcomes Measurement, devoted 

to accelerating and standardizing health outcomes measurement globally. 

Global Health Delivery. Professor Porter co-leads a research project on health care delivery in resource poor 

settings. With Professors Jim Yong Kim and Paul Farmer, he founded the Global Health Delivery (GHD) Project, a 

collaboration of Harvard Medical School's Department of Social Medicine and the Harvard Business School's 

Institute for Strategy and Competitiveness. Professor Porter has co-authored several articles laying out a strategic 

framework for global health delivery. The GHD project has also developed a body of in-depth case studies and 

other teaching materials, which examine value~based health care delivery in resource-poor settings in practice, and a 

growing number of courses as well as a Master's program. The curriculum and an accompanying web site GHD 

online (globalhealthdelivery.org), aim to provide a bridge between known science and the actual delivery of care in 

the field, and a vehicle to train practitioners. 

Competition and Society 

Professor Porter's fourth major body of work has addressed the relationship between competition and society. 

Inner City Economic Development. Professor Porter offered a new theory of urban economic development. 

beginning with the Harvard Business Review article 'The Competitive Advantage of the Inner City'. In 1994, he 

founded The Initiative for a Competitive Inner City (ICIC), a non-profit, private-sector organization to catalyze 

inner-city business development across the country. Professor Porter is Chairman ofthe ICIC, a national 

organization that works in cities across America. It has developed numerous articles and national programs (see 

ICIC.org). 

Rural Development. In 2004, Professor Porter published a study commissioned by the Economic Development 

Administration on rural development, 'Competitiveness in Rural U.S. Regions: Learning and Research Agenda.' 

The Natural Environment. Professor Porter introduced a new theory that argued that environmental progress 

and competitiveness were not inconsistent but complementary. His Scientific American essay, 'America's Green 

Strategy', triggered this literature as did the article 'Toward a New Conception of the Environment-Competitiveness 

Relationship' (1995). The so-called "Porter Hypothesis" has been much studied in subsequent literature. 

Philanthropy and Corporate Social ResponsihlJ.ity. Professor Porter has devoted growing attention to 

philanthropy and the role of corporations in society. His Harvard Business Review article with Mark Kramer, 

'Philanthropy's New Agenda: Creating Value' (1999). introduced a new framework for developing strategy in 

foundations and other philanthropic organizations. 

His Harvard Business Review article, 'The Competitive Advantage of Corporate Philanthropy' (2002), focused on 

how corporations can create more social benefit from their philanthropy. His Harvard Business Review article with 

Mark Kramer, 'Strategy and Society: The Link Between Competitive Advantage and Corporate Social 

Responsibility' (2006), tackles the strategic underpinnings of corporate social responsibility. 

Creating Shared Value. Professor Porter's 2011 Harvard Business Review article with Mark Kramer, entitled 

'Creating Shared Value', introduced the next generation of thinking about the role of the corporation in society. 

Creating Shared Value is about utilizing capitalism itself to address societal needs and problems. This article is 

giving rise to widespread changes in corporate practice and shifts in governmental and NGO perspectives globally. 

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Testimony by Michael E, Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

With Mark Kramer, Professor Porter co-founded FSG, an international non-profit advisory firm that provides advice 

and innovative ideas about social strategy to corporations, foundations, and social service organizations, FSG, with a 

staff of more than 100, has offices in multiple countries and works with leading companies, NGOs and foundations 

globally, FSG and Professor Porter have recently launched the Shared Value Institute to advance research and 

catalyze broader adoption of shared value thinking in business, government and the NGO community. 

ADVISORY 

Professor Porter has served as a strategie advisor to many leading U.S. and international companies, including Anglo 

American, Procter & Gamble, Royal Dutch Shell, Scotts Miracle Gro, and Taiwan Semiconductor Manufacturing 

Company. He also works with national and state goveroment leaders in the U.S. and other countries and regions 

including the Basque Country, Canada, Central America, Colombia, Korea, New Zealand, Peru, Portugal, Rwanda, 

Saudi Arabia, Singapore, and Taiwan. More recently, he has assisted major health care delivery organizations 

including the Cleveland Clinic, MD Anderson Cancer Center, Texas Childrens Hospital, The National Health 

Service (U.K.), The National Health Service (Portugal), Amil Assistencia Medica Internacional (Brazil), and others. 

ORGANIZATIONS FOLINDED 

Co-Founder, International Consortium for Health Outcomes Measurement, 2012, non-profit 

Co-Founder and Senior Advisor, FSG, 2000, non-profit 

Co-Pounder, Center for EfTective Philanthropy (CEP), 2000, non-profit 

Founder and Chairman, Initiative for a Competitive Inner City (lCIC), 1994, non-profit 

Co-Founder, Monitor Company, 1983, for profit 

PRINCIPLE BOARDS OF DIRECTORS/ADVISORY BOARDS 

Corporate Boards: 

Parametric Technology Corporation 

Merrimack Pharmaceuticals 

Advisory Boards: 

American Securities LLC 

Pershing Square Capital Management, LP 

Major Public Sen'ice Boards: 

Presidential Advisory Council, Rwanda 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business Schoo! 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

Presidential Advisory Group, Republic of Korea 

Princeton University, Board of Trustees, 2008-2012 

Chairman, Governor's Council on Economic Growth and Technology (Massachusetts), 1994-1996 

Executive Committee, Council on Competitiveness (Washington, DC): principal advisor for Competitiveness Index, 

Innovation Index, and Clusters oflnnovation projects 

International Advisor, National Competitiveness Council of Nigeria 

Special Advisor to the President of the World Bank 

AWARDS AND PRIZES 

National Honors 

Lifetime Achievement Award in Economic Development, U.S. Department of Commerce, 2008 

Order of Jose Dolores Estrada, Great Cross, Government of Nicaragua, 2002 

La Creu de Sant Jordi, Government of Catalonia (Spain), 1998 

Honorary Doctorates 

Honorary doctorate, University ofPuebla, Mexico, 2012 

Honorary doctorate, Illinois Institute of Technology, 2011 

Honorary doctorate, Universidad del Pacifico, Peru, 2009 

Honorary doctorate, University of Toronto, 2009 

Honorary doctorate, McGill University, 2009 

Honorary doctorate, Nyenrode Business Universiteit, 2009 

Honorary doctorate, Leipzig Graduate School of Management. Germany, 2008 

Honorary doctorate, Universidad de los Andes, Bogota, Colombia, 2007 

Honorary doctorate, Universidad Deusto, Bilbao, Spain, 2007 

Honorary doctorate, University oflceland, Reykjavik, Iceland, 2006 

Honorary doctorate, BI Norwegian School of Management, Oslo, Norway, 2003 

Honorary doctorate, Universidad San Martin de Porres, Lima, Peru, 2001 

Honorary doctorate, HEC School of Management, Paris, France, 1999 

Honorary doctorate, INCAE, Alajuela, Costa Rica, June, 1996 

Honorary doctorate, Universidad Adolfo Ibanez, Chile, 1995 

Honorary doctorate, Mount Ida College, 1994 

Honorary doctorate, Universidada Tecnica de Lisboa, 1994 

Honorary doctorate, Erasmus University, Rotterdam, The Netherlands, 1993 

Honorary doctorate, Johnson & Wales University, 1991 

Honorary doctorate, Stockholm School of Economics, 1989 

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Testimony by Michael E, Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

Scholarly Honors 

American College of Health care Executives James A. Hamilton award, 2007 

John Kenneth Galbraith Medal, American Agricultural Economics Association, 2005 

Distinguished Contributor to Case Research and Teaching Award, North American Case Research Association, 

2005 

The Academy of Management Award for Scholarly Contributions to Management, August 2003 

Distinguished Award for Contribution to the Field of Management, International Academy of Management, 1998 

Adam Smith Award, National Association of Business Economists, in recognition of exceptional contribution to the 

business economics profession, 1997 

Award for Outstanding Contribution to Competitiveness, American Society for Competitiveness, 1994 

Irwin Outstanding Educator Award, Academy of Management, 1993 

Charles Coolidge Parlin Award for outstanding contribution to the field of marketing and strategy, American 

Marketing Association, 1991 

Graham and Dodd Award of the Financial Analysts Federation, 1980 

David A. Wells Prize in Economics (Harvard University) 1973-1974 

George F. Baker Scholar (Harvard Business School), 1971 

BSE with High Honors, Phi Beta Kappa, Sigma Xi, Tau Beta Pi (Princeton University). 1969 

Honors for Books and Articles 

McKinsey Award for the best Harvard Business Review article, 20 II 

McKinsey Award for the best Harvard Business Review article, 2006 

McKinsey Award for the best lIarvard Business Review article (second place), 2002 

McKinsey Award for the best Harvard Business Review article, 2001 

McKinsey Award for the best Harvard Business Review article (second place), 1996 

McKinsey Award for the best Harvard Business Review article. 1987 

George R. Terry Book Award (Academy of Management) for outstanding contribution to management thought in 

1985, for Competitive Advantage 

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House Committee on Small Business, United States House of Representatives, 

July 9,2013 

Outstanding Academic Books 1980-81 for Competitive Strategy, Choice Magazine 

McKinsey Award for the best Harvard Business Review article, 1979 

Honorary Societies 

Fellow, Royal Society of Edinburgh, 2005 

Charter Member, Fellows ofthe Strategic Management Society, 2005 

Fellow, World Academy of Productivity Science, 1995 

Foreign Member, Royal Academy of Engineering Sciences (Sweden), 1991 

Fellow, Academy of Management, 1988 

Fellow, International Academy of Management, 1985 

Athletic Honors 

NCAA Golf All-American Team, 1968 

Eastern Intercollegiate Golf Champion, 1968 

All State in Football and Baseball, State of New Jersey, 1965 and earlier years 

EXTENSIVE BOOKS AND COMMENTARIES ON PROFESSOR PORTER'S RESEARCH 

Understanding Michael Porter: The Essential Guide to Compelition and Strategy. Magretta, Joan. Boston: Harvard 

Business School Publishing, 20l2. 

