THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND
MAY BE UPDATED.
ANNOUNCER: This is a special holiday edition of Lou Dobbs MONEYLINE for
Monday, May 26th, sitting in for Lou Dobbs, Jan Hopkins.
JAN HOPKINS, CNN ANCHOR: Good evening. Tonight, "Exporting America,"
free trade was supposed to create new jobs and markets for U.S. workers.
The reality is very different.
The United States is sending much needed jobs and dollars overseas at a
high cost here at home.
Then, nuclear standoff, we examine the North Korean nuclear threat. What
can be done to stop Kim Jong-il's nuclear program? A series of special
reports with the "Economist" magazine and we'll talk with former
National Security Advisor Zbigniew Brzezinski.
And, the new South, in contrast to the economic crisis in the north,
South Korea has emerged as one of the most successful economies in the
world.
But we begin tonight with a special series or reports on a rising threat
to the American economy and the American worker. We've called these
reports "Exporting America" because we are shipping not only American
dollars around the world, we are also shipping jobs.
We begin with a look at the broken promise of international trade for
hundreds of thousands of American workers. Jobs in this country are
disappearing. In some cases literally being exported overseas along with
valuable technology and intellectual capital. We could have easily
called these reports the great American giveaway.
Peter Viles has the story.
(BEGIN VIDEOTAPE)
PETER VILES, CNNfn CORRESPONDENT (voice-over): For two years, the
American economy has been losing jobs and sometimes you can see exactly
where they're going, Honeywell shutting a factory in Rhode Island, where
it makes thermal controls, exporting 374 jobs to Mexico and China.
Alcoa this spring announced cutbacks in New York, Texas, and Washington,
and invested $400 million in South America, invested $1.1 billion in
East Iceland. Delta Airlines outsourcing some reservations jobs
overseas, 600 hundred new jobs in India and the Philippines.
Now this is not how global trade was supposed to work out. The promise
was new markets and new jobs for American workers. BILL CLINTON, FORMER
PRESIDENT OF THE UNITED STATES: We must recognize that the only way for
a wealthy nation to grow richer is to export, to simply find new
customers for the products and services it makes.
VILES: The reality is the trade deficit has rocketed the five percent of
GDP. The promise of new markets for American products appears broken in
what author Arthur Tonelson calls a race to the bottom in wages and
costs.
ARTHUR TONELSON, "THE RACE TO THE BOTTOM": And they sold America a bill
of goods during the 1990 because they said that all of these new trade
agreements, NAFTA, normalized trade with China, were going to boost
exports from their American factories, and what they've done is they've
used these trade agreements to send production abroad.
VILES: And not just production. Increasingly, corporate America is
exporting so-called knowledge jobs. By one estimate, the high tech
industry in this country lost 560,000 jobs in 2001 and 2002.
The U.S. is also exporting capital. Among the biggest investors in
China, Motorola, $3.4 billion invested; General Electric, $1.5 billion
invested; Kodak, $1.2 billion, all participating in a rush to globalize
that has outraced U.S. policy.
BARRY C. LYNN, TRADE ANALYST: One of the things that they really don't
understand is the degree to which most manufacturing has become
globalized and it happens so quickly and it happens so dramatically in
the 1990s and over this last decade that most policymakers it's just way
off their map.
VILES: The issue is not just jobs. It's intellectual capital as well. In
semiconductors and other high tech manufacturing, China has narrowed the
gap with the U.S. so quickly it raises national security concerns.
Right now most of the magnets that make smart bombs work are made in
Indiana, but (UNINTELLIGIBLE) is closing its Indiana plant and may move
the jobs overseas. Indiana lawmakers are asking the White House to
intervene and keep those jobs out of China, saying such a move would
"threaten national security."
(on camera): Now, that Indiana factory is not an isolated case. A
special commission that studied trade with China reported to Congress
last year about growing concerns that there was so much reliance on
Chinese imports all throughout the American economy that that reliance
might "undermine the U.S. defense industrial base.
Peter Viles, CNN, New York.
(END VIDEOTAPE)
HOPKINS: American companies are also struggling to compete in an
international market. We take a look now at the challenges and
opportunities of an international economy and how companies and labor
are responding to the cost of competition. Bill Tucker has that
report.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNNfn CORRESPONDENT (voice-over): The international trade
often looks like this but it can also look like this, a small town in
central Wisconsin. Here in Coloma is the company, Especially For You.
The company makes gifts and home furnishings, making furniture for
catalogues like Land of Nod and a collectible line of cast resins.
Especially For You is a company caught in the middle of the competitive
struggle of international trade. It sends orders for its collectible
line to a factory in China. In its shop in Coloma it makes furniture.
The company does find some relief from a lower dollar.
JACK ZELIENKA, CO-CEO, ESPECIALLY FOR YOU, LTD.: I think the weaker
dollar you would definitely see buyers looking more at domestic
manufacturers because now all of a sudden the big price difference
between buying something offshore and buying domestic wouldn't be as big
as what it is right now.
