[Extensions of Remarks]
[Pages E984-E986]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

AMERICA AS EXPORT SUPERPOWER

______

HON. JANE HARMAN

of california

in the house of representatives

Wednesday, May 10, 1995
Ms. HARMAN. Mr. Speaker, the aftermath of the cold war presents
America with a wide range of opportunities as well as challenges to its
pre-eminent position in world commerce. To many, the source of our
success provides comfort in the fact of these challenges. And, indeed,
the skills and technology which created the military might by which we
won the cold war afford us one means for shaping our future response.
But skills and technology alone are not enough. We must do more. We
must carefully assess the international environment and understand more
fully the nature of our competition abroad. Thus, while the United
States is poised to build upon its superiority in world commerce, there
are some questions which are part of our public debate which remain to
be answered. Among them are the evolving relationship between
government and business, industry's relative strengths and weaknesses,
and how we can open markets currently closed to U.S. investment and
products.
The answers to these questions are not easy ones. But a recent speech
by my friend Michael Armstrong concisely presents some possibilities
worthy of further discussion. Mike is the chairman and CEO of Hughes
Electronics, a company highly successful because of its clear
understanding of the international environment. I commend to my
colleagues his remarks on making America an export superpower.
America as Export Superpower: Reassessing Government's Role in Economic
Growth

(By C. Michael Armstrong)

It is a tremendous honor to follow the long line of
distinguished speakers to this podium. Since its founding in
the wake of World War I, the Council on Foreign Relations has
been at the very center of the public debate on America's
place in the world--a forum for ideas, and a fulcrum for
change.
I want to underscore right at the onset, that while I am
privileged to serve as Chairman of the President's Export
Council--and while my visits to Washington have been more
frequent--I can still say, at this point, that the views I
express today are my own.

transitions: 1945-1995

I think all of us were moved by the celebrations--the
commemoration--of V-E Day. That journey back to May 1945 to
the beginning of a post-war era that was prelude to the long
Cold War no one could yet foresee--has undeniable parallels
to our present. Today, we are once again making a difficult
crossing--ending one era and entering the next: A new world,
with new rules for the way nations cooperate--for the way
nations compete.
As the historians in the audience today know better than I,
the outlines of our era are only now becoming clear. Just as
American GIs shook hands with Ivan at Torgau on the Elbe in
1945--only to find an implacable Soviet Union blockading
Berlin in 1948--periods of transition unfold in unpredictable
ways.
The distance from 1995 back to the fall of the Berlin Wall
or the implosion of the Soviet Union may seem significant--
but in the handful of years since those events, we are only
now beginning to seize the opportunities--to shape a future--
beyond the Cold War's long shadow.
Already we see more clearly that with the passing of the
Cold WAr, the coming competition will be less military than
economic: Dominion will be defined by the development of new
technologies and economic performance. I am convinced: If the
measure of our Cold War strength was military--America's
destiny in the remainder of the century is as an Export
Superpower.
[[Page E985]] As the first generation after the Cold War--
we have an opportunity that is also an obligation. History
will judge what happens on our watch.
If we are to sustain our role of global leadership and
expand our country's economic well-being, it will only happen
if America is the Export Superpower of the world.
And there are signs we are on track:
We've just passed Japan and Germany to regain the top spot
as the world's largest exporter--12.8% of all global trade,
compared to 10.5% for Germany and 9.9% for Japan.
U.S. exports, according to the latest Department of
Commerce estimates, are projected at double-digit growth--up
from a still-impressive 5 to 7% as recently as one year ago.
Broad, bi-partisan leadership has passed NAFTA and now
GATT, opening the way to expanded trade opportunities that
will boost GDP and job creation.
So with all this good news--what's the problem? Why are
some of us more concerned than confident?
Because the positive signs I've just mentioned coexist with
a more worrisome record: A record that points to a far
different future--to a competitive implosion so fundamental
it could amount to gradual economic disarmament.
We've got to ask:
Does a decade-long trade deficit of $1.1 trillion dollars
define an export superpower?
Does a 10-year, $2.1 trillion dollar federal budget
deficit--a budget that hasn't been balanced since 1969--
define an economic superpower?
Does an education ``deficit'' that produces students that
rank consistently in last place among industrialized nations
portend a leader of the societies of this world?
We've had a good run at economic success for 50 years, but
I happen to believe that we succeeded so well economically
after World War II also because of some fundamentals:
First, we won the war without internal economic
destruction. As a result, we quickly re-tooled our war
economy and dominated global commerce.
Second, we firmly established the world's foremost public
education system including a GI bill that opened the door of
opportunity to millions throughout our society.
And third, we let the market system sort through our
problems which gave an adaptive America room to restructure
to compete.
But is the market system alone enough to deliver America's
economic destiny? Just what should the government's role be
to enable our businesses to compete globally; to enable our
people to enjoy a standard of living second to none; to
enable our nation to preserve where history has witnessed the
demise of others.