The Lords qfStrategy: The Secret Intellectual lfistDlY q(the New Corporate World Kiechel, Walter Ill. Harvard 

Business School Publishing, Boston, 2010. 

''The Porter Hypothesis After 20 Years: How Can Environmental Regulation Enhance Innovation and 

Competitiveness"" Stefan Ambec, Mark A. Cohen, Stewart Elgie, and Paul Lanoie. Resources for the Future 

Discussion Paper, Washington DC, 2011. 

TVell-Designed Environmental Regulations will Strengthen Companies' Competitiveness,· Re'viewing the Porler 

llypothesis. Mitsuhashi Tadahiro (ed.) Japan, 2008. 

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Testimony by Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

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House Committee on Small Business, United States House of Representatives, 

July 9,2013 

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House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

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House Committee on Small Business, United States House of Representatives, 

July 9,2013 

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House Committee on Small Business, United States House of Representatives, 

July 9,2013 

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House Committee on Small Business, United States House of Representatlves, 

July 9,2013 

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House Committee on Small Business, United States House of Representatives, 

July 9,2013 

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House Committee on Small Business, United States House of Representatives, 

July 9,2013 

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July 9, 2013 

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July 9, 2013 

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Deterrence to New Competition," Quarter(v Journal of Economics (May 1977): 241-262. Also reprinted in 

Strategic Management (Volume I). J. Birkinshaw (cd.). Cheltenham. England: Edward Elgar Publishing. 2004. 

"Please Note Location of Nearest Exit: Exit Barriers and Planning." <alirornia Management Review XIX (Winter 

1976): 21-33 . 

.. _- with R.E. Caves. "Barriers to Exit," in Masson and Qualls, eds., £i,'says in Industrial Organization in Honor 

of Joe S. Bain. Cambridge. Massachusetts: Ballinger Press (1976), 39-69. 

"Interbrand Choice, Media Mix and Market Performance," American Economic Review 66 (May 1976): 398-406. 

---with J.F. Sagansky. "Information, Politics and Economic Analysis: The Regulatory Decision Process in the 

Air Freight Cases:' Public Policy 24, no. 2 (Spring 1976): 263-307. 

--- with R.E. Caves and J. Khalilzadeh-Shirazi. "Scale Economies in Statistical Analyses of Market Power," 

Review fir Economics and Statistics (May 1975): 133-40. 

"Consumer Behavior, Retailer Power and Performance in Consumer Goods Industries," Revieu' qf Economh.'s and 

Statistics (November 1974): 419-436. 

CASE STlJDlES 

Professor Porter has authored numerous case studies on strategy. competitiveness and health care. For references 

see: isc.hbs.edu. 

WORKING PAPERS 

and Jim Yong Kim. "Redefining Global Health Care Delivery." 

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Testimony by Michael E. Porter, Bishop Wliliam lawrence University Professor, Harvard Business Schoo! 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

---, Joseph Rhatigan, Sachin Jain, and Joia S. Mukherjee. "Applying the Care Delivery Value Chain: 

HTV/AIDS Care in Resource Poor Settings," Harvard Business School Working Paper 09-093, April 3, 2009. 

Kim, Jim Yong, Joseph Rhatigan, Sachin H. Jain, and Michael E. Porter. "From a Declaration of Values to the 

Creation of Value in Global Health." Glohal Public Health (submitted for review). 

POPULAR PRESS 

and Elizabeth Olmsted Teisberg. "Rethinking the role of employers," Financial Times, July 3, 2008. 

---and Elizabeth Olmsted Teisberg. "Doctor Know," The New Republic 235 (July 10 and 17,2006): 13-14. 

"The Tax Cut That Could Pay Dividends," Financial Times, January 14,2003. 

"How to Profit from a Downturn," The Wall Street Journal, November 12,200 I. Also reprinted as "Now is the 

Time to Rediscover Strategy", in European Business Forum, Issue 8, Winter 200112002. Also reprinted as 

"Strategie in Zeiten des Abschwungs," in Strategie im Wettbewerb, H. Simon (ed.), Frankfurt: Frankfurter 

Allgemeine Buch (2003). 

---with Yagil Weinberg and Noreena Hertz. "The Bottom-Up Solution," The Financial Times, September 16, 

1997. 

--with Tapan Munroe. "The Inner City's Competitive Advantage," San fi'ancisco lexaminer, February 27, 1997. 

"The Rise of the Urban Entrepreneur," Inc. (Special Issue: The State of Small Business), May 16, 1995. 

---with Elizabeth Teisberg and Gregory Brown. "Innovation: Medicine's Best Cost-Cutter:' The .Vew York 

Times, Sunday, February 27,1994. 

"The Wealth of Regions," World Link, World Link Publishing Limited, London, England, November/December 

1993. 

"Will Japan Remain a Long-Term Investor?" (with Rebecca E. Wayland), Nikkei Business, Tokyo, December 14, 

1992. 

"America's Long-Term Investment Problem." (with Rebecca E. Wayland), Nikkei Business, Tokyo, December 7, 

1992. 

"Know Your Place: How to Assess the Attractiveness of Your Industry and Your Company's Position In It." Inc .. 

September 1991. 

"Japan Isn't Playing by Different Rules." The New York Times, July 22,1990. 

"Don't Collaborate, Compete." The Economist, June 9,1990. 

"The State of Strategic Thinking." The Economist, May 23, 1987. 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business Schoo! 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

"Why U.S. Business is Falling Behind." Fortune. April 28, 1986. 

"Attacking an Industry Leader." Forlune, April 29, 1985. 

"A Good Competitor Is Not Always a Dead Competitor." Manager's 10urnal, The Wall Street Journal, April I, 

1985. Also reprinted in The Wall Street Joumal on Managing: Adding Value through Synergy, edited by David 

Asman. New York: Doubleday/Currency, 1990. 

"Price Wars, More Liberal Credit and Other Competitive Maneuvers," Boardroom Reports II, no. I (January 1. 

1982). 

"More Competition Ahead: The Way to Recognize It, Respond, and Get Ahead." Boardroom Reports 10, no. 5, 

(March 9,1981). 

"Experience Curve." The Wall Street Joumal, October 22, 1979. 

PUBLISHED SPEECHES 

"Corporate Philanthropy: Taking the High Ground," Foundation Strategy Group (from a presentation at a gathering 

of corporate philanthropy leaders in New York City), May 14,2003. 

"Achieving Competitiveness in the UK: Challenges for Government and Industry," Merck Sharp & Dohme 

(December 10, 1998). 

"Michael Porter's Wellington Town Hall presentation" (on the economy of New Zealand), New Zealand Trade 

Development Board (November 1998). 

"Location, Clusters, and the 'New' Microeconomics of Competition," The Adam Smith Address, Business 

Economics 23, no. I (January 1998). 

"The Next Agenda for America's Cities: Competing in a Global Economy," First Annual James W. Rouse Lecture 

(June 24, 1997). 

SELECTED EXPERT TESTIMONY 

House Ways and Means Committee, Subcommittee on Human Resources, Joint Hearing on H.R. 3467, "Saving Our 

Children: The American Community Act of 1996," July 30, 1996. 

House Ways and Means Committee, on increasing U.S. corporate investment, February I, 1995. 

Senate ludiciary Committee (Antitrust, Monopolies, and Business Rights Subcommittee) on join! production 

ventures, July 17, 1990. 

Select Committee on Science and Technology (House of Lords, London, England), June 6,1990. 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business Schoo! 

House Committee on Small Business, United States House of Representatives, 

July 9,2013 

Senate Committee on Commerce, Science and Transportation Consumer Subcommittee, on the effect of product 

liability law on industry competitiveness and on insurance, April 5, 1990. 

Senate Judiciary Committee, on antitrust and economic competitiveness, May 7, 1987. 

Senate Committee on Governmental Affairs, on U.S. industrial competitiveness, March 26, 1987. 

House Committee on Education and Labor, on education and training for American competitiveness, February II, 

1987. 

SELECTED INTERVIEWS 

"En vez de cambios relevantes, Chile s610 hace pequenos ajustes." Maria Luisa Vicuna, Capital N° 230: June 13-

26,2008. 

"How nations compete." Neelima Mahajan-Bansal, The limes qf!ndia: May 13,2008. 

"Strategy is about competitive advantage." Neelima Mahajan-Bansal, The Times qf India: May 6, 2008. 

"Michael Porter and Elizabeth Teisberg on redefining value in health care: an interview." Alistair Davidson and 

Robert M. Randall, Strategy & Leadership Vol. 34 No.6: 2006, pp. 48-50, Emerald Ground Publishing Limited. 

"Strategy Returns to its Roots: An Interview with Michael Porter." New Zealand Strategic Management 3, no. 2 

(Spring 1997). 

"Martin Charter Interviews Professor Michael Porter," (on the link between environmental regulation, innovation, 

and competitiveness), The Green Management Letter, June 1995. 

"Porter's Precious Cure for Bad Location Choices., Corporate Location, March-April 1994. 

"A Conversation with Michael Porter: International Competitive Strategy From a European Perspective," European 

Management Journal, Fall 1991. 

"Innovation, Rivalry, and Competitive Advantage," Interview with Professor Michael E. Porter, Antitrust Magazine 

5, no. 2 (Spring 1991). 

VIDEOS 

"The Competitive Advantage of Nations," Harvard Business School video series, Boston, 1993. 

"Michael Porter on Competitive Strategy," Harvard Business School video series, Boston, 1988. 

REVIEWS 

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House Committee on Small Business, United States House of Representatives, 

July 9,2013 

Review of Paul N. Bloom, Advertising, Competition and Public Policy, Cambridge, Massachusetts: Ballinger 

(1976) in the Antitrust Bulletin XXIII, no. 2. (Summer 1978). 

