Economics and Public Issues Conference

Article excerpt

Keynote Address

June 5, 2004

The Georgia economy has been doing pretty well-having just added 27,000 jobs over the past year and an unemployment rate of 3.8 percent, one of the lowest in the country (3.5 percent is the record low). I would like to talk a little bit about economic integration; in particular, I would like to briefly discuss what I think are The Unseen Benefits of Economic Integration for the U.S.

The economies of the world, of both advanced and developing countries, have changed significantly as the world has become increasingly integrated. Lower barriers to trade, deregulation, and the increasing rate of technological advancement have all worked to expand international trade at a faster pace than GDP now for decades. Not surprisingly, the increasing integration of the U.S. economy with the rest of the world has become a subject of concern to many Americans. Dimly sensed and understood events in different parts of the world now appear to have a major impact on U.S. companies and U.S. workers. Corners of the economy that once appeared to be immune to pressures from the outside world now seem to be buffeted by competition from far-away countries.

Concerns about global integration are not new to Americans. In the 1980s, there was a sharp debate over why U.S. companies were losing global market share in traditional assembly line goods, like automobiles and appliances. Before that, in the 1970s, Americans were shocked to discover the vulnerability of the U.S. economy to the international political economy of the oil industry. In fact, this debate has been a fixture in this country since its founding. Americans once lived a much more self-sufficient existence on farms and in small towns. In the late 19th century, the increasing integration of farms and small towns with global agricultural and financial markets was one of the key sources of political division in the country. Unfortunately, the discussion of these issues today tends to highlight only the concerns and risks of economic integration. We read in the newspapers about Americans who lost their jobs to foreign competition, but not about Americans who work making goods and services that are purchased by foreign consumers.

Commentators draw attention to the dependence of U.S. firms on foreign suppliers, but ignore the fact that millions of Americans benefit from the lower costs those foreign suppliers provide. Pundits tell scary stories of foreign corporations controlling the wealth of the United States-and neglect to mention the increasing American ownership of those supposedly "foreign" corporations. What I would like to talk about today is some of the important benefits of the integration of the U.S. economy with the rest of the world. There is no denying that such integration creates costs, but those have been well documented. The benefits have not.

Let me start by saying that, although I will talk about the number of American jobs supported by trade and foreign investment, the true benefits of economic integration do not come primarily from increasing the number of jobs in the economy. A successful economy directs people into the jobs that make the best use of their productive abilities-that is, into the jobs that create the most value for consumers. And this is precisely how economic integration, through trade and investment, benefit an economy.

Americans are anything but economic isolationists. We are, by far, the number one importer of goods and services in the world. Two-thirds of our imports enter duty free, and the average U.S. tariff rate is less than 2 percent (1.7 percent). We buy cameras from South Korea, toys from China, shirts from Bangladesh, computer software from India.

Our grocery stores are practically international food bazaars. Potatoes from Idaho, beef from Texas, and peanuts from Georgia sit next to bananas from Costa Rica, melons from Mexico, and coffee from Kenya. Americans certainly have a penchant for importing, but we are also integrated into the world economy in many more ways. …