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INDEX

INDEX.................................................................................................................................................................1 1AC SHELL........................................................................................................................................................3 1AC SHELL........................................................................................................................................................4 1AC SHELL........................................................................................................................................................5 1AC SHELL........................................................................................................................................................6 1AC SHELL........................................................................................................................................................7 **UNIQUENESS**............................................................................................................................................8 US COMP LOW – TRADE DEFICIT -- NAFTA..............................................................................................9 US COMP LOW – TRADE DEFICIT – OIL IMPORTS.................................................................................10 US COMP LOW – TRADE DEFICIT – OIL IMPORTS.................................................................................11 US COMP LOW – FOREIGN GROWTH – ENERGY EFFICIENCY...........................................................12 US COMP LOW – FOREIGN GROWTH – OUTSTRIP US..........................................................................13 US COMP LOW – FOREIGN GROWTH – POST-AMERICANISM............................................................14 US COMP LOW – FOREIGN GROWTH – CAPITAL INVESTMENT........................................................15 US COMP LOW – FOREIGN GROWTH – MARKET CONTROL...............................................................16 US COMP LOW – FOREIGN GROWTH -- CONSUMPTON.......................................................................18 US COMP LOW – DOMESTIC – ENERGY COSTS.....................................................................................19 US COMP LOW – DOMESTIC – ENERGY EFFICIENCY...........................................................................20 US COMP LOW – DOMESTIC – DEBT.........................................................................................................20 US COMP LOW – DOMESTIC – TAX LAWS.............................................................................................22 US COMP LOW – OIL DEPENDENCY – NO CONTROL...........................................................................23 US COMP LOW – OIL DEPENDENCY – FOREIGN CONTROL................................................................24 US COMP LOW – OIL DEPENDENCY – FOREIGN CONTROL................................................................26 **LINKS**.......................................................................................................................................................27 I/L – AE KEY TO COMP – INNOVATION....................................................................................................28 I/L – AE KEY TO ECON – DEPENDENCE..................................................................................................29 I/L – AE KEY TO TECH – COMPETITION...................................................................................................30 I/L – AE KEY TO COMP – TRADE DEFICIT..............................................................................................31 I/L – TRADE DEFICIT KEY -- ECON............................................................................................................32 I/L – AE KEY TO LEADERSHIP – TECH.....................................................................................................33 I/L – AE KEY TO COMP – NEW MARKETS...............................................................................................35 I/L – LOW ENERGY COSTS KEY TO COMP.............................................................................................36 I/L – ENERGY COSTS – OUTSOURCING....................................................................................................37 I/L – OIL DEPENDENCY – TRADE DEFICIT..............................................................................................38 I/L – AE KEY TO COMP – OIL PRICES........................................................................................................39 I/L - AE KEY TO COMP – OIL PRICES.......................................................................................................40 I/L – AE KEY TO COMP – OIL DEPENDENCY...........................................................................................41 I/L – AE KEY TO COMP – OIL DEPENDENCY...........................................................................................42 I/L – AE KEY TO COMP – OIL DEPENDENCE..........................................................................................43 I/L – AE KEY TO ECON – OIL DEPENDENCY...........................................................................................44 I/L – AE KEY TO US FIRMS – ENERGY COSTS........................................................................................46 I/L – ENERGY SECURITY KEY...................................................................................................................47 I/L – AE DRIVES PRIVATE INVESTMENT.................................................................................................48 I/L – DOMESTIC ENERGY KEY TO COMP.................................................................................................49

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**IMPACTS**..................................................................................................................................................50 IMPACT-DOLLAR DECLINE........................................................................................................................51 IMPACT-INNOVATION KEY TO ECON DOMINANCE............................................................................54 IMPACT-INNOVATION KEY TO ECON DOMINANCE............................................................................55 ......................................................................................................................................................................56 IMPACT-ECON KEY TO HEG.......................................................................................................................56 IMPACT-ECON KEY TO HEG.......................................................................................................................57 IMPACT-COMP KEY TO HEG......................................................................................................................58 IMPACT-SCIENCE KEY TO LEADERSHIP.................................................................................................60 IMPACT-TRADE DEFICIT KILLS COMP....................................................................................................61 IMPACT—ECON KEY TO NATIONAL SECURITY...................................................................................62 IMPACT—HEG GOOD..............................................................................................................................63 HEG LOW – GENERIC...................................................................................................................................64 HEG LOW – GENERIC...................................................................................................................................65 HEG LOW – LAUNDRY LIST........................................................................................................................66 HEG LOW – E.U. AND CHINA......................................................................................................................67 HEG HIGH – STRONG FOUNDATIONS......................................................................................................69 HEG HIGH – ECON.........................................................................................................................................70 **NEG**...........................................................................................................................................................71 US COMP HIGH – EFFECTIVE ADMINSTRATION...................................................................................72 US COMP HIGH – EXPORTS.........................................................................................................................73 US COMP HIGH – INDUSTRIES...................................................................................................................74 US COMP HIGH – FOREIGN GROWTH – LABOR.....................................................................................75 US COMP HIGH – FOREIGN GROWTH – INVESTMENT.........................................................................76 US COMP HIGH – DOMESTIC POLICY – OPEN MARKET......................................................................77 US COMP HIGH – DOMESTIC POLICY -- NEW INDUSTRIES................................................................78 US COMP HIGH – LOW DOLLAR – RECORD EXPORTS.........................................................................79 A2: TRADE DEFICIT – MORE EXPORTS....................................................................................................80 A2: SERVICE ECONOMY, TRADE DEFICIT – MARKET CONTROL......................................................81 LINK T/ -- ALT ENERGY UNDERCUTS ECON..........................................................................................82 LINK T/ -- OIL PRICES KEY TO ECON........................................................................................................83

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DEPENDENCE ON FOREIGN OIL HAS CRIPPLED US COMPETITIVENESS, ONLY INCENTIVES FOR ALTERNATIVE ENERGY CAN ALLOW THE US TO RETAIN PRIMACY
John Denniston, Partner at VC firm Kleiner Perkins Caufield & Byers, “Financing for Clean Energy Technology”, CQ Congressional Testimony, 7/15/08, Lexis.

There's a fast-growing consensus among Americans today about the need to confront our three main energy challenges: the climate crisis, our dependence on foreign oil, and the risk of losing our global competitive edge by failing to champion new technologies that are becoming a huge new source of economic growth, jobs and
prosperity.

Renewable energy sources - such as sun, wind, geothermal and biofuels - offer this country's best hope of addressing all three of these dimensions, and of helping us rebuild our domestic economy and regain our edge as an economic superpower. Our leading climate scientists predict we have only a short period of time to make dramatic cuts in our greenhouse gas emissions or risk potentially catastrophic climate change. Global temperatures and sea levels are already rising and will continue to do so; the question now is whether we can slow down the projected rate of future increases. Global warming is not a partisan issue: President Bush and both Presidential candidates have publicly declared we must seriously confront our climate crisis. Yet perilously, we have so far failed to move with the requisite
speed and determination. As for our energy security dilemma, this Committee is well aware that America

continues to import approximately 70% of our oil needs. Rapid growth in worldwide energy demand has stretched supplies, causing energy prices across the board - oil, natural gas, coal, and even uranium - to skyrocket. As world population and energy demand increase, there's every reason to believe supply and price pressures will persist. Global Competitiveness: Finally, our future prosperity is at risk, and here I speak from very personal experience. As I've traveled on business to China and Europe, I've witnessed how the rest of the world is striving, and often succeeding, to emulate in the renewable energy sector, the technology innovation that has been a hallmark of the U.S. economy and perhaps the single most important driver of our enviable standard of living. Increasingly, entrepreneurs overseas enjoy advantages in the form of determined government policies, including financial incentives and large investments in research and
education. Credible economic studies suggest our technology industries are responsible for roughly one-half of American GDP growth. Our country would look quite a bit different today had we not, several decades ago, become a global leader in biotechnology, computing, the Internet, medical devices, semiconductors, software and telecommunications. And now we find

ourselves with a vast new economic opportunity - to grow green energy technologies that seem destined to become the economic engine of the 21st Century.

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1AC SHELL

US RELIANCE ON OIL IS UNDERCUTTING COMPETITIVENESS – ONLY A TRANSITION TO ALTERNATIVE ENERGY CAN REVERSE THIS Carlos Gutierrez. July 14, 2008. [U.S. commerce secretary and former chairman and chief executive of Kellogg Co. “Exports Key to Detroit’s Future”, The Detroit News, http://detnews.com/apps/pbcs.dll/article? AID=/20080714/OPINION01/807140332 KZ] In an increasingly global economy, great American cities like Detroit have a choice: Step up and compete, or retreat from the international marketplace. New data would suggest that Detroit is ready to compete. Today, the Commerce Department
is releasing new metropolitan export data, which shows that for the first half of 2007, Metro Detroit was the fifth largest export market in the nation with sales totaling $24.3 billion. Exports continue to be one of the bright spots in our economy. Last year, the United States exported a record $1.6 trillion, and we're on pace this year to shatter that record with exports already up more than 18 percent year-to-date through April. Exports contributed 12 percent to our gross domestic product last year. Now is the time to take actions to boost exports, create jobs and keep our economy strong. We know our economy is growing more slowly than we would like. The economic stimulus plan passed with bipartisan support in Congress is starting to have an impact and came at the right time. Already, 104 million stimulus checks totaling $86 billion have been sent to households. We expect the stimulus to help the economy as the year progresses, but there are other steps we can take now to put us on the right path, including making the tax cuts permanent and allowing more

our reliance on foreign oil is one of our most serious national security concerns. Allowing more exploration of our own resources will create good American jobs and help lower prices by signaling to the market that we are taking action to expand supply. But there are alternative energy sources -- wind, natural gas, biofuels and clean coal, for example -- that must also be a part of meeting our nation's energy needs. Developing these alternative sources gives us a unique opportunity to increase American competitiveness and encourage innovation while addressing climate change. Innovation -- including the development of clean and efficient energy technologies -- can help foster prosperity both here and around the world. To grow exports of clean technology, and other American products, we need to expand access to overseas markets for U.S. goods and services. Free trade agreements are the best way to do this. There are
environmentally responsible oil exploration in America. Energy prices are the top pocket book issue for the American people -- and three FTAs pending before Congress with Colombia, Panama and South Korea that would give Michigan's workers and companies increased access to 100 million consumers. Last year, Michigan's export shipments of merchandise to Korea totaled $627 million. That was an increase of 72 percent since 2003. A free trade agreement with South Korea would level the playing field and provide U.S. automotive exporters a competitive advantage in gaining access to the Korean market.

Getting it right demands that we stay open to new ideas for powering our economy, open to innovations that will help us meet the challenges of climate change and open to new markets that will grow our exports and our economy.
To compete in the global economy, Detroit -- and America -- need smart, pro-growth policies that get it right -- on energy, the environment and trade.

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1AC SHELL

ALTERNATIVE ENERGY SOURCES BOOSTS COMPETITIVENESS --- US RELIANCE ON NATURAL GAS IS THE PRIMARY CAUSE FOR ITS FALLING COMPETITIVENESS IN THE GLOBAL MARKET. National Economic Council, February 2006 [The White House, “Advanced Energy Initiative,” State of the Union Address, Accessed 7/16/2008 http://www.whitehouse.gov/stateoftheunion/2006/energy/energy_booklet.pdf KZ] This substantial increase in natural gas prices and volatility has had a negative impact on the U.S. industrial sector. High prices for natural gas translate to increased production costs for U.S. companies, which places them at a disadvantage to their foreign competitors. As a result, many firms have either shut down U.S. production facilities altogether or relocated them to another country where energy costs are more competitive with the global market. According to the National Association of Manufacturers, the chemicals and plastics industries, which rely on natural gas both for energy and as a raw material, have lost 250,000 jobs and $65 billion in business because of rising natural gas prices. High natural gas prices similarly harm the competitiveness of U.S. farm products in global markets, as natural gas is a primary input for fertilizer. Diversification of our electric power sector will ensure the availability of affordable electricity and ample natural gas supplies. At the same time, increased efficiency will help reduce demand for natural gas. By easing the demand pressure on natural gas, prices will drop and U.S. firms will be more competitive in the global market, keeping jobs here at home.

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COMPETITIVENESS KEY TO US HEGEMONY
HARTMAN

’99 [DAVID, CHAIRMAN, THE ROCKFORD INSTITUTE, ‘AMERICA’S ECONOMIC CHALLENGE’,

HTTP://72.14.205.104/ SEARCH? Q = CACHE:9LGZE H N H J6EJ: WWW. LONESTARFOUNDATION . ORG/ECONOMIC C HALLENGE. DOC+U NITED +S TATES+E CONOMIC +C OMPE TITIVENESS+HEGEMONY& HL= EN& CT =CLNK & CD=33& GL= US]

The engine of American power has been its economic prowess, and underlying that prowess are its original cultural roots of individualism and self-reliance forged by traditional families, deferred to by limited government. Yet whether or not America retains its hegemony will depend substantially upon the outcome of an ongoing battle with the relentless encroachment of socialist government and its debilitating redistribution of income from productive families to unproductive lifestyles. Consider for a moment the extent of the remarkable world hegemony of America at present: The dollar has superseded even gold as the dominant denominator of international commerce.The U.S. military capability at home or abroad has no peer, nor current prospect of one.The U.S. is the most competitive producer in agriculture, high-tech manufacturers, plus management and financial services worldwide.American business techniques have been emulated and adopted as the prevailing modus operandi of the world.The English language has become the language of international business.Popular American culture (if we must call it culture) is exported worldwide in the form of fashion, entertainment, and knowledge to an unprecedented extent.America continues to be the haven of choice for displaced persons, particularly those with knowledge and skills. The world’s unique perceptions of American support their receptivity to America’s leadership. Among these perceptions are: admiration for perceived freedom and equality of opportunity; a sense of kinship derived from America’s broad immigration roots; and trust in America’s principled use of its dominant military power as world policeman. (a perception a bit tarnished by American adventures in Yugoslavia.) But underlying these subordinate contributants, the chief source of America’s power is economic: America’s unique capability to invent, organize, and finance, and it’s huge home market which provides economies of scale to American enterprise, and the most lucrative target for world commerce.

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1AC SHELL

THE COLLAPSE OF U.S. HEG CAUSES A MULTIPOLAR VACUUM LEADING TO MULTIPLE SCENARIOS FOR EXTINCTION FERGUSON ‘4 [NIALL, PROFESSOR OF HISTORY AT NEW YORK UNIVERSITY'S STERN SCHOOL OF BUSINESS AND SENIOR FELLOW
AT THE

HOOVER INSTITUTION, "A WORLD WITHOUT POWER," FOREIGN POLICY 143, P. 32-39, JULY-AUGUST]

So what is left? Waning empires. Religious revivals. Incipient anarchy. A coming retreat into fortified cities. These are the Dark Age experiences that a world without a hyperpower might quickly find itself reliving. The trouble is, of course, that this Dark Age would be an altogether more dangerous one than the Dark Age of the ninth century. For the world is much more populous--roughly 20 times more--so friction between the world's disparate "tribes" is bound to be more frequent. Technology has transformed production; now human societies depend not merely on freshwater and the harvest but also on supplies of fossil fuels that are known to be finite. Technology has upgraded destruction, too, so it is now possible not just to sack a city but to obliterate it. For more than two decades, globalization--the integration of world markets for commodities, labor, and capital—has raised living standards throughout the world, except where countries have shut themselves off from the process through tyranny or civil war. reversal of globalization--which a new Dark Age would produce--would certainly lead to economic stagnation and even depression. As the United States sought to protect itself after a second September 11 devastates, say, Houston or Chicago, it would inevitably become a less open society, less hospitable for foreigners seeking to work, visit, or do business. Meanwhile, as Europe's Muslim enclaves grew, lslamist extremists' infiltration of the EU would become irreversible, increasing trans-Atlantic tensions over the Middle East to the breaking point. An economic meltdown in China would plunge the Communist system into crisis, unleashing the centrifugal forces that undermined previous Chinese empires. Western investors would lose out and conclude that lower returns at home are preferable to the risks of default abroad. The worst effects of the new Dark Age would be felt on the edges of the waning great powers. The wealthiest ports of the global economy--from New York to Rotterdam to Shanghai -would become the targets of plunderers and pirates. With ease, terrorists could disrupt the freedom of the seas, targeting oil tankers, aircraft carriers. and cruise liners, while Western nations frantically concentrated on making their airports secure. Meanwhile, limited nuclear wars could devastate numerous regions, beginning in the Korean peninsula and Kashmir, perhaps ending catastrophically in the Middle East. In Latin America, wretchedly poor citizens would seek solace in Evangelical Christianity imported by U.S. religious orders. In Africa, the area plaques of AIDS and malaria would continue their deadly work. The few remaining solvent airlines would simply suspend services to many cities in these continents; who would wish to leave their privately guarded safe havens to go there? For all these reasons, the prospect of an apolar world should frighten us today a great deal more than it frightened the heirs of Charlernagne. If the United States retreats from global hegemony--its fragile self-image dented by minor setbacks on the imperial frontier--its critics at home and abroad must not pretend that they are ushering in a new era of multipolar harmony, or even a return to the good old balance of power. Be careful what you wish for. The alternative to unipolarity would not be multipolarity at all. It would be apolarity-a global vacuum of power. And far more dangerous forces than rival great powers would benefit from such a not-so-new world disorder

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**UNIQUENESS**

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US COMP LOW – TRADE DEFICIT -- NAFTA

US competitiveness low – skyrocketing trade deficit, housing market, and recession prove
Janet Plume, editor of Gulf Shipper (member of Commonwealth Business Media) “NAFTA Bashing”, Gulf Shipper, 4/28/08, Lexis. This year is turning out to be a tough one for free-trade agreements. The

downturn in the housing market, the credit crunch and the recession have amplified the erosion of U.S. competitiveness in the global economy.
The Bush

administration's inability to slow the skyrocketing trade deficit soaring to $712 billion last year and the continued loss of manufacturing jobs have helped make free-trade agreements fair game in this election year.
Since 2000, the biggest U.S. free-trade agreement of the past 20 years the North American Free Trade Agreement has been a common target of labor unions that blamed it for sending jobs overseas. Now both Democratic presidential candidates have threatened to pull the U.S. out of NAFTA to pressure Canada and Mexico to negotiate more protection for the environment and workers. When Barack Obama and Hillary Clinton imply that NAFTA is to blame for U.S. job losses, let's hope they actually know better and are just grandstanding for the voter sympathy such statements can generate. It's true that a lot of U.S. manufacturing jobs have been outsourced to Mexico, but that's not the reason for the huge trade deficit. A

close look at the details reveal oil and gas imports are the culprit. The NAFTA trade deficit has nearly doubled in the past eight years, growing from $77 billion in 2000 to $140 billion last year. Nearly 95 percent of that increase stems directly from U.S. imports of oil and gas from
Canada and Mexico, not from manufacturing jobs displaced to those trading partners. If you subtract the oil and gas from the NAFTA trade deficit, all that remains is a $3.5 billion trade deficit since 2000. The sale of U.S. farm products and manufactured goods to Canada and Mexico go a long way to offset the job loss from U.S. production shifting to Canada and Mexico. That $3.5 billion is hardly grounds for pulling out of NAFTA when the

non-energy trade deficit between the U.S. and non-NAFTA nations increased some $150 billion. The U.S. has a much more substantial growth in its trade deficit with the European Union and China, but we don't hear the president candidates grousing about it.

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US COMP LOW – TRADE DEFICIT – OIL IMPORTS

US competitiveness low – trade deficit increasing through huge oil imports Barrie Mckenna, Business Reporter, “U.S. energy independence frenzy leaves Canada out in the cold”, The Globe and Mail (Canadian Magazine), 7/8/08, Lexis. For anyone concerned about the rising protectionist mood in Washington, this Friday's U.S. trade figures will mark an ominous development. The country's monthly trade deficit is expected to rise for the third month in row in May to $62.4-billion (U.S.), according to a Bloomberg survey of forecasters. There will, of course, be the usual gnashing of teeth about cheap imports from low-wage countries such as China and its undervalued currency. The real culprit, of course, isn't China. It's oil. Think instead about Canada, Saudi Arabia, Mexico, Nigeria and Venezuela - the top five sources of U.S. oil imports. So far this year, nearly half of the cumulative trade gap - 47 per cent - is due to oil imports. And with every increase in the price of crude, the bill rises. China, on the other hand, accounts for just a quarter of the trade shortfall, and that share is falling. The United States is now spending more than $38-billion a month on imported crude, up from $24-billion in 2007. And for that it's getting less oil. The volume of imports is actually falling for a third consecutive year as Americans predictably react to the higher price by consuming less. At an average price of $140 a barrel, oil is adding $320-billion a year to the trade deficit, potentially pushing the overall gap to more than $1trillion, according to a recent report by the non-partisan Congressional Research Service. In 2007, oil added just $28-billion to the deficit. The report warned that high oil prices could permanently inflate the trade deficit, fuelling angst among lawmakers about the country's reliance on foreign crude. "Over the long run, a sustained increase in the prices of energy imports will permanently increase the nations' merchandise trade deficit," the report warned. "A sharp rise in the trade gap may ... add to pressures for Congress to examine the causes of the deficit and to address the underlying factors that are generating the deficit."

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US COMP LOW – TRADE DEFICIT – OIL IMPORTS

Dependence and trade deficit with oil exporting companies keep the US undercompetitive Fred Cederholm, forensic accountant, and writer for the Weekly Observer, “TH*NK*NG”, Atlantic Free Press, 7/8/08,
Lexis.

Official numbers for our trade deficits, cumulative trade deficit(s) for the calendar year thus far, and our energy import sources for this past April were released a week ago. The results and implications for US/us were actually both startling and depressing.You see four years ago (on June 29th, 2004), I wrote a column about the forthcoming July 4th holiday and how it is
supposed to be a celebration of American Independence. In objectively looking at the US situation I chronicled how much we

"were " depending on foreign imported goods, foreign energy sources, and foreign money to keep the good old American economy chugging along. I had growing reservations about whether we are still the "land of the free," in the
sense that the freedom of our choices and actions were more and more governed by our dependencies. When you are "dependent," the options that are open to you to choose from become constrained and colored by the very nature of the dependency. Moving ahead four years (and 208 weekly columns) later, it appears this sorry situation has not corrected itself one bit. Things are still as dire for US/ us --- or worse.Our eight largest trade deficits for the month of April 2008 (and 2008 Year to Date) are as follows: China $20.239 Billion ($74.984 Billion YTD), Canada $7.611 Billion, ($26.409 Billion YTD), Japan $7.562 Billion ($28.521 Billion YTD), Mexico $6.824 Billion ($23.437 Billion YTD), Germany $4.438 Billion ($15.246 Billion YTD), Saudi Arabia $3.406 Billion ($12.995 Billion YTD), Nigeria $3.382 Billion ($12.962 Billion YTD), and Venezuela $2.983 Billion ($11.757 Billion YTD), Our hands-down overall biggest dollar denominated imports are for crude oil and petroleum distillates - note that our first, third, and fifth largest deficits are with countries who sell us no energy related products what-so-ever. Our trade surpluses grew by a record $5 Billion in April 2008, but our trade deficits grew by a record $9.4 Billion for the month! April imports of crude oil ($29.3 billion) and the April average price per barrel of crude oil ($96.81) were records as well.The top eight sources of Uncle $ugar 's crude oil imports for April 2008 were: Canada (1.952 Million barrels per DAY--MBPD) up 8.7% over March, Saudi Arabia (1.453 MBPD) down 5.3%, Mexico (1.259 MBPD) up 2.2%, Nigeria (1.115 MBPD) down 3.4%, Venezuela (1.019 MBPD) up 18.8%, Iraq (0.679 MBPD) down 12.2%, Angola (0.5.79 MBPD) up 50.8%, and Algeria (0.393 MBPD) up 59.1%. Uncle $ugar 's top eight sources of total petroleum imports for April 2008 were: Canada (2.476 MILLION barrels per DAY--MBPD) down 2.6%, Saudi Arabia (1.462 MBPD) down 5.2%, Mexico (1.357 MBPD) no change, Nigeria (1.214 MBPD) up 3.4%, Venezuela (1.176 MBPD) up 13.8%, Iraq (0.679 MBPD) down 12.2%, Algeria (0.628 MBPD) up 42.4%, and Angola (0.591 MBPD) up 52.3%. Crude imports averaged 9.921 MBPD. While the average April price was a record at $96.81, it should be noted that the Monday, June 30th pricing was approaching $143. Domestic energy (OOTC:DMEC) consumption may be contracting, but the continued erosion of the purchasing power of the US dollar relative to other currencies gives the "appearance " of our spending more.

