SEC. SUMMERS: Claude, thank you very much for that kind introduction. I'm
reminded of what Lyndon Johnson said when he was introduced nicely: "I wish
my parents had been here to hear that. My father would have appreciated it. And my
mother would have believed it." (Laughter.)
It's good to have a chance to be at a DLC PPI event. I want to thank Al From
and Will Marshall for everything that they have done over many years now to
provide an intellectual underpinning for so much of what all of us in the government
do.
You know, 65 years ago, Keynes wrote about how everything that some
policymaker did was really just distilling the frenzy of some defunct scribbler. Well,
you know, with the Information Age, lags are much shorter, and most of what
policymakers do is what a think tank recommended just a few weeks or months ago.
Conferences like this one, the input that they provide, the ideas that they
promote, really make an enormous difference in shaping the policy of our country.
And I think one of the very important strengths of our country is precisely the vibrancy
of all of this type of activity on our side of the aisle, on other sides of the aisle.
Whatever the objective, there are a group of Americans who are coming together,
thinking and working to make this country a better place.
What I'd like to talk about today is what I think is simply the most
important policy issue that will affect how my children live in the United States over
the next half-century, and that is the approach that the United States takes toward the
global economy in general, and toward the world trading system in particular, because
my judgment is that the choices we make, about how engaged and in what way
engaged internationally we are going to be, are going to be among the most important
choices that we make over the next few years.
Now, at a time of remarkable economic strength for our country, when our
economic power is at a zenith and when the power of our example has never been
greater, it is particularly important that we make the right international economic
policy choices. And yet the fundamental choice, the choice for the United States to be a
force for the right kind of global integration, is today under challenge in our country in
a way that it has not been since the second World War. And it is that debate about the
future of our policies that is so terribly important.
I would like to make four points today: First, there is an overwhelming
political and national security case for an American open markets policy.
Second, there is a compelling direct economic case, in terms of the standards
of living of the American people, for an open market policy.
Third, the right kind of open market policy is a policy that can work very
directly for the American people.
Fourth, there is a compelling political challenge in the kind of economy we
have now, in maintaining political support for American leadership toward global
integration.
The crucial link between closer economic integration and our national
security is this: We are much less likely as a nation to be drawn into conflict if nations
of the world are strong, confident, and forging ever-closer connections than if they are
financially unstable and disconnected. In short, trade promotes prosperity, and by
promoting prosperity, promotes peace.
Fifty years ago, in the wake of the Second World War, the challenge the
world faced was the economic reconstruction of war-ravaged Europe and Japan. And
the challenge the world faced was making sure that the cycle of protectionism of the
1930s did not recur; that the tragic errors the world made in failure to accommodate,
through an open-market system, the rising power, economic power, of Germany during
the first war and Japan before the second was not repeated. A generation of visionary
leaders responded by supporting a successful strategy of rapid economic rebuilding as
essential to normalization and prosperity and increased economic integration. So
people stood more to gain from shared peace than from divisive conflict.
I would dare to suggest that there has never been so radical a change in the
economic balance of strength as there has been in the emerging markets of the world,
and in Asia in particular, over the last 25 years. And that it has taken place without
major conflict is in no small part a tribute to the openness, the increasing openness of a
global trading system.
Today's challenge is to integrate the 5 billion people of the developing
world, hundreds of millions of whom are now glimpsing the benefits that a global
economy can offer, into a strong and truly global market system. And our answer to
that challenge should be the same as it has been since 1945. By supporting liberalization
in these countries, we invest in our future security and we invest in the spread of our
core values. Examples such as Korea, Taiwan and Argentina illustrate that economic
development and openness bring democratization in its wake, and there's no better way
to spur this process than by integrating them into the global marketplace.
We support in our country a major effort, through the international financial
institutions, through our own direct programs, to provide assistance to some of the
poorest countries in the world to promote economic development because we recognize
that it is a moral and an economic imperative. And yet study after study after study
confirm common sense -- in many ways it's the same common sense that was behind
welfare reform in this country -- common sense that money earned by exporting is a
much better route to economic development than money received from some donor.
By opening our markets, by supporting freer trade, we support that economic
development imperative, create larger markets for our products down the world, and
take pressure off our aid budgets.
Whatever the stakes may be -- and I'll talk about this in a few minutes in
some of the larger trade issues -- it cannot be right that the richest country in the world,
the richest country that there has ever been is unable to provide preferential access to its
markets to a continent where 500 million people live, nearly half on incomes of less than
one dollar a day. That is why the African trade bill is such a crucial piece of legislation.
