Commerce Back On Course

Dec. 21, 2004
Bill Daley isnt well-known, but he has returned stability to the once-beleaguered Cabinet department -- and made friends in business.

Whos the U.S. Secretary of Commerce? Congratulations if you named William M. Daley. A lot of industry executives apparently cant. For example, when 10 random attendees at a recent industry conference in New York were asked that question, only four could correctly identify the head of the Cabinet department most closely associated with the business community.

A Monstrous Challenge
Bill Daleys thoughts on running the governments most diverse department. With a $4.9 billion budget and 33,000 employees, the Commerce Dept. is not only one of the largest of the Cabinet departments but also the most diverse. It is the home of a bewildering maze -- critics call it a "catchall" -- of federal agencies. Among them: the Office of Trade Development, the U.S. and Foreign Commercial Service, the Bureau of Export Administration, the Bureau of Economic Analysis, the Economic Development Administration, the National Institute of Standards and Technology, the Office of Technology Policy, the Census Bureau, the Patent and Trademark Office, the National Weather Service, and the National Oceanic and Atmospheric Administration. "In some ways, [running Commerce] is analogous to running a large business," Secretary William Daley muses. "The CEO has to lay out a strategy and set a tone for senior managers to follow. . . . And you dont kid yourself that you really can manage the [day-to-day] operations under you." But in other respects, he says his management challenge is very different. "In business you worry about the bottom line. We dont have a bottom line at the Commerce Dept. And in government we have all kinds of review processes. Theres Congress, for instance. Its not like a board of directors in business -- its more like a partner who has equal ownership. Then, too, our agencies are very public. If the Weather Service, for example, misses a tornado, you have a problem." Asked if hed favor a reorganization of the department, as many observers have suggested, he offers a larger answer. "At some point," he says, "Id like to see a reorganization of the entire federal government. Its been structured the same for nearly 70 years, the way it was after the Depression in Franklin Roosevelts time. Im not talking about just the Executive Branch, but about Congress, too. Here we are going into the next century, and government is the only business in this country that has not dramatically changed."
No, Bill Daley doesnt pop up much on the Washington talk shows. He doesnt dominate a room as did the flashy Ron Brown, his late predecessor during most of President Clintons first term. Hes not a household name as was his dad, the late longtime Chicago mayor, Richard J. Daley. Hes not even as well known as his brother, Richard M. Daley, the current Chicago mayor. Business insiders in Washington know Bill Daley, though. And they laud the 49-year-old lawyer as a low-profile, no-nonsense leader who has instilled normalcy to the sprawling department that not long ago was reeling from Democratic political fund-raising scandals. "Secretary Daley has done a superb job of bringing stability and integrity back into the department," praises Jerry Jasinowski, president of the National Assn. of Manufacturers and former assistant secretary for policy at Commerce in the Carter Administration. "Hes put a lot of effort into doing that, and hes succeeded." Echoes Barry Rogstad, president of the American Business Conference: "Bill Daley has taken the bull by the horns and made the Commerce Dept. pure as the driven snow." When he arrived as secretary in January 1997 (replacing Mickey Kantor, who briefly succeeded Brown) the Commerce Dept. was a focus of widely publicized investigations into illegal campaign-financing activities. A central figure in the probe was John Huang, a Democratic fund-raiser who won a political appointment to a high-level job in Commerce and was charged with passing classified trade secrets to his former employer, Lippo Group, an Indonesian-based company with ties to China. In addition, the department was accused of awarding seats on its overseas trade missions as payoffs to business executives for Democratic Party contributions. Daley silenced much of the criticism by chopping 100 political appointees off Commerces payroll (leaving just 156) and tightening procedures for the selection of trade-mission participants. He also sharply cut the number of people at Commerce with security clearances from 5,000 to fewer than 3,000 -- a step he calls "simply good management," besides lessening the risk of political influence or theft of secrets. Daley himself regards Commerces return to stability as his most significant accomplishment. In a wide-ranging interview in his vast, oak-paneled office, he acknowledges, "When I came in, there were a lot of allegations and demagoguery about the department." But, he assesses, "Weve done a good job of quelling that. Weve addressed the concerns in a businesslike fashion. We have reestablished confidence in the department." With the political firestorm off the front pages, Commerce now is able to focus on its broad spectrum of activities that ranges from promoting trade, gathering economic statistics, and developing technology to running the Malcolm Baldrige Quality Award program, conducting the census, and forecasting the weather. Of all those functions, the most diverse of any Cabinet department, none is more important to business than the departments role in trade -- especially trade expansion. And Daley has been at the forefront of the effort. Under his leadership, Commerce last year helped U.S. companies win 60 contracts overseas, worth $18 billion. He visited 18 countries while leading trade missions to Latin America, India, and Canada. So far this year he has headed missions to Turkey (in January) and Northern Ireland (last month), and others are scheduled later to Africa and back to Latin America. He helped land $1.1 billion in export deals for U.S. companies during President Clintons recent trip to China. Daleys flair for trade is one reason President Clinton appointed him to lead Commerce. The trim, neatly dressed Chicagoan moved into the post from the White House, where in 1994 he was the Administrations point man in steering the North American Free Trade Agreement (NAFTA) through Congress. His behind-the-scenes effectiveness earned him admiration from the business community. The admiration remains. "He continues to work forcefully on articulating the benefits of expanded trade," NAMs Jasinowski says. "He speaks out strongly for trade within the Administration." Making the same point, ABCs Rogstad notes that Daley is effective in "pushing core issues of interest to the business community in an Administration that doesnt have its act together on this kind of stuff." So far, though, Daley hasnt been able to duplicate his NAFTA success in winning Congressional approval of fast-track trade-negotiating authority for the White House, without which the Administration is unable to negotiate substantive details of new trade agreements. Last year Democrats and Republicans