TCS Daily

Against the "Pious Frauds"

By Donald L. Evans - March 24, 2004 12:00 AM

Editor's Note: The following is taken from a speech delivered by Secretary of Commerce Donald L. Evans at the World Affairs Council of Washington D.C. on March 23, 2004.

Our subject tonight is global education and we can learn a great deal by looking beneath the surface of current events and analyzing them through the lessons of history.

All of us gathered here this evening are united by a central idea. We subscribe to a positive vision of global progress -- progress that is driven by American engagement. We accept the belief that the free interaction between nations brings prosperity at home... and higher living standards around the world. We share the conviction that the free flow of goods and services across borders supports the emergence of a world that is more free, more open, more prosperous and more peaceful. This approach to the world is not partisan.

It was the internationalism of Theodore and Franklin Roosevelt that moved us away from isolationism and toward active engagement with the rest of the world. That laid the foundation for American prosperity and built the global economy.

This bipartisan tradition has not only delivered the world's highest living standards for Americans. It has also uplifted countless millions around the globe. It has been the most powerful source of economic progress in modern times.

Ladies and gentlemen, in recent days that progressive tradition of global economic engagement has come under calculated assault and tonight I'm here to defend it.

Spirited debate is a hallmark of democracy and I promise you a candid and vigorous discussion of these issues. My thesis is simple: The emerging economic isolationism and its undercurrent of unspoken nativism must be firmly and forcefully rejected.

Free and fair trade is the only way forward for America. But some are advocating a retreat from engagement. We must be wary of that danger. A reversal from these policies would bring economic hardship for the United States and a descent into depression for the world economy.

If we care about the developing world...

If we care about people mired in chronic poverty...

If we care about emerging nations struggling without the resources to succeed...

And if we care about the general welfare and long-term best interests of the American people, our choice is clear:

We must not only remain a country that works with the world, we must lead the way forward for the global economy. Anything less would be a timid, shortsighted, and shameful abdication of American leadership.

It is a double dose of defeatism that those who criticize the President for waging the war against terrorism too aggressively are also encouraging an American retreat from the world on economic matters.

Franklin Roosevelt confronted a similar problem. A rising tide of isolationism threatened to choke-off America's participation in the global economy. A large and influential group of Americans -- men and women who should have known better -- were openly embracing a doctrine of appeasement. They wanted America to retreat inside our borders. We would have stood apart -- a passive and disinterested hermit nation as fellow democracies fell victim to gathering dangers.

President Roosevelt forcefully rejected the false but dangerous arguments of those who claimed freedom could secure peace by negotiating with evil and that America could build prosperity behind a new wall of isolation.

In his Four Freedoms speech, he said, and I quote:

"The United States has at all times maintained opposition --clear, definite opposition-- to any attempt to lock us in behind an ancient Chinese wall while the procession of civilization went past.

"Today, thinking of our children and of their children, we oppose enforced isolation for ourselves or for any other part of the Americas."

-- The Four Freedoms, January 6, 1941, Franklin Delano Roosevelt.

Unfortunately, some influential Americans who also should know better are renouncing the legacy of Roosevelt's leadership by embracing economic isolationism.

Not every American agrees with every decision FDR made on issues like taxation and government spending. But every American can appreciate the strength of Franklin Roosevelt's leadership on matters of national security and economic freedom. FDR said, and history teaches, that political freedom and economic liberty are related and necessary components of healthy societies.

It was for good reason that FDR listed "economic understandings that will secure to every nation a healthy peacetime life" as one of his "Four Freedoms." They have been the foundation of American foreign policy from the Second World War until today.

Like the danger to self-government posed by the recent terror attacks in Madrid, FDR recognized in 1941 that the democratic way of life was under attack, by arms or by "secret spreading of poisonous propaganda by those who seek to destroy unity and promote discord in nations that are still at peace."

President Bush also recognizes that terrorism cannot be appeased. He understands that economic engagement and the forward strategy of freedom are linked. They are necessary elements for the triumph of liberty. We cannot have economic security without national security. He knows that the men and women working around the world in the enterprises of democratic capitalism play a powerful role in the conflict of ideas between democracy and terror.

Global commerce leads to communication. Communication leads to understanding. Understanding leads to mutual respect and partnership. Partners become friends and they realize that we all have the same common goals and aspirations. We want to feed our families. We want a roof over our heads. And we want a good education for our children.

Engagement opens the lines of communication, expands understanding, and builds relationships that bridge divisions between cultures and countries. Economic engagement not only expands prosperity... it also makes our world more cohesive and peaceful.

Americans created the highest standard of living by working with the world. Consider the progress since 1950.

Today, our economy is five times larger and exports have expanded by a factor of 20. Americans are more involved with the world than we have ever been and our standard of living has never been higher. And the point to be made, is that, as America reached out to the world, not only did we do better, but everyone we traded with did better too.

For America, more trade with other countries breeds more growth for American markets and, ultimately, more jobs right here in the U.S.A. Alan Greenspan has said that global economic engagement is one of "the most underestimated aspects of U.S. growth."

Roughly one out of every five, factory jobs -- 20% of the jobs in America -- depends on trade. The wages of those working in plants that export are 18 percent higher than those who don't. One out of every three acres planted by American farmers is planted for export.

