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Heavy-Handed Politics

"€œGod willing, with the force of God behind it, we shall soon experience a world
without the United States and Zionism."€ -- Iran President Ahmadi-Nejad

Monday, September 12, 2005


By Neal Asbury

"Over this past week everything I do feels unimportant and meaningless compared to the wrath of Katrina and the suffering of our countrymen on the Gulf Coast. It has shown how vulnerable we truly are. These horrific scenes are being compared to something out of Indonesia, Somalia or Sri Lanka. People from around the world are stunned that these images could be coming from the United States.

I am incredibly saddened by the thought that New Orleans may never fully recover. I have so many fond memories of my time in the Big Easy. I have participated in numerous trade shows at the Convention Center where I introduced American-made products to eager customers from all over the world.

I have partied hard on Bourbon Street and tossed beads from the balconies. I have thrown passes and kicked field goals at the Superdome. The endless pictures of despair and chaos coming from these magical places are too much to bear.

There will be many lessons learned from Katrina and her indiscriminate destruction. The biggest lesson should be our vulnerability. Even with all the facts and warnings staring us in the face, we failed to act. We have another Katrina pounding our shores. Many in our country fail to realize, we are fully engaged in a World War of Trade. This has been ramping up the past two decades and today is raging all around us. America is losing.

There are cracks in our levee and the American middle class is at huge risk. Just like Katrina, nothing is being done about it. We have now seen how quickly we can look like a Third World country. This is our wake up call.

It amazes me that many believe through the process of globalization, it is inevitable that high paying American jobs must relocate to China and India. In a recent roundtable sponsored by BusinessWeek entitled Expert Advice for the U.S., all thirteen of the “smartest people BusinessWeek could find” has essentially written off the American worker.

According to them, America to survive needs to just keep inventing things and forget about making them. These people have obviously never tried selling the countless products Americans design and make efficiently and competitively. It is not the American worker that can not compete; it is the system they are competing in.

As I travel around the world, it is striking to note how many different meanings of globalization are out there. It is one of the most over used and misunderstood words of the past decade. Before we can correct our shameful trade imbalance (which can be done rather quickly), we first need to understand the world is playing by entirely different rules and definitions. This sounds so basic but it is at the heart of our global trade crisis.

In our naiveté, we have opened up our markets to the world (with the exception of agricultural subsidies which we will discuss later), expecting the world would willingly do the same for our manufacturers. To have believed in this myth wholeheartedly shows complete ignorance of history and foreign cultures."
A general definition of globalization, as understood in the United States, is the economic integration and interdependence of countries. It involves the increasing world-wide integration of markets for manufacturered goods, services, labor and capital. It is the belief fierce competition and access to lower cost imported products raises the living standard of all citizens.

It is often over simplified and referred to as “free trade” which is complete fiction and does not exist anywhere.

It describes the idea that time and space have shrunk as a result of modern telecommunications and travel which allows instantaneous communications between people almost anywhere on the planet at a fraction of what it cost just a few years ago. (As an example, we spent on telecommunications $40,000 per month in the mid ‘90’s. Today we pay under $5,000 per month for dramatically better service).

The concept of globalization also applies to values like spirituality, protecting the environment and belief in human rights to cultural products such as food, fashion, movies and music.

Among developing countries in Asia, Africa and Latin America, the term globalization can quickly get emotional and often refers to the domination of world economic affairs and resources by the United States.

Here, it is defined as American capitalism in the form of its huge multinationals backed by our government and media re-colonizing the world. “Coca-Colonization” and “McGlobalization” is seen as the result of cultural homogenization as local traditions are swallowed up by American values.

Is globalization a force for economic growth, prosperity and democracy? Or is it a force to destroy local cultures, exploit defenseless labor and ruin the environment? Is globalization benefiting the American worker? Is globalization a good thing or a bad thing?

It all depends on one’s definition.

Globalization is not new and has been going on for centuries. The expansion of Buddhism in Asia in the First Century eventually laid the foundation of the Silk Road.

The rapid spread of Islam from the Western Mediterranean to India in 650-850 economically linked many diverse lands and cultures.

In 960-1279, the Song Dynasty in China produced the economic output, financial instruments and technologies that were the impetus of a medieval world economy that linked Europe and China by land and sea across Eurasia and the Indian Ocean. When Europeans were literally rolling around in the mud, China was the world’s center of invention, wealth and commerce.

The creation of the Ottoman Empire after the fall of Constantinople in 1453, spanning Europe, North Africa and the Middle East, economically connected many peoples – at the cost of doing business between Europe and China.

This increase was partially responsible for Christopher Columbus making his voyage in 1492 to find a shortcut to China by sailing west. Instead he discovered America which set into motion the globalization of the Western Hemisphere. The enormous and powerful British Empire of the 16th-18th centuries set the global standards in commerce, values and culture.

It is important that we all understand globalization is not an American invention. Currently being the world’s most powerful and wealthy country only puts us at the forefront as were the Greeks, Romans, Chinese and British before us.

It would require several hundred pages to touch on all the nuances of globalization from around the world (this is a book that needs to be written). I will therefore limit my brief discussion of the issues to a few of the foremost players.