OTHER PUBLICATIONS 

"Defining and introducing value in healthcare," Institute orMedicine Annual Meeting, 2007 

.... -~ and Elizabeth O. Teisberg. Fixing Competition in u.s. Health Care, HBR Research Report from Harvard 

Business Review, June 2004. 

with Christian H.M. Ketels, Kaia Miller, and Richard T. Bryden. Competitiveness in Rural u.s. Regions: 

Learning and Research Agenda, report prepared for the Economic Development Administration, Department of 

Commerce, Washington, DC, February 25, 2004. 

The Cluster Initiative Greenbaok (foreword by Michael E. Porter), O. S6lvell, G. Lindqvist, and C. Ketels, 

Stockholm: Ivory Tower (2003). 

and Christian H.M. Ketels. U. K. Competiliveness: Moving to the IVext Stage, DTI Economics Paper No.3, 

Economic and Social Research Council (UK), May 2003. 

Orjan Solvell, and Ivo Zander. "The Micro-competitiveness of Wireless Valley," in Invest in Sweden 2000, 

Stockholm: Invest in Sweden Agency, 2000. 

with Scott Stem and Council on Competitiveness. The New Challenge to America's Prosperity Findings 

from the Innovatiol11ndex, Washington, DC, March 1999. 

"Lifting All Boats: Increasing the Payoff from Private Investment in the US Economy," report of the Capital 

Allocation Subcouncil (Robert Denham and Michael Porter, co-chairmen) to the Competitiveness Policy Council, 

September 1995. 

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"'Restoring US Competitiveness H 

Testimony by Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

HBS Research and Reports on U.S. Competitiveness 

1, Harvard Business Review, March 2012: The Looming Challenge to U.S. Competitiveness 

The United States is a competitive location to the extent that firms operating in the U.S. are able to 

compete successfully in the global economy while supporting high and rising wages and living standards. 

Trends indicate the latest cyclical downturn, the Great Recession, is merely a symptom of longer-term 

structural challenges to U.S. competitiveness. America's crucial economic strengths are weakening and 

cracks are visible in its macroeconomic foundations. If government and business leaders continue to 

react only to the cyclical downturn without confronting America's structural challenges to its business 

environment, they will revive an economy with weak long-term prospects. A coordinated effort by 

business and government to pursue a national economic strategy can reverse the erosion of U.s. 

competitiveness and restore an upward trajectory to American living standards. 

2. Harvard Business School 2011 Survey on U.S. Competitiveness: Prosperity at Risk 

As part of the U.S. Competitiveness Project, Harvard Business School asked its alumni to complete an indepth survey on U.S. competitiveness. Nearly 10,000 business leaders responded worldwide, resulting in 

a first-of-its-kind analysis of data from a broad group of central actors in the global economy. The survey 

results provide strong evidence that America faces a deepening competitiveness problem and help 

pinpoint where the roots of the problem lie. 

• 71% of survey respondents expect U.S. competitiveness to decline over the next 3 years. 

• According to more than 1,700 respondents personally involved in business location decisions, 

the United States competed with virtually the entire world and fared poorly, losing two-thirds of 

the decisions that were resolved. 

Facilities involving high-end work and large numbers of jobs moved out of the U.s. much faster 

than they moved in. 

Respondents saw the underlying businesses environment in America as still strong in critical 

areas, but not keeping pace with other economies, especially fast-growing emerging economies. 

• Respondents identified America's greatest current weaknesses as its tax, code, political system, 

and K-12 education system. 

3. The Economist: The World in 2013. What Washington must do now: An eight-point plan to 

restore American competitiveness, by Michael E. Porter and Jan W. Rivkin 

Our research indicates 8 strategic priorities for federal policy that the president and Congress should 

enact now that would dramatically improve the U.S. business environment and, with it, America's 

economic prospects. Each is highly achievable and can be implemented in 2 or 3 years. Most business 

leaders and policymakers - both Democrat and Republican - agree on the essence of these policies, at 

least behind closed doors. The 8 priorities are: 

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Testimony by Michael E. Porter, Bishop William lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives, 

July 9, 2013 

Ease the immigration of highly skilled individuals, starting with (but not restricted to) 

international graduates of u.s. universities. 

Rewrite the corporate tax code with lower statutory rates and no loopholes. 

Create an international taxation system for multinational companies that taxes overseas profits 

only where they are earned, without additional taxes on profits repatriated to the u.s. 

Aggressively use established international institutions to address distortions and abuses in the 

international trading system that disadvantage the United States. 

• Streamline regulations affecting business by focusing on outcomes while simplifying reporting 

and compliance, reducing delays, and minimizing the need for litigation. 

Enact a multiyear program to improve logistics, communications and energy infrastructure. 

Agree on a federal regulatory and reporting framework to guide the responsible development of 

newly accessible American gas and oil reserves. 

Create a sustainable federal budget through a combination of revenue increases (including 

reducing deductions) and less spending (through efficiencies in entitlement programs and 

revised spending priorities), embodying a compromise such as Simpson-Bowles or RivlinDomenici. 

These 8 strategic priorities are not all that America must do to restore its competitiveness. There is, 

however, wide consensus on these 8 priorities and making progress on them will profoundly change the 

trajectory of our economy. 

4. Harvard Business School 2012 Survey on U.S. Competitiveness: Competitiveness at a 

Crossroads 

Second in the series of u.s. Competitiveness surveys, Harvard Business School gleaned responses from 

nearly 7,000 alumni and more than 1,000 members of the general public. The survey not only provides 

an updated view of the U.s. business environment, largely consistent with the 2011 survey findings, but 

also illuminates specific actions that business leaders and policymakers can take to improve U.S. 

competitiveness. Across the political spectrum, business leaders and the general public strongly called 

on the President and Congress to put the federal budget on a sustainable path, reform the corporate tax 

code, improve America's infrastructure, address distortions of the international trading system and craft 

a responsible framework for developing new energy sources. 

5. Fortune: What Business Should Do to Restore U.S. Competitiveness 

Every firm draws on the business environment in the communities where it operates, or the 

"commons". Government has a profound impact on the health of the commons and must do its part to 

make the U.S. a competitive location for business. At the same time, business leaders influence the 

commons on which they draw. Historically in the U.s. business and government collaborated to build 

the strongest commons the world has ever seen. Globalization opened up the entire world to business, 

and many companies forgot the importance of local conditions for their productivity and growth. But 

now a growing number of u.s. business leaders are rediscovering the critical role of the local business 

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Testimony by Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School 

House Committee on Small Business, United States House of Representatives. 

July 9, 2013 

environment to their companies' success. Businesses can lead in restoring U.s. competitiveness by 

engaging in the following: 

1. Vigorously pursue productivity and profitability in the business: Position the company to draw 

on U.S. strengths. Move back to the U.s. business activities that can be productive here. 

2. Improve the commons: 

• Improve skills, by creating or expanding an apprentice and training programs, and 

partnering with a community college, technical school, or university. 

• Upgrade supporting industries, by identifying and increasing sourcing from capable local 

suppliers, and mentoring local suppliers to upgrade their capabilities. 

• 

Support innovation and entrepreneurship by participating in research collaboratives, 

and investing in or incubating promising startups related to the company's business. 

Bolster regional and cluster development by participating in a regional or cluster. 

competitiveness initiative in the company's field. 

3. Shift the business-government relationship: Advocate business-wide improvements rather than 

lobby for special interests. 

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z 

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WHAT COMPETITIVENESS? 

The United States is a competitive location to the extent that firms operating 

the U.S. are able to in the global economy while suppo

for the average American 

Competitiveness is low wages or a cheap dollar 

Competitiveness depends on improving long-run 

Productivity of existing employees 

High participation of working age citizens in the workforce 

HARVARDIBUSIN!sslSCHOOL U.S. COMPETITIVENESS PROJECT 

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DISTURBING TRENDS 

ROLLING 10-YEAR COMPOUND ANNUAL GROWTH RATE IN TOTAL NUMBER O

U.S. PRIVATE NONFARM EMPLOYEES, 1975-2012 

3% 

2% 1% 

0% 

-1% 

1975 1981 1987 1993 

Source: Bureau of Labor Statistics, Current Population Survey; author's calculations. 

HAAVARO!BUSINESS!SCHOOL 

1999 2005 

U.S. COMPETITIVENESS PROJECT 

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120 

100 

(j) 

.0 

.2, 

4-

0 80 

60 

+-' 

C 

<lJ 

E 

>. 

-@. 40 

E 

lJ.J 

20 

0 

1990 1993 1996 1999 2002 2005 2008 

Source: Prot Michael E. Porter, U.S. Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Proauthor'S calculations. Underlying data drawn from U.S. Census Bureau County Business Patterns. 

HARVARO!SUSINESS1SCHOOl U.S. COMPETITIVENESS PROJECT 

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DISTURBING TRENDS 

PARTICIPATION RATE 

78% 74% 

70% 

66% 62% 

1948 1956 1964 1972 1980 1988 

Note: Rolling 12-month average in civilian labor force (not seasonally adjusted) over civilian noninstitutional population. 

Source: Bureau of Labor Statistics, author's calculations. 

HARVARO!BUSfNEsslsCHOOL 

1996 2004 

U.S. COMPETITIVENESS PROJEC

Insert offset folio 69 here 81935.042SBREP-219 with DISTILLER

200 

180 160 

i!:? 

140 0 

"0 

o 120 ::;) 

""' (j 100 N 

'0 

<J) 

"0 

C 

C1l 

<J) 

::::l 

0 

.c 

I80 60 

40 

20 

o 

1967 1971 1975 1979 

WAGE GROWTH 

"" 

80th PERCENTILE (CAGR = 0.

1983 1987 1991 1995 1999 2003 2007 

Note: Household income includes wages, self-employment, retirement, jnterest, dividends, other investment, unemployment, disabHlty, alimony or child suppo

income. 

U.S. Census Bureau, Current Population Survey, Annual Socia! and Economic Supplements. 

