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The Win-Win Response: Promoting Exports and Democracy in the Clinton Administration 1993-1997

Geoffrey Allen Pigman

University of Birmingham

International Studies Association
March 1998

I. Introduction

The collapse of the Soviet Union changed the international order forever. The emerging economic powerhouses of the Pacific are changing the financial order forever. The proliferation of demonic weapons of mass destruction threaten to change the distribution of military power forever. Resurgent ethnic conflict is challenging the very meaning of the nation state. The rise of a global economy has changed the linkages between our domestic and foreign policies and I would argue to you has made them indivisible.

In a time of dramatic global change we must define America's broader purposes anew. And part of that purpose clearly consists of reviving economic opportunity and growth here at home, for the opportunity to do well here at home is the ultimate basis of our influence abroad.

President Bill Clinton, April 1, 1993 1

The Clinton Administration, the first U.S. administration to begin its term of office after the end of the Cold War, has faced a new set of challenges in the making and implementation of foreign policy generally and foreign economic policy specifically. They faced a world radically different from what had preceded it in terms of the relationship between states and between states and non-state actors in the internaitonal system and global economy. The needs of state security have been fundamentally redefined in an economic sense. How the Administration has responded to those challenges has played a substantial role in redefining the role of the United States in the international system and global economy and also, critically, in reshaping how Americans perceive that U.S. role, which in turn has both domestic and international political implications.

Analysts of contemporary U.S. foreign policy, international political economy, democratization and economic development all converge upon the question of whether U.S. foreign policy generally and foreign economic policy in particular has changed following the end of the Cold War, or whether it can better be seen as an evolving continuity of interests and policy means to achieve those interests. Supporters of continuity would expect that evolution to be traceable from the Bush Administration's policy responses to rapid global political and economic changes through the early Clinton Administration up to the present. They would highlight factors of continuity as outweighing those indicating substantial change, despite changes in political rhetoric in a new administration of a different party and a certain degree of change in policy implementation. Supporters of fundamental change, on the other hand, would expect real discontinuity between the policies adopted by the Clinton Administration and those of its predecessors. The timing of the Clinton Administration 's coming to power after the end of the Cold War, coupled with the change in personnel occasioned by the shift in political party of the Executive for the first time in twelve years, made possible, but not certain, a reassessment of U.S. policy objectives and the means of achieving them.

This paper forms part of the broad research agenda required to analyze and explain the making of the Clinton Administration's foreign policy and foreign economic policy. Parts of the research have already been documented, as illustrated by Robert Reich's 1991 blueprint for Clinton foreign economic policy The Work of Nations and Jeffrey Garten's account of the Administration's export promotion strategy in The Big Ten (1997), but much of the work is yet to be done. 2 This paper, itself part of a research project in progress, undertakes to document a significant aspect of Clinton foreign economic policy that, in conjunction with other work already complete or underway, supports the general view that Clinton policies are a distinctive and new response to structural change in the global economy heralded by the end of the Cold War. One of the important ways in which the Clinton Administration has responded effectively to that change is to serve its overall domestic economic policy objectives of growing and safeguarding stable, well paying jobs for U.S. workers by successfully redefining national security at a broad level to encompass economic security. This has meant combining foreign economic policy (trade policy, monetary policy, industrial policy) objectives of generating opportunities for export growth and foreign direct investment for U.S.-based firms and broader foreign policy goals of supporting democratization, liberal market-based economies and political stability around the world. This new combination of policies has contributed directly to the export-led growth of the 1990s U.S. economy but without undercutting the economic growth and incurring the wrath of major U.S. security allies and economic competitors, as the Reagan economic boom of the 1980s had done. Hence it has constituted a 'win-win' policy response, in contrast to the often zero-sum character of the Reagan and Bush policies, and in the process has lessened global perceptions that had risen in the late Cold War period that the United States was abandoning its commitment to a multilaterally coordinated, rule-driven liberal international economy.

This 'win-win' foreign economic policy has meant a basic reorienting of the focus of economic diplomacy away from the previously predominant concern with U.S. allies and largest trading partners Western Europe, Canada and Japan. The overriding objective of the new policy has been to promote U.S. exports to and investments in states with the greatest potential as new markets, and in the process to strengthen the position of U.S.-based firms and firms operating in the United States, and thereby to promote the creation and maintenance of jobs for U.S. workers. This can be seen in a natural division of target states into two distinct categories. The first group of states, which Commerce Department officials early on dubbed the 'Big Ten', were chosen on the basis of more exclusively economic factors such as population, wealth and growth rate to yield the greatest gains, and other policy considerations would not be permitted to interfere with the achievement of those gains. The second group of states more fully reveals the post-Cold War identification of U.S. economic and security interests, ranging from Russia, which remains the most important security concern of the post-Cold War United States, to states such as Bosnia, Croatia and Haiti, in which U.S. policymakers have identified and acted to assert security interests. Policy towards this group of states has allowed for the harmonization of the promotion of U.S. exports and investments with broader and more longrunning U.S. security objectives of promoting political stabilization and democratization. The policy combination, in cases where it has been employed, has begun to produce relative market gains for the United States and has also generated absolute gains for all participants in international trade and investment, thus in the process strengthening the liberal structure of the post-Cold War global economy.

This paper initially considers the Clinton foreign economic policy as a whole and then briefly examines three examples of the implementation of policy towards the second group of states, seeking to evaluate the effectiveness of the policy in terms of its own stated objectives. In seeking to generate new foreign growth opportunities for U.S.-based firms beyond the Big Ten, Clinton Administration officials identified accurately that many of the same areas that hold significant potential for future overall market growth were areas in which U.S.-based firms could compete favorably with respect to their rivals. But as a prerequisite for the envisaged market development, politically these areas would tend to require strengthening of state structures, fuller democratization and general political stabilization. This motivated Clinton foreign economic policy initiatives and broader foreign policy projects in the target states, which tend to be predominantly former socialist economies in transition and developing countries, to be organized in a coordinated and mutually supportive way. The paper concludes by looking at explanations for why the Clinton Administration chose the foreign economic policies that they did and the implications for the future in terms of the policy's strengths and weaknesses.

