The United States in the Global Economy

Abstract

We live in a global economy, and we need to think and act accordingly. To be sure, the United States has the world's largest, most dynamic economy, one that is the envy of the rest of the world, and we are less dependent on international trade than many other nations. But our exports and imports have grown strongly as shares of GDP in recent decades. Your car may have been made in Germany or Japan. If you are in the cattle industry, your beef may be sold in Mexico or Southeast Asia. And the cartoons that your children watch on television may have been animated in the Philippines or India, if they were not drawn by a computer. International financial linkages have also expanded, and the current account deficit is at record levels. These international linkages have become important considerations in business decisions and economic policy. Tonight, I will begin by reviewing recent U.S. economic performance and the outlook for 2004. All in all, that outlook is favorable, with real output growth likely to be strong and consumer price inflation low. And, although labor market conditions remain a concern, employment growth appears to be strengthening as well. After discussing the national outlook, I will turn to two important international issues, the offshoring of jobs and the large U.S. current account deficit. I will argue that our nation needs to be proactive in addressing these issues. However, protectionism is not a good response to international competition and, in fact, would do more harm than good. Better responses include improving the assistance that we give to workers