```

[Congressional Record Volume 141, Number 77 (Wednesday, May 10, 1995)]
[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.

       

                          ____________________
```