[Congressional Record Volume 151, Number 86 (Friday, June 24, 2005)]
[Senate]
[Pages S7390-S7393]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
AMERICA'S PLACE IN THE WORLD
Mr. BAUCUS. Mr. President, a little less than 2500 years ago, in
Athens, Pericles the king looked out from the Acropolis. In the bay
beyond the port city, he saw some of Athens's 200 ships, which brought
peace, commerce, and Athenian pottery to a free-trade area of more than
100 Greek city-states. Pericles boasted: ``The wares of the whole world
find their way to us.''
Pericles stood astride one the wealthiest, most culturally-advanced
states of his time. Greeks had vanquished the evil empire of Persia to
the east. Pericles had transformed the Delian League, a defensive
alliance formed to contain Persia, into an Athenian empire. And
Pericles advanced the world of ideas, advocating the new idea of
democracy.
Said Pericles: ``Athens alone, of the states we know, comes to her
testing time in a greatness that surpasses what was imagined of her. .
. . Future ages will wonder at us, as the present age does now.''
Pericles had every reason to believe that Divine Providence had
smiled on him and on his city.
A little less than 500 years ago, in Aachen, Charles V looked up to
receive the crown of Germany. Charles had become the most powerful
ruler in Christendom: Holy Roman Emperor and sovereign over what is now
Spain, Central Europe, southern Italy, and Spain's new overseas
colonies. Sir Walter Scott said: ``The sun never sets on the immense
empire of Charles V.'' Charles sought to unite his empire into a
universal, multinational, Christian empire. His motto was: ``Even
further.''
Charles had every reason to believe that divine providence had smiled
on him and on his empire.
A little more that 150 years ago, in London, Queen Victoria, adorned
in pink, silver, and diamonds, escorted by a troop of the Household
Cavalry, road in a closed carriage from Buckingham Palace to Hyde Park
to see the Great Exhibition at The Crystal Palace. Trumpets flourished,
and a thousand voices greeted her, singing Handel's Hallelujah Chorus.
She walked through the Exhibition, a world's fair, and saw exhibits
displaying the riches of Britain's far-flung colonies: carved ivory
furniture from India, furs from Canada, hats made by convicts from
Australia. The theme of the Exhibition was one word: ``Progress.''
Victoria saw exhibits representing an England that was industrially
supreme. England controlled one-third of the world's international
trade. The English merchant navy handled three-fifths of the world's
oceangoing tonnage. Senator Daniel Webster called the English empire:
``A power which has dotted over the surface of the whole globe with her
possessions and military posts, whose morning drum-beat, following the
sun, and keeping company with the hours, circles the earth with one
continuous and unbroken strain of the martial airs of England.''
Victoria had every reason to believe that Divine Providence had
smiled on her and on her empire.
The citizens of Periclean Athens, Habsburg Spain, and Victorian
England each could feel that their nation had reached the zenith of
human endeavor. From where they stood, Pericles, Charles, and Victoria
were the most powerful leaders of their time. Their centuries belonged
to them.
Pericles looked to ``future ages.'' Charles envisioned going ``even
further.'' And Victoria saw ever more ``progress.''
But within a century, each nation had been eclipsed.
Periclean Athens fell victim to war. Not long after Pericles's death,
the devastating Peloponnesian War with Sparta weakened Athens. Within a
hundred years, the great city was dominated by a little known northern
country called Macedonia.
Charles V, seeking to harness a new technology of shipbuilding and
royal navies, incurred spiraling defense costs. Charles's wars caused
him to pledge his revenues to bankers for years into the future. By
1543, two-thirds of his ordinary revenue went to pay interest on past
debts alone. Not
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long after Charles' death, dynastic division rent his empire apart. And
within a hundred years, Europe had become a continent of many roughly-
equal powers.
Not long after Victoria's death, England found itself surpassed by
American economic growth and mired in World War. And within a hundred
years, Britain's once-great empire had spun off into a splintered
commonwealth.
And so began what Henry Luce called ``the American Century.'' At the
beginning of the 20th century, America's economy was already 40 percent
larger than China's and more than twice as big as Britain's.
And in the wake of World War II, America was the only major power
whose homeland had not suffered massive devastation. America's economy
dominated the world. At mid-century, America's gross domestic product
was 5 times Britain's, 5\1/2\ times China's.
Look out today at the ships docked in the port of Seattle. Count the
containers that bring grain and beef from Montana to the world. Count
the containers that bring ``the wares of the whole world . . . to us.''