TUCKER: But, a lower dollar is not enough and try as Jack might, he
can't really compete on an hourly wage basis. Compared with the hourly
wages in the United States, workers in Canada are paid 77 cents on the
dollar, workers in Mexico 12 cents, Taiwan 28 cents, and in Spain 54
cents.
Unions argue the trade agreements depress wages in both the United
States and in the country the jobs are exported to because of the
priorities of trade agreements, agreements which put companies and
investors first including workers only as an afterthought if they are
included at all.
So, labor unions rather than objecting to economic globalization are
pushing lawmakers to impose improved working conditions and worker's
rights similar to their American counterparts on foreign labor sources
as a condition for trade agreements.
ROBERT SCOTT, ECONOMIC POLICY INSTITUTE: A good trade agreement is going
to be good for all the members of society. It's going to make everyone
better off. It's not going to work to simply enrich one particular class
of societies.
TUCKER: Companies meanwhile are finding that to compete effectively they
can be successful playing to their strengths.
ZELIENKA: Oh, a nice job.
TUCKER: Sometimes it's on a price basis and sometimes prices outweighed
by other advantages.
ZELIENKA: There are some things that we can bring to the table that they
can't. For instance, if I work with a national account they can come
right to central Wisconsin in my offices over here. We can sit down at
my conference table and we can work on developments.
We can bring shorter lead times. We can bring smaller minimum orders and
we feel that we're getting close to being on the same level playing
field as our foreign competition, simply from the fact that we can bring
these things to the table.
TUCKER: Jack would also like a little help from the government in
leveling the playing field. He'd like politicians to start by simply
paying attention to the issue.
Bill Tucker, CNN, New York.
(END VIDEOTAPE)
HOPKINS: The issue of American jobs being exported overseas has not gone
unnoticed in Washington. Senator Fritz Hollings of South Carolina is
working to give American companies incentives to hire Americans.
Lou Dobbs spoke with Senator Hollings, the Ranking Member of the Senate
Commerce Committee about his efforts on the matter.
(BEGIN VIDEOTAPE)
SEN. FRITZ HOLLINGS (D), SOUTH CAROLINA: Instead of investigating
manufacturing firms that are exporting the jobs, we got to sort of
investigate the Congress, educate the Congress, and the only way we can
get in on this game is to stop the dumping on the one hand and make the
penalties for those who manufacture overseas and the benefits for those
who manufacture in the United States.
There's a bill in the House side. Both Charlie Rangel and Phil Crane
have got it, a bipartisan bill. I have a similar bill over there to keep
the jobs in this country and it's going to be an uphill fight because we
got to really change the culture.
LOU DOBBS, CNN ANCHOR: Change the culture. As we look at the trade
deficit, the declining dollar and end recovery this economy is not
creating jobs, in fact going the other way. It is a jobless recovery as
you well know.
HOLLINGS: Definitely.
DOBBS: The fact is that there are some sophisticates who would suggest
that to be worried about American jobs just isn't really embracing of a
more worldly globalizing trend. How do you respond to that?
HOLLINGS: Well, globalizing the trend, you know, that's the crowd that
talks about protectionism. Look, we've rebuilt the Pacific Rim in Europe
with the Marshal Plan.
Now with the fall of the wall they've gone capitalistic throughout
Europe. Even communist China is, you know, competing in a capitalist
fashion and there's a real viable trade war or conflict or competition
and we've been AWOL. We've got to get into it, use our richest market
here as leverage to open up the other markets. We're still not into
Japan, 50 years later. These are the kind of things.
We've got a deficit in the balance of trade not only in manufacture.
Now, we have lost the high tech. We've got a $15 billion deficit there.
We even got a deficit in the balance of cotton and farm products and the
Koreans now are really buying all their corn from China, so we're losing
that market.
DOBBS: Senator, let me ask you.
HOLLINGS: Yes.
DOBBS: There was a time that a working man or woman in this country
could count on the AFL-CIO, the Teamsters, a number of unions to
represent their interests. Some would argue that the Democratic Party
provided the same service.
HOLLINGS: No. Lou, they're afraid to open their mouths. If they open
their mouths they're gone, the job is gone overseas. That's the
trouble.
DOBBS: Where in the world is the working man and woman in this country,
the middle class, going to find representation in this? It is not of
much consolation to say, you know, in the long-term trend we'll see some
efficiencies introduced in the economy when a man and a woman loses a
job like this.
HOLLINGS: That's exactly right and what happens is, if you open up Dobbs
Manufacturing tomorrow morning, you have to have clean air, clean water,
Social Security, Medicare, Medicaid, plant closing notice, parental
leave, safe working place, safe machinery. You can go to China for less
than 50 cents an hour and none of that.
So, I lost 59,600 textile jobs in NAFTA down to Mexico. Now the Mexicans
are losing jobs to China and we've got to sort of sober up and get into
the competition and do like the others, use barriers, use tariffs,
enforce our dumping laws.
Those are the kind of things when I say change the culture, we've got
special trade representative goes to Doha, Bob Zoellick. He says we're
going to do away with the dumping laws. Well we're not enforcing them
but the solution is to enforce those dumping laws, selling at less than
cost. We can't compete with that.