II. Responding to the End of the Cold War: Promoting Exports and Investment Opportunities and Democratization/Stabilization

A. Structural Change and the End of the Cold War

The end of the Cold War unleashed major structural changes affecting the global economy and the functioning of the international system of states. No longer dominated by the military rivalry between the United States and the Soviet Union, the principal rivalries between states in the international system have become primarily economic in nature rather than ideological and political. Before the end of the Cold War, the structure of today's global economy was already being permeated by forces of globalization and becoming heavily influenced by transnational firms, international and supranational organizations and other non-state actors, posing serious challenges to governments of all nation-states in choosing and implementing economic policies. 3 Those challenges have now been complicated by addition to the Western liberal international economy of a large new set of states occasioned by the end of the ideological rivalry between competing economic systems. The integration of these new full participants in the global liberal economy has presented a complex set of constraints and opportunities to policymakers in the Western industrial economies, particularly in the United States. It has brought about an unprecedented degree of integration of the global production structure, adding well over half a billion people to the global labor pool (at varying skill levels) and introducing enormous reserves of natural resources and productive capacity (of varying degrees of quality) to the global marketplace. The resulting increase in competition between states to capture labor-intensive industries invariably makes downward pressure on global wages into a serious structural constraint upon domestic and foreign economic policymaking in high wage industrialized countries such as the United States.

The opportunity presented, however, is that as the newly integrated labor joins the global workforce and earns income in hard currency, they become global consumers and not least of the goods, services, knowledge and capital of the Western industrial states. The inherent risk to policymakers lies in that as this process of transformation is uneven, both geographically and temporally, various forms of political instability and disruption are more likely. For example, following the fall of the Berlin Wall, consumption rose in the former East Germany rose much faster than productivity growth in the Eastern German economy justified, thereby caused economic and political disruption in both parts of Germany that, among other things, forced the West German Government to acquiesce in the conversion of East German marks into deutschmarks at a 1:1 parity, a rate much more generous to Eastern Germany than was warranted by its output and productivity. This decision in turn affected the entire European Union adversely through its impact on Germany's unwillingness to see the deutschmark revalued within the Exchange Rate Mechanism (ERM) and the subsequent collapse of the ERM parities in 1992.

The second critical structural change in the global economy precipitated by the end of the Cold War is the loss by the United States of much of its security leverage in structuring economic relations with its allies. Gowa has argued that in a bipolar distribution of military power, military alliances make economic cooperation more likely between states. 4 The history of Cold War U.S. foreign policy has been about the United States initially using economic assistance programs to strengthen its allies against military encroachment from the Soviet bloc and simultaneously to grow markets for U.S. exports and investments, as was the case with the Marshall Plan for Western Europe and the Dodge Plan for Japan. Subsequently, as U.S. military allies have become economic competitors with diverrging economic interests from that of the United States, U.S. officials have been able to use the leverage afforded by the military security umbrella to impose constraints on allied economic policy decsions, as the Nixon Measures of 1971 illustrate. During the Reagan Administration, Cold War oppositionalism dominated foreign economic policymaking and economic diplomacy between the Western allies. U.S. containment of Soviet expansionism remained the dominant foreign policy objective, even at a cost in terms of economic relations with European allies, as illustrated by the U.S.-European conflict in the early 1980s over the proposed construction of a natural gas pipeline from the Soviet Union to Western Europe. The end of the Cold War, the end of the Soviet Union and its aggressive military stance towards Western Europe and Japan meant the end of European and Japanese dependence upon the United States and its nuclear umbrella for defense against that threat. This was one of the factors leading Clinton Undersecretary of Commerce Garten to fear in the early 1990s that the decade would be a period of significantly increased economic conflict between the United States and its major military allies. 5

At perhaps a deeper structural level, the easing of the ultimate Cold War threat of all-out nuclear war has change the baseline relationship of publics to their governments everywhere in the world. Publics no longer felt dependent upon their governments for ultimate security in the same immediate sense as they did during the Cold War. This removal of an essential parameter bounding the general range of expression of public attitudes towards their governments left people free to be critical of politics, government and its role in society at a much deeper level than before, a phenomenon captured by the German term Politikverdrossenheit. 6 This phenomenon manifested itself in a variety of ways, but principally in demands for domestic political reforms (usually but not always in a democratizing direction) and criticism of traditional corrupt governmental practices, which contributed to widespread political instability and partisan realignment in states across the globe, West and East, North and South. Whilst states as diverse as Russia, Italy, Japan, Mexico and Zambia underwent transformations, successful or unsuccessful, of their political systems and arrangements of political parties, the United States too was not immune from the effects of this phenomenon. Popular demands for change led to the election of Bill Clinton despite (contrary to the prevailing media portrayal) a recovering economy in 1992 and despite the resounding domestic popularity of President Bush's performance in the 1991 Gulf War. The U.S. public's Politikverdrossenheit, however, ran much deeper than a desire to change the party in the White House after 12 years, manifesting itself also in the popularity of the 1992 and 1996 candidacies of political outsider Ross Perot, the 1994 election that ended decades of Democratic Party majority in the House of Representatives and gave both houses to the Republicans for the first time since the 1950s, a rise in general criticism of the two-party system and political party fundraising, and the rise in anarchist and other anti-state activity exemplified by the 1995 Oklahoma City bombing. 7

Last but not least, post-Cold War structural change complicated the already difficult relationship between the Executive and Congress over making foreign policy. Even before the 1994 elections turned both houses of Congress over to Republican control and unleashed a major new push to cut government spending under Rep. And House Speaker from 1994 Newt Gingrich's 'Contract with America', the traditional support of Congressional for New Deal and Great Society era government spending that Clinton had experienced growing up had waned over twelve years of Reagan-Bush government. Already incipient trends on Capitol Hill in both parties questioning the extent of U.S. projection overseas were reinforced by the end of the Cold War, which threw into question the purposes of all of the traditional relationships with U.S. allies and initiated an open ended debate on the proper role of the United States in the post-Cold War world. Moreover, with the military alliance motivation for cooperation on trade with the allies removed, Clinton would also find himself vulnerable to opposition not only from isolationists on the Republican right but from the left of his own party, led by Rep. Richard Gephardt, who criticized trade liberalization as a threat to those not insignificant numbers of U.S. workers whose jobs were increasingly at risk in a barrier free global economy. One of the leading features of the post-Cold War global economy was the increasing divergence of economic interests between different groups of workers in every state. 8 In terms of securing Congressional approval for his foreign economic policy plans, for Clinton this would mean the necessity of selling his foreign economic policy as a jobs policy for all Americans, and it would mean that he would have to come up with ways of achieving his policy objectives as inexpensively as possible. Given the ambition of the policies he intended to undertake, that would require an extent of public-private partnership never before undertaken in the United States. 9

