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Great Seal William M. Daley, U.S. Secretary of Commerce
Remarks at the Japan Society Annual Dinner
June 13, 2000, New York City
Released by the U.S. Department of Commerce

[As Prepared For Delivery]

Jim (Thompson) left out one little fact in that very kind introduction: I am now the longest serving Commerce Secretary in this century -- all of 5 months, 13 days, and 19 hours. The longest serving in the last century -- was Herbert Hoover. To show you how times have changed, he went on to be President. And I just want to leave Washington without having to a hire a criminal lawyer! By the way, governor, another distinguished Commerce Secretary in the last century, Averell Harriman, went on to an even more important job, governor of New York!

Over the years, many of your speakers, whether Japanese or American, have come with a pro-business view. Obviously, I am happy to be part of that group. But tonight, I want to take the worker's view, and talk first about how they see globalization shaping this new century. And second, I want to talk about what this means for the very special relationship that Japan and America have had since the middle of the last century.

Taking the view of the workers might seem a little risky, and not the job of a Commerce Secretary. Although when the Commerce Department was formed 97 years ago, it was the Department of Commerce and Labor.

But after what we saw in Seattle and Davos ... and on the streets of Washington in April during the World Bank meetings ... and again during the House vote on China three weeks ago ... the message could not be clearer: If business thinks it can just go anywhere in the world, and compete so that it helps the bottom line, and then pay lip service to workers trying to adjust to this new globalization, forget it. It will backfire.

There is a lot of fear out there among who I call the normal people, the people outside of Washington, and outside corporate boardrooms. In short, Main Street America. And you see these fears rising in Asia, in Europe, in South America, in just about every part of the world.

People see a plant close and a tide of imports and they ask: Is this going to hurt my job? Is this going to make it tougher for my kids to succeed? Obviously, trade is not the only factor. Technology has probably had a greater impact. But the fact is, trade today is very visible and it has become the target for the pent-up anxiety people have about a rapidly changing world.

These fears date back to when Japan started relying heavily on the American market in the 1960s and 70s, and we began to run large trade deficits, in autos, in televisions, radios, cameras, so many products which Americans thought we would always produce!

Seven years ago, when I helped President Clinton get NAFTA through Congress, these fears about trade with Japan expanded to Mexico. At the time, we were just coming out of a recession, with unemployment almost double what it is today. We won -- but it was the toughest fight I had ever been in.

Seven years later, NAFTA has done what we said it would. It has led to that tremendous increase in trade between Mexico, the United States, and Canada. No question, there have been some negatives, but overall NAFTA has been good.

So, here we are, in the longest economic expansion in American history. Here we are, with unemployment in our country at about 4 percent -- a 30-year low. Here we have the Internet economy that is changing the way we do business. And we have before Congress an historic one-way trade deal, in our favor, with China. As President Clinton says: "If you saw the deal, you would ask why they signed it."

When the House of Representatives passed the bill, it was a vote that was even more emotional, and even tougher than the NAFTA vote. Every Democratic member from my home state of Illinois voted against it. You saw the same lopsided margin in many other states. We did better in New York, mainly because Rep. Rangel was with us, but we still got a lot of no votes, on both sides of the aisle.

These aren't fringe groups or disgruntled activists. The 197 members who were against the China bill, represented the views of tens of millions of Americans, and a very broad spectrum of interest groups. And labor, which has been calling for fair trade with Japan for 3 decades, was joined against the China bill by environmental groups, by veterans, by human rights activists, by religious groups -- all opposed.

So this was a courageous vote for those who supported the bill. I hope we do better in the Senate, but even there we're going to have to work hard for every single vote.

But the biggest mistake business -- that has so much to gain from globalization -- could make is to declare victory and to dismiss the sincere concerns of those opposed. The opposition is not going away. They are becoming a movement. They will be a force because as long as trade -- and technology -- move forward, with this incredible pace, there will be job losses, and communities that are hurt. Maybe it is only a minority who actually get hurt, but it is a majority of people who fear they will be hurt. And it is a big majority who fears trade with low-wage countries leads to lower wages in the United States.

So you have to ask: How are we going to respond to this? What are we going to do about addressing these very real concerns? Are we going to put our heads in the sand, or are we going to be realists, and take positive action?

In my opinion, the right choice is very clear: take positive action, or risk losing the good that we all know can come from globalization. And of all the nations in the world, I believe Japan and the United States, as major economic powers and partners in peace, have a special responsibility to lead.

We can and should set the tone for the rest of the world, and for the other 134 members of the WTO. For America's part, we must keep our markets open and continue to press for fair trade while keeping labor issues on the front burner. And we must maintain fiscal discipline, and keep paying down the debt.

I gave a commencement speech at DePaul University on Sunday. And it occurred to me that in all my working life, since I graduated from law school in 1975, I haven't seen a trade surplus. You can always hope: we hadn't seen a budget surplus in three decades until three years ago!

No question, the trade deficit is causing a rise in anti-big business feeling. My party especially, and the Congress as a whole, see this. They created a commission to monitor human rights and labor market issues in China. And we'll be watching for surges in imports once China joins the WTO so we have credibility when we say we are for free but fair trade. Without these measures, the bill would never have passed.

