Question 4
Tom Friedman, The New York Times Foreign Affairs columnist
We've diagnosed the problem here as well as one could in a short period of time. What are your one or two prescriptive ideas?

Answers

Ron Blackwell, Director of Corporate Affairs of the AFL-CIO
This is fundamentally a business decision and I think it calls for business leadership. I think you need to engage this issue of how we are going to create successful companies in the global economy based on innovation. It's hard to understand how you're going to mobilize business leadership. Certainly, it's not my responsibility to do that but I'm very disappointed by what I see in the business community. 

One of the main issues is that our trade and investment agreements have a tremendous asymmetry.  On the one hand, they carefully protect intellectual property, not to stop trade, of course, but to take piracy out of competition.  On the other hand, they are absolutely silent on human rights and worker rights, which gives incentives to countries to compete with each other for investment locations by oppressing their workers.  That system is well developed in China.  Worker rights and human rights are at least as important  as intellectual property rights and they are no more difficult to inscribe in treaties on international trade and investment.  If they were put there, not to stop trade but to take oppression out of competition, that would be a worthy objective.

Diana Farrell, Director of McKinsey Global Institute
Addressing the topic of human rights and sweat shops abroad that Ron brought up, so much of the debate right now is on offshoring of IT and business process services to India where those issues are just not relevant, frankly. So, while I think that has been a major issue in the past, I think we need to remind ourselves that the big anxiety and fear is really not around that right now.  The other point that I would make is, as much as there have been egregious examples of companies violating rights abroad, by and large, in the extensive work that we've done on multinational company investment in developing economies, what we've seen are companies being a strong positive force in helping drive improved standards. Partly, at least, they do this not out of the goodness of their own heart but because they're subject to U.S. law in many cases. As a result, this economic integration that we see globally actually drives up the bar on labor rights, which is what we've seen.

But let me get back to the policy prescriptions, because I think at some level, we all share something here. As much as one can be a believer in free trade and in the positive force of global economic integration, it would be a mistake to become complacent about some of the challenges that this country and others will face.  All the policy prescriptions that we would focus on really have to do with increasing the ability of individuals, companies, and policy makers, to embrace change.  Lori Kletzer and Robert Liten, for example, have put forth a proposal for insuring wage loss. The portability of health care and pension funds, as well, is an essential part of reducing the anxiety that people go through when they lose their jobs. At the same time, you also have to increase the competitiveness of companies who are carrying an undue burden around the world.  And, as much as it has been written off, the retraining and the reskilling of workers has had success in many cases, particularly in the kind of proposals that Catherine Mann of the IIE (Insititute for International Economics) ­ is putting forth for tax credits for companies providing skill training and retraining is a very good idea.

Jeffrey Garten, Dean of Yale School of Management
We're really talking about globalization. We've come to a period in history where we have to pay a lot more attention to the social safety net and the adjustment of policies in our country than we have before. Up until now, we've benefited enormously, simply through trade and investment, but now it's really crunch time, in terms of willingness to continue to support globalization and its impact on people. If the U.S. doesn'tface these issues, then there will be a cascading effect around the world. And right behind us, or maybe even ahead of us, will be a large Europe, which I think is on the verge of becoming highly protectionist.

I also think there is something wrong with the growth models of a lot of these big, emerging markets.  It simply isn't going to wash that they run huge trade surpluses and that they don't use their domestic demand to grow.  Even in China, where there's a very healthy growth rate, it's all a result of sort of foreign stimulus. Their domestic consumption is very low.  An enormous structural problem is building. The Chinas and the Indias, and so many other countries are growing on the strength of American consumption. At some point, that's simply not going to work.