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US COMP LOW – FOREIGN GROWTH – ENERGY EFFICIENCY

Lack of US energy productivity policy keeps it under-competitive in relation to other nations Council on Competitiveness, nonprofit group comprised of corporate CEOs, university presidents and labor leaders, “Define: The Energy Competitiveness Relationship”, September 2007,
http://www.compete.org/publications/detail/407/define/ The United States Is a Global Laggard in Energy Productivity. The United States is the most energy-intensive developed region today and lags behind its OECD competitors in improving energy productivity. At the same time, many developing regions are making rapid progress in reducing their energy intensity. To the extent that energy is an important part of production costs, the United States is losing competitive ground relative to its global competitors.Energy productivity, like labor and capital productivity, is important for wealth creation. The United States has underinvested in energy efficiency. American business leaders in general are not as knowledgeable or open to the economic opportunity inherent in improved energy management as they should be. U.S. Government Policies and Regulation Can Inhibit Energy Competitiveness. There are current policies in place that serve to maintain existing energy technologies, such as depreciation cycles meant to keep old coal plants running, input-based emission standards, rules against hanging wires over streets and subsidies. It may be better to reassess and reform or disas-semble these policies rather than simply layer new policies over existing ones. Lack of credible policy commitments, those that are sustained over adequate periods of time, can fail to motivate business behavior as intended. Local codes and state government policies can also inhibit the deployment of cleaner energy and energy efficiency technologies.

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US COMP LOW – FOREIGN GROWTH – OUTSTRIP US

US Competitiveness Low – India and China are outstripping US growth
Gabor Steingart, international bestselling author and senior correspondent of Der Spiegel in Washington DC, “As Asia rises, so the west shall fall”, Financial Post (Canada), excerpt from The War for Wealth: The True Story of Globalization, or Why the Flat World Is Broken, 7/12/08, Lexis.
Nowadays, world history isn't being written in Afghanistan, Baghdad or Tehran, but in Shanghai. The fateful word

confronting our generation is

not terrorism, but globalization. It is the rise of India and China, not the goings on in the mountains of Pakistan, that will leave their imprint on this era. The war for wealth, a bitter struggle for a share of affluence and the related struggle over political and cultural dominance in the world, are the real conflicts of our day.
The war on terror is overblown, the man in the White House has set the wrong priorities and the public--deliberately or not -- is being kept in the dark over the true extent of the global shift of power and wealth. The

true tale of globalization is anything but a win-win situation. China and India, with populations of more than a billion people each, two countries we considered part of the Third World only yesterday, are suddenly surging ahead. We are all contemporary
A metamorphosis of virtually unprecedented proportions is taking place outside our direct field of vision. witnesses of, and participants in, an eruption of vitality that is unique in world history.

The era of Western dominance, those two centuries in which first the Europeans and then the Americans overshadowed the rest of the world with their economic might, is coming to an end. A new topography of power is taking
shape. What began with the rise of Japan and continued with the success stories of the Asian Tigers -- Singapore, Hong Kong, Taiwan and South Korea -- is now coming full circle. By 2025, China and India will likely dominate the world market with their purchasing power. Meanwhile, the West is turning into a miniaturized version of itself. Its population is both shrinking and ageing, its inventive spirit is diminishing and its relative share of the economic pie is getting smaller. Europe's share of the global market, three times the size of China's and India's combined before the First World War,

the next two decades. The United States, still the world's dominant economic power, will also have fallen behind China and India by then. Globalization has shifted the economic emphasis away from the West. Asia's emerging economies have managed to significantly expand their productive cores -- the sphere in which capital and labour come together to generate the wealth of a nation -- in the last two decades. Meanwhile, the productive core of the West is shrinking.
will shrink to only 15% of the economic power of these two countries within

The

U. S. share of global exports, for example, has been cut in half since 1960.
But China is not America's biggest problem. America's problem is America itself or, to be more precise, its broad lack of understanding and awareness of the world's rising powers. What many in the West fail to realize is that what is happening in the Far East is not an extension of the present but the beginning of a new present. The rules of the world economy are being rewritten, but not by the West. The flat world once dominated by the West, the world in which the United States, Canada and Europe held sway over world markets with their companies, their currencies and their rules and regulations, is broken. The new world is not flat. It is a structure with many sharp edges and deep chasms. For the Asians, taking control of the low-wage labour market was only the beginning. Their attack on the middle class and modern high-tech jobs is still in its infancy as Asian nations invest more and more of their revenues in research and education. Their goal is dominance, not being part of a silent partnership. They want to lead instead of follow. The truth is that the winners and losers in the war for wealth have already switched roles. Asia's new strength leads to the weakening of the West. Its rise is the

the United States, the balance of trade deficit, consumer debt and risks to the stability of the dollar are all growing. The American economy is now on shaky ground. The country will not be able to afford this form of the present for much longer.
West's descent. As Asia booms Europe faces mass unemployment

and growing national debt. In

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US COMP LOW – FOREIGN GROWTH – POST-AMERICANISM

Inability of US to match global growth proves lack of competitiveness
Fareed Zakaria, “The Rise of the Rest”, Newsweek (Excerpt from The Post American World), 5/12/08, http://www.newsweek.com/id/135380/page/1
American anxiety springs from something much deeper, a sense that large and disruptive forces are coursing through the world.

In almost every

industry, in every aspect of life, it feels like the patterns of the past are being scrambled. "Whirl is king, having driven out Zeus," wrote Aristophanes 2,400 years ago. And—for the first time in living memory—the United States does not seem to be leading the charge. Americans see that a new world is coming into being, but fear it is one being shaped in distant lands and by foreign people Look around. The world's tallest building is in Taipei, and will soon be in Dubai. Its largest publicly traded company is in Beijing. Its biggest refinery is
being constructed in India. Its largest passenger airplane is built in Europe. The largest investment fund on the planet is in Abu Dhabi; the biggest movie industry is Bollywood, not Hollywood. Once quintessentially American icons have been usurped by the natives. The largest Ferris wheel is in Singapore. The largest casino is in Macao, which overtook Las Vegas in gambling revenues last year. America no longer dominates even its favorite sport, shopping. The Mall of America in Minnesota once boasted that it was the largest shopping mall in the world. Today it wouldn't make the top ten. In the most recent rankings, only two of the world's ten richest people are American. These lists are arbitrary and a bit silly, but consider that

only ten years ago, the United States would have

serenely topped almost every one of these categories. In America, we are still debating the nature and extent of anti-Americanism. One side says that the problem is real and worrying and that we must woo the world back. The other says this is the inevitable price of power and that many of these countries are envious—and vaguely French—so we can safely ignore their griping. But while we argue over why they hate us, "they" have moved on, and are now far more interested in other, more dynamic parts of the globe. The world has shifted from anti-Americanism to post-Americanism.
These factoids reflect a seismic shift in power and attitudes. It is one that I sense when I travel around the world. During the 1980s, when I would visit India—where I grew up—most Indians were fascinated by the United States. Their interest, I have to confess, was not in the important power players in Washington or the great intellectuals in Cambridge. People would often ask me about … Donald Trump. He was the very symbol of the United States—brassy, rich, and modern. He symbolized the feeling that if you wanted to find the biggest and largest anything, you had to look to America. Today, outside of entertainment figures, there is no comparable interest in American personalities. If you wonder why, read India's newspapers or watch its television. There are dozens of Indian businessmen who are now wealthier than the Donald. Indians are obsessed by their own vulgar real estate billionaires. And that newfound interest in their own story is being replicated across much of the world.

In 2006 and 2007, 124 countries grew their economies at over 4 percent a year. That the last two decades, lands outside the industrialized West have been growing at rates that were once unthinkable. While there have been booms and busts, the overall trend has been unambiguously upward. Antoine van Agtmael, the fund manager who coined the term "emerging markets," has identified the 25 companies most likely
How much? Well, consider this fact. includes more than 30 countries in Africa. Over to be the world's next great multinationals. His list includes four companies each from Brazil, Mexico, South Korea, and Taiwan; three from India, two from China,

This is something much broader than the much-ballyhooed rise of China or even Asia. It is the rise of the rest—the rest of the world. We are living through the third great power shift in modern history. The first was the rise of the Western world, around the 15th
and one each from Argentina, Chile, Malaysia, and South Africa. century. It produced the world as we know it now—science and technology, commerce and capitalism, the industrial and agricultural revolutions. It also led to the prolonged political dominance of the nations of the Western world.

The second shift, which took place in the closing years of the 19th century, was the

rise of the United States. Once it industrialized, it soon became the most powerful nation in the world, stronger than any likely combination of other
nations. For the last 20 years, America's superpower status in every realm has been largely unchallenged—something that's never happened before in history, at

During this Pax Americana, the global economy has accelerated dramatically. And that expansion is the driver behind the third great power shift of the modern age—the rise of the rest. At the military and political level, we still live in a unipolar world. But along every other dimension—industrial, financial, social, cultural—the distribution of power is shifting, moving away from American dominance. In terms of war and peace, economics and business, ideas and art, this will produce a landscape that is quite different from the one we have lived in until now—one defined and directed from many places and by many peoples.
least since the Roman Empire dominated the known world 2,000 years ago.

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US COMP LOW – FOREIGN GROWTH – CAPITAL INVESTMENT

Growth of the rest of the world has lost America its competitive advantage in capital investment Fareed Zakaria, “The Future of American Power”, Foreign Affairs, June 2008, http://www.foreignaffairs.org/20080501facomment87303-p30/fareed-zakaria/the-future-of-americanpower.html Being on top for so long has its downsides. The U.S. market has been so large that Americans have assumed that the rest of the world would take the trouble to understand it and them. They have not had to reciprocate by learning foreign languages, cultures, or markets. Now, that could leave the United States at a competitive disadvantage. Take the spread of English worldwide as a metaphor. Americans have delighted in this process because it makes it so much easier for them to travel and do business abroad. But it also gives the locals an understanding of and access to two markets and cultures. They can speak English but also Mandarin or Hindi or Portuguese. They can penetrate the U.S. market but also the internal Chinese, Indian, or Brazilian one. Americans, by contrast, have never developed the ability to move into other people's worlds. The United States is used to being the leading economy and society. It has not noticed that most of the rest of the industrialized world -- and a good part of the nonindustrialized world as well -- has better cell-phone service than the United States. Computer connectivity is faster and cheaper across the rest of the industrialized world, from Canada to France to Japan, and the United States now stands 16th in the world in broadband penetration per capita. Americans are constantly told by their politicians that the only thing they have to learn from other countries' health-care systems is to be thankful for their own. Americans rarely look around and notice other options and alternatives, let alone adopt them. Learning from the rest is no longer a matter of morality or politics. Increasingly, it is about competitiveness. Consider the automobile industry. For more than a century after 1894, most of the cars manufactured in North America were made in Michigan. Since 2004, Michigan has been replaced by Ontario, Canada. The reason is simple: health care. In the United States, car manufacturers have to pay $6,500 in medical and insurance costs for every worker. If they move a plant to Canada, which has a government-run health-care system, the cost to them is around $800 per worker. This is not necessarily an advertisement for the Canadian health-care system, but it does make clear that the costs of the U.S. health-care system have risen to a point where there is a significant competitive disadvantage to hiring American workers. Jobs are going not to lowwage countries but to places where well-trained and educated workers can be found: it is smart benefits, not low wages, that employers are looking for. For decades, American workers, whether in car companies, steel plants, or banks, had one enormous advantage over all other workers: privileged access to American capital. They could use that access to buy technology and training that no one else had -- and thus produce products that no one else could, and at competitive prices. That special access is also gone. The world is swimming in capital, and suddenly American workers have to ask themselves, What can we do better than others? It is a dilemma not just for workers but for companies as well. When American companies went abroad, they used to bring with them capital and know-how. But when they go abroad now, they discover that the natives already have money and already know how.

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US COMP LOW – FOREIGN GROWTH – MARKET CONTROL

Huge power shift to Asia keeps the US under-competitive globally Joergen Oerstroem Moeller, senior research fellow with the Institute of Southeast Asian Studies (Singapore), “Is the Sun Setting on US Dominance? Part I”, Yale Center for the Study of Globalization, 2/27/08, http://yaleglobal.yale.edu/display.article?id=10418 Just before our eyes a tectonic shift in the global economy is taking place – the Asian economies rising to replace the US as the dominating global economic power. Absolute figures may still give primacy to the US, but emerging trends suggest its grip on the steering wheel is slipping. The most persuasive signal is that Asia has decoupled, with a decreasing dependence on the US. The Economist reported in February 24, 2007, that the increase in China’s exports accounted for 2.2 percent of the country’s 11 percent GDP growth in 2006, down from 2.7 points in 2005. The figure for 2007 was expected to shrink to 1.6 points. Statistics from the Asian Development Bank show that over the last five years domestic demand, primarily investment but also consumption, amounts to more than 80 percent of contributions to growth. The Asian Development Bank’s outlook for 2007 reports that the US, Europe and Japan – the G-3 – accounted for 43.3 percent of Asia’s exports in 2005 compared to 53.2 percent in 1985. The world’s savings also take place in Asia, excluding the Middle East and its petro-economy. Asia may not like it, but most on the continent have acquiesced in allowing reputable Western financial institutions to shuffle their savings around, investing them as deemed most profitable. However, most of Asia’s financial institutions wisely did not embrace the risky financial instruments that included sub-prime mortgages originating from the US. The sub-prime crisis – triggered by increasing defaults as housing prices slip in the US and homeowners cannot afford rising interest rates – revealed that these venerable Wall Street firms are less than perfect. In fact, many firms sought rescue from Asia’s growing wealth funds. The list of Western financial institutions relying on support from Asia reads like a “Who’s Who” in international finance: For example, Singapore’s General Investment Corporation took a stake of US$9.7 billion in UBS, China Investment Corporation channeled US$5 billion into Morgan Stanley. The support does not signify control or ownership, but does signal that global investment decisions can no longer be made without hearing Asia out. An augury of what the world can expect surfaced in February 2008: The mining giant BHP wanted to acquire its competitor Rio Tinto to create a juggernaut sitting on one-third of the world’s trade in iron ore and the biggest producer of aluminum and coal. China feared that the new company would use its power to push up prices and stepped in to prevent the merger. With a war chest of US$120 billion, the Chinese aluminum company Chinalco entered the fray offering to bid for Rio Tinto. Multinational companies originating in Asia, excluding Japan, not only emulate existing Western multinationals, but also forge their own path. Companies from small nation-states like Singapore are active, as can be seen with Singtel and DBS, both of which invest in other Asian countries, but still hold back from the global scene. Chinese and Indian companies demonstrate no such modesty: Chinese companies like Lenovo, Petrochina and CNOOC spread their wings globally, and Indian companies like Mittal Steel, Tata, Wipro and Infosys also enter the big game. Asian companies are active in mergers and acquisitions, as seen with Lenovo’s purchase of IBM’s computer division. India’s Mittal Steel bought Europe’s biggest steelmaker, Arcelor, consolidating its position as the world’s number-one steelmaker. India’s Tata Group launches the people’s car for US$2500 on its home turf and wants to purchase two British motor-industry icons: Jaguar and Land Rover. Inexperienced compared with established Western multinationals, most Asian firms, particularly the Chinese companies, prefer the minority-shareholder route in this initial phase of going global. Industrial and Commercial Bank of China has taken a 20 percent share of South Africa’s largest bank,

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Standard Bank, also operating in 18 other African countries, thus gaining a foothold in Africa. Two Chinese firms vie for 20-percent stakes of the West Australian iron-ore miner, Mount Gibson. India’s biggest bank, ICICI, is present in 18 countries through wholly-owned subsidiaries, branches and representative offices. International operations account for about 23 percent of its consolidated banking assets. The exciting question is whether a new corporate culture forged by the Asian way of doing business – more cautious, more network-oriented and not compelled to publish higher earnings on a quarterly basis – will emerge or whether the new multinational companies born out of Asia will adopt existing formulas. The most likely outcome is a gradual transformation of corporate culture, depriving Western companies of their monopoly of not only doing business, but also drawing the lines in business culture. Admittedly, Japan, China, India and Southeast Asian countries have striking dissimilarities in business practices, much like the differences in US and European practices. Still the fundamental difference between Asian and Western business culture remains the Western focus on short-term profits, a factor that was instrumental in the Enron and WorldCom disasters. The reaction of the Western world to Asia’s rise is defensive in nature, bordering on protectionism. For decades, the Western world, in particular the US, praised the free market, free trade and all related principles. Now as newcomers like China and India use free competition to erode market shares of established powers, another tune is heard.

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US COMP LOW – FOREIGN GROWTH -- CONSUMPTON

US debt and rise of foreign consumption keeps competitiveness low
Roger Cohen, award winning former NYT editor and IHT correspondent, “A Terrible Bust Is Born”, New York Times, 6/30/08, Lexis.

The recessionary Irish story is familiar, a mirror of developments in the United States, Britain and elsewhere: disappearing credit, plunging house prices, sapped consumer confidence, falling demand, lost jobs, and inflationary stirrings driven by record prices for oil and other commodities.
In Britain, Gordon Brown's poll ratings are the lowest for any Prime Minister since World War II, a reflection of the woes of a service-dominated economy. He makes Bush's popularity look enviable -- an achievement. The Irish economy is expected to contract this year after growing 4.5 percent in 2007. Bye-bye, tiger. Hello, bear. Yes, a bear market is upon us with the Dow Jones Industrial Average now off 19.9 percent from its October record. (A bear market is typically defined as a decline of 20 percent or more.) A terrible bust is born. But we had good times, didn't we? Over the past decade, China, India and Russia joined global markets, doubling the labor force (at least) and changing the relationship between capital and labor in the former's favor. Business leaders had many more cheap workers at their disposal, not least because technology eliminated distance. One result was the rich thrived. Another was low inflation. Imports of goods produced by cheap labor in Asia ensured that: the Wal-Mart dividend spread. But as with most things, there was another side to the coin. Those hundreds of millions of people emerging from poverty, moving to cities from central China or Vietnam's Mekong Delta, began to consume. They asked for wage rises. They started to eat two meals a day instead of one. They needed building materials for homes. After acquiring bicycles, they got scooters. Now they're starting to offload scooters for cars. These neo-consumers created new pressures, and not only on the environment: commodities went through the roof and oil hit $140. A post-cold-war wealth shock became a resources shock. Inflation returned. That's where we are. But not everyone is suffering as the Dow dives. That's worth recalling. The new consumers are still living better. I wrote a few weeks back that the world is no longer flat, it's upside-down. In the BRIC economies -- Brazil, Russia, India and China -confidence persists. There's a reason. The four emerging behemoths' combined reserves stand at close to $3 trillion, almost ten times where they were in 2001. Their share of world output has doubled in that period to 16 percent. The military dominance of the United States

is no longer matched by economic dominance.
One way of looking at the current crisis is as an adjustment between the old economic power structures of the world and the emergent ones. It can't be resolved by the ancien regime alone. The G-8 and permanent members of the U.N. Security Council must be expanded to reflect today's realities. One such reality is debt-ridden America's economic vulnerability. Many politicians, including Missouri's Republican governor, Matt Blunt, have been protesting the $46.6 billion bid by a Belgian-Brazilian company for Anheuser-Busch, maker of Budweiser.

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US COMP LOW – DOMESTIC – ENERGY COSTS

US competitiveness low – high energy costs ensure Council on Competitiveness, nonprofit group comprised of corporate CEOs, university presidents and labor leaders, “Define: The Energy Competitiveness Relationship”, September 2007,
http://www.compete.org/publications/detail/407/define/ Energy Efficiency Powerfully Impacts the Ability of All Companies to Compete. The rapid

rise in energy costs in recent years has added significantly to the costs of U.S. goods and made it more difficult for U.S. firms to compete with countries with lower energy costs. Higher energy costs have a pervasive effect on the business ecosystem. For example, the transportation, manufacturing and information technology sectors are highly sensitive to the cost of energy. In the agricultural sector, energy prices ripple up and down the supply chain, affecting the cost of producing crops, feeding animals and transporting foodstuffs. Initiatives that increase energy efficiency can powerfully benefit the competitiveness of U.S. business. Energy quality and reliability are also crucial. According to a study by Sandia National Laboratories, annual financial losses from power disruptions in the U.S. amount to $150 billion and one-third of all computer problems are related to poor power quality.

