Essays for the Presidency
A Century's Worth of Candidates and Their Advisers Make Their Cases
Rebooting Republican Foreign Policy
Needed: Less Fox, More Foxes
Getting the GOP's Groove Back
How to Bridge the Republican Foreign Policy Divide
The Clinton Legacy
How Will History Judge the Soft-Power Secretary of State?
Renewing American Leadership
Rising to a New Generation of Global Challenges
Reengaging With the World
A Return to Moral Leadership
Toward a Realistic Peace
Defending Civilization and Defeating Terrorists by Making the International System Work
Security and Opportunity for the Twenty-first Century
An Enduring Peace Built on Freedom
Securing America's Future
A New Realism
A Realistic and Principled Foreign Policy
America's Priorities in the War on Terror
Islamists, Iraq, Iran, and Pakistan
Bridges, Bombs, or Bluster?
A Strategy of Partnerships
Foreign Policy for a Democratic President
Campaign 2000: Promoting the National Interest
Campaign 2000: A Republican Foreign Policy
Campaign 2000: New World, New Deal: A Democratic Approach to Globalization
A Republican Looks at Foreign Policy
A Democrat Looks at Foreign Policy
America's First Post-Cold War President
A Republican Looks at Foreign Policy
A Democrat Looks at Foreign Policy
The 1988 Election: U.S. Foreign Policy at a Watershed
American Foreign Policy: The Bush Agenda
The 1988 Election
Foreign Policy and the American Character
After the Election: Foreign Policy Under Reagan II
The First Term: From Carter to Reagan
The First Term: Four More Years: Diplomacy Restored?
The First Term: The Reagan Road to Détente
Beyond Détente: Toward International Economic Security
For a New Policy Balance
The End of Either/Or
Asia After Viet Nam
Policy and the People
The Presidency and the Peace
Two Years of the Peace Corps
U.S. Policy in Latin America
A Democrat Looks at Foreign Policy
Putting First Things First
A Democratic View
The Senate in Foreign Policy
Foreign Policy in Presidential Campaigns
Korea in Perspective
November 1952: Imperatives of Foreign Policy
The Challenge to Americans
The Foreign Policy of the American Communist Party
The Promise of Human Rights
Our Sovereignty: Shall We Use It?
European Legislation for Industrial Peace
Labor Under the Nazis
The Permanent Bases of American Foreign Policy
Political Factors in American Foreign Policy
Some Foreign Problems of the Next Administration
Our Foreign Policy
A Republican View
Our Foreign Policy
A Democratic View
The Senate and Our Foreign Relations
Foreign Relations of the United States, 1921-1924
American Foreign Policy: a Democratic View
American Foreign Policy: a Republican View
American Foreign Policy: a Progressive View
After the Election
AN ERA OF FUNDAMENTAL CHANGE
The United States enters the 21st century as the greatest beneficiary of the global system it helped create after World War II. As a power with unrivaled dominance, prosperity, and security, it must now lead the peaceful evolution of this system through an era of significant changes. Rapid shifts in technology and the embrace of markets by developing and formerly communist countries are shifting the balance of power among nations, between nations and nonstate actors, and between nations and global economic forces. New technologies are making the world much more interdependent. These technologies are accelerating the movement of goods, services, ideas, and capital across national boundaries. They are also displacing traditional security threats with nontraditional worries like international terrorism, organized crime, drug trafficking, and environmental degradation while strengthening the capacities of nongovernmental organizations (NGOs) to influence policy. Tension is mounting between the fixed geography of nation-states and the nonterritorial nature of global problems and their solutions.
The United States cannot shield itself from the effects of globalization. In today's interdependent capital markets, global perceptions of the stability of the American economy and the credibility of American economic policy can significantly affect the dollar's value and domestic interest rates. Despite its economic and military might, the United States cannot protect itself from global environmental problems like ozone depletion, climate change, and threats to biodiversity by acting alone.
