U.S. DEPARTMENT OF STATE
95/05/22 REMARKS: AMB. WATSON ON TRADE/PRIORITIES IN THE AMERICAS
BUREAU OF INTER-AMERICAN AFFAIRS
Remarks by Alexander F. Watson
Assistant Secretary of State for Inter-American Affairs
to Council of the Americas
Washington - May 22, 1995
First, let me congratulate you on this, your twenty-fifth annual Washington Conference. This conference has always provided a thoughtful and informed audience with which to review our policies. As Secretary Christopher noted, your theme -- Staying the Course -- is particularly apt this year.
This is the first meeting since last December's historic Summit of the Americas -- to which you made very important contributions through your trade report and in helping to define its agenda. So, I'd like to use this opportunity to review some aspects of the record since Miami. Some might argue that an evaluation of the Summit only six months after its conclusion is premature. But we are moving very rapidly in many areas. In fact, Secretary Christopher will chair a meeting of foreign ministers June 4 on the margins of the General Assembly of the Organization of American States in Port-Au-Prince to examine our progress in some detail.
Last December in Miami, our leaders articulated and consolidated the convergence of values which has been emerging over the past decade, and defined a course of action not only for the United States but for all the countries of the hemisphere, excepting only Cuba. That is the course we must stay.
The 23 initiatives agreed to in the Miami Plan of Action comprise a comprehensive and mutually reinforcing agenda to achieve the goals which the hemisphere now shares. To promote prosperity, for example, we agreed to work toward free trade, but also to strengthen capital markets, improve the hemisphere's infrastructure, and improve cooperation in energy, science, and tourism. And the Summit recognized that prosperity cannot be achieved without parallel action to strengthen democratic institutions, improve education and health, and conserve our natural environment for future generations.
The Challenges of 1995
As Secretary Christopher observed, we have heard some voices lately asserting that the Summit was the high point of convergence and progress and that events since December demonstrate the hemisphere is on a downhill slide. These views arise from a fundamental misunderstanding of the Summit, and of what is actually happening in the hemisphere.
The Summit was conceived to celebrate the hemisphere's consensus on values -- certainly. But as important, it was designed to chart the course for dealing with the issues which we recognized we must address. Far from declaring that all problems were resolved, the Summit identified them clearly and projected how we should deal with them.
The Mexican financial crisis and the shock it sent through financial markets are indeed a setback. The resultant tariff increases by Argentina, Brazil and Mexico are indeed disruptive. The border war between Peru and Ecuador was frightening to all who want to see military solutions to political problems put forever in our past. But we should note that the Summit identified capital markets, trade liberalization and regional security as challenges for the hemisphere.
The paramount lesson of these events is that we are in much better shape to deal with such crises than we would have been without NAFTA and without the Summit. The peso crisis did not weaken the Zedillo Administration's commitment to reform; indeed, the government recognized that restoring investor confidence requires not only a continuation but a deepening and quickening of reforms. In acknowledgement of the disciplines of the NAFTA and the central free trade dynamic of the Summit, Mexico did not restrict financial flows or increase trade barriers against the U.S. and Canada, as had been the case in 1982.
The multilateral support for Mexico's recovery led by President Clinton; the creative package of financing extended by the international financial institutions to Argentina; the assurances from Mexico, Argentina and Brazil that their trade actions are temporary and will not jeopardize the momentum toward hemispheric free trade; the united hemispheric effort to separate Ecuadoran and Peruvian forces and thereafter to work at resolving the underlying issues; the unprecedented unity of the hemisphere in supporting democracy in Haiti -- these are dramatic examples of new attitudes and stronger cooperation: what we call the Spirit of Miami.
Forging a Free Trade Area
The Council of the Americas has been a leader in the quest for free trade in our hemisphere. The agreement to complete negotiations on the Free Trade Area of the Americas by 2005 is perhaps the boldest commitment of the Summit. Ambassador Barshefsky will discuss how we are doing on this commitment in greater detail this afternoon, but I do want to make a few points.
