American Decline or Renewal? Part 1

Opening Statement By Chairman Brad Miller

"What I’ve learned," former Fed Vice Chairman Alan Blinder has observed, "is anyone who says anything even obliquely that sounds hostile to free trade is treated as an apostate."

The faith that Blinder has recently begun to question has guided both U.S. and international economic policy for more than two decades.  Its credo is that lowering trade barriers while curbing regulation produces optimal growth.  According to its doctrine, this new order would provide undiluted benefit to an advanced nation like ours.  It would free Americans trapped in traditional jobs for more sophisticated, remunerative work, while flooding the world with goods and services made in the U.S.A.

But 15 years after the ratification of NAFTA, and 13 years after the birth of the WTO, the ranks of the doubters seem to be growing.

• Could this reflect America’s net loss of 3.5 million manufacturing jobs since 2001?
• Could it reflect the fact that the U.S. merchandise trade deficit has risen every year but one over the past decade, and has hovered around three-quarters of a trillion dollars for three years running?  By the way, our trade surplus in services is tiny in comparison.  In 2007, it was only around one-eight the goods deficit’s size.
• Could this reflect the Nation’s assumption since 2001 of $10 trillion in new debt, $6.5 trillion by households, $3.5 trillion by the federal government – an indication that we have not produced anywhere near the level at which we wish to consume?
• Could it reflect anxiety over the rise of colossal Sovereign Wealth Funds that are using what they take in from us to buy up our industrial and financial assets?

In this context, the hardships of working Americans are proving enduring and profound.  Lawrence Summers – Treasury Secretary under President Clinton and, before that, Chief Economist of the World Bank – last month wrote of "a world where Americans can legitimately doubt whether the success of the global economy is good for them."  He also acknowledged that "growth in the global economy encourages the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered."

That even such a figure as Summers, one of the architects of the current international trading system, is now expressing such concerns heralds a significant change in public discourse on the global economy.  No longer can we in good conscience escape the question: What do we do about it?  If we are to find effective answers, we must be open to hearing new ideas.  We must be prepared to discover that we know less than we thought about the consequences of globalization, or even that some of our basic views on the subject may rest on mistaken assumptions.

Today we have two panels, each of which will, in its own way, help us along this path.

The first panel will offer new perspectives on the beliefs that have, for several decades, underlain the design and governance of the world trading system, as well as our expectations of proper behavior by corporations.  One of its members, Dr. Ralph Gomory, last year testified before the Science and Technology Committee that the interests of U.S.-based multinational corporations are no longer necessarily in step with those of a healthy American economy.  Today the members of this panel will question things we think we know – about the role and responsibilities of corporations, about the relationship of the state and the market, about the ability of technological innovation to ensure our country’s economic prosperity in the absence of changes in the trading system.  And they will suggest some measures that might strengthen America for the future.

The second panel will bring us into the trenches.  Two heads of domestic firms will talk about their commitment to producing at home, which they do out of concern for the well-being of their employees, the viability of their communities, and the sustainability of the Nation’s economy.  They will also tell us about the cost of upholding that commitment under the current trading system, and suggest how the federal government might help lighten their burdens now.  Joining them is a regional development expert who will explain what it takes to attract investment as the lure of offshoring becomes more prevalent, and will add some ideas of his own on how to improve American competitiveness.

With that I yield back my time – which has, in fact, already expired – and recognize the distinguished ranking member for his opening statement.

Witnesses

Panel 1

1 - Dr. Ralph E. Gomory
Research Professor, Henry Kaufman Management Center Stern School of Business, New York University Stern School of Business, New York University
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2 - Dr. Margaret Blair
Professor, School of Law Vanderbilt University Vanderbilt University
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3 - Dr. Bruce R. Scott
Paul Whiton Cherington Professor of Business Administration School of Business, Harvard University School of Business, Harvard University
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Panel 2

1 - Mr. James R. Copland
Chairman Copland Fabrics Copland Fabrics
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2 - Mr. Brian O’Shaughnessy
Chairman Revere Copper Products, Inc. Revere Copper Products, Inc.
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3 - Mr. Wes Jurey
President and Chief Executive Officer Arlington Chamber of Commerce Arlington Chamber of Commerce
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