alike teamed up to defeat the business-supported legislation. Daley says "its unrealistic" for the Administration to mount a new try for the measure this year. The issue is too controversial in an election year, especially in a shortened Congressional session, he explains. Besides, he says, the Administration doesnt want to divert attention from its push for another piece of trade-related legislation -- expanded funding for the International Monetary Fund. Reflecting on last years fast-track setback, Daley refuses to blame business, which many observers criticize for coming into the fray too late and with too little firepower. "I dont buy the theory that if business had done a better job, wed have passed fast-track," he says. The loss, he continues, "cant just be dismissed as a squeeze by [organized] labor on Democrats, or the lack of business involvement, or the lack of an Administration strategy. There was something bigger going on." That larger problem, as he sees it, is a deep-rooted fear among the public that trade agreements might lead to job losses and environmental degradation. "This fear will be replicated in other countries around the world as they get more into the global economy," he predicts. "Until the concerns are addressed, those of us who believe in free trade will be on the defensive. We have an education job to do." Daley indicates that hes exploring with top business executives -- among them U.S. Chamber of Commerce President Thomas Donahue and leaders of the Business Roundtable -- how their organizations and Commerce might work together to tout the benefits of free trade, including media campaigns. "But I tell CEOs," he says, "that they should start with their own employees. Poll them. Find out why theyre nervous. That may prove to be very enlightening in trying to figure out where we go from here." Without fast-track, the Administration wont be able to seriously negotiate an agreement for a Free Trade Area of the Americas (FTAA) treaty, an expansion of NAFTA that is eagerly sought by the Administration and business. Daley indicates the U.S. can make progress on certain "business facilitation" issues -- a common customs form and uniformity of standards, for example -- in the absence of the legislation. "But the fact of the matter is," he emphasizes, "the longer we negotiate without fast-track the more difficult it will be to get the other countries to begin negotiating the really tough issues." Hes not troubled by the fact that other Western Hemisphere nations may negotiate regional agreements without the U.S. Existing regional pacts, especially in South America, "have improved and liberalized economies," he argues. He also feels the NAFTA pact among the U.S., Canada, and Mexico has been beneficial, particularly in opening up the Mexican market and helping Mexico quickly recover from its peso-devaluation crisis. On the other side of the Pacific, however, Daley openly voices his concern about Asias pervasive economic woes and their effect on the U.S. Contrary to findings of a Business Council survey of top business executives, American companies "are beginning to take a hit," he says, noting that exports to South Korea, Indonesia, and China have declined noticeably. Although hes encouraged by signs that every country in Asia is dealing with the problem, "the crisis has not bottomed out," he warns. "It is very deep. In some ways, there will have to be institutional, structural, and even cultural changes in the way [Asian countries] do business. Youre not going to see a quick turnaround in which their growth is back up to 8% to 10% a year. But as the countries come back, I think theyll have more stable, mature, and predictable economies -- without the boom patterns theyve had in the past. In the long run, that may be good." Overall, Daley is pleased with the growth of U.S. exports, long a Commerce Dept. priority. But even though exports now account for about one-third of the U.S. economic growth, the Commerce chief doesnt hide his disappointment that more small and medium-sized companies arent tapping overseas markets. "Were trying to find ways to get them more involved," he stresses. Among other actions, the department is stepping up its assistance to smaller firms through its Export Assistance Centers and district offices and is inviting more small businesses to join its trade missions. "Its difficult for small and medium-sized businesses to export," he admits. "But the Internet may change that. It provides a way for them to make their goods and services available and save upfront marketing costs." Besides keeping an eye on exports, Daley is closely monitoring the U.S. ever more ravenous appetite for imports, which has resulted in a widening goods-and-services trade deficit that reached $113 billion in 1997. So far, though, that doesnt worry him. "The overall economy is growing," he emphasizes. "So even though our imports have the potential to increase greatly this year, their percentage of the GDP is well within range and should not give people concern. . . . If we had a morbid economy, we wouldnt have all these imports. We wouldnt have all these exports, either." He declines to say at what percentage of GDP -- the figure is now about 1% -- the import surge might become a concern. "But if the numbers get too big," he observes, "political problems may arise." Daley does admit to one big worry: the looming Year 2000 computer problem -- now almost universally referred to as Y2K. Not mincing words, he calls the actions of American companies in dealing with the potential computer catastrophe "woefully inadequate." Although he says "major companies are looking for solutions and spending money" to forestall the problem, "the vast majority of businesses are not -- especially small and medium-sized businesses. Im not saying that in a critical sense, for its a difficult problem for these companies to grasp. The problem is that everybody figures someone else will come up with solutions. "Well, there will be solutions for a vast majority of systems -- but not all. Theres no question that there will be disruptions, delays, and problems in early 2000. In some companies they may exist for some time." Overall, though, "Its a great time to be in business in the United States," Daley reflects. "The strong economy is no accident. We made the tough decisions in government -- balancing the budget and attacking the deficit. And business downsized and took the tough hits in the late 80s and early 90s. We should protect the good times, though. We need to stay competitive. The government should continue to live within its means. And so should business. It should resist the temptation to overexpand, as it has in the past during boom times. "But make no mistake," Daley sums up, "this country is in very good shape as we come into the new century." He doesnt say so, but so is the Commerce Dept. It wasnt too long ago that conservative Republicans nearly succeeded in their long-held goal of eliminating the department. Significantly, that campaign has slowed, and Bill Daley is largely responsible. Saving the department, in fact, may be his legacy. And it may someday make him as well known as his brother.

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