Whereas Latin America and the Caribbean used to be convenient sources of raw materials for a giant U.S. domestic economy, today the hemisphere has become more broadly crucial to our global competitiveness. NAFTA, the successful conclusion of the Uruguay Round, and the Summit signalled our determination to assert leadership on behalf of open trading regimes that will serve as major components of the competitive world economy of the twenty-first century.
By any standard, Latin America and the Caribbean are increasingly important participants in the world economy. With a population approaching half-a-billion, a growing and sophisticated entrepreneurial class oriented towards international markets, and relatively high standards of living by developing country standards, our neighbors have captured the interest of investors world-wide.
I am confident everyone here understands the importance to the United States of the developments I have described. However, some less informed are asking: "With all the demands at home and elsewhere in the world, what's so important about Latin America and the Caribbean? What's in it for us?"
Let's start with a few numbers:
-- Latin America and the Caribbean purchased $92 billion of U.S. goods last year. It is the fastest growing region for U.S. exports and current projections indicate that our exports to our neighbors will surpass those to Europe in a decade.
-- Even so-called "small" countries are important for U.S. trade. We sell more to Chile (14 million people) than to India (920 million). We sell about as much to Costa Rica (3 million) as we do to all Eastern Europe (100 million).
-- Latin American countries tend to import more from the U.S. than other regions. (For example, China buys about 10% of its imports from the U.S.; Latin America buys more than 40%.) So, increasing our neighbors' capacity to import is very important for the U.S. -- for U.S. business, for U.S. jobs.
In addition to trade, our neighbors have a major impact on our ability to deal successfully with issues of vital national concern, such as: migration, drugs, law enforcement, and the environment. So, there is no doubt about the importance of our neighbors to our own welfare. To advance these interests, the only practical approach is cooperative engagement with the countries of the hemisphere. And the Summit of the Americas provides the necessary framework for this cooperation.
But, back to trade. The commitment to free trade was a centerpiece of the Summit and it is very high on our Summit follow-up agenda. As the Secretary noted, we are energetically preparing for the Trade Ministerial and the Trade and Commerce Forum in Denver next month.
At the same time that we move forward internationally, we are also moving domestically. The Administration is working with Congress to develop an appropriate mechanism -- the "fast-track" -- to implement further trade agreements. At hearings last week before a joint session of the House Ways and Means and Rules Committees, Ambassador Kantor testified that timely passage of fast-track is a crucial element in the expansion of NAFTA to include Chile, and other countries thereafter.
Timely action on this legislation is very important. Economic integration among other countries of the hemisphere is moving ahead quickly, and the Europeans and Asians are knocking at the door. This is healthy. We want Latin America and the Caribbean to integrate and to participate more fully in the global economy. But, if we leave the Latin American playing field to others, we will lose major economic opportunities, including investment, trade, jobs, and ultimately growth. The game is on, and we can compete very effectively. If we don't play, however, we lose.
I also want to emphasize the Administration's strong support for enhancement of trade benefits for the Caribbean Basin Initiative countries. Last week Charlene Barshefsky and I testified before the Senate Finance Committee in support of the bill introduced by Senator Graham to provide NAFTA parity to Caribbean Basin Initiative countries, a companion bill to the one introduced by Representatives Crane and Gibbons in the House. We fully agree with these bills' intent that the CBI countries -- so important to the U.S. -- should not be disadvantaged in their access to the U.S. market as a result of NAFTA. We are working closely with the Committees, and are confident that the Congress will move quickly to pass good legislation to address this important problem. The Broad Context of U.S. Trade Policy
I understand, of course, that the members of the Council of the Americas are primarily interested in U.S. trade and investment policy in the hemisphere. However, neither we in the Administration nor you in the business community can afford the luxury of focusing too narrowly on those issues. The Summit of the Americas defined a comprehensive agenda and plan of action on a broad spectrum of issues that will contribute to achieving free trade and economic growth.