DOBBS: Senator Fritz Hollings, as always it's good to talk with you. We
look forward to you coming back to talk about this very important
issue.
HOLLINGS: Thank you very much.
DOBBS: Senator Hollings.
(END VIDEOTAPE) HOPKINS: Coming up, we continue our special series of
reports on "Exporting America." Thousands of workers in other countries
are taking critical technology jobs away from Americans.
And later, working to keep the jobs at home, what's being done to
protect American jobs? We have the report.
(COMMERCIAL BREAK)
HOPKINS: By one count, 560,000 high tech jobs have been lost in this
country in the last two years. Many of those jobs have ended up in India
and this trend of exporting high tech jobs to India is expected to
explode.
(BEGIN VIDEOTAPE)
(voice-over): Bangalore, India home to 100,000 high tech workers, many
of them employed by American companies. Across all of India, one million
people work for U.S. based companies, like GE Capital and Microsoft.
Eight billion dollars in services are exported from India to the United
States each year. The U.S. consulting firm A.T. Kearney is doing more
and more work in India.
STEFAN SPOHR, A.T. KEARNEY, INC.: We do have an office in Delhi actually
with nearly 100 people, 50 of whom are consultants and the rest are
working in creative services and information research.
HOPKINS: Companies like Indian employees because they're hard- working,
well educated, and speak English, but the most attractive thing is the
difference in pay. An Indian worker earns from one-tenth to one-half
what a U.S. worker would. More and more companies are looking at these
numbers and moving jobs to India.
JOHN MCCARTHY, FORRESTER RESEARCH: The conservative numbers show that
over the next 13 years upwards of 3.3 million services jobs in the U.S.
economy will be moved offshore.
HOPKINS: India is the leading destination. The exporting of jobs angers
groups like Wash Tech, an offshoot of the Communications Workers of
America. They regularly protest outside Microsoft in Seattle with signs
like "Think India, Think Unemployment."
MARCUS COURTNEY, WASHTECH: This is a real slap in the face to American
technology workers that they have built up this industry. It's one of
the most profitable industries in the history of America and now what
they're facing is that these companies are turning around and sending
their jobs offshore.
HOPKINS: Most companies we talked with like Oracle say they are global
companies. They aren't outsourcing high tech jobs they're "augmenting
work done in this country with thousands of workers in India." Whatever
they call it, in high tech centers like Silicon Valley it's hard to find
a job. HEATHER BOUSHEY, ECON. AND POLICY RESEARCH: Unemployment for
information technology in the information technology sector has more
than doubled over the past couple of years. It now stands at 7.7
percent.
HOPKINS: Wall Street is the latest to join the flight to India. JP
Morgan Chase will create 40 jobs in India for research analysts. Lehman
Brothers is also hiring analysts in India.
ANDREA BIERCE, A.T. KEARNEY, INC.: If you even look at an MBA graduating
from the India Institute of Technology, you'll see that that graduate
will hope to get about a $12,000 per year salary and that's with two to
three years' experience. Contrast that with a Harvard Business School
graduate who will really hope to get closer to $100,000 with the same
sort of skill set.
(END VIDEOTAPE)
HOPKINS: Now, Wall Street firms point out that these are not the star
research analysts jobs like Jack Grubman had and Mary Meeker has but for
crunching the numbers, Wall Street says Indian analysts will do just
fine.
Critical technology jobs in this country are also being lost to foreign
workers holding special immigrant visas. Kitty Pilgrim has the
report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNNfn CORRESPONDENT (voice-over): Mike Roberts was laid
off from his technology consultant job in California. He sold his house
and is living in a hotel room with his family and plans to leave
California for good when his daughter finishes the school year. He says
the company he worked for brought in a wave of foreign workers on H1-B
visas. He eventually was replaced.
MICHAEL ROBERTS, TECHNOLOGY CONSULTANT: They were bringing in
consultants like one, two, three every week, all H1-Bs, so you start
asking and then you start discovering they're all coming through just
one or two agencies and you realize they're not even considering
American citizens at all.
PILGRIM: Thirty-year-old Daniel Soong was making $160,000 a year but no
longer. He lost his job to an H1-B visa worker. The former consultant
now can't find a job and lives with his parents. He talks about a recent
job interview that went nowhere.
DANIEL SOONG, TECHNOLOGY CONSULTANT: They were just interviewing me in
order to satisfy the equal opportunity requirements of the state so they
wouldn't be discriminating against American citizens, but in reality
they had no intentions of hiring me and they wanted to hire an H1-B visa
candidate.
PILGRIM: The H1-B visa was born in the tech room of the early 1990s.
There were not enough American workers, so employers asked for a special
visa to bring in college educated workers from overseas to fill
specialized jobs.
In 1992, the H1-B visa let in a maximum number of 65,000 workers, but by
the end of the decade that number jumped to 195,000 every year and that
doesn't count visa renewals. For example, in 2001, 342,000 people
renewed their H1-B visa.