East Asia, including China, Japan and Korea is responsible for a whopping 60% of our non-oil trade deficit. India is often linked with China as the biggest threats to U.S. jobs. At a recent summit, the leaders of China and India half joked that “China would be the factory of the world and India the office of the world.”

The Arabian Peninsula has globalized oil and terrorism. Yesterday, when driving home, a SUV in front of me had big bold letters across its back window claiming “SAUDI ARABIA IS NOT OUR FRIEND.” Maybe he doesn’t know what irony is.

France is interesting. They are the self appointed leaders of the anti-globalization movement which is an extension of their fervent anti-America dementia.

Brazil is an important player as the FTAA (Free Trade Agreement of the Americas) hinges on the United States and Brazil coming to terms on American agricultural subsides.

Our non-oil trade deficit in 2004 was $446 billion. Of this $258 billion was with China, Japan and Korea. In solving our trade crisis this is where to start. All three are similar in they have defined and implemented globalization as a process to export their products as much as possible while greatly limiting imports.

There is no shortage of Chinese officials running around the world singing the praise of globalization. However, it is their definition, not ours, to which they are so committed.

They are proud to point out that 200 million people have been lifted out of poverty in the last 20 years while China has become the 5th largest trading country in the world. They cite in the last ten years China has attracted more foreign direct investment (FDI) than any country in the world other than the United States.

They claim lower cost Chinese goods have raised the living standards of all Americans by 5-10 percent (I have no idea how they calculate this) and helped to reduce our inflation.

They talk of the success in China of a few American multinationals such as Coca Cola, McDonald’s and GM. They finally assert America is beholden to China because of their purchase of US Treasury Bonds which has helped to finance the budget deficit with the implicit threat to dump them if we do not play by their rules.

The Chinese Communist leadership has developed their version of globalization to hold on to power and so far it is working. They must continue to create millions of jobs to legitimize their rule. They do this by keeping artificially low the cost of Chinese exports, which in turn brings in more foreign direct investment (FDI) which builds more export capacity that finally employs more people.

However, clearly the Communist leadership is saving their skins at the expense of the American worker. They vigorously protect their market from American exports through the manipulation of its currency, import restrictions and tariffs, unfair competition from State Owned Enterprises (SOE), cheap loans, brazen intellectual property infringements, corruption, cronyism and bureaucratic red tape.

The Chinese government does not talk about raising the standard of living of its own people by importing higher quality and more competitive American products. The US multinationals they showcase as success stories have had to localize content. Coca Cola, McDonald’s and GM have very little US content in their products. Maximizing local content was a condition of establishing their operations in China. Globalization in China is a one way street.

Japan and Korea also have adopted the same single dimension of globalization. Simply put… we make and you buy. It has nothing to do with openness and let the best product win. Sadly, there is nothing on the horizon that is going to change this.

I am fundamentally against managed trade. I also stand first for the fair treatment of the American worker. In China, Japan and Korea it is blindingly obvious American workers are getting shafted everyday as products made with their labor are not allowed to be sold in the same open marketplace which we have granted these three countries.

We should not be surprised. There are historic, cultural and bureaucratic reasons why this occurs. It is time to accept that China-Japan-Korea (C-J-K) have a totally different meaning of globalization than we. If our trade partners refuse to agree to our definition, we must respond accordingly.

One proposal is to determine what American imports would occur if not for C-J-K impediments to trade, then require these countries to make up the shortfall in government purchases.

India fancies itself as the office of the world. Following their success in software engineering and call centers, they have now set their sights on pharmaceuticals and biotech as well as higher-value design segments of classical blue-collar industries such as textiles and auto-components.

In 2005, General Electric will employ more top-end talent at its Bangalore facility than in New York. It is estimated that 70% of American white collar jobs that are being exported overseas are headed for India.

Just like China, there is no shortage of Indian government officials talking about the virtues of globalization. However their definition is also not anything like ours. India fervently protects its market against American imports. India is in effect a closed market with its extreme duties and barriers.

Globalization to India means outsourcing skilled jobs from the United States and Europe to India. It does not mean lifting the lives of their people through better imported products at cheaper prices. Once again the American worker is paying a huge price and getting absolutely nothing in return.

Something needs to be mentioned about globalization on the Arabian Peninsula. The Saudis have globalized the oil industry through the 11 members of OPEC that are located in the Middle East, Africa, Latin America and Asia. In 2004, OPEC’s members received $338 billion in revenue from oil exports. That was an increase of nearly 40 percent over the $243 billion they received in 2003. The increase in 2005 will be even more dramatic. In 2004, the United States imported $166 billion of crude oil and petroleum products. This could nearly double in 2005.

Also originating in ultra-conservative Wahhabi Saudi Arabia is the globalization of terrorism stemming from Islamic Fascism. It can now be found in all corners of the world save for Antarctica.

It is ironic to note Al-Qaeda was formed to resist and eliminate Western influences in the Middle East that are the result of the globalization process. Obviously, when a region only survives on a single commodity and has no technological development, creativity or manufacturing of their own, they must import. One globalization begets another.