The international economic challenges facing a new American president are twofold: first, to grasp the fundamental changes in the global economy, and second, to respond by fostering the conditions and institutions required for a world in which the United States can remain secure and prosperous. The central task of international economic policy is to help develop a new system of global economic relations—a task made essential, rather than simply desirable, by the enormous and irreversible changes now sweeping the world.
THE TRANSITIONAL 1990S
When the Clinton administration arrived in Washington in 1993, the changes engulfing the world economy were already under way, but their permanence, magnitude, and implications were still uncertain. In the absence of a reliable road map, the Clinton administration's approach to international economic policy was shaped by a few basic principles, which will also guide the next Democratic president. First, America's leadership is essential to developing and maintaining multilateral rules and institutions—not because they are ends in themselves, but because the health of the global economy depends on them. Second, America's credibility to lead on international economic issues depends first and foremost on the strength of the American economy. Third, the primary goal of American trade policy is improved market access abroad, not protected markets at home. More open markets and greater competition benefit both the United States and its trading partners. Fourth, those who might be harmed by economic change should have the tools to exploit the opportunities that it creates. Among the tools crafted by the Clinton administration are greater portability of health and pension coverage across jobs; individual training accounts and one-stop career centers for federal job-training programs; tax credits for postsecondary education; and substantial increases in the earned-income tax credit. Fifth, economic engagement with emerging countries, including China, serves America's interests because it enhances those countries' prospects for economic reform and political liberalization based on the rule of law.
Finally, national economic interests should not be considered "secondary" or subordinated to traditional security interests. National security must be broadly construed to include both economic and geopolitical concerns. And in many circumstances, economic policies may prove the best instrument for achieving geopolitical objectives.
During the last seven years, the basic principles motivating the international economic policies of the Clinton administration have not changed, but domestic and global circumstances have. The most important domestic change after 1995 was a Congress controlled by Republicans, many of whom are avowedly isolationist and prefer confrontation to cooperation with the Democratic White House. In addition, environmental, labor, and human rights groups have become increasingly well organized and vociferous in their efforts to block further trade liberalization. The result has been the continued erosion of presidential power over trade policy, culminating in successful congressional efforts to block passage of "fast-track" trade authority in 1997 and 1998. This hampered the administration's ability to move its ambitious trade agenda forward. Nonetheless, significant progress has been made during the last three years, including the completion of a global Information Technology Agreement, multilateral agreements on telecommunications and financial services, and an agreement with China on the terms of its accession to the World Trade Organization (WTO).
International economic policy during Clinton's second term has also been affected by the financial crises that erupted around the world in 1997. Working together as they had previously to alleviate Mexico's financial difficulties in 1995, the administration and the Federal Reserve first responded with several ad hoc crisis-management measures, including large International Monetary Fund (IMF) loan packages, informal debt-rescheduling agreements, and interest-rate cuts. These measures brought the world back from the brink of a global credit crunch in late 1998. Since then, the Clinton administration has led multilateral efforts to design new methods for reducing the frequency and intensity of future crises. The next Democratic president will have to shepherd these efforts as the global community searches for more effective ways to contain recurrent financial crises in a world of highly mobile private capital.
The protests at the WTO meetings in Seattle last November have been interpreted by some as a sign that globalization is in retreat. But the response of emerging markets to the pain of the 1997-98 financial crises is a more powerful sign that globalization will continue. Rather than turning inward and reverting to state controls over economic activity, these countries have continued on the path of market reform and greater integration into the world economy—affirming the basic principles of President Clinton's international economic agenda. Still, these recent crises, along with symptoms of a populist backlash against globalization in the United States and elsewhere, provide compelling evidence of the need for better management of the world economy.
To meet the challenges posed by the dramatic changes in the global economy during the 1990s, the next Democratic president should focus on three broad objectives: nurturing strategic partnerships with old, new, and changing players; strengthening existing multilateral regimes; and creating new regimes for emerging transnational issues including the environment, labor rights, and the appropriate governance of the global information economy.