On behalf of a great and powerful nation, on February 2, President
Bush could look out over lawmakers assembled in the House of
Representatives and say: ``[W]e've declared our own intention: America
will stand with the allies of freedom to support democratic movements
in the Middle East and beyond, with the ultimate goal of ending tyranny
in our world.''
America's is a great promise. Ours is the leading nation. We live in
the preeminent country on earth.
Americans have every reason to believe that Divine Providence has
smiled on us and on our Nation.
Today, Americans account for fewer than 1 in 20 of the world's
people. But Americans produce more than a fifth of the world's economic
output.
Today, America has a $12 trillion economy, three times the size of
Japan's, fives times the size of Germany's.
But China's economy, when measured on a purchasing power parity
basis, is now $7.3 trillion. And it is growing fast.
Like Athens or Spain or England in their day, America is the greatest
power of our time. But our lease on greatness is no more certain than
those of the great powers of the past. We, no more than they, cannot
maintain our leadership of the world without effort.
The next two decades will challenge America. We face competition from
rising economic powers, powers with vast populations with nowhere to go
but up. And foremost among those competitors will be China.
We cannot blithely sit back and rest on our laurels. We must energize
ourselves anew to maintain America's place in the world.
Over the last two decades, China's economy has grown an average of
9.5 percent, roughly three times as fast as America's. And although
America is a populous country of almost 300 million people, China is
home to 1.3 billion people. India is not far behind, with just over a
billion people.
Starting in the late 1970s, China and India began to reform their
economies. And in the late 1980s, Communism collapsed in Eastern
Europe. In the last two decades, these transformations have led to
nearly half the world's population--about 2.6 billion people--entering
the global workforce. The world has only just begun to feel the effects
of this awakening.
Visit export-zone China, and you will see that corporate America and
corporate--Japan are already well in evidence. The international
corporations already understand that China will fuel this century's
economy.
Much of America, however, still has a shock ahead of it. Before 2020,
China may surpass America as the world's largest economy. Superpower
America has competition, after all. And we had better hustle, too, or
the Chinese will eat our lunch.
Well-educated young people in China, India, and Eastern Europe
increasingly have the skills to compete with Americans for high-value-
added jobs. Companies are moving jobs offshore to workers in these
countries not only because they work for less, but also because they
are well educated in math and science.
An old Chinese proverb says: ``What you cannot avoid, welcome.''
Dramatic Chinese growth appears unavoidable.
China has drunk the Kool-Aid of capitalism and it is not looking
back. Big city China hustles, bargains, and works hard for a better
life. Skylines soar in Shanghai and Beijing.
Big city Chinese public street signs come in Chinese and English.
Western and Japanese companies' neon signs dominate the skyline.
Western commerce is well represented, half a world from the West. China
is no longer as foreign as you might expect.
You can see one district of Beijing that still sports Cyrillic
billboards and shop signs. But this Russian enclave sells furs, not
ideas. You can see which economic system won the cold war.
They call it ``market socialism.'' And the European economic
tradition is full of the melding of the two systems, so we cannot
necessarily say that the term is a contradiction. But plainly the
Maoist state-controlled economy is on the descent, and free-enterprise,
self-interested capitalism is on the rise. Chinese government officials
smile as they explain, quote, ``Communism.''
The bargaining economy now permeates China. Chinese merchants love to
haggle over sales great and small.
The change began with Deng Xiaoping, who ruled from 1978 to 1997. But
the change has now firmly taken root. Some will explain, in muffled
tones, that in the wake of the 1989 Tiananmen massacre, the government
made a concerted effort to demonstrate that China was ``open for
business.''
China, India, and Eastern Europe are now actively seeking to move
underemployed populations into more productive occupations--occupations
that America and other developed countries once dominated. Millions of
jobs in high-tech manufacturing, software development, and services are
moving to these growing labor markets.
More than 700 million workers live in China. Half of them still work
in agriculture and forestry. More than three out of every five Chinese
still live in the countryside. As many as 200 million underemployed
Chinese workers in rural areas could move into the cities and
industrial jobs.
This huge pool of surplus labor presents China with a vast
opportunity to modernize its economy, continue rapid growth, and move
its people up the value-added ladder into more productive employment.
Tour an American or Japanese company plant in Shanghai. You will see
rows of diligent, uniformed workers filling rows of clean, well-lit
work stations. The plant manager will tell you how he pays these
workers $1 an hour--+about $2,000 a year-plus food and housing
benefits. That is a good wage in a country with an average income of
$1,100 a year. Compare that to America's average income of $37,600.
Plants like this boast of a 90-percent retention of employees.
