The Americans have bragging rights in Naples. “We’ve cut our budget deficit, created 3.5 million new jobs in the last 18 months, held inflation below 2.5 percent, and we’ve got a couple of good years’ growth ahead of us,” says Robert Rubin, head of the National Economic Council in the White House. For the last two years, by contrast, Japan and most European countries have been struggling with recessions. Though growth is returning, Europe, at least, still has unemployment rates of more than 11 percent.
To a large extent, Clinton has been able to fulfill his pledge to make economics the focus of his foreign policy, racking up some important victories: NAFTA, the successful conclusion of the GATT round, last year’s Asia-Pacific economic summit in Seattle. The public wants to see foreign policy through an economic prism. A Poll by the Times Mirror Center for the People and the Press last year found that 85 percent of Americans think “protecting the jobs of American workers” should be the nation’s top diplomatic priority. Ask a businessman in Seattle whether the administration was right to stress trade with China over human rights, for example, and you will be reminded that the Boeing Company sold planes worth $2.1 billion to China last year.
So here’s a catchy phrase for David Gergen, new spinmeister supreme at the State Department: “What’s good for Boeing is good for the United States.” But an economic foreign policy is no simpler to deliver than one based on Manifest Destiny or human rights. And there’s just as much chance of signals getting crossed in economics as there is in striped-pants diplomacy.
Take the dollar. While the greenback was sliding on the foreign-exchange markets, both Treasury Secretary Lloyd Bentsen and Rubin said publicly that a stronger dollar was in everyone’s interest. Privately, however, officials say they have little intention of stopping the rise of the Japanese yen, which last week broke through the symbolic barrier of 100 to the dollar. Washington attributes the yen’s rise to the markets’ determination to correct Japan’s huge, destabilizing export surpluses (a stronger yen makes Japan’s exports less competitive), “There’s nothing we can do to halt the yen’s rise,” says one senior administration official, “and we shouldn’t.”
Even if they could get their stories on the dollar straight, the administration would have problems with Japan. A new government there, headed by a Tomiichi Murayama, a socialist, may throw cooperation with Tokyo for a loop. Quite apart from help on North Korea, the administration has its usual wish list of economic change in Japan: more open markets, a fiscal stimulus. Prudence personified, Secretary of State Warren Christopher says that “the very uncertainty of the situation does add a difficult dimension.” Privately, senior State Department officials are gloomier: “We have to be realistic,” says one. “We have to lower our expectations.”
Old-fashioned foreign policy made old-fashioned demands on Americans: it asked them to get used to the sight of body bags and air-raid shelters. International economics makes demands almost as unsettling. Take, for example, the growing strength of the world’s “emerging markets” in Asia and Latin America. They won’t be represented at Naples-the G-7 is in danger of becoming a club of yesterday’s men (no women this year)-but their influence will be felt. According to Jeffrey Garten, under secretary for international trade in the Commerce Department, by the year 2000, the 10 largest emerging markets will, combined, take more American exports than either Western Europe or Japan. By the year 2010, they will take more exports than Western Europe and Japan put together.
Sounds great for Boeing, right? Yes; but there may be a catch. East Asia is experiencing an unprecedented investment boom as economies order planes and power plants, and build new ports. Where’s the money for that investment going to come from, when savings levels are in relative decline throughout most of the G-7 countries? Without more savings, the mismatch may lead to higher global interest rates. In the Senate, Bill Bradley has drawn the obvious conclusion; he’s holding hearings on ways to increase American savings. But nobody from the administration has yet said that the new international economy may mean either higher interest rates for Americans or compulsory saving.
Still, they may: the economics of foreign policy is still a work in progress. And however much Clinton enjoys himself at Naples (he’s determined that this year’s meeting will have time for Clintonian unscripted gabfests), economics cannot be the only thing on an American president’s mind. Poland’s President Lech Walesa, whom Clinton will meet before Naples, told NEWSWEEK last week: “I remember [that Clinton said] that his agenda focused on America and the economy… I don’t think that the top people from any other administration have made as many visits to Europe, including to Poland. But at this time of reforms and revolutions in Europe, the needs are even greater. So our expectations exceed even this great American activism.” There stands the true warning for the clever young things who have crafted Clinton’s international economic policy. Not that they have done their job badly-they haven’t-but that their boss may let other jobs remain undone.