RON HIRA, IEEE-USA CHAIR: Usually in the technology area that you would
bring an H1-B worker in temporarily. Unfortunately, the program has
changed into instead of being a last resort the H1-Bs have become in
some cases, you know, a first choice.
Pete Bennett interview by CNN Correspondent Kitty Pilgrim
I was often called by CNN for snippets taped for insertion when
issues about jobs and outsourcing came up.
PILGRIM: Peter Bennett started a Web site complaining about
the H1-B visas. Then it gets 1,500 hits a week on his Web
site.
PETE BENNETT, NOMOREH1B.COM: Across the country, workers are
being displaced wholesale. Entire teams are brought in to
replace American workers and where they're being forced to
train their replacements.
PILGRIM: Charles Corry did consultant work in Colorado Springs
with many high tech firms that use the H1-B visa. He says to
him it's clear that companies give preference to the H1-B
applicants because the workers are willing to put in longer
hours for less money, anything to keep their job in the
states.
CHARLES CORRY, TECHNOLOGY CONSULTANT: They're a modern version
of indentured servitude, the hours, the salaries typically
much lower. I was probably getting twice what the H1-B visa
people were.
PILGRIM (on camera): The General Accounting Office is looking
into the issue of whether H1-B visa workers are crowding
American workers out of their jobs and they expect to come up
with a report about mid-September. That timing is critical
because Congress takes up the issue of limits on the visas the
following month.
Kitty Pilgrim, CNN, New York.
(END VIDEOTAPE)
HOPKINS: Coming up next, keeping jobs at home. We'll take a look at what
American businesses and local governments are doing to keep jobs in the
U.S. and still allow companies to compete in the international
market.
And later, the growing military threat from North Korea. We'll have a
special report in conjunction with the "Economist" magazine. We'll talk
with former National Security Advisor Zbigniew Brzezinski.
(COMMERCIAL BREAK)
HOPKINS: Companies save millions of dollars by shipping jobs overseas
but the savings to corporate America comes at a very high cost to
American workers.
Casey Wian reports on what is being done to keep the jobs at home.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNNfn CORRESPONDENT (voice-over): Ace Clearwater is all
about made in America producing aerospace and power plant parts but
rising expenses and cost pressures from customers are forcing the
company to consider moving some work to Mexico.
GARY JOHNSON, V.P., ACE CLEARWATER: One of our larger customers requires
a six percent price reduction every year. Raw material is going up. The
cost of labor is going up. We don't have any interest in moving our
company out of the United States but we do have an interest in staying
in business and that may be a requirement.
WIAN: Many competitors and customers have already gone overseas.
(on camera): Ace Clearwater used to make $8 million a year worth of
these power plant ducts for General Electric but G.E. has shipped about
85 percent of that work to China and Hungary, so Ace Clearwater was in
danger of having to lay off nearly half its employees.
(voice-over): Those jobs were saved recently by a military contract for
Apache helicopter exhaust nozzles. Still, Mexico beckons. Government
officials from Washington to Sacramento are struggling to stop job
migration with programs ranging from White House tax breaks for small
business to state-funded training and new manufacturing techniques.
LON HATAMIYA, CALIF. TECH. TRADE AND COMMERCE SECY.: We've tried to
utilize various incentive programs, whether they're tax incentives,
manufacturing investment credits, R&D credits as well as industrial
development bonds. We do the best we can and it is very competitive.
WIAN: One New Jersey state Senator wants to make some job migration
illegal after learning a state contractor hired operators in India for a
welfare program call center. Shirley Turner is sponsoring a bill to keep
taxpayer funded jobs home.
SHIRLEY TURNER, NEW JERSEY STATE SENATE: When we send jobs overseas we
get no return on that money that's (AUDIO GAP). The people there do not
pay taxes. They do not spend money. They do not stimulate our
economy.
WIAN: Others stress American productivity and legal protections.
DAVID BRAUNSTEIN, CALIF. MANUFACTURING & TECHNOLOGY CTR.: I'd be a
little nervous if I had a good design to put it in China because I would
expect that it would move quickly to a lot of other companies
unprotected.
WIAN: Still, costs persuade many companies to take the risks. Buck
Knives has been fighting to stay profitable in California. Its workers
compensation insurance and electricity bills jumped nearly $1 million
last year.
Buck has tried making knives in Mexico and Taiwan where it still has
limited operations. Cheap labor there helps slash prices enough to
satisfy one big customer, Wal-Mart. But the fiercely patriot Buck family
and many individual customers never liked the idea.
CHARLES T. BUCK, CHAIRMAN, BUCK KNIVES: I've had a real problem with
having another country on our blades. Buck Knives is an American knife
and we wanted to keep it that way.
WIAN: Buck is still leaving California, but instead of 50 percent cost
savings in Mexico or Taiwan, it's moving to Idaho where it expects
savings of about 25 percent.
Casey Wian, CNN, Los Angeles.
(END VIDEOTAPE)
HOPKINS: Still to come, the nuclear threat from one of the countries in
what President Bush calls the axis of evil, Our special series in
conjunction with the "Economist" magazine; "The Challenge of Change, the
new Korea."