The plant manager will complain, however, that for the less-
sophisticated operations, still-lower-cost centers are already nipping
at their heels. Even within China, competitive businesses need to
profit from innovation and new ideas, or fall victim to even-lower-cost
competition.
In the long-term, Chinese labor rights must advance to help lift
Chinese wages. But with 200 million job seekers at the door,
substantial wage increases still appear a ways off. For the near
future, China appears to own the role of the world's low-cost
manufacturer.
And China's workers are not all unskilled laborers. China has focused
on its education system. It is quite good for a country its size. The
literacy rate tops 86 percent.
Visit a primary school in a middle-sized Chinese city. Bright,
enthusiastic, charming children will greet you and win your heart.
Happy first graders will greet you in English. Chinese schools are
preparing students to compete in an intertwined, multinational,
multilingual world economy.
Are American schoolchildren learning Mandarin? Are they even learning
Spanish? The coming generation of Chinese businesspeople will do
business around the world. Americans need to broaden our linguistic
abilities, or Chinese businesspeople will cut the deals before us.
China's growing population of college graduates also fuels its
increasing strength in high tech. Last year, nearly 3 million Chinese
entered the workforce from colleges and graduate programs. That was
one-third more than
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the year before and double the year before that. Last year, China
produced 220,000 new engineers. America educated only 60,000.
China now has an unusually open economy. Foreign investment in China
is more than a third of its economy, compared with only 2 percent in
Japan. In 2004, the sum of exports and imports is likely to reach
three-quarters of China's GDP, far more than in other large economies.
In American, Japan, India, and Brazil, the figure is 30 percent or
less. China has allowed foreigners to participate in its growth and
development.
China has stoked the engines of its economic development through
means both fair and foul. China promotes its domestic high-tech
industry at the expense of foreign firms. World Trade Organization
commitments prohibit discriminatory taxation of foreign products. But
China applied a 17 percent value added tax on all semiconductor sales,
and then rebated 11 percent of this for semiconductors produced in
China and 14 percent for semiconductors designed and produced in China.
The United States had to bring a WTO case to challenge the policy.
China agreed to drop the policy last year.
And China does an abysmal job of protecting patents and intellectual
property. Walk into an open-air market in Shanghai, and you can buy
ties that bear less than credible labels: well-known brand names,
``Made in Italy.''
And it is not just ties that Chinese businesses knock off. A red sign
festooned a Shanghai market: Respect ``trademark law,'' it cajoled. But
as you walk under the sign, literally dozens of men hawk DVDs and
watches of plainly dubious vintage.
And China also uses its currency exchange rate to distort the market.
China has set, or pegged, its currency to the dollar, with an exchange
rate of 8.28 renminbi to the dollar. Critics argue that as China's
economy has grown, its currency should have appreciated against the
dollar, making Chinese goods more expensive relative to American goods.
The renminbi has not appreciated--and Chinese goods have not gotten
more expensive--because of the peg. Many argue that China keeps the peg
in place to support its manufacturing sector.
The reality may be more complex. But there is no denying that China
does not have a free-floating currency. And there is no denying that a
free-floating currency would be better for China and its trading
partners, over the longer term. How to get there, especially with
China's badly insolvent banking system, is what the debate is about.
China's economy could easily stumble, as America's did during the
booms and busts of the 19th century. But barring any truly devastating
crisis, China's economy will likely continue its upward trajectory.
China will become the world's largest economy. The only question is
when.
Faster growth in China should mean faster growth elsewhere. If
China's real income grows by 8 percent per year--and it is--income
distribution remains unchanged, then by 2020, China's top 100 million
households will have an average income equal to the current average in
Western Europe. That is a giant new market for consumer goods.
China's boost to global growth could exceed even those that the world
economy has recently enjoyed from the spread of computers. Like that IT
revolution, China's growth may lead to the loss of some jobs in the
United States. But it will also likely lead to the creation of
different jobs in greater numbers.
Notwithstanding the pervasive influence of American and Western
culture even in once-isolated China, one senses a love-hate
relationship with America. Chinese officials will note how our two
nations had once been sworn enemies in a war that Americans, with our
short memories, forgot long ago. On Chinese streets, men will walk up
to you, asked you if you are American, and debate you about American
foreign policy.
The Chinese Government maintains power through two tools: One, an
improving standard of living, and two, nationalistic sentiment. In
furthering the latter, China often paints America as the enemy keeping
China from reuniting with Taiwan. The U.S. is thus second only to the
Japanese in unpopularity in China. It need not be so.
