Full text of Statements and Speeches of Robert P. Forrestal : Trends in the Global Economy (Outline) : Remarks to the Southern Center for International Studies

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

TRENDS IN THE GLOBAL ECONOMY
R e m a r k s of M r . R o b e r t P. F o r r e s t a l . P r e s i d e n t
F e d e r a l R e s e r v e B a n k of A t l a n t a
To t h e S o u t h e r n C e n t e r fo r In t e r n a t i o n a l S t u d i e s
J u l y 16. 1987
'

I.

In t r o d u c t i o n
Go o d

afternoon!

I'm

pleased

and

honored

to

have

the

OPPORTUNITY TO SPEAK TO MY FRIENDS AND COLLEAGUES HERE AT THE
So u t h e r n

Ce n t e r

In t e r n a t i o n a l

fo r

Studies

about

th e

forces

SHAPING CHANGE IN THE WORLD'S ECONOMY AND THE DIRECTIONS IN WHICH
I THINK THAT CHANGE WILL LEAD US.

THE EXISTENCE OF THIS UNIQUE

INSTITUTION IS SYMBOLIC OF THE MOST IMPORTANT OF THOSE CHANGES.
THE DRAMATIC SHIFT TOWARD INTERNATIONALIZATION OF MARKETS THAT IS
AN IRREVERSIBLE— AND BENEFICIAL-FACTOR
BECOME

EVER

MORE

INVOLVED

IN

IN THESE TIMES.

GLOBAL

BUSINESS.

WE

As

WE

BECOME

INCREASINGLY AWARE OF THE NECESSITY TO THINK OF OURSELVES AS
INTERNATIONALISTS— NOT

SIMPLY

OUT

OF

ALTRUISM

PRACTICAL BASIS OF COMPARATIVE ADVANTAGE.

BUT

ON

THE

COMPARATIVE ADVANTAGE

WORKS TO BENEFIT ALL PARTICIPANTS IN THE INTERNATIONAL MARKET BY
ENCOURAGING EACH COUNTRY TO EMPHASIZE PRODUCTION OF WHAT IT IS
BEST ABLE TO PRODUCE.

THE RESULTING EFFICIENT USE OF RESOURCES

MEANS THAT CONSUMERS ULTIMATELY HAVE THE WIDEST POSSIBLE CHOICE
OF GOODS AND SERVICES AT THE LOWEST PRICE.

I'd
MOVEMENT




like

to talk this af ternoon about four elements

TOWARD

INTERNATIONALIZATION

THAT

WILL

HAVE

in t h i s

PROFOUND

2

EFFECTS ON THE WAY WE DO BUSINESS AND THUS ON THE WAY WE LIVE AS
THIS CENTURY DRAWS TO A CLOSE.

THESE ARE (1) THE SHIFT FROM

NATIONAL ECONOMIES TO A TRULY MULTINATIONAL ECONOMY; (2) CHANGING
TRADE PATTERNS THAT ARE PROGRESSIVELY BRINGING TRANSPACIFIC TRADE
TO EQUAL PROMINENCE WITH TRANSATLANTIC TRADE; (3) THE

LDC

DEBT

SITUATION; AND (4) THE DAMAGE THAT COUNTRIES WHICH ATTEMPT TO
REVERSE THE TREND TOWARD INTERNATIONALIZATION WITH PROTECTIONIST
BARRIERS COULD DO TO THEIR OWN AND THE WORLD'S ECONOMIES.

II.

T he S h i f t t o a M u l t i n a t i o n a l E c o n o m y

A.

shift

from

multiple

national

economies

to

a

global

MARKETPLACE IS OCCURRING RAPIDLY.

B.

INEVITABLE RESULT OF DEVELOPMENTS SET IN MOTION AT THE
e n d of

1.

W o r l d W ar

After

war.

II
Un i t e d

States

encouraged

f r e e -m a r k e t

ECONOMIC COMPETITION AS ALTERNATIVE TO THE TYPES OF
GOVERNMENT-CONTROLLED ECONOMIC SYSTEMS LINKED WITH
THE MILITARY AGGRESSION OF THE AXIS POWERS.

2.

