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	Virginia Peninsula Chamber of Commerce Leadership Forum
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            <h1>Virginia Peninsula Chamber of Commerce Leadership Forum</h1>
            <h3>13 Aug 2019</h3>
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                <p><span style="font-size:130%;">Well, good morning! Thanks, Bob, for inviting me to speak. I would like first to thank the Chamber for your longstanding relationships with area military commands. You serve a very critical role connecting us to area businesses and the rest of the community – and I think that really allows us to discuss some pressing issues. I really appreciate your leadership here.<br />
<br />
As the Chamber of Commerce, I understand one of your fundamental objectives is to foster strategic partnerships in order to realize new and better opportunities. And I tell you...I couldn’t agree more with this goal. I’m here this morning to engage in a conversation about that partnership. I look forward to your questions after I’ve had a chance to tee up the discussion a bit with some prepared remarks.<br />
<br />
So, my aim today is to highlight the Navy’s role within the region’s economy; to provide my perspective on the world security environment and your Navy’s role for the nation; to share the Navy’s approach to the challenges we face; and finally, how I believe, as a team, leaders such as yourselves within the region can play and important role.<br />
<br />
Now, I am excited for the opportunity to discuss the peninsula’s biggest business sector – defense. But, before we bring it a little bit closer to home, let’s look at the Navy as if it were a business for a moment. I think it’s a pretty compelling analogy – especially for the purposes of today’s discussion.<br />
<br />
So, the Navy, as a whole, manages about 195 billion dollars annually. It has a total of 711 thousand people, including active, reserve and government civilians. And the Navy has about a half a trillion dollars in assets under management. Now, that is a pretty big company. And if you put it all together, we’d be a “Fortune 7” company if we were publicly traded.<br />
<br />
Now, of course, we’re not a company. Profits and loss are not our focus. I say to my folks all the time – we don’t work Amazon or Google or Starbucks. Instead, our profit is readiness and lethality. We are laser-focused on taking the resources Congress gives us – that you give us as taxpayers – and delivering on that readiness and lethality, so you, the taxpayer, can get the most for your money.<br />
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And so, if you take that back to the region – and I think you all know this – the Navy’s impact here is huge. In fact, this region is synonymous with Navy. Navy’s history in this area goes back to the very beginning of our story in the Revolutionary War.<br />
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The Navy’s direct impact on the region in fiscal year 2017, which is the last year we have data, was 13.4 billion dollars. That’s a 600 million dollar increase over the previous year. And overall, the total defense-wide direct economic impact was 22 billion dollars, which represents 10 percent growth over two years.<br />
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Now, I think a big factor in that rebound is growth in the manufacturing sector, which was arguably impacted hard by the recession and federal sequestration cuts. In fact, according to ODU, regional job growth is now outpacing the national average. According to a recent ODU study, defense spending constitutes 42 percent – nearly half – of the region’s gross domestic product. Fortunately, for our region, the last two years witnessed a return to real GDP growth, the defense sector being the leading driver. The Navy’s impact here goes beyond economics, of course. The region, as many of you know, is home to the world’s largest naval base. There are 146 thousand personnel working on our bases, including military, civilians and contractors. When you add in our Sailor’s families, our civilian employees, retirees, and survivors of retired Sailors, you get a total Navy family of 316 thousand people – or nearly 20 percent of the region’s population of 1.7 million.<br />
<br />
And, I fully believe and am proud of the fact that the Navy is indeed a part of this community. I know you see it the same way. You see us as coaches, scout leaders, and in our places of worship. As I said, I appreciate and am grateful for this close relationship. I would submit, too, that there is no more important partnership to the success of this region – and the Navy, for that matter – than the one between the Navy and the greater coastal Virginia region.<br />
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The father of the American Navy, John Paul Jones, once said, “Men mean more than guns in the rating of the ship.” So, in the end, all of the people around the region supporting the Navy mission – including you, our partners – mean more to global security than how much we spend on ships and aircraft. Thank you.<br />
<br />
Speaking of security, our global environment is growing more complex and challenging. I’ll set the stage a bit...if you start at the beginning, you will notice that 70 percent of the earth is covered in water. And there are some fundamental differences between the land and the sea. The most important being, the concept of ‘Freedom of the Seas,’ or that the high seas are free to all and belong to none, which makes 70 percent of the earth a global commons.<br />
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Eighty percent of the world’s population lives near the sea, with nearly every megacity included. This trend is increasing with time, causing overcrowding and scarcity, and as you might imagine, leads to greater risk of human conflict in the littorals – all of which is shaped at and from the sea.<br />
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More than 90 percent of all international trade – almost everything that we buy and sell – travels by sea. Last Year, 735 million containers were shipped worldwide – nearly 1 million in Hampton Roads. And if placed those containers end-to-end, they would encircle the globe at the equator more than 11 times. Worldwide, our predictions are the volume of traffic on the seas will triple by the year 2050. Again, according to ODU, the Port of Virginia saw 5 percent growth in shipping volume just last year.<br />
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And finally, the seabed plays host to over 287 undersea fiber-optic cables, through which more than 99 percent of global internet traffic passes, fueling the modern economy. As you might expect, these cables are vulnerable in many ways – and the economic and security implications here are rather obvious.<br />
