Select Committee on Foreign Affairs Minutes of Evidence

Examination of witness (Questions 80-94)



  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—


  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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