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US COMP LOW – DOMESTIC – ENERGY EFFICIENCY

COMPETITIVENESS

Dependence on one form of energy in oil keeps the US undercompetitive – Alternative energy allows the US to remain competitive Council on Competitiveness, nonprofit group comprised of corporate CEOs, university presidents and labor leaders, “Presidential Candidates Urged to Discuss Questions Key to U.S. Energy Security and Competitiveness”, 6/11/08,
http://www.compete.org/news/entry/513/presidential-candidates-urged-to-discuss-questions-key-to-us-energy-securit1/

Though finding solutions to the energy challenge is fundamental to the economic and national security of the United States, ESIS leaders noted that, during the campaign to date, there has not been a commensurate intensive focus on a comprehensive energy policy. If the United States is to remain competitive, we know that we must secure access to adequate energy supplies, increase the nation’s energy productivity, maximize the economic value of each unit of energy consumed, and minimize the environmental impact of energy choices. Yet there has been comparatively little discussion about the role of government in creating the environment for progress toward global energy security. Likewise, there has been limited debate about how to create the conditions necessary to stimulate innovation in the
energy arena, nor about how to ensure an energy workforce adequate to meet the needs of the 21st century. ESIS leaders have urged a focus on three key questions for the presidential candidates: As president, what will be the first steps you will take to advance a comprehensive energy security and sustainability strategy for the United States? What federal policies would you put into place to create the conditions necessary to stimulate U.S. energy innovation, including enhancing energy productivity to get the maximum economic value out of each unit of energy consumed? What steps would you take to ensure that the United States has the energy workforce necessary for the 21st century? As ESIS leaders point out, energy security cannot be achieved without a comprehensive national strategy. This

certainly includes

reducing U.S. dependence on foreign oil, but an energy strategy must encompass more. Redundancy of supply and diversity of source are essential if the United States is not to be overly dependent on any one energy source or supplier in the marketplace. The match-up of appropriate energy source to sector of use must be optimized—
whether supplying energy to heat homes, transport goods, light cities or power business enterprises. Each of these elements must be supported by innovation: technological innovation, policy innovation and innovative global collaboration. Recognizing the urgency of the 21st century energy challenge, the Council launched the ESIS Initiative in 2007. The Initiative provides a privatesector-led forum to drive sustainable energy solutions and to enhance U.S. energy security and global competitiveness. The ESIS Initiative co-chairs are James Owens, chairman & CEO of Caterpillar Inc., Shirley Ann Jackson, Ph.D., president of Rensselaer Polytechnic Institute, and Michael Langford, national president of the Utility Workers Union of America, AFL-CIO. Deborah Wince-Smith is president of the Council on Competitiveness. In February they released the first report, Define. The Energy–Competitiveness Relationship, based on a dialogue among leaders from business, labor, and academia. Each of the co-chairs have added their perspective on the urgency of the energy security challenge: James Owens, chairman & CEO of Caterpillar: “The private sector recognizes the opportunities and challenges presented by current energy use, and we’re moving to secure the benefits of a new energy future today.” Shirley Ann Jackson, president of Rensselaer Polytechnic Institute: “We cannot just drill our way out of this problem, we must innovate our way out. The exponential demand for energy worldwide—and the link to climate change—presents extraordinary geopolitical challenges and offers extraordinary economic opportunities, magnifying the need for a comprehensive energy roadmap. This nation has a tremendous capacity to rise to great challenges, but it will require strong national leadership to spark a new generation of innovation to put us on the pathway to global energy security and sustainability.” Michael Langford, national president of the Utility Workers Union of America, AFL-CIO: “America’s workforce is the critical underpinning of our energy system. Our investments in technology and infrastructure must be matched by investments in training and education.” And, from Deborah Wince-Smith, president of the Council: “Energy is the cornerstone of U.S. productivity and global

competitiveness—and this has not been adequately articulated in the presidential campaign thus far, even though this will be one of the central challenges the next administration must face.”
US COMP LOW – DOMESTIC – DEBT

US markets continually show deterioration in competitiveness

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US Newswire, “Committee On Capital Markets Regulation to Study 'Fundamental Issues in the Securitized Debt Markets”, 7/10/08, Lexis
Hal Scott, the Committee's Director and Nomura Professor at Harvard Law School, said: "The worsening state of the debt markets and the continued deterioration of the competitiveness of the U.S. equity markets, are a major concern. Without stronger capital markets, full economic recovery in the U.S. will not be possible." The Committee's recommendations will focus on five principal areas: transparency, consumer protection and borrower relief, capital requirements, regulatory reorganization and monetary policy (including issues raised by the Bear Stearns rescue). The Committee will release its report in December prior to the new Administration taking office. "Revitalization of the securitized debt markets, on a more prudent footing, is important to the ability of millions of Americans seeking credit to buy homes or automobiles," said Professor Scott. "Further, it is crucial for spreading risk in the financial system. The banking system would have been more devastated, and the credit crisis more intense, if banks had been unable to securitize mortgages or other forms of consumer debt. Revitalization may indeed require more regulation -- if so, we want to make sure it works, is consistent with other international initiatives and is cost-justified." The CCMR has created an Advisory Committee to oversee the research and recommendations, which will be chaired by Glenn Hubbard, Dean of Columbia Business School. The Committee will be composed of several CCMR members as well as outside experts. CCMR members include: Robert Glauber, Visiting Professor, Harvard University Kennedy School of Government and former Chairman and CEO, NASD; Blythe Masters, Head of Global Commodities, JP Morgan Investment Bank; Wilbur Ross, Chairman and CEO, WL Ross & Co. LLC; and Hal Scott. Outside experts include: Peter Fisher, Co-Head of Fixed and former Under Secretary of the U.S. Treasury for Domestic Finance; Boyce Greer, President of Fixed Income and Asset Allocation, Fidelity Investments; Robert Kaplan, Professor of Management Practice, Harvard Business School; John Rutherfurd, Retired Chairman and CEO, Moody's Corporation; and Jeffrey Solomon, Managing Member, Ramius LLC. The Advisory Committee will also be assisted by a panel of experts in law, finance and accounting. The Committee on Capital Markets Regulation is an independent and nonpartisan 501(c)(3) research organization dedicated to improving the regulation of U.S. capital markets. In November 2006, the Committee issued its Interim Report, which found a marked deterioration in the competitiveness of the U.S. public equity market and proposed 32 regulatory and other reforms to address the problem. The Committee has also issued quarterly updates of these findings (available at www.capmktsreg.org), showing a continued deterioration in U.S. competitiveness.

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US COMP LOW – DOMESTIC – TAX LAWS

COMPETITIVENESS

US tax laws are disadvantageous to US firms and counterproductive to maintaining competitiveness USA Today, “Energy fees will hurt U.S. competitiveness”, December 2007,
http://findarticles.com/p/articles/mi_m1272/is_2751_136/ai_n24256272/pg_1?tag=artBody;col1

Robert Murphy (economist for IER), Ben Lieberman (senior policy analyst with the Heritage Foundation), and Margo Thorning (senior vice president and chief economist with the American Council for Capital Formation) maintain that there are possible unintended consequences for consumers and businesses of higher taxes on the oil and gas industry. For

example, the Windfall Profits Tax of the 1980s resulted in lower domestic oil production, higher oil imports, and a depressed U.S. oil industry with reduced profits that limited the development of technologies for obtaining oil in
deeper offshore and onshore wells. "This proposed tax hike would generate only $15,000,000,000, whereas opening exploration in the Alaskan National Wildlife Reserve would generate $75,000,000,000 in revenue," Lieberman points out. This type of pro-growth strategy, he adds, would preserve American goals of increased supply and energy security, whereas taxes undermine them. Lieberman characterizes the current proposal as "raising taxes on energies that work in order to subsidize energy sources that don't work," referring to the economic inefficiency of biofuel and wind power. Murphy catalogues the failures of past attempts to tax or regulate energy prices, and the damage that was done to consumers in gas shortages, lost time, and escalating costs. We can expect more of the same, he asserts, if proposed legislation passes. "High taxes

and controls by the U.S. Federal government raise the world price of oil, which makes the U.S. more dependent on foreign producers and U.S. companies less competitive in a global market." He also notes that oil
companies are paying their share of income taxes, almost $70,000,000,000. Expressing concern about the compromising of U.S. competitiveness, Thorning states, "The tax code is a ball and chain around American industry--putting U.S. firms at a disadvantage." She encourages legislation that would reduce the cost of capital for new energy investment and promote availability of domestic petroleum supplies rather than imposing more punitive taxes on the oil industry.

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US COMP LOW – OIL DEPENDENCY – NO CONTROL

COMPETITIVENESS

US no longer has control over global economy and oil prices, keeping competitiveness low
Jay Hancock, financial and economics columnist, “Fed is bit player in global economy”, The Baltimore Sun, 7/2/08, Lexis. The business press paints the Federal Reserve as omnipotent. Maybe once it was. But events are likely to prove it has lost some of its mojo. The nation's central bank controls a smaller piece of the global economy than in the last severe recession, in the early 1980s. And it no longer influences the price of oil as it once did. Those seldom-acknowledged facts make its job more difficult, and the outcome of its efforts to fight inflation or keep the country out of a bad recession more uncertain. The Fed directly influences only the U.S. economy and dollar-denominated investments overseas. But for a long time, this meant it pretty much controlled the global economy, and, by extension, the price of petroleum. "America sniffles and the world gets double pneumonia" was the economic cliche for 40 years. The U.S. economy was comparatively so big - delivering a fourth of world output in the 1980s, after adjusting for currency swings - that it set the trend for the rest of the planet. U.S. dominance was reinforced by its openness to trade while many countries walled off international commerce in miserable attempts at communist self-sufficiency. Now, however, the world sets the course for America. The U.S. share of world output is down to about a fifth. Many nations - China, Brazil, Russia, India - are growing much faster than this country and will do so for decades. Despite the hearty U.S. appetite for imports, this country's contribution to international trade has also fallen. (Our share of global imports has fallen to 15 percent, the lowest level since the early 1990s, while developing-nation imports have risen from less than 30 percent to 40 percent.)

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COMPETITIVENESS US COMP LOW – OIL DEPENDENCY – FOREIGN CONTROL

US competitiveness low – oil dependency and rise of other nations has shifted power and economic dominance away Paul Kelly, editor-at-large of The Australian, PhD in economics from University of Sydney, “Nirvana out of American Reach”, The Australian, 7/5/08, Lexis. THE energy, financial and political woes that grip the US signal a decisive shift in world power, mocking the liberal delusion that Barack Obama or John McCain can return American prestige and power to its pre-Bush year 2000 nirvana. There is no such nirvana. There is instead a new reality: the greatest transfer of income in human history, away from energy importers such as the US to energy exporters; the rise of a new breed of wealthy autocracies that cripple US hopes of dominating the global system; and demands on the US to make fresh compromises in a world where power is rapidly being diversified.
Far from the Obama-McCain contest being America's saviour, it has another dimension entirely: evidence of the generic failure of the US political system. The US struggles but seems unable to confront the world that exists. It slips into pessimism while fooling itself another irresistible revival is just around the corner. But the structural trends offer a different conclusion.

world oil and energy prices will stay high, driven by long-run changes in supply and demand. This provokes a global wealth redistribution without precedent to oil exporters, mainly in the Middle East and Russia, that marches in tandem with China's export-driven current account surplus. It is an extensive transfer of economic power away from the US to nations that are not mainly democracies, a dynamic that is the subject of agonising
Despite cyclical fluctuations, review in seminars and debates in the US. Flynt Leverett, former director of Middle East Affairs on the National Security Council, says: ``The

international economic position of the United States has deteriorated substantially since the new millennium. The big trends in global finance and energy markets are working against the US. There isn't any solving this problem in terms of making it go away. These are ongoing realities.
The energy picture is not going to change: it is here to stay.'' World oil prices have risen from $US16 a barrel in 2001 to $US140 ($145.50) a barrel today. No respite is in sight. This week the International Energy Agency warned that the oil market would stay tight for the next five years, with the capacity to expand supply severely restricted. Non-energy-rich developing nations will be crippled and confront recessions, dislocation and violence;

giants such as the US will face deep political and economic

adjustment. Australia is both a winner and a loser as its coal and gas export prices rise and it pays more for petrol; but it is a big winner overall from the
broad-based commodity boom likely to run for decades. Writing in the May-June issue of Foreign Affairs, US strategic analyst Fareed Zakaria, whose new book The Post-American World is reviewed in The Weekend Australian Review today,

puts the oil trend into a wider context, arguing that the third great power shift of the past 500 years is under way.
The first was the rise of the Western world that began in the 15th century; the second was the rise of the US in the late 19th century; and the third is what analysts call the rise of the rest.

This is the shift in power to parts (but not all) of the developing world that are ``experiencing rates of economic growth that were once unthinkable'' and whose total gross domestic product surpasses that of the industrialised nations. Countries driving this structural change are China, India, Brazil, Russia, the Organisation of the Petroleum Exporting
Countries and Gulf nations, and parts of Southeast Asia. This points to a more complex global power structure, unlike the duopoly of the Cold War or the brief US unipolar period post-1989 that so deceived US President George W. Bush. For Zakaria, ``on every dimension other than military power -- industrial, financial, social, cultural -- the distribution of power is shifting, moving away from US dominance. That does not mean we are entering an anti-American world. But we are moving into a post-America world.''

US analyst Robert Kagan argues that ``the world has become normal again'' with the smashing of hopes for a post-1989 liberal international order based on democratic values and US dominance. Instead, Kagan argues, the future will witness a range of powerful nations aspiring to be global
Opinions are divided about the strategic consequences. In his new book The Return of History and the End of Dreams, or regional powers -- Russia, China, India, Japan, Europe and Iran -- working in various forms of co-operation and competition with the US. Energy and financial trends are reinforcing. Sovereign wealth funds from nations with a current account surplus have more than $US3trillion in assets and this figure will grow to $US12trillion by 2015. The biggest funds are those of China and the Gulf Co-operation Council. This technique, in one form or another, is followed by China, Saudi Arabia, Kuwait, Singapore, Brazil and Russia. Leverett says the GCC will surpass China to ``become the world's most important investor''. Western oil companies own only about 8 per cent of proven oil reserves. Energy-rich governments and national oil companies own more than 80 per cent, a significant structural shift since the 1970s. As demand for energy continues, the cash reserves of oil exporters and their sovereign funds will expand dramatically. This drives a transfer of global financial power and creates huge imbalances.

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Where do such funds go? They finance America's excess of consumption over savings.

COMPETITIVENESS

The US needs about $US2 billion each day to finance its trade deficit. These funds are coming, increasingly, from the energy and export-strong developing nations courtesy of their governments, which control sovereign wealth fund strategies. Going into US bonds and securities, such investments constitute a heavy US dependence on the developing world's trade surplus nations.
In his comments this week to the Carnegie Council workshop in New York, Leverett said that when US politicians talked about achieving energy independence, ``either they don't understand how stupid that is or they do understand and say it anyway''. He argued that the classic remedy to confront the US's declining currency was to raise interest rates and balance the budget, but there was no sign ``that either McCain or Obama will do this''. The US debate ``was about some other planet from where we are now''. In the current issue of The American Interest, Gal Luft, from the Institute for the Analysis of Global Security, argues that

``perpetually high oil prices

will undoubtedly transform the existing world economic order''. Even below today's prices, OPEC could potentially buy the Bank of
America with two months' worth of production and General Motors with six days' worth. This dictates only one sensible response: non-petroleum fuels must become the US's top strategic economic priority, to be introduced over a generation.

The US is tied to interdependence with sovereign wealth funds. In the present US crisis, Bear Stearns has disappeared but other US
financial institutions would have sunk without the operation of these funds.

The US is hostage to global oil markets, for years having refused to embark on radical reforms to break its consumer oil addiction. The price of such refusals will plague the present generation of politicians and consumers. Addressing the same Carnegie Council workshop, Nikolas Gvosdev, editor of another publication, The National Interest, said the idea that the US could determine the global order has been terminated. It is not clear whether the US Congress grasps this reality. The alternative world
order to the liberal internationalism favoured by the US is that defined by state-to-state negotiations and agreements. This is the favoured model of Russia and China and many other emerging countries.

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US COMP LOW – OIL DEPENDENCY – FOREIGN CONTROL

Oil based econ creates foreign-controlled US firms and real-estate, loses US jobs Council on Competitiveness, nonprofit group comprised of corporate CEOs, university presidents and labor leaders, “Define: The Energy Competitiveness Relationship”, September 2007,
http://www.compete.org/publications/detail/407/define/

Capital export is a daunting, seldom-discussed problem for the United States that is inherent in our conventional, petroleum-based economy. Capital export results in the loss of American jobs and greater foreign control of U.S. firms and real estate. In 2006, oil imports were the largest component of the U.S. trade deficit, accounting for 33 percent. The 2006 petroleum deficit was roughly 270 billion, which was an increase of roughly $42 billion (or 18 percent) from 2005. Each $1 billion of trade defi cit costs 27,000 U.S. jobs; hence, this increase in oil imports translates into the equivalent of 1.1 million American jobs. This transfer of wealth is expected to continue. Capital export must be
considered in combination with other strategic factors, such as the instability of the Middle East and the fi nite supply of petroleum.

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**LINKS**

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COMPETITIVENESS

I/L – AE KEY TO COMP – INNOVATION

US reliance on oil is a problem; alternative energy is crucial to increase American competitiveness and technological innovation. Carlos Gutierrez. July 14, 2008. [U.S. commerce secretary and former chairman and chief executive of Kellogg Co. “Exports Key to Detroit’s Future”, The Detroit News, http://detnews.com/apps/pbcs.dll/article? AID=/20080714/OPINION01/807140332 KZ] In an increasingly global economy, great American cities like Detroit have a choice: Step up and compete, or retreat from the international marketplace. New data would suggest that Detroit is ready to compete. Today, the Commerce Department
is releasing new metropolitan export data, which shows that for the first half of 2007, Metro Detroit was the fifth largest export market in the nation with sales totaling $24.3 billion. Exports continue to be one of the bright spots in our economy. Last year, the United States exported a record $1.6 trillion, and we're on pace this year to shatter that record with exports already up more than 18 percent year-to-date through April. Exports contributed 12 percent to our gross domestic product last year. Now is the time to take actions to boost exports, create jobs and keep our economy strong. We know our economy is growing more slowly than we would like. The economic stimulus plan passed with bipartisan support in Congress is starting to have an impact and came at the right time. Already, 104 million stimulus checks totaling $86 billion have been sent to households. We expect the stimulus to help the economy as the year progresses, but there are other steps we can take now to put us on the right path, including making the tax cuts permanent and allowing more

our reliance on foreign oil is one of our most serious national security concerns. Allowing more exploration of our own resources will create good American jobs and help lower prices by signaling to the market that we are taking action to expand supply. But there are alternative energy sources -- wind, natural gas, biofuels and clean coal, for example -- that must also be a part of meeting our nation's energy needs. Developing these alternative sources gives us a unique opportunity to increase American competitiveness and encourage innovation while addressing climate change. Innovation -- including the development of clean and efficient energy technologies -- can help foster prosperity both here and around the world. To grow exports of clean technology, and other American products, we need to expand access to overseas markets for U.S. goods and services. Free trade agreements are the best way to do this. There are
environmentally responsible oil exploration in America. Energy prices are the top pocket book issue for the American people -- and three FTAs pending before Congress with Colombia, Panama and South Korea that would give Michigan's workers and companies increased access to 100 million consumers. Last year, Michigan's export shipments of merchandise to Korea totaled $627 million. That was an increase of 72 percent since 2003. A free trade agreement with South Korea would level the playing field and provide U.S. automotive exporters a competitive advantage in gaining access to the Korean market.

Getting it right demands that we stay open to new ideas for powering our economy, open to innovations that will help us meet the challenges of climate change and open to new markets that will grow our exports and our economy.
To compete in the global economy, Detroit -- and America -- need smart, pro-growth policies that get it right -- on energy, the environment and trade.

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I/L – AE KEY TO ECON – DEPENDENCE

US energy reliance severely damages its economy; alternative energy sources are needed to increase independence. The Boston Globe, 91
[Diverging paths to energy future, Pg 25] The energy debate is long on technical detail and short on media attention, but the stakes are high indeed. Both sides acknowledge that it represents a test of competing visions, and that the result will affect the nation's competitiveness, international economic security and the pace of environmental degradation over the next 40 years. The administration plan, based on
the National Energy Strategy developed by the Department of Energy over the last 30 months, is driven by assumptions of continuing strong economic growth and a primary goal of job creation. The alternative, whose principles are embodied in a new two-year study produced by a

coalition of public interest groups, is most strongly influenced by concerns about global environmental decay and the need for energy self-sufficiency. Each side believes its vision represents the only viable and sensible course to meeting America's energy
needs. Major components of the administration plan, which has the backing of most major energy industries, in-clude building 600 new nuclear and coal power plants by 2030, boosting oil stocks by drilling in the Arctic refuge, streamlining the licensing process for new nuclear power plants and requiring that automobiles average 37 miles per gallon of fuel by 2006. The competing plan, which has the backing of a number of influential Democrats, relies on large-scale investments in conservation and renewable technologies for electricity generation, autos that get at least 40 m.p.g., and a host of tax and regulatory changes to promote the development and marketing of
alternative energy sources. The cornerstones of the alternative vision outlined in "America's Energy Choices," the study produced by the Alliance to Save Energy, the American Council for an Energy-Efficient Economy, the Natural Resources Defense Council and the Union of Concerned Scientists, are conservation and the use of renewable sources. The study suggests that conservation and energy efficiency alone could eventually save the equivalent of one-third of the current energy consumption. And it envisions nearly 30 percent of US energy coming from renewable sources such as solar heat, wind and hydroelectric power, geothermal wells and the burning of agricultural, lumber and yard wastes. The Energy Department projections, by contrast, call for just 7.5 percent of energy needs in 2030 to come from these alternative sources, and more than 90 percent from fossil and nuclear sources. The authors of the alternative plan claim that by 2030 their approach would cut overall energy requirements in half from 1988 levels, reduce oil consumption by two-thirds, reduce carbon dioxide emissions by 70 percent and save consumers $ 5 trillion in fuel and electricity costs. While the developers of this alternative scenario call it realistic and achievable with the right policies and incentives, administration spokesmen say such projections are little more than wishful thinking President Bush put his chips squarely on a bill that followed the contours of his Energy Department's National Energy Strategy. DOE officials, the White House and Senate backers, including Sen. Bennett Johnston (D-La.) and Malcolm Wallop (R-Wyo.), insisted it would provide a balanced, diversified mix of energy sources that would insulate the country equally against overreliance on imported oil and failures of what they say are largely unproven benefits of conservation and alternative technologies. "The problem is that energy comsumption is increasing and domestic production is dropping," said W. Henson Moore, second in command at the agency, in a telephone interview late last week. The administration is trying to bridge that gap, he said, by requiring that autos begin moving to alternative fuels by 1995 and by stimulating domestic oil production, notably from the Alaska wildlife refuge. "The National Energy Strategy is the best this government has ever done in trying to address the country's total energy picture and analyzing its impact on the economy and the environment," Moore declared. But Democratic critics in Congress say the measure is essentially a sop to utilities, oil companies and automakers. Sen. Paul Wellstone (D-Minn), said the "bill has become a giant Christmas tree of goodies for big energy corporations." Senate opponents cite a recent report by the Congressional Office of Technology Assessment that concludes the country could improve energy efficiency by 2 percent a year as a way to cut dependence on fossil fuels. The OTA said increased reliance on methanol, compressed gas and biomass could replace gasoline for transportation, for example. "Any energy policy should rely on sources which cost the least, which do the least environmental damage, and which increase the country's energy independence," said Alden Meyer, one of the principal authors of "America's Energy Choices." He added, "Neither the DOE strategy nor the Johnston-Wallop bill meets those criteria." The study called for legislated energy-efficiency standards for automobiles, appliances and heating systems; a system of rebates for energy-efficient products and fees for energy-wasteful products; tax credits for renewable energy use; pollution taxes to reflect the environmental costs of dirty technologies; and dedication of 67 percent of the DOE research and development budget to renewable energy sources. But DOE's Moore charged opponents with political posturing rather than substantive contributions to the country's energy dilemma: "Their position makes for an easy political sell. But they have no data to back it up. Where are their numbers, their evidence? It's a simplistic political statement with no backup." The critics respond that Bush's plan is as flawed on energy

independence grounds as on environmental grounds. They contend their approach would cut foreign energy imports far below the levels projected by DOE, which forecasts fuel imports increasing by 33 million barrels-a-day of oil, or its equivalents, by the year 2030. Moore defended the administration's import projections, saying the critics' goal of energy self-sufficiency is unrealistic. "Our goal is to hold energy imports to 45 percent of net consumption by the year 2010. We cannot get it to zero," he said. " There is no way to further reduce

foreign fuel imports without draconian policies that would severely damage our economy."

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COMPETITIVENESS

I/L – AE KEY TO TECH – COMPETITION

More efficient and innovative energy is crucial to diversify technology and enhance competition. Lynette Khoo. March 4, 2008 [“S'pore gives solar energy sector a $20m boost; Incentive scheme to spur innovative approaches and capability.” The Business Times Singapore, KZ] As subsidies are not sustainable in the long run, the government encourages competition which would exert a downward pressure on prices. Since competition was introduced in the electricity market in 2001, electricity tariff for low tension users - mainly households - only increased by 14 per cent although fuel prices more than doubled over the past seven years. Mr Iswaran said he is hence not in favour of suggestions by some MPs to provide subsidies to solar energy in the form of feed-in tariffs, but rather allocate resources to R&D and test bedding to develop technologies that will bring down the cost of generating alternative energies. To cope with intensifying global competition for resources, Mr Iswaran said the government's response has to be on two fronts. On the demand side, more efficient and innovative use of energy is required, and in this aspect, the Min-istry of the Environment and Water Resources outlined its efforts last week. On the supply side, Singapore needs to diversify its sources of energy and continuously explore new fuel and energy technologies. To this end, the government has decided to import liquefied natural gas (LNG) to reduce its vulnerability to possible supply disruptions as some three- quarters of Singapore's electricity is generated using piped natural gas. 'We are currently in the final stages of liberalising the gas market and that will further enhance competition in our energy sector, Mr Iswaran said.

