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Prospects for Global and Regional Integration in the Maghreb

Daniel S. Sullivan, Assistant Secretary for Economic, Energy, and Business Affairs
C. Fred Bergsten, Director of the Peterson Institute for International Economics
Remarks at the Peterson Institute for International Economics
Washington, DC
May 29, 2008

Thank you, Fred. John thanks. I want to make sure if there is any kind of initiative coming out of the State Department we might just maybe refer to that as a Veroneau initiative, but it depends on how well you continue to do your excellent work at USTR. I want to particularly thank Ambassador Eizenstat for inviting me to be here. I consider him a friend, advisor, clearly one of the Washington, DC wise men, and this is another example of that. So, I want to thank you. 

 Also, for what I am about to say, if it goes off well, I’ll give all the credit to Professor Hufbauer, who interested me in all these topics when I was a young grad student at Georgetown; when I took his Trade Policy and Process seminar. I’d like to say everything I learned about trade since then, again, if it comes out well, it’s due to Professor Hufbauer. Thank you again, Sir. 

 And the Peterson Institute, Dr. Bergsten, it’s great to be here. Very often we consider what comes out of this Institute required reading in my Bureau. And we look forward to more outstanding analysis and reports in these areas. 

 What I wanted to do before talking about North Africa in particular was to take a step back and talk briefly, and highlight the record of this administration over a broader area of international economics, development and trade, because I think that it’s critical when we look at the global issues, how that plays into regional areas such as North Africa, but it’s important from our perspective to have a sense of that background. So, what I wanted to do is just briefly highlight some elements of what we think has been an extremely strong record in the international economic and development area, and then touch on some elements particularly with regard to North Africa.

Early on in the administration the President set out his ideas, policies, the intellectual basis of our international economic and development policy, and the national security strategic document of 2002, which set out in one chapter to ignite a new era of global economic growth through free markets and free trade, and to expand the circle of development by opening societies and building the infrastructure of democracy.

And I think what we have seen over the course of the last 7 years, is that we’ve worked to steadily implement these broader strategic visions by focusing in three areas. One is revolutionizing our approach to development assistance. The other is through opening markets both bilaterally, regionally and globally, and leveling the playing field for U.S. workers, farmers and businesses. And the third area is setting the conditions for strong global historic, really in many ways, historic global economic growth. I just want to touch on these three, because I think they are quite important.

With regard to revolutionizing development assistance, in 2002, the Monterey Summit world leaders got together and decided to put together a new compact, with regard to development assistance, whereby developed countries would dramatically increase their assistance, and have developing countries implementing more responsible policy approaches to economic policy. In that we believe, we have been doing that. Since 2002 we have undergone the largest increase in development assistance that any administration has undertaken since the Marshall plan.

So, the last year in 2000, our ODA average about $10 billion, between 2001 and 2006 average about $22 billion, so, a dramatic, dramatic increase. You see it in a number of different areas with regard to just official development assistance, with regard to infectious diseases, under the President’s PEPFAR initiative. The United States has done more in terms of the $15 billion, 5 year initiative, now requested, $30 billion for the next 5 years, more than the rest of the world combined on these issues. ODA, we talk about the food crisis, again, we’ve traditionally provided over a half of all global food aid, so we think it’s a strong record in this regard.

On the other side of that, though, you also have the initiatives that focus on the responsible policies of developing countries, who receiving this assistance and, that is really exemplified in our Millennium Challenge Account initiative, and Millennium Challenge Corporation, of which is focusing on compacts and partnership with our developing countries, who received this development assistance, focused on countries that rule justly, invest in people and promote economic freedom. So, we think this is a very strong story in this area.

Obviously, in the area where the Institute here is focused, we also, in the second area that I mentioned, a very strong record with regard to opening markets, and a lot of times this is viewed just in terms of free trade, free trade agreements, which we think we have a strong record on. There were two U.S. free trade agreements in 2001 covering three countries. Today, we have completed negotiations with 11 additional FTAs, covering 17 additional countries. Now, we need to get the final ones over the goal line. I know many here have been focused on that, but it’s a very strong area of achievement with regard to FTAs, but it goes way beyond that, playing a critical role in launching the Doha Development Round, critical at working with Congress on all our trade preference programs, whether it’s GSP, AGOA. As John mentioned, we have negotiated more than 20 Trade in Investment Framework Agreements, and expanded out network of Bilateral Investment Treaties. An area that is near and dear to my heart, because my Bureau negotiates these; we have concluded almost 40 Open Skies agreements since 2001, liberalizing services in terms of air travel. And so we think this is a strong record, important, again institutes like the Peterson Institute had been critical in terms on getting the word out on this.

