Examination of witness (Questions 80-94)
TUESDAY 24 APRIL 2001
PROFESSOR SIMON
REICH
80. Is this going to be an easy-going administration
like President Eisenhower's was?
(Professor Reich) No, not at all. The conflicts are
of two dimensions. When you have the rare example of a Republican
administration and a Republican Congress, two things start to
happen. One, there is a tremendous amount of conflict between
the centrists, the moderates, within the Republican party and
the right wing of the Republican party, and that is really an
ideological divide that we have already begun to see coming to
the fore. The second is between the different components, that
is the Republican-led Congress—and the key figure in there,
as you know, for example, has been Jesse Helms—and they
are far more radical in their approach than the executive officials
are. The executive officials are very Cold War in their mentality.
So on the issue of Taiwan, it is likely you will see someone like
Colin Powell saying, "We must take this slowly, we must take
this carefully, we do not want to say anything, we do not want
to antagonise or worsen the situation", but Jesse Helms is
not going to be inclined to do that. As the chair of the Senate
Foreign Relations Committee, I am sure he will be much more inclined
to say more aggressive things. We know historically the more Democratic
Taiwan looks, the stronger the support of the US Congress. There
is a direct correlation between those two. We know Taiwan has
been moving towards democratisation at a rapid rate of knots,
so it would be a historical reversal for the Congress to want
to hold back on supporting Taiwan at this time. I see potentially
a significant issue between the administration and Congress down
the line on this issue.
Mr Chidgey
81. In a number of your remarks you have made
either a direct or indirect link between American foreign policy
and American trade interests. I wonder could you tell us whether
America sees Britain and Europe as a partner in their ambitions
to globalise and liberalise world trade to the benefit of the
American economy, or whether they see Britain and Europe as an
adversary in that aim?
(Professor Reich) Honestly, I do not think either
one of those characterisations apply—
82. I am thinking of GATT, Kyoto—
(Professor Reich) I know. I think they see the Europeans
as confused.
83. They know the buck counts.
(Professor Reich) They see the Europeans as a group
of people who cannot get their act together. The classic example
was this weekend, the meeting of the finance ministers. I read
the report in the FT yesterday—and I think that was
a fairly accurate appraisal—in which the Austrians come
out saying, "Yes, let's have interest rate cuts", the
Spanish come out saying, "No, the majority of people do not
favour it." I think the Americans long for a Europe they
could characterise but given the present structure, given the
federalised structure, and given the many and often discordant
voices, they see a Europe in that sense that is in disorder.
84. Can I press a little further? I am thinking
particularly of the attempts to negotiate trade agreements which
break down the barriers set out by national governments on free
trade. One gets the impression that it is American-led to bring
in trade agreements which are all-embracing and cannot be set
aside by national legislation because of the interests of free
trade as a paramount device. I think I have summarised it fairly
accurately. That seems to be driven by the American economy, seems
to be, whereas in Europe we might have some hesitation in the
sense that we would argue from our standpoint in Europe that there
should be checks and balances against the rampant freedom of commerce
in our societies for the benefit of our citizens. That is not
the message that we seem to be getting from the American side
of the table, would that be fair? That is why I say they see us
as an adversary or as a partner.
(Professor Reich) I think that the Americans move
back and forth between a profound sense of insecurity and a profound
sense of triumphalism. The insecurity characterises the Europeans
as misguided and not very progressive.
85. We would see it the other way round in Europe,
that we were very well guided.
(Professor Reich) Yes. You asked me a question about
the American side.
86. I was fascinated by the complete distortion
of the different views.
(Professor Reich) Yes. I would say that the alternative
to that and the triumphalist mode is that the Europeans are misguided
and ill-educated.
87. Yes.
(Professor Reich) There are elements of nationalism
within the American economic approach in not only an open market
sense but also in a protectionist sense but functionally it operates
very differently. Historically, for example, around the defence
sector, there are all kinds of laws and amendments set out, who
you buy from and who you do not buy from, and it is an enormous
proportion of the budget. While foreign companies can participate
in that process it is relatively limited. That has historically
been an issue. There are also all kinds of exceptional rules that
can be brought in to mitigate and offset for temporary periods
the effects of imports. Claims about subsidisation are brought
in and some of them may be true, some are untrue, I am not discrediting
the notion. There are elements towards those things. The assumption
is that there is a convergence under globalisation, we talked
about the issue before, towards one common characterisation of
both capitalism and democracy. The question remains the extent
to which that convergence is taking place or whether there are
multiple models. Now I have to say—and this is a critical
point for me—in Britain there is a pretence, quite often,
that we are moving towards a comparable form of American style
capitalism if not necessarily American style democracy, that is
not evident.
88. A final question, if I may, Chairman. To
sum that up, how much would you say that American foreign policy
was driven by national defence in comparison to trade offensive?
(Professor Reich) Different components at different
times. One cannot ignore the subtleties of it. Neither played
a particularly important role in the context of the last ten years,
they did not need to. The American economy is so much more productive
and so much more efficient than any economy in Europe, maybe at
some cost. I am not here proselytising but it is so much more
efficient, so much more productive, so much more innovative, so
much more functional than any European economy or Europe combined
that you did not need to worry about either.
89. Now with this downturn.
(Professor Reich) Now with the downturn we will see.
I do not know which one but I would suggest, as I said before—apologies
for repeating myself—that historically you move towards
a recession, you move towards a more nationalist kind of approach,
jobs, jobs win elections. The American economy is neither equipped
in social welfare terms nor inclined temperamentally to carry
unemployment to the level say the Germans say: "Is it not
wonderful. We have finally reached below 10 per cent". That
is just not socially politically acceptable. I remember again,
alluding to my growing up in this country, I can still remember
as a kid where it was said "No Government could survive if
a million people became unemployed, politically". Well, we
have learnt to live with a lot higher, the Americans will not
tolerate that.
Chairman: I would like to move on to Mr Rowlands.
Mr Rowlands
90. Going back to your initial proposition,
if we buy this I can see what will flow from it and that is the
new administration and indeed America is now going to look hemispheric
and to the Americas. How far do you think that can be conceived
by the administration? Will the folk of Louisiana or Kentucky
or Southbend Indiana really have any common interest with a Peruvian,
Chilean or Argentinean?
(Professor Reich) Is that the question?
91. Yes?
(Professor Reich) How much do you have in common with
a Latvian? That is not the question, the point is that this becomes
a market of 800 million people, the largest hemispheric market
in the world, the largest free trade market in the world.
92. A market that has evolved very, very irregularly.
I have been listening to Brazilians potential for about 30 years.
(Professor Reich) I appreciate that and I understand
that. The person in Southbend, where I actually lived for six
months, sees the potential market for the export of products,
they do not care about what they have in common with an Andean
Indian, that is not the issue. Germans do not think about what
they have in common with aspects of Eastern Europe, they think
about potential export markets—
Chairman
93. They have security.
(Professor Reich)—and enhancing political security,
and the export of democracy and that is exactly what the Americans
think about when they think about the hemispheric regions. Nobody
is suggesting that all interest in Europe will end but again we
are talking about nuance, we are talking about subtleties, we
are talking about emphasis, focus. Here you have a President and
an administration that is much more inclined towards that regional
component.
94. Professor Reich, you have given us much
food for thought. We will have to work out with Sir John Kerr
how we apply to the areas within the report the perspectives you
have given us. Thank you very much indeed.
(Professor Reich) You are welcome.
Chairman: Thank you.
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