Speeches and Articles by Former Consul General Michael Klosson

Prosperity Depends on Countering Terrorism

By U.S. Consul General Michael Klosson

(The Chinese version of this article was published and translated by Hong Kong Economic Times on November 5, 2001, and this article is not for commercial use.)

When terrorists struck the World Trade Center and the Pentagon on September 11, their attacks were felt immediately around the world, including in Hong Kong. Why? Because their actions were also an assault on the entire global free-market economic system. They damaged international economic confidence and placed at risk the human values held so dear in the United States, Hong Kong and elsewhere. Al Qaeda's terrorist acts sought to destroy not only lives, but our very way of life - to shatter confidence in the world economy and to rip down the pillars of free movement of people, goods and capital that have brought prosperity to East Asia and elsewhere in this era of globalization. It's thus hard to imagine how the current international economic downturn can be reversed, uncertainty dispelled and economic confidence fully restored unless all of us - both public and private sector alike - join together in a decisive effort to counter terrorism while also getting on with our business and our lives.

Hong Kong - which, like New York, is one of the world's great trading and financial centers - is especially vulnerable to the consequences of al-Qaeda's attacks, even if they occur many thousands of miles away. Both of our business communities attract investment from every corner of the globe, while our manufacturing industries have survived by applying the tools of technology and modern transportation to reduce inventories, shave costs and better meet customer demands. In so doing, U.S. and Hong Kong businesses have applied some of the same methodologies, and leveraged the same openness, that these terrorists have tried to exploit.

Just look at Hong Kong's apparel industry. The blow to U.S. consumer confidence - and continued worries about the threat of further attacks - weakened sales at shopping malls across the United States. This consumer downturn has prompted buyers to cancel orders from their Hong Kong suppliers and to delay purchases for the year ahead. Already Hong Kong's export performance - the lifeblood of its economy - has begun to suffer, as illustrated by last month's 23 percent decline in domestic exports.

Hong Kong's tourism and hospitality industry is similarly vulnerable. The International Labor Organization estimates that some 200,000 jobs will be lost worldwide in the aviation industry and 8.8 million jobs will be lost in tourism as a result of the September 11 attacks. Hong Kong is arguably one of the safest cities in Asia, and its aviation security system is first rate. But because of the climate of fear that terrorism has created, costs of doing business are rising - as people pay for additional security and extra insurance - and people are deferring travel that would otherwise support Hong Kong's hotel, dining and travel industries.

Over the long term, one of the greatest costs of September 11 to Hong Kong and U.S. businesses could be the impact on logistics and transportation. If the international campaign does not succeed in uprooting terrorism, it will be hard to sustain the kind of technology-driven growth in trade and innovation that the U.S. and Hong Kong economies enjoyed during the 1990s. Just-in-time inventories, overnight fulfillment, and custom sourcing - the key elements that underpin Hong Kong's value-added trade services and "Made by Hong Kong" global production systems -- all depend on the ability to move goods quickly and reliably around the world. Already Hong Kong exporters - and many other trading partners -- have had to adjust their shipments to accommodate tightened Customs screening at U.S. ports of entry. Without a decisive international effort to counter terrorism, there will be increasing pressure to slow down commerce, further regulate the movement of people and money, and tighten controls on what moves into and out of the United States and other countries.

Some people have expressed concern about negative effects of military action on the global economy. That concern is misplaced: It is the continued threat of deadly terrorism that poses the greatest economic challenge. As Federal Reserve Chairman Alan Greenspan recently commented, "Terrorism poses a challenge to the remarkable record of globalization... If we allow terrorism to undermine our freedom of action, we could erase at least part of the palpable gains achieved by postwar globalization. It is incumbent on us not to allow that to happen."

The United States will do its part in this effort to protect the global economy and restore economic momentum, but it cannot succeed alone. Our markets remain open and our country is open for business. We are also working very hard, along with friends like Hong Kong, to build support for a new trade round in the WTO, which would help to broaden the benefits of economic growth. This growth -- combined with continued progress towards accountability, democracy, reform and shared prosperity in developing countries -- is key to eliminating the pockets of anger and alienation that help terrorist groups operate.

But a large part of the challenge before us is to mount an international, multifaceted and long-term campaign to protect the global economy by uprooting terrorist groups and those who give them shelter. This is not an effort targeted at Islam, Muslim countries, or the Afghan people. It is rather an effort to eliminate terrorist networks that seek to overturn our way of life. This is exactly what the leaders of APEC committed themselves to do last week in Shanghai, with their pledge to work together to deny sanctuary, funding, and material or moral support to the terrorists.

The United States welcomes the Hong Kong government's contribution to this effort. Senior Hong Kong officials have affirmed their opposition to terrorism in any form. Hong Kong subscribed to the APEC consensus and. has directed its own financial regulatory system to ensure that Hong Kong does not become a platform for terrorist financing. It is cooperating closely with U.S. law enforcement counterparts and is also moving to implement various UN Security Council Resolutions in support of the war on terrorism. Finally, as the current president of the international Financial Action Task Force which just met October 29-30 in Washington, Hong Kong has played a leading role in enlisting that potent organization's contribution to the international counter-terrorism campaign.

But there is also a role for the Hong Kong business community - like the American business community -- to play in helping to defeat a movement that threatens the global system from which we all have benefited. Without the vigorous support of the private sector in placing its long-term interests ahead of possible short-term inconvenience and additional costs, government will not succeed in rooting out suspicious financial transactions and tracking terrorist assets. The private sector must also recognize the importance of this issue and support government in developing new tools to fight terrorist financing and criminal money laundering.

One of the legal instruments we are employing to combat terrorism in the United States is the recently enacted USA Patriot Act. In sharpening our tools to engage in this fight, we have been very careful not to endanger one of the key components of our way of life -- our civil liberties. As President Bush stated when he signed the USA Patriot Act, this law was "crafted with skill and care, determination and a spirit of bipartisanship" and met with overwhelming support in Congress precisely because "it upholds and respects the civil liberties guaranteed by our Constitution."

Let no one be mistaken: Just as our freedoms do not make us soft on terrorism, neither does our increased determination to crush terrorists make us lose sight of our fundamental values. On the contrary, this is a war to defend those values at home and around the world. We also believe that a world of freedom, democracy, opportunity and stability is a world in which terrorism cannot thrive.