B. The Clinton Administration Policy Response

The leading figures in the incoming Clinton Administration in 1993 understood to a considerable degree the nature of these profound transformations and the implications that they would have for the making of U.S. foreign policy and in particular foreign economic policy. Central to this understanding was the realization that national security strategy would have to be recast in such a way as to place economic security and opportunity for American workers at its core. 10 They also understood that in the post-Cold War global economy, any pretense of separation between making domestic economic policy and making foreign economic policy was a thing of the past. 11 In his official foreign policy report to Congress required under the Goldwater-Nichols Defense Department Reorganization Act of 1986, Clinton declared the three main goals off U.S. foreign policy to be: 'To sustain our security with military forces that are ready to fight; to bolster America's economic revitalization; (and) to promote democracy abroad.' 12 The principal foreign policy goal of defending Americans and the principal domestic economic policy goal of promoting prosperity had now fully converged: defense was now as much about creating and maintaining jobs for Americans at home as it was about protecting the territory and resources of the U.S. and its citizens against attack. In turn, guaranteeing jobs at home more than ever required assuring access to stable, growing markets for U.S. goods, services, capital and knowledge on a global scale. 'We seek a new and more open global trading system not for its own sake, but for our own sake. Good jobs, rewarding careers, broadened horizons for the middle class Americans can only be secured by expanding exports and global growth.' 13 Just as after World War II U.S. economic growth had become dependent upon exports to a level thitherto not experienced, by the end of the Cold War the United States had crossed another threshold of dependence upon foreign markets. Creation of well paying jobs in sectors in which the United States excelled, such as aircraft, telecommunications, food products, entertainment and automobiles, were all linked to exports, and export-related jobs paid better on average than other jobs. The new Clinton team were ready to operationalize that knowledge. 14

The principal way in which awareness of the new situation was operationalized was by elevating economic policymaking, both formally and in practice, to the center of Clinton's policy agenda. 15 This was made clear from the beginning of the Administration by several key steps. A National Economic Council was created to coordinate national economic strategy, parallelling the role of the National Security Council for defense and with staff designated to link the two councils. 16 The Commerce Department, for the first time in its long existence, was at the core of the executive's overall foreign policy apparatus. 17 But beyond this formal structure, Bill Clinton personally led his team of handpicked experts, many of whom were close friends and confidantes and many of whom were, like Clinton himself, fascinated by the intricacy and detail of making public policy, in coordinating the making of economic and security policy together. 18 Recognizing both academically and politically the link between employment stability and growth at home and access to stable, growing global markets for U.S. goods, services, labor, capital and knowledge,.they made the policy of creating opportunity for U.S.-based firms and workers in the global economy the centerpiece of Clinton Administration foreign policy. Robert Reich, Clinton's Secretary of Labor, had already outlined this economic strategy in 1991 in The Work of Nations. 19 But the ability of U.S.-based firms and workers to benefit from a stable, growing global capitalism required as a prerequisite the maintenance of military peace and political stability over as much of the world as possible. Clearly this was a traditional security policy, but the difference was that the rationale for it had now changed, and it brought a different, and rather uncertain, calculus of U.S. interest to military decisionmaking. Incentives to do it cheaply and with as little risk to U.S. personnel as possible became much greater, for example. Administration officials saw promotion of democratization and the transformation of regimes around the world into representative governments with liberal capitalist economic systems as the key political means to advance the overall security objective. This policy too by itself was not new for the United States, but whereas previously it had been motivated by ideology, as practiced under the Carter and Reagan Administrations, the post-Cold War rationale was primarily economic in nature. Key security objectives falling under this rubric included maintaining the trajectory of democratization and economic stabilization and transition to capitalism in Russia, denuclearization of the non-Russian post-Soviet states and managing the relationship with China. 20 The Administration's early decision to decouple its stance on the annual renewal of China's most favored nation status from the ongoing dialogue on human rights issues despite strong sentiments on the issue both within the Administration and in Congress was indicative of the significance of economic objectives in the Administration's security strategy.

When Bill Clinton took office in January 1993, his new administration had the luxury of inheriting an economy that had already been in recovery for several months, which gave his team valuable breathing room in deciding on a strategy for achieving its economic objective of expanding stable, well paid employment at home by promoting U.S. exports and investments abroad. Despite criticism for slow implementation of a foreign economic policy in their first year of office, they took advantage of the extra time that the economic recovery permitted them. With U.S. exports rising and unemployment falling, Clinton's team could choose from three broad strategy options without immediate fear of strong short term adverse domestic political reaction. The first was to combine the best aspects of Carter and early Reagan foreign economic policies: focus on domestic macroeconomic management, cooperate with allies and major trading partners on maintaining exchange rate stability and further trade liberalization, but otherwise adopt a generally laissez faire approach to trade, allowing now leaner, more productive U.S. firms to get about the business of exporting where they could. The second option was to ramp up the late Reagan and Bush approach of aggressive unilateralism, focusing on using existing U.S. trade laws to press major trading partners Japan and the European Union to lower trade barriers to U.S. exports. The third option was to increase cooperation between the federal government and U.S.-based firms in creating opportunities for U.S. firms and U.S. workers in areas of the world, both geographical and sectoral, where they were likely to yield the greatest gain in terms of exports, profits and domestic employment. Such a policy would not exclude negotiated efforts to remove political and market barriers in target markets to U.S. products and restrictions on U.S. investments.

