AMBASSADOR'S REMARKS & PUBLIC EVENTS

Luncheon Remarks Innovation Conference
hosted by the
American Business Forum in Turkey
Ambassador Ross Wilson
As prepared for delivery

Istanbul, Turkey
June 13, 2008

Galip, colleagues, thank you for the honor of inviting me to join you at this second American Business Forum in Turkey conference on innovation.  Welcome.

We are grateful to the many sponsors of this event and to Galip Sukaya and the board of ABFT for their hard work and creativity in arranging it.  Besides looking at policy issues that bear on innovation, entrepreneurship and investment, I hope this will also produce some new Turkish-American business collaborations that will both spur and take advantage of the innovations and changes that seem likely to dominate the 21st Century.

We talked about the 2007 and 2008 ABFT innovation conferences at the US-Turkish Economic Partnership Commission (EPC) meeting this past April in Washington.  Drawing upon ideas discussed at the first ABFT innovation conference last year, we agreed on the need to renew our bilateral science and technology agreement and to expand Fulbright and other exchange programs.  We are developing an action plan now for this year’s EPC, and the ideas you come up with today will be very useful.

The past year since the first innovation conference has been busy.  Those of us responsible for managing US-Turkish relations had our hands full.  I guess I could say that we innovated in the face of some adversities.

Our countries are using the most advanced technologies now so that Turkey can locate and eliminate the facilities, bases and terrorists of the PKK in northern Iraq.  The lessons that Turkish security forces are learning will be useful in the internal fight against terrorists and will increase the interoperability of our forces for combating terrorism in places like Afghanistan and elsewhere.

To counter US House of Representatives Resolution 106, also known as the Armenian genocide resolution, we used more a more traditional technology – called lobbying.  ABFT expressed its views that those of its member companies, and I am grateful for it.  Looking ahead, I am hopeful that Turkey and Armenia will see it in their interests to normalize their relations and to engage in a different kind of dialogue about the past present and future that will be helpful bilaterally and for the region as a whole.

We energized our high level dialogue:  two Oval Office visits in November and January, a Vice Presidential visit in March, the first Secretary of Defense to come to Turkey in six years, the first official Attorney General visit ever, our Homeland Security Secretary, the chairman and vice chairman of our Joint Chiefs of Staff, and over twenty Congressional delegations in the past year.

We stand in June 2008 incomparably better off as allies.  That reflects the importance that we attach to one another as allies, investments of time and attention by our leaders, and the excellent relationships that exist among them.

Winston Churchill, I am told, once said that without innovation, art is a corpse.  He could have said that without innovation and change, business, or even societies as a whole are corpses, too, especially given the competitive world we live in today.

As Turkey, China, India, Russia and others have become full participants in the global economy over the past two decades, three billion consumers have joined the world’s economy.  Think about that.  Twenty years ago, trade accounted for 17 percent of the world’s economy.  Today it’s roughly 30 percent.  Twenty years ago, the world economy was worth about $15 trillion.  It is today close to $50 trillion.  The pace of change is staggering, and it is demanding a lot of all of us.

Countries have prospered as innovative societies have emerged, new ideas have been embraced, and barriers to trade have fallen.  Think of where Ireland, South Korea and Slovakia were just 1-2 generations ago.  Companies like Google, Dell, Cisco and E-Bay did not exist 30 years ago; now they are giants.  Consider Michael Dell.  With only $1000, Dell started selling computers from his college dorm in 1984.  His Dell Computers is one of the most successful businesses in the world and provided a net worth for Mr. Dell of $13 billion.  Or from an entirely different field, look at Phil Knight a track and field runner.  Displeased with the quality and durability of running shoes at the time, he founded a shoe company and began selling shoes from the back of his car.  Nike is now one of the best known brands in the world.

Innovation industries account for over half of all US exports, representing 40 percent of our economic growth in recent years.  Some 18 million American wage earners work in this sector taking home 40 percent more than the US national average wage.

These have been great accomplishments for my country.  Why did they happen?  One politician I met remarked that Americans are the most ordinary people in the world – certainly no better educated, brighter or hard working than people in most places around the world.  What sets us apart is an open, competitive economy where new ideas and ways of doing business face few obstacles or burdens – lower taxes, less bureaucracy, fewer regulations, easy of entry (and failure), etc..  The World Economic Forum recently ranked ours the number one competitive economy in the world, in large part due to our ability to encourage innovation.  A study by INSEAD, one of Europe’s premier business schools, ranked the United States as the world’s number one innovator.  It pointed to our “environment for innovation” comprised of technological sophistication, business markets and capital, and top-notch academic and research institutions.  I would add that the dynamic interconnections among these elements are also a key factor for our environment for innovation.