HARVARD!SUSINESS!SCHOOL u.s. COMPETITIVENESS PROJECT 

Insert offset folio 70 here 81935.043SBREP-219 with DISTILLER

OJ) 

c 

:;;;: 

c: 

'" cr: 

1 

3 

5 

7 

9 

11 13 15 

17 

19 

21 

World Bank- Doing 

Business Ranking 

1 

World Economic 

Forum - Global 

Competitiveness 

Ranking 

Fraser Institute -

Economic Freedom 

Index 

Heritage 

FoundationjWSJ -

Index of Economic 

Freedom 

Economist 

Intelligence Unit -

Overall Business 

Environment 

1 

BBCjFutureBrand 

Country Brand 

Report 

2 

Forbe

Coun

Busines

Sources: World Bank, Wor!d Economic Forum, Fraser Institute, Heritage Foundation, Economist InteUlgence Unit, BBC/FutureBrand, Forbes 

HARvARojausINESS!SCHOOL u.s. COMPETITIVENESS PROJECT 

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WHO DOES AMERICA COMPETE WITH AS A BUSINESS LOCATION

Source: Harvard Business School 2011 Survey on U.S. Competitiveness 

HARVARD! BUSINESSI SCHOOL u.s. COMPETITIVENESS PROJEC

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HBS SURVEY FINDINGS 

1. Business leaders see a deepening U.S. competitiveness probl

2. The United States is faring poorly in business location decision

HARVARD! BUSINESS ISCHOOL u.s. COMPETITIVENESS PRO

Insert offset folio 73 here 81935.046SBREP-219 with DISTILLER

C 

.8 

() 

Q) 

+-' 

<Ii 

::i 

ASSESSMENTS OF ELEMENTS OF THE U.S. BUSINESS ENVIRONMEN

40% 

Weakness but Improving 

20% 

0% 

-20% -40% -60% 

-80% 

-100% 

Strength but nptpyinr::.tinJi 

-60% -40% -20% 0% 20% 40% 60% 80% 

Current U.S. position 

Note: Scored as percentage with positive views minus percentage with negative views. 

Source: Harvard Business School Survey on U.S. Competitiveness 

HARVARD I BUSINESS! SCHOOL U,S, COMPETITIVENESS PROJECT 

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>, 

0 

...., 

<-> (j) 

...., 

0 

::l 

ASSESSMENTS OF ELEMENTS OF THE U.S. BUSINESS ENVIRONMEN

40% 

Weakness but Improving 

20% 

0% 

-20% -40% 

-60% 

-80% 

-100% 

"trpndth but Deteriorating 

-60% -40% -20% 0% 20% 40% 60% 80% 

Current U.S. position 

Note: Scored as percentage with positive views minus percentage with negative views. 

Source: Harvard BUSiness Schoo! Survey on U.S. Competitiveness 

HARVARD I BUSINESS]SCHOOl U.S. COMPETITIVENESS PROJECT 

Insert offset folio 75 here 81935.048SBREP-219 with DISTILLER

>, 

'--

0 +-' U 

(]) 

+-' 

0 

:::J 

ASSESSMENTS OF ELEMENTS OF THE U.S. BUSINESS ENVIRONMEN

40% 

Weakness but Improving 

20% 

0% 

-20% -40% -60% -80% 

• 

LOGISTICS 

• SKILLED LABOR 

INFRASTRUCTURE 

-100% Strength but Deteriorating 

-60% -40% -20% 0% 20% 

Current U.S. position 

Note: Scored as percentage wIth positive views minus percentage with negative views. 

Source: Harvard Business School Survey on U.S. Competitiveness 

40% 60% 80% 

HARVARD I BUSINESS I SCHOOL U.S. COMPETITIVENESS PROJECT 

Insert offset folio 76 here 81935.049SBREP-219 with DISTILLER

C 

.8 

() 

(J) 

of§' 

+-' 

u:i 

::i 

ASSESSMENTS OF ELEMENTS OF THE U.S. BUSINESS ENVIRONMEN

40% 

Weakness but Improving 

20% 

0% 

-20% 

-40% -60% -80% 

• 

LOGISTICS 

• SKILLED LABOR 

INFRASTRUCTURE 

FIRING 

-100% Strength but Deteriorating 

-60% -40% -20% 0% 20% 

Current U.S. position 

Note: Scored as percentage with positive views minus percentage with negative vIews. 

Source: Harvard Business School Survey on US. Competitiveness 

40% 60% 80% 

HARVARD! BUSINESSI SCHOOL u.s. COMPETITIVENESS PROJECT 

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ISC Competitiveness Model 

u.s. Competitiveness Profile. 2012 

Macroeconomic 

POlicy: 

69 

-

• Significant disadvantage 

Company Opera

and Strateg

9 

U.S. GOP per capita rank is 

6th 

versus 128 countries 

Moderate 

disadvantage D Neutral Moderate advantage 

analysIs prepared based on research findings by Scott 

COPYright 2012 © Professor Michael E. Porter 

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STRATEGIC PRIORITIES FOR FEDERAL POLICY 

ON U.S. COMPETITIVENESS 

1. Ease the immigration of highly skilled individuals 2. Simplify the corporate tax code 

3. Tax overseas profits earned by American multinational companies only where they are 

4. Aggressively address distortions and abuses in the international trading system 

5. Simplify and streamline regulation 

6. Improve logistics, communications and energy infrastructure 

7. Responsibly develop American shale-gas and oil reserves 

8. Create a sustainable federal budget, combining greater revenue and less spending 

Source: Porter, Michael, and Jan Rivkin. "An eight-point plan to restore American competitiveness." The Economist: The 

2013. (Nov 2012). 

HARVARD I BUSINESslsCHOOL U.S. COMPETITIVENESS PROJECT 

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Corporate tax reform 

Sustainable federal budget 

High-skill immigration 

Streamlined regulations 

Infrastructure investments International trading system 

Responsible energy extraction 

Territorial tax code 

CONSENSUS ON FEDERAL POLICY 

BUSINESS AND THE GENERAL PUBLIC 

U.S. business leaders 

All Liberal Conservative All 

91% 91% 92% 72% 

90% 92% 85% 60% 

89% 90% 88% 42% 

86% 71% 95% 52% 

85% 92% 75% 68% 

80% 81% 79% 60% 

79% 75% 80% 64% 

58% 34% 75% 25% 

Source: Harvard Business School 2012 Survey on U.S. Competitiveness 

General public 

Liberal Conse

75% 7

62% 6

55% 3

43% 6

74% 7

67% 5

65% 6

19% 3

HARVARD!BUSINESSjSCHOOL U,S. COMPETITIVENESS PROJECT i6 

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OPPORTUNITIES FOR U.S. BUSINESSES 

INVESTING IN THE COMMONS 

Improving skills 

• Create or expand an apprentice program 

• Create or expand a training program 

• Partner with a community college, technical 

school, or university 

Upgrading supporting industries 

• Identify and increase sourcing from capable 

local suppliers 

• Mentor local suppliers to upgrade their 

capabilities 

Supporting innovation and entrepreneurship 

• Participate in research collaboratives in 

company's field 

• Invest in or incubate promising startups 

related to company's business 

Locating in the U.S. 

• Move back to the U.S. business activities 

can be productive here 

Bolstering cluster development 

• Participate in a cluster competitiveness 

initiative in your field 

Bolstering regional development 

• Participate in a regional competitiveness 

initiative in your region 

Shifting the business-government relationsh

• Advocate business-wide improvements ra

than lobby for special interests 

Source: Porter, Michael, and Jan Rivkin. "What Business Should Do to Restore U.S. Competitiveness." FORTUNE. (Oct 2012

HARVARD!BUSINEssjSCMOOL u.s. COMPETITIVENESS PROJECT 

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TO ENHANCE COMPETITIVENESS 

Internal training programs 

Regional initiatives 

! 

Research collaboratives 

: 

Business-wide lobbying 

Startup incubation 

Apprenticeships 

Local sourcing 

1 

Cluster initiatives 

1 

Community college+ partnerships 

Supplier mentoring 

Reshoring 

; I 

0% 20% 40% 60% 

Portion of business leaders surveyed 

Excludes respondents who were not working, whose firms did not have U.S. operations, or who did not reply, 

Source: Harvard Business School Competltiveness 

HARVARo!aUSINES$ SCHOOL u.s. COMPETITIVENESS PROJECT 
82 

Testimony of Mr. James McConeghy 

Chief Financial Officer 

Chobani 

Before the U.S. House of Representatives Committee on Small 

Business Subcommittee on Economic Growth, Tax and Capital 

Access 

Mr. Chairman and members of the Subcommittee, thank you for 

the opportunity to testify at today’s hearing. I am James 

McConeghy, the Chief Financial Officer at Chobani Greek Yogurt 

located in Norwich, New York. 

The creation of Chobani is truly an American success story. 

Chobani was established in 2005 by Hamdi Ulukaya, a Turkish immigrant, who purchased an old Kraft Foods Plant in New Berlin, 

New York. Since its founding, it has grown from five to 2,600 employees and is the nation’s top selling Greek yogurt. 

The Chobani story is one that could only happen in America. 

Where else could a Turkish immigrant transform a shuttered factory into a thriving food manufacturing business in just a few short 

years? 

Our story began in 2005 when, with the help of a Small Business 

Administration loan, our founder, Hamdi Ulukaya, acquired a 

former Kraft Food plant in Central New York. Two years later, the 

first cups of Chobani Greek Yogurt rolled off the line. Today, 

Chobani is the number one selling Greek Yogurt brand in the country. 

In less than six years, we’ve grown our business from nothing to over $1 billion in sales, and expanded our reach across the globe. 

We’ve invested more than $700 million between our original manufacturing facility in New York and our new plant in Twin Falls, 

Idaho. We’re no longer a start-up with 5 employees, but a global 

organization with a workforce more than 2,600 strong. 

It is the American Dream come to life—proving that, if you truly 

believe in something and work hard, anything is possible. 