That the first two strategies were not chosen is indicative of the new administration's perception of the extent of change in the global economy. Adoption of the third policy approach, while not precluding employment of the other strategies on certain occasions and to certain degrees, did represent a real shift of focus towards different target states and different methods of creating opportunities. It also, importantly, was geared towards competition without confrontation, in that rather than aiming primarily at fighting over shares of existing mature markets such as Japan and the European Union often with firms based in those countries, the new target states and sectors represented new and growing markets in which U.S.-based firms could compete with European and East Asian firms and in which every competitor could be expected to gain something. Some firms would likely gain more than others, but overall the scenario was win-win. The centerpiece of the new policy identified in the Commerce Department during the first year of the Clinton Administration was the 'Big Emerging Markets', a group of ten middle tier industrializing countries with large populations whose demand for U.S. products could be expected to grow significantly. 21 To be counted as a Big Emerging Market, a country or region had to possess a combination of a large, growing population and a growing economy with an expanding middle class of consumers. The list of Big Emerging Markets included Mexico, Brazil, Argentina, India, Indonesia, South Korea, China (including the 'Chinese economic area' of China, Hong Kong, Taiwan and Singapore), South Africa, Poland, and Turkey. Notably, the list transcended Cold War-era categorizations, grouping states that were considered Newly Industrializing Countries with other developing countries and former Socialist economies in transition. 22

A second category of target states under the new strategy option, while perhaps less attractive in terms of short term economic gains, was perceived as having longer term economic potential and was already highlighted by the geopolitical significance of the states to the United States. Promotion of democratization and promotion of U.S. exports and investments, as a combined effort in single states, would be focused on potential markets that have been most held back by past political instability and which would hold the greatest potential for U.S.-based firms to capture the lion's share as the market grew. These did not have to be potentially the largest markets, as was the case with the BEMs, but it was a means to maximize U.S. structural power by applying the greatest range of U.S. structural power resources together (security, finance, knowledge, production) 23 to achieve the greatest nexus of political and economic gains: political stability, democratization, and maximum U.S. market share. These policies were seen to be naturally reinforcing. U.S.-sponsored democratization efforts, which received nearly 13 perdent of the Administration's 1994 international affairs budget, would seek to create state institutions and political conditions in which markets could take root and eventually flourish. Senior posts at the Departments of State and Defense were created to oversee the democratization initiative. 24 U.S.-based firms entering markets at this stage of development would acquire a positional advantage over later entrants that they often could retain once the market took off. Establishment and strengthening of markets would create and solidify political interests within the target states in maintaining democratic political structures, at least of the sort amenable to neoliberal, pro-market policies. 25 Exporting to and investing in a country would also makes U.S.-based firms 'stake-holders' in the democratic political institutions and stability of the target country. The cases that follow are examples of how the Clinton policy combination has been implemented towards this second category of state and initial indications of the results so far.

III. Three Cases

The case studies considered briefly in this paper have been selected both because they are prominent, high visibility applications of the policy combination of promoting exports and investments and promoting political stabilization and democratization and also because as target states they are, in a sense, at opposite extremes of the policy application spectrum in terms of economic importance and apparent immediate U.S. national security significance. Post-Cold War Russia, with its still enormous arsenal of nuclear weapons, and its fate, as noted already, remains the primary single state security concern of the United States. 26 It also has a population of 150 million people and an economy that, even if as Garten argues does not have quite the same short term growth potential as the Big Ten emerging markets, can be expected to grow tremendously in decades to come. The Russian Federation also possesses amongst the world's greatest stocks of natural resources. 27 Croatia is a small country with a small market, Bosnia has a very small population and an economy virtually destroyed by war, and Haiti has a small, desperately poor population and a minuscule economy. Yet Bosnia, Croatia and Haiti also possess a political importance to the United States that is significant, even if not of the same order of magnitude as Russia. In his 1996 book Betyond Hope and History President Clinton cited Bosnia and Haiti specifically as examples of where U.S. efforts at economic reconstruction supported overall U.S. military security objectives. 28 Bosnia and Croatia are important precisely because of the close relationship between the United States and its traditional European allies. As the first major challenge to the political stability of post-Cold War Europe, the collapse of the former Yugoslavia and war in Bosnia and Croatia posed a critical challenge no less to U.S.-European relations than to relations between the European states themselves. 29 Whether the United States and its European allies could cooperate on stabilizing Bosnia and Croatia was a key test of post-Cold War U.S.-European cooperation. With Haiti the United States has a long history of political and military involvement and a growing population of Haitians in the United States. Haiti was the penultimate state in the Western Hemisphere to establish a Western-style liberal democracy in 1991 (leaving only Cuba) and the first, seven months later, to have that transformation reversed. Haiti's physical proximity to both the U.S. mainland and Cuba add to its political interest to the United States. Hence the three cases considered here, disparate in their economic significance but linked by their political importance, frame the poilcy target space. Other cases of the application of this policy combination, such as Ukraine, Kazakhstan, Azerbaijan and Cambodia (and, arguably, Zaire/Democratic Republic of Congo) to varying degrees, fall in between the two poles staked here. Potential target states in which the policy has not been applied will be discussed in the concluding section of the paper.

A. Russia: NASA and The Russian Space Agency

Clinton Administration post-Cold War policy objectives towards the Russian Federation have centered on strengthening pro-market economy, pro-Western, democratic political interests against their more nationalist and authoritarian opponents. 30 Both the range of means and the extent of available resources for this task has been constrained by significant budgetary limitations imposed by Congress. The end of the Cold War and the collapse of the Soviet Union has allowed for a convergence of interests against high expenditure on Russia and the former Soviet Union between those members of Congress whose response to the end of the Cold War has been to downgrade the importance of Russia and unreconstructed conservatives whose traditional opposition to the Soviet Union keeps them opposed to significant U.S. investment in strengthening the Russian economy. Hence Clinton Administration officials have had to maximize leverage in promoting favorable change in Russia within significant resource constraints. Clinton highlighted the economic opportunity for the United States presented by transformation in Russia in one of his first major foreign policy addresses as president in 1993. 'The interest of all Americans lie with efforts that enhance our security. That's why our interests lie with Russian reform and with Russian reformers led by Boris Yeltsin.' 31 One of the most effective ways identified to achieve the objective was to strengthen and make more secure the economic position of the highly educated, highly trained and wealthy class of Russians who stand to gain most by the continued opening of the Russian economy to the global economy and the continued evolution of market-based capitalism in Russia: to make them 'stake-holders' in the new system.

