(04/21/05) Clyde Prestowitz mentioned on Voice of America
Voice of America
Copyright 2005 Federal Information & News Dispatch, Inc.
April 21, 2005
Radio Scripts - BACKGROUND REPORT 5-56800
HEADLINE: Business Leaders, Analysts, Warn of Mounting US Debt, Consumer Spending
INTRO: Some US business leaders and financial analysts say the US
economy may be heading for trouble if the country keeps consuming and
borrowing, while China and India expand as manufacturing bases and
service providers. VOA's Mike O'Sullivan reports from Los Angeles,
where a conference of the Milken Institute, a private research center,
focused on the state of the global economy.
TEXT: Richard Iley, a North American economist for the French bank BNP
Paribas, says the United States is the technological envy of the rest
of the world. He adds that on the surface, there seem to be few
problems on its horizon. But he says the US economy is fueled by
borrowing, which could spell trouble in the future.
The bottom line for me is that the US economy is under-saving and
over-consuming. Effectively, this is an economy that is living well
beyond its means and has been for some time.
He says credit market debt in the United States has reached a record
300 percent of the nation's gross domestic product, and mortgage debt
is growing faster than the economy as a whole. Another speaker at the
forum, Clyde Prestowitz , was a Commerce Department official and trade
negotiator in the Reagan administration. He says Americans have become
too good at spending and consuming, while the rest of the world is
saving and producing. The US household savings rate, at under two
percent, is among the lowest in the industrial world.
Former US trade official Charlene Barshefsky, who negotiated the
historic US trade deal with China, says political leaders in Washington
do not fully appreciate how China's dramatic growth is changing the
world. She says China's fast expansion as a manufacturing power is
unique in history, and says the United States cannot continue building
debt as it runs up ever-higher trade deficits with China and other
countries. The US trade deficit, which measures the funds that flow out
of the country in exchange for the goods and services that Americans
buy, reached a record 617 billion dollars last year. One-quarter of the
deficit stems from trade with China.
Outsourcing and offshore production by U.S. companies is part of the
reason. Barry Sternlicht, the chairman of the US-based Starwood Hotels
and Resorts, buys furniture from China and may turn to India for
high-end services. He recently visited the Indian technology company
Infosys, which he says has an advantage in the global marketplace
because its skilled workers are paid just a fraction of what U.S.
workers receive. He says outsourcing to India could help his
corporation stay competitive.
I came back and I said, I've got to move all their (Starwood Hotels and
Resorts) accounting functions to India because I can do it for
one-fiftieth of the cost.
Conference speakers worried that the United States is lagging in high
tech infrastructure such as broadband connections, which increasingly
are used for sharing information, distributing entertainment, and
carrying telephone calls.
But the chairman of one growing Internet firm, Terry Semel of Yahoo!,
says the United States remains a technological leader, despite its
challenges. He says commerce today is global, and is facilitated by
And one of the big questions would be, how dominant will the U.S. be ?
And part of the answer is, quite dominant, although there are major
challenges for many countries throughout the world.
One financial analyst says the United States retains an advantage in
the global economy because of its high productivity, and some look to
U.S. growth to reverse trade imbalances. Others, however, warn that
inflation and rising oil prices could dampen U.S. growth or cause
recession. Yet others say the unbalanced trade relationship between the
United States and China could mean trouble for both nations in the