History indicates that a preeminent power cannot long maintain its global leadership without the support and cooperation of other nations in the pursuit of agreed-upon interests. Hence forging a consensus with other major powers on international economic objectives and how to share the costs of achieving them will be key tasks confronting the new president.
One of the new centers of power is a united Europe. On the economic front, the European Union (EU) is already a reality. A common currency, free trade, and more unified regulations are propelling cross-border flows of money, goods, services, and people. Cross-border mergers and restructuring are making European firms more competitive and European capital markets more flexible. With time, the EU will gain new members, including Poland, Hungary, the Czech Republic, Slovenia, Estonia, and Turkey. Other central European and Baltic countries will complete the transition from communism to capitalism and will either join the EU or establish close economic ties with it. Although Europe will not form a supranational state, policy coordination among member states will gradually increase. The EU already conducts trade negotiations as a single entity. With the creation of European economic and monetary union and the establishment of a common currency and central bank, Europe will increasingly act as one on financial and monetary issues.
The next Democratic president must define American economic relations with Europe in terms of the EU. As it has long done, the United States should encourage European unification, which is a stabilizing, modernizing force. But while Europeans share U.S. goals and values, they also increasingly resent American economic, political, and security hegemony. Thus the next president must work to ensure that Europe does not turn inward and that transatlantic economic, political, and security ties are strengthened. The Clinton administration has already laid the groundwork for ongoing high-level dialogue with the Europeans on economic cooperation and common global challenges through the New Transatlantic Agenda.
Russia is a thornier challenge. The West has a profound interest in Russia's transition to a market economy and has been trying to help. Although this transition has been marred by corruption, on-again, off-again reforms, and a dramatic 1998 financial collapse, progress has been made during the 1990s. Russian citizens enjoy more basic freedoms in speech, travel, and religion and are more connected to the rest of the world than at any time in the twentieth century. Russia has a functioning central bank and stock and foreign-exchange markets, and two-thirds of Russian property is no longer under state control. Moreover, the "meltdown" of the Russian economy predicted after its 1998 default has not occurred. In fact, over the last year, industrial production has increased, the trade balance has improved, and Russian firms show signs of restructuring. By exploding the myth in global capital markets that Russia is too big to fail, the 1998 financial crisis weakened Russia's corrupt oligarchs and forced the Russian economy toward greater efficiency in the face of more realistic budget constraints. Perhaps most important, those now vying for political leadership in Russia—even the Communists—agree that there is no real alternative to market reform.
The next Democratic president must continue America's constructive engagement with Russia, relying wherever possible on multilateral institutions like the IMF and on cooperation with other advanced industrial countries. American policy should continue to be multifaceted, including trade; financial and technical assistance; educational exchanges; and programs to help Russia develop its civic institutions to combat corruption and safeguard an independent media. But America's interactions with Russia should not be based on illusions. Even with the West's financial and technical assistance, economic progress in Russia will be slow, unsteady, and largely dependent on political decisions made there. And the primary reason for the West's engagement with Russia is not economic—the Russian economy is too small to have much influence on global economic conditions—but geopolitical. Under the Clinton administration's leadership, more than 1,500 Russian nuclear warheads have been deactivated, and more than 300 missile launchers have been destroyed. Through the Cooperative Threat Reduction Program, the United States is working with the Russian leadership to try to ensure that Russian weapons of mass destruction do not fall into the wrong hands. Despite these successes, however, Russia poses a continuing nuclear-proliferation and security threat that must remain the central focus of American policy.
