TRADE, DEVELOPMENT AND SOCIAL PROGRESS
Prepared for Delivery

Ambassador Charlene Barshefsky
U.S. Trade Representative
June 16, 2000

Thank you very much. Let me thank the Center for International Private Enterprise for bringing us together, and welcome all of you to Washington.

Over the past two days, the Center has offered you an ambitious and comprehensive set of briefings, covering the full range of issues facing women entering business and international trade. This afternoon, I would like to speak more generally -- about the principles underlying American trade policy and the World Trade Organization; the initiatives we have underway at home; and our work to make the trading system more inclusive, more open to smaller and newer businesses, and more effective in promoting economic development.

USTR and U.S. Trade Policy

Let me begin, though, with my job and its responsibilities.

As U.S. Trade Representative, I am the President's principal trade negotiator and policy advisor. My agency is one of the smallest in the American government, with 178 professional staff and a budget of $24 million. With this we cover nearly $2.5 trillion in American trade; we monitor and enforce a network of agreements that has grown by nearly 300 since 1992; and we work with your governments to develop the agenda of the future. To look at it very briefly:

• At the World Trade Organization, we are working toward a new Round of global trade negotiations; monitoring and enforcing the implementation of its 20 multilateral agreements; litigating numerous dispute settlement cases; and negotiating on the entry of 30 prospective new WTO members.
  
  
• We have regional trade initiatives underway in each part of the world: in the Western Hemisphere, talks aimed at creating a Free Trade Area of the Americas; in Asia, the Asia-Pacific Economic Cooperation forum, or APEC; regional integration in the Middle East; the President's initiative on trade and investment in Africa; the Transatlantic Economic partnership in Europe.
  
  
• We are working with each of our major trade partners: towards market-opening and deregulation in Japan; in ensuring implementation of a network of trade agreements worldwide that has grown by nearly 300 since 1992; and in devoting special attention to developing the high-tech infrastructure for trade in the next century.

This is a busy and complex agenda. But all of our work rests on a simple foundation: the commitment to open markets, freer trade, and the rule of law in world commerce Americans made under Franklin Roosevelt, and which we have maintained ever since.

Hoover and Roosevelt

Our ideas are based in part on economic logic applicable throughout the world: exports allow us to serve larger markets and are generally associated with higher-paying jobs; and imports increase competition and economic efficiency, dampen inflation and raise the standard of living, especially for the poorest families. But we base policy not only on theory but on practical experience with the alternative.

Today, as it happens, is an important anniversary in American trade policy -- although it is not one we often commemorate, because it is so embarrassing. That is, seventy years ago today was President Herbert Hoover's signature of the Smoot-Hawley Act, which was the largest single restriction on trade in American history.

President Hoover's trade policy had rested on the belief that Americans could not compete effectively with developing countries. As Hoover put it, we "cannot successfully compete against foreign producers because of lower foreign wages and a lower cost of production." These are natural, understandable fears -- present in our trade debates today as well as seventy years ago. In contrast to the present era, however, Hoover persuaded Congress that he was correct. The result remains well-known today: a cycle of tariff hikes and retaliation which cut trade by 70% between 1930 and 1933, deepened the Depression, and intensified the political tensions of the era.

After this experience, Franklin Roosevelt proposed the alternative we have followed ever since. As he put it in 1944:

"A basic essential to peace, permanent peace, is a decent standard of living for all individual men and women and children in all nations. Freedom from fear is eternally linked with freedom from want. [And] it has been shown time and time again that if the standard of living in any country goes up, so does its purchasing power -- and that such a rise encourages a better standard of living in neighboring countries with whom it trades."

Since the Second World War, and together with our trading partners, we have turned this insight into lasting institutions and policies. The work has continued for more than fifty years; and it has brought enormous benefits:

• Growth and Rising Living Standards: The opening of world markets has helped to spark what is in effect a fifty-year boom, in which trade has expanded fifteen-fold since the 1950s, world economic production grown six-fold and per capita income nearly tripled. And the result has been historically unprecedented social progress: since the 1950s, world life expectancy has grownby twenty years, infant mortality dropped by two-thirds, and famine receded from all but the most remote or misgoverned corners of the world.
  
  
• Economic Security: In the Asian financial crisis of 1997-99, with 40% of the world in recession, the respect WTO members had for their commitments kept open the markets necessary for affected nations to recover. Thus the system of mutual benefit and rule of law represented by the WTO helped prevent a cycle of protection and retaliation like that of the 1930s; and ultimately to avert the political strife that can erupt in economic crisis.
  
  
• Peace and Stability: The GATT and now WTO have helped us address some of the most profound political challenges as well. It helped to reintegrate Germany and Japan in the 1950s, and the nations emerging from colonial rule in the 1960s and 1970s. And it has now taken up a task of equal gravity, as after the Cold War, nearly 30 nations breaking with communist planning systems seek WTO membership to reform their economies and integrate with the world.

The Question of Development

This is a remarkable record. The participants in it, from every continent and every region of the world, can look back on it with some justified pride.

But we must also admit that the world today remains marked by areas in which negotiations to date have fallen short; by new challenges arising from the end of the Cold War and the revolution in science and technology; by inequities we can all recognize; and thus by opportunities that remain untapped.

