[Congressional Record (Bound Edition), Volume 151 (2005), Part 10]
[Senate]
[Pages 14162-14166]
[From the U.S. 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

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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 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

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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 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

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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 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

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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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