Together, America and China accounted for half the world's economic
growth in recent years. We are economic partners. We share interests in
a non-nuclear Korean peninsula. And we share a common concern with
radical terrorists. But many Chinese appear put off by the swagger of
current U.S. foreign policy. We still have work to do to thaw U.S.-
Chinese relations.
No American Government can prevent the challenges to the American
economy posed by the increasing sophistication of labor markets in
China, India, and Eastern Europe. We must accept the reality of these
challenges.
The ancient Persians looked with disdain at the Athenian marketplace,
the Agora. It was a proverb among the Persians that there: ``Greeks
meet to cheat one another.'' But we can no more prevent the spread of
the world's commerce than Persia could stop the spread of Hellenism.
Some may seek to avoid the unavoidable future. But we would do better
to learn how to embrace it. We must adjust our policies to meet the
challenge.
The American Government cannot stop international companies from
hiring overseas workers instead of American workers, without inflicting
great harm on the American economy. American companies compete in a
global environment. If an American company cannot hire those hard-
working but low-wage Shanghai workers, a foreign company will. That
other company will sell the products of that factory at lower cost.
Consumers worldwide will buy them. And the American company will lose
the business and jobs.
Neither can we erect tariff barriers that wall off foreign
competition. Higher tariffs are taxes that harm both the foreign
sellers trying to sell into America and the American buyers who seek to
buy foreign products. Tariffs impose a dead-weight loss on both sides.
And protectionist measures invite retaliation. Protectionism thus
ultimately harms a country's economy. Protectionism puts at even
greater risk the jobs the politicians seek to protect.
Rather, to help prepare America to meet the challenges of the next 2
decades, we need to ensure that Americans develop the skills needed to
continue to compete in higher-value-added fields. We need to continue
our tradition of rewarding innovation and risk-taking. We need to fight
to open new markets around the world. And we need to remove burdens
that hinder our international competitiveness, like the high cost of
health care in America.
Engineers play a critical role in the development of new jobs and new
industries. In 1975, the United States ranked third in the world in the
percentage of 24-year olds who held a science or engineering degree. By
2000, we had slipped to fifteenth. By 2004, we were seventeenth. At the
same time, the Department of Labor projects that new jobs requiring
science, engineering, and technical training will increase four times
faster than the average national job growth rate.
Only a little more than 1 in 20 high school seniors who took the 2002
college entrance exam planned to pursue an engineering degree. The
United States trains only half as many engineers as Japan and Europe,
and less than a third as many as China. We should increase scholarships
and loan forgiveness for engineering students to entice more young
Americans to study engineering.
We should support community colleges, and strengthen the link between
them and the workforce. Schools can then develop training programs
relevant to jobs that actually exist in any given community.
We should make it easier, consistent with the requirements of
national security, for foreign students to study in America. America
has benefited from our ability to attract and to retain the best and
brightest students from countries all over the world. Yet, since 9/11,
many students are having a difficult time getting visas to study in
America. Foreign applications to American graduate schools fell 28
percent in 2004. And enrollments of foreign students at all levels of
college declined for the first time in 30 years.
Foreign students are increasingly studying in Europe and elsewhere.
We are losing a generation of foreign minds, minds that in another time
would have come to our shores. These
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declines are due in large part to the difficulties foreign students now
face in getting a visa to study in America.
We must not compromise our security needs to host foreign
businesspeople or students. But there must be ways to streamline visa
procedures and otherwise lighten the burden to make it easier for
foreigners to study and conduct business here.
American universities and research institutes do much of the most
innovative research in the world. But over the last 20 years, Federal
research funding in the physical sciences and engineering has actually
declined by nearly one-third as a share of the economy.
Money invested in Federal research programs pays dividends many times
the investment. For example, National Science Foundation funding of
research in the basic sciences and engineering has helped discover new
technologies that have led to multi-billion dollar industries and
created countless new jobs. These include jobs in fiber optics, radar,
wireless communication, nanotechnology, plant genomics, magnetic
resonance imaging, ultrasound, and the Internet.
We should invest in our future by fully funding research support
organizations such as the National Science Foundation, National
Institutes of Health, and the Office of Science at the Department of
Energy.
Without Government support, private investment in research and
development would be less than it should be. The society as a whole
needs to foster the research that will build a better nation in the
future. The R&D tax credit has helped. But we can improve the R&D tax
credit by simplifying it and making it permanent.
The Government has expended a tremendous amount of time, money, and
manpower negotiating trade agreements with countries like Bahrain,
Morocco, and Colombia. None of these small economies offers much to
American exporters.
By contrast, last year, American companies lost more than $3.8
billion to business software piracy in China alone. Putting more
resources toward defending American intellectual property rights would
have a real effect on the bottom line for many American companies.