Th r o u g h

th e

ASSISTANCE,

Ma r s h a l l
THE

U.S.

Plan

and

REBUILT

other

FORMER

forms

ALLIES

of

AND

ENEMIES ALIKE INTO TRADING PARTNERS.

C. As




TIME

PASSED,

U.S.

CONSUMPTION

OF FORE IGN”PRODUCED

3

GOODS REPLACED AID AS THE LOCOMOTIVE PULLING ALONG THE
FREE WORLD'S ECONOMY.

1.

T h r o u g h m u c h of t h e 1960s a n d 1970s , A m e r i c a n s s e e m
TO HAVE BEEN FOCUSED INWARD ECONOMICALLY PERHAPS
BECAUSE QUALITY OF MOST FOREIGN GOODS WAS STILL
POOR.

2.

B u t in th e 1980s , o i l p r i c e s a n d th e b a l l o o n i n g of
THE TRADE DEFICIT FORCED

U.S.

RETURN

THAT

TO

THE

REALITY

BUSINESS COMMUNITY TO
EVENTS

OUTSIDE

THE

goods

was

Un i t e d S t a t e s h a v e an i m p a c t w i t h i n .

D.

T he

imbalance

of

trade

in

manufactured

ACCELERATED IN LARGE MEASURE BY
POLICY-TAX

CUT

U.S.

GOVERNMENT FISCAL

IN 1980 COUPLED WITH AN

INCREASE

IN

DEFENSE SPENDING.

1.

Federal revenues di minished relative to s p e n d i n g,
GOVERNMENT HAD TO BORROW INCREASINGLY TO MAKE UP
THE DIFFERENCE.

2.

Do m e s t i c

savings

insufficient

to

support

both

PRIVATE INVESTMENT AND GOVERNMENT FINANCING.

3.

Sh o r t f a l l

drove

up

interest

rates

in

U.S.,

ATTRACTING INVESTMENT FROM JAPAN, WEST GERMANY, AND




4

ELSEWHERE.

4.

A c t i v i t y of t h e s e c o u n t r i e s b i d th e d o l l a r to g r e a t

U.S.

HEIGHTS AS THEY BOUGHT DOLLARS TO PURCHASE
GOVERNMENT SECURITIES AND OTHER INVESTMENTS.

5.

T he

resulting

EXPENSIVE

high

OVERSEAS

dollar

AND

SO

made

REDUCED

our

products

SALES

WHILE

MAKING FOREIGN GOODS CHEAPER HERE.

6.

So m e

of

our

major

trading a
prtners

are

now

SUFFERING AS THE DOLLAR FALLS.

7.

T he

real

RIDE WERE

winners

in h
te

THE NEWLY

TAIWAN/KOREA/

HONG

d o l l a r 's o
rller

coaster

INDUSTRIALIZED COUNTRIES
KONG,

AND/

OF

IN OUR

OWN

exposure

for

HEMISPHERE/ BRAZIL.

a.

Tho se

nations

gained

increased

THEIR PRODUCTS.

B.

HAVE BEEN ABLE TO HOLD ON TO THE MARKET SHARE
THEY

BUILT

CURRENCIES

BECAUSE/
HAD

NOT

UNTIL

RECENTLY/

APPRECIATED

AS

THEIR
MUCH

RELATIVE TO OURS AS HAVE THOSE OF JAPAN AND
Ge r m a n y .




b

E.

Another

factor

that

will

continue

to

promote

market

COMPETITION THE WOr Ld OVER IS THE PRODUCTION OF GOODS BY
MULTINATIONAL

COMPANIES

OPERATING

INSIDE

FOREIGN

COUNTRIES.

1. IT

IS ESTIMATED,

FOR EXAMPLE,

THAT

IN

1985 U.S.

COMPANIES LOCATED IN JAPAN PRODUCED AND SOLD MORE
THAN

$53

BILLION WORTH OF GOODS, AN AMOUNT THAT

EXCEEDED THE

U.S.

TRADE DEFICIT WITH JAPAN OF $46

BILLION THAT YEAR.

2.

T he m u l t i n a t i o n a l s a r e th e l e a d i n g e d g e of g r e a t e r
INTEGRATION IN THE WORLD MARKETPLACE

A.

