It's especially appropriate that my first speech to the Hong Kong General Chamber of
Commerce come just after the U.S. House of Representatives approved Permanent Normal Trade
Relations status (PNTR) for China. Many of your Members asked me often in recent months
how the vote would go. The outcome was surprisingly solid.
President Clinton and his Administration
worked exceptionally hard for this vote. I'm glad that visits to this city by Members of
Congress helped illuminate for them the issues at stake. Our Representatives had the
opportunity to talk to Hong Kong leaders, including members of this Chamber. Hong Kong
provided them a window on the kind of future China can achieve through increased
integration in the international economy. Chief Executive Tung's support for PNTR during
his April trip to Washington was very well received, and Martin Lee, on his trip, was
eloquent in addressing Congressional concerns over human rights. That May 24 House vote
has put in view China's accession to the World Trade Organization (WTO). It was an
enormously hopeful development for the U.S.-China relationship as well.
With at least the House PNTR vote behind
us (the Senate is still to come) and passage earlier this Spring of legislation providing
trade benefits to Africa and the Caribbean Basin, it is tempting to conclude we have also
turned the comer in the broader U.S. debate over trade policy. Some may argue we have laid
to rest the concerns about globalization and free trade that surged to the forefront last
December in Seattle and played a role in the PNTR debate.
Clearly, the PNTR vote helped to
mitigate the unfounded perception in some circles that the United States was becoming a
more protectionist and less open economy. Nonetheless, despite an unprecedented run of
surging economic growth in the United States, record-low unemployment, and the passage of
America into an era where the "new economy" of information technology is daily
changing the workplace, a significant proportion of American citizens remain deeply
concerned about the impact of technology, trade and globalization on their lives. Indeed,
in one public opinion survey published earlier this month, just over 50% of likely U.S.
voters thought that opening the Chinese economy would cost American workers their jobs and
do little for China's low-wage earners. Other polls indicate that while a majority of
Americans support in principle the growth of international trade, they are lukewarm about
its benefits for all sectors of society except business.
Globalization concerns have not surfaced
in Hong Kong in the same fashion. However, I was struck by a poll of Hong Kong workers,
published last month in the South China Morning Post, which suggested that 44% of the Hong
Kong respondents felt threatened by globalization and were worried about the impact of
China's WTO accession on their jobs. And everyone in this city remembers the pressures of
globalized financial markets during the summer of 1998, which drove interest rates in Hong
Kong through the sky, generated great anxiety in the community and prompted the SAR
Government to take unprecedented measures.
Globalization is a phenomenon to be
addressed everywhere, and the anxiety it stimulates is felt around the globe. Polls, for
example, indicated hat Europeans like Americans tend to put priority on the preservation
of jobs rather than the benefits of lower prices from free trade, and significant
percentages of Europeans take a negative view of foreign direct investment. For an economy
like Hong Kong's, which is critically dependent on exports and has benefited mightily from
the liberalization of trade under the GATT and WTO, the issue for government, business and
other sectors is how best to deal with the challenges of globalization - how to capitalize
on its benefits and address its downsides.
One description of globalization that I
particularly like came from a former U.S. President. Commenting on the forces of economic
change then at work, that President observed that:
"the world's products are exchanged
as never before, and with increasing transportation comes increasing knowledge and larger
trade. We travel greater distances in a shorter space of time, and with more ease, than
was ever dreamed of. The same important news is read, though in different languages, the
same day, in all the world. Isolation is no longer possible. No nation can longer be
indifferent to any other."
Remarkably, these words were penned by
U.S. President William McKinley. And if his name is not familiar in Hong Kong, that's not
surprising: he was president more than 100 years ago!
His insights remind us that
globalization is not new. But over the past century, the pace of that process has
accelerated from snail-like to light-speed, and those who have been able to keep up have
done very well. Fortunately for us here today, both the United States and Hong Kong have
been among globalization's winners.
While healthy in many ways, the debate
over globalization ignores a fundamental reality: globalization is here to stay. The
technological advances which underlie it, and which have transformed and are continuing to
transform our societies, cannot be undone. The genie cannot be put back in the bottle.
Those technological advances have stimulated a rapid increase in international
interactions, and a rapid evolution toward greater international activity.
Today, we know that because of
scientific and technological advance, we can change the equation between energy use and
economic growth. We can shatter the limits that time and space pose to doing business and
getting an education. As we can observe here everyday, openness and mobility, flexible
networking and sophisticated communications technologies have enabled geographically tiny
Hong Kong to play g role on the global Stage well beyond its traditional, physical natural
resources.
Nevertheless, these same factors have
also made us all more vulnerable to some of our oldest problems. Terrorism,
narco-traffickers and organized criminals can use all this new technology, too, and take
advantage of the openness of societies and borders. They present all of us with new
security challenges in the new century. The spread of disease; ethnic, racial, tribal,
religious conflicts, rooted in the fear of others who are different -- they seem to find
ways to spread in this globalized world. The grinding poverty of more than a billion
people who live for a year on less than what it costs to stay in a nice hotel at night --
they, too, are part of the globalized ? world. Look at the environment: greenhouse gases
generated by a single country's industries contribute to climatic warming around the globe
that knows no boundaries. And even here in Hong Kong, emissions and particles that travel
across borders mean that improving air pollution does not rest solely in the hands of the
local community.
