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U.S. Foreign Economic Policy After September 11th
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Unquestionably, the events of September 11th have reshaped the debate over globalization. A trend that many economists characterized as irresistible suddenly appears less so. Foreign assembly operations have become less attractive to U.S. corporations now that there is the fact, or even the danger, that their trucks will be stuck in mile-long queues at the U.S.-Canada or U.S.-Mexico border. Companies like McDonald's and Starbucks, whose main opportunities for market growth are outside the United States, now must factor in extra costs of security when contemplating opening another outlet abroad. Computer programmers from India and graduate students from Pakistan will face additional hurdles when attempting to obtain temporary residency in the United States, and American companies will think twice about posting their executives abroad. Foreign trade, foreign direct investment, and international migration all will grow less quickly than they did before the terrorist attacks.All this is common sense. But it is also common sense not to push the argument too far. For one thing, there will be a strong incentive to invest in new technologies that will minimize disruptions to international business. We already use infrared scanners on certain trucks coming in from Mexico and CAT scans on selected luggage at airports. More investment in such equipment will allow international traffic to move more quickly, whether that traffic takes the form of trucks, container ships, or passenger airliners. Technologies that are hard to imagine now, precisely because they have not been invented yet, will help to move these lines even faster. The 60 per cent rise in the prices of the stocks of security-related companies in the four weeks following September 11th confirms that the incentive for their development is there. International cooperation will work in the same direction. Vincente Fox has already proposed major investments in immigration control on Mexico’ southern border, which will limit the burden on U.S. immigration officials along the United States’ own southern border. A survey of 250 Canadian CEO’s, taken at the end of October, similarly yielded an overwhelming consensus that the two neighbors should urgently agree on a common set of rules immigration in order to protect Canadian access to the U.S. market. Our NAFTA partners have the largest investments in globalization of virtually any countries in the world. They have a strong incentive to make us see the relevant security zone as North America and not simply the United States. The terrorists targeted the World Trade Center because it was a symbol of American capitalism in one of its most visible manifestations, American financial markets. Among the victims were large number of persons who worked for companies, foreign as well as domestic, whose business was international finance. This points up the question of how international capital flows will be affected by these events. Clearly, bonds issued by countries that are on the front lines of the so-called war against terrorism, Pakistan for example, will be regarded as even riskier than before. But there are plausible reasons for thinking that disembodied portfolio investment, as opposed to direct investment, will be stimulated rather than depressed by the attacks. Buying a bond of a foreign government or a stock issued by a foreign corporation is physically less risky than opening an American factory abroad or checking into the Intercontinental Hotel in the capital city of a country whose government is not a member of the Bush Administration’s coalition against terrorism.
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