Will Terrorism Stall Globalization?

Will the war on terrorism enhance globalization, further immersing America in the global economy? Or will it cause us to retreat or try to retreat from the rest of the globe?

At first glance, the war seems to have generated a flowering of multilateralism. Western Europe and America haven't been closer since World War II. Suddenly, it seems we're also close allies of Russia, China, Pakistan, even places Americans hardly knew existed six weeks ago, like Uzbekistan.

And with political alliance comes economic integration. There's even a move afoot to increase trade with Pakistan. The administration is pushing Congress harder than ever for authority to move trade treaties without amendment.

Yet, most of this is symbolic. In fact, terrorism is already causing America and other advanced nations to step back from globalization. You can see this reflected in the steep drops in global equities, higher interest rates on bonds of emerging markets, and higher insurance costs in doing business abroad. Why? Because of the added risks of a world threatened by terrorism.

Or just look at the bottlenecks at our borders. Inspections of cargo inside trucks and tankers are dramatically slowing the flow of foreign parts and supplies, which is forcing American companies to stock more inventory and consider shifting some of their suppliers to the United States.

Foreign travel is down, not only among tourists but also corporate executives and staff. And the costs of providing security for overseas staff are rising.

You can bet on tighter controls over immigration to the United States. Legal immigrants accounted for more than a third of the growth of America's work force during the last decade. But those days may be over.

And don't expect a major new round of global trade talks to emerge from the World Trade Organization meetings, beginning November 9th. Many poorer nations are feeling the double punch of a slowing global economy and political unrest at home. They want rich nations to open their borders to exports of agricultural commodities, textiles and steel. But rich nations, including the United States, aren't in any mood.

Just last week, the Commerce Department's International Trade Commission found that America's steel industry has been seriously injured by foreign steelmakers, clearing the way for the White House to impose higher tariffs and quotas on foreign steel.

The irony, of course, is that the best way to fight terrorism over the long term is to give young people in poorer nations reason to believe they can make it in the new global economy. A retreat from globalization is exactly what the terrorists want.

Robert Reich, U.S. secretary of labor from 1993 to 1997, is University Professor of social and economic policy at Brandeis University, and founder and national editor of the American Prospect.

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