Asia poses quite different challenges. After a decade of stagnation, Japan is taking the first steps toward fundamental changes in its economic system. These changes are undermining traditional ways of doing business in Japan, including its lifetime employment system, its keiretsu supplier system, and its cross-shareholding system of "insider" corporate governance. Last year witnessed a dramatic increase in mergers and acquisitions in Japan, and foreign financial institutions were the dominant players. Foreign direct investment (FDI) increased sharply, although from a very low base. In a break with its past behavior, Tokyo has been promoting FDI, and the structural barriers to Japan's market that were a major irritant in U.S.-Japanese relations throughout most of the last quarter-century are gradually falling. Moreover, greater FDI will encourage imports into Japan by multinational companies operating there. Japan's imports will probably rise substantially as a share of its economy over the next decade, and U.S. firms—with their strong competitive position in information technologies—will likely win a significant share of Japan's market. Even during the 1990s, when slow growth depressed Japan's overall demand for U.S. imports, the U.S. surplus in services trade with Japan increased steadily, reflecting the strong competitive edge of American companies. Nonetheless, Japan's transition to a more open economic system will not make the substantial U.S.-Japan trade imbalance disappear, for two reasons. First, despite its economic difficulties, Japan has remained a formidable competitor in many global markets, and its painful restructuring will only increase its long-run competitiveness; and second, differences in aggregate growth rates and changes in the dollar-yen exchange rate will continue to be the major force behind changes in the bilateral trade balance.
During Clinton's first term, the United States engaged Japan in highly charged bilateral trade talks, relying on deadlines and threats. Both the goals of these negotiations and their sometimes combative tone reflected more than a decade of escalating trade deficits between the United States and Japan and frustration from American companies over structural barriers to Japan's markets. During Clinton's second term, trade tensions began to ease as Japan's macroeconomic crisis intensified and as the terms of previous trade agreements were implemented. Currently, Washington is pursuing a two-pronged series of negotiations with Tokyo on deregulation and investment. Unlike prior talks, these negotiations have neither deadlines nor specific targets—nor much rancor.
The next Democratic president should continue this approach and maintain a high-level bilateral dialogue on trade. Such a dialogue lets both countries air complaints and avoid confrontation, thereby shielding other aspects of their relationship from commercial tensions. Regular high-level conversations also let the two countries develop joint initiatives on shared global economic challenges and common objectives for multilateral organizations like the WTO. Increasingly, the United States must treat Japan not just as an ally but as a partner in safeguarding economic, political, and military security in the Asia-Pacific, strengthening existing multilateral institutions, and building new ones.
The next Democratic president should continue Clinton's policy of constructive engagement with China. China's gradual emergence as a great power is a central feature of the new global system, and America's long-run interests are best served by China's stable evolution toward a more open, democratic system based on the rule of law. Constructive engagement with China does not guarantee this outcome, but it is the best option for increasing its likelihood. China may not be America's ally or partner—but as a result of constructive engagement, it has acted responsibly on issues of mutual importance like Hong Kong, North Korea, and Asia's financial crisis.
Constructive engagement is not an endorsement of China's human rights behavior. But revoking normal trading relations with China or blocking its WTO membership will not improve such behavior. Indeed, the opposite is true. Commercial considerations may seem crass when compared with human rights, but impeding commercial relations with China would impede the flow of information about Western culture, ideas, and business practices to China's emerging middle class and weaken reformers in the state and party leadership.
What about China's trade behavior? Don't large U.S. deficits with China imply that it engages in unfair trading practices? Won't China violate the rules of the multilateral system once it gains admission to the WTO and its trading partners lose leverage? Probably not. China does not enjoy a persistent current-account surplus—a defining characteristic of a mercantilist state. Moreover, China has encouraged FDI as part of its development strategy. Indeed, foreign-funded companies in China accounted for more than half of the growth of its exports during the last decade. China's openness to FDI will mean increased imports in the future. In the final WTO deal announced last November, China made big concessions on trade in manufactured goods, agriculture, and services. It further yielded to America's insistence on special protections against unexpected import surges from China. The consensus among China experts is that the WTO deal is a bold—some would say desperate—move by China's leaders to forge ahead with market reforms despite substantial adjustment costs. Finally, China's performance in other multilateral institutions indicates that it will honor its end of the bargain. And should violations occur, the United States will be able to turn to the WTO dispute-settlement mechanism to enforce compliance.