The French define globalization as an Anglo-Saxon (read American-British) invention that has been designed to trample their “more refined” culture and generally dilute the “greatness” of France. They have vigorously taken the international lead in fighting the spread of globalization.

The French national debate no longer hinges on the traditional openness vs. protectionist dichotomy. Their deeply felt anti-Americanism has put it on a collision course with the 21st century world order as they go back to building walls instead of bridges.

We have seen this clearly when the French recently rejected the EU Constitution. The “non” vote was cast as a protest against further integration. They somehow believe by withdrawing into a cocoon they can protect their runaway socialist system of high paying jobs, short work weeks, long vacations and early retirement.

French leaders often seek ways to influence world politics as a “counter balance” to the United States. Being relegated to a second rate power has been too much to swallow. They would not even be this if not for their veto power on the Security Council. Their status on the world stage can no longer justify this.

The French have so far put forth no alternative to globalization which they vehemently oppose. Globalization has been vilified as a clash between the superior French culture against the much lower American culture.

The World Trade Organization (WTO) has been portrayed as the Trojan Horse of uniformity around the American way of life, or “low” culture made up of fast food, bad clothing and dumb sitcoms. By contrast, the French model is portrayed as “high” culture made up of worldly philosophers, fine paintings and intellectual movies. Globalization also threatens the revered French language which is at the core of their psyche.

When asked why France is isolated in the fight against globalization, especially within Europe, French politicians do not hesitate to snap back that France is the only one to defend its culture because it has something to defend. A clear sign they are suffering from Delusionary High Culture Syndrome (DHCS).

Many Americans believe we have the world’s most open and free market. This is not true. Agricultural subsidies create big distortions at home and around the world. They are also the rightful target of many developing countries when negotiating trade agreements. It is not fair that we demand to eliminate market barriers for our manufacturers and service providers but at the same time overly protect our market against food imports.

Many developing countries heavily depend on their agricultural sector which is one of the few things they can competitively export. The subsidies of the rich countries drive down the world prices of their crops driving them further into poverty. The US, EU and especially Japan have eliminated food from their definition of globalization except when it comes to exporting.

US farm subsidies are currently about $19 billion per annum. This pales against $67 billion in the EU (France is the main beneficiary) and $33 billion in Japan. Duties on many farm products in the US, EU and Japan exceed 100 percent (the tariff on rice in Japan is 500 percent).

The US farm support in 2003 was 17.6 percent of the total value of agricultural production compared to 36.5 percent in the EU and 60 percent in Japan. Japan’s support of farm land was a hard to believe $4415 per acre that dwarfed the EU at $308 and the US at $54.

American food exporters routinely sell their products below the cost of production. The latest numbers available from 2003 show cotton was exported at an average price of 47 percent below the cost of production. Wheat was exported at an average price of 28 percent below the cost of production. Rice was exported at an average price of 26 percent below the cost of production. Corn and Soy Beans were exported at an average price of 10 percent below the cost of production.

Not only are we running up an unsustainable trade deficit, we are losing big money in the export of our agricultural products that is being heavily subsidized by the US taxpayer.

Americans workers are losing their jobs to Chinese because of unequal access to the China market for the products they competitively produce while at the same time are paying with their tax dollars for food the Chinese are eating.

The definition Brazil attaches to globalization needs to be closely considered. It claims to be seeking a “third way” between the US version of globalization and state-controlled socialism. It rejects the Washington Consensus that is a set of market opening policies believed by many in the United States to be the path for promoting economic prosperity in Latin America. T

hey include the standard reforms the US has been promoting for the past 15 years including trade liberalism, low tariffs, protection of intellectual property rights, privatization of state enterprises, openness to foreign direct investments, moderate interest rates, due process and competitive exchange rates. This is the heart of the American globalization model. Most all Latin countries have implemented the Washington Consensus except Argentina, Brazil, Cuba and Venezuela.

The moderate left wing government of Brazil today sees the “third way” as a global community of developing and poor countries that does not rely on the industrialized West. Meanwhile Brazil remains one of the most closed markets in the world. This community would be focused on ending hunger, poverty and misery. These are certainly noble goals but simply not practical without the technology and financial resources of the United States and European Union. It is time they wake up.

Brazil and the United States are at an impasse in concluding FTAA (Free Trade Agreement of Americas) over US agricultural subsidies and the intellectual property protections laws in Brazil. Brazil being a major exporter of agricultural products insists upon the elimination of subsidies as part of the FTAA negotiations. They have a valid point. A solution needs to be found as FTAA is extremely important to all countries of the hemisphere, but especially Brazil and the US.

There do not have to be losers in the World War of Trade. Our trade partners win in many ways by permitting American products to enter their markets. However, by not responding to the many meanings of globalization we are destroying America’s ability to compete.

Think of the jobs created in places like New Orleans, Biloxi and Gulfport for our countrymen that desperately need them if $200, $300, or even $400 billion worth of manufacturing jobs were here in America because we had the guts to correct the many wrongs we have allowed.

If these trade wrongs are not corrected, in particular with China, Japan, and Korea, and stand up for the American worker, we can all end up suffering an economic Katrina.

Will we heed the warnings this time?"
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