BRING COMPETITIVE FOREIGN PRODUCTS TO MARKET,

B.

ALSO CONTRIBUTE TO THE ECONOMY OF THE COUNTRY
IN WHICH THEY ARE LOCATED.

(1)

T his
FORM

contribution

OF

WAGES,

is

immediate

RENTS,

in

TAXES,

the

AND

PURCHASES OF MATERIALS.

(2) It

a l s o h a s l o n g t e r m e f f e c t s t h r o u g h the

INTRODUCTION

OF

ALTERNATIVE

MANAGEMENT AND MARKETING.




METHODS

OF

6
F.

THE INTERNATIONALIZATION OF CAPITAL MARKETS.

1.

T he a d v e n t of 24-h o u r -a -d a y t r a d i n g i n ,c o m m o d i t y ,
SECURITY/

AND

CURRENCY

MARKETS

SYMBOLIZES

THE

GLOBAL NATURE OF CURRENT ECONOMIC ACTIVITY AT THE
SAME

TIME

THAT

IT

MAKES

FUNDS

AVAILABLE

IN A

VARIETY OF VEHICLES TO ADVANCE THAT ACTIVITY.

2.

T he E u r o y e n a n d E u r o d o l l a r m a r k e t s / t o g e t h e r w i t h
OTHER FUNDS THAT NOW FLOW EASILY ACROSS NATIONAL
BOUNDARIES/

PROVIDE

POTENTIAL

FUEL

FOR

ECONOMIC

EXPANSION NOT ONLY IN THE DEVELOPED NATIONS BUT IN
the

Third

Wo r l d

as

well,

though

competition

for

THESE FUNDS WILL BE KEEN IN THE LATTER REGION.

II.

S h i f t t o p r o m i n e n c e in w o r l d t r a d e of t h e P a c i f i c R im n a t i o n s

A.

Ov e r t h e p a s t d e c a d e , t h e s h a r e of U. S.
toward

B.

T he

trade

oriented

A s i a h a s g r o w n f r o m o n e - f i f t h t o o n e -t h i r d .

shares

REMAINED

AT

of

E u r o p e / Ca n a d a / a n d L a t i n A m e r i c a

ABOUT

THE

SAME

LEVELS

OVER

THE

al l

DECADE/

A s i a 's g a i n c o m i n g l a r g e l y a t th e e x p e n s e of th e o i l producing

1.

COUNTRIES.

In c r e a s i n g l e v e l s of q u a l i t y / a l o n g w i t h the U. S.
DOLLAR'S APPRECIATION/ COMBINED TO ALLOW JAPAN TO




7
CAPTURE A LARGE SHARE OF OUR FOREIGN PURCHASES.

2.

R e c e n t l y T a i w a n , S i n g a p o r e , Ko r e a , a n d Ho n g Ko n g
HAVE ALSO BOOSTED THEIR SHARES AS A RESULT OF THESE
FACTORS AND THEIR LOWER COSTS.

3.

EXPECT MANUFACTURING TO CONTINUE TO SHIFT TOWARD
the

Ea s t , p a r t i c u l a r l y

in

light

of

the

fact

that

THERE ARE EVEN CHEAPER SOURCES OF LABOR— THAILAND
and

C.

C h i n a — on th e h o r i z o n .

E u r o p e 's s h a r e of

U.S.

trade remained at a consistent

24

PERCENT OVER THE TEN YEARS JUST ENDED, AND I EXPECT THAT
TO CONTINUE.

1.

T he p o t e n t i a l d a n g e r E u r o p e a n s f a c e o v e r the l o n g e r
TERM IS THE SELF-INFLICTED ONE OF PROTECTIONISM.

2.

Eu r o p e a n
PARTICIPATE

Ec o n o m i c
MORE

Co m m u n i t y

FULLY

reluctance

IN RESTRUCTURING

to

TARIFFS

WILL, IF PRESENT TENDENCIES CONTINUE, ISOLATE THOSE
COUNTRIES

MORE

AND

MORE

UNTO

THEMSELVES,

A

DEVELOPMENT THAT WOULD LEAD TO STAGNATION.

