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Economic Engagement in the Americas

Daniel S. Sullivan, Assistant Secretary for Economic, Energy, and Business Affairs
Remarks at the Inter-American Development Bank Annual Meeting
Miami, Florida
April 6, 2008

Good morning everybody. Let me start off by thanking everybody for coming. My name is Dan Sullivan, and I am the Assistant Secretary for Economic, Energy and Business Affairs. My bureau at the Department of State has responsibility for a number of areas, primarily in the economic realm. What I want to do is cover a very positive story on our broader economic engagement in the Americas and then open it up to questions and see what’s on your mind.

The Secretary, in a speech at the OAS last fall, talked a lot about important aspects of our engagement in the region. We have copies for everybody. I really commend you to take a look at this because it’s a really powerful explanation of the importance of economic issues, obviously the trade issue but also other issues to our broader foreign policy in the region. I’ll be referencing some elements of that speech, but in that speech she laid it out in a very powerful way.

One of the things that she notes in the speech is what we see as democracy being the greatest driver of change in the region and how this is in line with what President Bush has talked about as a revolution in expectations – for jobs and opportunity, for personal security and social justice. One of the areas that I want to talk about today is the revolution of expectations with regard to economic opportunity and what we are doing in that area. It’s what we call our total economic engagement approach and what that is, is looking at the totality of our economic engagement in the region. Yes, there’s a big focus on trade and I certainly will get to that, but I think that when you look at the broader issues we’ve focused on as an Administration, this Total Economic Engagement approach presents a very positive story.

In addition to trade, it is the different economic tools and engagement tools that we have been undertaking as an Administration since President Bush came into office. The first area I’d like to focus on is ODA. What has happened under the Administration is essentially a doubling of ODA to the region from the last year of the Clinton Administration numbers. I was just looking at some of the statistics before I walked into this meeting. In an area such as health, you have almost a billion dollars invested to improve health issues in the Americas. This has really been a part of a broader effort under the Administration with regards to revolutionizing our approach to development assistance.

The beginning of that took place in Monterey, Mexico at the Monterey Summit in 2002 where you had a new compact between developed countries and developing countries, with a strong focus on developed countries significantly increasing their ODA. And developing countries, the recipients, undertaking as part of that new compact, more reform-oriented policies in the area of economics, and in the area of social development. So as I mentioned, ODA has doubled for Latin America. Indeed, more broadly, we have witnessed the largest increase in development assistance of any U.S. administration since the Marshall Plan was undertaken. Again, it’s an issue that’s not often reported, but the figure in the year 2000 was about $10 billion in ODA in the final year of the Clinton Administration; right now the Bush Administration averages in the area of about $22 billion. So you do the numbers, it’s a dramatic increase. We made a commitment to increase ODA by 50%, which we achieved 3 years early.

This is a reflection I think of the generosity of the American people and something that I did want to highlight – all these areas that I’m going to touch on today – they are very positive in terms of the engagement but they are also very positive, and this is very important, in terms of how they’ve been bipartisan in the United States. None of this increase in ODA could have happened without the full bipartisan support of the Congress.

But what you also have, you have that other side of that new compact, the Monterey Consensus, which is recipient countries undertaking reforms with regard to economic growth and development assistance utilization. We have institutionalized that, from the Administration’s perspective, in the Millennium Challenge Account and Millennium Challenge Corporation initiative. The MCC program focuses on three areas to provide donor aid to countries: ruling justly, investing in people, and promoting economic freedom. If you are not familiar with the MCC program, I’d love to discuss this perhaps offline here, or we can take some questions on it. But the MCC compacts and the threshold programs, which are very significant sums of development, are based on objective criteria in terms of how we distribute that development assistance. We are looking at different areas of a government’s focus in these three areas and how a government does on those.

Right now, in the Americas, we have eight compacts for threshold programs under the MCC program which amount to close to a billion dollars. Again, these are focused on these criteria of ruling justly, investing in people and promoting economic freedom. And, they are based on the notion of partnership. When we develop these MCC programs, it’s with country teams and it’s trying to integrate what these countries need in terms of their economic development with other initiatives such as our free trade agreements. So I think it’s a very positive area, and I want to go through some of the other economic engagement areas as I mentioned at the outset to give you a sense of this Total Economic Engagement approach.