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COMPETITIVENESS

I/L – AE KEY TO COMP – TRADE DEFICIT

Sustainable alternative energy is critical to solve international trade deficits and increase competitiveness. Allen Smith 11/19/2007 [Environmental writer and previously served as Alaska regional director of The Wilderness Society, “The road to energy conservation,” The Boston Globe, A13, Lexis Nexis]
Our preoccupation with letting the free market determine our national energy policy is wasteful folly and not in the public interest.

Our margin of error to make catastrophic energy policy mistakes with impunity is shrinking as fast as the window to tackle climate change is closing. Reliance on markets alone cannot solve this and doing so will bankrupt our future. We need sustainable national energy policy legislated now. Energy conservation should be first. The most abundant low-hanging fruit of energy conservation is rotting on the vine because we
are mired in political gridlock over improving fuel efficiency in vehicles. Detroit manufacturers brag about achieving greater efficiency in cutting the energy costs of producing an automobile, then pass on inefficient fuel costs to the environment and consumers. Green-washing themselves about the efficiency of their hybrids, they lobby successfully against any policy change to improve fleet mileage standards. Two-thirds of the petroleum consumed in this country is used in transportation. Imagine if we doubled transportation efficiency and cut that two-thirds in half. Consuming 21 billion barrels of petroleum per year in the United States, we use 14 billion barrels in transportation alone - saving half of that would be 7 billion barrels per year. If Congress directed Detroit to double all vehicle fuel efficiency, the resulting oil saving is only the first of many benefits that would accrue to our national well-being: - Improved security through reduced oil importation from volatile areas of the world. - Improved

economy through reduced production and transportation costs, reduced international trade deficits, and increased competitiveness. - Improved environment in air, water, and climate quality through reduced emissions, making a down payment on everything we must do to halt the devastation of long-term climate change. No other single action we could take now has that much benefit.

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I/L – TRADE DEFICIT KEY -- ECON

The trade deficit from imported oil taxes economic growth and development. Peter Morici 7/11/2008 [Director of Economics at the U.S. International Trade Commission, Professor of International Business at the University of Maryland, Reuters macroeconomic forecasting panel, “Breaking Down the Trade Deficit,” CounterPunch, http://www.counterpunch.org/morici07112008.html KZ] The trade deficit remains high because of surging prices for imported oil and refined products, continuously rising imports from China, and the shift to more fuel efficient imported vehicles. At about five percent of GDP, these pose a significant drag on the economy. The trade deficit aggravates the pain caused by recession and surging unemployment. Ben Bernanke’s recent comments about oil driven inflation only serve to distract attention from these issues and make matters worse. Simply, money spent on Middle East oil, Japanese and Korean cars and Chinese televisions and coffee makers goods can’t be spent on U.S. made goods and services. The drag on aggregate demand, along with the credit crisis and resulting shutdown in new housing and commercial construction, are driving up unemployment. Since December, the U.S. economy has lost 438,000 jobs—235,000 jobs in manufacturing and 261,000 in construction. At the same time, higher prices for imported oil, surging imports of cars and consumer goods from China, and the credit crunch have pushed the economy into recession, and high unemployment has put the skids on inflation on non-energy and non-food products. That is why core inflation, prices less food and energy, had
been so modest, and the kind of inflation gripping China and Europe is not likely in the United States. Federal Reserve Chairman Ben Bernanke in recent comments has emphasized that western central banks stand ready to resist oil induced recession, when in fact oil price increases are far beyond the control of the Federal Reserve and other central banks to affect. The threat of higher interest rates have tanked the stock market and pushed down the dollar against the euro, and the latter has actually pushed up oil prices by giving the Europeans extra dollars to bid up Middle East petroleum prices. China is subsidizing oil imports, without regard to spot prices in international markets, and controlling domestic gasoline prices with the dollars it purchases with yuan. It undertakes the latter purchases to keep the yuan undervalued against the dollar and boost exports. Hence, consumers in the country contributing most to growing demand for oil, China, are wholly insulated from rising oil prices. As oil prices rise, the Chinese drive prices even higher with their subsidies. Bernanke should talk about U.S. options for combating Chinese manipulation of oil and currency markets, instead of punishing the U.S. economy with the threat of higher interest rates that would serve no positive purpose. Instead, Bernanke’s words cause markets to believe the Fed may raise interest rates as we travel deeper into a recession, and this drives equity prices down, compounding the panic created by rising oil prices. Raising interest rates now would be the kind of policy the Federal Reserve pursued in 1929. Is that the kind of signal a central banker and student of the Great Depression wants to send to fragile markets? If Bernanke wants to do something about both the recession and inflation, he should focus on Chinese purchases of dollars with yuan, which boost exports to the United States, and Chinese subsidies on oil imports with those dollars, which drive up global oil prices. Together, these are driving up the trade deficit, exacerbating the recession and driving up U.S. gas prices. Were the Chinese yuan problem solved, the trade deficit could be cut by a third, and that would boost U.S. GDP by about $300 to $500 billion GDP. Trade deficits must be financed by foreigners investing in the U.S. economy or Americans borrowing money abroad. Direct investments in the United States provide only about a tenth of the needed funds, and Americans borrow about $50 billion each month. The total debt is about $6.5 trillion, and at five percent interest, the debt service comes to

High and rising trade deficits tax economic growth. Each dollar spent on imports, not matched by a dollar of exports, shifts workers into activities in non-trade competing industries like department stores and restaurants. Manufacturers are particularly hard hit by this subsidized competition. Through
about $2000 per U.S. worker each year. recession and recovery, the manufacturing sector has lost 3.8 million jobs since 2000. Following the pattern of past economic recoveries, the manufacturing sector should have regained more than 2 million of those jobs, especially given the very strong productivity growth accomplished in technology-intensive durable goods

Productivity is at least 50 percent higher in industries that export and compete with imports. By reducing the demand for high-skill and technology-intensive products, and U.S. made goods and services, the deficit reduces GDP by at least $300 billion a year or about $2000 for each worker. Longerterm, persistent U.S. trade deficits are a substantial drag on growth. U.S. import-competing and export industries spend at least three-times the national average on industrial R&D, and encourage more investments in skills and education than other sectors of the economy. By shifting employment away from trade-competing industries, the trade deficit reduces U.S. investments in new methods and products, and skilled labor.
industries.

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COMPETITIVENESS

A rapid switch to alternative energy is crucial to maintain our leadership in technology and the global market. Janet Sawin 3/26/2002
[Senior Researcher & Director, Energy and Climate Change Program, “Losing the Clean Energy Race,” http://www.greenbiz.com/column/2002/03/26/losing-clean-energy-race KZ]

Due to a lack of appropriate and consistent government support for clean energy technologies, and government subsidies that continue to favor dirty, conventional fuels and technologies, we are losing our role as technological leaders. We are now falling farther and farther behind as Japan and Europe surpass us with regard to total installed clean energy generating capacity, share of the global market, and ownership of manufacturers. U.S. companies must compete in the global marketplace. If this trend is not reversed, America will lose millions of potential high-wage, high-tech jobs, billions of dollars in potential investment and revenue. The US will also fail to glean multiple benefits not traditionally measured in economic terms that come with clean, safe, domestic and renewable energy technologies - including cleaner environment, reduced risk of global warming, improved human health, better quality of life, and a more secure future. With
only 4.5 percent of the United States land area and a fraction of its wind resource potential, Germany has more than double the U.S. installed wind energy capacity. Denmark, a small nation of about five million people, is the world's leading manufacturer of wind turbines, with several turbine companies that consistently rank in the global top ten. The U.S. share of global PV shipments reached a peak in 1996, declining from 44 percent that year to 27 percent in 2001. Total grid-connected PV in the United States is now estimated to be only 15 percent of that in Japan, and 31 percent of that in Germany. The rising demand for Japanese and European made technology is due primarily to the dramatic increases in demand for renewable energy capacity in these countries, sparked by successful government policies aimed to develop markets for renewable energy. Meanwhile, the U.S. government continues to subsidize fossil fuels and nuclear power, at levels many times that for renewable energy technologies. Around

the world, leaders in business and government are calling for a transition to a clean energy economy to address global climate change, increase national security and meet rising demand for energy worldwide. Perhaps most importantly, the American public wants clean energy. In poll after poll, Americans have expressed their preference for investment in renewable energy technologies over conventional energy. According to a Gallup poll taken November 8, 2001, 91 percent of Americans favor investments in new sources of energy, such as
solar and wind.Top level advisors under Clinton, Reagan and Nixon have urged Congress to adopt strong measures now to advance renewable energy in order to advance America's energy security. "They [renewable energy technologies] are now ready to be brought, full force, into service…. Speedy action by the Administration and the Congress is critical to establish the regulatory and tax conditions for these renewable resources to rapidly reach their potential." David Freeman, who has held top positions at the New York Power Authority and Tennessee Valley Authority (TVA), and now heads the California Power Authority, notes that "our whole system of electric power supply is hard to defend against attack. The worst is nuclear." Sir Mark Moody Stuart, former CEO of Shell Oil company last month called on governments of northern countries "to expand renewable energy targets, removing inappropriate subsidies and switching some to renewable energy to provide a level playing field in the energy sector." Russian Vice Prime Minister Ylia Klebanov recently said that "using traditional energy technologies, it's hard to talk about [a] competitive economy. And for renewable energy technologies we do too little…."Every region and state in this nation has significant renewable energy potential - wind and solar energy, geothermal energy, ocean power, crops for biomass, and environmentally sustainable hydropower. In fact, North America has some of the world's greatest wind energy resources; North Dakota alone has enough to produce 1.2 trillion kilowatt hours (kWh) of electricity each year , 37 percent of total U.S. electricity consumption in 1999 (3 trillion kWh ). Every minute, the sun drenches earth's surface with more energy than the world consumes in a year. The United States has the best solar resource of any industrialized country. According to the U.S. Department of Energy, enough

The benefits of renewable energy are compelling: a cleaner environment for current and future generations, reduced threats of global warming, economic growth, greater diversity of fuel supply, improved energy and national security, rapid and modular deployment, and a global potential for technology transfer and innovation. In addition, renewable energy
electricity could be generated to meet all of U.S. demand with solar energy on a plot of land 100 miles square in Nevada. technologies provide more jobs per unit of energy generated than do conventional energy technologies. According to the Department of Energy, wind energy provides about five times more jobs per dollar invested than coal or nuclear power. A recent study concluded that solar PV provides the most jobs of any renewable technology, on an energy capacity basis, and many of these positions are high-wage, high-tech jobs.

The global markets for renewable energy

and energy efficient technologies are booming. Wind has been the fastest growing energy source worldwide for most of the past decade,
while global shipments of solar photovoltaic (PV) panels and modules have increased at an average annual rate of 33 percent since 1996. During the same period, the use of coal for generating electricity has declined by 9 percent worldwide. Solar PV and wind power technologies have matured considerably since the 1980s, experiencing dramatic increases in productivity and lifetime, while achieving significant declines in cost. In good wind sites, wind power is now the cheapest new energy source, with full life-cycle costs below those of most fossil-fuel powered plants. Today, solar PV provides electricity for several hundred thousand people

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around the world, creates employment for more than ten thousand people and generates business worth more than $2 billion annually. According to some forecasts, clean-energy markets will grow from less than $7 billion in 2000 to more than $82 billion by 2010 , and the U.S. National Renewable Energy Laboratory (NREL)

Driven by concerns about global warming, energy security, increasing demand for energy worldwide - particularly in developing countries and advances in renewable energy technologies, nations around the world are setting targets for renewable energy. The European Union aims to generate ten percent of its electricity with renewables by 2010, and the European Wind Energy Association projects that
predicts that PV technology has "the potential to become one of the world's most important industries." Europe will have 60,000 MW of installed wind capacity by that year. By the year 2020, wind energy could generate 10 percent of the world's electricity and create more than 1.7 million jobs. The European PV Industry Association projects that solar PV will provide 26 percent of total global annual electricity demand by 2040. Even China, India and Brazil have committed to significant increases in the use of renewable energy; India established a ministry for advanced energy technologies, and China has eliminated subsidies for coal. These three nations combined have more than two billion people, with rapidly rising demand for energy and the technologies that produce it, offering nearly unlimited market potential. The current political and commercial commitment to renewable energy around the world implies that the recent surge of activity in this industry is only the beginning of a massive transformation and expansion expected to occur over the coming decades.

without strong and sustained political leadership at home, Americans will lose out in this energy revolution. To compete successfully in the clean energy race, U.S. industries must be strong and resilient, which requires a strong and consistent domestic market for their products.
But

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I/L – AE KEY TO COMP – NEW MARKETS

The financial potential in renewable energy is key to revitalize US competitiveness El-Ashry, CEO of the Global Environment Facility, 2001
(http://www.gefweb.org/Outreach/outreach-PUblications/New_Business_Renewable_Energy.pdf)

Renewable energy (see box) represents multiple technologies that harness power from the sun, wind, water, earth, and certain kinds of organic matter with few impacts on the environment. Once the technology is in place and maintained, it can power lighting, heating, cooling, water pumps, communications, and more, both costeffectively and reliably, utilizing locally abundant energy sources. “Bringing it close to home” has the added benefits of badly needed local jobs and business opportunities. The potential for renewable energy in these regions,
however, is challenged by several factors, not least of which are the up-front costs of installing equipment and the limited resources of the people who need it. Difficult institutional, regulatory, and capacity barriers also hamper efforts to promote renewable energy. Many believe that the private sector should play a primary role in expanding the use of renewable energy in developing countries— by establishing strong, sustainable, and profitable local markets in renewables. The good news is that

governments and development agencies want to partner with the private sector to make it happen. The annual world market for renewable energy systems (excluding large hydropower systems) is several billion U.S. dollars. Business experts believe that renewable energy markets are poised for expansion, particularly in developing countries. Installed renewable energy capacity in developing countries already exceeds 60,000 megawatts.
According to the World Bank, in the next four decades, developing countries will need 5 million megawatts of new electrical generating capacity. If renewable energy captures just 3 percent of this market within ten years— not unreasonable given current International Energy Agency projections— by 2010 renewable energy investments in developing countries could exceed $5 billion a year.1 Off-grid applications of renewable energy will also take off in the next decade, particularly as solar photovoltaics (PV) technology costs decline. These applications include solar-powered lighting, water pumping, telecommunications, and small industry targeted to millions of rural inhabitants through public-private partnerships. This promising outlook clearly offers

considerable opportunities for businesses— both foreign and domestic— willing to enter a unique and expanding market.

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I/L – LOW ENERGY COSTS KEY TO COMP

Lower energy costs are key to regain US competitiveness
Rachel Halpern, Sarah Lopp, and Samuel Beatty¸ US Department of Commerce, “Energy Policy and U.S. Industry Competitiveness”, International Trade Adminstration, 2007. www.ita.doc.gov/td/energy/energy%20use%20by%20industry.pdf

world oil prices have risen dramatically, and U.S. natural gas prices grew to be significantly higher than natural gas prices in most other countries. U.S. businesses have been hit by higher energy costs for fuel, feedstock, buildings, and transportation, in both energy-intensive industries and less energy intensive industries, as well as in the services sector. Many manufacturers in energy intensive industries say that rising energy costs are their biggest challenge. They base many decisions, including those about shutting down U.S. production and investing in other countries, on the cost of energy in the United States. This paper provides an overview of energy use by U.S. manufacturers and the impact of rising energy prices on U.S. manufacturing competitiveness, and discusses policies that could help U.S. manufacturers remain competitive in the current energy price environment. It draws from statistical data from the U.S. government and other sources, detailed
In the past five years, industry knowledge held by U.S. Department of Commerce analysts, and extensive discussions with other U.S. government experts and industry representatives.

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I/L – ENERGY COSTS – OUTSOURCING

US industry suffers from high domestic energy costs, forcing them to outsource
Rachel Halpern, Sarah Lopp, and Samuel Beatty¸ US Department of Commerce, “Energy Policy and U.S. Industry Competitiveness”, International Trade Adminstration, 2007. www.ita.doc.gov/td/energy/energy%20use%20by%20industry.pdf Recent high

U.S. natural gas prices relative to world oil prices have eroded the U.S. chemicals industry’s competitive position. Because natural gas prices have traditionally been relatively low in the United States, the U.S. chemicals industry relies heavily on natural gas for fuel and feedstock. Chemical manufacturers rely on
natural gas for 58 percent of their fuel, and natural gas and natural gas liquids for 58 percent of their feedstock. (ACC 2005) In Europe and Asia, the chemicals industry relies mostly on naphtha, a petroleum-based feedstock. The increase in U.S. natural gas prices has helped reduce and even eliminate in some recent years the United States’ trade surplus in bulk chemicals. The U.S. trade balance for the chemicals industry, excluding pharmaceuticals, declined from $16.8 billion in net exports in 1997 to $218 million in net exports in 2006. (Figure 7) Chemical plants are closing in the United States, as companies move their facilities

and dollars to countries where natural gas is cheaper, particularly to the Middle East where natural gas prices are a fraction of prices in the United States. Of the 120 largest chemical plants being built around the world as of mid-2005, only one was located in the United States. (Arndt, 2005) Spending by the U.S. chemicals industry has increased dramatically. In 2002, the U.S. chemicals industry spent $32 billion on energy. According to the
American Chemistry Council, spending on energy had increased to $52 billion by 2004, a 64 percent increase over energy spending in 2002. (ACC 2005) It is worth noting that the trade balance for the U.S. chemicals industry was declining before natural gas prices started to rise in 2000. Chemicals industry experts admit that there are many factors involved, including an expanding surplus in polymers. Industry executives say that for them, however, the largest factor in determining where

to

locate new plants or whether to invest resources in existing ones is the high price of energy in the United States.

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COMPETITIVENESS

I/L – OIL DEPENDENCY – TRADE DEFICIT

Oil imports add to the growing trade deficit and reduces the amount of US exports. John Atcheson 3/26/2000 [federal employee on energy and environmental issues, “A Look at the oil addiction, If we can learn to use less,” Washington Post, B03, LexisNexis] Either way, the United States would need to import more oil, from fewer suppliers--most of whom do not have our best interests at heart. Suppliers will periodically reduce prices because their own economies are often tied to ours in the global marketplace, and because, like any dealer, they need to structure their prices in a way that keeps us hooked on their product. But in the end, prices will rise. So what? Here's what: The United States spends more than $ 50 billion a year to protect our oil interests in the Middle East; by burning fossil fuels we also foul our air, increase childhood mortality rates and heat up the climate. Moreover, oil price volatility has extracted, and will continue to extract, a devastating toll on our economy. According to Oak Ridge National Laboratory, the United States spent more than $ 2.3 trillion on imported oil between 1970 and 1998. This represents the single largest contribution to a growing trade deficit. Because the price of that oil was artificially inflated by limited production quotas, it reduced the U.S. gross domestic product by $ 3.6 trillion, Oak Ridge says (mostly because rising prices contribute to inflation, and because of the shrinking number of goods factories could produce per unit of energy). Analysts at the investment firm of Solomon Smith Barney estimate that the most recent round of oil price increases will reduce annual economic growth by 1.5 percent, and increase inflation by a full percentage point.

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I/L – AE KEY TO COMP – OIL PRICES

Decreased demand for natural gas and alternative energy would drop the price of oil, increasing US competitiveness
Rachel Halpern, Sarah Lopp, and Samuel Beatty¸ US Department of Commerce, “Energy Policy and U.S. Industry Competitiveness”, International Trade Adminstration, 2007. www.ita.doc.gov/td/energy/energy%20use%20by%20industry.pdf Demand-Side: Reducing Overall Use of Natural Gas. The government could also enact policies to reduce the demand for natural gas in all sectors, particularly the electric power sector. A recent review by analysts at the Berkeley National Laboratory of a number of studies of the effect on natural gas prices of increasing the use of renewable energy found that the studies concluded that for every 1 percent decrease in demand for natural gas in the U.S. (which would today total about 200 billion cubic feet) natural gas prices would decrease by 0.8 to 2.0 percent. (Wiser and Bolinger 2007) Policies that would decrease demand for natural gas could include increased support for research and

development of alternative energy sources, including nuclear, coal gasification, and clean coal technologies; incentives for utilities to adopt new technologies that allow them to meet environmental goals without using additional natural gas, such as a permanent Production Tax Credit for alternative energy sources; programs that help consumers use less electric power such as time-of-day rates for commercial and residential electricity customers; and incentives for energy efficiency measures. Demand-Side: Helping Manufacturers Save Energy. As
noted previously, U.S. manufacturers have made great strides in reducing their energy use over the past thirty years. However, there are still gains that could be made. A recent ACEEE study found that there are still numerous opportunities for manufacturers to reduce their energy use. (Shipley and Elliott 2006)

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I/L - AE KEY TO COMP – OIL PRICES

Alternative energy is critical to ease the pressure of oil prices on US competitiveness Chattanooga Times, “End tax breaks for big oil”, 3/9/08, Chattanooga Times Free Press, Lexis.
The soaring price of crude oil, to nearly $106 a barrel last Thursday, easily shattered the 1980 inflation-adjusted record of $103.76 (today's value of the $39.50 a barrel of oil cost then). Though the record-breaking trend in oil prices has been tracked for some time, however, members of the U.S. Senate apparently had rather keep their eyes shut to alternative energy and leave their allegiance to big oil undisturbed. How else to explain why the Senate's Republicans are still so unwilling to shift some of the tax breaks for oil companies -- now fabulously profitable -- to tax incentives for desperately needed initiatives

in alternative energy, particularly solar, wind and renewable fuels. It's clear that this nation needs alternative sources of energy. It's also certain that oil companies can easily do without the gratuitous tax breaks they continue to receive. The five largest oil companies captured $145 billion in profits last year on exploding prices for gasoline and other fuels. They could well afford to give up the $17 billion in tax breaks sought by the House over 10 years (that's $1.7 billion a year for the entire industry) to provide tax credits to help get alternative energy programs off the ground. The Senate should have adopted the House plan last year when the 2007 energy bill was under consideration, but it
refused. That forced the House, under the Democratic majority's pay-as-you-go rule, to strip the alternative energy provision out of the bill for lack of revenue to finance it. The proposal is again on the table under a new bill passed by the House two weeks ago. Predictably, the oil industry is grumbling again that losing the tax breaks would reduce its incentive for exploration and new drilling. Worse, its Senate lackeys are pretending to buy that and are still balking on the House proposal. That's unfathomable. Alternative energy programs need a break. Oil companies don't. They're flush. And oil prices won't ease because

the Bush administration is not about to reverse its deeply entrenched, debt-driven budgets and weak-dollar policies that are spiking the price of oil. That possibility is not remotely on the horizon. In fact, the federal budget deficit
this year will top $400 billion. Even if the administration wanted to stanch its red ink, it couldn't happen soon enough to reduce oil prices much in the next year. That means dollar-wary investors around the globe will continue to flee U.S. Treasury notes and stocks for demand-sensitive commodities such as oil and grains, which are soaring in tandem with oil as investors embrace ethanol-based fuels. Hot economies in China and India, now the United States' biggest competitors for oil, will also

continue to drive oil prices higher. And the United States, which uses around 25 percent of the world's oil daily but possesses just 3 percent of known oil reserves, could not begin to reduce consumption of foreign oil enough to alter its current energy equation. Even if American oil companies discovered vast news deposits, new
production would be blended into the global commodity market, assuring that it would go to the highest bidders for oil futures. In these circumstances, oil companies have plenty of price incentives to keep up production and fatten their bottom lines. In fact, many economists already are forecasting $4-a-gallon gasoline, recession or not. The United States is simply to wedded to private vehicles and truck freight to reduce oil consumption quickly enough to avoid that price trend. Alternative energy, together with other efficiency and conservation strategies, could significantly relieve Americans' carbon-based energy use in the not too distant future, however. That would begin to reduce reliance on oil, domestic and imported, and vent some of the oil price pressure. The U.S. Senate ought to understand this by now, and be willing to shift tax breaks from oil companies to alternative energy.