D. IN

GENERAL, THE RESTRUCTURING OF TARIFFS THROUGH

GATT

(th e G e n e r a l A g r e e m e n t on T a r i f f s a n d T r a d e ) a n d o t h e r
FORMS




OF

NEGOTIATION WILL PLAY A MAJOR

ROLE

IN THE

8
EVOLVING PATTERN OF TRADE.

1.

Me x i c o h a s j o i n e d

GATT,

a n d we h a v e h a d e n c o u r a g i n g

SIGNALS OF INTEREST FROM TWO NON-MARKET ECONOMIES,
C h i n a a n d t h e S o v i e t Un i o n .

2.

A CONSIDERABLE DEGREE OF BALANCE COULD BE RETURNED
TO

THE

INTERNATIONAL

EXTENDED

TO

INSURANCE,

COVER

TRADE

SCENE

SERVICE

HOSPITAL

PROCESSING— POTENTIALLY

INDUSTRIES

MANAGEMENT,
SOME

GATT

IF

OF

AND

WERE
LIKE
DATA

AMERICA'S

MOST

PROFITABLE EXPORTS.

3. TO REALIZE

THE BENEFITS OF A GLOBAL MARKETPLACE, WE

MUST ALLOW THE PRINCIPLE OF COMPARATIVE ADVANTAGE
TO OPERATE.

a

. T he

Un i t e d

St a t e s

DEVELOPED

COUNTRIES

ADVANTAGE

IN

is

conceding

HAVE

A

MANUFACTURING

that

less

COMPARATIVE

MANY

OF

THE

INDUSTRIAL GOODS LONG MADE DOMESTICALLY.

b.

D e v e l o p i n g n a t i o n s m u s t p l a y b y th e r u l e s of
THE

GAME

AND

ALLOW

THE

U.S.

TO

REAP

THE

BENEFITS OF OUR PRESENT COMPARATIVE ADVANTAGE
IN GENERATING IDEAS FOR NEW PRODUCTS AND IN
PROVIDING HIGH QUALITY SERVICES.




u

III.

O ne of th e m o s t c h a l l e n g i n g i s s u e s f a c i n g b a n k s , g o v e r n m e n t s
AND INTERNATIONAL AGENCIES LIKE THE

IMF

AND THE WORLD BANK IS

LDC Debt
A.

T his

is

a

true

dilemma

because

the

size

LDCs '

of

EXTERNAL DEBTS MAKES IT EXTREMELY DIFFICULT FOR THESE
COUNTRIES TO REPAY OR EVEN MAKE INTEREST PAYMENTS GIVEN
THElR PRESENT LEVELS OF ECONOMIC GROWTH.

B.

They

are,

INVEST

however, also

IN

NEW

FACTORY

in

need

EQUIPMENT

of

fresh

AND

capital

MATERIALS

to

FOR

PRODUCTION.

C.

T he c r e d i t o r n a t i o n s h a v e a s t a k e in b o t h s i d e s of the
DILEMMA.

1. On

the

THEIR

hand,

on e

LARGEST

BECAUSE

THEY

the

BANKS
HAVE

balance

HAVE
BEEN

NONPERFORMING LOANS TO

A.

IN

U.S.,

THE

NINE

MAJOR

REDUCED

BY

sheets

SHOWN SIGNS
THE

MOST




1986,

some

of

OF STRAIN

VULNERABLE

TO

LDCs.

FOR EXAMPLE, THE EXPOSURE OF THE
MONEY
MORE

CENTER
THAN

A

BANKS,
THIRD

BEGINNING OF THE DEBT CRISIS IN
END OF

of

ALTHOUGH
FROM

1982

THE

TO THE

IS STILL AT ABOUT THE AVERAGE FOR

10
ALL

(1)

U.S.

1982.

BANKS IN

Mo n e y

center

exposure

to

n o n -OPEC

DEVELOPING NATIONS AS PERCENT OF CAPITAL:

223%
(2)

b

Jun e

U.S.
1986.

Al l

. Re c e n t

1982; 141%

De c .