Another controversial aspect of economic relations with China is whether and how to regulate American exports of dual-use technologies—those with substantial military and commercial applications—to China and other countries that may pose security risks. Banning the export of such technologies seems to some the simplest way to safeguard American national security. But this approach is both ineffective and counterproductive. The United States is not the sole source for such products, so a unilateral ban would merely drive would-be importers to other suppliers. And for many dual-use goods, America's national security hinges on the success of their American producers in the commercial marketplace. Unilateral export controls undermine this success and thereby endanger national security. This realization lies behind the gradual easing of export controls by the American government since the end of the Cold War, a trend that the next administration should continue.
Like China, many other emerging nations are restructuring their political and economic systems, pursuing market policies, and shifting their world-views. The United States must work to engage these new players, together with existing powers, in the processes and institutions on which governance of the global economy depends.
Two of these new players—India and Brazil—are virtually certain to develop significant regional, if not global, influence and are strategically important to the United States. India has the smaller economy of the two but seems closest to a sustained breakthrough in economic growth. More rapidly than is generally realized, India is likely to become an important factor in the strategic equation in Asia as a whole. And Brazil, as a result of its size, economic development, and leadership of the Mercosur trade bloc, has already become an important factor in Latin America. Over time, other nations like South Korea, Mexico, and South Africa will probably grow in influence and become part of the complex coalitions of nations required to address global economic problems.
PUTTING IT TOGETHER
The next Democratic president must strengthen America's alliance with the other major players—Europe and Japan—to reshape existing multilateral institutions and rules and create new ones as necessary. Emphasizing cooperation with these nations will also discourage them from turning inward or creating competing economic blocs. The United States, Europe, and Japan still account for about two-thirds of global GDP. They have similar levels of per capita GDP, effective legal and regulatory regimes, and highly developed capital markets. All trade and invest more with each other than with other regions of the world, and all are becoming information and network economies. The United States, Europe, and Japan should, therefore, be able to agree on many of the new challenges posed by globalization and the information revolution; negotiate free-trade areas in services, investment, and electronic commerce; adopt common guidelines for intellectual property and privacy; develop common regulatory standards in sectors such as biotechnology, the environment, health, and food safety; and agree on qualifications for professions and industries. New forms of cooperation and joint decision-making among these three great powers should be carefully designed to support the multilateral system, and agreements among them should be open to participation by other countries or adoption by other multilateral institutions.
Historically, the G-7 group of highly industrialized nations has promoted economic cooperation among the United States, Europe, and Japan by engaging their heads of state in annual discussions about mutual concerns and creating working groups in each nation to develop mutual solutions. In recent years, however, the G-7 process has begun to lose its relevance because it excludes other nations important to the global economy. Because an ongoing, high-level dialogue among the heads of the world's major economic powers is important to the United States, the next Democratic president should encourage the G-7 to broaden its membership to include Russia (which is already included in most discussions), Brazil, China, and India.
The recent failure of the WTO talks in Seattle demonstrates the foolishness of launching global trade talks before developing a consensus on the issues among the United States, Europe, and Japan—still the largest trading nations in the world. But the lessons of the Seattle debacle go deeper.
First, the low-hanging fruit in multilateral trade negotiations has already been picked. In previous rounds, tariffs were slashed and quotas eliminated for most trade in manufactured products. Future negotiations will focus on agriculture and services—sectors that are politically sensitive and highly regulated by individual countries, including the United States—and will involve such traditionally domestic issues as antitrust policy, consumer safety, and other regulatory questions. Crafting multilateral agreements on such issues will be a long, painful process. And enforcing compliance with such agreements, which require nations to change entire areas of domestic law, will prove much harder than enforcing compliance with previous agreements barring overt trade barriers. Establishing a permanent executive committee within the WTO to replace the loose ambassadorial mechanism that currently proposes new multilateral trade talks could help. And the pointless practice of holding biennial WTO meetings at the ministerial level, even when there is nothing substantive to discuss, should end.