And then, the new government in South Korea, we'll have a special report
on its efforts to bridge the divide between the north and the south.
(COMMERCIAL BREAK)
HOPKINS: Now to another threat to Americans, the continued belligerence
of North Korea. The United States clearly wants North Korea to shut down
its nuclear program before it can produce any more nuclear weapons.
The nuclear standoff began last October when North Korea admitted it has
a covert program to make enriched uranium for nuclear weapons. It is not
clear, however, just how advanced that program is.
Tonight, in conjunction with the "Economist" magazine, we assess the
threat of North Korea in "The Challenge of Change, the new Korea." Lou
Dobbs has the report.
(BEGIN VIDEOTAPE)
CHUNG MIN LEE, PROFESSOR, YONSEI UNIVERSITY: North Korea has the fifth
largest standing army in the world, 1.1 million men in arms. It has over
700 ballistic missiles that targets everything in South Korea and parts
of Japan, a very large stockpile of bio and chemical weapons agents and
plus, on top of this, he may already have one or two nuclear
warheads.
DOBBS (voice-over): And soon, North Korea could have even more.
Recently, North Korea restarted its plutonium-based nuclear energy
reactor at Yongbyon, which can be used to create the fuel for nuclear
bombs.
ROBERT GALLUCCI, DEAN, GEORGETOWN UNIVERSITY: Whether it's in six months
or it's in 12 months, they will have the 30 kilograms of plutonium. They
will have enough material for five or six weapons.
DOBBS: Robert Gallucci, Assistant Secretary of State in the Clinton
administration helped draft the 1994 framework agreement in which North
Korea pledged to freeze and eventually dismantle its nuclear weapons
program. We now know the North cheated on that agreement for years. But
now the question remains where to draw the so-called red line, the limit
that would provoke a serious military response.
BILL EMMOTT, EDITOR-IN-CHIEF, "THE ECONOMIST": It may be that we now
have to start contemplating a situation when we accept North Korea with
nuclear weapons and decide that the red line has to be in their trade of
nuclear material.
GALLUCCI: The problem with that red line is that five kilograms of
plutonium would amount to essentially the size of a baseball, so the
question is would you be sure a baseball is being transferred to a
terrorist group?
DOBBS: The north has already passed on significant ballistic missile
technology to Iran, Pakistan and Syria.
President Bush has insisted that North Korea agree to abandon its
weapons program and accept reliable, intrusive inspections.
North Korea's leadership is both isolated and enigmatic. Kim Jong-il has
a taste for French wine and American movies. His eccentricities,
however, in no way diminish the very real danger he and his government
present to the region.
GALLUCCI: Whatever you can say about Kim Jong-il, you also need to add,
he's intelligent, he's rational.
DOBBS: Rational enough, it seems, to retract his initial demand for one
on one talks with the United States. Some interpret North Korea's
withdrawal of that demand to be the result of the quick U.S.- led
military victory over Saddam Hussein and his regime.
That demonstration of U.S. resolve and power may have influenced China
to finally get involved in the North Korean nuclear issue, as well.
China's influence and pressure may be necessary to curtail Kim Jong-il's
nuclear ambitions.
LEE: If China really wants to see a North Korea without nuclear weapons,
China has to do its part and to cut off, for example, even temporarily,
those oil shipments and grain shipments into North Korea.
DOBBS: Without the Chinese support, North Korea cannot afford to
maintain its huge military force and apparatus.
The negotiations, to be led by Assistant Secretary of State James Kelly,
will be complex, difficult and the outcome anything but certain.
Diplomacy is limited, in large measure because the United States is
disadvantaged militarily on the Korean Peninsula. While the United
States would obliterate North Korea in a full-blown conflict, North
Korea would have initial and devastating success against South Korea.
Despite a 600,000-man South Korean army equipped with the best U.S.
weaponry and 37,000 U.S. troops, most experts say North Korea could
level Seoul in hours, not days, in the event of an attack.
EMMOTT: It would be likely to be carried out at the cost of tens of
thousands of South Korean lives. And that just may be unacceptable.
YANG SUNG CHUN, FORMER AMBASSADOR, REPUBLIC OF KOREA: We can't make any
rash judgment or rash act. For Koreans, this is a life and death matter
and we have to decide ultimately about our future and our fate.
DOBBS: The South Korean ambassador could have added that the decision
about the future and fate of South Korea is at this moment as much in
the hands of Kim Jong-il as it is in the hands of President Roh. South
Korea's government now faces the most daunting challenge to its security
in half a century.
(END VIDEOTAPE)
HOPKINS: To discuss the threat of North Korea and how the United States
should respond, Lou spoke with the former national security advisor,
Zbigniew Brzezinski. He is a counsel at the Center for Strategic and
International Studies. He is also a professor of American foreign policy
at the Johns Hopkins University.
Lou began by asking him if there was any chance of success in these
talks.