149%

Jun e

banks:

C iticorp

move

to

1986.
1982; 88%

increase

De c .

l o a n -l o s s

RESERVES HAS BEEN FOLLOWED BY ALMOST ALL OTHER
BANKS WITH LARGE EXPOSURES.

c.

B a n k s l i k e M o r g a n Gu a r a n t y a n d B a n k e r s T r u s t
ARE RELATIVELY STRONG AND WILL PROBABLY NOT BE
HURT OVERMUCH# BUT OTHERS LIKE MANUFACTURERS
H a n o v e r a n d B a n k A m e r i c a c o u l d be w e a k e n e d in
THE LONG RUN.

2. On

the

other

h a n d # on e

could

argue

that

the

banks

IN CREDITOR NATIONS ALONG WITH MANUFACTURERS

OF

POTENTIAL EXPORT PRODUCTS INDUSTRIES HAVE A STAKE
IN THE ECONOMIC PROGRESS OF

a

. S t r o n g e r m a r k e t s in th e

LDCs.
LDCs

would help reduce

OUR TRADE DEFICIT# SINCE THOSE COUNTRIES COULD
RESUME THEIR ROLE AS MAJOR PURCHASERS OF OUR




11
PRODUCTS.

b

.

In c r e a s e d t r a d e w o u l d in t u r n s t i m u l a t e d e m a n d
FOR LOANS AND IMPROVE BANKS' BUSINESS.

D.

D e s p i t e t h e u r g e n c y of t h e s i t u a t i o n , c u r r e n t l y p r o p o s e d
SOLUTIONS ALL HAVE WEAKNESSES.

1.

Baker

plan

BANKING

would

have

INDUSTRY

IN

provided r
fesh

ORDER

TO

ALLOW

loans

from

SERVICE

OF

CURRENT DEBT ALONG WITH PURCHASE OF IMPORTS.

A.

INSPIRED CONSIDERABLE ENTHUSIASM LAST FALL

B.

FALTERED

BECAUSE

THEMSELVESWILLING

BANKS
TO

COME

HAVE

NOT

SHOWN

FORTH

WITH

ADDITIONAL LOANS.

2.

B ra dle y plan calls for writi ng off large portions
OF LOANS

A.

BUT

THIS

IS

AN ANATHEMA

TO THE

BANKING

COMMUNITY

B.

POSES SERIOUS 'MORAL HAZARD' PROBLEMS IN THAT
THE EASING OF THE DEBT BURDEN MAY MAKE THE
LDCS




LESS

VIGILANT

IN

INSTITUTING

ECONOMIC

12
REFORMS.

3.

D e b t -e q u i t y

swaps

entail

conversion

LOCAL CURRENCY AND SUBSEQUENT

of

debt

to

INVESTMENT OF THAT

CURRENCY IN THE DEBTOR NATION'S INDUSTRIES.

a

. T he

market

for

this

debt

is

quite

thin,

HOWEVER.

B.

LDC

equity

investments

are

inherently

risky

DUE TO CURRENCY VOLATILITY, INFLATION, FOREIGN
EXCHANGE

RESTRICTIONS,

DANGER

OF

NATIONALIZATION, AND THE LIKE.

c.

P o t e n t i a l p u r c h a s e r s of th e s w a p s a r e l i m i t e d
FOR THE MOST PART
OPERATIONS IN THE
PROFIT

FROM

TO MULTINATIONALS

LDCs—

CONVERTING

HAVING

SUCH COMPANIES COULD
DEBT

BOUGHT

DISCOUNT TO HOLDINGS DENOMINATED IN THAT

AT

A

LDC'S

CURRENCY.

E.

Ul t i m a t e l y , it s e e m s t h a t i n t e r n a t i o n a l b a n k i n g a g e n c i e s
WILL HAVE TO BE SOURCES OF THE NEW LOANS NECESSARY TO
KEEP THE

F.

LDCS

ON THE NECESSARY GROWTH PATH.

R e c e n t i n c r e a s e s in l o a n -l o s s r e s e r v e s h a v e a c c e l e r a t e d
A t r e n d of l e s s p a r t i c i p a t i o n on t h e p a r t of c o m m e r c i a l
BANKS, WHICH IN THE PAST HAVE BEEN THE MAIN SOURCE OF




13
LENDING TO

IV. AS

LDCs.