And finally the third area, I just wanted to mention, with regard to global economic growth. Now again, it’s obvious that the United States, domestically is currently experiencing some domestic challenges with regard to our economic growth, but the growth that has occurred globally over the last six, seven years has many ways been historic. We often hear about China and India growing at 9%, but this global economic growth has been very broad, very deep and very sustained throughout the globe. I think from 2003 to 2006 global GDP expanded by almost 5 %, and we think that one of the results of this, in our economy, up until this year has been growing at a steady clip of about approximately a little bit less than 3%, which has been critical to this growth given that we are about, depending on how you measure  it, 25% of global GDP, but we think one of the outcomes of this is going to be extremely important is that you are going to see in the first decade, we hope, of this century significant declines in poverty that have been generated by this very strong global economic growth. So, this is a strong record, we think it matters for a number of core reasons. One of which is the obvious one that global economic growth reducing poverty abroad is core American goals we have had for decades, but also really, this idea of what many have called the post 9-11 paradigm, which is this idea that Secretary Rice mentioned it in a speech not too long ago where she said: “Half the human race still remains on the margins of the global economy living on less than $2 a day, and for a long time we did not see in this tragic situation an urgent national security challenge, but we do now. If we look at where the greatest threats have emerged over the past two decades that the many countries that we and our allies are working to stabilize they all share one thing in common, often times they are poorly governed states, and one of the key things is they have yet to integrate into the global economy and realize its promise.” And so, from the broader prospective, the reason I wanted to lay out that background is because, we think with regard to, not only economic growth and poverty reduction, but also security, the importance of integrating countries into the global economy to take advantage of the global economy, and what opportunities exist with regard to integration, with regard to openness are critical, also with regard to national security issues.

So, I lay that out because I think that this record, the Maghreb region has benefited from this overall record, I think. One good example is Morocco, where we have a strong free trade agreement. I looked at the numbers this morning: 2004 – 2007 bilateral trade has almost increased to almost 100% from a billion dollars to $1.9 billon. We have an Open Skies agreement and we have a very, very robust MCC program of almost $700 hundred million, so that record fits in to what we are doing in the region, but what I wanted to do now is kind of talk in terms of the region more broadly in some of the initiatives we are undertaking.

As everybody here knows the U.S. has a long history of relations with North Africa. We signed our first treaties of friendship on trade and commercial issues with Morocco and Algeria, during the early days of our independence, and so we remain committed to strengthening our relations with like-minded partners in that North African region, and supporting the reform both economic and political, and opportunities that that brings.

There have obviously been some very positive aspects of these reforms. Some of the reforms undertaken by the Maghreb countries over the past two decades have resulted in improved macro economic conditions, and an accelerating rate of GDP growth. Again, the number I looked at this morning for the region: over the course of the last 2 years is about 5% GDP growth, according to the IMF. And yet, everybody knows here that the region is facing challenges, significant challenges. Whether posed by demographic pressures, human development, poverty rates, global competition, and also, the concern of growing extremism in some areas of North Africa. So, one of the things that we’ve been doing is focusing on exactly what Ambassador Eizenstat and the Peterson Institute have focused on. One of my colleagues, the principal deputy in my bureau, Elizabeth Dibble led a broad interagency delegation to North Africa last year to focus in a number of countries meeting with the leadership, meeting with all the ministers on a number of these economic reforms whether in terms of investment climate, IPR issues, banking sectors reform. Again, it was a very broad interagency group that was there to primarily focus on the economic reform issues.

One of the key things that came out of this trip that I know is of concern to many here is that the intra-regional trade still remains low. As a matter fact, one of the lowest measures of intra-regional trade in the world, 1.2 %, according to the World Bank last year, and from our prospective this is not sustainable, with regard to the reality of a region that has to create about 20 to 25 million new jobs by 2020 to keep up with its population growth. So, one of the things that I know Ambassador Eizenstat has been focused on is how key regional generation is, and we fully agree with that and we fully support that.

