[Congressional Record Volume 143, Number 148 (Wednesday, October 29, 1997)]
[Extensions of Remarks]
[Pages E2119-E2120]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           THE GLOBAL ECONOMY

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                      Wednesday, October 29, 1997

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, October 29, 1997, into the Congressional Record.

                      Globalization of the Economy

       Hoosiers have heard and read a lot about the globalization 
     of the U.S. economy, but their reaction is mixed. While some 
     seem to like the idea, others react with confusion and 
     concern. What exactly is globalization, and what does it mean 
     for the U.S. economy?


                         What is globalization?

       Globalization is the way the economies of various countries 
     around the world are becoming increasingly linked. Economic 
     interaction among countries is obviously not new, as 
     countries have been trading with each other for centuries. 
     But fundamental changes in recent years have accelerated that 
     interaction and reshaped the world economy. Technological 
     barriers to commerce have fallen as transportation and 
     communications costs have plummeted. Man-made barriers, like 
     tariffs, have been drastically reduced. These changes, 
     together with the rapid industrialization of the developing 
     world, especially in Asia, and the transition of the formerly 
     communist countries to market economies, have dramatically 
     changed the international economic system and made it more 
     ``globalized''.
       Over the past decade, world trade has grown twice as fast 
     as the world economy. Numerous companies around the globe are 
     spending several trillion dollars annually on factories and 
     other facilities in countries other than their own. And 
     financial market reforms combined with new information 
     technologies are enabling traders in various countries to 
     exchange hundreds of billions of dollars worth of stocks, 
     bonds, and currencies every day.


                             Impact on U.S.

       Globalization has affected the U.S. economy in many ways. 
     The U.S. now exports one-eighth of everything it produces and 
     one-third of its agricultural production. Boeing, 
     Caterpillar, and many other large U.S. firms now sell more 
     than half of their output in other countries, and export-
     related jobs pay on the average 16% more than non-export 
     jobs. Foreign-owned corporations employ more than 12 million 
     Americans--5% of the U.S. workforce. More than half the cars 
     sold by Toyota in the U.S. are assembled here, and nearly all 
     of the cars sold by U.S. automakers include major components 
     made in foreign countries. Through mutual funds and pension 
     funds, the earnings of millions of middle-class Americans 
     have been invested in dozens of foreign stock markets.


                         Different perspectives

       People disagree on whether globalization is good for the 
     U.S. economy.
       Some consider globalization positive for the U.S. They 
     argue that booming exports have helped keep our economic 
     expansion going, reduce our unemployment rate to the lowest 
     level in 20 years, and, through increased competition, hold 
     inflation down. They say we are in the best position to 
     prosper in an increasingly dynamic international economy 
     because we have the world's most open markets, most 
     productive workers, and most talented entrepreneurs.
       Others see globalization as a problem. They argue that two 
     key features of globalization--additional imports from lower-
     wage countries and the increased ease with which U.S. firms 
     can shift production to other countries--are hurting U.S. 
     wages and eliminating U.S. jobs.
       A third group says globalization simply hasn't made much of 
     a difference to the lives of most Americans. Despite our 
     increasing links to other countries, trade still accounts for 
     a significantly smaller share of our total

[[Page E2120]]

     economy than in most other industrialized nations. U.S. 
     growth, unemployment, and inflation are still determined 
     mainly by domestic decisions on interest rates, budget 
     deficits, and the like. And, according to most economists, 
     technological change has a bigger impact on wage stagnation 
     and job loss than do trade and foreign investment.
       None of these perspectives on globalization is entirely 
     correct, but each has some merit. Globalization clearly 
     offers great opportunities to the U.S. economy. Firms capable 
     of exploiting new foreign markets can bring valuable returns 
     to their employees and investors. By keeping prices down and 
     increasing purchasing options, import competition can benefit 
     consumers and manufacturers. But developments that offer 
     opportunities to some Americans pose challenges to others. 
     Even though technology may be a bigger threat to U.S. wages 
     and jobs, lower-skilled workers, in particular, face tough 
     competition from countries where labor costs are much lower.


                              U.S. policy

       The United States cannot stop globalization; the economic 
     forces behind it are simply too strong. Nor could we withdraw 
     from the world economy. The challenge for the U.S. is to 
     position itself to benefit from the major changes now 
     sweeping over the international economic system so that we 
     raise the living standards of U.S. residents overall. We need 
     to seize the opportunities created by globalization while 
     responding to its costs.
       That means, first of all, that we need to maintain our 
     leadership on trade and continue to work to improve the 
     international economic system. All nations will benefit from 
     policies of openness and engagement, the kind of 
     international economic system the U.S. has worked hard to 
     establish for half a century. Such policies will create new 
     markets for our products and enhance international stability 
     and cooperation. By renewing fast-track trade negotiating 
     authority, Congress can give the President the critical tool 
     he needs to open foreign markets and prevent other countries 
     from reaching trade agreements that harm our interests.
       At the same time, we need to do a better job of helping 
     lower-skilled workers acquire the education and training they 
     need to get the higher-paying, higher-skilled jobs that our 
     economy is creating. We provide too little support to workers 
     who lose their jobs due to trade. Federal and state worker 
     education and training programs are underfunded and uneven in 
     quality. Efforts to reform these programs have stalled 
     several times in recent years. With the federal budget 
     climate improved, it makes sense to try again.


                               Conclusion

       Our number one concern in this increasingly globalized 
     economy is jobs--good and secure jobs for Americans. We need 
     to pursue policies that promote economic growth and improve 
     living standards for all Americans. We need to redouble our 
     efforts to better prepare workers for the new jobs our 
     economy is creating.

     

                          ____________________