The fact is, ignoring the social consequences of trade, and winning by strong-arming 10 more votes, doesn't work anymore. To business' credit, they tried very hard, to educate workers on the importance of trade with China. They tried to show how jobs are created and supported by trade, as easily as workers can see how a plant closing is caused by globalization. And while they did a good job, it can't end there.

Engaging workers and communities, addressing their concerns about globalization, must be on-going. It needs to become part of the corporate culture, with CEOs getting in closer touch with what's happening on the shop floor, and in countries where their companies are located. Businesses must be more open and forthright with their workers.

Business and government also need to keep working to close the digital divide, the gap between those who have access to technology, and those that don't. This is vital so people don't feel they're being left behind. Let me say, we very much welcome Japan's efforts on closing this gap within countries, and a widening global digital divide between rich and poor nations.

I hope the Okinawa G-8 summit next month will come up with ways of dealing with these.

Now, let's talk about Japan.

To be honest, Japan has a tougher job ahead of it because of its weak economy. The Asian financial crisis didn't help matters. Japan has taken steps to put its economy on firmer ground, as we saw under the leadership of the late Prime Minister, Keizo Obuchi.

As a result there are some positive signs. Japan's economy grew strongly in the first quarter. Corporate profits and investments are on the rise. And the flow of foreign direct investment has doubled since 1997, notably in autos, financial services, and telecommunications.

Over the years, America has benefitted from Japanese investment. And the question is: Will Japan continue to accept more foreign investment? Is it now willing to allow more competition, and reap the benefits it can bring? Despite the uptick in foreign investment into Japan, the truth is, problems remain, mainly the trade deficit, and 8 years of relatively flat growth in Japan.

These kind of problems are causing friction in our trade relations, and feeding protectionist forces in both our countries. The solutions to these problems rest in Japan, not the United States. We have made great progress on the fiscal front. Our companies have restructured, and as a result of all this, our domestic economy is strong.

There is no getting around the fact that to get back on track, Japan must take a long hard look at itself, because no country can survive in this world without a vibrant, and dynamically changing, domestic economy. And I think Japan knows this.

Will Japan recover? Absolutely. The real question is when, and how fast. And this depends entirely on how effectively Japan changes the way it does business. There is no better example of why this matters than E-commerce, which will be a top issue at the G-8 summit in Okinawa. It will be the first ever E-8 summit, if we can agree on a set of principles for developing the Internet.

Last week, we issued a Commerce Department report on the Digital Economy. And it concludes that information technology will fuel faster growth for many years to come. IT now accounts for a third of our growth. It's making workers more productive. It's holding down inflation.

And it's creating jobs and new businesses. We've not seen anything like it in a generation. And it's largely because we have kept the market open, and encouraged industry to take the lead in regulating the Internet. To be sure, we face a number of tough issues: privacy, consumer protection, and security. But I'm confident we can resolve them so the Internet and IT are not harmed.

Japan should be able to benefit from IT productivity gains and e-commerce, as we have. But it must deregulate its industry and encourage competition. Today it costs 8 to 10 times more for Internet access than it does in the United States because of excessively high telecom network fees, and a lack of competition.
My point is this: You can buy all the IT you want, computers, satellites, cell phones, beepers, you name it. But it's not going to do any good unless companies and governments are willing to reorganize, and to change. And I am not talking about moving the boxes around. Managers must be willing to adapt to the new technology by changing the way they operate, and by training workers so they are more productive, so they don't fear technology as they fear trade.

Who will use e-commerce if they have those fears? Who will buy new technology if prices are too high? What good is an auction on the Internet for auto suppliers, if old business practices and closed markets prevent them from bidding? And how much faith will people have in government if citizens are hooked up to the net, but basic government services aren't?

Don't get me wrong. There's been a lot of progress made on deregulation, in areas such as housing and energy. I hope this can be said one day for telecom, steel, construction, glass, and other areas where series problems remain. And I think there is reason for hope. Over the weekend we saw Prime Minister Mori call for completely privatizing Nippon Telegraph and Telephone.

This is a new century, and a time for renewal. I hope to see a renewal in the U.S.-Japan friendship, which is a very special relationship, based on mutual respect and shared values in the pursuit of democracy, economic freedom and security. So I hope we can redouble efforts to improve our trade partnership. And I hope we can help build a stronger global economy that doesn't forget about raising the standard of living for all people.

Times have changed on this score. And to resist change is to resist reality, and that would be to our peril. What's needed is a new global mind set among the bureaucrats, and in our businesses. I think Japan and the United States can take the lead in creating a new and positive way of dealing with labor conditions, with human rights, with environmental standards, all the things that people care about.

If we do these things, and do them right, if we can convince workers and the unions that they can master change, we can ease their fears, and steer away from the old ways of putting up walls. As President Clinton likes to say, these are very hopeful times, and we have the chance to build a world that is more prosperous, more united, more humane then every before. I ask everyone here tonight, to join together in this effort.

Thank you.

[end of document]


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