technology v. bureaucracy

To answer this, we must recognize two new realities that
are currently transforming our world: First, with the fall of
the Berlin Wall and the Soviet Union, we are witnessing the
fall of economic, social and cultural borders as well. There
is an unmistakable, irreversible trend toward open markets--
to the reality and the bounty of a global village.
Second, the phenomenon that defines our age--the speed of
technology in bringing new products, new capabilities, new
markets, new lifestyles and new economics. In contrast to the
past, where either government or mega-corporations defined
markets, today the contest pits the speed of technology
versus the speed of bureaucracy--or, more precisely, the lack
of it, as the information age makes a mockery of borders and
barriers of all kinds.
It is in this context that we should ask, ``How much
Government do we need?''
I believe the answer is simply, just enough.
Just enough: No more--and no less government than we need
to sustain a globally competitive society.
Enough government means getting the night government where
we need it--and getting rid of it where we don't.
While the premise of ``just enough'' is hard to dispute,
the devil is in the details. Thus, I would propose we answer
two questions with each policy and factor-in our quest for
exports:
What government must do.
What governments should not do.

competitiveness, exports and economic growth

As we explore this question of government's role in
America's export competitiveness, I want to be clear that our
country's economic responsibility makes demands of the
private sector as well as public policy.
While business cannot overcome a government that shackles
it with a bureacractic ball and chain, nothing government can
do--no policy/no practice/no politics--will spark our
economic engine if American business is not competitive.
There is sometimes a certain ``no-fault'' mentality that's
crept into American management. The antidote is
accountability.
The ancient Romans had a tradition: Whenever one of their
engineers constructed an arch--as the capstone was hoisted
into place, the engineer assumed accountability for his work
in the most profound way possible:
He stood under the arch.
If his construction was shoody--he would be the first to
know.
With out market systems, American management must, at the
end, stand under the arch.
And we've had our share of fallen arches. Historically, the
companies that did not respond to the international challenge
are the companies that did not reap the rewards. Look back at
the list of companies at the top of the first-ever Fortune
500, compiled back in 1955: Of the Top 50--\1/3\ have dropped
off the list/another \1/3\ have merged--only \1/3\ are still
going strong. Whatever their industry, the companies that
have kept their place all share one common trait. They took
their American business international--conquering new markets
to create new growth.
Now look ahead--to the export opportunities we enjoy: Over
the next two decades, 12 countries with a combined population
of 2.7 billion--more than ten times the population of the
United States--are expected to account for 40 percent of all
export opportunities. For countries as well as individual
companies, there's a world out their hungry for the goods and
services we provide.
The question is whether American industry is up the
challenge. Many of you know the studies by the Council on
Competitiveness of U.S. industry's strengths and weaknesses
in 94 critical, cutting-edge technologies. The most recent
review showed some positive movement--but also distressing
evidence of the distance we've got to go to make our
positions more competitive.
While the U.S, has improved its position in 22 categories--
a closer look reveals the sobering part of the story. In 11
of those 22 areas we move from the last category--``losing
badly or lost''--to ``weak.'' In the other 11, we moved from
``weak'' to ``competitive.'' In not one case--not one--did we
move from competitive to strong.
Now, getting off the critical list is welcome news for
anyone--but finding out the patient has a pulse isn't the
same as watching him hop out of bed and run a marathon.