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So, these broad stage-setting figures – the 70, the 80, the 90, and nearly 100 – mean the seas are growing ever-more congested, and more vital to us all. And I think there is only one reasonable conclusion one can draw from this – and that is we’re unquestionably now in a maritime era. As the strategist Colin Gray once wrote, “The geographical setting is...only a stage; it is not the script, though it does suggest the plot and influence the cast of characters.”<br />
<br />
Now, let’s talk about that cast of characters. The world around us is rapidly changing. For the first time in over a quarter century, we now regularly observe overt challenges to the free and open international order and the re-emergence of long-term strategic competition between nations. We in the defense sector see this as a return to <em>Great Power Competition</em>. Our adversaries aim to replace the United States as the dominant power and change the free and open world order into a more authoritarian model arranged for their exclusive benefit.<br />
<br />
In fact, when talking about this new era of Great Power Competition, we use the phrase “2+3.” We used to describe the global security environment as “4+1,” with Russia, China, Iran, and North Korea – plus terrorists, or violent extremist organizations, as threats to our well-being as a nation.<br />
<br />
But, now, it’s “2+3”– China and Russia are our two great power competitors, with Iran, North Korea, and violent extremists also challenging the international order. Russia, as a declining power, is a more short-term challenge. Just look at their activities over the last 10 years or so to see their demonstration of hostile intent. We saw them conduct cyber-attacks in the Baltics in 2008, annex Crimea in 2014, conduct a poisoning attack recently in the UK, and we have strong evidence they meddled with our 2016 elections.<br />
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Meanwhile, militarily – and particularly within the undersea domain – they’ve undergone a significant rearmament program over the last decade, fielding some very exquisite technology, including things such as the Severodvinsk-class submarine and the Kalibr family of weapons systems, which brings long range land attack cruise missiles to the table, like they haven’t since the Cold War.<br />
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It reaffirms to me, as fleet commander and the naval component of U.S. Northern Command, that the homeland is no longer a sanctuary. What I mean is that, while we used to think of the oceans surrounding us as moats, they are now better-considered attack vectors.<br />
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China, on the other hand, is a rising power, with the economic strength to back it up. They take the long view. And, I would tell you, they are the long-term pacing military challenge. China is undermining the liberal economic order by instituting unfair trade practices, such as forced technology transfer, intellectual property theft, and other non-tariff barriers to accessing their markets. I believe they intend to spread their authoritarian-rule model globally, using thins such as debt-trap diplomacy to gain leverage – this is their One Belt, One Road strategy. And, I’m here to tell you that’s a euphemism if I’ve ever heard one.<br />
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From a military standpoint, they’ve launched over 100 warships in the last decade, including some pretty good kit of their own, like their Yuan-class submarines and Luyangclass destroyers. China is steadily ramping up its infringements upon others’ sovereignty and freedoms – very gradually asserting increased control of both the global commons in places like the South China Sea and others’ sovereign territory.<br />
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They also threaten because of their pursuit of capabilities designed to contest our access in times of crisis, such as anti-ship cruse and ballistic missile systems. And many don’t realize that they are aggressively pursuing the weaponization of space to deny our ability to see, sense and understand.<br />
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Now, the good news is that your leaders in the Pentagon fully understand the shifting stage, including the changing cast of characters. And, they have developed what is, I believe, really a maritime strategy in our larger <em>National Defense Strategy</em>. In fact, our <em>National Defense Strategy </em>endorses a principle long understood by our nation’s leaders – that in order to prosper as a nation, we must defense far forward.<br />
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Since before our founding days, America has been heavily dependent on seaborne commerce – something absolutely still true today. To maintain our prosperity and secure our influence in an increasingly interconnected world, we must defend our interests in the global commons.<br />
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The bottom line here is your Navy is critical to securing America’s place in the world and we are responding with a sense of urgency and creativity. We will protect our nation’s unfettered access to the global commons, defeating any adversary who elects to challenge freedom of the seas.<br />
<br />
Now, as many of you are aware, we made a series of well-meaning decisions through nearly two decades of land-based war to achieve short-term mission accomplishment and, I would say, some cost efficiencies. In the end, though, this resulted in the fleet consuming its readiness at what I would tell you is an unsustainable rate, creating the ‘readiness trough’ we are now working out way out of.<br />
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Over the last few years – the good news is – we reversed this trend of underinvestment and are aggressively recovering long-deferred maintenance. But, there’s lots more work to do. While many call this return to Great Power Competition a new Cold War, I see it as fundamentally different. The Cold War was a finite game. We beat the Soviet Union by leveraging their internal contradictions to hasten their demise.<br />
<br />
This competition we’re in now; however, is best understood as an infinite game. China is unquestionably a rising power on a long-term trajectory. And, so, our aim is not to hasten their demise, but guard against their authoritarian urges to redefine norms, and instead protect the free and open order where everyone can win, and no one loses.<br />
