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WASHINGTON (Reuters) - President Barack Obama on Friday announced a competition for $4 billion in federal grants to improve academic achievement and reverse a decline in U.S. public schools.

“In an economy where knowledge is the most valuable commodity a person and a country have to offer, the best jobs will go to the best educated, whether they live in the United States, or India, or China,” Obama said.

The president wants states to use funds from the competition, dubbed the “Race to the Top,” to ease limits on so-called charter schools, link teacher pay to student achievement and move toward common U.S. academic standards.

Charter schools receive public funding but generally are exempt from some state or local rules and regulations. They are operated as an alternative to traditional public schools.

“America will not succeed in the 21st century unless we do a far better job in educating our sons and daughters,” Obama said in an address at the Department of Education.

The $4 billion education grant program was created under the $787 billion economic stimulus plan passed by Congress and signed into law by Obama in February.

“Rather than divvying it up and handing it out, we are letting states and districts compete for it. That’s how we can incentivize excellence and spur reform and launch a race for the top in America’s public schools,” he said.

The United States has one of the worst high school dropout rates in the industrialized world, and its students often rank below those in other Western nations in reading and math.

Obama has portrayed the drive to improve education as part of a broader push to promote economic growth in the face of a deep recession and the worst U.S. financial crisis in decades.