The second area that I wanted to mention is highlighted in Secretary Rice’s OAS speech: it’s in the debt relief area. We view that as another way to expand economic opportunity. In different multilateral fora, the U.S. has been a leader in global efforts; whether it is through the G8, the IDB, or through the HIPC initiative, since the beginning of the Administration we have led efforts to provide more than $17 billion in debt relief for the poorest neighbors in the Americas. That’s a very, very significant sum, and that’s something that again is a part of our engagement and we think a very positive one.

The third area, I think some of you have written about, is some of the work we’ve been doing on remittances, trying to reduce transaction costs. The numbers here, I think all of you are aware, with regard to remittances from the USA are enormous. The 2006 figure that I have is $48 billion in remittances, which in many ways dwarfs ODA.

The fourth area that I wanted to highlight is in the area of energy diversification. We have been working very closely with Brazil with regard to our U.S.-Brazil Biofuels Initiative. This is an initiative launched by Secretary Rice and Foreign Minister Amorim, which is focusing on three different areas: bilateral R&D, cooperation with third countries, and the development of codes and standards. As many of you know, the U.S. and Brazil are the two largest biofuels producers in the world by far. To accelerate movement to the next generation of biofuels, celulostic second generation biofuels, will require extensive R&D. We’ve also had very good success with regard to cooperation with third countries which has been an important component of our deepening relationship with Brazil. We are working together to help with feasibility studies and technical assistance in third countries – the Dominican Republic, El Salvador, Haiti, and St Kitts and Nevis – which have been aimed at helping stimulate private sector development in their biofuels industries. Another very important area where we’ve made significant progress in the biofuels initiative with Brazilians is in our global work to develop codes and standards with Brazil and with the EU that will help in terms of the commercialization and commoditization, and eventual trade – deepening trade in the area of biofuels. We’ve been doing this in partnership with the IDB, OAS, and UN Foundation. My colleague Greg Manual who’s one of the leaders at the State Department on this issue gave some remarks yesterday on this and it’s an area that I know Mr. Moreno is very interested in.

The fifth area is our extensive work in engaging with the private sector. Today, Secretary Gutierrez, our Commerce Secretary, will be headlining a Competitiveness Forum. The head of our Overseas Private Investment Corporation (OPIC) Rob Mosbacher was here on Friday and yesterday discussing infrastructure and finance, and OPIC has also been very active with regard to low housing mortgage funds.

So that brings me finally to the subject of trade. Another area, before I get to trade, but it’s obviously related to the trade area, is our trade preference program, including GSP, our Global Trade Preference Program, ATPA which has just recently been reauthorized, and CBI. These are all areas that I know you recognize are key elements to our engagement and critical in terms of job producing economic growth opportunities both in the region and opportunity for American investors and exporters as well.

I mentioned the preference programs; what I wanted to focus on now is the free trade agreements. Secretary Rice in her OAS speech focused on this as a key element of our engagement in the region, a key aspect of our foreign policy where she stated “ultimately though, only one force is strong enough to lift people out of poverty and to reduce economic inequality and to break down social exclusion in the Americas and that is sustained economic growth fueled by free and fair trade.” And another speech that I would highly recommend you take a look at for those interested in the economic engagement that we’ve had in the region is the President’s recent speech on March 12 to the Hispanic Chamber of Commerce where he said trade also serves a broad strategic purpose. When we enter into free trade agreements, we reinforce commitments to democracy, transparency, and the rule of law. So, obviously the trade focus has been a priority of this Administration, from the President on down, and the results have been very positive in many ways – they’ve been very historic. We have concluded free trade agreements in the hemisphere with 10 additional countries beyond Canada and Mexico. We now have an unbroken chain of trading partners that extends from Veril Alaska, down to Tierra del Fuego in Chile.

