TNI: Isn't it also true that when people worry about the loss of relatively low-skill jobs in the United States, they're really worrying overly much, because those jobs have left us a long time ago. Isn't it so that what we have seen in recent years is the displacement of one overseas country for another, rather than a massive loss of more jobs in the United States?

CH: That's a macro-analysis, and it is correct as far as it goes. But if you are the person who holds one of the remaining low-skills jobs on a micro level, you're very unhappy when a more competitive foreign product displaces you. Those who are directly affected are very unhappy and nervous about the next wave of change. So there's a high degree of anxiety in our country with respect to trade, globalization and open markets for capital, goods, and services. I think we have to do a better job not only in explaining the benefits of trade to the economy as a whole, but also do a better job trying to figure out how to raise the skill levels of those who are displaced so that they can move into sectors that provide higher pay, better benefits and greater security. The benefits of trade are great. Trade is truly the bedrock of our prosperity. But if we don't find a way to bring along those who may be displaced, we'll lose the national consensus that supports our nation's leadership in opening markets.

Energy Prices

TNI: If trade liberalization can help the global economy, we should also mention a factor that might harm it: an energy crunch. I have seen lately several projections of what oil prices might be over the next few years, out to a decade. Many people in the oil industry argue something like this: We have been living for the past decade or so on wells that were developed in the 1960s and the 1970s, while in most of the 1980s and the 1990s the industry was investing at something like 20 percent of the rate of the 1960s and 1970s. The reason is that prices were mostly soft and the investment climate in geologically promising areas has not been hospitable. As a result of this dearth of investment, they say, the rough balance of supply and demand we have witnessed in the 1990s will give way to shortages and price increases. Many industry analysts believe that prices will rise fairly substantially in the next few years, and that if substantial new investment is not forthcoming soon, high prices will predominate for a long time. That, of course, would put a whole different spin on the prospects for global economic growth. Since such projections have been made in the past and have been proven wrong, what do you make of these new analyses?

CH: The oil companies must go where the oil is located, and that very often is not a hospitable climate. They also have a five- to eight-year capital outlay before they achieve a return, and they cannot know exactly what the politics and investment climate will be in the future. But as you say, in the mid-1970s, our intelligence agencies were telling us that we were going to run out of oil by the 1990s. Frankly, there are markets opening up all the time. We are integrating Russia into the world economy and newly found reserves are being announced regularly. Also, new technologies are being developed, and we will have mechanisms for producing energy that did not exist in the past.

MF: That's a very important point: thanks to technological advances, we're getting a lot more oil out of the same wells than we did before. I think we will see Mexico become a larger supplier and, with any luck at all, as Carla said, Russia will become a very major supplier as well.

I think we also have to give credence to market signs. Certainly, there's nothing in the futures market for oil that suggests that people who are investing in those markets believe that there will be major increases in the benchmark price anytime soon. Moreover, if energy experts really believed that--if the consensus really was that the price was going to go to, say, $30 to $35 per barrel--the producers would pull back on their production now in order to get that higher price in the future, and the price would go up now. So the fact that the price is where it is today is in itself, to some extent, a forecast about the future.

TNI: Let me pose a related question: Is it ever appropriate for the United States government to try to insure or in some other way protect investments in the energy sector from risky projects in politically unstable places? The Baku-Ceyhan pipeline is a great example of such a case. Many people have wanted that pipeline built for a variety of political and strategic reasons, but the United States government has until now turned away from the idea of subsidizing it. And since the people who build pipelines and do other things in the energy business have pretty sharp pencils, they will only build it if they think it is financially viable. So far, they don't think it can be.