(BEGIN VIDEOTAPE)
ZBIGNIEW BRZEZINSKI, FORMER NATIONAL SECURITY ADVISOR: Certainly not
initially. At some point, if we want to have some sort of regional
arrangement, we have to involve the Japanese. And certainly, the South
Koreans have to be involved because they have an enormous stake in
it.
Negotiations at this stage are really being intermediary, so they're
providing facilities but these are essentially bilateral talks
pretending to be trilateral talks with the Chinese giving us the
umbrella, sort to speak.
DOBBS: And the last time, in 1994, that that was attempted it led to
agreements for which North Korea stated it would not proceed with
nuclear weapons manufacturing. They didn't work out.
What is the leverage that the United States has in this instance with
North Korea?
BRZEZINSKI: Well, the leverage, obviously has to be both negative and
positive. The negative leverage is the threat, for example, of the
regional boycott of eventually even a regional embargo on North Korea.
And as a last resort, even military action. But to achieve that, you
have to have a great deal of political consensus, and that's very
difficult to manufacture.
The positive inducements, of course, are some form of financial economic
assistance. But that may not be enough at this stage to get the North
Koreans to roll back what they're already doing. They may be willing to
slow down or to stop, but to have them really dismantle what they have
been doing is going to take a lot of pressure.
DOBBS: And there are those who might be somewhat confused that there
would be these, as you describe them, disguised bilateral talks between
North Korea and the United States without the participation of the
principle power in the region, that is, China, and certainly without the
representatives of the government of the nation whose national security,
the United States, is trying to protect. That is, South Korea.
What possible positive result can come out of that?
BRZEZINSKI: Well, I would assume that these talks are preliminary. And
in a sense, we're feeling them out. They're feeling us out. At some
point, if this is to be a serious negotiation, we'll have to involve the
Japanese and the South Koreans. After all, if there's to be pressure, it
has to have a collective base.
If there are to be incentives, we have to provide them. But my guess is
the North Koreas, will ask for too much in the way of incentives unless
there are credible threats and as I said, these credible threats require
a regional point of departure.
DOBBS: And, regional point of departure means what in the case of
specifically China and Japan?
BRZEZINSKI: It means their involvement, their support, the same is true
of the South Koreans and the South Koreans, are very uneasy about a
policy of confrontation, of genuine pressure. So, in effect, in a
practical sense, we are left essentially with positive incentives. And
these may not be enough to satisfy the North Korean expectation.
DOBBS: Not enough to satisfy them and the outcome is then what?
BRZEZINSKI: Probably in the short run, essentially, continued talks
while they go ahead with the production or procurement of nuclear
weapons, and these will change the strategic equation because if they
have won now, they can only use it essentially defensively. They
couldn't use it offensively because they would have nothing left and it
may not even work.
But once they have several, then they're in a much better position to
exercise choice, even to exert blackmail.
DOBBS: And that blackmail now directed toward the United States, yet the
principle power in the region, China, would ,seemingly at least, have
the most to lose, would have its national security most at risk here.
Why the reticence, in your judgment, for the Chinese to participate in
straight up, head up in talks with North Korea?
BRZEZINSKI: I think they are beginning gradually to be involved. And I
hope that we can draw them into a more intensified and generally
constructive strategic engagement. At this stage, they don't really want
to be involved because the position on our presence in the region, on
the implications of all of this for Japan, is still not very clear. Last
but not least, they're increasingly preoccupied with their domestic
difficulty. That should, however, induce them to take a more
constructive stand because the economy could be affected by what is
going on right now with SARS.
DOBBS: What is clear now, would you not say, is that it is a very risky
business and a very difficult process that the United States has
embarked upon?
BRZEZINSKI: It's much more serious than the so-called struggle of the
weapons of mass destruction in Iraq, which haven't yet been turned up.
North Korea represents a genuine security problem and a potential very
serious security threat.
DOBBS: Zbigniew Brzezinski, thank you for being with us.
BRZEZINSKI: Thank you.
(END VIDEOTAPE)
HOPKINS: Coming up next, a startling admission from North Korea. Last
month, it claimed for the first time it has nuclear weapons. We examine
what that could mean for the delicate balance of power on the Korean
Peninsula.
And then the stunning success of the South Korean economy. We look at
whether it's strong enough to withstand the challenges posed by North
Korea.
(COMMERCIAL BREAK)
HOPKINS: For the first time, North Korea admitted it has nuclear
weapons. Long suspected, North Korea said it would prove that it has
weapons and soon.
North Korea's claim is a challenge for the newly installed government of
South Korea. That government was elected on a promise of improved
relations with the north.
Now an in-depth look at the new face of South Korean politics, in
conjunction with "The Economist" magazine, in "The Challenge of Change:
The New Korea."
Lou Dobbs reports.
(BEGIN VIDEOTAPE)
DOBBS (voice-over): The narrow election of President Roh in December of
2002 was a surprise not only to South Korea, but also, to Washington.
The Roh administration immediately demonstrated it wants to follow new
policies on North Korea.
Roh is determined to be different. The first Korean president not to be
a member the political elite, President Roh is a guitar- playing
activist with his own Internet site who even cried on television.