Against this background, the question is
not "whither globalization," but rather how to harness the forces unleashed by
globalization to produce the greatest benefits to the most people, and so limit the costs.
Harnessing those forces, sustaining the benefits of globalization, boils down to
responsible policies and institutions both at the local arid international level, both
governmental and private sector.
In this regard, the experience of recent
decades suggests there are three main tasks:
-- First, individual countries must
create open, market-based, competitive environments supported by good macroeconomic
policies. Hong Kong in many respects has done this. It is a leader in free trade, in
budgetary responsibility etc. So, it is not surprising that Hong Kong is one of the
world's great advertisements for the benefits of globalization.
-- Second, countries must put in place
sound institutions, governed by law and unhindered by corruption, to help the benefits of
growth reach all levels of society. Hong Kong's record in this area, including the 25-year
history of the Independent Commission Against Corruption, is also strong and provides a
positive example that other countries would do well to emulate.
-- Third, working through international
economic institutions, we must find ways to ensure a strong global economic framework that
that facilitates trade, investment, and capital flows, sets clear rules, promotes
transparency, responds quickly and effectively to crises, provides policy guidance and,
where appropriate, financial assistance.
Again, Hong Kong provides an instructive
example - your strong and transparent financial regulatory system helped the SAR to avoid
the kind of banking instability that devastated other regional economies during the Asian
financial crisis.
Let's take trade as an example of the
new globalization imperative. Trade liberalization has always been valuable; it is now
essential. The only way in which countries can benefit fully from globalization is if they
are completely tuned into market signals, and that can only happen if those signals are
fully reported and not distorted by trade barriers. Trade barriers (and restricted flow of
information) create distortions that reduce efficiency and competitiveness that's hard to
overcome today when competitiveness reigns supreme.
We need look no further than America's
and Hong Kong's experience over the past three decades to see the benefits of free trade.
Since the last time the U.S. unemployment rate touched 4%, in January of l970, our economy
has grown to more than US$9 trillion, manufacturing output nearly tripled, and 50 million
men and women joined the work-force. During that period, trade went from just 13 percent
of GDP to 31 percent of GDP.
At the same time, the percentage of our
rivers and streams fit-for fishing and swimming doubled; the number of citizens living in
cities with unhealthy air fell by half; many endangered or threatened species, including
the U.S. national symbol, the bald eagle, are recovering; we created modem consumer safety
laws and key regulatory policies; and the number of workplace deaths fell 60%. Our
companies have found it good business to be concerned with work conditions and the
environment. It is not a coincidence that the most dynamic and fastest growing sectors of
the U.S. economy have been those most plugged into the global trading system and global
trends.
Similarly in Hong Kong, during the same
30 year period, the economy grew from US$4 billion to US$l58 billion, and average per
capita income grew from US$959 to more than US$23,OOO. Again, trade and free trade
policies were an important engine of this growth: trade went from 143 percent of GDP in
1970 to 223 percent now. In Hong Kong this expansion coincided with rising incomes and
business opportunities, an increasing quality of life, strengthened labor laws, a free
press and, most recently, growing attention to the environment. Male life expectancy, for
instance, has grown from 67.8 years to 77.2 years, and infant mortality bas declined
dramatically from 17.7 per 1,000 to 3.1.
The benefits of liberalization and a
policy of relying on markets as the best response to globalization - with governments
providing legal and regulatory frameworks that facilitate rather than impede the
development of markets - can also be seen in individual industries - sometimes with
astonishing clarity.
Look at Hong Kong's experience over the
past year or so with opening of its telecommunications market. As a result of the January
1999 liberalization of the international simple resale market, Hong Kong residents now
enjoy international direct dial rates that are among the cheapest in the world. At some
times of the day, a call from Hong Kong to New York can cost less than a call from New
York to Washington, D.C. There are now more than 145 licensed international direct dial
operators in Hong Kong, giving businesses and the general public a vast range of choices
in price and service level. And you can tell a similar story about other consumer
telecommunications services, including mobile and corporate broadband markets.
Telecommunications is an industry on which all others rely; the huge benefits of this
increase in competition and decrease in prices accrues to every sector of Hong Kong's
economy and society. Liberalization overall has been a win-win-win-win: for consumers,
businesses, workers and government alike.
Another industry on which many other
sectors rely, and which could benefit from a similarly liberal approach, is aviation. Hong
Kong's producers, and marketers, and e-commerce traders, could all benefit from a more
open and competitive air freight market. Several major international air cargo players -
including some based in the United States - would like to make Hong Kong a hub for the
kind of air services that Asia needs for the 21st century. But they cannot do so unless
the Hong Kong government makes their investments possible by providing a more open market
environment -- as it did in telecommunications.
So far, unfortunately, it has not been
willing to do so. If it had adopted in the telecommunications industry this philosophy of
protecting existing players from competition, you know what your phone bills would look
like today. And the e-industries of the future would be dying on the line. If the
authorities promote significant liberalization of the air cargo industry, Hong Kong
businesses will be able to take full advantage of the globalized market being created by
the internet and low-cost telecommunications.
N e x t P a g e
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