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I/L – AE KEY TO COMP – OIL DEPENDENCY

Alternative energy sources can lessen US reliance on natural gas, the primary cause for its falling competitiveness in the global market. National Economic Council, February 2006 [The White House, “Advanced Energy Initiative,” State of the Union Address, Accessed 7/16/2008 http://www.whitehouse.gov/stateoftheunion/2006/energy/energy_booklet.pdf KZ] This substantial increase in natural gas prices and volatility has had a negative impact on the U.S. industrial sector. High prices for natural gas translate to increased production costs for U.S. companies, which places them at a disadvantage to their foreign competitors. As a result, many firms have either shut down U.S. production facilities altogether or relocated them to another country where energy costs are more competitive with the global market. According to the National Association of Manufacturers, the chemicals and plastics industries, which rely on natural gas both for energy and as a raw material, have lost 250,000 jobs and $65 billion in business because of rising natural gas prices. High natural gas prices similarly harm the competitiveness of U.S. farm products in global markets, as natural gas is a primary input for fertilizer. Diversification of our electric power sector will ensure the availability of affordable electricity and ample natural gas supplies. At the same time, increased efficiency will help reduce demand for natural gas. By easing the demand pressure on natural gas, prices will drop and U.S. firms will be more competitive in the global market, keeping jobs here at home.

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I/L – AE KEY TO COMP – OIL DEPENDENCY

Renewable energy is key to secure our global competitiveness by decreasing dependence on oil
John Denniston, Partner at VC firm Kleiner Perkins Caufield & Byers, “Financing for Clean Energy Technology”, CQ Congressional Testimony, 7/15/08, Lexis.

There's a fast-growing consensus among Americans today about the need to confront our three main energy challenges: the climate crisis, our dependence on foreign oil, and the risk of losing our global competitive edge by failing to champion new technologies that are becoming a huge new source of economic growth, jobs and
prosperity.

Renewable energy sources - such as sun, wind, geothermal and biofuels - offer this country's best hope of addressing all three of these dimensions, and of helping us rebuild our domestic economy and regain our edge as an economic superpower. Our leading climate scientists predict we have only a short period of time to make dramatic cuts in our greenhouse gas emissions or risk potentially catastrophic climate change. Global temperatures and sea levels are already rising and will continue to do so; the question now is whether we can slow down the projected rate of future increases. Global warming is not a partisan issue: President Bush and both Presidential candidates have publicly declared we must seriously confront our climate crisis. Yet perilously, we have so far failed to move with the requisite
speed and determination.

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I/L – AE KEY TO COMP – OIL DEPENDENCE

Alternative energy is key to reduce oil dependence and boost US competitiveness
Samir Ahmed, US Chamber of Commerce Urges Investment in Alternative Energy”, Market News International, 7/16/08, Lexis. The U.S. Chamber of Commerce and a former Bush Commerce secretary Wednesday demanded a change in energy policy as soaring oil prices continue to damage the U.S. economy, while the nation spends 50% less on developing alternative energies than during the 1970s oil embargo. Former U.S. Commerce secretary Donald L. Evans was part of a bipartisan group of former secretaries of Energy, Defense, Commerce, Treasury and former members of Congress who joined to unveil the Chamber's open letter to the future president calling for policy changes they say are essential for U.S. prosperity. "I have seen this industry go up and I have seen it go down, I was here doing the oil embargo of 1973. I was here during the hostage crisis of 1979, but this is different," Evans said. The group called for increasing renewable and alternative forms of energy, expanding

funding for research and development, increasing the use of clean coal and establishing the U.S. as a global leader on energy and climate change. "This is not another cycle, this is a paradigm shift and the challenges we have in providing the world affordable, available, clean burning energy," Evans said. The Chamber said the government spends less than $4 billion dollars in research and development a year, about what the nation spends in importing oil in three days. Chamber of Commerce President Thomas J. Donohue acknowledged that making progress on all 13 recommendations would be tough, but said, "American economic competitiveness and national security depend on affordable, abundant and clean supply of energy." Some of the policy initiatives have been discussed in Washington. The House Committee on Small Business held a hearing in June where wind and solar power energy experts testified on the importance of investing in alternative energies. They cited Department of Energy study released last month that said wind power could make up 20% of the U.S. electrical needs by 2030, creating 500,000 American jobs. But this would only be possible with political support. One of the Chamber's
recommended platforms calls for expansion of nuclear energy use because of its zero emissions of carbon dioxide.

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I/L – AE KEY TO ECON – OIL DEPENDENCY

Alternative energy is key to reduce oil dependency and increase competitiveness Michele Cavallo 9/22/2006
[NY University, Department of Economics, Economist, International Researcher, International Bank of San Francisco, “Oil Prices and the US Trade Deficit,” http://www.frbsf.org/publications/economics/letter/2006/el2006-24.html KZ]
It shows that the overall monthly trade deficit went from $30 billion to $68 billion, and the petroleum-related trade deficit went from $6 billion to $26 billion. These numbers imply that higher oil prices and the resulting higher cost of petroleum imports have accounted for over 50% of the deterioration in the overall U.S. trade deficit during this period. Indeed, looking at only the last two years, from August 2004 to July 2006, the data are more striking. The overall trade deficit grew from $54 billion to $68 billion and the petroleum-related trade deficit rose from $14 billion to $26 billion, indicating that the deterioration in the petroleum-related trade deficit accounts for 80% of the worsening in the overall trade deficit. If oil prices persist at higher levels, what will happen to the U.S. trade deficit? Will it continue to deteriorate, or will it level off over time, or even revert to a balanced position? These questions are particularly pertinent because oil futures markets indicate that oil prices may well remain at their relatively high current levels for the foreseeable future. To tackle these questions, Rebucci and Spatafora (2006) examine how an advanced oil-importing economy like the U.S. adjusts to a permanent increase in the price of oil. As one would expect, they find that, as the price of oil rises, the overall trade deficit increases noticeably relative to its baseline level. In their analysis, the adjustment process works through the effects of relative price changes on the nonpetroleum trade deficit. Specifically, as oil imports become more expensive, households and businesses have fewer resources to spend on other goods and services, which leads to a contraction in domestic nonpetroleum demand for consumption and investment. This contraction, in turn, leads to a decline in the terms-of-trade, which is the relative price of domestic tradables in terms of foreign tradables. In particular, lower domestic demand for nonpetroleum products leads to lower domestic demand for domestic tradables, which is compensated only in part by higher foreign demand coming from oil-exporting countries, which is generated by their higher oil revenues. This effect is related to "home bias," as domestic tradables normally represent a disproportionately higher share of domestic demand than they do of foreign demand. As a result, a contraction in domestic nonpetroleum demand generates a lower overall demand for domestic tradables and, correspondingly, an excess of supply of these goods, leading therefore to a decline in their relative price. As domestic tradables become more competitive, export sales increase and the nonpetroleum trade balance improves. In turn, this improvement helps the overall trade deficit, so that, eventually, it returns to its baseline level. How has this adjustment process played out in the U.S. so far? During the last two years, the nonpetroleum trade deficit has not improved but has actually remained constant, at $44 billion. This suggests that the adjustment process in the U.S. overall trade deficit is occurring quite slowly. How long, then, can the adjustment process take? The answer depends, in part, on the persistence of the oil price increase: The longer oil prices stay at high levels, the longer it will take for the trade deficit to adjust. As Rebucci and Spatafora point out, the answer also depends on other factors, two of which I will highlight here. The first factor is the monetary policy responses of oil-importing countries. Monetary policy, of course, affects interest rates, which, in turn, affect domestic aggregate demand and economic growth in oil-importing countries, ultimately influencing their demand for imports and, therefore, the evolution of their overall trade deficit. When higher oil prices start to raise not only headline inflation but also core inflation—that is, the price measure that excludes food and energy—the central bank usually tightens monetary policy to offset the inflationary pressure. The resulting increase in interest rates dampens domestic aggregate demand even further, leading to slower economic growth, a decline in the demand for imports, and a faster improvement in the overall trade deficit. In theory, the increase in interest rates can also induce an offsetting effect on the trade deficit by appreciating the domestic currency. The currency appreciation, by making domestic goods relatively more expensive than imported goods, can lead to a decline in exports, an increase in imports, and a deterioration in the overall trade deficit. In reality, however, this effect is likely to be smaller than the one that works through the reduction in the demand for imports. In fact, empirical evidence shows that the degree of pass-through of exchange rate movements to domestic import prices is quite limited, and that the demand for imports and exports tends to be rather unresponsive to relative price changes. As a result, the effect that works through the demand for imports is likely to dominate, so that an increase in the domestic interest rate leads to a faster improvement in the overall trade balance. How much tightening the central bank does may depend on how well-anchored the public's inflation expectations are—in other words, on how firmly the public expects inflation to stay in the vicinity of price stability in the future. For example, in the U.S., inflation expectations appear to be pretty well-anchored, and, as a result, higher oil prices have had only a limited impact on core inflation; therefore, with well-anchored expectations, the Fed has not had to raise interest rates aggressively. Rebucci and Spatafora conclude that this factor might have helped delay the adjustment of trade deficits in the U.S. The speed of the adjustment can also be affected by how strongly the central bank responds to any increase in inflation expectations and core inflation. The second factor is the extent to which oilexporting countries spend or save their additional revenues from higher oil prices. In fact, oil-exporting countries have been quite cautious about increasing their spending in response to the windfall generated by larger oil revenues. One consequence of the resulting increase in saving by these economies has been a larger global supply of funds, helping to keep global interest rates at lower levels. Rebucci and Spatafora suggest that unusually low global interest rates might have limited the contraction in demand, thereby facilitating the persistence of trade deficits. Obstfeld and Rogoff (1995) argue that this factor was also at work after the oil-price increase of the early 1970s; at that time, oil-exporting countries were unable to raise their spending in line with the increase in oil revenues. As spending in oil-exporting countries rose by less than it fell in oil-importing countries, the amount of global saving increased and helped push global interest rates down. Oil

prices have almost quadrupled since the beginning of 2002. For an oil-importing country like the U.S., this has substantially increased the cost of petroleum imports. International trade data suggest that this increase has exacerbated the deterioration of the U.S. trade deficit, especially since the second half of 2004. One factor can explain this evolution: The real volume of
U.S. petroleum imports has remained essentially constant. One explanation for why the demand for petroleum imports has not declined in response to higher prices comes from a model in which firms are fairly limited in their ability to adjust their use of energy sources, such as oil, in the short term. Of course, the mechanism underlying this model may imply that it could take a while for the U.S. trade deficit to adjust in response to persistently higher oil prices, as businesses need time to install new, less energy-intensive equipment. However, one positive and important implication is that eventually the U.S. economy will

become more energy-efficient, which, in turn, would help contain the cost of oil imports and increase the economy's flexibility in absorbing future oil price increases. Oil prices have almost quadrupled since the beginning of 2002. For an oil-importing country like the U.S., this has substantially increased the cost of petroleum imports.

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International trade data suggest that this increase has exacerbated the deterioration of the U.S. trade deficit, ability to adjust their use of energy sources, such as oil, in the short term.

especially since the second half of 2004. One factor can explain this evolution: The real volume of U.S. petroleum imports has remained essentially constant. One explanation for why the demand for petroleum imports has not declined in response to higher prices comes from a model in which firms are fairly limited in their

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I/L – AE KEY TO US FIRMS – ENERGY COSTS

Reduced energy costs are critical to allow U.S. based firms to compete globally Council on Competitiveness, “Energy Security, Innovation & Sustainability Initiative”, 2008,
http://www.compete.org/about-us/initiatives/esis Unlike the ‘supply shock’ of the late 1970s,

recent energy price increases have been attributed to a sharp rise in demand, by both industrialized economies and rapidly growing emerging economies. Recent price volatility in oil, natural gas, and electric power have shaved almost a point off of U.S. GDP growth in recent years, increased costs to U.S. public and private sector enterprises and reduced the discretionary income of ordinary Americans. The current trajectory of energy supply and demand, combined with the growing likelihood that some form of carbon emission restraints will be imposed in the United States, present the nation and its enterprises with a new competitiveness challenge. Meeting our growing energy needs in new, environmentally-friendly and sustainable ways has
become a national imperative. “With three billion new consumers from India, Russia and China joining the world economy, it is inevitable that manufacturing clean, green power systems, appliances, homes and cars will be the next great global industry” The last two years have seen a dramatic rise in private capital investment into new energy technologies and clean energy ventures of all kinds. As demand for biofuels continues to grow, we see the boundaries between the agricultural, biotechnology, manufacturing and energy industries beginning to blur and new value chains being created. In parallel, many U.S. industries

are beginning to relocate to areas around the nation and world that produce reliable, renewable, and costcompetitive energy. In turn, American state government leaders are striving to attract new investment and to
establish their regions as centers of energy-related innovation. These trends presage dramatic transformations in major industries, sectors, and regions of our economy.

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I/L – ENERGY SECURITY KEY

Energy security and sustainability are key to US competitiveness and productivity. The Council on Competitiveness 8/1/2007
[A nonpartisan, nongovernmental organization in Washington, D.C. bringing together business, labor, academic and government leaders to evaluate economic challenges and opportunities. “Energy Security, Innovation & Sustainability Initiative Latest Council Initiative, Future of U.S. energy and competitiveness tightly linked,” Complete.org, http://www.compete.org/media-resources/entry/365/council-launches-energy-security-innovation-sustainability-initiative/ KZ]

Deborah L. Wince-Smith, president of the Council on Competitiveness, announced a new initiative that seeks to enhance U.S. competitiveness and energy security. The initiative will be co-chaired by Dr. Shirley Ann Jackson, president of Rensselaer Polytechnic Institute; D. Michael Langford, national president of Utility Workers Union of America, AFL-CIO; and James W. Owens, chairman and chief executive officer of Caterpillar Inc. Together, energy security and sustainability are key U.S. competitiveness issues because of their direct impact on the productivity of U.S. companies and the standard of living of all Americans. During the next 18 months, the Council on Competitiveness will conduct a series of high-level, expert dialogues to examine the competitiveness implications of today's energy challenges and opportunities. The dialogues will highlight the critical role private sector demand will play in moving the nation forward to a more secure and sustainable energy future. “Rising energy prices extend beyond gas pumps and affect the ability of U.S. corporations to compete in the global economy,” said Wince-Smith. “By creating the conditions that will foster private sector innovation and investment in more sustainable energy approaches, we can improve our economy, environment, national security and standard of living.” The idea for the initiative emerged during the Council’s National Innovation Initiative, which produced the landmark report Innovate America in 2005. The report identified energy as a critical part of the infrastructure needed to support an innovative economy – the foundation of U.S. competitiveness. As with the National Innovation Initiative, the Energy Security, Innovation and Sustainability Initiative will focus strongly on the private sector and synergistic collaborations with academia and labor on innovation and competitiveness. The initiative’s steering committee will be drawn from the executive suite of major U.S. corporations, universities and labor unions.

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I/L – AE DRIVES PRIVATE INVESTMENT INCREASED GOVERNMENT SUPPORT FOR RENEWABLES DRIVES INCREASED PRIVATE INVESTMENT
UNEP

‘7
NATIONS ENVIRONMENT PROGRAMME ,

[UNITED

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RENEWABLE E NERGY

AND

EFFICIENCY TECHNOLOGIES ,

JUNE

20 2007]
TH

Climate change worries coupled with high oil prices and increasing government support top a set of drivers fueling soaring rates of investment in the renewable energy and energy efficiency industries, according to a trend analysis from the UN Environment Programme. The report says investment capital flowing into renewable energy climbed from $80 billion in 2005 to a record $100 billion in 2006. As well, the renewable energy sector's growth "although still volatile ... is showing no sign of abating." The report offers a host of reasons behind and insights into the world's newest gold rush, which saw investors pour $71 billion into companies and new sector opportunities in 2006, a 43% jump from 2005 (and up 158% over the last two years. The trend continues in 2007 with experts predicting investments of $85 billion this year). In addition to the $71 billion, about $30 billion entered the sector in 2006 via mergers and acquisitions, leveraged buyouts and asset refinancing. This buy-out activity, rewarding the sector's pioneers, implies deeper, more liquid markets and is helping the sector shed its niche image, according to the report. While renewable sources today produce about 2% of the world's energy, they now account for about 18% of world investment in power generation, with wind generation at the investment forefront. Solar and bio-fuel energy technologies grew even more quickly than wind, but from a smaller base. Renewables now compete head-on with coal and gas in terms of new installed generating capacity and the portion of world energy produced from renewable sources is sure to rise substantially as the tens of billions of new investment dollars bear fruit. Says UNEP Executive Director Achim Steiner: "One of the new and fundamental messages of this report is that renewable energies are no longer subject to the vagaries of rising and falling oil prices-they are becoming generating systems of choice for increasing numbers of power companies, communities and countries irrespective of the costs of fossil fuels.

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I/L – DOMESTIC ENERGY KEY TO COMP

Consumer Alliance for Energy Security 2008 [“U.S. Energy Crisis Domestic Energy Exploration and Development For a More Affordable, Secure Energy Future” http://www.secureourenergy.com/crisis/ KZ] American energy prices are skyrocketing. Millions of manufacturing jobs have been lost or have gone overseas largely due to these rising prices. Americans are feeling the pain at the pump as well as in increased costs for everything from heating, cooling, and electricity to food and consumer goods. A major factor in rising energy prices and eroding U.S. competitiveness is a supply-demand imbalance for energy. America must be able to access more of its own energy supplies, and Congress must enact legislation to make this happen. As pressure to address this crisis continues to grow, lawmakers are finally beginning to take note, and Congress will be considering a variety of proposals. Along with other important steps in America’s energy plan, expanded access to domestic energy is vital. Congress must seize on this opportunity and act now to allow Americans to access more of their own energy resources in the Outer Continental Shelf (OCS). The United States is alone in the industrialized world in our ban on offshore energy development. In the case of natural gas, which is priced regionally, high U.S. prices have already caused significant U.S. production and jobs to be lost or relocated overseas, where natural gas costs are far lower. America cannot afford this kind of harm to our global competitiveness. 1. American consumers are feeling the pain of the growing energy crisis. Oil is at more than $140 per barrel.
Since 2000, U.S. natural gas prices are up 500%, while residential natural gas heating bills have doubled and electricity heating bills are up 24%. Electricity bills (including cooling) are up 29% in that time. In the last decade, the cumulative increase in the nation’s natural gas bill is more than $522 billion (or $4,568 per taxpayer). 2. Energy-intensive industries have experienced negative impacts. More than three million American manufacturing jobs have been lost since 2000, largely due to the high cost of energy in the United States. The U.S. chemistry industry has lost nearly 120,000 jobs and has gone from a $19 billion trade surplus in 1997 to an $8 billion trade deficit. Nearly half of U.S. fertilizer capacity has been permanently lost. America’s farm sector is being weakened by constraints on domestic natural gas development, even as global demand for food is growing every year. For the forest products industry, energy is the third-largest manufacturing costs – up 50% in the last couple of years for pulp and paper mills. For some mills, the cost of energy has eclipsed employee compensation. Meanwhile, consumers are paying more for electricity, home heating and cooling, gasoline, diesel fuel, and food. Today 10% of the nation’s homeowners – over six million households – are having difficulty paying their natural gas heating bills. 3. America’s energy security and future demands increased domestic energy production. There is intense global competition for energy supplies. The United States must secure our energy future by producing more of our own energy. 4. Several recent public opinion surveys show a clear majority of Americans support offshore energy development. Lawmakers should listen to their constituents and support legislation allowing that to happen. Congress’s inaction in allowing America to tap into our abundant

domestic energy supplies has only allowed energy prices to climb higher. It is well past time for Congress to put politics aside, work together and enact the package of policies that can put the United States on a path to a more affordable, secure, energy future and a more competitive economy with more American jobs. Lawmakers must listen to their constituents and to the majority of Americans and cast a pro-jobs vote
by supporting energy exploration and development at home. We support aggressive energy efficiency programs, in part to stretch the existing domestic natural gas supply base; investments in alternative energy R&D to diversify energy sources; investments in energy delivery infrastructure; and – last but certainly not least – increased access to new sources of domestic energy supply.

America’s economy, jobs, security, and future depend on affordable domestic energy.

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**IMPACTS**

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IMPACT-DOLLAR DECLINE A TRADE DEFICIT LEADS TO A DEPRECIATED DOLLAR, RISKING A LOSS OF U.S. ECONOMIC AND POLITICAL HEGEMONY FRANKEL, ‘6 [JEFFREY , KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY, J OURNAL OF POLICY MAKNG, VOLUME 28, ISSUE 6, ‘TWIN DEFICITS , http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V82-4KPGNS89&_user=1458830&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_acct=C000052790&_version=1&_urlVersion=0& _userid=1458830&md5=dff192c063d6434ddd27c6b2db688ac6#secx6 ]
GROWTH AND STABILITY OF THE US ECONOMY ’,

I claimed a moment ago that the US can no longer necessarily rely on the support of foreign central banks . One reason for this, which holds even if China continues to keep its currency undervalued in order to enjoy export competitiveness, is that it can diversify its currency basket out of dollars, without allowing an appreciation on a trade-weighted basis. (Indeed this is the change that it officially announced in July 2005, but has not yet actually been implemented.) The important point is that there now exists a credible rival for lead international reserve currency, the euro, which has many of the desirable characteristics of an international currency. This was not true in the late 1970s and early 1990s when the press feverishly speculated that the dollar might be overtaken by the yen or mark . It is true that each Asian central bank stands to lose considerably, in the value of its current holdings, if dollar sales precipitate a dollar crash. But I agree with Barry Eichengreen that each individual participant will realize that it stands to lose more if it holds pat than if it joins the run, when it comes to that. If we are relying on the economic interests of other countries, we cannot count on being bailed out indefinitely. In a recent paper, Menzie Chinn and I econometrically estimate determinants of reserve currency status (size of home economy, size of its financial markets, inflation rates, exchange rate volatility, trend depreciation, lagged adjustment, and a tipping phenomenon), and conclude that, under certain scenarios, the euro could surpass the dollar as leading international reserve currency by 2022. If this happened, the cost to the US would probably extend beyond the simple loss of seignorage narrowly defined. We would lose the exorbitant privilege of playing banker to the world, accepting short-term deposits at low interest rates in return for long-term investments at high average rates of return. When combined with other political developments, it might even spell the end of economic and political hegemony . These are century-long advantages that are not to be cast away lightly.