Roh campaigned on a platform of reform that would be ground- breaking
even in this country. He took donations from piggy banks he handed out
to ordinary citizens, not relying on huge checks from political interest
groups.
LEE: It's a very American story, if you think about it. I mean, he had
nothing. He grew up with nothing, none of the privileges of the South
Korean blue blood, and then rose to become a lawyer first. And then,
chose to be a labor activist lawyer and then eventually rose to be
president of South Korea.
DOBBS: Roh was barely elected and he won because of the support of those
known as Korea's 386 generation. The three stands for people in their
30s. The six because most were born in the 60s. The 8 for the 1980s, a
decade that began in Korea with the killing of hundreds of pro-democracy
protesters in a governmental crack-down that South Koreans refer to
still as the Kwangju Massacre.
CHI YEON HO, PRESIDENT, OHMYNEWS: I was in the generation believes that
the United States supported and endorsed the dictatorship regime
responsible for Kwangju.
DOBBS: Mr. Ho says the Kwangju Massacre fueled anti-Americanism among
the 386 generation. Mr. Ho himself was imprisoned for a year for
criticizing both the South Korean and U.S. governments.
The 386 generation stakes much of its identity on independence from U.S.
policy in the region.
In December of 2002, candlelight vigils for two Korean schoolgirls that
were killed by a U.S. military personnel vehicle was full-scale
anti-American protest.
That anti-Americanism is reflected in a Pew Research. The survey found
44 percent of South Koreans had a negative opinion of the United States.
Only Muslim countries and Argentina dislike America more.
Some suggest those popular opinions surveys reflect a need for a change
in U.S. policy.
EMMOTT: I think the experience of dealing with South Korea on the
decades of dictatorship probably shaped American attitudes and also
froze the American position with regard to South Korea. Under
dictatorship, you could influence a single set of people, politicians.
Under a democracy, you have to influence a wide range of people many of
whom will have local sensitivities, their own interests, their own
prejudices.
DOBBS: Some of those prejudices border on the delusional. Most South
Koreans actually believe that if North Korea were to use nuclear
weapons, they would be directed at Japan or the west coast of the United
States, but not at Kim Jong-il's ethnic cousins to the south.
HO: Historically, North Korea and South Korea have been one nation and
we have the same blood. It is beyond ideology and politics.
DOBBS: But it is because of politics and ideology that the United States
maintains 37,000 troops. After 50 years after an attempt to repel the
north's invasion of the south.
Early in his career, President Roh called for the complete withdrawal of
U.S. forces from the peninsula. More recently, as Defense Secretary
Rumsfeld said that would be fine with him, Roh and others backtracked.
They have made it clear they want U.S. troops to remain.
CHA: While generations change in Korea, one thing that doesn't change in
Korea is geography and Korea will forever be a small country in a region
of very big powers.
DOBBS: Those big powers, China, Russia, and then Japan, but what if the
biggest country of all were to withdraw its troops from the
peninsula?
EMMOTT: I don't think it matters to regional security beyond South
Korea. I think the U.S. has enough resources, enough friends and
facilities to deal with the broad, regional security issues without
South Korea.
DOBBS: The question now is whether South Korea's new government, which
rode a tide of anti-Americanism to victory at the polls, possesses the
character to successfully manage a changing relationship with the north
and an evolving relationship with its most powerful ally, upon whom it's
dependent for national security and from whom it must demonstrate
political and social independence to preserve its national identity.
(END VIDEOTAPE)
HOPKINS: Diplomatic efforts continue between South Korea and the United
States. Earlier this month, South Korean President Roh Moo- hyun met
face to face with President Bush for the first time.
During their summit, the two leaders agreed to seek a peaceful solution
to the nuclear stand-off with the north but also to consider, quote,
"further steps if Pyongyang continues threats to peace and stability on
the peninsula."
Still ahead, you e-mails. We'll share some of your thoughts on exporting
America.
Plus, the dramatic economic success and challenges facing South Korea.
Part of our special series from "The Economist" magazine.
And we'll hear from international financier Wilbur Ross.
(COMMERCIAL BREAK)
HOPKINS: Over the past two decades, South Korea has become one of the
most successful economies in the world. South Korea is now the 12th
largest trading nation. Its growth rate climbed to 6 percent last year
after the economic crisis of the late 1990s.
We look at the South Korean economy in conjunction with "The Economist"
magazine in "Challenges of Change: The New Korea."
Again, Lou Dobbs reports.
(BEGIN VIDEOTAPE)
DOBBS (voice-over): Welcome to the most wired nation on Earth: South
Korea. It leads the world in broadband Internet access. Sixty- seven
percent of Korean households have a broadband connection, compared to
only 15 percent in the United States.
And Seoul has fast become the online gaming capital of the world, thanks
to startup NCsoft, created and run by a 35-year-old Kim Tack Jin.
KIM TACK JIN, PRESIDENT AND CEO, NCSOFT, Korea had the leadership in the
area of the Internet and we give a lot new style of content, especially
in games.
DOBBS: And with more than four million subscribers, NCsoft's online
fantasy game, "Lineage," allows 300,000 players to log on at the same
time. It surprised even gaming powerhouses like Microsoft and Sony.