An early candidate to test out the policy objective presented itself in the form of the Russian space program. There was already a precedent for cooperation in that there had been sporadic, generally low-level cooperation between NASA and Soviet space scientists during the Cold War, climaxing in the 1975 Apollo-Soyuz docking and joint space walk. Space research and exploration has been a leading edge technology sector in the Russian economy since World War II and is one of the few sectors in certain areas of which Russia has retained a world technological lead. The Soviet higher education system for decades turned out a steady stream of skilled and talented scientists to supply an industry that fulfilled dual Soviet objectives of achieving prestige and economic gain from space exploration and perfecting cutting edge military technology. However, after the fall of the Soviet Union, the military rationale for continued heavy state spending on the space sector virtually disappeared. Competing demands for funding in Russia threatened its very survival, in turn creating the risk that leading scientists and managers might choose to sell their knowledge, skills and hardware abroad. 32 Likewise for similar reasons in the United States, pressure to cut federal funding for NASA has increased, beginning in the 1980s but accelerating since the end of the Cold War. At their first summit meeting, in Vancouver in April 1993, Presidents Clinton and Yeltsin created a high-level commission on technical cooperation in the space and energy sectors, to be chaired by Vice President Al Gore and Prime Minister Viktor Chernomyrdin. The Clinton Administration backed close cooperation between NASA and the Russian Space Agency in which major current and upcoming mission objectives such as testing human habitation in space aboard the Sapce Station Mir, construction of the International Space Station Alpha and the projected human mission to Mars were to be conducted jointly. 33 NASA committed $473 million to the Russian Space Agency for a 5-year program of cooperation. 34

The success of these cooperative efforts, although already measurable in some aspects, will have a long payout and will be varied in nature. First, it must be noted that political stability and the functioning of democratic political processes in Russia, as in the other target states, may not go hand in hand for a long time to come. But so far, in terms of promoting political stabilization and the Yeltsin government in Russia, U.S.-Russian cooperation has enabled Russia to maintain scientific advancement and employment of highly skilled personnel in its leading edge technology sector, and the political constituency in Russia favoring continued economic modernization and transformation has not declined or been marginalized by its opponents. In terms of promoting U.S. economic interests both public and private, already access to Russian facilities such as unmanned Proton solid-fuel rockets has resulted in important cost and time savings to NASA's ability to place large payloads in space, notwithstanding ongoing technical problems on the Russian end. U.S. firms have invested in Russia in space-related ventures, and the Russian Space Agency has become a client of U.S.-based aerospace firms.

B. Bosnia and Croatia

Among the overall U.S. objectives towards Bosnia and Croatia, as they came to be defined by the Clinton administration, were the restoration peace and respect for human rights and establishment of democratic governance. 35 The administration's considerable uncertainty as to the extent of resources they were willing to commit to ending the Bosnian War was conditioned in part by the early reluctance of Congress to commit ground troops to peace implementation and the unwillingness of the Europeans to commit ground troops without U.S. participation. In 1995 the Administration organized the Dayton peace process and committed troops to NATO's implementation force to implement and maintain the agreement. U.S. offers of economic reconstruction assistance were credited with helping to entice the warring factions to cut a deal at Dayton. 36 The administration, led by the Commerce Department, then launched a concerted effort to promote investment for economic reconstruction in Croatia and Bosnia and a well orchestrated effort to encourage the Croatian and Bosnian governments and private firms operating there to purchase U.S. exports of goods and services. The administration regarded this effort as important enough to dispatch a high-level trade mission to Croatia and Bosnia led by Commerce Secretary Ron Brown himself. Commerce Secretary Ron The mission's objective was to generate business for U.S. firms in the reconstruction of Bosnia and Croatia, and in the process preposition U.S. firms in those markets in anticipation of future economic growth, in which European-based firms might otherwise be expected to have a market advantage. Brown, several other Commerce Department officials and staff members and numerous representatives of U.S. firms were killed when their plane crashed at Dubrovnik, Croatia. It is early still to measure gains in Bosnia, and any economic gains for U.S. firms and workers so far have been very limited. But war has not resumed since the implementation peace plan, elections have proceeded and the groundwork has been laid for economic reconstruction in many parts of Bosnia, with the expectation that U.S. firms will be well positioned to participate extensively. Croatia is farther advanced in this process than Bosnia.

C. Haiti

After the U.S.-led military intervention reinstated the democratically elected government of President Jean-Bertrand Aristide in October 1994, Clinton Administration officials faced the twin tasks of stabilizing democracy in Haiti and restarting economic growth there generally, and with it the flow of U.S. exports and investments that the 1991 coup had cut off. The Administration undertook these tasks in a vigorous, swift and coordinated manner that up to now has yielded considerable successes in a difficult policy theatre. Even before President Aristide had physically returned to Haiti, the White House claimed credit for organizing a multilateral group to commit $550 million for the first year of the Haitian recovery. 37 What makes the Administration's approach unusual in this instance is the extent of American assistance given the small size of the Haitian economy and potential market for U.S. exporters and investors: a population with a per capita income around $250 per annum. Clinton officials coordinated a broad-based multilateral aid effort with the International Financial Intitutions (IFIs), other nation-state governments, international organizations and NGOs. Simultaneously they effectively coordinated a domestic U.S. interagency effort to promote economic recovery and growth in Haiti and at the same time attract U.S. investors and promote U.S. exports. According to one U.S. official, `there is a plan', notwithstanding the logistical and political difficulties of orchestrating interagency cooperation in policy implementation. 38 This coordinated approach reflected the view held at high levels that stabilizing the Haitian political system would not succeed without a simultaneous effort to bring about economic recovery that would involve U.S. economic policy agencies. U.S. offficials perceived clearly the need for the policies to be implemented together. The U.S. ambassador to Haiti, William Swing, later commented informally that while troops can restore order and democracy, they cannot grow an economy. 39

The State Department set up a Haiti working group to coordinate the Administration's post-embargo Haiti economic policy by holding regular interagency meetings. Two broad approaches were planned, one focusing on bilateral assistance by U.S. government economic agencies and the other focusing on close cooperation with the IFIs. U.S. agency efforts would be spearheaded by USAID and the Commerce Department, and would also involve the Treasury Department and the Overseas Private Investment Corporation (OPIC). IFI cooperation would principally involve the World Bank, International Monetary Fund (`IMF') and Inter-American Development Bank (`IDB'). Multilateral assistance efforts involving the IFIs would include other bodies such as the United Nations,the European Union and other nation-state governments.