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IMPACT-DOLLAR DECLINE
INCREASED AMERICAN TRADE DEFICITS DRIVE DOWN THE U.S. DOLLAR MORROW, ‘3 [ROBERTSON , THE AMERICAN CONSERVATIVE, ‘DECLINE OF THE DOLLAR: GLOBALIZATION AND OVER -CONSUMPTION AMERICA ’S STRONG-DOLLAR TRADITION, HTTP://WWW .AMCONMAG .COM/07_14_03/ COVER .HTML]
COMBINE TO TOPPLE

For the past six years, America’s great export has been not goods but debt. Foreigners sell us oil, cars, computer components, and other goods. In return, we sell them debt and other financial instruments—government bonds, corporate bonds, and securities backed by the mortgages of American homeowners—for which foreigners have seemed to have an almost insatiable appetite. From 1997 to 2002, imports of goods and services increased by a third, while exports of goods and services were flat. The measure economists use to quantify this export of debt is the “current account”— the broadest measure of foreign trade. The current account is the difference between what we earn overseas (primarily sales of goods, sales of services, and earnings on our overseas investments) minus what foreigners earn here (primarily imports of goods, imports of services, and foreigners’ earnings on their investments in the U.S.). If the current account is negative, we cover the deficit with debt. Prior to 1983, America’s current account deficit never exceeded 1 percent of GDP. (In fact, it was usually in surplus.) Now, the current account is in massive deficit, and that deficit is rising. We buy more overseas than we sell. In 2003, the current account deficit will be more than half a trillion dollars—over 5 percent of GDP. Foreigners have been willing to lend massive amounts of money to Americans because of a relatively strong dollar, high financial returns in the U.S., and an almost touching faith in the strength of America. Moreover, foreign governments such as those in Japan and China have also been willing to hold our debt in order to make the dollar stronger so they can build their home industries with exports to America. Because interest on debt compounds, rising foreign demand for additional U.S. debt cannot go on forever. In fifty years time, each year’s current account deficit will be greater than GDP. At some point, long before then, something must give. That something is the dollar. The trade crisis of the late 1980s was the only other time America’s current account deficit greatly exceeded 1 percent of GDP. In the six worst years of the ’80s trade crisis, 1984 to 1989, the cumulative current account deficits totaled 16 percent of GDP. At that time, the dollar declined by half. Yet the current account crisis in 2003 is much worse than it was in 1989, and for the simplest of reasons: while the crisis of the 1980s ended by 1989, today’s has just begun. In the six years from 1998 to 2003, the cumulative current account deficit will total 23 percent of GDP—almost half again as large as the six worst years of the 1980s. The trade deficit in 2003 will come in at least twice as large as that of the 1989 deficit. The 2004 deficit may be larger still. How low is the dollar likely to go? As foreign demand for U.S. debt abates, the strength of the dollar will no longer be determined by money flows. It will be determined by trade flows. That means the dollar will decline until those flows come into something approaching historical balance: a current account deficit of about 1 percent of GDP or less.

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IMPACT-MILITARY STRENGTH
THE STRENGTH OF THE UNITED STATES MILITARY IS DIRECTLY LINKED TO THE STRENGTH OF THE U.S. DOLLAR. FURTHER DECLINE OF THE DOLLAR WILL PUT THE U.S. MILITARY POWER AT RISK
LOPEZ ,

‘7

[ BERNARDO, WRITE FOR BUSINESS WORLD , ‘UPSHOT; ‘THE DOLLAR AND THE U.S. M ILITARY’, BUSINESS WORLD, http://www.lexisnexis.com.turing.library.northwestern.edu/us/lnacademic/results/docview/docview.do? docLinkInd=true&risb=21_T4167722766&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T41 67720348&cisb=22_T4167722768&treeMax=true&treeWidth=0&csi=173384&docNo=13 ] Dollar hegemony, or the ability of the dollar to control the world economy, is related to American military might. If the dollar goes down considerably, America the superpower will lose the capability to wage wars as it is now doing in Afghanistan and Iraq. Dollar decline translates to removing "super" from the word "superpower."

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IMPACT-INNOVATION KEY TO ECON DOMINANCE U.S. INNOVATION
GATES , IS KEY IN MAINTING ECONOMIC COMPETITIVENESS AND DOMINANCE

‘7
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[BILL, CHAIRMAN OF MICROSOFT CO , ‘HOW TO KEEP AMERICA COMPETITITVE ’, DYN / CONTENT / ARTICLE /2007/02/23/AR2007022301697. HTML ]

For centuries people assumed that economic growth resulted from the interplay between capital and labor. Today we know that these elements are outweighed by a single critical factor: innovation. Innovation is the source of U.S. economic leadership and the foundation for our competitiveness in the global economy. Government investment in research, strong intellectual property laws and efficient capital markets are among the reasons that America has for decades been best at transforming new ideas into successful businesses. The most important factor is our workforce. Scientists and engineers trained in U.S. universities -- the world's best -- have pioneered key technologies such as the microprocessor, creating industries and generating millions of highpaying jobs. But our status as the world's center for new ideas cannot be taken for granted. Other governments are waking up to the vital role innovation plays in competitiveness.

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IMPACT-INNOVATION KEY TO ECON DOMINANCE

RESEARCH AND DEVELOPMENT OF NEW TECHNOLOGIES IS KEY TO CONTINUE AMERICAN ECONOMIC COMPETITIVENESS U.S. DEPARTMENT OF
COMMERCE COMPETITIVENESS IN THE AMERICAS

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[‘C OMPETITIVENESS IN THE AMERICAS : PROMOTING PROSPERITY AND HTTP :// WWW . TRADE . GOV / COMPETITIVENESS /ACF/ ACF _ REPORT . PDF ]

ECONOMIC OPPORTUNITY ,

The development and deployment of innovation creates growth. Development of new products and services, as well as processes and organizational structures, provides opportunities for expansion and efficiency. Innovation manifests itself in two ways: first, the development of new ideas and processes; second, the adoption of these advances. Innovative product design and manufacture follow technological advances. Education, risk tolerance, and intellectual property protection each play roles in bringing new products and services to market. Innovators also modify and improve production processes in seeking profits and growth. New processes and products more broadly affect productivity when diffused to firms and individuals. Countries and companies that are able to incorporate successful new ideas provide advantages to workers and consumers. The distribution and impact of these innovations depend on the development and infrastructure of a country. Technologies have greater positive effects in economies with basic infrastructure elements, such as electricity and telecommunications, already in place. The availability of more complex equipment and services, such as personal computers or wireless broadband Internet access, depends on these fundamental components. Innovation is fostered by the protection of intellectual property rights (IPR). Intellectual property rights become even more important as more and more manufacturing and services activities move abroad and global sourcing increases. Thirty years ago tangible assets, like plants, equipment and inventory, represented four-fifths of the market value of U.S. companies and intangible assets such as brand name, reputation, and other factors accounted for the remainder. Now intangibles account for fourfifths of market share, with the largest part made up of patents, copyrighted material, and other forms of intellectual property. This shift between tangible and intangible assets is likely to be more and more applicable for all countries in the hemisphere and it is therefore important to pay special attention to IPR in the context of business competitiveness. Entrepreneurs and businesses are more likely to create new products and processes and to adopt products and processes from other countries and other industries if they can be assured that they will be able to earn a fair return on their investments in innovation. The diffusion of information and communications technologies (ICT) across Western Hemisphere countries provides an example. Production in modern economies depends on ICT. When individuals and businesses have access and the ability to use to these tools, lives are improved and productivity increases. According to the International Telecommunication Union, in 2004 “the United States and Canada had roughly twice the mobile penetration rate, four times the fixed line penetration rate, and six times the Internet penetration rate of the countries of Central and South America and the Caribbean.” Patents play an important role in innovation and economic progress. One important indicator of a country’s success at innovation is the number of U.S. utility patents obtained by nationals of foreign countries. As of 2006, non-U.S. Western Hemisphere nationals accounted for 4.6 percent of U.S. utility patents granted to foreign nationals compared to 29 percent for nationals of the European Union (EU-27) and nearly 61 percent for Asian nationals (Figure 8). Moreover, these ratios have remained roughly the same since 1990, indicating that hemispheric countries may have difficulties in gaining competitiveness vis-à-vis Asia and Europe without additional investments in research and development (R&D). Indeed, per capita expenditure in R&D in North America and Europe were 16.1 times and 6.6 times higher than that of South America, respectively, in 2000. If the countries of the Western Hemisphere are to remain competitive, it is important for governments to continue promoting policies that do not inhibit innovation and support technology development and diffusion.

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IMPACT-ECON KEY TO HEG ECONOMIC POWER IS A KEY COMPONENT OF UNITED STATES HEGEMONY LOH , ‘99 [Anthony A., Weatherhead Center for International Affairs Harvard University, ‘A stripped down conception of Hegemony’, http://www.ciaonet.org/wps/loa01/] Hegemony consists of the possession and the command of a multifaceted, multidimensional set of power variables, including military, economic (financial, industrial, trade), ideological, political, as well as cultural, i.e. all the dimensions of power. All types of hegemony, then, probably share one common characteristic: they enjoy “structural power.” It is this structural power that permits the hegemon to occupy a central position within its own system, and, if it so chooses, to play a leading role in it. This is also why only some states, with their rich endowment of human and natural resources, have at least the potential to become hegemons. It is the hegemon’s exclusive privilege and inimitable ability (usually with a superior quality of government) to command a given set of power resources and also to acquire a range of preponderant power capabilities. There is no doubt, then, that hegemony is a power concept.

A KEY COMPONENT OF UNITED STATES HEGEMONY IS OUR COMPETITIVE AND ROBUST ECONOMY

FORBES

‘8
ON THE ROCKS ’, HTTP :// WWW . FORBES . COM /2008/04/30/ HEGEMONY - GLOBAL- CULTURE - BIZ - WASH -

[FORBES MAGAZINE, 5/1/8, ‘HEGEMONY CX _0501 OXFORD . HTML ]

Such "hegemonic dominance" rests on cultural influence, non-military resources and economic power. Russia's influence over its "near abroad" is an obvious example, as is U.S. sway in Canada and Central America; Washington is also sometimes described as the "global hegemon." China might increasingly be seen to exhibit some hegemonic characteristics in Southeast Asia. Most analysts prefer the term hegemony over "empire" due to its relative accuracy in describing present global affairs. Although some media commentators and politicians refer to the "U.S. empire," the United States does not fit this description in any meaningful sense. It does not make territorial claims of other states, directly seek to control other countries in order to extract and exploit their resources or impose an ideology on other peoples by force (though Iraq may be an exception). Instead of describing U.S. "imperialism," it is more apposite to refer to Washington's position as a hegemonic power in a number of dimensions, such as its dominant position in international political and economic organizations, its cultural reach and its relative military prowess. U.S. hegemonic power is exercised globally through several key institutions and mechanisms: Economic power: Following the Second World War, U.S. economic dominance was so great that it was able to help reconstruct post-war Western Europe via the Marshall Plan. Although its relative advantage has since declined, Washington continues to play a key role in global economic affairs; its intervention helped halt the spiraling depreciation of the Mexican peso in 1994. The dollar also remains the world's dominant reserve, or "numeraire" currency.

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IMPACT-ECON KEY TO HEG AMERICA’S HEGEMONY IS BASED UPON ITS ECONOMIC COMPETITIVENESS
HARTMAN

‘99

[DAVID , CHAIRMAN , THE ROCKFORD INSTITUTE , ‘AMERICA ’S ECONOMIC CHALLENGE’, HTTP://72.14.205.104/ SEARCH? Q = CACHE:9LGZE H N H J6EJ: WWW . LONESTARFOUNDATION . ORG /E CONOMIC C HALLENGE . DOC +U NITED +S TATES +E CONOMIC +C OMPETITIVENESS + HEGEMONY & HL= EN & CT = CLNK & CD =33& GL = US ] The engine of American power has been its economic prowess, and underlying that prowess are its original cultural roots of individualism and self-reliance forged by traditional families, deferred to by limited government. Yet whether or not America retains its hegemony will depend substantially upon the outcome of an ongoing battle with the relentless encroachment of socialist government and its debilitating redistribution of income from productive families to unproductive lifestyles. Consider for a moment the extent of the remarkable world hegemony of America at present: The dollar has superseded even gold as the dominant denominator of international commerce.The U.S. military capability at home or abroad has no peer, nor current prospect of one.The U.S. is the most competitive producer in agriculture, high-tech manufacturers, plus management and financial services worldwide.American business techniques have been emulated and adopted as the prevailing modus operandi of the world.The English language has become the language of international business.Popular American culture (if we must call it culture) is exported worldwide in the form of fashion, entertainment, and knowledge to an unprecedented extent.America continues to be the haven of choice for displaced persons, particularly those with knowledge and skills. The world’s unique perceptions of American support their receptivity to America’s leadership. Among these perceptions are: admiration for perceived freedom and equality of opportunity; a sense of kinship derived from America’s broad immigration roots; and trust in America’s principled use of its dominant military power as world policeman. (a perception a bit tarnished by American adventures in Yugoslavia.) But underlying these subordinate contributants, the chief source of America’s power is economic: America’s unique capability to invent, organize, and finance, and it’s huge home market which provides economies of scale to American enterprise, and the most lucrative target for world commerce. ECONOMIC DOWN TURN COULD UNDERMINE LONG-TERM U.S. DOMINANCE BAKER ‘6 [GERARD , GERARD BAKER IS UNITED STATES EDITOR AND AN ASSISTANT E DITOR OF THE T IMES, ‘AMERICA’S SAFE ’, HTTP :// BUSINESS . TIMESONLINE . CO . UK / TOL / BUSINESS / MARKETS / UNITED _ STATES / ARTICLE 708963. ECE ]
ECONOMIC HEGEMONY IS

What could undermine long-term US dominance? Some fret that the precarious American fiscal position could do it. However, this is mostly hyperventilation. The fiscal deficit, at a cyclically adjusted 2.5 per cent of GDP, is on the large side, but American public debt as a proportion of GDP — at less than 70 per cent — still puts the United States comfortably among the more frugal of the world’s big nations. The inevitable unravelling of global financial imbalances could certainly harm US demand growth in the short

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term, as both public and private sectors increase savings, but, assuming these extra savings are efficiently allocated by America’s highly flexible capital markets, they might even end up improving long-run potential. The ageing population will surely crimp American economic activity. Most economists expect trend growth to slip a bit in the early part of the next decade as the proportion of the population in work begins to drop. Yet relative to the rest of the world this may not matter that much. America’s demographics — a reasonable birth rate and strong immigration flows — are actually rather better than for most other industrialised countries. A century ago, China’s population was almost six times that of the US. In 50 years’ time, on current trends, it will be less than three times the size.

IMPACT-COMP KEY TO HEG DECREASED ECONOMIC COMPETITIVENESS RESULTS IN DECREASED UNITED STATES POWER
LAWRENCE, ‘2 [ROBERT Z., FORMER MEMBER OF PRESIDENT CLINTON' S COUNCIL OF E CONOMIC A DVISERS ‘C OMPETITIVENESS ’, T HE LIBRARY LIBERTY , HTTP :// WWW . ECONLIB . ORG /LIBRARY/E NC/C OMPETITIVENESS . HTML ]
OF ECONOMICS AND

It is important to recognize that this relative decline of the United States has differing implications for American power and for American living standards. The power of a nation (i.e., its ability to influence the actions of other nations) flows in large part from its relative economic capacity—the economic performance of the United States compared with other nations, particularly its adversaries. In this respect the power of the United States is less in a richer world economy. On the other hand, the welfare of a nation's citizens is largely a function of its absolute economic capacity. A nation's living standards are primarily based on its productivity and on its ability to exchange its products for those of others on international markets. Both of these effects are enhanced when increased innovation abroad provides U.S. consumers access to better products and U.S. manufacturers more opportunities to emulate foreign products and processes. The United States no longer has to carry the burden of global innovation alone—increasingly, American firms can learn from others.

AMERICA’S ECONOMIC COMPETITIVENESS IS A KEY COMPONENT OF ITS HEGEMONY SEN , ‘5 [SANKAR, PROFESSOR OF M ARKETING AND DEPARTMENTAL COORDINATOR OF THE PHD PROGRAM IN BUSINESS BARUCH COLLEGE , ‘AMERICAN POWER: HOW LONG WILL IT LAST?’ HTTP :// WWW . LEXISNEXIS . COM . TURING . LIBRARY . NORTHWESTERN . EDU / US / LNACADEMIC/ RESULTS / DOCVIEW / DOCVIEW . DO ? DOC L INK I ND = TRUE & RISB =21_T4177709686& FORMAT =GNBFI& SORT =RELEVANCE& START D OC N O =51& RESULTS U RL K EY =29_ T4177707980&CISB =22_T4177709689& TREEM AX=TRUE&TREEWIDTH =0&CSI=227171&DOCNO=59] The US today bestrides the globe like a Colossus. Today's international system, says Robert Kagan, "is built not around a balance of power but around American hegemony". American military power is now far stronger then that of any other nation. The USA today accounts for 40 to 50 per cent of global defence spending. In every sphere of warfare US now has clear preponderance over other powers. No other power has the capacity to move large forces around the globe and support its troops with precision firepower and unsurpassed amount of information and intelligence. Military resources as a result of the $ 400 billion military budget are formidable. The defence research establishment of the US receives more money than the entire defence budget of its largest European ally. No other power has B2 bombers, the satellite constellations, the aircraft carriers or the long range unmanned aircraft like that of the US Navy and Air Force. Sources of strength But no power can sustain itself by military strength alone; it must possess other sources of strength. Another pillar of American strength is its economy. It is indeed the world's largest and most vibrant. In 2000 the US economy was equal in size to that of the next four national economies (Japan, France, Germany, Great Britain) combined. However, the economic gap is smaller than the military gap when the US economy is compared to that of the European Union. Nevertheless, the American dominance remains remarkable.

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IMPACT-COMP KEY TO HEG
RECENT ECONOMIC LOSS OF COMPETITIVENESS HAS RESULTED IN A DECLINE OF UNITED STATES HEGEMONY
ISERI ,

‘7

[EMRE, PH.D. CANDIDATE, SCHOOL OF POLITICS , INTERNATIONAL RELATIONS AND THE ENVIRONMENT KEELE UNIVERSITY , U.K, 'NEOGRAMSCIAN ANALYSIS OF US HEGEMONY TODAY ', http://72.14.205.104/search?q=cache:Z3bZriQav2oJ:www.inspire.org/articles/ei02062007_NeoGramscian_US_Hegemony.pdf+Hegemony+relies+on+economic+competitiveness&hl=en&ct=clnk&cd=32&gl=us ] This analysis has applied the basic Gramscian notion of hegemony to the U.S. as a declining hegemonic power by first clarifying the concept itself, and then by comparing it to Susan Strange’s concept of ‘structural power.’ This combination has been applied to the post-World War Two period of American power to argue that it has shifted from a hegemonic construction emphasizing multilateral institutionalism, to one based purely on national self-interest, by undermining and abolishing the primary sources of its institutional power, found in the Bretton Woods agreements and the monetary and trade system that it authored. I argue that this rejection stemmed from declining U.S. relative economic power, which has been offset first by the resurrection of the European and Japanese economies, and then by the consolidation of the Chinese and Indian economies as alternative centers of economic power. These developments have contributed to the decline of the U.S. as a hegemonic power by displacing its claims of intellectual and moral authority and requiring that the U.S. increasingly relies on pure coercive power. In the post 9/11 environment, the U.S. has fewer and fewer choices, which will make it difficult to reverse its decline.

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IMPACT-SCIENCE KEY TO LEADERSHIP AMERICAN LEADERSHIP IS A DIRECT RESULT OF INVESTMENTS IN SCIENTIFIC RESEARCH
GATES ,

‘7
ON

[BILL, CHAIRMAN OF MICROSOFT CO, T RANSCRIPT OF ORAL TESTIMONY BY BILL GATES, UNITED STATES SENATE COMMITTEE EDUCATION, LABOR, AND PENSIONS "STRENGTHENING AMERICAN COMPETITIVENESS FOR THE 21ST CENTURY "]

HEALTH ,

Finally, maintaining American competitiveness requires that we invest in research and reward innovation. Our nation's current economic leadership is a direct result of investments that previous generations made in scientific research, especially through public funding of projects in government and university research laboratories. American companies have capitalized on these innovations, thanks to our world-class universities, innovative policies on technology transfer, and pro-investment tax rules. These policies have driven a surge in private sector research and development While private sector research and development is important, federal research funding is vital. Unfortunately, while other countries and regions, such as China and the European Union, are increasing their public investment in R&D, federal research spending in the United States is not keeping pace. To address this problem, I urge Congress to take action. The Federal Government should increase funding for basic scientific research. Recent expansion of the research budgets at the Department of Energy and the National Science Foundation is commendable, but more must be done. We should also increase funding for basic research by 10 percent annually for the next seven years.

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IMPACT-TRADE DEFICIT KILLS COMP TRADE DEFICITS RISK UNITED STATES ECONOMIC COMPETITIVENESS ASSOCIATED PRESS ‘6 [9/26/06, ‘U.S. ECONOMIC COMPETITIVENESS FALLING, WORLD ECONOMIC FORUM SAYS ’, HTTP :// WWW . IHT . COM / ARTICLES / AP /2006/09/26/ BUSINESS /EU_FIN_G LOBAL _E CONOMIC_C OMPETITIVENESS . PHP ] U.S. economic competitiveness fell significantly over the last year, as high budget and trade deficits combined with low health and education standards to worsen America's business environment, according to a survey released Tuesday by the World Economic Forum. The poor response to Hurricane Katrina, government corruption and a decreasing talent pool for employment due to immigration restrictions were other factors cited by the forum, which moved the United States to sixth in its "global competitiveness index" from the top spot a year ago. "While strengths in the technological and market efficiency sectors explain the country's overall high rank, the U.S. economy suffers from striking weaknesses," the report said. "There is significant risk to both the country's overall competitiveness and, given the relative size of the U.S., the future of the global economy."

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IMPACT—ECON KEY TO NATIONAL SECURITY A ROBUST AND HEALTHY U.S. ECONOMY IS KEY TO NATIONAL SECURITY
THE TASK FOCE ON THE FUTURE OF AMERICAN INNOVATION

‘5

[‘THE KNOWLEDGE ECONOMY : IS THE UNITED STATES LOSING ITS COMPETITIVE EDGE?’ 2/16/05, http://64.233.167.104/search? q=cache:vfV358zV8_QJ:www.futureofinnovation.org/PDF/Benchmarks.pdf+Economy+key+to+U.S. +power&hl=en&ct=clnk&cd=71&gl=us ] For more than half a century, the United States has led the world in scientific discovery and innovation. It has been a beacon, drawing the best scientists to its educational institutions, industries and laboratories from around the globe. However, in today’s rapidly evolving competitive world, the United States can no longer take its supremacy for granted. Nations from Europe to Eastern Asia are on a fast track to pass the United States in scientific excellence and technological innovation. The Task Force on the Future of American Innovation has developed a set of benchmarks to assess the international standing of the United States in science and technology. These benchmarks in education, the science and engineering (S&E) workforce, scientific knowledge, innovation, investment and high-tech economic output reveal troubling trends across the research and development (R&D) spectrum. The United States still leads the world in research and discovery, but our advantage is rapidly eroding, and our global competitors may soon overtake us. Research, education, the technical workforce, scientific discovery, innovation and economic growth are intertwined. To remain competitive on the global stage, we must ensure that each remains vigorous and healthy. That requires sustained investments and informed policies. Federal support of science and engineering research in universities and national laboratories has been key to America’s prosperity for more than half a century. A robust educational system to support and train the best U.S. scientists and engineers and to attract outstanding students from other nations is essential for producing a worldclass workforce and enabling the R&D enterprise it underpins. But in recent years federal investments in the physical sciences, math and engineering have not kept pace with the demands of a knowledge economy, declining sharply as a percentage of the gross domestic product. This has placed future innovation and our economic competitiveness at risk. To help policymakers and others assess U.S. high-tech competitiveness and the health of the American science and engineering enterprise, we have identified key benchmarks in six essential areas—education, the workforce, knowledge creation and new ideas, R&D investments, the hightech economy, and specific high-tech sectors. We conclude that although the United States still leads the world in research and discovery, our advantage is eroding rapidly as other countries commit significant resources to enhance their own innovative capabilities. It is essential that we act now; otherwise our global leadership will dwindle, and the talent pool required to support our high-tech economy will evaporate. As a recent report by the Council on Competitiveness recommends, to help address this situation the federal government should: Increase significantly the research budgets of agencies that support basic research in the physical sciences and engineering, and complete the commitment to double the NSF budget. These increases should strive to ensure that the federal commitment of research to all federal agencies totals one percent of U.S. GDP. This is not just a question of economic progress. Not only do our economy and quality of life depend critically on a vibrant R&D enterprise, but so too do our national and homeland security. As the Hart-Rudman Commission on National Security stated in 2001: [T]he U.S. government has seriously underfunded basic scientific research in recent years… [T]he inadequacies of our systems of research and education pose a greater threat to U.S. national security over the next quarter century than any potential conventional war that we might imagine. American national leadership must understand these deficiencies as threats to national security. If we do not invest heavily and wisely in rebuilding these two core strengths, America will be incapable of maintaining its global position long into the 21st century.