Second, given the complicated nature of future issues and the unwieldy number of future participants, the "global round" approach to trade talks—involving all WTO participants in a comprehensive agenda requiring bargains across several sectors—may have outlived its usefulness. Since it will be so difficult to forge consensus on the agenda for another global round, negotiations focused on liberalizing trade in individual sectors are an attractive alternative. In recent years, such negotiations have produced significant agreements in the diverse areas of information technology, telecommunications, and financial services. Moreover, since there is still much to do to implement these agreements, consolidating their achievements may be the best way to strengthen the multilateral trading system and achieve real progress over the next few years.
Third, to fight the burgeoning backlash against globalization and build public trust, WTO operations must become more transparent. At the same time, new multilateral approaches must be developed to address global concerns in other areas such as the environment, labor rights, and human rights. The next Democratic president should encourage such efforts while making sure that the WTO maintains its focus on trade. The WTO exists to develop and enforce trade agreements, and such agreements exist to foster trade. The WTO is not the appropriate forum for other issues, although it could adjust over time to permit trade restrictions to enforce multilateral pacts on issues negotiated elsewhere.
In the meantime, the United States should eschew unilateral trade restrictions, including sanctions, to compel other nations to comply with American laws on the environment, labor practices, or human rights. During the last several years, America has imposed some form of unilateral economic sanctions against 26 countries, accounting for half the world's population. These sanctions have not achieved their goals; indeed, sanctions often harm exactly those they seek to help. And sanctions have cost the United States about $20 billion in lost exports, 200,000 jobs, and the goodwill and trust of its allies abroad.
Finally, the next Democratic president must continue to educate the American public about the ways the U.S. economy is helped by enforceable multilateral trading rules. As the largest exporting country and the one with the lowest trade barriers, the United States reaps the greatest benefits from trade liberalization. The more countries trade with one another, the better off they are. But the more they need multilateral rules to settle disputes, the more these rules influence domestic practices. Still, the WTO is not a world government that can override or proscribe its members' laws. If the United States loses a case before the WTO, it can either retain its domestic laws and accept trade sanctions from the complaining nation or adjust these laws to eliminate discrimination against foreign producers.
Regional economic integration can complement and spur multilateral liberalization. It can also contribute to political stability. For these reasons, the next Democratic president should build on the efforts of the Clinton administration to promote regional cooperation and liberalization in both Asia and Latin America. The Asia-Pacific Economic Cooperation forum is the basis for a sound economic strategy in the Pacific basin. Its membership boasts a number of important regional players (among them China, Japan, South Korea, Mexico, and the members of the Association of Southeast Asian Nations), it provides a useful forum for the region's heads of state, and it is committed to trade liberalization and cooperation in fields from telecommunications to basic infrastructure.
Building on the success of the North American Free Trade Agreement, the United States has convinced Latin American countries to agree on a broad economic agenda whose centerpiece is the creation of a Free Trade Agreement for the Americas (FTAA), with additional cooperation on the environment, human rights, crime, and other global issues. The next Democratic president should accelerate the FTAA process, which has been hampered by the absence of fast-track trade authority. Without such a process, American influence in the region will diminish, and the likelihood of competing economic zones will increase.
FOR RICHER, FOR POORER
As globalization has intensified, the gap between per capita incomes in rich and poor countries has widened. Although this trend has been around for the past two centuries, it has accelerated in recent years. For the many emerging countries that already have the institutions and income levels to attract private capital and the education levels to prosper in the new information age, the private sector will fuel continued economic development. Indeed, for most of these countries, the economic development problem—although substantial—is best understood as an internal poverty problem. But this is not so for the nations of Africa, many of which are being left behind.