So what is the focus of the Administration now? I’m sure it’s not surprising to hear that, with regard to the Americas, it’s to complete and get Congressional approval of the two remaining free trade agreements. We had a great bipartisan vote on the Peru FTA this past fall and now the focus is on achieving a similar result with regard to the Colombia FTA, and later, hopefully, the Panama FTA. For those of you who focus on the Asia-Pacific region, we will then be moving on to hopefully a strong vote this year on the Korea FTA. So there’ve been many, many speeches on this, and again, I would commend you to the Secretary’s OAS speech, and the President’s recent speech at the Hispanic Chamber of Commerce, on why these agreements, particularly the Colombia agreement, matter to the United States. I will briefly touch on this and we can talk a little bit more, but obviously the Secretary of State and the President are able to say this much more articulately than I am, so again, take a look at those speeches.

There are enormous foreign policy benefits, both from the perspective of not only our strong alliance with Colombia, but from a regional perspective. The economic benefits are also going to be significant. If there’s an example of the win-win aspects of free trade agreements, we think the Colombia FTA will be that win-win example. In many ways you already have free trade, it’s free trade one-way with regard to Colombian exports to the United States through our trade preference program, but a free trade agreement will help the Colombia government lock in what has been a very dramatic and very successful economic reform program undertaken by President Uribe. I had the opportunity to meet with the Finance Minister this morning and mentioned to him what an impressive economic reform program it’s been – in terms of increasing FDI, in terms of decreasing unemployment, in terms of decreasing the poverty levels. The FTA will be an important way to lock in that significant economic reform program.

With regard to U.S. benefits, this is something that in the debate over trade often doesn’t get a lot of press – but there would be significant economic benefits to U.S. exporters. Again, as I mentioned, we have one-way free trade: U.S. exporters face on average tariffs of about 12%, much higher for agriculture goods, and so we think that enacting the FTA will help American businesses and help American farmers. You’ve seen the U.S. International Trade Commission, which has done a study on the potential benefits of the FTA with Colombia, has estimated about a $1.1 billion increase in U.S. exports due to that significant tariff differential coming down to zero. We think those are very important benefits.

One thing I did want to mention because it’s gotten a fair amount of press lately is with regard to the process the Administration has undertaken. We are very, very much continuing to look forward to engaging with the Congress on this agreement – engaging with the leadership on looking at ways to move this forward. What you’ve seen has really in many ways been an unprecedented effort. The Administration has completed over 400 contacts with Members of Congress –one on one meetings with regard to the Colombia FTA. Over 400 members of Congress have been invited to join trips to Colombia, led by U.S. Cabinet members. Sue Schwab, our US Trade Representative, is in Colombia right now with 10 members of Congress. I had a good opportunity to travel with Secretary Rice when she took nine democratic members of Congress to Medellin, and Secretary Gutierrez has probably taken five different trips. So this has been a great opportunity for members to meet with Colombian ministers, meet with Colombian workers and get first hand knowledge of how this agreement will help the United States and Colombia. So that engagement continues, and we are very, very focused on continuing that important engagement with our Congress.

I want to close by mentioning a few things. Again, under this historic record with regard to trade, I think one of the key things is as these agreements have been completed, the free trade agreements, it’s important to continue to look at ways to enable U.S. citizens and the citizens in the region to take advantage of the opportunities that are presented by these FTAs. So, indeed what the IDB annual meetings are about – especially some of the bilateral side meetings that have taken place here – is looking at initiatives that help citizens take advantage of these opportunities. Secretary Gutierrez today will be headlining a Competitiveness Forum. Secretary Paulson will obviously be here – there’s been a lot of initiatives with regards to the U.S. Treasury Department, such as the small business initiative for SME lending, the infrastructure initiative, and these all play into the broader issue – helping the citizens of the hemisphere take advantage of what we think has been an historic record with regard to trade and our economic engagement. Which brings me to my final point and that is on the on the engagement front.

What I wanted to do was to lay out some of the economic tools, some of the economic initiatives in addition to trade that we’ve been focused on, but also to emphasize that the engagement takes place not only on the policy front but on the people front. On the government-to-government contact front. As the Secretary of State points out, President Bush has visited the hemisphere I think from our count more than any other President previous to him. Indeed Secretary Rice herself has just been in the region – Colombia, Chile, and Brazil – twice in the last month. As I mentioned, Ambassador Schwab is in the region right now. Secretary Paulson has been to the hemisphere, I think, at least four times, and it goes on and on and on with really every cabinet member in this Administration. It’s been a very big focus of what the Administration has been focused on in the foreign policy realm and we think it’s been a positive one on the economic side but we recognize there’s more work to be done and that’s why we’re here at the annual meeting and that’s why we continue to be focused on completing our free trade agreements in the hemisphere.