American companies sold $626.6 billion in copyrighted products in
2002, 6 percent of American GDP, and employed 5.5 million workers, or 4
percent of the American workforce. Their foreign sales and exports
amount to $89 billion, more than most other export sectors. Our
intellectual property is among our most valuable assets. Some would say
it is now the American comparative advantage. We must do a better job
protecting it.
The political bargain that has kept a consensus in support of
liberalized trade has long been that in exchange for labor market
flexibility, those hurt by trade would have help finding new jobs. That
bargain has eroded.
America spends less on labor-adjustment assistance than any major
industrialized country. Japan spends nearly twice the share of GDP,
Canada nearly three times, and Germany more than eight times as much.
Trade adjustment assistance provides retraining, income support, a
health insurance tax credit, and other benefits to workers who lose
their jobs due to trade. TAA is not a handout for idle workers, but a
means to retrain them for competitive employment and help them through
the transition.
We should expand trade adjustment assistance to service workers and
emphasize, and possibly expand, the wage insurance program.
And we need to do more to keep jobs in America. For most American
companies, health care costs are the single biggest disincentive to
hiring new workers. The costs are enormous, increasing at a double-
digit pace, far outstripping health care costs in other countries.
America spends more on health care than any other country in the
world. Per capita spending on health care in America is nearly 2\1/2\
times the average in the industrialized world.
Employers in America also bear much of the cost of the rising number
of uninsured Americans through cost-shifting by hospitals and other
health care providers. Last year, employers paid an average of nearly
$2,900 for single employee coverage and more than $6,500 for family
coverage.
By contrast, most employers in other industrialized countries do not
pay anything for their employees' health care. A Government-sponsored
universal health program bears those costs. The difference is hurting
America's competitiveness.
We can take several small, practical steps to help lessen health
care's burden on American companies. We could provide tax credits to
small employers, fund employer-based group-purchasing pools, increase
funding for high-risk pools, expand Medicaid and the State Children's
Health Insurance Program, and permit a Medicare buy-in for the near-
elderly.
But we cannot keep kidding ourselves. We need real change to address
the problem of American health care costs. We need to do so, to meet
the challenge to America's place in the world.
In reality, the economic reforms in China, India, and Eastern Europe
that cause the challenge to American leadership are a good thing. We
should want China, India, and Eastern Europe to educate their people,
open their markets, and trade with us.
Since World War II, there has been no greater advocate for free
markets around the world than America. America has much to gain in a
world of free markets. When foreign workers move into more productive
work, their incomes will rise. As foreign workers become more
prosperous, they will become better able to buy American goods and
services. And by keeping our markets open to foreign products, consumer
prices fall on everything from footwear to electronics, making the
American consumer's dollar go further. Everyone can be better off.
Trade is not a zero sum game. Increasing competition from China,
India, and Eastern Europe does not mean that America will suffer.
Remember, after World War II, America prospered as it helped to
rebuild a shattered Europe. Competition from recovering European
economies did not hurt America. Rather, as Europe emerged from the
devastation of war, the American economy grew along with Europe's. With
the right policies, much the same can happen perhaps with much larger
positive effects with the growth in China, India, and Eastern Europe.
Remember, in 1957, when the Soviet Union launched Sputnik, the first
man-made satellite to orbit the Earth. The challenge of Sputnik gave
America the political will to devote the resources needed to become the
world's premier space power.
In the same vein, the economic challenge of the next 2 decades
presents its own opportunities. The challenge posed by economic
development in China, India, and Eastern Europe could help create a
political consensus in favor of change and growth.
The former Librarian of Congress Daniel Boorstein wrote: ``The most
important lesson of American history is the promise of the unexpected.
None of our ancestors would have imagined settling way over here on
this unknown continent. So we must continue to have a society that is
hospitable to the unexpected, which allows possibilities to develop
beyond our own imaginings.''
We cannot rest on our laurels. But if we remain open to the
unexpected, if we allow the possibilities to develop, we can maintain
America's leadership in the world.
It will take work. But if we redouble our education, if we open more
markets, if we better manage our healthcare, then we can face the
challenges of the decades to come.
We must get to work. But if we do, we can make an America that, in
Pericles's words, ``comes to her testing time in a greatness that
surpasses what was imagined of her.''
If we do, America can continue to ``stand with the allies of
freedom'' throughout the world.
And if we do, ``Future ages will wonder at us, as the present age
does now.''
The PRESIDING OFFICER (Mr. Warner). The Senator from Utah.
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