American society has its strengths and weaknesses, to be sure.  Our model may or may not have elements appropriate for Turkey.  Indeed, Turkey has to find its own model.  But it should not be blindered by the past or by tradition; it can and should look for the policies and practices that will ensure prosperity and hope for this country’s growing population.  Several agenda items seem crucial for Turkey, and I hope the discussions today can elaborate on them.

First, what is the right mix of government encouragement, intervention and direction, and how can different approaches affect the economy and especially innovation and entrepreneurship?

In general, innovation cannot prosper if it is centrally directed by government policymakers or is impeded by artificial boundaries – like restrictions on the Internet – that interfere with the free flow of ideas across borders.  When governments use industrial policy to decide which ideas, products, and companies can compete, the result is technological and economic stagnation.  History shows that if the market is allowed to determine the use of R&D resources, and customers are permitted to buy the products they want, resources and innovative products flow to efficient uses.

Second and within my first consideration about the role of government, what policies can best support knowledge-based innovative industries?  Here we think one of the key issues is the protection of intellectual property rights.

The world is now beginning to understand the dangerous consequences of counterfeit materials making their way into products such as toys, food, pharmaceuticals, autos, and electronics.  Counterfeiting doesn’t just erode consumer confidence – it can put consumers in danger.  Counterfeit software can crash a computer’s hard drive, but counterfeit drugs can kill.  Consistent, transparent and equitably enforced rules regulating intellectual property increase the incentive to innovate.  Without clear rules and strong enforcement, no country can fully develop the economy it wants, nor build the strong, recognizable and respected brands that are hallmarks of business success.

For many years, Turkey’s listing on our top tier (or bottom tier) Special 301 Priority Watch List of countries of IPR concern was a sore in our bilateral economic relationship.  Reflecting recent improvements, the US Trade Representative removed it from this list.  More remains to be done here, both in terms of regulation and enforcement (and Turkey is still on a broader watch list), but the government’s determination to modernize and innovate-ize this country’s economy has had an effect.

Third, there are broader issues affecting investment generally that have an impact on innovation and change.  Much has been made – and rightly so – of Turkey’s three consecutive record years of record foreign direct investment.  But too much of this has been acquisition of existing companies, rather than new “Greenfield” investment – the kind that establishes new productive facilities and creates new jobs.  How welcome new investment is influences the readiness of start-up companies to start up, these being great drivers of change all over the world.

Foreign companies tell us that they face many factors that make it difficult to do business in Turkey:  judicial processes can be extremely slow and laws unevenly enforced; employment and social security regimes effectively punish legally established enterprises relative to off-the-books competitors; and foreign managers and specialists have great difficulty getting work permits.  Getting these government policies and practices more right and friendlier to entrepreneurship will also be a determinant of Turkey’s success in the 21st Century.  Steps the government has taken on social security, the labor laws and other issues have been encouraging.  The business community and political leaders need to work together on next steps.  Through this conference and in other ways, I hope and expect that ABFT will contribute to this.

Fourth, there is a psychological change in the shift to an innovation economy.  The futurologist Leo Melamed talks about the end of the "closed innovation" culture that was standard in 19th and 20th Century business.  Companies generated their ideas internally, financed them, marketed them, and supported them.  It was an architecture of self-reliance.  But in the 21st Century, Melamed sees “open innovation” that is practiced by newcomers such as Microsoft, Sun, Oracle, Cisco and others.  They invite and create avenues for ideas to flow from external sources.  This open, interactive model of innovation, adaptation and change is the mirror image of an open society.  The two interact to give freedom, opportunity, entrepreneurship and innovation wide scope to create wealth and a better future for our children.

Here there are social, educational, psychological, political and other steps that Turkey needs to take to further an open society here.  I know there are many in government and elsewhere in Turkish society who want to work on these issues.  Freedom-loving and entrepreneurial people need to support this effort.

From the declaration over sixty years ago by our 33rd President Harry Truman that Turkey’s success was in the national interest of the United States, my country has advocated for and welcomed Turkey’s integration into the global economy and community of nations.  We have strongly supported the democratic and market economic reforms that this country, especially over the last 5-6 years, has pursued to substantiate its EU accession efforts, and we commend the government of Prime Minister Erdogan and all the leaders of Turkey for it.  With its rich history of trading, risk-taking and entrepreneurialism, Turkey is on the road to becoming a more innovative society, and I hope that today’s discussion will provide many fruitful ideas for furthering that work.