Overall the Clinton Administration has enjoyed modest successes in its Haiti policies. Clinton's restoration of Aristide and steady support for elected government in Haiti thereafter has been perceived as a major foreign policy victory for democratic rule in the Western Hemisphere. The Administration has also shown consistency in its efforts to bring the benefits of Haitian democratization and political stabilization to U.S. firms as well as to the Haitian people. It was known from the start that this project would be slow to yield fruit, due to the major structural difficulties in generating major growth in the Haitian economy and Haitian market. Economically, growth has resumed, albeit slowly, following a 30 percent aggregate fall in GDP over the embargo period 1991-1994. GDP grew 4.5 percent in 1995 and a more modest 2 percent in 1996, as demand growth caused imports to grow more rapidly than exports. 40 The Haitian Government has successfully reduced capital and operations expenditures, transfers and subsidies, enabling its deficit to be limited to 3.2 percent of GDP. An April 1996 agreement between the Haitian Central Bank and the Ministry of Finance imposed rigorous control on the relationship between receipt of tax revenues and expenditures, and tax collection has improved substantially. Inflation was reduced from 30 percent in 1995 to 20 percent in 1996. 41 Availability of credit for projects of different sizes has improved. The Preval Government remains publicly committed to privatizations, business-friendly legal reforms and creation of the duty-free zone, and the process is proceeding. 42 Modest socioeconomic improvements in health, education agriculture and environmental management have been achieved. The business climate, however, has remained mixed, with an interest in expansion to meet domestic demand tempered by pessimism about prospects for cooperation with the Lavalas government. Exports from Haiti, after their initial post-embargo recovery, have experienced minimal growth. Haitian businesspeople remain harshly critical of corruption in government and remain reluctant to invest in the sort of assets that could be vulnerable to government seizure. 43

U.S. exports to and investments in Haiti have also grown modestly. With its OPIC-backed loan program, Citibank has profited from the prior exit of numerous other foreign-owned financial services firms from the Haitian market. U.S. construction firms such as Caterpillar have profited from the thriving construction sector in Haiti, which so far has outpaced agriculture and manufacturing in the post-1994 recovery. U.S. exports of grain and flour continue to thrive, as they had begun to do prior to the embargo under the World Bank project to encourage Haitian subsistence farmers to shift into manufacturing. More disappointing has been the reluctance of the Haitian-American community to invest their own capital in Haiti since the embargo, especially given that they led the domestic pressure on the Clinton Administration to restore President Aristide to power. 44

IV. Explanations for the Administration's New Policy

Given that the Clinton Administration faced a range of foreign economic policy choices upon taking office in 1993, how can the choices of the new President and the group of advisers with whom he surrounded himself best be explained? The Administration's choices were conditioned by structural changes that were underway in the global economy and the international political system itself before the end of the Cold War and long before the Administration came to office, but the nature of the individuals concerned and the interaction between them clearly played a role in the decisions actually taken.

It was the response to structural change of the most important actor in the policymaking process, Bill Clinton himself, that initiated the unfolding of events leading to a new U.S. post-Cold War foreign economic policy. As a member of a different generation from his predecessors, Clinton himself saw himself, the United States and the world in a different way. He was the first of his post-World War II, baby boomer generation to become president. As Maraniss argues, Clinton developed his political ideas growing up in the shadow of Camelot, meeting John F. Kennedy at a Boy's Nation congress in Washington while Kennedy was president. Clinton took on Kennedy's idealism about solving problems and government's ability to help people, an idealism that he has never lost but that has been forced to be constrained by the change in the attitudes of the American public towards government that progressed even while Clinton's own political career swam ahead seemingly against a rising anti-government tide. 45 This phenomenon itself may have been initiated by the flawed macroeconomic policies of the 1970s (and that found its first flowering in the election of Ronald Reagan) but was accelerated by the removal of bipolar nuclear confrontation as a parameter restraining dissatisfaction of publics with their government the world over (and saw its second, if briefer, bloom in the 1994 Republican 'Contract with America'). Equally importantly, Clinton saw experienced the world beyond U.S. borders and the essential nature of the Cold War differently from his predecessors. He began his adult life, and his eligibility for military service, at a time in which the lengthiest and costliest military conflict of the Cold War for the United States, the Vietnam War, was at its height but as part of a generation coming of age profoundly ambivalent about the war, the Cold War generally and their place in it. Winning a Rhodes Scholarship to Oxford University in England, Clinton lived abroad for two years in a nonmilitary, nonofficial capacity, studying and travelling extensively in Western and Eastern Europe, including the Soviet Union itself. While at Oxford, he formed close and enduring personal friendships both with other Americans (many also on Rhodes Scholarships) with whom he shared views and interests and also, equally importantly, with many Europeans. By travelling, making friends, engagaing in discourse and questioning ideologies in a broader journey of personal self-discovery (if not of an entirely academically rigorous character), Clinton experienced Europe, both East and West, fundamentally differently from the way in which his predecessors had done, at a pivotal time in his own career and long prior to becoming president. 46 Presidents Carter and Bush, for example, at that key age in their respective lives, had both fought in World War II, and President Reagan had made numerous films that portrayed the United States as the traditional World War II-Cold War protagonist in a moralistic global struggle.

Clinton was subsequently in the first generation of political leaders like himself to learn his skills of governance in a period characterized by technology-accelerated flows of capital, goods and services in conjunction with a U.S. federal government that attempted unsuccessfully to reduce the role of the U.S. government in both domestic economic management and global economic cooperation. As Bill Clinton governed Arkansas during the 1980s, even his small and relatively poor state was buffeted to some degree by such phenomena as the Mariel boatlift from Cuba, instability in the U.S. banking system resulting from the Third World debt crisis and the precipitate increase in the value of the U.S. dollar that undercut the competitiveness of exports from U.S.-based firms on global markets and even sales of U.S.-produced goods in the home market, thus stimulating demands by business for new protectionism from Congress. 47

