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Deepening U.S. Economic Engagement with Latin America

Daniel S. Sullivan, Assistant Secretary for Economic, Energy and Business Affairs
Remarks to the International Economic Forum of the Americas
Montreal, Canada
June 11, 2008

Thank you, Sean, for that kind introduction and thank you to the conference sponsors and participants, and the City of Montreal for having made this such a wonderful event. It is an honor and a privilege to be here today.

First, I wanted to talk briefly about the U.S. economy. Ladies and gentlemen, while the long-term fundamentals of the United States economy remain solid, we face challenges in the near term. Real GDP growth in the first quarter was 0.9% at an annual rate and is expected to remain slow in the second quarter.

Fortunately, the Bush Administration and the Federal Reserve anticipated this slowdown in economic growth and have taken proactive steps to keep the United States’ economy strong. The Economic Stimulus Act passed into law in February will put over $150 billion back in the hands of America’s workers and business this year. That is about 1% of our GDP. The Administration also has undertaken a variety of initiatives to shore up the housing sector.

I know that our concerns about the U.S. economy are shared by many observers around the world, including in our own Hemisphere. The potential consequences, especially, for at-risk populations bear close watching.

This afternoon, however, I want to focus on the positive story over the last eight years–the continued broadening and deepening of the United State’s economic relationship with Latin America and the world–and the need to continue to work to enhance those links to ensure that our economies continue to prosper.

I want to talk specifically about our economic engagement with Latin America and put that engagement in the context of the Bush Administration’s broader economic development and trade initiatives. We believe we have an extremely strong record in these areas, although it is not an element of the Bush Administration’s foreign policy record that gets much attention from the media.

In 2002, the President laid out the intellectual framework for our international economic and development policy in the U.S. National Security Strategy. A key element of this strategy was 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.”

Over the last seven years, we have worked steadily to implement this vision using a variety of tools. We refer to this as our Total Economic Engagement, or TEE strategy, using in a coordinated manner all elements of our economic policy and development tools to foster economic growth with key countries and regions of the world. This strategy has had a positive impact in many areas of the world. I want to highlight three broad initiatives of our TEE strategy that have had a positive impact in our Hemisphere.

First, we have revolutionized our approach to development assistance. In 2002 world leaders gathered at Monterrey, Mexico and agreed to significantly increase development assistance, while developing countries would focus on implementing more responsible economic policies.

To implement this “new compact” for development, the Bush Administration–with bipartisan support in Congress–has dramatically increased U.S. official development assistance (ODA). In fact, the Bush Administration has launched the largest ODA increase since the Marshall Plan, and we met our Monterrey Commitment to increase ODA by 50% three years early.

The numbers speak for themselves. In the last year of the Clinton Administration, U.S. ODA averaged about $10 billion. Between 2001 and 2006, it has averaged about $22 billion. This historic increase has manifested itself in different ways. For example, the Bush Administration has quadrupled our development assistance to sub-Saharan Africa.

U.S. funding to combat HIV/AIDS under the President’s PEPFAR initiative will exceed $18 billion over the initiative’s first five years. This amount is as much as the rest of the world’s governments combined. And for the next five years, the President has requested an additional $30 billion. Already, PEPFAR is saving lives and bringing hope to millions afflicted with HIV/AIDS.

We also have launched a five-year, $1.2 billion program to combat malaria and we continue to provide more than half of all global food aid.

Under our Millennium Challenge Corporation (MCC) initiative, we have further implemented the Monterrey Consensus by working in partnership with recipient governments to establish assistance compacts that focus on their key priorities. At the same time, the MCC supports only governments that rule justly, invest in people, and promote economic freedom. In this way, we have generated an “MCC effect” that spurs MCC and even non-MCC recipients to undertake responsible and effective economic policies.

This record of revolutionizing development assistance has been a key part of our engagement with Latin America. For example, with strong bipartisan support, U.S. foreign assistance to the region has nearly doubled since the start of this Administration from $862 million in fiscal 2001 to over $1.5 billion in fiscal 2008.

The United States has committed nearly $1 billion in aid to El Salvador, Honduras, Nicaragua, Paraguay, Guyana and Peru’s MCC Compacts and threshold programs. This MCC engagement focuses on working with these countries to eliminate corruption, promote transparency, improve health care and education, and build infrastructure to connect people, businessmen and farmers to national and international markets.

A second element of this strategy that I would like to highlight is debt relief. The Bush Administration has provided strong global leadership on debt relief by supporting two major initiatives -- the Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI)–that are expected to provide over $110 billion in debt relief over time to 33 heavily-indebted poor countries.

Latin America has been an important part of this debt relief strategy. Since the beginning of the Bush Administration, we have led efforts through international financial institutions to provide more than $17 billion in debt relief to the poorest countries in the region.

A third element of our TEE strategy that I would like to highlight has been to open markets–bilaterally, regionally and globally. The President’s intense focus on promoting open markets and free trade has taken many forms.

For example, in 2002, the Administration was able to secure Trade Promotion Authority that allows for Congress to consider trade legislation under streamlined procedures. We also played a leading role in launching the Doha Development Round in 2001, and remain committed from the President on down to an ambitious conclusion to the Doha Round by year’s end. In fact, just yesterday this was a significant topic of discussion at the U.S.-EU Summit.

Working with Congress, we also have successfully achieved reauthorization and extension of our trade preference programs, including the Generalized System of Preferences and the Africa Growth and Opportunity Act. In addition, we have liberalized civil aviation by concluding Open Skies agreements with almost 40 countries, including the European Union and all its member states.

And, of course, we have vigorously pursued bilateral and regional free trade agreements. When President Bush took office, the United States was party to two free trade agreements (FTAs) covering three countries. Today, we have completed negotiations on 11 additional FTAs, covering an additional 17 countries.