Thank you very much, I appreciate the attention. I know I went on a little bit long, hopefully you can tell I get excited about this topic and I look forward to your questions. And, if you would, please identify yourself. Thanks

QUESTION: Adriana Garcia, Reuters/Latin America. What is the timeframe for sending the Colombia FTA to Congress – next week/this month? How is the TAA going? Is the White House putting something else on the table?

ASSISTANT SECRETARY SULLIVAN: That’s a great question. I’ll answer both questions. On the first question, there has been a lot of speculation on when the Administration will send forward legislation. As I mentioned, the engagement with the leadership of the Congress has been intense, will remain intense, and I think the best and latest statement on the timing of this is in the President’s March 12 speech to the Hispanic Chamber of Commerce where he has emphasized the importance of a vote on Colombia this year. And, so that is where we are. I don’t want to speculate exactly on the timing. I think what’s more important is what the President stated, which is the Colombian people and government deserve a vote this year and so do the United States businesses and workers. I think one element of this debate that hasn’t really gotten a lot of attention is this agreement, as I tried to lay out, is the benefit to our economic interests, to our workers, to our exporters, to our farmers. Colombia is one of the largest importers of U.S. agriculture goods in South America and the tariffs on U.S. exports on farm products range from 5-20% on average. So, we will have a significant benefit from the reduction in tariffs that will come with the implementation of this FTA. But, I don’t want to speculate on timing. Again, I would point to the President’s statement and focus in his speech about a month ago or less than a month ago.

Second, on TAA, you are right, it’s been an important element of the engagement with the Congress. The President in his State of the Union expressed the importance of a strong TAA bill – and we have been engaged even the last couple of weeks, very intensively working with different staffs on the Hill, some of the leaders on the Democratic side in the House and Senate on a strong TAA bill. The Administration is certainly looking forward to continuing those discussions. And as the President has stated in the State of the Union, he is focused on a strong TAA bill. So, you are right to bring that up. It is an important component of moving forward on the Free Trade agenda, and we are looking forward to continuing working with the Congress on that.

Yes Sir,

QUESTION: Paul Cabros from Ecuador. My country exports bananas, flowers, and other products. I would like to know what the benefits are in trade agreements?

ASSISTANT SECRETARY SULLIVAN: Well, as you probably know, again, on a bipartisan manner, with the Congress, we just reauthorized the ATPA agreement, the Andean trade preference program, which is an extremely important program to countries in the region, including Ecuador. The numbers I’ve seen are upwards of hundreds of thousands of jobs directly related to the ATPA preference program in Ecuador itself.

So, that’s an area of our engagement – we think that’s a very important program. That this is actually the fourth reauthorization of ATPA since President Bush took office, and it’s been continuous, which is extremely important to make sure ATPA beneficiary countries have the ability to make investment decisions based on the continuing preferences provided by the ATPA

QUESTION: Gisela Salomon, AP. You mentioned Panama. What are you doing to get approval of the Panama FTA? Also, what do you think would happen if the agreement with Colombia doesn’t get approved before the Bush Administration ends?

ASSISTANT SECRETARY SULLIVAN: Well, let me answer your first question, on Panama. The Administration is focused on moving forward on the FTAs in the order in which they were completed. So we would see the focus on Panama next. Now, there has been an issue with regards to Panama that has come up. It is something that has concerned members of Congress, and to be honest it’s concerned members of the Administration, and that was with regard to the election with regards to the leader of the Panamanian legislature. It was something that was a significant disappointment to the United States in both branches given his involvement with what we think was the murder of a U.S. soldier in Panama. And, that has complicated significantly that aspect of the free trade agreement approval. But the Administration is still very focused on moving forward with approval of the Panama FTA this year. And, I’m sorry, what was your second question?

On Colombia.