what government can do

My promise is thus quite straightforward, if we are to be
an export superpower, it takes both a competitive commercial
base and a competitive government system. For the most part,
over time, our market system should define and produce a
competitive commercial base. But it is up to all of us to
define the role of government in our pursuit of exports.
To begin, I'd suggest what government must do.
First, while we may need a balanced budget to discipline
our politicians, what we need for export growth is a balanced
economy.
We need a reasonable balance between our country's
investment accounts and its ``care and feeding'' accounts.
Undisciplined deficits and a disabled dollar are critical
challenges government must address.
We need competitive and well educated graduates coming out
of our schools if we are going to have competitive products
to export. It is not enough to delegate such a national
policy to thousands of individual communities to solve alone.
A national consensus should be followed by a thoughful
results-based education strategy.
We need a political balance in our system of government
that is both principled and practical--that is responsive,
committed and gets things done. If we elect people to spend
their time serving society, we are out of balance if they
spend half their time running for re-election. Whether it
takes the form of campaign reform or term limits--a better
balance must be struck.
Second, government must act to open markets for our exports
and our investment.
The passage of NAFTA and GATT will serve trade expansion
well--and the passage of these landmark agreements was surely
a signal from both ends of Pennsylvania Avenue that America's
destiny is tied to trade.
However, we need to build on those successes, and open the
markets of the second largest commercial nation in the world.
We should all support the difficult negotiations now underway
with Japan. It will never be easy; it will take understanding
and trust on both sides; but it must be done now. Hopefully,
if sanctions are required, they will limit Japan and not just
layoff Americans.
We need to sustain our support for Mexico, our third
largest export market. It is not politics; it is not Federal
Aid; it is not a give-away to banking interests; it is simply
in our economic self-interest.
We need to ensure market access to U.S. consumer goods--
taking aim at restrictive standards designed to keep foreign
goods out and protect domestic producers.
We need effective, strategic negotiating authority in
government to respond, act and conclude. Fast-track
negotiating authority is not an option--it is a necessity--if
we really want to open markets.
And while we drive to open markets, we should concurrently
demand that respect for intellectual property rights must be
a condition of access to our market.
Third, in addition to opening markets, all of our
government must act as an export advocate. While we now have
a sensible and thoughtful National Export Strategy, we need
support and follow-through in the marketplace. It is terrific
to see Commerce, Defense, Transportation, Energy and
Ambassadors around the world, not only stating their support,
but engaging to help make things happen. But we need more
advocacy; more agency coordination and consolidation; more
leadership in the markets, not just at the podium.
However, I've heard proposals to reorganize the U.S.
Foreign and Commercial Services--newly named the Commercial
Service--a network of offices across the country and in our
embassies whose clientele is American companies trying to
break export barriers and win business. This is an area where
our
[[Page E986]] present policy makes sense--change would be a
mistake. It ain't broke--so don't fix it.
Fourth, at times, government must act as an export
financier. This is not a disguised form of foreign aid. This
is a market necessity for large and small American businesses
to compete abroad and create jobs at home.
There are many instances where businesses and banks with
their balance sheets should fear to tread. Where the risk,
the venture, or the competition dictates that the appropriate
role of government is as guarantor.
There is a critical roll for established institutions like
the Export-Import Bank. Ex-Im can help broker blockbuster
deals--like the recent $500 million package for Indonesia's
first-ever private-sector power project. Without Ex-Im's
political risk coverage, projects like this one would not go
forward--and the loss wouldn't just be Indonesia's because,
in this case, the project will provide 7000 new American
jobs.
And the benefits of export financing and export advocacy
should flow so that small businesses can become powerhouses
in the export game. There is no reason the small firms in the
industrial park down the street can't export to markets
around the globe. It ought to be possible in America to be an
export entrepreneur.
Fifth, we must recognize that long-term export expansion
and technology leadership are synonymous. To assure
directionr and application, we should enact a permanent R&D
tax credit. However, I would add that irrespective of an R&D
tax credit, businesses should be investing in R&D to satisfy
their futures and stay ahead of their competitors. But tax
policy in this country has often helped to shape our republic
and assure our future. A permanent R&D tax policy today could
help to do just that.
And sixth, we need U.S. export policy that addresses a
globally competitive marketplace, not policies rooted in the
Cold War, fashioned to contain communism rather than expand
peace and prosperity. We should have an Export Administration
Act that minimizes licensing requirements; that implements,
where needed, a licensing process that is fast, fair and
responsive; that places commodity jurisdiction within the
government where it belongs--based on today's technology and
markets; and a Munitions List that is rational to the
realities of technology as well as the needs of national
security.
Anything less constitutes a weakness of American
competitiveness--anything less consigns our industry to a
kind of bureaucratic Berlin Wall blocking American exports.
I disagree with the school of thought that suggests a
strong export strategy equals a weak foreign policy. In fact,
the truth is just the opposite:
Strong exports mean more leverage--more options, more choice
in our foreign policy.
In our current foreign policy, we seem to think technology
can be quarantined by bureaucracy. The fact is: Technology
travels. One nation's export ban is another nation's economic
boon: An invitation to win trade opportunities while
competitor companies are kept in the penalty box.
On this last point, an outdated Munitions List too often
teaches the right lesson to the wrong people.
Last month, it was a businessman stopped at Customs for