We are trying to actually move forward with that key aspect of regional integration through two administration initiatives that I wanted to briefly highlight here. The first one is the President’s Middle East partnership initiative, MEPI as its known, and the second, that I’ll briefly touch on, that John has already mentioned is the Middle East Free Trade area that the president announced in 2003. So, MEPI has different pillars, but there’s an economic pillar with regard to MEPI that’s focused on encouraging and mobilizing investment, entrepreneurship, enhancement in trade, and transparency issues, that again relate to competitiveness and entrepreneurship growth. We think that this program has been working. It has had some challenges. A few examples of some of the successes under MEPI, there have been a focus on financial sector reform. This is particularly taking place with regard to what’s happened in Morocco; the Financial Services Volunteer Corp in collaboration with MEPI; supported a successful conversion of Morocco’s central bank into a fully independent private regulatory institution, and we think that that is one indication of progress on this. There has also been a focus on trade reform. There has been a 3-year program that has helped 160 companies export over $75 million in goods and services, again this is in Morocco. And so, we think that that helps compliment and integrate with both the FTA that we have, and the MCC program, and the Open Skies program, which we think it is an important element of the economic engagement to be able to integrate our efforts in a coordinated fashion.

As John mentioned, you have the MEFTA, which as he mentioned, we’ve made some progress, we would like to make more progress on that. Those of you who are familiar with that, it’s often talked about in terms of the goal by 2013 that the President laid out of a Middle East Free Trade Area, which is not only bilaterals with the United States, but also regional with regard to integrating the different FTAs within the region, which, again, goes to the goal of regional integration. But the MEFTA initiative is also very much based on graduated steps for economic integration and reform. So for those countries covered by the MEFTA area, who are not WTO members that has a focus on WTO accession, it has a focus on, as I mentioned, trade preference programs, GSP programs, TIFAs, BITs, and to build up towhat we think ultimately is the ultimate goal of economic integration, economic engagement, which is the Free Trade Areas.

The final piece that I just want to touch on today, which I know this conference will help spur, is the strengthening of engagement with North Africa between our private sectors. And we think that that’s in some ways really the most important element of what we are trying to do from a policy standpoint is to increase the opportunities that U.S. and other private sector companies have with regard to engagement in the region. We know that conferences such as this are critical, in that regard, to highlight the opportunities for that kind of increased private sector engagement, and therefore; we think that the studies presented here, the debates, the discussions are critical and we want to thank you again for doing this, and look forward to seeing the results from today’s conference. Thank you very much.

DIRECTOR BERGSTEN: Dan’s time is tight too, but he’s agreed to take a couple of questions from the floor. So, the floor is open if anyone would like to pursue any of the themes that he mentioned. Dan let me just ask you, as others think about it.

QUESTION: As you think about the path to MEFTA, as you were describing as John mentioned too, could you explicitly imagine a Free Trade Agreement between the United States and the Maghreb countries as a way station to the broader outcome that the President set out as the goal for 2013?

ASSISTANT SECRETARY SULLIVAN: The way the MEFTA has initially been envisioned is the way the President in his speech in 2003 when he laid out this vision talked about it, as I mentioned, it got the incremental approach, which we think is an important element. It’s got kind of the hub and spoke idea, where were working with the U.S., with regard to bilateral FTAs. And then it also has the element of tying those different FTAs together, so there is integration among the different countries in the region. So, with regard to a sub-regional approach, to be honest, as we look, there are obviously other examples of that. We’ve had sub-regional approaches, for example, with regard to CAFTA, and we think that’s been quite successful, not only with regard to deepening our relationship with South Central America, but looking at ways to deepen the Central American integration. So, Fred to answer your question more directly, clearly it’s not something that is on the plate of the administration right now, but it is also something that I don’t think should be ruled out, because it focuses on what really was the over-arching goal of the president initiative to deepen our bilateral economic engagement with the region, but to also deepen the regional intra-trade relationship. And, as I mentioned in my remarks, that’s an area that we think needs very, very significant improvement with regard to increasing the economic opportunity in the region.

DIRECTOR BERGSTEN: I just asked that because it struck me that it would be a logical stepping stone toward your broader outcome. I think one thing is to distinguish the MEFTA approach and the administrations approach to some other regions like South East Asia, has been flexibility. Countries that need to get a WTO first, you pursue that; countries that need TIFAs, you do that, but if there is a sub-set that will be ready to move ahead, and that is what we are trying to stimulate with this project here, it seemed to me, it would be not only constant with your approach, but in fact, give your approach a positive spur that would be perfectly fitting and keeping with your objectives.

ASSISTANT SECRETARY SULLIVAN: Well, as I mention one of the things that’s clearly articulated in the MEFTA is not only this idea of the bilateral between the U.S. and the region, but the knitting together between the different countries, which as I mentioned here we think is important.

Released on June 16, 2008

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