I don’t want to speculate with regard to what would happen if there wasn’t passage of Colombia this year. I can tell you having worked in the administration for almost 7 years with a little hiatus when I had to go back and undertake some U.S. Marine Corps duties for a year and a half. The focus on moving forward, on working with Congress, with regard to the Colombia FTA, from the Administration, from the President on down, from all different cabinet members, is one of the most focused, coordinated, and intense efforts I’ve seen with regard to almost any economic initiative that the Administration has focused on. So our focus as the President laid out in his speech is working closely with Congress to get approval this year. So I don’t think anyone is that focused on really the aspect of your question which is what happens if it doesn’t. The focus right now is we want to work hard to make sure that it does.

Yes sir.

QUESTION: Emerging Markets (inaudible) What are your views on political risk in the region?

ASSISTANT SECRETARY SULLIVAN: Well I think one view, and again, not to try to keep focusing my comments here, but it’s an important view, is the political risk of doing business in the region is less the more our engagement is increased. That can mean FTAs certainly, given the very world class standards that accompany U.S. bilateral and regional FTAs with regards to investment, transparency, international arbitration, and anti corruption provisions. Those of you who have seen the FTAs know they are quite thick, and that’s because they have world class standards across the board on a number of very important issues. So enacting these agreements helps diminish what you noted, as a rise in political risk. But it’s not only FTAs. We completed a bilateral investment treaty with Uruguay: our new model bilateral investment treaty. So there are other ways in which we are engaging with countries. My colleague Tom Shannon, the Assistant Secretary of State for the Western Hemisphere, and I launched in December an initiative to increase our economic dialogue with Brazil across a number of different areas. This was an idea that came out a meeting that Secretary Rice had with Foreign Minister Alamad to build on the important biofuels initiative partnership. So as we look to deepen our engagement, whether it’s through FTAs, whether it’s through bilateral investment treaties, whether it’s to increase OPIC programs which actually directly relate to the political risk – we think that that deepening of our economic engagement across the board helps address what’s perceived as a rise in risk, particularly in certain sectors, like the energy sector.

Yes.

QUESTION: Claire Haywood, Euromoney Magazine. What is the state of the U.S. relationships with Hugo Chavez and Cuba?

ASSISTANT SECRETARY SULLIVAN: Well, with regard to Venezuela, my colleague Tom Shannon gave some remarks recently. We stand ready to look at ways to engage across the board on a number of not only economic issues, but other issues. We have made clear to their leadership that we continue to look for ways for engagement. On the economic side, as you know we have a very important energy relationship with Venezuela. That’s something that we think is important to keep on a steady keel. A lot of our engagement has not been reciprocated, but it’s something that I think as recently as last week my colleague Tom Shannon mentioned the U.S. looks for ways to have a constructive relationship there. With regard to Cuba, I think our focus is what it has always been under this Administration: a peaceful transition to democracy, and the opportunity to the Cuban people to begin a dialogue with their government. I think that it is the focus right now and continues to be the focus – to look towards a way to bring democracy to that island.

QUESTION: In regards to Uruguay-U.S. negotiations – what are some of the objectives for a commercial exchange with Uruguay?

ASSISTANT SECRETARY SULLIVAN: Well again, I think one thing that’s been a very positive element of our engagement with Uruguay was the Bilateral Investment Treaty. That was the first new "model BIT" in the United States – very high level investor protection for both Uruguayan investors in the U.S. and U.S. investors there. We saw that as an important development of our relationship. I believe my colleague Edward Eissenstat from the USTR office has been to Uruguay a few times in the last year; focused on deepening our trade relationship. And I know there have been a number of discussions on ways to build on the bilateral investment treaty, which I think we’ve seen is very successful. I think we also have a trade investment framework agreement with Uruguay which is another way in which to deepen the relationship. And I think there’s a lot of interest in building on what we saw as positive movement, to move forward on the BIT. So, I think there’s a lot of enthusiasm on continuing to deepen our economic relationship with Uruguay and the United States.

Yes.

QUESTION: Business News Americas. What will be the impact of the Uruguay BIT on new investment?