WEIGHTY A PROBLEM AS THE

OF PROTECTIONISM

LDC

DEBT POSES, THE REEMERGENCE

IS PERHAPS AN EVEN MORE SERIOUS PROBLEM

BECAUSE IT THREATENS THE VERY EXISTENCE OF THE FREE MARKET AS
A BASIS FOR INTERNATIONAL COMMERCE.

A.

B e c a u s e it l i m i t s th e a b i l i t y of a c o u n t r y 's e c o n o m y t o
DO WHAT IT DOES BEST, PROTECTIONISM PLACES ARTIFICIAL
RESTRICTIONS ON INTERNAL ECONOMIC DEVELOPMENT ALONG WITH
THE ARTIFICIAL BARRIERS PRESENTED TO IMPORT COMPETITION.

B.

PROTECTIONSISM AFFECTS ALL CONSUMERS WHEN THE PRICE OF
FOREIGN GOODS GOES UP BECAUSE OF TARIFFS OR WHEN THEIR
QUANTITY IS LIMITED BY QUOTAS.

1. WE

ARE LEFT WITH FEWER SELECTIONS AND ONES THAT

COST MORE.

2.

O ne

recent

study

estimates

that

if

all

existing

TARIFFS AND QUOTAS WERE REMOVED, THE BENEFITS TO
THE

U.S.

ECONOMY WOULD BE NEARLY

$13

BILLION PER

YEAR.

C.

Co n t r a r y t o t h e o f t e n - h e a r d a r g u m e n t t h a t p r o t e c t i o n i s t
POLICIES PRESERVE JOBS FOR ONE'S OWN COUNTRYMEN, THEY DO
NOT.




14

1.

A n y p r e s e r v a t i o n of jo bs p r o m o t e d
CAN

ONLY

INDUSTRY

BE

TEMPORARY*

THAT

HAS

SINCE

BECOME

in

this

manner

PROPPING

INEFFICIENT

UP

AN

ULTIMATELY

BECOMES AN UNSUSTAINABLE TASK.

2.

Ev e n

more

important*

protecting

jobs

in

one

INDUSTRY CAN LEAD TO LOSSES IN ANOTHER.

a

. F or

e x amp le* just

in

the

So u t h a n e s t i m a t e d

14*000 RETAILING JOBS MIGHT HAVE BEEN LOST HAD
P r e s i d e n t R e a g a n no t v e t o e d th e 1985 t e x t i l e s
AND APPAREL TRADE BILL.

B.

By

blunting

CAUSED

competition*

PRICES

TO

RISE

RETAILERS WHO WEREN'T

tariffs

AND

would

THEREBY

have

HURT

INVOLVED IN THE TRADE

DISPUTE THAT LED TO THE CLAMOR FOR PROTECTION
IN THE FIRST PLACE.

D.

A s i d e f r o m c o s t i n g a t l e a s t as m a n y — p r o b a b l y m o r e — j o b s
THAN

IT SAVES*

PROTECTIONISM

ALSO

ROBS

OUR

ECONOMIC

SYSTEM OF ONE OF ITS GREAT ADVANTAGES* THE CONTINUOUS
PROCESS OF CHANGE THAT MAKES INDUSTRY RESPONSIVE TO THE
NEEDS OF CONSUMERS.

E.




By

keeping capital and labor resources

in n o n c o m p e t i t i v e

15
INDUSTRIES WHICH SURVIVE ONLY BECAUSE THEY ARE PROPPED
UP BY TRADE BARRIERS#

WE

CHOKE OFF

THE CREATION OF

POTENTIAL NEW FIRMS# INDUSTRIES# AND JOBS.

F.

Wo r s t

of

GREAT

all#

COSTS

t r a d e -d i s t o r t i n g

ON

THE

measures

INTERNATIONAL

can

lead

STAGE#

to

WHERE

PROTECTIONISM GUARANTEES MORE PROTECTIONISM.

1.

T hi s

arises

from

both

internal

and

external

pet

industry

DYNAMICS.

a

.

