America—who needs it?

America—who needs it?

America—who needs it?

Moneybox
Commentary about business and finance.
Dec. 15 2004 3:52 PM

America—Who Needs It?

The global economy thrives without the United States.

Sure, the United States is a hegemonic military power, the wealthiest nation on Earth, a magnet for immigration and investment, and a prodigious exporter of ideas, popular culture, and services. But who needs it? For the past few decades, the U.S. has been both the chief proponent and biggest beneficiary of the freer flow of ideas, commerce, and investment. Now that we are erecting barriers, denigrating old allies, and wallowing in our unipolar arrogance—and as the rest of the world is adapting—a continually integrating global economy is simply tuning us out. We have reveled in our status as the world's indispensable nation, but maybe we're not that indispensable anymore.

The Financial Timeshas been a leading chronicler—and exponent—of this trend. For example, this week it reported that Air Canada's "traffic destined for Latin America originating outside Canada had trebled in the first 11 months of this year," with travelers jetting between Japan and Brazil via Canada accounting for a big chunk of the increase. Why? The U.S. in August 2003 stopped the transit-without-visa program, which means travelers touching down in the States, however briefly, are subject to more paperwork and bureaucracy. Globe-trotters don't want to deal with the hassle of traveling via the U.S.

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Our financial markets have long been the envy of the world, despite their many flaws. But foreign companies now want out of them. The FT has run a series of stories hinting that European companies are really cheesed off by the requirements imposed upon them by Sarbanes-Oxley. Apparently, "the majority of German companies with U.S. stock market listings would like to get out of New York to avoid the cost and hassle of complying with the U.S. regulatory regime."

Young foreign wannabe executives are shunning the United States. Business Week earlier this year lamented the "staggering" declines in applications of foreigners to U.S. business schools—down 24 percent at Wharton in 2004. According to the Graduate Management Admission Council's four-year trend, the number of foreigners taking the GMAT has fallen 27 percent since 2002, and this detailed report (see Fig. 9 on Page 13) shows that 74 percent of the schools in the survey saw declines in international applications in 2004. Thanks in part to the sharp reductions in the availability of H1-B visas—from about 200,000 in fiscal 2001 to about 65,000 this yearlegions of skilled foreigners now ply their trades at home, or in other countries, instead of helping to build businesses here.

If the America Left Behind apostles are to be believed, we are increasingly becoming superfluous in Asia. Taiwan now exports "twice as much to China as to the United States," Keith Bradsher wrote in the New York Times on Monday. The same day, Sen. Max Baucus, D-Mont., penned an op-ed in the FT lamenting the fact that China and 10 Southeast Asian countries are negotiating a trade agreement without the participation of the United States.

We're not doing much better in our own hemisphere. When President Bush attended the Asia-Pacific summit in Chile, he made one stopover—in Colombia. Meanwhile, China President Hu Jintao spent 12 days in Brazil, Argentina, Chile, and Cuba, during which he struck tens of billions of dollars in deals. And Brazil is increasingly displacing the U.S. as the largest and most productive source of food for the world, according to the Times.

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The media generally presents these global developments as deserved comeuppance, or as reactions to our neglect, aggression, or burdensome and unnecessary regulations. Could the time be ripe for a reissuing of Paul Kennedy's Rise and Fall of the Great Powers?

But many of these data points could also be taken as validation of America and its role in the global economy. If they negotiate a huge free-trade bloc, China and Southeast Asian countries will simply be emulating the North American Free Trade Agreement. Brazil is a food-export behemoth today because it has used technology to make previously useless land arable and "increased productivity levels beyond those in the United States and Europe," the Times reported on Dec. 12. Talented computer programmers no longer have to leave India to carve out a middle-class life because native software companies can now compensate them well enough. And British moguls-in-the-making avoid Wharton in part because European universities have improved their own MBA programs.

In other words, it may not be simply that the U.S. is getting stupider when it comes to our engagement in the world's economy—although there's plenty of evidence of our stupid decisions. It's also that the rest of the world, powered in part by our operating system, is getting smarter.