Free flows of goods and services also benefit Americans in other ways. Foreign companies employ 6.4 million Americans. The U.S. attracts more foreign investment than any country in the world. In 2003, $86.6 billion flowed into the United States in the form of foreign direct investment.

History confirms Chairman Greenspan's insight. We've heard that America couldn't compete before. In 1980, academics were trumpeting the "Japanese Miracle" and advising us to copy Japan by creating a vast new economic bureaucracy to devise a centrally-planned "industrial policy" for the U.S.

During the early 1990s, some worried that the emergence of the new European Union would create a "Fortress Europe" that would roll over the United States. During the 1990s, the growth of Asian semiconductor makers fueled fears that American companies could no longer compete.

In each case, American ingenuity, creativity and resourcefulness exposed the truth. The arguments advanced by the defeatists were fallacies. American workers are the most talented, hardest working, most innovative, and most productive labor force in the world. On a level playing field, they are more than the equal of any potential competitor.

The critical point to understand is that a retreat from the world would cost American jobs by denying new markets for U.S. products. Isolationism would choke-off the pace of global economic development that is creating millions of consumers for American goods and services around the world. We need to remember that Americans are only five percent of the world's population. The other 95 percent are all potential customers. From the perspective of the 95 percent of humanity that lives beyond our borders, America's retreat from the world would also ensure a bleak existence for people in poverty.

If we starve free trade, we starve people who are not free. Government-to-government international aid only goes so far. Foreign direct investment by American companies is an indispensable element of that transformation.

By threatening to rescind American leadership in support of a global free market, the President's critics would bar millions of people in poverty from the ladder of opportunity. A ladder extended upward by the investments of thousands of American companies in foreign countries.

The real answer for developing countries is to transform themselves into fully functioning economies by participating in the global economy. Misguided attempts to erect new walls to block the free flow of goods and services invariably cause far more harm than help to the country raising barriers.

America is not a fortress, it's a bridge -- and the traffic on that bridge goes two ways: Exchanging jobs, trade, profits, and prosperity. We're now hearing the misguided theory that America could boost manufacturing by raising a barrier to keep out foreign products. The majority of U.S. imports don't go straight to stores or showrooms. They go on to American factories where American workers add value.

Here at home, recent threats to withdraw from trading agreements place at risk not only the jobs of the 6.4 million people employed by foreign companies in America, but also the 10 million Americans whose jobs depend on exports. More than 35,000 Americans work for Toyota. Nestle employs 43,000 Americans. And these foreign firms have an enormous multiplier effect in their communities. For example, the 4,700 American workers at BMW's South Carolina plant generate more than 12,000 additional local jobs to support the plant.

Let's be sure to remember the lessons of the 1920s and 1930s. While economists may differ on whether isolationism actually caused or only worsened and extended the Great Depression, there's no doubt that protectionist policies made things a lot worse for Americans and for people around the world.

When America raised barriers to trade, other countries followed suit and economic walls started going up around the world. Country after country raised retaliatory tariffs and world equity markets sank lower and lower. Credit markets contracted. 10,000 banks failed. U.S. economic activity fell by a third. World trade fell by two thirds. Demand died. Goods began piling up in countries around the world. Growth stagnated. And companies laid-off workers. The unemployment rate hit 25 percent. As the global decline took hold, the U.S. government raised taxes. Higher taxes further harmed our economy.

What we learned, is that throwing isolationist punches only results in knocking yourself out. The lessons of the Depression should be a cautionary tale-discouraging any flirtation with protectionism. History shows that economic isolationism starts as populist regression and ends as unpopular Depression.

While a retreat from the world would be an economic and political disaster for Americans, one thing this Administration is committed to doing is making sure that our trading partners are playing by the rules. We are aggressively confronting any country that tilts the playing field against American workers. Whether that country is China or India or any other trading partner, we are cracking down on unfair trade practices not only after they've happened but as they happen.

As long ago as 1856, the Democratic Party was clearly committed to an economic vision that embraced confidence in America and hope for the world. The Democratic Platform that year stated: "the time has come for the people of the United States to declare themselves in favor of free seas, and progressive free trade throughout the world." The Democrats were correct about free trade in 1856. On this issue, they were standing on the right side of history. The economic isolationists need to dust off that old platform.

History proves that America moves forward by engaging the world, by exporting not just our goods and services but by exporting our liberating principles of freedom, including free and fair trade.

Those who exercise the freedom to sell American products and services from anywhere in the world aren't "Benedict Arnold" traitors. They are Benjamin Franklin free traders and innovators who recognize that success comes from making the pie bigger not from slicing it ever thinner.

Economic isolationists preach a bogus salvation. FDR had a term for claims like these: "pious frauds." Economic isolationists are waving a surrender flag rather than the American flag. As history has shown, time and again, those like the economic isolationists who underestimate America's ability to compete and win, are standing on the wrong side of history.

President Bush and this Administration are charting a different course. We trust America. We trust freedom. And we trust in the hopes and aspirations of the millions of people around the world who dream of building lives of comfort and security for their families.

America stood tall in beating back Communism. We are standing tall with our allies in beating back terrorism. On the economic front, America must stand tall to beat back isolationism.

We recognize that days of danger and uncertainty demand steady, principled American leadership. In this way, we will build a more peaceful, more prosperous, and more secure world. We will build a place that all of our children and grandchildren would want to call home.


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