But even today, it is the chaebol of large family-controlled businesses
such as Samsung and Hyundai who wield real economic power here.
The chaebol were responsible for the success of Korea Inc. that made the
quick industrial growth in capital-intensive sectors like steel and
semiconductors. The success has come at a cost. Rules bent and laws
broken.
The chaebol have sometimes been built on insider training, questionable
accounting practices and sweetheart deals, some sanctioned by the
government.
EMMOTT: Korea has had crony-capitalism in the past. Their were a lot of
big strides in pushing it back. It hasn't gone far enough. There's still
too much corruption.
DOBBS: Hyundai, the largest chaebol, was forced to break up. Daewoo,
second on the list, defaulted in 1999 on $78 billion of debt. Korean
accounting standards remain murky and many remain unconvinced by
attempted reforms of the chaebol.
VICTOR O. CHA, PROFESSOR, GEORGETOWN UNIVERSITY: If you look at the exit
polling, for the election, you will find that contrary to what many
people outside of South Korea might think, North Korea was not the
number one issue. The number one issue for voters was the economy and it
was reform in terms of political reform and ridding corruption.
EMMOTT: The chaebol represents an unhealthy concentration of power in
the Korean economy and Korean society. It's just like the Rockefeller
Trust and other big monopolies formed in the United States in the early
20th Century. The monopolies were too big; they had to be broken up.
It's the same in South Korea.
DOBBS: The major challenge to the South Korean economy miracle in the
short term comes from just north of the border.
CHA: I've done lots of conference calls with investors in which the main
question that they ask is not about the Roh Moo-hyun government, not
about his economic plans, not about his economic advisors. It's about
the threat from North Korea.
DOBBS: In February, Moody's had its long-term outlook on the South
Korean economy from positive to negative because of rising tensions on
the peninsula.
But ironically, if war with the north causes concern, reunification
would bring its own substantial problems. North Korea's economy is in
shambles. Absorbing communism's worst failure could easily cost more
than a trillion dollars.
South Korean leaders argue the answer, both to avoiding war with the
north and easing the cost of reunification, is the same. The Sunshine
Policy, that's the term of former President Kim Dae-Jung's program of
reconciliation, engagement and investment in the north.
CHUN: The kind of achievement and accomplishment in the humanitarian,
economic and non-controversial areas between north and south for the
last five years will not be reversible or revocable.
DOBBS: So far, it's resulted in the construction of north-south rail
links through devastated North Korea that could open eventually Chinese,
Russian and European markets. And there have also been dramatic family
reunions across the DMZ.
Still, some argue the Sunshine Policy has a darker side, a side that can
no longer be ignored.
LEE: Ironically, of the hundreds of millions of dollars we gave to North
Korea, I am convinced that much of the money was used for military
purposes to target the U.S. forces as well as South Korea. And this is
the biggest irony of the Sunshine Policy.
(END VIDEOTAPE)
HOPKINS: For more on the rise of South Korea's economy, Lou spoke with
Wilbur Ross. He's the chairman and CEO of WL Ross and Company, perhaps
the best known restructuring financier in this country.
He has first-hand experience in Korea. He was awarded a medal by the
South Korean government for his help during the crisis of 1997 and '98.
Lou began by asking him to what extent will the impact on the South
Korean economy be lasting.
(BEGIN VIDEOTAPE)
WILBUR ROSS, CHMN. & CEO, WL ROSS: I think it will only last until
there's some resolution of the present situation. Prior to that, most of
us were quite convinced that North Korea didn't really want war, had no
aggressive plans. And I felt the Sunshine Policy would lead, not to
reunification but to normalization of relations.
I don't think anybody wants reunification. The German experience has
proven how expensive that can be.
But South Korea desperately needs a low-cost manufacturing alternative
to China. Eight-hundred companies had signed up with Hyundai for what
was going to be a big industrial park just on the north side of the DMZ
before the Sunshine Policy was eliminated by our government.
DOBBS: Are the antics of Kim Jong-il inexplicable to you?
ROSS: No. And I think that's the only weapon he has. You have people
starving there. And no condition's stronger than having a common enemy
to distract a starving population from their own problems.
But I also think if you look at the timing, he was very agreeable until
the Sunshine Policy was knocked out. He really wants money, not
weapons.
DOBBS: He wants money. Not weapons. But he is engaging in nuclear
blackmail now.
ROSS: Up to this point.
DOBBS: He's successfully in at least creating an engagement. And, at the
same time, he is leading a country, dictator of a country of some 25
million people. Of almost 15 million people in South Korea.
He is watching an economic miracle right across the border. He is
watching the punishment of his own people.
ROSS: Right.
DOBBS: There can be no question what the right answer is here.
ROSS: Well, I think the right answer was what was about to happen before
the Sunshine Policy was ended, namely South Korea and Japan were going
to dump tens of billions of dollars into North Korea, as they say, to
provide an alternative to China. It's unfortunate that our geopolitical
policy interfered with the economic trend that was developing.
