ambassador
Ambassador's Speech
AMBASSADOR’S SPEECH TO CONSEJO INTERAMERICANO DE COMERCIO Y PRODUCCIÓN “U.S. INTERNATIONAL ECONOMIC PRIORITIES”
March 15, 2007
First off I want to thank the Council's leadership for the invitation to speak with you today, and in particular President Julio Werthein and Vice President Antonio Estrany y Gendre for their distinguished leadership. Under their guidance, the Council has maintained its reputation as a respected forum for a candid exchange of ideas.
I continue to work diligently on my Spanish and my loyal Embassy staff tells me I’m getting better. But I have much I want to share with you today and so -- to speed things along -- I will ask your permission to continue in English.
Before we get to the topic of U.S. international economic priorities, I would like to briefly note that President Bush has just completed his 8th visit to Latin America. He delivered a positive message of cooperation and engagement. The President spoke about accomplishments and the challenges in the region. He focused on the areas of ensuring social justice and breaking the cycle of poverty and social exclusion, and he offered U.S. help to achieve these goals. It was a strong message of our commitment to cooperation and partnership with governments that are making good decisions in delivering the benefits of democracy and economic opportunity to their people.
Looking beyond our hemisphere, my six years as the State Department's Assistant Secretary for Economic Business Affairs allowed me to focus on some of the broader challenges facing the global economy and on U.S. international economic priorities. I want to share some thoughts on these priorities with you today.
The World Economy
Let me begin with good news. The world economy has been enjoying a golden period of broadly shared growth, high profits, strong commodity prices, modest real interest rates and low prices for risk. The world economy in aggregate grew more during the past five years than in any five-year period since World War II. This growth is not merely strong: it is also widely shared. In 2006, according to the World Bank, the economies of high-income countries probably grew by 3.1%, while the economies of the developing countries, led by rising giants China and India, expanded 7%, following levels of 6.6% in 2005 and 7.2% in 2004.
This broadly shared growth has been achieved in the face of significant challenges. The global economy adjusted with extraordinary flexibility to the shocks and stresses of the last seven years, whether they were terrorist attacks, conflicts, oil price rises, or the emergence and integration of the Chinese and Indian economies.
U.S. economic achievements have made a strong contribution to the overall good health of the global economy. Historically, the U.S. economy's sheer size and dynamism has made it an engine for global economic expansion. The U.S. economy grew 3.1% in 2006, and has averaged 3.0% growth since 2001. Since August 2003, the United States economy has created 7.6 million jobs, more than in the European Union and Japan combined.
I've read your Council's mission statement with interest -- it highlights "facilitating economic integration and increasing investment flows to promote economic and social development in every country on the American continent." We share this important hemispheric goal and broaden it to a global imperative. Let me review with you some components of U.S. international economic policy that reflect our desire to grow, to better integrate the global economy, and to more broadly distribute the benefits of global economic development:
Trade & Investment
An important component of our economic integration strategy in the last four decades has been the expansion of international trade and investment in order to generate greater global employment and prosperity.
Mobilizing domestic and foreign investment capital is key to any nation's efforts to build an infrastructure foundation and productive capacity that sustains growth and unleashes national potential. Risk capital, of course, seeks out the most secure and welcoming investment climates. In my years observing international capital flows, it has become abundantly clear that, to sustain a welcoming investment climate that attracts socially responsible, long-term commitments of capital, governments need to maintain transparent, consistent, and well functioning regulatory and tax regimes.
The best kinds of foreign direct investment benefit investors, who get to participate in a country's growth, and host nations, who gain the domestic employment and training, tax revenues, infrastructure development and technology transfer from the investment. It is one of the important responsibilities of U.S. embassies to support U.S. investment overseas. By the end of 2005, U.S. companies had invested $353 billion in Latin America and the Caribbean. At the end of 2004, foreign affiliates of U.S. companies employed 1.6 million people in Mexico, the Caribbean, and Central and South America. By the same token, the United States also welcomes foreign investment: At the end of 2005, the cumulative value of inward direct investment totaled over $1.8 trillion. U.S. subsidiaries of foreign firms employ about 5.1 million American workers.
Over the last two decades, the U.S. has pursued a large number of new trade initiatives and agreements – multilateral, regional and bilateral. These initiatives are based on the belief that trade is a multiplier that creates wealth, alleviates poverty, and contributes to global prosperity via a virtuous economic circle: More trade leads to increased competition and lower prices, which leads to more jobs and higher real wages, which leads to more demand and increased supply, which leads to more trade. Expanded trade has contributed significantly to U.S. economic growth. The value of goods and services trade accounted for 28% of U.S. GDP in 2006, an increase from 11% of GDP in 1970.