carrying a telephone on a foreign trip. The phone was
equipped with a security scrambler--a technology on the
Munitions List.
And that made the telephone a dangerous weapon--right along
with ballistic missiles and nuclear warheads. Meanwhile, any
foreign national can walk into an American computer store,
buy the same encryption software that makes the phone
secure--and take it out of the country. And even that is a
waste of a plane ticket--because anyone on the internet can
e-mail the program, anywhere in the world. You can even print
the computer code on a mailing label and send it abroad--for
the price of a postage stamp.
In fact, there's only one way you can't carry or sell that
software abroad--and that's if you're an American citizen.
While the government is busy managing exports based on
yesterday's threats and technology, the 1995 Cadillac now has
more computing power under its hood than the original
guidance system that landed the Apollo space capsule on the
moon.
The examples are legion:
In the 1970s the average interval between taking a computer
from the drawing board to the market was 7 years.
Today, in some cases, a new generation comes along every
12-18 months.
70% of American computer products have a shelf-life of less
than 18 months.
Some of the fastest growing foreign markets--some expanding
as much as 7 to 10% per year--are among the 50 to 60
countries designated as ``sensitive'' on the Munitions List.
That's one-third of all the countries in the world--fenced
from U.S. high-tech goods and services.
We've got to recognize the inherent tension between the
speed of technology and the speed of bureaucracy: Government
policies that slow non-threatening technology will cost this
country its competitive position in the marketplace.
I am encouraged that secretaries Christopher and Brown have
pledged their support to work with each other, and the
Congress, for the passage of an effective Export
Administration Act this year.
Each of the issues I've identified argue for what is just
enough government.
While 19 agencies may be too many to achieve a coherent
trade policy . . .
While the finance function government performs may be fine-
tuned . . .
While government's role in advocating U.S. exports may be
activist in a number of ways . . .
We cannot lose sight of the positive role government must
play in promoting our economy's export engine. To do anything
less would be to abandon our destiny as an Export
Superpower--and put ourselves on the path to economic
disarmaments.
If these are the areas where we need the right kind of
government to support export expansion, there are also areas
where we need government to change or get out of the way.
The most difficult policy that needs to be addressed is
also one of the most economically damaging policies of our
government. I'm speaking of the use of unilateral economic
sanctions. Generally speaking, history has judged unilateral
economic sanctions as an unsuccessful policy to change errant
behavior. Only if unilateral sanctions are a means of
leadership to bring about multilateral sanctions, are the
chances of success able to justify the cost at home.
That's not the case when we take a go-it-alone approach to
sanctions. I would cite two examples.
In August of 1993, the State Department invoked unilateral
economic sanctions against China for violations of the MTCR.
This was due to alleged
shipments in 1992 by China of M-11 missile parts to
Pakistan. The State Department chose to extend
interpretation of the Munitions List to embedded
technology. Based on this interpretation, it then forbade
the export or launch of commercial communications
satellites.
As a result:
Australia and Hong Kong could not launch their Hughes
satellites--satellites that would primarily be carrying home
TV, much of it American programming.
The Chinese canceled their orders with Hughes for 2
satellites, mainly to be used for tying their banking system
together. This was a $400 million order worth hundreds of
American jobs.
Then, after Chancellor Kohl visited China and pointed out
the differences between American and German policy, China
canceled a joint agreement to build 10 sat ellites--and
transferred this multi-billion dollar agreement to Deutsch
Aerospace. Thousands more jobs were lost.
The sanctions did little to hurt China--but they certainly
registered in California, creating a new wave of unemployment
potential among people already dealing with difficult times.
Now, there are times when government gets it right. When
the issue was piracy of intellectual property rights
involving American-made movies and other software, the U.S.
threatened the Chinese government--and it paid off, with
quick and conspicuous results. We taught the right lesson to
the right people.
The tragedy is that if there was some process, some
required involvement with affected industry, its possible
sanctions could be implemented without sustaining such large
self-inflicted wounds.
Presently the U.S. has just invoked broad unilateral
sanctions against Iran. There is no question in my mind--and
no lessons we can look to--that suggests sanctions will
change the behavior of Iran--unless they are multilateral.
The purpose of sanctions cannot simply be to feel politically
justified. The purpose, of course, must be to change errant
behavior.
In imposing unilateral sanctions, this step by the United
States should be our calling card for them to join us. If
this is not the charge to the State Department, then the
outcome will merely be a shift in the flow of commerce, a few
thousand fewer jobs in America, and more important, no change
in Iran's behavior.
To learn from the lessons over time of unilateral economic
sanctions, I strongly urge the Administration to put in place
a process to involve industries affected and a policy that
recognizes that multilateral sanctions, and ``reverse''
sanctions on the offending country are the only effective
means to achieve our security objectives.
Yes, Ladies and Gentlemen, the end of a century is like a
hinge in history: A time to look to at the past--and always a
time to complete the unfinished work of the future. The steps
we take in the final five years of this century could well
spell our destiny in the next.
Failure to understand the public and private economic
imperatives of export expansion, will put us on a slow but
sure spiral into economic disarmament: Will earn us a page in
history offering a painful lesson in decline--a lesson made
more bleak because our prospects were so bright.
Success--traveling the path that leads to our destiny as an
Export Superpower--will bring a standard of living and a
level of security the likes of which earlier generations
could never have dreamed possible.
To realize that future: We must all pay attention . . .
And America must act.
Thank you.

____________________