Hence Clinton as governor of Arkansas experienced the fall of the Berlin Wall and the subsequent collapse of Communism across Easten Europe with particular ideas and views about the nature of the global economy, international relations and the role and interests of the United States conditioned by a variety of structural factors. According to Maraniss, Clinton was ready for the end of the Cold War before it happened. 48 He had had experiences that his predecessors had not, he had formed his political views under different circumstances and, critically, when the time came to launch a presidential campaign and subsequently form an administration, he had accumulated a reservoir of friends, colleagues and advisors whose views he either shared or respected for their difference and from whom he could draw deeply in assembling a team to govern and fashion a new foreign economic policy in the post-Cold War era. Clinton chose his economic policy team from among those who understood the changing nature of the global economy and shared his broad views. 49 At the core of his team were several individuals who understood what had changed in the global economy and the international system in the way that Clinton did and whose stamp would be on the new Administration's foreign economic policy: Robert Reich, Clinton's first Secretary of Labor; Ron Brown, to be Secretary of Commerce; Robert Rubin, to head the Council of Economic Advisers and later to be Secretary of the Treasury; Mickey Kantor, initially U.S. Trade Representative and then Secretary of Commerce after Brown's death; Laura D'Andrea Tyson, to head the newly-created National Economic Council; Strobe Talbott, to be Undersecretary of State for Eastern Europe; and last but not least, Alan Greenspan, already Chairman of the Federal Reserve Board. Reich, with whom Clinton had become close friends while they both were at Oxford, had laid out the blueprint for a comprehensive post-Cold War economic and security policy that was at once domestic and foreign two years before the election in his book The Work of Nations. Brown, a leading U.S. attorney and businessman and close confidante of Clinton, by going to Commerce signalled the central role that the Commerce Department would play in the administration's new economic and security policy. Rubin, a former chairman of Goldman Sachs, indicated to Wall Street that the concerns of the nation's financial services industry would be ably represented at the heart of the policy team. Kantor, Clinton's campaign manager and a skilled lawyer, brought to USTR negotiating toughness and acumen coupled with a nonconfrontational personal style that would prove critical during difficult trade negotiations with Japan over the first three years of the Administration. Tyson, a leading academic economist, had distinguished herself in the 1980s analyzing the impact of technology upon global markets and its implications for U.S. trade policy, offering an informed critique of strategic trade policy that was ultimately doubtful about its efficacy in most situations. Talbott, another of Clinton's close friends from Oxford, was an expert on the former Soviet Union and Eastern Europe who had worked for many years as a journalist. Greenspan's support Clinton recognized early as indispensable to winning the backing of capital markets for his economic reform plans, an acknowledgement that in the post-Cold War era low interest rates would be a vital precondition for stable economic growth and job creation. That this understanding occurred at an interpersonal as well as theoretical level is illustrated in that Greenspan worked closely from the start with the new administration, became an important advisor to Clinton and was reappointed by him to the Fed chairmanship when his term expired.

The policies that were chosen were not all implemented successfully. Some particular policies, such as the Administration's Bosnia policy, took a considerable amount of time to formulate. Some policies were adjusted and revised substantially in accord with circumstances. Under Secretary of Commerce Garten's early fears that the administration's foreign economic policy agenda would be dominated by conflict with Japan and Germany that would demand the bulk of official attention, which he detailed in his 1993 book A Cold Peace, were not borne out, as conclusion of the 1993 U.S.-Japan Framework Agreement and the 1995 U.S.-European Union New Transatlantic Agenda indicated. But what is essential is that the thrust of Clinton Administration foreign economic policy of promoting employment at home by promoting exports, investment and growth and by promoting the global political stabilization and democratization needed to underpin the more immediate economic objectives could have been different. The means of achieving the policy objective, coordination between different executive agencies and close cooperation between government and the private sector to produce results at low cost to the government also could have been different. Hence that this team of individuals chose the policies that they did for the reasons that they did and achieved the results that have followed is significant.

V. Conclusions

Measured against its own stated objectives, overall the achievements of the Clinton administration's foreign economic policies to date have been substantial. Completing and securing passage in Congress of the Uruguay Round and NAFTA and working actively to complete the World Trade Organization's ongoing work program of sectoral trade liberalization have advanced the overall project of multilateral trade liberalization significantly and seen off the expectations of those who viewed early administration conflicts with trading partners as presaging an administration preference for the strategy option of aggressive unilateralism conflictual market opening negotiations with existing major trading partners such as Japan. According to Clinton, in the first three and a half years of the administration, over 200 trade deals were negotiated with trading partners, including 21 with Japan. Exports to Japan over that period increased by 85 percent. 50 Domestifcally, the long economic recovery has been export-led and so far has created over ten million jobs, pushing officially measured unemployment to quarter-century lows and under conditions of virtually nonexistent inflation. Democratization throughout the world has continued to advance, albeit at different speeds in different places. The setbacks, where they have occurred (Belarus, Uzbekistan, etc.) have been rather more minor than the relative successes (Russia) in what is of necessity a long process. As Clinton commented: 'As our own history demonstrates, democracies are built slowly, not all at once. History also tells us that countries making the transition from authoritarian regimes to democracy are unstable and prone to conflict, especially if they are not also making economic progress.' 51

The Clinton administration's efforts to harmonize promotion of U.S. exports and investments and promotion of democratization and political stabilization represent one of their most difficult foreign policy challenges, much more difficult than, for example, implementing a stategy to increase exports to the Big Ten. Each of the case studies discussed here is unfinished. In each case progress may be stopped and even eroded. However, thus far the administration in these cases has advanced the economic interests of U.S.-based firms without adopting aggressively neomercantilist techniques that violate the WTO rulebook of liberal international trade. The policy has strengthened the generally liberal structure of the global economy rather than eroding it just to produce relative gains for the United States, and by doing so has generated absolute gains for all participants in international trade and investment: hence the notion of a 'win-win' response to structural change.

The major problems that the administration has faced and continues to face are focused on implementation of the chosen policies and on inconsistency of their application. The administration is still hamstrung to a considerable degree by the constraints imposed by Congress. Many in the Republican majority in Congress not still only oppose the export promotion activity of the Commerce Department but favor abolition of the department altogether. The administration has as yet not constructed a majority in both houses to pass renewal of Fast Track legislation, which is vital to renew the process of treaty-based regional and multilateral trade liberalization negotiations. Difficulties in securing funding for all the administration's efforts, ranging from commercial diplomacy to funding for NASA and its missions, are an endemic feature of the policy landscape of the post-Cold War era. The administration also faces obstacles to the efficient implementation of its policy of combining promotion of U.S. exports and investments with promotion of democratization owing to the bureaucratic and organizational politics of government. The Haitian example shows the difficulties inherent in coordinating the operations of many different governmental organs with different bureaucratic and organizational objectivs to undertake a cross-cutting project with a common goal, and it helps to make the case that Garten advances in The Big Ten for major reorganization of export-related governmental functions.