More open markets and expanded trade help shift the composition of U.S. job growth toward more productive, better paying jobs. U.S. jobs supported by goods exports pay well above the national average and over 58 million Americans are employed by businesses that engage in international trade. As Council members here well know, expanded trade has similarly played an important role in the strong growth in Latin America and in the global economies of East and South Asia, very notably China and India.
For the United States, our top trade priority remains a successful conclusion of the Doha Round of WTO trade talks. We believe that the inclusion of services and the reduction of barriers to agricultural trade will allow a significant boost of economic activity in many countries around the world -- notably countries like the United States and Argentina, which have strong competitive advantages in both areas.
Clearly, there is uneasiness about the impact of globalization, even among countries that stand to gain the most from a new global trade deal. We need to address such concerns head-on, by being attentive to the impact of trade opening on different groups, ensuring that benefits are widely spread, and helping those who may need adjustment. There is hard and important work ahead in building a broad coalition to bring the Doha round to a successful conclusion. The rewards of trade liberalization, growth and development, however, make this work imperative. The World Bank estimates that free trade could boost growth and lift tens of millions of people out of poverty by 2015 and boost income in developing countries by $142 billion, an amount that dwarfs current foreign aid flows.
Besides our multilateral efforts we are committed to pursuing regional and bilateral trade agreements. Just since January 2001, we have implemented seven bilateral and regional trade agreements, including a number in this hemisphere. (Jordan, Chile, Singapore, Australia, Morocco, CAFTA-DR, Bahrain). Four others are pending implementation or Congressional approval. (Oman not yet implemented, Peru, Colombia and Panama pending Congressional approval).
I have watched over the years as Mercosur's original four members have expanded trade with each other fourfold. From my perspective, a clear sign of Mercosur's weight is the fact that most U.S. companies I talk to tell me they have developed Mercosur-wide strategies for their trade and investment activities.
Foreign Assistance
Along with investment and trade, U.S. foreign assistance plays an important role in our worldwide efforts to bridge the wide disparities of income and wealth that limit the ability of some countries to plug themselves into -- and fully benefit from -- the global economy dynamo. The United States has a long history of extending a helping hand to those people overseas struggling to make a better life, recovering from a disaster or striving to live in a free and democratic country.
Our official government assistance of $27.6 billion in 2005 made the U.S. the world’s largest single donor nation. At the March 2002 UN conference in Monterrey, Mexico, we pledged to increase foreign assistance by 50% over 2000 levels by 2006 and I'm happy to say we met that pledge three years early and were at nearly three times the 2000 levels by 2005.
We also have worked to enhance dramatically the effectiveness of our development assistance programs through the Millennium Challenge Corporation (MCC). The MCC's focus is on the long term development of countries that demonstrate a commitment to governing justly and democratically, investing in education and health care, and supporting poverty reduction and economic progress. So far, we've signed Millennium Challenge compacts with three Latin American nations (Nicaragua, Honduras and El Salvador). We're also engaged with a fourth country (Paraguay) that is working to meet the standards to qualify for a compact on its own. In the coming years, these agreements will provide a total of $885 million in new aid, so long as these countries continue to meet the standards of the Millennium Challenge program.
I want to emphasize that MCC assistance comes on top of the "standard" bilateral assistance we provide. Our overall assistance levels to the hemisphere have nearly doubled since 2001, rising from $862 million to roughly $1.6 billion last year -- an accumulated total of over $8 billion in the past six years. This assistance has focused on helping the poor, with a special emphasis on rural and indigenous areas.
Last week, President Bush announced a series of initiatives to expand U.S. hemispheric assistance on three vital social issues: education, health care and affordable housing. As he said, "By investing in programs that empower people, we are helping the working families of our hemisphere build a more hopeful future for themselves."
Another important way the U.S. is helping to build a more hopeful future is by trying to relieve the burden of debt. We have worked with the Group of 8 industrialized nations to reduce the debt of Latin America and Caribbean nations by $4.8 billion. Members of the Inter-American Development Bank are close to an agreement on another debt relief initiative, and we look forward to helping them complete it. This agreement would cancel $3.4 billion owed by some of the poorest countries in our hemisphere -- Bolivia, Guyana, Haiti, Honduras and Nicaragua. That works out to about $110 for every man, woman and child in these countries, monies that their governments should use to invest in the education and health of their citizens.