What should the next Democratic president do to address human needs and spur economic development in the most impoverished nations? First, the White House should espouse complete debt forgiveness for the world's poorest nations. Second, the president should lobby to increase America's inadequate foreign-aid budget and redirect it toward programs to meet basic human needs—for example, a U.S.-led effort among the developed nations to counter the aids epidemic in Africa or to establish a special fund to help the poorest nations honor multilateral environmental agreements. Third, the president should work with other advanced nations to reduce tariffs, ease antidumping penalties, and lower quotas on trade with developing countries. Finally, the administration should foster cooperation with the NGOs that already deliver more development assistance than the entire U.N. system, including the World Bank and the IMF.
EARTH IN THE BALANCE
The next Democratic president should establish a bipartisan group of experts to assess the lessons learned from recent financial crises, evaluate the adjustments already under way, and recommend additional changes. At the same time, the president should pledge America's commitment to the World Bank and the IMF, emphasizing their importance while recognizing the need for further reform. Such reform should be guided by two considerations. First, these institutions must adjust to the vastly greater scope and scale of private cross-border capital flows. Second, they must find ways to engage more of the public in the countries to which they lend—both to use their resources more efficiently and to help promote the stable civil societies on which successful economic development depends.
A growing number of environmental problems—ozone depletion, global climate change, threats to biodiversity—are international in scope and require cross-border solutions. Industrial countries, including the United States, are disproportionately responsible for most of these environmental problems, but developing countries are also rapidly damaging common environmental resources. Solutions, therefore, require the participation of both developed and developing nations. But since the costs and benefits of addressing common environmental problems vary among countries, as do the available resources, global agreements must include effective transfer mechanisms and flexibility about the methods used by different countries to achieve environmental targets.
No vehicle exists for nations to negotiate new multilateral pacts on environmental issues. That is one big reason why environmentalists have focused on the WTO. But using the WTO as the forum for multilateral environmental negotiations both endangers further trade liberalization and raises the risk that trade will be restricted in the name of environmentalism but in the service of protectionism. To head off these risks, a new Democratic president should propose creating a new Global Environmental Organization to develop and enforce new international agreements on specific problems, using the successful Montreal protocol on slowing ozone depletion as a model.
In recent years, a growing number of NGOs at home and abroad have called for a set of internationally recognized and enforced labor standards that would ban child labor and sweatshops and support workers' rights to organize. Logically, labor rights and standards are development and political issues, not trade issues. There is no evidence that trade undermines labor standards and leads to an international "race to the bottom." In fact, the opposite is true. Most global trade still occurs between developed countries, which enjoy the highest wages, labor standards, and productivity levels. And as trade and integration in the global economy have helped poor countries develop, their wages, productivity, and labor standards have improved. Developing countries that have strengthened their labor standards have done so because of more trade and integration, not less.
Despite such evidence, labor standards will move up the agenda of international economic negotiations as global integration continues. And the next Democratic president will have to be sensitive to the desires of both NGOs and organized labor for global workers' standards. Given the opposition of most of the rest of the world, however, this will not be easy. So Clinton's heir should continue to promote his reasonable Seattle approach of establishing a multilateral discussion group to examine some labor rights issues, including child labor and sweatshop conditions. The group should include the International Labor Organization, the United Nations, and the World Bank, and it should be charged with reporting its findings to the WTO by a specified date. Second, the president should encourage the private sector to develop labeling systems and codes of conduct certifying compliance with core labor standards. One promising effort is a program called Social Accountability 8000, launched by the Council of Economic Priorities and a group of influential American companies to encourage firms to comply with labor and human rights standards. Another is the United Nations' proposed Global Compact with Business, under which the U.N. will help multinational companies meet internationally accepted principles of human rights, labor practices, and environmental standards.