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IMPACT—HEG GOOD UNITED STATES HEGEMONY HAS FAR REACHING POLITICAL AND ECONOMIC BENEFITS
KAGAN

‘98
EMPIRE ’,

[ROBERT, MEMBER OF THE COUNCIL ON FOREIGN RELATIONS , ‘THE BENEVOLENT HTTP :// WWW . FOREIGNPOLICY . COM /N ING / ARCHIVE / ARCHIVE /111/ EMPIRE . PDF ]

And neither of them, one suspects, is very seriously intended. For the truth about America's dominant role in the world is known to most clear-eyed international observers. And the truth is that the benevolent hegemony exercised by the United States is good for a vast portion of the world's population. It is certainly a better international arrangement than all realistic alternatives. To undermine it would cost many others around the world far more than it would cost Americans--and far sooner. As Samuel Huntington wrote five years ago, before he joined the plethora of scholars disturbed by the "arrogance" of American hegemony: "A world without U.S. primacy will be a world with more violence and disorder and less democracy and economic growth than a world where the United States continues to have more influence than any other country shaping global affairs."

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HEG LOW – GENERIC UNITED STATES HEGEMONY IS AT AN ALL TIME LOW DUE TO OUR MIDDLE-EAST POLICIES
LOBE ,

‘6
US HEGEMONY EBBING FAST ’,

[JIM, WASHINGTON BUREAU CHIEF OF IPS , ‘50 YEARS AFTER SUEZ, HTTP :// WWW . COMMONDREAMS . ORG / HEADLINES 06/1027-02. HTM ]

As the Middle East prepares to mark the 50th anniversary on Oct. 29 of the Suez Crisis that effectively ended European colonialism, a half century of U.S. hegemony in the region also appears to be coming to an end, according to a growing number of analysts here. The observation is based primarily on the serious damage done to Washington's position in the Middle East by its 2003 invasion and subsequent occupation of Iraq, where more than 140,000 of its troops remain bogged down in what seems likely an increasingly futile effort both to crush a Sunni insurgency that it failed to anticipate and prevent a larger sectarian civil war. In addition, however, the passivity -- or obstinacy -- of the administration of President George W. Bush in failing to revive any kind of Arab-Israeli peace process, particularly in the wake of last summer's war between Israel and Hezbollah or the ongoing deterioration of the Palestinian Authority, appears to have brought both Washington's image and influence in the region to an alltime low. "American foreign policy in the Middle East is approaching a very serious crisis," noted Zbigniew Brzezinski, national security adviser under former President Jimmy Carter, at a dinner this week in which he noted the imminence of the 1956 crisis that he said marked "the beginning of (Washington's) domination of the region". "We are facing the possibility of literally being pushed out of the Middle East," he warned, suggesting that only a major change in U.S. policy, particularly regarding the IsraeliPalestinian peace process, can reverse the current trend. While other analysts insist that Washington's status as the world's military hyperpower and its continued heavy reliance on Middle Eastern oil -- let alone its continued presence in Iraq -- ensure its continued relevance to the region, the consensus among regional specialists here is that its ability to affect events there has indeed been substantially diminished. "The age of U.S. dominance in the Middle East has ended and a new era in the modern history of the region has begun," wrote Richard Haass, president of the influential Council on Foreign Relations (CFR) and a top Middle East adviser to the George H.W. Bush administration, in a remarkably downbeat article in the latest edition of Foreign Affairs journal.

THE SCRAMBLE FOR ENERGY RESOURCES BY DEVELOPING COUNTRIES SUCH AS CHINA AND INDIA HAS LOWERED U.S. HEGEMONY GLOBAL POLITICIAN ‘5 [‘ U.S. HEGEMONY IN THE FAR EAST UNDER SEIGE’, 6/10/05, GLOBAL POLITICIAN , HTTP :// WWW. GLOBALPOLITICIAN .COM/2862-ASIAAMERICA ] The rise to prominency on the world stage of China and India has implications for the US hegemony in the Far East. Over the past six months, moves and counter moves have been being made by the major players in the region that all were motivated by one factor; the scramble for energy resources. There's no international etiquette apart from the legislation that prevents war, but US foreign policy which is clearly centered around 'serving the US interests' is being duplicated by the rapidly developing countries in the East. Manishankar Aiyer, petroleum and natural gas minister of India spoke for the entire region when he put his country's foreign policy down to anything securing a tangible quantity of energy. "We need 100 million standard cubic meters per day of natural gas by 2025. Can America supply us that? I am only looking at securing energy security for the country", he told reporters on the sidelines of the Confederation of the Indian Industries. This is basically what 22nd Century foreign policy is all about.

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HEG LOW – GENERIC THE U.S. HAS PASSED ITS GEOPOLITICAL HEIGHT-DECLINE INTO MULTI-POLARITY INEVITABLE DIBB ‘6 [PAUL,
FORMER AUSTRALIAN DEPUTY DEFENSE SECRETARY AND EMERITUS PROFFESER OF

STRATEGIC STUDIES

AT AUSTRALIAN NATION

UNIVERSITY , THE AUSTRALIAN ,

“THE

DECLINE OF AMERICAN SWAY ”]

As time goes on, the US will find its Daramountcv gradually eroded and its interests and values will not remain unchallenged. The Australian National University's Coral Bell has argued, in a publication last year by the Australian Strategic Policy Institute, that we are moving in to a world order in which a concert of several great powers will be necessary to keep the peace. She calls this a company of giants, which will include the US, China, India, Japan, Russia and perhaps a confederated Europe. This redistribution of power will inevitably herald the twilight of the present unipolar world of US dominance. Some argue that a concert of powers such as this will be less dangerous for world order. That, of course, will depend upon whether there is indeed an internationally cooperative concert or whether, instead, there will be competing centres of power and a struggle for a new global balance of power. The most dangerous outcome for Australia would be if China in its bid for the mastery of Asia sought to design some sort of antiUS alliance.Throughout history, great powers have waxed and waned, some quicker than others. The great question of our contemporary era is not whether America's physical attributes of power are under challenge. Rather it is whether, after a short 15 years at the top, US global political leadership and influence have passed their zenith.

UNITED STATES HEGEMONY IS IN DECLINE-DEPRECIATED DOLLAR PROVES
MCSMITH

‘7

[ANDY , EDITOR OF THE INDEPENDENT, ‘THE DOLLARS DECLINE: FROM SYMBOL OF HEGEMONY TO SHUNNED CURRENCY’, THE INDEPENDENT, HTTP :// WWW . INDEPENDENT . CO . UK / NEWS / WORLD / AMERICAS / THE - DOLLARS - DECLINE - FROM - SYMBOL - OF - HEGEMONY - TO - SHUNNED - CURRENCY 400715.HTML] The decline of the dollar, symbol of US global hegemony for the best part of a century, may have become so entrenched that some experts now fear it is irreversible. After months of huge and sustained turmoil on the money markets, lack of confidence in the world's totemic currency has become so widespread that an increasing number of international traders are transferring their wealth to stronger currencies such as the euro, which recently hit its highest level against the dollar.

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HEG LOW – LAUNDRY LIST UNITED STATES HEGEMONY IS ON THE DECLINE FOR A LAUNDRY LIST OF REASONS
HAASS

‘8
PLANNING FOR THE UNITED STATES DEPARTMENT

[RICHARD , PRESIDENT OF THE COUNCIL ON FOREIGN RELATIONS, FORMER DIRECTOR OF POLICY OF STATE , FINANCIAL TIMES , APRIL 16 2008, ‘W HAT FOLLOWS AMERICAN DOMINION ?’]
TH

The unipolar era, a time of un-precedented American domin-ion, is over. It lasted some two decades, little more than a moment in historical terms. Why did it end? One explanation is history. States get better at generating and piecing together the human, financial and technological resources that lead to productivity and prosperity. The same holds for companies and other organisations. The rise of new powers cannot be stopped. The result is an ever larger number of actors able to exert influence regionally or globally. It is not that the US has grown weaker, but that many other entities have grown much stronger. A second reason unipolarity has ended is US policy. By both what it has done and what it has failed to do, the US has accelerated the emergence of new power centres and has weakened its own position relative to them. US energy policy (or the lack thereof) is one driving force behind the end of unipolarity. Since the first oil shocks of the 1970s, US oil consumption has grown by some 20 per cent and, more important, US imports of petroleum products have more than doubled in volume and nearly doubled as a percentage of consumption. This growth in demand for foreign oil has helped drive up the world price from just over Dollars 20 a barrel to more than Dollars 100 a barrel. The result is an enormous transfer of wealth and leverage to those states with energy reserves. US economic policy has played a role as well. President George W. Bush has fought costly wars in Afghanistan and Iraq, allowed discretionary spending to increase by 8 per cent a year and cut taxes. The US fiscal position declined from a surplus of more than Dollars 100bn in 2001 to an estimated deficit of about Dollars 250bn in 2007. The ballooning current account deficit is now more than 6 per cent of gross domestic product. This places downward pressure on the dollar, stimulates inflation and contributes to the accumulation of wealth and power elsewhere in the world. Poor regulation of the US mortgage market and the credit crisis it spawned have exacerbated these problems. Iraq has also contributed to the dilution of American primacy. The conflict has proved to be an expensive war of choice - militarily, economically and diplomatically, as well as in human terms. Years ago, the historian Paul Kennedy outlined his thesis about "imperial overstretch", which posited that the US would eventually decline by overreaching, just as other great powers had. Prof Kennedy's theory turned out to apply most immediately to the Soviet Union, but the US - for all its corrective mechanisms and dynamism - has not proved to be immune. Finally, unipolarity's end is not simply the result of the rise of other states and organisations or of the failures and follies of US policy. It is also a consequence of globalisation. Globalisation has increased the volume, velocity and importance of cross-border flows of just about everything, from drugs, e-mails, greenhouse gases, goods and people to television and radio signals, viruses (virtual and real) and weapons. Many of these flows take place outside the control of governments and without their knowledge. As a result, globalisation dilutes the influence of big powers, including the US.

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HEG LOW – E.U. AND CHINA THE RISE OF THE E.U. AND CHINA AS WORLD PLAYERS HAS DIMINISHED UNITED STATES HEGEMONY NEW YORK TIMES ‘8 [‘WAVING GOODBYE TO HEGEMONY ’, NEW YORK TIMES 1/27/08, PARAG KHANNA, HTTP :// WWW . NYTIMES . COM /2008/01/27/ MAGAZINE /27 WORLD - T . HTML ? PAGEWANTED =1&_ R =1& REF = MAGAZINE ]
Turn on the TV today, and you could be forgiven for thinking it’s 1999. Democrats and Republicans are bickering about where and how to intervene, whether to do it alone or with allies and what kind of world America should lead. Democrats believe they can hit a reset button, and Republicans believe muscular moralism is the way to go. It’s as if the first decade of the 21st century didn’t happen — and almost as if history itself doesn’t happen. But the distribution of power in the world has fundamentally altered over the two presidential terms of George W. Bush, both because of his policies and, more significant, despite them. Maybe the best way to understand how quickly history happens is to look just a bit ahead. It is 2016, and the Hillary Clinton or John McCain or Barack Obama administration is nearing the end of its second term. America has pulled out of Iraq but has about 20,000 troops in the independent state of Kurdistan, as well as warships anchored at Bahrain and an Air Force presence in Qatar. Afghanistan is stable; Iran is nuclear. China has absorbed Taiwan and is steadily increasing its naval presence around the Pacific Rim and, from the Pakistani port of Gwadar, on the Arabian Sea. The European Union has expanded to well over 30 members and has secure oil and gas flows from North Africa, Russia and the Caspian Sea, as well as substantial nuclear energy. America’s standing in the world remains in steady decline. Why? Weren’t we supposed to reconnect with the United Nations and reaffirm to the world that America can, and should, lead it to collective security and prosperity? Indeed, improvements to America’s image may or may not occur, but either way, they mean little. Condoleezza Rice has said America has no “permanent enemies,” but it has no permanent friends either. Many saw the invasions of Afghanistan and Iraq as the symbols of a global American imperialism; in fact, they were signs of imperial overstretch. Every expenditure has weakened America’s armed forces, and each assertion of power has awakened resistance in the form of terrorist networks, insurgent groups and “asymmetric” weapons like suicide bombers. America’s unipolar moment has inspired diplomatic and financial countermovements to block American bullying and construct an alternate world order. That new global order has arrived, and there is precious little Clinton or McCain or Obama could do to resist its growth. The Geopolitical Marketplace. At best, America’s unipolar moment lasted through the 1990s, but that was also a decade adrift. The post-cold-war “peace dividend” was never converted into a global liberal order under American leadership. So now, rather than bestriding the globe, we are competing — and losing — in a geopolitical marketplace alongside the world’s other superpowers: the European Union and China. This is geopolitics in the 21st century: the new Big Three. Not Russia, an increasingly depopulated expanse run by Gazprom.gov; not an incoherent Islam embroiled in internal wars; and not India, lagging decades behind China in both development and strategic appetite. The Big Three make the rules — their own rules — without any one of them dominating. And the others are left to choose their suitors in this post-American world. The more we appreciate the differences among the American, European and Chinese worldviews, the more we will see the planetary stakes of the new global game. Previous eras of balance of power have been among European powers sharing a common culture. The cold war, too, was not truly an “East-West” struggle; it remained essentially a contest over Europe. What we have today, for the first time in history, is a global, multicivilizational, multipolar battle. In Europe’s capital, Brussels, technocrats, strategists and legislators increasingly see their role as being the global balancer between America and China. Jorgo Chatzimarkakis, a German member of the European Parliament, calls it “European patriotism.” The Europeans play both sides, and if they do it well, they profit handsomely. It’s a trend that will outlast both President Nicolas Sarkozy of France, the selfdescribed “friend of America,” and Chancellor Angela Merkel of Germany, regardless of her visiting the Crawford ranch. It may comfort American conservatives to point out that Europe still lacks a common army; the only problem is that it doesn’t really need one. Europeans use intelligence and the police to apprehend radical Islamists, social policy to try to integrate restive Muslim populations and economic strength to incorporate the former Soviet Union and gradually subdue Russia. Each year European investment in Turkey grows as well, binding it closer to the E.U. even if it never becomes a member. And each year a new pipeline route opens transporting oil and gas from Libya, Algeria or Azerbaijan to Europe. What other superpower grows by an average of one country per year, with others waiting in line and begging to join? Robert Kagan famously said that America hails from Mars and Europe from Venus, but in reality, Europe is more like Mercury — carrying a big wallet. The E.U.’s market is the world’s largest, European technologies more and more set the global standard and European countries give the most development assistance. And if America and China fight, the world’s money will be safely invested in European banks. Many Americans scoffed at the introduction of the euro, claiming it was an overreach that would bring the collapse of the European project. Yet today, Persian Gulf oil exporters are diversifying their currency holdings into euros, and President Mahmoud Ahmadinejad of Iran has proposed that OPEC no longer price its oil in “worthless” dollars. President Hugo Chávez of Venezuela went on to suggest euros. It doesn’t help that Congress revealed its true protectionist colors by essentially blocking the Dubai ports deal in 2006. With London taking over (again) as the world’s financial capital for stock listing, it’s no surprise that China’s new state investment fund intends to locate its main Western offices there instead of New York. Meanwhile, America’s share of global exchange reserves has dropped to 65 percent. Gisele Bündchen demands to be paid in euros, while Jay-Z drowns in 500 euro notes in a recent video. American soft power seems on the wane even at home. And Europe’s influence grows at America’s expense. While America fumbles at nation-building, Europe spends its money and political capital on locking peripheral countries into its orbit. Many poor regions of the world have realized that they want the European

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dream, not the American dream. Africa wants a real African Union like the E.U.; we offer no equivalent. Activists in the Middle East want parliamentary democracy like Europe’s, not American-style presidential strongman rule. Many of the foreign students we shunned after 9/11 are now in London and Berlin: twice as many Chinese study in Europe as in the U.S. We didn’t educate them, so we have no claims on their brains or loyalties as we have in decades past. More broadly, America controls legacy institutions few seem to want — like the International Monetary Fund — while Europe excels at building new and sophisticated ones modeled on itself. The U.S. has a hard time getting its way even when it dominates summit meetings — consider the ill-fated Free Trade Area of the Americas — let alone when it’s not even invited, as with the new East Asian Community, the region’s answer to America’s Apec. The East Asian Community is but one example of how China is also too busy restoring its place as the world’s “Middle Kingdom” to be distracted by the Middle Eastern disturbances that so preoccupy the United States. In America’s own hemisphere, from Canada to Cuba to Chávez’s Venezuela, China is cutting massive resource and investment deals. Across the globe, it is deploying tens of thousands of its own engineers, aid workers, dam-builders and covert military personnel. In Africa, China is not only securing energy supplies; it is also making major strategic investments in the financial sector. The whole world is abetting China’s spectacular rise as evidenced by the ballooning share of trade in its gross domestic product — and China is exporting weapons at a rate reminiscent of the Soviet Union during the cold war, pinning America down while filling whatever power vacuums it can find. Every country in the world currently considered a rogue state by the U.S. now enjoys a diplomatic, economic or strategic lifeline from China, Iran being the most prominent example. Without firing a shot, China is doing on its southern and western peripheries what Europe is achieving to its east and south. Aided by a 35 million-strong ethnic Chinese diaspora well placed around East Asia’s rising economies, a Greater Chinese Co-Prosperity Sphere has emerged. Like Europeans, Asians are insulating themselves from America’s economic uncertainties. Under Japanese sponsorship, they plan to launch their own regional monetary fund, while China has slashed tariffs and increased loans to its Southeast Asian neighbors. Trade within the India-Japan-Australia triangle — of which China sits at the center — has surpassed trade across the Pacific. At the same time, a set of Asian security and diplomatic institutions is being built from the inside out, resulting in America’s grip on the Pacific Rim being loosened one finger at a time. From Thailand to Indonesia to Korea, no country — friend of America’s or not — wants political tension to upset economic growth. To the Western eye, it is a bizarre phenomenon: small Asian nation-states should be balancing against the rising China, but increasingly they rally toward it out of Asian cultural pride and an understanding of the historical-cultural reality of Chinese dominance. And in the former Soviet Central Asian countries — the so-called Stans — China is the new heavyweight player, its manifest destiny pushing its Han pioneers westward while pulling defunct microstates like Kyrgyzstan and Tajikistan, as well as oil-rich Kazakhstan, into its orbit. The Shanghai Cooperation Organization gathers these Central Asian strongmen together with China and Russia and may eventually become the “NATO of the East.”

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HEG HIGH – STRONG FOUNDATIONS THE UNITED STATES’ CURRENT ACCOUNT DEFICIT AND FOREIGN DEBT ARE NOT DIRE THREATES TO ITS GLOBAL POSITION, AS WOULD-BE CASSANDRAS WARN. U.S. POWER IS FIRMLY GROUNDED ON ECONOMIC SUPERIORITY AND FINANCIAL STABILITY THAT WILL NOT END SOON. LEVEY
AND

BROWN ‘5 STUART S, MARCH /APRIL ISSUE
OF

[DAVID H

AND

FOREIGN AFFAIRS]

Would-be Cassandras have been predicting the imminent downfall of the American imperium ever since its inception. First came Sputnik and "the missile gap," followed by Vietnam, Soviet nuclear parity, and the Japanese economic challenge--a cascade of decline encapsulated by Yale historian Paul Kennedy's 1987 "overstretch" thesis. The resurgence of U.S. economic and political power in the 1990s momentarily put such fears to rest. But recently, a new threat to the sustainability of U.S. hegemony has emerged: excessive dependence on foreign capital and growing foreign debt. As former Treasury Secretary Lawrence Summers has said, "there is something odd about the world's greatest power being the world's greatest debtor." The U.S. economy, according to doubters, rests on an unsustainable accumulation of foreign debt. Fueled by government profligacy and low private savings rates, the current account deficit--the difference between what U.S. residents spend abroad and what they earn abroad in a year-now stands at almost six percent of GDP; total net foreign liabilities are approaching a quarter of GDP. Sudden unwillingness by investors abroad to continue adding to their already large dollar assets, in this scenario, would set off a panic, causing the dollar to tank, interest rates to skyrocket, and the U.S. economy to descend into crisis, dragging the rest of the world down with it. Despite the persistence and pervasiveness of this doomsday prophecy, U.S. hegemony is in reality solidly grounded: it rests on an economy that is continually extending its lead in the innovation and application of new technology, ensuring its continued appeal for foreign central banks and private investors. The dollar's role as the global monetary standard is not threatened, and the risk to U.S. financial stability posed by large foreign liabilities has been exaggerated. To be sure, the economy will at some point have to adjust to a decline in the dollar and a rise in interest rates. But these trends will at worst slow the growth of U.S. consumers' standard of living, not undermine the United States' role as global pacesetter. If anything, the world's appetite for U.S. assets bolsters U.S. predominance rather than undermines it.

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HEG HIGH – ECON DESPITE TWO WARS AND SLOWER GROWTH RATES, THE UNITED STATES IS STILL AN ECONOMIC HEGEMON
BAKER ,

‘6
IS SAFE ’, APRIL

[GERARD , UNITED STATES E DITOR AND AN ASSISTANT EDITOR OF THE TIMES , ‘AMERICA ’S ECONOMIC HEGEMONY 2006, http://business.timesonline.co.uk/tol/business/markets/united_states/article708963.ece ]

25

TH

Given that the United States is a $12 trillion ($6,700 billion) economy, the new data mean that in the first quarter the US added to global output an amount that, if sustained at that pace for a year, would be about $600 billion — roughly the equivalent of adding one whole new Brazil or Australia to global economic activity every year, just from the incremental extra sweat and heave and click of 300 million Americans. Think of it another way. In an era in which China embodies the hopes and fears of much of the developed world, the US, with a growth rate of half that of China’s, is adding roughly twice as much in absolute terms to global output as is the Middle Kingdom, with its GDP (depending on how you measure it) of between $2 trillion and $4 trillion and its growth of about 10 per cent. Even when you account for the fact that US growth is not going to continue at 5 per cent, but will revert to its trend of more like 3.5 per cent per year, you are still talking about an economy adding more than $400 billion in inflation-adjusted terms every year (not quite Brazil or Australia, but significantly bigger than Switzerland or Belgium). That means that, on current trends, for at least the next decade the US will actually keep growing in total dollar or yuan numbers by a larger amount than will China (even if the yuan is substantially revalued, by the way). And beyond that ten-year horizon, can anybody really be confident that China will maintain its current rate of growth? (We haven’t even talked here about per capita GDP, where the US advantage will remain unapproachable for decades.) Think of it yet another way: at current economic and population growth rates, the United States — now about 30 per cent larger than the eurozone in GDP — will be twice the size of Europe’s economy in less than 15 years. I give you this little statistical litany not just for its own intrinsic appeal, but as a healthful antidote to some of the wishful thinking about America’s inevitable decline you can read in the rest of the media. Historically speaking, indeed, America’s economic hegemony has never been greater. However messy Iraq and Afghanistan get, it would be unwise to bet that the US will not continue to be Top Nation for quite a while yet.

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**NEG**

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US COMP HIGH – EFFECTIVE ADMINSTRATION

US competitiveness highest in the world, and administrative capabilities ensure its maintenance.
Bradley S. Klapper, AP writer, “U.S. maintains edge in competitiveness; Singapore, Hong Kong just behind in Swiss study”, The Associated Press, 5/15/08, Lexis.

