2.4: Global Market
Respond to the Impact of Global Market Forces on U.S. Economic and Security Interests Other Information:
The increasing interdependence of the world’s economies has a significant impact on the national security and the economic
well-being of the American people. U.S. exports have grown much faster than the economy as a whole. However, U.S. imports
have grown faster, leading to a widening trade deficit … Moreover, the United States has been the principal architect of an
open world trading system and, as the world’s largest exporter and importer of goods and services, has benefited immensely
from global trade. But segments of U.S. and world populations have not shared equally in these benefits and may not do so
in the future. Moreover, global market forces have resulted in large trade imbalances and made the United States more vulnerable
to overseas economic crises. Trends such as rapid growth in China and India have increased international competition for scarce
natural resources, such as energy. In addition, it has become more difficult for the United States to maintain control over
critical technologies and the supplier base on which U.S. economic and military security depends. Also, the United States
has faced terrorist threats emanating from some of the least integrated countries in the world as well as health threats from
some of the most integrated regions of the world. For policymakers, several aspects of these trends require particular attention.
Trade agreements are increasing in number and importance to the U.S. economy. More than 300 international trade agreements
affect hundreds of billions of dollars in trade and millions of U.S. jobs. The mutual dependence of international markets
and the U.S. economy has increased even further with China’s 2001 admission to the World Trade Organization and the emergence
of developing countries such as India, shifting traditional patterns of trade, production, and investment. In addition, the
United States is currently involved in major multilateral negotiations in the World Trade Organization, as well as numerous
free trade agreements with other partners. Over 10 U.S. agencies have programs to promote U.S. exports. These programs include
providing financial assistance through loans, loan guarantees, and grants as well as providing U.S. businesses with information
on the export process. The globalization of the supplier base is driving changes in the way the United States obtains technologies
and capabilities to protect its national security interests. As companies increasingly engage in a wide variety of business
arrangements across national borders, and DOD increasingly relies on them, the department is seeking new ways to benefit from
the competitive sources and innovative technologies that a diverse supplier base may provide. For example, the department
is partnering with foreign countries to develop major weapon systems, such as the Joint Strike Fighter aircraft program. Although
globalization has the potential to speed innovation and reduce costs, it also carries potential threats to the technological
superiority of the U.S. military and may require new approaches to protect national security interests. Global financial health
and the maintenance of the world financial system are critical to long-term U.S. objectives and cornerstones of U.S. foreign
policy. International financial institutions have created mechanisms to anticipate, prevent, and resolve financial crises,
but it remains to be seen if these mechanisms will be adequate to safeguard the stability of the international financial system.
International financial institutions, such as the International Monetary Fund and the World Bank, are at the center of efforts
to address financial crises. The United States is the major contributor to the International Monetary Fund and relies heavily
on it and the World Bank to promote world economic health. The operations and transparency of these institutions have come
under increased scrutiny. Overseeing financial institutions and markets in the 21st century is a growing challenge. Trillions
of dollars flow through the nation’s financial institutions and markets, including the investments and retirement savings
of working households. The globalization of financial firms and markets coupled with continuing advances in technology have
created opportunities to improve the speed and efficiency of market operations. But these advances also provide new opportunities
for illegal market activities and may broaden the scope of financial crises or cause them to spread more rapidly. Creating
new products and the increasing importance of new market participants continue to pose challenges to existing regulatory frameworks
and oversight programs. Innovations such as the increasing use of Internet-based financial activities also present new regulatory
challenges. While these innovations can benefit U.S. markets and investors, they also expose individuals to increased risks
and potential fraud.
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