A View from Washington
Shepherd, Bill, Global Finance
The brain truster in the Clinton administration who probably does the most thinking about the impact of globalization is Lawrence H. Summers, deputy secretary of the US treasury. A former Harvard economics professor, Summers, 43, is a strong advocate of international trade negotiations as an instrument of geostrategic policy, and his thinking often directly influences the White House.
He has not explicitly addressed the question of whether globalization is leading to overcapacity in major industries. But Summers has certainly been in the thick of the Washington debate over "fast-track" approval of trade agreements and what the impact of globalization is on wages and jobs. His basic view: "The idea that economic dislocations in the United States, as serious as they are, are substantially due to international trade is wrong."
Summers builds his case by measuring big structural changes in the US economy against America's enormous GDP, which will surpass $8 trillion this year. "Over the past 30 years the share of national defense has fallen by more than half, from 9.3% to 4.6% of GDP." In the same period health care's share of the economy has more than doubled, from 5.7% to 13.6%. Other major long-term changes include the economy's shift from manufacturing to services (some of which can be attributed to the flight of manufacturing to lower-wage countries) and the increasing number of women who have entered the US workforce. All these trends have raised more havoc with wages and jobs than imports have.
Imports from low-wage developing countries have nearly tripled in the past decade, to roughly $330 billion-an impressive figure, but one that looks puny once it's stacked up next to America's economy. All told, US imports run about 12% of GDP, and those from developing countries account for barely a third of that, or 4.2%. For all their fast growth, imports from low-wage countries have increased their share of GDP by a mere 1.5% in the past decade.
Summers notes, too, that most US workers aren't vulnerable to international competition. …