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So, this will undoubtedly be a long-term competition, which means the Navy must compete in ways that are sustainable. Because sustainable readiness begets credible deterrence. Only a Navy, which is combat-credible and present where it matters, and when it matters, can protect American interests.<br />
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So, this leads to an area of significant concern for me, and I think also for you, which is the state of our defense industrial base. The factors of vastly reduced industrial capacity, significantly more complex equipment, and a constrained supplier base challenge our leadership as the arsenal of democracy.<br />
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China surpassed us in manufacturing sector capacity in 2010, and it simply takes more time and superior craftsmanship to build an F-35 Joint Strike Fighter than it took to crank out P-51 Mustangs. Lastly, the advent of just-in-time logistics has resulted in efficiency and profitability in all business sectors – the defense sector included.<br />
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I get it. That makes sense to me, and I would do the same if I were in your shoes. But, I worry that while this may work in peace, it will not work in war. This intense, long-term, global competition will demand more of the Navy than we are currently equipped to manage over the long run. The Navy the Nation Needs must be bigger to meet rising worldwide challenges, and more capable to stay ahead of our adversaries.<br />
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We must also remember that, as we build <em>the Navy the Nation Needs</em>, we have to be ready to fight with <em>the Navy the Nation Has</em>. It is important to remember that 70 percent of what we have right now, we will fight with in 2030. I’m talking about the warships you see now as you cross the Hampton Roads Bridge Tunnel, and the Navy aircraft and Air Force planes you see flying overhead all around the area. They will be our Navy’s warhorses in 2030.<br />
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We must sustain what we have now to defend our interests in the future. My concern is the growth rate of demand for maintenance is outpacing the rate at which our industrial base can keep up right now. At issue here is how can grow our capacity for both maintenance and new acquisition, including an ability to surge when necessary for security reasons, without becoming cost ineffective or exposing our industrial base to excessive risk.<br />
<br />
For our part, a strong, highly productive partnership between the Navy and our industrial base is a vital element of addressing this challenge. To get after this, we are driving toward a more open dialogue to determine where barriers exist and discover ideas to eliminate or avoid them. Our own early efforts are focusing on where we can get out of own way within Navy lifelines before asking industry to change.<br />
<br />
For instance, we’ve made efforts to become more predictable in our workload demands and to reduce bureaucratic displays associated with the inevitable challenges of ship maintenance. I anticipate that everything we are doing on the government side should improve things to what our private sector partners will do to take this effort the last mile.<br />
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Now, beyond the specific things we can each do within our realms of control, I believe there is also room for growth in our strategic partnership for ensuring the long-term health of our industrial base. I would submit this will require a holistic, collaborative approach to solve.<br />
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As an example, I am sure you all would agree that we have a shortage of skilled craftsman in this country. And it impacts this area, in particular. We have a shortage of highly qualified welders, pipefitters, marine engineers, electricians, and other skilled artisans. I would also argue that this shortage represents a significant national security concern.<br />
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To address this, together, I think we need to elevate the sense of importance – the gravitas, even – with which we associate these types of critical jobs. I am doing my best to shine a light on those who do this vital work. I encourage you all to do the same whenever such an opportunity presents itself.<br />
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I applaud and encourage the success stories on this issue across the region. For example, things like the apprentice school, Virginia Ship Repair Association training programs, and the collaboration across the various regional technical colleges, the community colleges, the Hampton City School Maritime Academy, and more.<br />
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nd, I am confident we can collaborate on discovering even better ways to expand the skilled workforce capacity in the coastal Virginia region. For instance, what if we took these achievements even further by branding them as one cohesive effort and deliberately made this area known nationally – globally, even – for developing the very best tradesman in the nation with the absolute best prospects for jobs?<br />
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We could make this cohesive effort known as the ‘Harvard of Trade Schools.’ This could potentially draw talent into the area and make it easier to attract and retain the very best right here. It certainly would have to be a truly collaborative and cooperative effort – including the Navy, the larger federal government, state and local officials, academia, and a local consortium of trades’ educators. This is certainly an aspirational vision, but I believe it is something worth exploring.<br />
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So, wrapping up, I am proud of the partnership we have between the Navy and the coastal Virginia region. I appreciate the Chamber’s work to bring us closer together as a team.<br />
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The demands of this <em>Great Power Competition</em>  will demand much of us in this maritime era. I look forward to working together with you to discover new and exciting ways to maintain America’s place in the world. I hope these remarks sparked some good discussion points.<br />
<br />
Thank you, and I look forward to your questions.</span></p>

<p style="text-align: center;"><strong>- END -</strong></p>

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            <hr />
            <p><strong>Speech by:</strong> Christopher W. Grady</p>
            
            <p><strong>Presented on:</strong> 13 August 2019</p>
            
            <p><strong>Date Published:</strong> 13 August 2019</p>
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