Challenges to the Future of Chobani Greek Yogurt 

The future of Chobani’s success is strongly burdened by current 

federal regulatory and legal challenges. The four most prominent 

challenges that I will touch on today are the lack of an FDA standard of identity for Greek Yogurt, Geographic Indicators in international trade, Trans-Pacific Partnership (TPP) trade negotiations 

and their potential impact on trade in dairy products with Canada, 

and tax reform. 

First, Chobani strongly supports the establishment of a standard 

of identity for Greek Yogurt. The Food and Drug Administration 

establishes standards of identity for various food products to reduce 

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consumer confusion. Unfortunately, the current FDA standards of 

identity (SI) for yogurt are extremely outdated, do not take into account current manufacturing processes and only include definitions 

for Yogurt, Nonfat yogurt and Lowfat Yogurt. The definition does 

not reflect the composition and processes used to manufacture 

Greek Yogurt, which is very distinct from traditional yogurt. Greek 

Yogurt is to yogurt as sour cream is to milk. 

The lack of a proper standard of identity for true Greek Yogurt 

literally allows any product that meets one of the current FDA 

standard definitions of yogurt to be branded as Greek Yogurt, regardless of its composition or the processes used to manufacture it. 

USDA’s Child Nutrition Programs routinely follow FDA Standards 

of Identity for products used in their programs. The lack of a SI 

for true Greek Yogurt makes it difficult for consumers and the 

USDA to differentiate between yogurt and Greek Yogurt for purposes of the nutrition programs, including proper allowances for 

meat/meat alternates in child nutrition program crediting. FDA 

and Congress must recognize and address this blatant inequity in 

order for the rapidly emerging market for Greek Yogurt to meet its 

potential without misleading consumers towards a product that is 

not ‘‘true’’ Greek Yogurt. 

Second, we have seen an increase in challenges of the labeling 

of common food products abroad. We recently embarked on a costly 

and difficult process of re-labeling in England and Wales after it 

was, incorrectly in our opinion, ruled that using the term ‘Greek’ 

on our true Greek Yogurt product mislead consumers into presuming the yogurt was made in Greece. The European Union (EU) 

has embarked on an aggressive campaign to monopolize commercially significant terms that are used in foreign markets as a competitive advantage for EU member country produced products. 

Chobani is devoted to preserving and protecting properly applied 

use of common food names. However, the EU position puts common 

food names at great risk. If this problem is not dealt with soon, the 

EU’s aggressive actions to monopolize common food names will 

damage sales of many popular food products around the globe. 

Recently, the EU has been actively working to control many common names for foods, actions indicating a strategy to secure exclusive rights to names long used in many places around the world 

outside the EU. Generic names used by millions of consumers. 

Common names like bologna, chorizo, feta, gorgonzola, parmesan, 

provolone, and salami. 

Arguing that a small group of EU producers should have an exclusive right to use such names is like claiming that only Italians 

should be permitted to use the term ‘‘pizza’’. Protectionism is protectionism, not matter how you couch it. We hope Congress will 

continue to urge our negotiators to take an aggressive stance on 

the matter of geographic indicators in future trade negotiations. 

On a third point, Chobani recently engaged in an extensive process to bring our product to Canada. This process included researching the ability to import yogurt into Canada from the United States 

and to explore making yogurt in Canada for Canadian consumers. 

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In the case of importing yogurt, we found this to be essentially 

impossible, as there is a 237.5% duty for virtually all yogurt imports. This is despite the open borders promulgated by NAFTA. 

As an alternative, we attempted to buy land and build a manufacturing facility in Canada. When this plan became visible to our 

competitors, they launched a series of actions directly against various Canadian government agencies and the local Chobani entity to 

stall our Canadian plans. Despite the fact that we and the Canadian government prevailed in court, all of the previous market barriers continue to exit. 

Accordingly, we recommend that the Congress and the Administration use the TPP umbrella to look at the closed borders for dairy 

trade with Canada. We understand that other countries are recommending the same course of action. 

Lastly, we understand that there are many discussions surrounding ‘‘Tax Reform’’ in the halls of government. We wholly support this effort to eliminate inconsistencies in the taxation of U.S. 

entities and to have a globally competitive tax system. 

We appreciate the support that this Committee has shown and 

the opportunity for us to testify today. We look forward to working 

with the Committee in addressing the current challenges. 

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Insert offset folio 85 here 81935.055

United States House of Representatives 

Committee on Small BusinessEconomic Growth, Tax and Capital Access Subcommittee 

American Competitiveness Worldwide: Impacts on Small Businesses and Entrepreneurs 

eTO 

Testimony Presented By: 

Smyth McKissick 

Chief Executive Officer 

Alice Manufacturing, Easley South Carolina 

On behalf of 

The National Council of Textile Organizations 

(NCTO) 

Tuesday, July 9 2013 

1 
86 

Chairman Rice and members of the subcommittee, Good afternoon and thank you for the opportunity to discuss the important 

role that over 500,000 men and women earning their livelihoods in 

the textile sector play in advancing the U.S. economy. 

Good afternoon, my name is Smyth McKissick and I am the CEO 

of Alice Manufacturing. We are located in Easley, South Carolina. 

My company produces yarns and fabrics primarily for home furnishings, apparel, and health care applications. We also create 

home furnishing products, mainly fashion bedding, which we sell 

directly to our country’s great retailers. Alice Manufacturing was 

established in 1910, and for four generations my family has lead 

this company through good times and bad including numerous recessions, the Great Depression, and World War II. Over the years, 

Alice and other U.S. textile manufacturers have consistently invested in the most technologically advanced equipment, continuing 

education, and technical training for our manufacturing facilities 

and workers. We employ best practices such as Lean, Six Sigma, 

and Maintenance Excellence. As a result our employee productivity, a key measure of competitiveness, has enjoyed incredible 

growth. 

While our company and industry have adapted to changing 

times, U.S. trade policy has oftentimes hampered the growth and 

competitiveness of the U.S. textile industry. Our prosperity as an 

industry is dependent upon healthy engagement with the rest of 

the world. As the third largest exporter of textile products in the 

world, shipping nearly $23 billion in textile and apparel products 

to more than 170 countries, our industry is opposed to the unfair, 

or even in some instances illegal, trade practices that many foreign 

‘competitors’ use to gain U.S. market share. These unfair practices 

are many and are damaging to the U.S. industrial base and run 

contrary to the core principles of ‘‘free trade’’. 

The U.S. textile industry has been a world leader in innovation, 

developing biological resistant fabrics, wrinkle free fabrics, and sophisticated fabrics for military and other industrial applications. 

For all the positives that the U.S. industry enjoys, some serious 

challenges also confront U.S. textile manufacturers. For example, 

our chief competitors are located in countries that manipulate their 

currency, encourage nonperforming loans, ignore labor and environmental laws, tolerate nontariff barriers, and steal intellectual property. We also face the difficulty of the U.S. government’s tendency 

to trade U.S. textile manufacturing interests away to competitors 

for perceived gains in other policy arenas. This does nothing more 

than erode the U.S. industrial base and displace workers and families in small towns and communities nationwide. 

Prior to the Asian financial crisis, the textile industry in the 

United States was quite successful. One hundred percent of the apparel manufacturing process took place on American soil, from the 

cotton fields, to shirt, and retail. When the crisis hit, overnight, the 

U.S. market was flooded with artificially cheap goods. Due in large 

part to currency devaluations, our foreign ‘competitors’ gained a 

huge pricing advantage driven by weakened currency. These ‘competitors’ didn’t become more productive nor did they develop new 

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manufacturing practices that created a competitive edge, these 

‘competitors’ cheated, and the United States textile supply chain 

was decimated. The industry was cut in half and thousands upon 

thousands of U.S. textile jobs were lost in the process. 

At Alice Manufacturing, we realized that we had to quickly establish new business models in order survive. Our customers were 

being put out of business which required new strategies to access 

the consumer base. The first strategic move that Alice made was 

the creation of a new division whereby we would sell direct to retail. Before, we were an intermediate supplier of fabric in a complex, U.S. based, supply chain. Our new division, allowed Alice to 

become a ‘‘vertically integrated’’ home textile supplier. Knowing 

that the creation of outstanding designs is the ‘‘crown-jewel’’ of 

fashion bedding, we developed our own ‘‘in-house’’ design team by 

adding incredibly talented designers to our workforce. Using our 

fabrics, the product is finished with our designs, then cut and 

sewn, and sold to our country’s major retailers. Our focus is on 

great designs, outstanding customer service, outstanding quality, 

and competitive pricing. Later, we diversified our product mix with 

the use of outside suppliers. This division of our company is a great 

contributor to our overall success. 

Our second strategy is one whereby we partner directly with our 

neighbors in NAFTA and CAFTA countries. By doing so we are 

able to optimize our supply chain by spinning fibers into yarns and 

weaving fabrics in our U.S. based plants and then export the fabric 

to Mexico for finishing and cut and sew. Most of the products made 

from our fabrics are sold abroad. It’s an optimal partnership and 

we are blessed to have ‘‘World-Class’’ producers in the NAFTA/ 

CAFTA countries to partner with. We have benefited from having 

market access through out trade agreements to this region and our 

business is growing as a result. What makes these trade agreements so beneficial to the U.S. textile industry are the core tenants 

of textile and apparel trade: the Yarn Forward Rule of Origin, access to partnering countries markets, and customs enforcement. 

Additionally, productivity is a critical component of competitiveness, and productivity growth is as important as anything we do. 

We invest in state-of-the-art manufacturing equipment as well as 

training to arm our workforce with the necessary skills and assets 

to compete. Most importantly, doing business with integrity is everything! We pride ourselves in doing what we say we’ll do. Our 

customers depend on us to deliver great quality on time. 

Though we’ve been able to ‘‘re-create’’ ourselves and start a new 

and growing business inside our company; at the same time we had 

to downsize our core business. It’s incredibly difficult to go to a 

workforce that has been part of our company for generations and 

tell them that their job will be lost. Especially knowing that these 

workers were being displaced by foreign ‘competitors’ relying on a 

foreign supply chain that is dependent upon unfair or illegal subsidies like: currency manipulation, technology transfer, theft of intellectual property, and rebates of import duties to name a few. 