ASSISTANT SECRETARY SULLIVAN: Let me take your first question. With regard to specific sectors, as you know, those are private sector decisions. What’s important about the BIT is that it provides the protections to encourage deeper economic engagement through investment, through trade. The different sectors where that engagement might take place is going to be up to the Uruguayan and U.S. private sector interests, but we think that having the investment treaty is a very important spur to making that happen.

With regard to the question on the climate issues and climate challenges, I already mentioned what we saw as an important initiative in the hemisphere with regard to our hemispheric biofuels initiative in partnership with Brazil. But, more broadly, the U.S. has been very focused on addressing the challenge of climate change. I think that the equation that Kyoto is the only indication to seriously addressing the climate change challenge is something that we absolutely reject.

I have the opportunity this year to be one of the two G8 negotiators for the President. In the run up to the G8 summit last year, you had the launch of an extremely important initiative – an initiative by the President of the U.S. for the 16 major economies in the world to come together to work on making a detailed contribution to the post 2012 framework. It’s critical to have the countries that represent over 80% of total greenhouse gases get together and meet. So this was an initiative that was announced by President Bush before last year’s G8 summit, and adopted by the G8 leaders. The first meeting of the major economies, which include Canada and Brazil, took place in September at the U.S. State Department hosted by Secretary Rice. Since that time, there has been very significant work being undertaken – by many countries and at the highest levels of the U.S. – to not only have a detailed contribution into the UNFCC process on a post 2012 framework, but with regard to the long term global greenhouse gas reduction goal. Under Kyoto, the commitments that China, India and the other developing countries had to take were essentially very, very limited. We think the key to addressing the global climate challenge is to have all the major economies making commitments and that is what the MEM process has been focused on, and it’s something that the Administration at the highest levels is focused on. So that is a significant contribution.

One other contribution is in the area of clean energy technology, which we see as critical to addressing the climate challenge. The Administration has undertaken, I think, more than $12 billion of clean energy technology R&D. There is $38.5 billion in loan guarantees to private sector companies who are focused on clean energy technology goods. And there’s an initiative that is headed up by Secretary Paulson to have a clean energy technology fund at the World Bank that the United States has stated it will contribute $2 billion to. And, we have also tabled with the European Union an important initiative focused on reducing tariffs on clean energy technology goods and services. If you look at global greenhouse clean energy technology trading, goods and services last year was over $450 billion. If you reduce tariffs significantly, you will have significant opportunities, but also progress towards addressing the climate and energy security challenge. So, as you can see from the U.S. perspective, we believe we’re doing quite a lot and there’s more to do and we are going to play an important leadership role in that area.

QUESTION: Reducing the pollutants – what happens if we take down the ceiling? If we have a global warming solution, will it get through the bureaucracy? (inaudible) The way bacteria can heat up oil spills, it might be possible to find a similar solution for global warming such that we can put up there what we want to. How can the bureaucracy change direction?

ASSISTANT SECRETARY SULLIVAN: Well, I think, if I follow your question correctly, I think the preface is: would the ongoing efforts undermine the ability to provide a solution?

My own view is on the clean energy technology front, which is why I mentioned the tariff, it also provides an opportunity for the private sector in the hemisphere to address what I think we recognize as a challenge. Now, most people, the scientists, and I’m not one, who’ve studied this think it’s going to be a long term solution. So the likelihood of something happening quickly with regard to addressing this and reversing it, again, I don’t want to speak because I am not a climate scientist, but, from what I understand, that is not terribly likely. However, it does point to the issue of technological breakthroughs. For example, one that we’ve been very focused on and have had significant government funding for is second generation biofuels – celulostic biofuels where you get ethanol from things like switch grass and not food sources but bark and celulosity. If you have a significant breakthrough in that area, that could have a dramatic impact with regard to different policies. But I think to answer your questions, right now the focus is that this is a long term challenge and we need to undertake policies with all major economies to try and address it. If there was some kind of dramatic breakthrough, I think governments hopefully are nimble and flexible enough to readjust targets and readjust policies to try to take this into account.

I want to thank you. You’ve been very attentive audience, and if you have any other questions, you can feel free to reach out to me or any of my other colleagues. I appreciate your attention.



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