The United States topped world competitiveness rankings for the 15th straight year, but its economy is showing
the same signs of weakness that sank booming Japan in the early 1990s, according to an annual survey released Thursday. Asian tigers Singapore and Hong Kong ranked just behind the U.S., as they did last year. Switzerland jumped two places to fourth, while Luxembourg rounded out the top five most competitive national economies, said the Lausanne, Switzerland-based, IMD business school, publisher of the World Competitiveness Yearbook. "The big question is whether the United States will be No. 1 after this year," project director Stephane Garelli said, adding that the report was based on 2007 data that do not fully reflect all of the problems in U.S. financial markets. "Everyone is catching up very quickly, but so far the U.S. economy is showing a lot of resilience." The study lists 55 economies according to 331 criteria that measure how the nations create and maintain conditions favorable to businesses.

The U.S. position was cemented by its domestic economy, which is the world's strongest, topping all others in its amount of investments, stock purchases and commercial service exports. The U.S. also ranks as the easiest place to secure venture capital for business development and dominates all other economies in key technology criteria such as computers in use, according to the report.
But Garelli warned that U.S. economic health is vulnerable because of its heavy reliance on the financial sector for corporate profits. The 2008 report says there are parallels between now and two decades ago, when the business school first started to study competitiveness and "Japan's competitiveness seemed unassailable, with a strong domination in economic dynamism, industrial efficiency and innovation. "Then all hell broke loose," it added. "The stock market went into reverse in 1989, land prices collapsed in 1992, credit cooperatives and regional banks came under attack in 1994, large banks teetered on the edge of bankruptcy in 1997, and a major credit crunch occurred in 1998. Does this ring a bell?" While the report called the similarities "frightening," Garelli said there are important differences between stagnated for nearly a decade and the U.S. economy teetering on the brink of a recession now. Japan's decision-makers were bureaucrats or politicians who reacted too slowly. The

the Japan that

U.S. administration, by contrast, is full of business and financial experts that know when things need to be shaken up.

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"The U.S always seems to find the means to reinvent itself in ways that Japan and much of Europe often lacks," he said.

US COMP HIGH – EXPORTS

US is most competitive in the world – record level exports prove National Competitiveness Summit (Transcript), Department of Commerce summit gathering the nation's premier leaders of business, government and academia, “American Competitiveness”, 5/22/08,
http://www.americancompetitiveness.com/

At the dawn of the 21st century, the United States is the most competitive economy in the world. Meanwhile international competition is intensifying across the globe and America must continue to adapt and innovate to maintain our leadership position. Increasing worldwide competition calls on us to respond more rapidly to computer needs, innovate faster and add more value. This is not only what is expected by American consumers but by
the growing customer base overseas for goods and services provided by American companies and workers. How we respond to these challenges and opportunities brought on by an interconnected 21st century worldwide economy today will shape the prosperity of Americans for generations to come. Meeting this challenge requires creativity and commitment from all Americans especially entrepreneurs. America's entrepreneurs are constantly reinventing wait we do business, are tightly linked to our economic prosperity and provide more job opportunities for Americans than any other sector. Another key component of American competitiveness is our ability to access the growing markets of the worldwide marketplace. With a significant expansion of free trade agreements in recent years American businesses have expanded opportunities to market their products and services to new customers around the world. From Wall Street to main street. The impact of worldwide markets is enormous.

U.S. exports are at record levels up nearly 13% over last year. These exports to the world are driving the U.S. economy. That impact is already evident here at home. There are many great examples of American communities that have successfully driven economic transformations in their regions to bolster competitiveness in global markets.

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US COMP HIGH – INDUSTRIES

Despite growth around the world, US competitiveness remains high
Jim McNerney, Chairman, President and CEO at Boeing, and Deborah Wince-Smith, President, Council on Competitiveness, “American Competitiveness”, National Competitiveness Summit Transcript, 5/22/08, http://www.americancompetitiveness.com/ Well, here we are

every day, finding ourselves talking about a slowdown in the economy, growth of just about 1 or 1 1/2% as we watch international economies grow -- strongly. China at 12%. India at 10%. Russia, the Middle East seeing an enormous amount of money moving into those countries because of the price of oil. The question keeps arising: America, has it lost competitiveness or worse has it lost importance relative to its neighbors around the world? That's what we're tackling and that's why we're setting the
tone for this important conference today. Jim McNerney, you run a global business, how

competitive is America relative to the rest of the world today?

By and large, America is, in my view, very competitive. I think the -- but the threat to that position in many industries is very obvious. And from my point of view there's a call to action even in industries like my own which doesn't have a plethora of global competitors but I know we will. But other industries are facing it much more rigorously now. And so you look at the education levels of some countries, China, India, someplace in the Middle East, you look at the infrastructure that they're investing in, it is at multiples to what we're doing here in country. So a better educated workforce, in entrepreneurial societies, take China as the obvious example, capital markets have sort it out so money flows around on a global basis now and I know we'll talk in more detail about it, but the answer to your question is, we're very competitive today. In most industries.

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US COMP HIGH – FOREIGN GROWTH – LABOR

Foreign growth provides more labor for US based firms, keeping competitiveness high Investor’s Business Daily, “Straight Talk At Last From McCain Gramm”, 7/14/08, Editorial, Lexis.
"We're in the midst of an export boom in manufacturing," Gramm pointed out. China and India's populations entering the global work force "greatly increased the supply of labor," and "almost everything Americans buy from China" is produced by American manufacturers utilizing Chinese workers. The availability of so much new labor has meant that with America holding 60% of the world's capital, we have been huge beneficiaries, he added. "We've never been more dominant," according to Gramm, who as a vice chairman of the massive UBS international asset
management company has seen U.S. firms' effective use of foreign labor markets firsthand. "We've never had more natural advantages than we have today." Within that context, the tax-cut-driven Bush expansion may be slowing (nothing lasts forever), but there remains no proof that we are in a recession yet. Democrats and their toadies in the media, however, certainly seem intent on talking us into one. That particular "whine" has reached such a fever pitch that capitalism itself is doubted. Washington Post business columnist Steven Pearlstein gloats that the Wall Street Journal editorial page now approves of a "wee bit of socialism" in the form of a Fannie Mae /Freddie Mac bailout. And in our own pages last week, columnist E.J. Dionne charged that "even conservatives recognize that capitalism is ailing." But under a President Obama and a Democratic Congress, there would be far more than a "wee bit of socialism." The real remedy is more action motivated by the principles of economic freedom, something President Bush put his finger on Friday. Oil prices are up "because demand is outstripping supply," the president noted. "And one way to deal with supply problems is to increase supply here in America" by exploiting "the vast potential of crude oil reserves on offshore lands, as well as in Alaska, as well as in the oil shale in the western part of our country." As the president pointed out, however, "the Democratic leaders of Congress have consistently blocked opening up these lands for exploration . . . they have a responsibility to explain to their constituents why we should not be drilling for more oil here in America to take the pressure off of gasoline prices." Gramm is perfectly right about America's economic dominance. That does not preclude, however, the legitimate complaints Americans have -- concerns that will multiply if Democrats gain full power in Washington, raise taxes and expand government drastically, and further prevent us from tapping

our own domestic sources of energy.

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US COMP HIGH – FOREIGN GROWTH – INVESTMENT

US competitiveness high – still highest in the world despite growth in Asia
Fareed Zakaria, “The Rise of the Rest”, Newsweek (Excerpt from The Post American World), 5/12/08, http://www.newsweek.com/id/135380/page/1 But take a step back. Over

the last 20 years, globalization has been gaining depth and breadth. America has benefited massively from these trends. It has enjoyed unusually robust growth, low unemployment and inflation, and received hundreds of billions of dollars in investment. These are not signs of economic collapse. Its companies have entered new countries and industries with great success, using global supply chains and technology to stay in the vanguard of efficiency. U.S. exports and manufacturing have actually held their ground and services have boomed. The United States is currently ranked as the globe's most competitive economy by the World Economic Forum. It remains dominant in many industries of the future like nanotechnology, biotechnology, and dozens of smaller high-tech fields. Its universities are the finest in the world, making up 8 of the top ten and 37 of the top fifty, according to a prominent ranking produced by Shanghai Jiao Tong University. A few years ago the National Science
Foundation put out a scary and much-discussed statistic. In 2004, the group said, 950,000 engineers graduated from China and India, while only 70,000 graduated from the United States. But those numbers are wildly off the mark. If you exclude the car mechanics and repairmen—who are all counted as engineers in Chinese and Indian statistics—the numbers look quite different. Per capita, it turns out, the United States trains more engineers than either of the Asian giants. But America's hidden secret is that most of these engineers are immigrants. Foreign students and immigrants account for almost 50 percent of all science researchers in the country. In 2006 they received 40 percent of all PhDs. By 2010, 75 percent of all science PhDs in this country will be awarded to foreign students. When these graduates settle in the country, they create economic opportunity. Half of all Silicon Valley start-ups have one founder who is an immigrant or first generation American. The potential for a new burst of American productivity depends not on our education system or R&D spending, but on our immigration policies. If these people are allowed and encouraged to stay, then innovation will happen here. If they leave, they'll take it with them. More broadly, this is America's great—and potentially insurmountable—strength. It remains the most open, flexible society in the world, able to absorb other people, cultures, ideas, goods, and services. The country thrives on the hunger and energy of poor immigrants. Faced with the new technologies of foreign companies, or growing markets overseas, it adapts and adjusts. When you compare this dynamism with the closed and hierarchical nations that were once superpowers, you sense that the United States is different and may not fall into the trap of becoming rich, and fat, and lazy.

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US COMP HIGH – DOMESTIC POLICY – OPEN MARKET

US open market policy maintains global competitiveness
Christopher A. Padilla, Undersecratary of International Trade (US Department of Commerce), “Oppenness and American Creed”, States News Service, 7/9/08, Lexis.

For as long as America has existed, there have been defeatists who argue that America is in decline, and that it needs to close its doors to be competitive. Twenty years ago, it was widely believed that Japan would overtake the United States to become the world' pre-eminent economy. In Japanese investment in Rockefeller Center and
Pebble Beach, many saw the inexorable decline of America. And there were other perceived threats as well: the "giant sucking sound" of NAFTA, or the looming dominance of "Fortress Europe." But reality intervened. America continued growing, bouncing back from the oil embargo, from stagflation, from the dot-com bubble and from the terrorist attacks of September 11. Meanwhile, Japan has suffered economic sclerosis for more than a decade; in the aftermath of NAFTA weave seen all three countries grow; and in the EU the rate of employment and growth has been slower than in the U.S. In fact since August 2003 the United States has created more jobs than all major industrialized countries combined. Today, instead of Japan or Europe serving as the focal point of hysteria, pundits suggest that a rising China will overtake America in the 21st Century. But one way to reliably lose money is to bet against America' success, and I donat believe China' economy will inevitably overtake our own. Openness: America' Secret Ingredient for Success What is it that is different about America? Why, despite many challenges, do we continue to grow, innovate, and remain the largest, most competitive economy in the world? I believe America' continuing success can be traced to one fundamental and differentiating principle: openness. America' openness is the secret ingredient in our national recipe, the trump card in America' hand. It is our openness that gives us a leg up in the global economy a" we are stronger as a nation because we welcome the world' products, ideas, investment, and people. In Japan, China, and elsewhere, economies are relatively less open. To this day, Japan discourages foreign direct investment and immigration. China raised two hundred million people out of poverty through its reform policy, yet today shows disturbing signs of limiting foreign participation in its economy. In Latin America, Africa, and Asia, most economies are relatively closed, and relatively poor. In America, our openness to trade gives us access to the world' products at affordable prices, keeps us on our competitive toes, and creates new markets for our exports. Being open to foreign investment capital provides the lubricating oil for the American economic engine, with a total stock of foreign direct investment valued at $1.8 trillion that supports nearly 6 million U.S. jobs. Receptivity to foreign ideas, students, and scientists makes us a global hub for innovation; half of Silicon Valley start-ups today have at least one founder who is either an immigrant or a first-generation American citizen. As the proud son of an immigrant, I agree with Fareed Zakaria, who recently wrote in Foreign Affairs that our nation is "constantly revitalized by streams of people who are eager to make a new life in a new world."

Fifty years ago, exports accounted for only 4.4 percent of American GDP. In the first quarter of 2008, exports accounted for nearly 13 percent of GDP, and topped $1.6 trillion in 2007. Both are all-time records. Partly because exports grew more than 17 percent in the first quarter of this year, our economy was able to show a bit
of growth even in the face of the housing market downturn. Imagine where we would be today if vibrant exports were not cushioning the blow of the sub-prime mortgage fallout, or if foreign imports were not helping to keep inflation in check.

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US COMP HIGH – DOMESTIC POLICY -- NEW INDUSTRIES

US competitiveness high – changes in global economic structure haven’t affected US economic dominance.
Fareed Zakaria, “The Future of American Power”, Foreign Affairs, June 2008, http://www.foreignaffairs.org/20080501facomment87303-p30/fareed-zakaria/the-future-of-american-power.html U.S. military power is not the cause of its strength but the consequence. The fuel is the United States' economic and technological base, which remains extremely strong. The United States does face larger, deeper, and broader challenges than it has ever faced in its history, and it will undoubtedly lose some share of global GDP. But the process will look nothing like Britain's slide in the twentieth century, when the country lost the lead in innovation, energy, and entrepreneurship. The United States will remain a vital, vibrant economy, at the forefront of the next revolutions in science, technology, and industry. In trying to understand how the United States will fare in the new world, the first thing to do is simply look around: the future is already here. Over the last 20 years, globalization has been gaining breadth and depth. More countries are making goods, communications technology has been leveling the playing field, capital has been free to move across the world -- and the

United States has benefited massively from these trends. Its economy has received hundreds of billions of dollars in investment, and its companies have entered new countries and industries with great success. Despite two decades of a very expensive dollar, U.S. exports have held ground, and the World Economic Forum currently ranks the United States as the world's most competitive economy. GDP growth, the bottom
line, has averaged just over three percent in the United States for 25 years, significantly higher than in Europe or Japan. Productivity growth, the elixir of modern economics, has been over 2.5 percent for a decade now, a full percentage point higher than the European average. This superior growth trajectory might be petering out, and perhaps U.S. growth will be more typical for an advanced industrialized country for the next few years. But the general point -- that the United States is a highly dynamic economy at the cutting edge, despite its enormous size -- holds. Consider the industries of the future. Nanotechnology (applied science dealing with the control of matter at the atomic or molecular scale) is likely to lead to fundamental breakthroughs over the next 50 years, and the United States dominates the field. It has more dedicated "nanocenters" than the next three nations (Germany, Britain, and China) combined and has issued more patents for nanotechnology than the rest of the world combined, highlighting its unusual strength in turning abstract theory into practical products. Biotechnology (a broad category that describes the use of biological systems to create medical, agricultural, and industrial products) is also dominated by the United States. Biotech revenues in the United States approached $50 billion in 2005, five times as large as the amount in Europe and representing 76 percent of global biotech revenues.

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US COMP HIGH – LOW DOLLAR – RECORD EXPORTS

US remains competitive – record high exports and a narrowing trade deficit prove
Jeannine Aversa, AP economics writer, “Trade deficit ebbs as exports rise to record high”, AP Financial Wire, 7/11/08, Lexis.

The U.S. trade deficit narrowed in May as exports including industrial supplies and consumer goods climbed to all-time highs. The latest snapshot of trade activity, reported by the Commerce Department on Friday, showed that the nation's trade gap, thanks largely to the declining dollar, decreased to $59.8 billion. That was down 1.2 percent from April's trade deficit
and was the best showing since March. The improvement came even as imports including crude oil hit new record highs. The trade deficit narrowed in May because exports grew faster than imports. Exports of U.S.-made goods and services totaled an all-time high of $157.6 billion in May. That marked a 0.9 percent increase from April. The declining value of the U.S. dollar relative to other currencies, especially the euro, is helping to make U.S. exports cheaper and thus more attractive to foreign buyers. Growth in exports has been one of the few bright spots for the U.S. economy, which has been pounded by housing, credit and financial crises. Imports of goods and services grew to a record of $217.3 billion in May, a 0.3 percent increase from the prior month. On Wall Street, fears about the financial health of Fannie Mae and Freddie Mac sent stocks tumbling. The Dow Jones industrials closed down 128.48 points at 11,100.54 .The trade picture turned out better than many economists were anticipating. They were forecasting the trade gap to widen to $62.2 billion in May.The stronger export figures should help boost overall economic growth during the April-to-June quarter, which is already shaping up to be better than the grim projections made at the start of the year, when many feared the economy might contract. Tax rebates also are energizing shoppers, which should help second-quarter activity. "The narrowing trade deficit may be enough to keep second quarter growth in the black," said Joel Naroff, president of Naroff Economic Advisors. The economy could grow from 1 percent to more than 2 percent in the second quarter, according to various projections.

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A2: TRADE DEFICIT – MORE EXPORTS

Faster growth of exports is actively reducing the trade deficit Shipping Digest, “Deficit in manufactured goods trade shrinks”, 7/14/08, Lexis
"Manufactured goods exports continued their sizzling pace," said Frank Vargo, the NAM's vice president for international economic affairs. "For the first five months of this year, they were up 12 percent over the comparable year-ago period. "Coupled with a slower 4 percent rise in imports, the export performance has resulted in a further reduction in the manufactured goods trade deficit which, through May, is 11 percent smaller than last year," said Vargo. "There is no question that

the value of the dollar, which has returned to roughly equilibrium rates, is playing an important role in this export growth as well." "Exports are keeping U.S. manufacturing afloat this year as domestic demand is very soft," said Vargo. "We
need to do everything possible to continue our export expansion, which is why the NAM is pressing so hard to get barriers against U.S. exports eliminated in Colombia, Panama, and South Korea by Congressional passage of trade agreements with those countries."By holding back on these agreements and forcing American manufacturers to pay higher import tariffs in these countries than would otherwise be the case, Congress is hurting the competitiveness of American manufacturers and their workers," Vargo said.The Commerce Department released the totals on Friday. Total merchanise exports in May were up 0.9 percent to $157.5 billion, while imports increased 0.3 percent to $217.3 billion, leaving a deficit of $59.8 billion, compared with $60.5 billion in May.

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A2: SERVICE ECONOMY, TRADE DEFICIT – MARKET CONTROL

Despite shifting to a service economy, US maintains dominance in lucrative markets and, in turn, its global competitiveness
Fareed Zakaria, “The Future of American Power”, Foreign Affairs, June 2008, http://www.foreignaffairs.org/20080501facomment87303-p30/fareed-zakaria/the-future-of-american-power.html

Manufacturing has, of course, been leaving the country, shifting to the developing world and turning the United States into a service economy. This scares many Americans, who wonder what their country will make if everything is "made in China." But Asian manufacturing must be viewed in the context of a global economy. The Atlantic Monthly's James Fallows spent a year in China watching its manufacturing juggernaut up close, and he provides a persuasive explanation of how outsourcing has strengthened U.S. competitiveness. What it comes down to is that the real money is in designing and distributing products -- which the United States dominates -- rather than manufacturing them. A vivid example of this is the iPod: it is manufactured mostly outside the United States, but most of the
added value is captured by Apple, in California. Many experts and scholars, and even a few politicians, worry about certain statistics that bode ill for the United States. The U.S. savings rate is zero; the current account deficit, the trade deficit, and the budget deficit are high; the median income is flat; and commitments for entitlements are unsustainable. These are all valid concerns that will have to be addressed. But it is important to keep in mind that many frequently cited statistics offer only an approximate or an antiquated measure of an economy. Many of them were developed in the late nineteenth century to describe industrial economies with limited cross-border activity, not modern economies in today's interconnected global market. For the last two decades, for example, the United States has had unemployment rates well below levels economists thought possible without driving up inflation. Or consider that the United States' current account deficit -- which in 2007 reached $800 billion, or seven percent of GDP -- was supposed to be unsustainable at four percent of GDP. The current account deficit is at a dangerous level, but its magnitude can be explained in part by the fact that there is a worldwide surplus of savings and that the United States remains an unusually stable and attractive place to invest. The decrease in personal savings, as the Harvard economist Richard Cooper has noted, has been largely offset by an increase in corporate savings. The U.S. investment picture also looks much rosier if education and research-and-development spending are considered along with spending on physical capital and housing.

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LINK T/ -- ALT ENERGY UNDERCUTS ECON

Alternative energy policy undercuts our economic foundations and will increase energy costs.
John Engler, former governor of Michigan and president of the National Association of Manufacturers, “Energy Bills Will Hit U.S. Competitiveness”, August 8, 2007, http://www.nam.org/s_nam/doc1.asp?CID=202003&DID=239127 As Congress breaks for its annual August recess, both the House and Senate have passed energy bills that supporters hail as reshaping America’s energy economy. If by reshaping they mean shrink, sadly, their claims are true. If enacted into law, the bills

will reduce access to domestic sources of energy, raise taxes on oil and gas production, and dramatically increase the cost of electricity. American competitiveness will suffer yet another serious blow, and manufacturers in the United States will consider their options in the face of more expensive energy. Manufacturers consume one-third of all the electricity in the country, and they cannot do without. Other things must give, whether it’s capital investment,
expansions, R&D or employee benefits. One other thing might also be sacrificed: a domestic presence. Rising energy costs have already contributed to the loss of three million U.S. manufacturing jobs since 2000. The chemical industry is migrating overseas to take advantage of affordable natural gas, and fertilizer manufacturers have shuttered American plants.

In their rush to encourage alternative fuels, Congress is undercutting the foundations of our economy – oil, natural gas, nuclear power and coal. According to the 2007 Energy Outlook by the Energy Information Administration, energy demand is expected to climb 30 percent by 2030, even as the economy uses it more efficiently. Fossil fuels will continue to dominate the nation’s energy mix.
Yet Congress is punishing production. The House bill imposes $16 billion in additional taxes on the oil and gas industry and breaks contract terms over royalties paid on energy leases. Incentives built into the 2005 Energy Policy Act are rolling back, undermining an infrastructure- and investment-heavy industry that measures projects in terms of decades. In addition, a requirement that utilities produce 15 percent of their power from renewable sources – given current technology, simply unfeasible – will increase electricity costs for consumers, most dramatically in southern states with little access to energy alternatives like wind power.

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LINK T/ -- OIL PRICES KEY TO ECON HIGH OIL PRICES SERVE AS A STIMILUS TO THE U.S. ECONOMY
WALDMAN

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A NET STIMILUS TO THE

[STEVE, INTERFLUIDITY AUTHOR, APRIL 17 2006, ‘ARE HIGH OIL PRICES HTTP :// WWW . INTERFLUIDITY . COM / POSTS /1145290813. SHTML ]

US

ECONOMY ’,

Now, when a US consumer purchases that a dollar's worth of oil, the US economy sees an outward cashflow of $1. Oil producers see an incoming cash flow of $4 (since the US represents 25% of the world market by assumption). Oil producers lend $3.20 of that revenue to international markets. US borrowers take on $2.56 worth of debt. What's the net cashflow to the US economy associated with a purchase of oil? For ever dollar spent on oil, Americans get their dollar right back in lendings, plus an extra $1.56 of new lending to purchase homes, vacations, and SUVs with. In other words, an increase in the price of fuel is cash flow positive to the US economy! By assumption 4, this means that despite the reduction of net exports represented by high fuel prices, an increase in the price of oil leads to an increase in US GDP! It's a great deal, until something changes. The assumptions above are not quite right. Probably something less that 64% of every dollar in the world spent on oil ends up repackaged as loans to the US. World oil demand is likely to be price elastic, especially outside of the US where funds spent on oil are not offset by incoming debt-driven cash flows. But I think the overall point stands. So long as the US collectively is not worried about its increasing debt load to the rest of the world, high oil prices may well be a current stimulus, and not a drag at all, on the US economy.

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