In terms of inconsistency of policy application, instances in which policies chosen towards particular states are producing the opposite result, with the net effect of reducing the gains for both the United States and the global economy achieved by the democratization/export promotion combination, help to make the overall case for expanded and more uniform appliciation of this policy approach. Application of the policy to other target states, such as Cuba, Syria and Iran could be expected to yield results much more quickly than Haiti or Bosnia. Cuba is a clear example of a state towards which a foreign economic policy of promoting U.S. exports and investments could be expected both to yield substantial gains to U.S.-based firms and employment and to further overall foreign policy goals of political stabilization and democratization. Yet the administration is constrained by substantial enough political opposition in Congress to make early revision of Cuba policy unlikely. Syria and Iran are more likely possibilities in the medium term.

In summary, while the implementation of the chosen policies may have been and continue to be flawed, the Clinton Administration has the right objective for U.S. foreign economic policy as a response to structural change in the global economy brought about by the end of the Cold War. They have had the benefits of good fortune in terms of coming to office at a time of global economic growth, but the fact of that growth does not take away from the tremendous uncertainty of the shape that growth would take in the post-Cold War environment or its effect on U.S. workers. Those who argue that the Clinton White House has not really had a foreign policy I would argue miss Clinton's essential point: 'It's the economy, stupid.' The durability of the administration's policies and the adaptability of their policymakers to changing circumstances are likely to face more rigorous tests during the remainder of the second term as they face challenges raised by fallout from the East Asian economic difficulties and the ever present danger of a serious political or economic collapse in any one of the major foreign economic policy target states.

Notes:

Note 1: Bill Clinton (1993) Remarks by the President to the American Society of Newspaper Editors, Annapolis, Maryland, April 1. Back.

Note 2: Robert Reich (1991) The Work of Nations. New York: Vintage Books; Jeffrey E. Garten (1997) The Big Ten; the Big Emerging Markets and HowThey Will Change Our Lives. New York: Basic Books. Back.

Note 3: Joseph A. Camilleri and Jim Falk (1992) The End of Sovereignty? The Politics of a Shrinking World. Aldershot: Edward Elgar; Susan Strange (1994) States and Markets, 2nd edn. London: Pinter Publishers Ltd. Back.

Note 4: Joanne Gowa (1989) 'Bipolarity, Multipolarity and Free Trade'. American Political Science Review vol. 83, no. 4, December, pp. 1245-1256. Back.

Note 5: Jeffrey E. Garten (1993) A Cold Peace; America, Japan, Germany and the Struggle for Supremacy. New York: Twentieth Century Fund. Back.

Note 6: E.J. Dionne, Jr. (1994) 'Summit In a Swamp'. The Washington Post, March 15, p. A19. Back.

Note 7: Andrew Sullivan (1993) 'How Clinton turned out to be Bush's man'. The Sunday Times, Sept. 26, p. 20. Back.

Note 8: Reich (1991) pp. 6-7. Back.

Note 9: William J. Clinton (1995) A National Security Strategy of Engagement and Enlargement 1995-1996. Washington: Brassey's, pp. 82-83. Back.

Note 10: Bill Clinton (1996) Between Hope and History. New York: Random House; Sandy Berger (1993) Remarks by National Security Adviser at Press Briefing, Dec. 14. Back.

Note 11: Clinton (1993); Berger (1993). Back.

Note 12: Clinton (1995) p. xiii. Back.

Note 13: Bill Clinton (1993b) Remarks by the President in NAFTA Bill Signing Ceremony, Washington, D.C., December 8. Back.

Note 14: Clinton (1996). Back.

Note 15: Martin Walker (1997) Clinton; The President They Deserve. London: Vintage, pp. 15-16, 286-287. Back.

Note 16: Walker (1997) pp. 162-163. Back.

Note 17: Walker (1997) p. 297. Back.

Note 18: David Maraniss (1995) First In His Class. New York: Touchstone; Michael Cox (1995) US foreign policy since the Cold War. London: Royal Institute of International Affairs. Back.

Note 19: Reich (1991). Back.

Note 20: Clinton (1993). Back.

Note 21: Ronald H. Brown (1995) 'BEMs Message from Commerce Secretary Ronald H. Brown'. Back.

Note 22: Garten (1997) pp. xiii-xiv. Back.

Note 23: Strange (1994). Back.

Note 24: John M. Goshko and R. Jeffrey Smith (1993) 'Details of Clinton's Democracy Program' Back.

Note 25: William Robinson (1996) Promoting Polyarchy. Cambridge: Cambridge University Press, pp. 48-72. Back.

Note 26: Clinton (1993). Back.

Note 27: Clinton (1993). Back.

Note 28: Clinton (1996). Back.

Note 29: William Drozdiak (1993) 'Recriminations Intensify Strain in Atlantic Alliance', The Washington Post, Oct. 25, p. A14. Back.

Note 30: Clinton (1993); Walker (1997) pp. 268-269. Back.

Note 31: Clinton (1993). Back.

Note 32: David Hoffman (1997) 'Russia's Space Program Takes a Blow From Mir', International Herald Tribune, June 30. Back.

Note 33: William J. Broad (1997) 'Mars Mission Hints at New Life For Space Program', The New York Times, July 20, p. A1. Back.

Note 34: Hoffman (1997). Back.

Note 35: Clinton (1995) p. 111. Back.

Note 36: Michael Dobbs (1996) 'Christopher Pursues Political Objectives by Economic Means', The Washington Post, Feb. 12, p. A10. Back.

Note 37: Senior Administration Officials (1994) Background Briefing , The White House, Office of the Press Secretary, October 6. Back.

Note 38: Interview with U.S. Official. Back.

Note 39: Comments of Senior U.S. Official, Port-au-Prince, January 1997. Back.

Note 40: Haiti; Recent Economic Developments', IDB internal report, undated (1997). Back.

Note 41: IDB report (1997). Back.

Note 42: Don Bohning, 'Haiti persists in move toward business privatization', Miami Herald, July 25, 1997. Back.

Note 43: Interview with Haitian industrialists, January 1997. Back.

Note 44: Interview with U.S. official. Back.

Note 45: Maraniss (1995). Back.

Note 46: Maraniss (1995); Walker (1997) pp. 61-68. Back.

Note 47: Maraniss (1995) I.M. Destler, (1992) American Trade Politics. Washington: Institute for International Economics. Back.

Note 48: Maraniss (1995). Back.

Note 49: Walker (1997) pp. 161-171; Cox (1995). Back.

Note 50: Clinton (1996). Back.

Note 51: Clinton (1996) p. 163. Back.

References