That is why enacting fair trade and investment policies that promote the competitiveness of U.S. manufacturers, as well as the 

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competitiveness of the nations we trade with is critically important. 

Government to government, economy to economy, and industry to 

industry, the two-way exchange of goods must be fair and create 

mutual benefits. 

Yet, there is good news to share, over the past few years the U.S. 

textile industry has experienced resurgence. Textile manufacturing 

has begun to come back to the United States; in fact, the textile 

industry has invested over $3 billion in new technologies, machinery, and manufacturing facilities since 2010. This positive trend 

could be further bolstered by sound U.S. trade policy, particularly 

as the U.S. government works to complete negotiations on the 

Trans-Pacific Partnership or the TPP. The TPP is the largest free 

trade agreement since NAFTA that the U.S. is negotiating with 

eleven other nations—Japan, Mexico, Chile, Peru, Canada, Australia, New Zealand, Brunei, Singapore, Malaysia and Vietnam. If 

properly structured, the U.S. textile industry is poised to continue 

a positive trajectory of growth. However, if weak rules are adopted, 

particularly given Vietnam’s participation in the TPP, our industry 

will be at the mercy of an unfair free trade agreement, which will 

decimate the United States textile industry once again. 

There have been a number of U.S. policies that have complimented U.S. textile manufacturing over the past 10 years. New 

markets have opened, and new international partnerships have 

been formed. The yarn forward rule of origin has been especially 

important to our industry. The yarn forward rule of origin means 

that the yarn used to form fabric, dyeing and finishing of fabric, 

and the final cut, sew, and assembly must occur in a free trade 

partner country to gain U.S. market access. Yarn forward has been 

the standard bearer in the creation of nearly $25 billion in two-way 

trade between the industry and our FTA partners. The rule has 

been the primary force behind the more than two million textile 

and apparel jobs in the United States and amongst our Western 

Hemisphere free trade partners. 

Other examples of policies that have helped Alice to remain globally competitive are cotton and energy policies. Programs such as 

the Economic Adjustment Assistance Act have allowed Alice and 

other textile manufactures to invest in new machinery and equipment which had lead to the creation of thousands of textile jobs 

since the program was enacted in the 2008 farm bill. Energy costs 

have also been a huge contributor to our success. Textile manufacturing requires large amounts of energy and energy costs in the 

U.S. are an important competitive advantage. 

While we have been able to regain a foothold over the past few 

years there are new policies which could present great danger to 

our industry. The Trans Pacific Partnership (TPP) could be the 

U.S. textile industry’s single greatest threat since the Asian financial crisis. TPP negotiators must recognize that trade developed 

under free-market principles must be both defended and encouraged for the TPP to work as intended. In the case of Vietnam, a 

non-market economy, the government heavily subsidizes its industrial sectors particularly its textile and apparel sector. This requires new counterbalancing measures. These measures include 

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long tariff phase outs for sensitive product categories and strict 

customs rules and enforcement to deter illegal trade. The U.S. textile industry continues to be concerned about the treatment of state 

owned and directed Vinatex, the 10th largest garment producer in 

the world, and by far the largest textile and apparel producer in 

Vietnam. This past week, news broke that the Chinese are considering heavy investments into Vinatex if the United States buckles 

to the single transformation rule that Vietnam would like to see in 

the TPP. Should the U.S. agree to a single transformation rule, 

Chinese state owned and operated textile producers will be granted 

duty-free access to the United States market through Vietnam. 

This is because single transformation rules requires that only the 

cut and sew part of the manufacturing process take place inside a 

TPP country in order to gain preferential access to the U.S. market. This means that Vietnam could continue to import textile inputs from China, cut and sew the apparel in Vietnam, and then export to the U.S. If this occurs, Vietnam and China stand to gain 

billions of dollars in textile trade at our industry’s expense. 

While the United States continues to hold fast on a yard forward 

rule of origin in the TPP, the Vietnamese oppose yarn forward. 

They are focusing on short-term foreign earnings and job growth 

from apparel exports. The Vietnamese are looking for a single 

transformation rule of origin and the U.S. apparel and retail importers have stated that they will support and push for single 

transformation as well. Single transformation creates an uneven 

playing field between the U.S. and Vietnam and will allow Vietnam 

to import goods from China and export those goods to the United 

States duty-free, circumventing the TPP agreement and flooding 

the U.S. market with duty-free Chinese textile and apparel products, leaving over 500,000 U.S. textile jobs at risk. 

The initial 6–8 year impact of a single transformation rule in the 

TPP would prove devastating to the U.S. textile industry. Exports 

to the Western Hemisphere would decline by $3.8 billion and exports of apparel to the U.S. from the CAFTA, NAFTA, and the Andean regions would decline by $4.5 billion. Total possible job losses 

in the Western Hemisphere could total more than 1.5 million. 

These figures do not include collateral damage to other textile sectors including industrial, home furnishings, and military which are 

likely to be significant as overall industry capacity declines. The 

total projected job loss in the United States after 10 years of a single transformation rule as part of the TPP would be equivalent to 

532,363 jobs. Vietnam fully expects that the TPP will allow integration of textile and apparel trade under a single transformation 

rule. 

More than 75% of the apparel produced in Vietnam uses fabric 

and other textile inputs from China. A yarn forward rule would encourage Vietnam to build its own textile industry or source its inputs from another TPP country, like the United States, so that the 

value of the orders for textile processing goes to Vietnam and not 

China, as it does now. Vietnam continues to insist upon a single 

transformation rule and is prepared to trade the long-term benefits 

of having a primary textile sector for short-term gain; giving away 

a yarn forward rule would be a disaster for the textile and apparel 

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industries in this hemisphere. The only winner in this situation is 

China. 

Another concern of the U.S. domestic industry is that Vietnam 

engages in currency manipulation. Trade with countries that manipulate currency to gain export advantages and drive down the 

cost of goods creates uneven playing fields that sends manufacturing and jobs overseas. Currency manipulation easily nullifies 

any U.S. export benefits in an FTA with Vietnam. The Vietnamese 

government has steadily devalued the dong my more than 25% 

over the past three years; these devaluations have been a crucial 

assist in making Vietnam the fastest-growing apparel exporter to 

the United States and in taking the market share of production 

jobs from the U.S. textile industry and its Western Hemisphere 

partners. Currency manipulation must be addressed in the TPP if 

U.S. textile producers are to get a fair and competitive playing field 

under the agreement. It makes no sense to ignore such a fundamental issue in the TPP, particularly one that has such significant 

impact on U.S. jobs. If currency manipulation by the Vietnamese 

government continues to depress the value of the dong it will erase 

any market opening benefits for U.S. textile exporters under the 

TPP. 

The United States government has a unique opportunity to develop a high standard 21st century forward thinking agreement 

through the Trans-Pacific Partnership. The yarn forward rule of origin supports hundreds of thousands of U.S. jobs as well as 1.5 million textile and apparel jobs in countries bordering and near the 

United States. In our past FTA agreements this rule is serving to 

bring jobs and production from Asia to the United States and the 

West Hemisphere. The yarn-forward rule of origin creates strong 

partnerships and export growth and opportunities for the U.S. textile industry around the world. 

In conclusion, a flexible rule of origin will cause widespread plant 

closures and job losses in the United States and destroy enormous 

export markets that our free trade partners in CAFTA, NAFTA, 

the Andean region and African trade promotion programs depend 

on. It would also encourage Chinese textile manufacturers to continue to displace U.S. production and retard our textile sector development. In the entire TPP region the principal beneficiaries 

would be the importers and retailers who would get more than $1 

billion in new duty savings, while displacing more U.S. manufacturing jobs at a time when the need for these jobs is extremely 

high. 

I am here today to urge you to endorse the fundamental trading 

rules that have encapsulated every major FTA over the last 25 

years along with the principles of fair market access and strong 

customs enforcement in the Trans-Pacific Partnership. This will 

allow the U.S. textile industry to continue to innovate, grow, and 

prosper. The distinguished members of this Subcommittee can support these principles by signing onto a Dear Colleague Letter authored by Representatives Coble (R-NC), McHenry (R-NC), and 

Pascrell (D-NJ) to the USTR that already has more than 143 of 

your colleagues supporting these important trading rules. I would 

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like to thank those Subcommittee members who have already 

agreed to sign onto this important letter, including you, Mr. Chairman. 

Thank you for the opportunity to provide testimony to the Subcommittee today and I would be pleased to answer any questions 

that you or any of the Subcommittee members may have of me, Mr. 

Chairman. 

Respectfully Submitted: 

Smyth McKissick 

Chief Executive Officer 

Alice Manufacturing 

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Key Facts about the U.S. Textile Industry 

• The U.S. textile industry is a large manufacturing employer in 

the United States. The overall textile sector—from textile fibers to 

apparel—employed 499,000 workers in 2012. 

• Textile companies alone employed 235,000 workers. 

• The U.S. government estimates that one textile job in this 

country supports three other jobs. 

• U.S. textile shipments totaled more than $53 billion in 2012. 

• The U.S. textile industry is the third largest exporter of textile 

products in the world. Exports of all textile products exceeded $17 

billion in 2011 and again in 2012. Total textile and apparel exports 

were a record $22.6 billion in 2012. 

• Two-thirds of U.S. textile exports during 2012 went to our 

Western Hemisphere free trade partners. The U.S. textile industry 

exported to more than 170 countries, with 24 countries buying 

more than $100 million a year. 

• The U.S. textile industry supplies more than 8,000 different 

textile products per year to the U.S. military. 

• The U.S. is the world leader in textile research and development, with private textile companies and universities developing 

new textile materials such as conductive fabric with antistatic 

properties, electronic textiles that monitor heart rate and other 

vital signs, antimicrobial fibers, antiballistic body armor for people 

and the machines that carry them and new garments that adapt 

to the climate to make the wearer warmer or cooler. 