And what is true -- (applause) -- and what is true in Africa is also true much
closer to home, with the Caribbean. NAFTA was a very -- (applause) -- NAFTA was a
very important step, but it had the consequence of hurting some of our other neighbors
who did not benefit from the preferences that were provided to Mexican products. The
right trade preferences for the Caribbean will make their economies much stronger and
our economy much safer.
But even if there were no security case, no political case, no foreign policy
case for open markets and interchange between nations, I believe there would be a
compelling economic case rooted in our standard of living. Perhaps you will pardon
me a slightly academic approach of making this point through an analogy.
Imagine a country all of whose harbors were filled with rocks so that ships
and goods could not come in, though some could go out. And imagine that it was
proposed to remove the rocks from the harbors. Would that be a good thing, or would
that be a bad thing?
I think most would say that it would be good, because the people who lived
in that country would enjoy a wider choice of consumer goods at lower prices. I think it
would provide the producers of that country with a wider choice of inputs at lower
costs, making them more competitive as they tried to export and able to hire more
workers and pay them more wages.
I think it would be good because it would help markets function by spurring
competition, by spurring productivity and new ideas, resulting in better economic
performance.
Is removing rocks from the harbors a good thing? I think it is. Is the logic
fundamentally any different if the rocks are man-made, in the form of trade restrictions,
tariffs, quotas, and the like? I think not.
Of course, it brings about change, and as I will discuss, that change has to be
managed. And it has to be managed very carefully. But few would favor making our
harbors, our airports not work. And indeed we take great pride in the progress in
telecommunications and transportation that are bringing us all closer together.
Is there a better case for man-made barriers than for natural barriers? I
think not.
And this is not just a hypothetical proposition. The success of the United
States in the 1990s is a testament to what increasing openness can bring. Exports have
created millions of new jobs, jobs that on average pay 13-to-16 percent above average
wages. And it is openness to imports, it is competition from abroad that has allowed
something to happen that no economists I know did or could have predicted seven
years ago, and that is grow the economy at this pace, bring unemployment down to the
low 4 percents, and see inflation remain below 2 percent, and long-term interest rates 2
percentage points below where they were at the start. That is crucially related to the
increasing openness of our economy.
But you know, in arguing the case for open markets, I have so far
understated the case, because I've only focused on the economic side and not the
mercantilist side.
No one argues that the United States should have a policy of unilaterally
lowering all our own trade barriers without reciprocal steps by others. What has been
at issue, what will be at issue in the future, whether it's in the GATT or fast track or the
World Trade Organization, is whether we should be involved in a broad project of
being willing to remove what few rocks remain in our harbors in return for others
removing the large volumes of man-made rocks that still remain in their harbors.
To take just one example of the asymmetry, the tariff reductions achieved in
NAFTA with Mexico were five times as large in Mexico as in the United States. And
estimates suggest that that factor would be in the range of three for further trade
agreements with Latin America and with Asia.
To put it yet another way, an open markets approach is not just good
economic policy; it's good mercantilist policy, as well. And it is especially good policy
for the United States because of our strategic position, because of the diversity of our
population, because of the size and strength of our economy.
We have closer relations with Europe than any other region has with
Europe, closer relations with Latin America than any other region has with Latin
America, closer relations with Asia than any other region has with Asia. We stand at
the hub of a world trading system. And the bigger that world trading system is, the
more open it is, the greater we will benefit from our position at its hub. There is then a
compelling economic, case and I believe a compelling foreign policy and security case,
for an American policy of greater openness.
But trade cannot be taken in isolation. If you think about the history of our
country in the late 1800s and the early 1900s, you saw a much greater coming together
of the national economy, driven by improvements in transportation and
communications. And what was recognized by political leaders in both parties was that
that greater degree of interconnection necessitated a greater need for common
rule-setting at the national level; that it was important that we avoid a race to the
bottom, a bottom in which state governments could not promote fair taxes, uphold fair
labor standards, regulate product safety, protect the environment, or promote other key
values.
Just so as the world is coming together, as the man-made barriers and as the
natural barriers to trade are coming together, the world we want to build is not a world
where capital races from jurisdiction to jurisdiction, playing off its greater mobility to
the detriment of labor and consumers. And that means that an approach to integration
to work has to be a balanced approach.
As the president has said, "A legal framework of mutual responsibility
and social safety is not destructive to the market, it is essential to its success."