Perhaps more than any other region of the world, Latin America has been a key focus of this concerted U.S. effort to promote open markets and free trade. Since 2001, the Administration has concluded free trade agreements with 10 Latin American countries.[1]

Free trade agreements (FTAs) with Costa Rica and Peru are awaiting entry into force, and two others, Colombia and Panama are awaiting congressional approval. Once implemented, these agreements will complete an unbroken chain of trading partners stretching from Canada to Chile.

At the same time the Administration has worked successfully to reauthorize regional trade preference programs such as the Andean Trade Preference Act and the Caribbean Basin Economic Recovery Act. These programs have provided open markets to our friends in the region and helped sustain their economic growth.

We also have concluded Open Skies agreements within Latin America with Uruguay, Paraguay and Chile, and liberalized civil aviation agreements with Colombia and Argentina.

We believe this strategy of promoting open markets and free trade has clearly been “win-win.” Trade with United States over the past decade has accounted for over 45% of Latin America’s world trade. Total merchandise trade–exports plus imports–has constituted on average over the last decade some 45% of Latin America’s GDP.

The U.S.-Chile FTA, which was implemented in January 2004, is an example of how bilateral free trade agreements can benefit the citizens of both countries. I recently had the opportunity to celebrate the 5th anniversary of the signing of the U.S.-Chile FTA at the Chilean Embassy in Washington with Chile’s Foreign Minister Foxley and U.S. Trade Representative Sue Schwab present.

The U.S. International Trade Commission had forecast total export growth of 18-to-25% over the first 12 years of the agreement’s implementation. Yet bilateral trade has grown from nearly $6 billion in 2003 to $16 billion in 2007, representing a remarkable boost of 160% in four years. Chilean exports to the United States increased nearly 130% from 2003 to 2007. Meanwhile, U.S. exports to Chile have increased approximately 210% during the first four years of the FTA. This is an example of how free trade has helped my country to continue growing during challenging economic times. One of the key bright spots in the U.S. economic performance recently has been exports.

In the three years from the end of 2003 to the end of 2006, real U.S. exports grew at an annual average rate of 8.3%, more than twice as fast as the overall U.S. economy. In 2007, exports accounted for more than 40% of real GDP growth in the United States, reaching a record of approximately $1.6 trillion in goods and services exports.

Despite such successes, free trade is facing significant opposition in some quarters in the United States. Economic populists–sometimes fueled by legitimate concerns about economic insecurity–have tended to blame free trade for a number of ills. When allowed to vote their conscience, lawmakers in the House of Representatives approved the U.S.-Peru FTA with an overwhelming bipartisan majority. Since then, progress on the other pending FTAs has stalled. Unfortunately, the leadership of the U.S. House of Representatives has taken the unprecedented decision to suspend expedited procedures for bringing the Colombia FTA to an up-or-down vote. It is not clear when or if the Congress will act, but the Administration, from the President on down, is committed to working with the Congress to ensure that the Colombia FTA and other pending FTAs get a vote this year.

The 8,000 U.S. small and medium-sized enterprises that trade with Colombia are among those paying the price for inaction. Since the Colombia FTA was signed in November 2006, more than a billion dollars worth of tariffs have been assessed on U.S. exports to Colombia.

As President Bush has said, “If you're worried about the economy, it seems like you ought to be sending a clear signal that the United States of America will continue to trade, not shut down trade.”

The brave people of Colombia–one of America’s closest allies in South America–also deserve a vote.

It is in the interest of both the United States and the rest of the Hemisphere to continue the significant record of achievement and momentum on opening markets. The Bush Administration believes more can and should be done to help satisfy the revolution in expectations that we are witnessing in Latin America. The future prosperity of our economies depends on trading more not less, and deepening economic integration rather than capitulating to isolationist impulses.

As Secretary Rice said in an important speech before the OAS in October 2007, “ultimately…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.”

I believe there are four main areas where the economies of the region, particularly those with whom the United States already has free trade agreements, can strengthen cooperation.

First, we should look at ways of ensuring that the benefits of trade liberalization are broadly shared throughout our societies. This could entail using international development assistance to empower small businesses and farmers, and excluded groups, to benefit from trade opportunities.

Second, we should look for ways to further reduce barriers to trade, increase competitiveness and deepen connections between national and regional markets. This could include eliminating the most burdensome administrative barriers hindering effective regional trade in industrial goods, agriculture and services.

Third, we should look at ways to improve labor and environmental standards and enforcement. This could involve exchanging best practices and more effectively monitoring the effectiveness of trade capacity building.

Fourth, we should look at ways of deepening regional cooperation on economic development initiatives. This could be achieved by working with like-minded countries dedicated to democracy and free trade to address common global and regional challenges and shape common positions in international forums, including the WTO.

I urge those gathered here today to consider how the ideas I have outlined could be most effectively operationalized. Ladies and gentleman, there is a certain conventional wisdom in some sectors that after 9/11 the United States did not focus on Latin America in the way it should. But conventional wisdom in the media does not always reflect the facts.

The record on the international economic and development front is strong. And this is only one element of the Bush Administration’s overall Latin America engagement. For example, we have clearly strengthened and deepened bilateral relationships with Brazil and Mexico in a number of areas. Of course, more can and should be done, but the trajectory has clearly been positive.

A more prosperous Hemisphere is an ideal and vision that we remain committed to today–as much as we were seven years ago. We should all work together to make this vision a reality. That is why, once again, I want to thank the sponsors and participants and the City of Montreal for this wonderful conference.



[1] Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic, Chile, Peru, Panama and Colombia .



Released on July 1, 2008

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