Democracy, for example, is critical to a prosperous and stable hemisphere. Because of their fundamental legitimacy, democracies are more likely to achieve domestic consensus for implementing far-reaching policies. They make more reliable partners not only in diplomacy, but also in trade.
The Summit high-lighted the importance of effective, honest, transparent government to the success of democracy and economic integration. The rule of law and a judicial system which is efficient, impartial, transparent and fair, for instance, are important not only to a country's citizens but also to the foreign investors which work within that country's legal framework. The same can be said for tax systems and regulatory procedures.
The Summit's emphasis on social equity and the eradication of poverty makes sense not only in terms of our national ideals of compassion and our interest in political stability, but also because growing economies need healthy, educated and committed workers and consumers. Similarly, a modern state cannot ignore environmental issues. Countries must carefully husband their resources for maximum benefit not only for today but for tomorrow, not only for the elite but for all their citizens so that development truly improves peoples' lives and economic growth is sustainable over time. The broad scope of the Summit agenda thus provides a concrete and realistic framework for long-term growth and for the sustained expansion of hemispheric trade. The Importance of Aid
In this context, I want to emphasize the crucial importance of a well- targeted foreign assistance program.
U.S. direct assistance to Latin America and the Caribbean has been dramatically reduced in the past several years. Much of the slack has been taken up by more efficient, growing economies, increased trade opportunities with the United States and elsewhere, and increased lending by the international financial institutions. Nevertheless, carefully targeted U.S. aid programs remain critical to strengthening democracy, modernizing judicial and other institutions, increasing economic integration and addressing destabilizing social inequities. And these, in turn, are important for managing effectively problems of law enforcement and migration within the hemisphere. As I have noted before, sound political and social conditions are indispensable to a positive long-term trade and investment climate, and to vibrant economic growth.
Let me cite a couple of examples. The peace process in El Salvador -- whose economy is booming, by the way -- has been a widely acclaimed success story. Continued funding is required to consolidate and institutionalize the peace. To have fought over this issue, both at home and abroad, for so many years and now not fund the peace adequately would be a serious failure of leadership.
Equally compelling is the need for continued assistance to Haiti. The restoration of democracy in that impoverished country was a dramatic success for the hemisphere. Some caution is warranted, but democratic institutions are taking root and the economy is beginning to recover. For Haiti to continue to move forward, we must continue to invest significant resources, resources which leverage greater sums from the international community.
We must also adequately support cooperative efforts to combat the drug trade which causes so much damage to free market economies and democratic institutions throughout the hemisphere. This should include both bilateral and multilateral support for viable economic alternatives to drug production, as well as strengthening judicial and law enforcement institutions. We all must support vigorously efforts to stop drug trafficking and money laundering.
Let me take a moment to emphasize how important it is to maintain our financial support of the multilateral development banks. Both the World Bank and the Inter-American Development Bank are deeply involved in our most important efforts in the region, mobilizing resources from other donors and the private sector which are far beyond our bilateral capability. They are working on alternative development, strengthening democracy, improving governance, protecting the environment, enhancing market liberalization and privatization, and promoting the private sector, all of which are key tenets of our policy. The IDB and, very importantly the OAS, have seized energetically their important responsibilities for implementing substantial portions of the Summit agenda.
In order to achieve the objectives defined at the Summit of the Americas, we need to explain more clearly to the American people just how important is our stake in a stable, prosperous and democratic hemisphere. In this effort, the support of the Council has proven invaluable in the past. Once again, we call on you to help define and defend a dynamic, constructive relationship with Latin America and the Caribbean. We are partners with you in the Council in the pursuit of U.S. foreign policy goals -- goals increasingly shared by our neighbors. Working together, we can achieve our ambitious agenda for the good of the people of the United States, and of the hemisphere as a whole.
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