Third, the president must continue to educate the American people about the way trade boosts labor standards by highlighting American firms that have improved working conditions in their foreign operations. Polls indicate that most Americans would rather buy from companies committed to ending worker abuses and that American consumers would be willing to pay somewhat more for products made in worker-friendly environments. In addition, a growing number of American multinationals recognize that bad publicity about working conditions in their foreign operations can damage their reputations and bottom lines. A new Democratic president can effectively use the bully pulpit to shine the spotlight on American firms that are doing well by doing good and encourage a "race to the top."
Nations must also begin to work with one another and the business community to define appropriate policies for the world of e-business. Without cooperation, different policy regimes will develop within different regions and nations, each attempting to govern phenomena that are inherently transnational. Different sets of rules will in turn generate unnecessary transaction costs and slow the diffusion of wealth and knowledge made possible by the new technologies.
To date, the Clinton administration has avoided regulation of the networked economy at home and made the case for a similar approach abroad. American officials had hoped to include digital issues on the agenda for the next global trade round, but that has been delayed by the failure of the Seattle talks. In addition, the Seattle discussions suggest that even when a new round begins, negotiations will focus on highly visible, politically contentious issues such as agriculture, textiles, and dumping that traditionally dominate trade debates, rather than on digital issues.
Therefore, it is time to develop a specific multilateral process focusing exclusively on such issues. This should be a principal objective of the next Democratic president. There are three logical steps: first, establishing a trade and investment round within the WTO focusing specifically on e-commerce; second, developing a set of basic principles for such talks, with a broad agenda including crime prevention, privacy, intellectual property, taxation (including the possible establishment of a multilateral tax clearing-house), and dispute settlement processes; and third, providing access to the networked economy for all nations and regions. The last step will require targeted lending programs funded by the World Bank, NGOs, and developed countries to help the poorest countries build the necessary infrastructure.
STAY ON TARGET
The United States has benefited from globalization. Throughout much of the 1990s, exports accounted for about a third of U.S. growth. Even when American exports slowed in response to recessions in emerging markets, the same financial crises causing these recessions also increased flows of capital into American financial markets and reduced import prices for American consumers, fueling America's continued economic expansion during the last three years. This expansion—now the longest in the nation's history—has produced the lowest unemployment rate in more than 30 years and raised incomes for all groups of American workers, including the least skilled. True, the nation's trade and current-account deficits have hit record levels, but these primarily reflect the relative strength of the American economy compared to its trading partners and the resulting strength of the dollar, not an increase in protectionist barriers abroad.
It is easy to understand why a populist backlash against globalization has taken hold in much of the world, plagued by an endemic poverty made worse by recent contractions. As hundreds of millions of people in emerging markets have seen their jobs and incomes decimated by global financial shocks, modern information technologies have shown them images of American prosperity—and of American officials and business leaders lecturing them about the necessity of painful sacrifice. Signs of an emerging backlash against globalization in the United States, although perhaps harder to justify, are inflamed by some of the same concerns: rising income inequality, job insecurity in a rapidly changing and harshly competitive environment, and a sense of powerlessness and uncertainty about the future.
Economic integration among nations, although beneficial overall, does create winners and losers. And even many winners fear that the next wave of change spawned by footloose capital and technological change will make them losers. To allay such concerns about globalization, the next American president must design policies to sustain America's expansion and give Americans the tools they need in the global marketplace. Among the most important of these are lifetime education and training opportunities, portable and fair pensions and health-care benefits, and a safety net to support incomes during periods of adjustment or recession.
At the same time, the next president must work with the leaders of other nations to develop multilateral agreements and institutions to ease the economic downsides of globalization and address new global issues. As President Clinton noted in his 1998 speech before the Council on Foreign Relations, the multilateral system must evolve toward a kind of "Global New Deal." The painful experiences of many transition economies and the unexpected financial crises of the 1990s have reminded the world that to work well, markets require a strong commitment to the rule of law, transparent financial institutions, legitimate corporate and political governance structures, and adequate social safety nets. As the new millennium begins, a new Democratic president will have the opportunity to lead the world in creating institutions and policies to sustain a more equitable process of globalization built on the marvels of the market and modern technologies.