In t e r n a l l y #

when

politically

powerful

any

group

of

a

protected#

is

INDUSTRIES WITH POLITICAL CLOUT IN OTHER AREAS
BEGIN

CLAMORING

FOR

SIMILAR

PREFERENTIAL

TREATMENT.

b

. T he g r e a t d i s a s t e r of th e S m o o t -Ha w l e y t a r i f f
IMPOSED BY THE

U.S.

GOVERNMENT IN

1933

CAME

ABOUT AS VESTED INTERESTS WERE ADDED TO THE
LIST IN JUST THIS WAY UNTIL ON AVERAGE TARIFFS
ENDED UP AT OVER

50

PERCENT ON AN AD VALOREM

BASIS.

2.

Ex t e r n a l l y #

protectionist

measures

ASSURED OF EVOKING RETALIATION.




ar e

almost

16
a

.

In

t h e r e c e n t c o n f r o n t a t i o n b e t w e e n the

Un i t e d

S t a t e s a n d C a n a d a th e C a n a d i a n s w e r e p r e p a r e d
TO TAX U.S. FEED CORN IN RETALIATION WERE WE
TO PLACE A DUTY ON THEIR LUMBER.

b

. Aga i n

in

attempting

to

help

on e

industry,

ANOTHER TYPE OF PRODUCER ENTIRELY REMOVED FROM
THE ORIGINAL DISPUTE IS THREATENED.

c.

T he S m o o t -Ha w l e y t a r i f f h e l p e d ti p t h e w o r l d
TOWARD

JUST

SUCH

A

SPIRAL

OF

TIT-FOR-TAT

MANEUVERS, AND THE END RESULT WAS THE COLLAPSE
OF WORLD TRADE AND A LENGTHY DEPRESSION.

V.

Co n c l u s i o n

I HAVE TALKED ABOUT FOUR ELEMENTS INFLUENCING THE DIRECTION
OF THE GLOBAL ECONOMY.

TWO OF THOSE— THE MOVEMENT TOWARD A TRULY

INTERNATIONAL ECONOMY AND THE CHANGE IN TRADE PATTERNS THAT IS
BRINGING

THE

CONSTRUCTIVE.

RlM NATIONS
THIRD, LDC DEBT,

PACIFIC
THE

TO

GREATER

IMPORTANCE-ARE

IS A CHALLENGE THAT WILL,

I

HOPE, EVOKE A CONSTRUCTIVE RESPONSE FROM GOVERNMENT AND BANKING
LEADERS AND LEAD TO GREATER COOPERATION IN THE WORLDWIDE BUSINESS
COMMUNITY.

The

FOURTH

ELEMENT,

PROTECTIONISM,

CONSTRUCTIVE VIRTUE FOR THE PRESENT OR THE FUTURE.
A

REACTION




AGAINST

INTERNATIONALIZATION

WHICH,

HOLDS

NO

It REPRESENTS
IF

UNCHECKED,

17
COULD

RETARD

AND

EVEN

DESTROY

PROGRESS

IN THE

DIRECTION

OF

GREATER ACCESS TO WORLD MARKETS FOR ALL.

It

is t r u e t h a t w e

Am e r i c a n s f a c e g r e a t e r c o m p e t i t i o n t o d a y ,

PARTICULARLY FROM THE NATIONS OF THE PACIFIC
ANY TIME IN THE LAST FORTY YEARS.
THAT

SUCH COMPETITION WILL

RlM,

THAN WE HAVE AT

W e SHOULD UNDERSTAND, HOWEVER,

ULTIMATELY

IMPROVE OUR OWN LIVING

STANDARD FOR THE REASONS I DESCRIBED THIS AFTERNOON.
t

OUR FREE

ENTERPRISE SYSTEM HAS LED THE WORLD INTO THIS INTERNATIONALIZED
MARKETPLACE.
IN

THAT

W e CAN BEST CHAMPION THE CAUSE OF AMERICAN INDUSTRY

MARKETPLACE

NOT

BY

HIDING

FROM

COMPETITION

BEHIND

PROTECTIVE WALLS BUT BY WORKING FOR MORE OPEN MARKETS EVERYWHERE.