This is why we are working with other countries to promote global cooperation against
corporate and legal tax havens as we work actively in the OECD on the issue of tax
competition. This is why I think the WTO should commit to collaborating more closely
with the International Labor Organization, which has worked so hard to protect human
rights and to ban abusive child labor. That is why, among other things, at the WTO
ministerial in Seattle we will be calling for the creation of a WTO working group on
trade and living standards, and for thorough reviews of the environmental impact at
the Seattle Round.
But if we want to have an opportunity to shape the right kind of global
economy, one in which there are rules that enable it to work for all, we have to be part
of the process. If we are there working with developing countries to achieve strong
agreements which open global markets to them and to us, we can simultaneously
promote labor and environmental priorities and other issues that are important to us.
What is more, we can offer their workers the most reliable route to higher wages;
namely, access to global markets and expertise. Without our involvement, neither
outcome can be guaranteed.
I think these arguments for economic improvement through trade, for
strategic pursuit of our interests through trade, for protecting our broader interest in
which the global economy is regulated through trade, are compelling ones. But I have
tried often to reflect in recent months and years on why, as compelling as these
arguments seem to me to be, the debate about trade in our country is such a divisive
one and the case for open markets seems less than compelling to so many of our fellow
citizens.
I think there are three primary reasons why this is so. The first is a natural
tendency that we all have to internalize good news and externalize bad news. Think
about how many people who were doing a so-so job at a so-so company in a so-so
industry who somehow managed to lose their job who said, "It must be due to a
runaway plant or it must be due to international trade, it obviously can't be my
fault." Then ask yourself how many people you've ever met who said, "You
know, I was kind of doing a mediocre job, but labor was short and there was a surge of
export demand, and so I got a promotion." (Laughter.) It is the nature of the
trading process that when there are costs, those costs are apparent and attributed to
trade, often much more than is actually the case, and when there are benefits, they are
never attributed to international trade. And that makes the case more difficult.
The second reason why we have had a hard time making a compelling case
for trade is that the compelling geopolitical rationale that the Cold War provided is no
more. Historians have written at length about the oscillations of the United States
between isolationism and global engagement. And it vulgarizes, but perhaps does not
distort, that history to say that our global engagement has typically been in response to
a dire threat. The threats of the current time of rising disorder, of increasing
impoverishment do not have that emergency character that the threats of an earlier time
have had. And yet we have seen in the aftermath of the 1920s, also a time of a confident
America, a rich America, a prospering America, a business-celebrative America, in the
period that followed the 1920s we saw what happened when American policy oscillated
towards protection, towards isolation. And that is the danger we must work to avoid
today.
I think the third reason why it has been so hard to bring about a consensus
on open markets so far is that trade tends to become the lens through which all kinds of
concerns about a changing world are projected. Whether it is technology, whether it is
deregulation, it all comes together in terms of concerns about economic insecurity when
the subject is trade. And that is why it is so essential that we work to equip workers
with the education and skills to manage the transition process and to seize the
opportunities that come with it.
It's instructive to think about that period after the Second World War, of
remarkable American internationalism. The communist threat is one part of it. A
different kind of political process is another. I doubt anyone ever focus-grouped the
Marshall Plan, and if they had, I'm not sure how well it would have done. (Soft
laughter.) But also it was a period when opportunity and protection was being given to
the American middle class. I suspect the G.I. Bill of Rights was a much larger
component, not just of America's domestic economic strategy, but of America's
international economic strategy, than many think of today.
And I think President Clinton was exactly right in sensing these issues when
he made the judgment at the beginning of his administration, in setting up the National
Economic Council, that we had to recognize that our domestic economic policies and
our international economic policies were always going to have to be intertwined.
These are difficult issues, and I think how well our country resolves them is
going to depend very much on the efforts of people like those in this room, who
understand and believe in the importance of open markets and are prepared to make
that case across this country.
If we are literal about the definitions and define the current century as
ending on January 1st, 2001, then there is much about the 21st century that this century
will still shape. The decisions that we and others make on crucial issues of the world
trading system -- whether the United States will or will not aid Africa and the
Caribbean, whether the United States and China will find a way together to enable
one-fifth of humanity to carve its place in an open and rule-based global trading system,
whether we will find ways to preserve momentum on key regional trade initiatives in
Latin America and Asia, and above all, whether or not the global trading system will
continue moving forward at Seattle and beyond -- these are among the most important
questions that we have, that we face in this country. America has an enormous stake in
helping to build an open, global trading system in the months ahead and a great deal to
lose if we take now as the time to turn our backs.
Thank you very much.