• The U.S. textile industry invested $16.5 billion in new plants 

and equipment from 2001 to 2010. And recently producers have 

opened new fiber, yarn and recycling facilities to convert textile 

waste to new textile uses and resins. 

• The U.S. textile industry has increased productivity by 45 percent over the last 10 years, making textiles one of the top industries among all industrial sectors in productivity increases. 

• In 2011, textile workers on average earned 135% more than 

apparel store workers ($576 per week vs. $245) and received health 

care and pension benefits. 

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Testimony of Dr. Cynthia McIntyre 

Senior Vice President 

Council on Competitiveness 

U.S. House of Representatives Committee on Small Business 

Subcommittee on Subcommittee on Economic Growth, Tax 

and Capital Access 

Hearing 

American Competitiveness Worldwide: Impacts on Small 

Businesses and Entrepreneurs 

July 9, 2013 

1:00 pm 

Chairman Rice, Ranking Member Chu, and other distinguished 

Members on the Subcommittee, thank you for having me here 

today. It is an honor to share with you on a public-private partnership with which the Council on Competitiveness has been heavily 

involved since its inception, the National Digital Engineering and 

Manufacturing Consortium. This program currently wrapping up 

its pilot phase is a pilot public-private partnership connecting small 

and medium-sized manufacturers with high performance computing via modeling and simulation. 

U.S. manufacturers are being challenged today by an unprecedented confluence of global events. This convergence of powerful internal and external forces—The Great Recession, global economic 

contraction, the U.S. automotive manufacturing base receiving 

from the financial crisis and the recession, and increasing competition from overseas—is challenging U.S. manufacturing leadership 

like never before. Indeed, these extraordinary circumstances require extraordinary measures, and the U.S. public and private sectors must cooperate strategically, coordinating and investing to repair, reposition, and reaffirm U.S. global leadership in manufacturing. 

Research by the Council on Competitiveness presents powerful 

evidence of the capacity of high performance computing (HPC) to 

drive innovation and make U.S. companies and the nation more 

competitive. Indeed, for those who have adopted it, HPC represents 

a crucial edge that can build and sustain competitive advantage 

through innovative product design, production techniques, cost savings, improved time-to-market cycles, and overall quality. However, 

Council research has also shown that many U.S. companies are 

‘‘stuck at the desktop’’ and not able to take full advantage of HPC, 

while still others—including many suppliers to U.S. tier 1 companies—have limited, if any, computational R&D capacity (with many 

not even using desktop workstations). 

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Our situation becomes even more critical when one surveys the 

competitive landscape that U.S. companies face today—where 

many foreign governments have established public-private partnerships for the use of HPC in manufacturing. Indeed, sustained national investments in innovation and manufacturing are occurring 

in China (e.g., China’s 863 Program), the European Union (PRACE 

program), and in the UK to name only a few. Meanwhile, our own 

national policy regarding HPC is fragmented. The time is right for 

the U.S. federal government to take bold steps to leverage HPC for 

next-generation innovation, manufacturing, and U.S. competitiveness. 

The Council sees public-private sector collaboration as the best 

and most effective means for quickly advancing HPC in manufacturing. However, to be successful in this effort, much closer coordination between government, national labs, universities, and industry will be needed and must be bolstered by a national strategy 

that transcends the parochial interests of any single federal agency, department, university, or HPC center. To these ends, the 

Council offered several recommendations for quick action: 

• Improve coordination of the federal government’s overall approach to advancing HPC (i.e., work toward a more balanced program across DOE labs, NSF-funded supercomputing centers, the 

DOD, universities, and so on). 

• Increase outreach efforts to chief executives (the so-called ‘‘Csuite’’) in manufacturing to help them better understand the true 

benefits of HPC to their bottom lines. Bring together CEOs and 

CTOs from the nation’s manufacturing base, along with U.S. experts in HPC hardware and software, in a national summit to better frame and address the issues surrounding HPC for next-generation manufacturing. 

• Enhance industrial access to HPC resources by establishing a 

government-supported HPC center or program dedicated solely to 

assisting U.S. industrial partners in addressing their research and 

innovation needs by adopting or improving modeling, simulation, 

and advanced computation. 

Æ The center or program would provide assistance with problem definition; software selection, development, or 

customization (indeed, software is often the most crucial gap); 

and access to HPC hardware. 

Æ It should feature a task force or working group that would 

(1) visit all top U.S. manufacturing companies, HPC centers, 

national labs, and major independent software vendors (ISVs); 

and (2) work to address major technical hurdles in the manufacturing sector’s use of HPC (e.g., software, interoperability, 

multiphysics, and so on). 

Æ It should be overseen by an advisory board with balanced 

membership from government, university, and industry. 

Æ It could be started with initial funding from the federal 

government, but should be supported in the long term by a 

broad mixture of support from federal, university, and industrial partners. 

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• Invest in U.S. HPC expertise. Some of our most precious national resources are the people who operate in the HPC domain— 

from the computational scientists and engineers to the domain experts that apply HPC in their fields (e.g. mechanical, electrical, 

chemical engineers). The federal government, national labs, universities, and industry need to take concrete steps to educate, train, 

retrain and retain people with the expertise to take advantage of 

large HPC systems and manage their application and deployment 

in new settings, and create the new software and hardware needed 

to drive innovation. 

The Council on Competitiveness and selected original equipment 

manufacturers (OEMs) developed a Midwestern regional pilot program as a public-private partnership with the U.S. federal government based on these recommendations. The pilot program is aimed 

at improving competiveness and innovation in small- and mediumsized enterprises (SMEs) in the U.S. manufacturing supply chain. 

The ultimate outcome of the pilot program will be a workforce with 

enhanced technical skills, improved product quality, better 

customization of products, and job retention and growth. 

On August 31, 2010, a Summit & Workshop was held at the 

Gleacher Center in Chicago that brought together representatives 

from a broad cross-section of industry, academia and the federal 

government to brainstorm ideas and to agree upon the necessary 

and desired components for such a pilot program. This document 

captures the decisions made at that meeting, and provides guidelines for implementing the pilot program. 

The high level goal of this pilot program is to develop and demonstrate a sustainable, scalable and replicable model for accelerating and broadening use of modeling, simulation and analysis 

(MS&A) in Midwestern SMEs through a public-private partnership 

(described below). Funding will be provided as seed money for this 

pilot program, with the expectation that it will demonstrate a path 

toward long-term sustainability. This is only achievable if (a) the 

supply chain members can rapidly reach a point where the results 

produce cost-benefits that allow and incentivize them to continue 

use of MS&A, either independently or within the continued context 

of the pilot program, and (b) software vendors can develop a business model that provides easier and more affordable access to software tools for SMEs. 

The longer term goals of this pilot program are to put U.S. manufacturing on a path toward using MS&A for digital prototyping of 

new and existing products and for process manufacturing. Also, we 

expect this pilot program to be a demonstration of effective coordination that will be used in the startup of other regional centers. 

The current level of MS&A across the manufactures in the U.S. 

is greatly varied with the companies lying at one of the three levels; entry, advancing, and expert. The key points are that U.S. 

manufacturers are at different levels in their adoption of MS&A in 

their processes, and that a natural progression of adoption and expertise exists to either adopt or advance usage to the next level. 

The focus of the pilot program is on the first two levels: 

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• Entry level—supply chain manufacturers who currently have 

no capabilities in MS&A, but recognize the benefits as a way to increase their competitive advantage. 

• Advancing—supply chain manufacturers who currently have 

some initial capability, but want to become more advanced in their 

use of MS&A to promote innovation and ensure their long-term 

competitive advantage. 

This early pilot program laid the groundwork for the formal recognition of the pilot program as a partnership with the U.S. government. In March 2011, a Memorandum of Understanding was 

signed at a White House Ceremony, formally establishing the public-private partnership (PPP) known as the National Digital Engineering and Manufacturing Consortium (NDEMC) for five years. 

The Council of Competitiveness became the lead partner for the 

project, in collaboration with a number of other stakeholders. The 

Consortium is funded by a public-private partnership established 

by the United States Government and a number of participating 

OEMs. This funding partnership has the U.S. government giving 

$2 million and the private sector contributing $2.5 million to the 

project. Some of the companies backing the project include Deere 

& Company, General Electric, Lockheed Martin Corporation and 

Proctor and Gamble. 

The NDEMC’s main purpose is to pilot programs that promote 

adoption and advancement of modeling and simulation (MS&A) 

and high performance computing (HPC) among small and mediumsized manufacturers (SMEs) in the United States. The network of 

OEMs, manufacturers, solution providers, and collaborators that 

make up the NDEMC will result in accelerated innovation through 

a powerful collaborative ecosystem of like-minded organizations. 

NDEMC is energizing the growth and development of small- and 

medium-sized American manufacturing enterprises (SMEs) by promoting public-private partnerships and encouraging skills transfer 

of advanced manufacturing techniques and processes that leverage 

computational power, simulation and cutting-edge modeling techniques. With funding through the Economic Development Administration, and as the initial project of President Obama’s Advanced 

Manufacturing Partnership, the White House and the Council of 

Competitiveness are leading the effort to collaborate with SMEs to 

use modeling and simulation. 

NDEMC brokers and promotes collaborative relationships that 

will sustain the growth of American manufacturing through jobs 

creation and enhanced competitiveness. NDEMC provides modeling, simulation and analytics education and training, access to 

High Performance Computing (HPC) and access to Software as a 

Service (SaaS). These services will be available through a distributed application to make U.S. SMEs more competitive in the global 

marketplace. 

