[Congressional Record Volume 144, Number 118 (Wednesday, September 9, 1998)]
[Extensions of Remarks]
[Pages E1663-E1664]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      RESPONDING TO GLOBALIZATION

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                      Wednesday, September 9, 1998

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, September 9, 1998 into the Congressional Record.

                      Responding to Globalization

       Globalization is the way that the economies of various 
     countries around the world are becoming increasingly linked 
     through improved telecommunications and transportation 
     networks. 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 enable traders around the world to 
     exchange hundreds of billions of dollars worth of stocks, 
     bonds, and currencies every day.
       The increased trade and foreign investment from 
     globalization can enrich America by increasing our economic 
     efficiency, increasing returns on investments, and creating 
     higher paying export jobs. However, while globalization holds 
     the promise of many benefits for American workers, it is also 
     a disruptive force as U.S. workers in various industries face 
     tough competition from countries where pay and labor 
     standards are much lower. Policy changes will be needed to 
     soften the negative impact of globalization on communities 
     and individuals.


                      Responding to these changes

       Although some of the reactions to globalization may 
     overstate the threat, there are some very valid concerns 
     about its impact. These are some of the concerns and possible 
     ways to respond:
     Equity
       One concern about globalization is equity. The benefits of 
     globalization are often derived from increased specialization 
     in an economy. In advanced industrial economies such as ours, 
     this means that lower-skill jobs may be lost to imports from 
     developing countries while higher-skilled sectors prosper. 
     Although globalization should have an overall positive effect 
     on our economy, it will tend to drive down the wages of lower 
     skilled workers in the U.S.
       Response: We can and should strengthen and improve the 
     social safety nets that have served American society well for 
     decades. These include worker protections such as 
     unemployment insurance, job retraining programs for workers 
     who lose their jobs due to trade, and support for education 
     and training programs that will build a smarter, more 
     productive workforce.
     Environmental and Labor Standards
       In developing countries, globalization can lead to 
     worsening labor and environmental standards, at least in the 
     short term. The increased mobility of investment makes it 
     easier for industries to move to poorer countries, where they 
     may take advantage of lax worker protections or environmental 
     regulation.
       Response: Over time, globalization actually helps address 
     these problems on its own. By generating wealth and raising 
     employment in those countries, more affluent citizens become 
     more willing and able to demand higher labor and 
     environmental protections. But we should also continue to 
     implement and enforce international labor and environmental 
     agreements, such as the labor standards promoted by the 
     International Labor Organization and the Kyoto Convention on 
     greenhouse gases.
     Volatility
       The current Asian economic crisis has its roots in 
     globalization. Over the last thirty years, investment has 
     poured into developing countries. This led to spectacular 
     growth in

[[Page E1664]]

     East Asia. Now the world has learned that capital that flows 
     in quickly can flow out just as quickly. Global economic 
     instability of this nature affects the U.S. economy too, 
     hurting our exports and damaging investments.
       Response: Many economists have proposed restrictions on 
     short-term investment to address this problem, such as a very 
     small tax on international financial transactions, which 
     would make investors more reluctant to move their money from 
     place to place quickly. Overall, we need to take steps to 
     manage the global economy more carefully. This can be done, 
     though not easily, through institutions such as the 
     International Monetary Fund and new cooperative agreements on 
     regulating global economic activity.
     Revenue concerns
       When money can be moved easily across borders, it becomes 
     very tempting for corporations to place their assets in ``tax 
     havens,'' that is, countries with very low corporate tax 
     rates. This in turn can lead governments to compete to reduce 
     corporate taxes, which means they must rely more heavily on 
     income taxes on individuals. And, with lower tax revenue, 
     this reduces the ability of countries to respond to the other 
     disruptions of globalization.
       Response: New international agreements and standards on tax 
     policies and regulating investment can help minimize this 
     effect. Eventually, governments are likely to find that 
     agreements on harmonizing financial regulations will make it 
     easier to eliminate tax evaders.


                         An Inexorable Process

       There is a parallel between the economic forces which shook 
     the United States early this century and those we are 
     confronting today. For most of the 19th century, the 
     economies of our various states were isolated and 
     independent. However, rapid technology changes, driven by 
     railroads and telegraphs, resulted in a nationalization of 
     the economy. Suddenly, workers became concerned about 
     conditions and competition from neighboring states. 
     Unregulated capital went streaming into frontier ventures, 
     leading to a series of banking panics. The answer, clearly, 
     was not that the railroads could be torn up or that telegraph 
     lines be pulled down. Instead, Americans found new ways to 
     regulate production and manage the national economy. And the 
     result was the creation of the most efficient wealth-
     producing economy the world has ever seen.
       The challenge today is to find new ways of cooperating in 
     the global economy. That includes reinvigorating and 
     improving the tools of international cooperation that have 
     served as well over the last 50 years. Instruments such as 
     the International Monetary Fund, the World Trade 
     Organization, and new international environmental and labor 
     agreements will have to be strengthened to cushion us from 
     the inevitable shocks.


                               Conclusion

       Our number one concern in this increasingly globalized 
     economy is jobs--good and secure jobs for Americans. We must 
     pursue policies that continue to promote economic growth and 
     improve living standards. Just as Americans in the last 
     century successfully found ways to master the economic forces 
     of that day, so Americans now must find ways to master, and 
     not resist, the forces of today's global economy.

     

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