We have also committed resources to address global pandemics and infectious diseases that destroy families, drain societies of their productive capacity and undermine development. The US Emergency Plan for AIDS Relief is the largest international health initiative dedicated to a single disease in history. This program commits $15 billion over five years to support treatment for two million people, supports prevention for seven million and support care for 10 million. Similarly, the US Malaria initiative announced June 2005 channels $1.2 billion over five years, with the goal of reducing malaria-related deaths by 50% in the 15 most affected African countries.
U.S. foreign assistance is one important tool that, along with the promotion of trade and investment, can help countries lift themselves to a level where they can provide a better life for their citizens. The true value of assistance from the United States provided to emerging economies is much more than official development assistance, however. In 2005, non-trade private financial flows from the U.S. -- including personal remittances, net private investment and NGO grants -- totaled some $119 billion, over four times the size of our global official development assistance.
And this total does not include the charitable giving of individual Americans. This undervalued generosity is one of the very strongest pillars of our society. In 2005, Americans gave over $260 billion dollars to charity, with 76.5% of that individual giving. Much of that money went overseas for disaster relief in places hit by earthquakes and tsunamis, hurricanes, famine and drought. Many Americans gave to people they will never meet in countries they knew little about. They gave because it felt right.
Corruption
Of course, many of us know well that for economies to function well, you need solid institutions and practices. That is why we also work to combat corruption and bribery, two of the most persistent obstacles to international economic growth faced by both developed and emerging economies. They are a scourge that prevents many countries from raising the standard of living and ensuring a dignified life for all peoples. So, improving accountability and transparency in governance is one of our most important foreign policy objectives. We work with many others in the UN, G-8, OECD and other multilateral organizations to eliminate this scourge. In this hemisphere, the OAS anti-bribery convention, which requires state parties to criminalize both domestic and foreign bribery, has been particularly helpful.
Energy
Finally, energy remains a fundamental driver of economic growth. While the world will continue to have a large appetite for oil and gas, energy efficiency can be enhanced if we work to reduce dependence on oil by promoting conservation and the development of cleaner and renewable sources.
It remains in the interest of all economies to diversify their sources and types of energy they use. Wind, solar, and biofuel initiatives are all examples of sustainable solutions to promote greater energy efficiency. Many of these technologies are available and cost competitive now, and have the added benefit of keeping more foreign exchange in consumer countries and creating more jobs. On March 9, Secretary of State Condoleezza Rice and Brazilian Foreign Minister Celso Amorim signed a memorandum of understanding to advance cooperation on biofuels. Regionally, the two nations intend to help third countries, beginning in Central America and the Caribbean, to stimulate private investment for local production and consumption of biofuels. The United States and Brazil expect to support feasibility studies and technical assistance in partnership with the Inter-American Development Bank, the United Nations Foundation, and the Organization of the American States.
Multilaterally, the United States and Brazil intend to work through the International Biofuels Forum to examine development of common biofuels standards and codes to facilitate commoditization of biofuels. This is a market driven approach that will advance hemispheric energy security by introducing more diversity into the energy supply, reduce vulnerability to "petropolitics," support economic growth and development and offer environmental benefits.
Some have characterized the development of biofuels as taking food out of the mouths of the poor. Let me rebut this point: In Central America, South America, and the Caribbean, ethanol is made from sugar. As you know, sugar is mostly an export product in the region, not a staple, so unlike corn based ethanol in the U.S., increases in prices will flow more revenues through regional producer economies. It is premature to rush to any overall conclusion about the impact of biofuels on food crops, even in the U.S. where farmers are simply planting more corn on unused land.
As in so many other areas, technology has evolved to increase efficiencies, yields, and to balance supply and demand. In fact, thanks to cutting edge research in the U.S. on "cellulosic" ethanol, we hope producers will soon be able to use the agricultural waste part of the plant. With this new technology, the starch or seed part of the plant will go to the food supply, and the previously discarded parts will go to the energy supply.
We believe in regional, integrated, approaches to energy efficiency that workin harmony with the environment and that enlist the best and brightest minds in our universities, governments and companies will best support our shared pursuit of solutions that meet each of our needs whether we are net consumers or suppliers of fuels.
In Spanish: I've reviewed some key building blocks of U.S. economic policy that reflect our desire to work closely with our friends and partner nations to grow and better integrate our global economy and to more broadly distribute the benefits of global economic development. Key elements are expanding international trade and investment to boost global prosperity and eliminate poverty; using well our substantial levels of foreign assistance to help countries lift themselves up to levels where they can better plug into the global economy; working to eliminate corruption and bribery as we build stronger institutions and practices; and a market driven approach to energy security and efficiency that will introduce more diversity into the energy supply and support economic growth and development.
Thank you and now I'll be happy to take some of your questions.