A great example of how NDEMC has positively impacted U.S. 

companies is the case of Jeco Plastic Products LLC. Jeco Plastic 

Products, LLC is a small custom-mold manufacturer of large, complex, and high-tolerance products with a plant in the Indianapolis 

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tional molding and twin-sheet pressure. Jeco’s customer base includes large U.S. and international original equipment manufacturers (OEMs) in the automotive, aerospace, printing and defense industries. To take advantage of a monumental opportunity to secure 

a large OEM account, Jeco Plastic Products required high performance computing (HPC) and modeling, simulation and analysis 

(MS&A) resources to successfully evaluate design scenarios and 

predict the product performance of a complex custom pallet. In 

house finite element analysis (FEA) software and computing resources were inadequate to accomplish this task. Jeco joined the 

NDEMC program to gain training, experience, access to university 

expertise, software and hardware to successfully compete against 

large foreign competitors. By employing HPC simulation, the company was able to simulate and analyze their pallet in a highly predictive and time-efficient manner. Without these HPC resources, 

they would not have earned a multiyear contract from a large German automotive OEM. 

Improvements to Jeco’s pallet product have impacted their bottom-line as sales revenue is expected to double, payroll will increase by 35 percent at their plant, and they will be in contention 

for additional high-margin, domestic and export business projects. 

Overcoming Technical Challenges with High-Impact Computing 

Jeco experienced a technical challenge in its simulation of complex, 

high tolerance designs in inhomogeneous anisotropic materials, 

which is virtually impossible to produce with the current commercially available software. Tedious trial-and-error physical design 

and testing was deemed inefficient and would not meet the expectations of their large automotive OEM client. High-ranking executives at the company were cognizant that they needed to upgrade 

their MS&A capabilities to effectively compete in this high growth 

niche industry. 

A last minute requirement for a multi-year project with a major 

German OEM required Jeco to take immediate action to upgrade. 

The critical situation prompted the company to contact Purdue 

University for assistance through their Manufacturing Extension 

Partnership (MEP) program, which led to becoming part of the 

NDEMC Midwest Project. Jeco understood that the relatively small 

cosmetic alteration required by their client could potentially affect 

critical specifications for deflection, and they needed outside assistance. To facilitate this change and receive the initial order, they 

had to rapidly analyze a very complex design before making the expensive, irreversible tool changes. Access to HPC and the Purdue 

support staff were invaluable resources in enabling the company to 

make quick and accurate evaluations for the final step in the design process. Jeco CEO Craig Carson learned that the NDEMC 

public-private partnership would be instrumental in accessing the 

training, hardware and software necessary for MS&A. 

Based on their limited resources, Jeco’s participation in the 

NDEMC project became imperative to meet their strategic organizational, product and financial objectives. NDEMC’s Midwest 

Project offered Jeco access to Purdue’s faculty and staff. Jeco’s leadership valued the university’s strong collaboration, unwavering 

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support and intellectual insight to assist them in bringing technological improvement to their pallet product. The program also introduced the company to superior test facilities for a wide range of 

applications. This included utilizing HPC simulation paired with 

laboratory materials test equipment at Purdue to validate their 

models. 

From an MS&A perspective, NDEMC facilitated Jeco’s access to 

software which ordinarily would have been beyond the realm of 

possibility due to budgetary constraints. By gaining access to 

MS&A and technical expertise, Jeco had the ability to develop creative technological solutions in the final, time-critical phase of the 

product innovation process. 

Based on current projections, Jeco management is expecting a 

reasonably steady increase in incremental, cumulative sales revenue for rotational molding between 2013 and 2022, totaling nearly 

$23 million during the period. These projections are based on a 

full-scale release of a new product for their German OEM customer 

and additional projects in the twin-sheet thermoforming market. 

Due to increased production demand from their large clients, Jeco 

is expected to increase payroll and hire 15 advanced manufacturing 

workers within the next few years. 

While we celebrate the successes and learn from the challenges 

of the Midwest pilot program, NDEMC continues to move forward. 

I am pleased to share with you that the NDEMC program received 

the HPCwire Editor’s Choice Award for Best HPC Collaboration 

Between Government and Industry in 2012. Currently the NDEMC 

pilot program is wrapping up its federal funding and the Council 

on Competitiveness and other key NDEMC stakeholders are working to move NDEMC from a public-private partnership to a nonprofit entity which would be the conduit for new partnerships, including new public-private partnerships, across the United States 

which will continue to work together to sustain America’s manufacturing and competitiveness. The EDA and its partners will study 

the economic impact of technology-based innovation infrastructure 

toward boosting the long-term job capacity and competitiveness of 

U.S. manufacturing and industry. 

Thank you. 

For further information on the National Digital Engineering and 

Manufacturing Consortium please visit www.ndemc.org. 

For further information on the Council on Competitiveness and 

its manufacturing work, including the US Manufacturing Competitiveness Initiative and the American Energy & Manufacturing 

Partnership, please visit www.compete.org. 

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N DEMC Helps Jeco to Exceed Growth 

and Financial Expectations 

Overview 
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and the Purdue support staff were invaluable resources 

in enabling the company to make quick and accurate 

evaluations for the final step in the design process. 

Jeco CEO Craig Carson learned that the NDEMC public· 

private partnership would be instrumental in accessing 

the training, hardware and software necessary for MS&A. 

Based on their limited resources, Jeco's participation in 

the NDEMC project became imperative to meet their 

strategic organizational, product and financial objectives. 

NDEMC Facilitates Jeco's Bright Future 

NDEMC's Midwest Project offered Jeco access to 

Purdue's faculty and staff. Jeco's leadership valued the 

university's strong collaboration, unwavering support and 

intellectual insight to assist them in bringing technological improvement to their pallet product. The program also 

introduced the company to superior test facilities for a 

wide range of applications. This included utilizing HPC 

simulation paired with laboratory materials test equipment at Purdue to validate their models. 

From an MS&A perspective, NDEMC facilitated Jeco's 

access to SIMUUA Abaqus Unified FEA,2 which ordinarily would have been beyond the realm of possibility due 

to budgetary constraints. By gaining access to MS&A 

and technical expertise, Jeco had the ability to develop 

creative technological solutions in the final, time-critical 

phase of the product innovation process. 

Long-term Economic and Financial 

Prospects for Jeco Plastic Products 

Based on current projections, Jeco management is 

expecting a reasonably steady increase in incrementa!, 

cumulative sales revenue for rotational molding between 

2013 and 2022, totaling nearly $23 million during the 

period. Figure 1 indicates a solid forecast of expected 

annual revenue growth during the next ten years.:3 These 

projections are based on a full-scale release of a new 

product for their German OEM customer and additional 

projects in the twin-sheet thermoforming market. 

Due to increased production demand from their large 

clients, Jeco is expected to increase payroll and hire 

15 advanced manufacturing workers within the next 

few years. 

Figure 1. Projected Annual Revenue (Millions) 

$9 

$8 

II Revenue 

$7 

$6 

$5 

$4 

$3 

$1 

$1 

$0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 
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HPC Helps Deliver New Business 

Opportunities For Jeco 

Carson and his company plan to utilize their new core 

competency to address emerging markets in the aerospace and automotive industry. The company has 

received a lucrative order from NASA for a major component for the Internationa! Space Station, based upon 

their new ability to design and manufacture products in 

layered anisotropic materials with continuous internal 

fiber reinforcement. HPC has become a vital resource in 

Jece's product development process for various industrial applications. Most importantly, Jeca's demonstrated 

experience with MS&A during the Midwest Project was 

instrumenta! in helping them secure additional projects 

with other major aerospace and automotive clientele. 

Management reported that they are very pleased with the 

results of NDEMC's Midwest Project. 

Additional Financial Projections 

Carson insists the sales volume forecast for the next 

few years is very achievable, and the company will have 

working capital to fund growth by the 2015 fiscal year, 

Figure 2 illustrates revenue growth and sales projections 

for both rotational molding and twin-sheet forming 

processes. The total revenue for their twin-sheet work 

during the next ten years is expected to climb to nearly 

$24 million. 

Figure 2. Sales Revenue for Twin Sheet Forming and Rotation Molding (Millions) 

Dr. Cynthia R. McIntyre 

Senior Vice Presld,;nt 

NDEMG. plp.8.sl;-') 

on ConlpetltlVn:l0SS 

Mr. Aaron Malofsky 

NDEMC & Communications 

COUr1cJl on Compelitive,'e" 

arnaiofskyCfi)cornpete.org 
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Æ 

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OEMs 

• Deere & Company 

~ General Electric Company 

~ Lockheed Mariin Corporation 

- The Procter & Gamble Company 

Solution Partners 

~ CounCil on Competitiveness 

• Ohio Supercomputer Center 

~ Purdue Uriverslfy 

• SeRA 

State Governments 

• Ohio Board of Regents 

Federal Government 

• The White House 

• U.S. Department of Commerce 

~ Economic Development 

AdmmistTatlOIl 

• U.S, Departmer'!t of Energy 

• National SCience Foundation 

NDEMC is energizing the growth and development of small- and 

medium~sized American manufacturing enterprises (SMEs) by 

promoting public-private partnerships and encouraging skills 

transfer of advanced manufacturing techniques and processes that 

leverage computational power, simulation and cutting-edge modeling 

techniques. With funding through the Economic Development 

Administration, and as the initial project of President Obama's 

Advanced Manufacturing Partnership, the White House and the 

Council on Competitiveness are leading the effort to collaborate with 

SMEs to use modeling and simulation. 

NDEMC brokers and promotes collaborative relationships that will 

sustain the growth of American manufacturing through jobs creation 

and enhanced competitiveness. NDEMC provides modeling, simulation and analytics education and training, access to High Performance 

Computing (HPC) and access to Software as a Service (SaaS). 

These services will be available through a distributed application to 

make U.S. SMEs more competitive in the global marketplace. 

NDEMC has two major deliverables: a web based portal and up to 

40 demonstration projects/case studies. The portal will be easy to 

access with features that include: 

A single point of entry to access MS&A software and HPC 

A searchable database of MS&A software (at present there are 

143 types of software in the database) 

A secure business transaction capability (pay-by-use model) 

Access to unbiased advice and direction (university partners) 

A database of MS&A consultants and their areas of expertise 

The first seven projects in process now are the following SMEs: 

Adams Thermal Systems 

Greenlight Optics 

Jeco Plastic Products 

Plastipak Packaging, Inc. 

Pratt Industries 

Rosenboom, Inc. 

TPI Composites