Presidential Candidates Should Address Globalization’s Challenges

John L. Thornton
John L. Thornton Chair Emeritus - The Brookings Institution, Executive Chairman - Barrick Gold Corporation

January 14, 2008

As the presidential candidates turn to the South Carolina primaries, differences have emerged between the parties about how to maintain America’s economic competitive advantage, particularly given the rise of countries like China and India. Most candidates seem aware that China is on its way to becoming the world’s largest economy by 2050. Yet when asked how America — and places such as South Carolina — will compete in this new world, neither the Republican nor Democratic answers do justice to the challenge.

Republicans celebrate the Port of Charleston, where container ships unload foreign-made consumer goods, as contributing to the region’s decade-long boom. Democrats, in contrast, point to shuttered textile mills and workers struggling to afford housing and transportation, and they blame booming economies such as China and India for shattering the state’s tranquility.

The next president should put forward a positive agenda for strengthening American competitiveness that learns from both the good news and the bad news in South Carolina. A comprehensive national strategy should embrace trade, address legitimate concerns about globalization, prioritize science and mathematics, invest in innovation and build strong communities.

Global trade has propelled the world’s longest and largest economic expansion and been a cornerstone of international security for six decades. For the U.S., commerce has contributed to consistent growth, increased productivity, innovation, lower prices and greater choice for consumers. Trade is not the main culprit behind the loss of jobs. Recent studies have shown that 90 percent of U.S. manufacturing job losses are due to companies shedding workers as they become more technologically advanced.

The next president needs to make the case for trade persuasively and unapologetically. At the same time, he or she will need to give the benefits of trade concrete meaning in American minds by aggressively expanding markets abroad for our most competitive industries — from information technology to aerospace to financial services to entertainment. Trading partners respond no better than we do to unilateral demands or mixed signals, which unfortunately is how U.S. policy is often viewed abroad. If the president is truly committed to addressing our imbalance with China, for instance, he or she needs to make the issue the first talking point, without hectoring, in each meeting with Chinese leaders. The U.S. can also work with influential Chinese, in and out of government, who themselves argue openly that China’s massive surpluses are distorting its own economy the most.

A recent Wall Street Journal/NBC News poll found that Democratic and Republican voters alike worry about globalization. Even if the proportion of American job losses attributable to trade is comparatively low, they are no less real for the affected families and communities. The next president should address globalization’s painful reality with more than words. The U.S. labor market is second to none in job turnover, yet we spend the smallest share of GDP on “social protection” programs of any industrialized nation except South Korea and Ireland. Comprehensive health care reform would help considerably. But even less ambitious fixes go a long way. Wage insurance policies, costing as little as $25 per year per worker, would provide support and incentives to nearly half a million workers finding jobs after trade-related shocks.

More — and better — teaching of science and engineering is essential to innovation and the key to long-term competitiveness. Chinese students who transfer to American high schools typically discover that the most advanced math classes offered teach subjects that were covered years ago back home. Intel Executive Vice President Sean Maloney recommends that the U.S. recruit 10,000 new mathematics and science teachers each year, doubling the nation’s number of engineering graduates and giving incentives to induce 1,000 more top engineering students annually to pursue doctoral studies. Meanwhile, until the U.S. can ramp up the number of American engineers back to competitive levels, Maloney and others argue that the U.S. should double the number of H1-B visas for highly skilled foreign workers to meet market demand.

Charleston remains one of the world’s most attractive places to work and live. Its port is linked to the interstate system, the city center is flourishing, and the region boasts the beauty of the Atlantic seashore.

Like many metropolitan areas, however, Charleston’s future growth is threatened by congestion, increasing air and water pollution, and a shortage of affordable, accessible and livable neighborhoods. The region has tried to protect its coastline, retain open land, and preserve historic and natural landmarks. But no city can go it alone.

The next president could promote the country’s top-100 regions as central to national competitiveness through a mix of federal, state and local policies. As Brookings Institution expert Bruce Katz has noted, 83 percent of Americans live in metropolitan areas which “dominate the economy and house our wealth-generating industries.” The next administration should put forth a coordinated strategy of housing, education, transportation and environmental policies that will sustain the communities that form the foundation of national prosperity.

As voters consider who to choose in South Carolina, Republican and Democratic candidates should be required to discuss specific policies in a serious debate about American competitiveness that eschews sound bites and populist pandering. As the examples here show, there is no shortage of ideas that could form the basis of that conversation.