Central to each of these challenges are the questions of development: Why, in a world more prosperous and dynamic than ever before, are nearly a billion people trapped in absolute poverty?

Will new technologies heal or widen this divide? And what role can trade policy play in addressing these challenges?

These questions demands answers for practical reasons -- as stagnating development in any country can bring political tension, and in light of our moral responsibility in the face of suffering and deprivation beyond our borders. The Center for International Private Enterprise itself is an expression of this moral commitment; and trade policy must also respond to it.

The Place of Trade Policy in Development

We must begin by recognizing that trade policy can never be enough. Ultimately, countries largely control their own destinies. Trade policy, while it can create new opportunities, can never substitute for effective domestic policy or for financial stability; to believe otherwise is to court disillusion. Rather, development comes from the union of several different fields:

• Appropriate domestic policies: the rule of law and a stable, democratic political system; a market-based economy; health and social safety net policies; financial stability; perhaps above all, education and the development of skills for workers.
  
  
• The right balance of international assistance and financial policies: including recognition of the fact that for the least developed countries, the financial burden posed by debt has made growth very difficult. President Clinton has thus challenged our Congress and the world to forgive 100% of this debt when relief will help finance basic human needs.
  
  
• And together with these, a trading system that gives developing nations, in particular the least developed, greater access to world markets and more ability to defend their rights and interests; and which does more to ease the unique difficulties newer and smaller firms encounter in the world market.

To the latter challenge, we bring our own experience and principles, and we have sought advice and ideas from our friends overseas. We can always learn more, and I hope you will give me some of your thoughts later today. But we can begin with two major goals: a more fully open world market; and a trading system which is more transparent and easier to use.

A More Open Trading System

The first point is more open markets.

1. Benefits of Open Economies

Part of the responsibility for this lies with developing country governments. Experience shows that the most open economies grow fastest, create new and innovative businesses most efficiently, and reduce poverty most effectively.

This is clear not only in American history but worldwide experience. As Southeast Asia, Central Europe and Latin America opened to the world, they grew more rapidly; reduced poverty; and built more stable, peaceful regions. By contrast, South Asia, the Middle East and Africa, where trade barriers remain highest, have reduced poverty more slowly and seen political tensions persist. There is simply no substitute for membership in the WTO; commercially meaningful commitments to reduce tariffs and other barriers to goods and services; participation in the WTO's most modern agreements on information technology, telecommunications and financial services; and the development of regional integration initiatives like the ASEAN Free Trade Area, the Free Trade Area of the Americas, and Africa's three regional trade groups.

2. U.S. Programs

At the same time, however, when countries do the right thing, the world must do more than stand by and applaud.

We offer a generally open market, as we see in more than $500 billion worth of goods and services imports from developing countries last year, and perhaps $600 billion this year. We have also, however, recognized that we can do better. Thus, we have developed a series of programs which offer special market access privileges to developing countries:

• The Generalized System of Preferences, or GSP, which offers duty-free treatment to about two-thirds of all goods from developing countries, and which I have recently expanded by over 1,700 tariff lines for the least developed countries.
  
  
• The Caribbean Basin Initiative, which over the years has helped Central America and the Caribbean to diversify their economies away from primary commodities into computers, apparel, semiconductors and other goods, making the region more stable and less vulnerable to swings in commodity prices; and which just last month we significantly expanded.
  
  
• The African Growth and Opportunity Act, which is a central element of the President's initiative on African policy, creating substantial new opportunities for African entrepreneurs, including guarantees of quota-free and in most cases duty-free treatment for textiles and apparel.
  
  
• Regional integration in the Middle East, through a pilot program in support of the peace process, offering duty-free privileges to several joint Israeli-Jordanian industrial projects, and we hope in future to projects involving Palestinians and Egyptians as well. We have also recently announced our plan for a full Free Trade Agreement with Jordan.
  
  
• And we are consulting with Congress on the Southeast Europe Trade Preference Act, offering duty-free treatment to a number of goods from the countries most deeply affected by the recent conflicts in the Balkans.

3. WTO Negotiations

Our hope is that others will take similar steps. The European Union, Japan and Canada have expressed interest in the concept, and we believe the more advanced developing countries should consider it as well. And at the same time, we are working toward opportunities on a broader scale at the WTO.

This begins with the negotiations the WTO opened last February, on agriculture and services. In these, to choose just one example, we hope to see the elimination of export subsidies in agriculture. This is one of the most disruptive practices in trade today, as it not only makes it difficult for developing country farmers to compete on the international market but domestically as well. The rewards of success may be substantial and immediate: according to the UN's Food and Agricultural Organization, when the European Union cut export subsidies on beef sales to West Africa six years ago, the result was an immediate and substantial increase in beef production across some of the world's poorest countries - Mali, Niger, Burkina Faso and others.

We also can do more in other areas, such as manufacturing. We are therefore working to build consensus for a new, more broadly based Round that would include such issues, and have made some progress over the past months.

A Trading System Easier to Use

Second, open markets mean little in practice without the ability to reach them. This presents us with two separate challenges: first, ensuring that the least developed countries can take full advantage of a trading system that is more complicated than ever before; and second, making sure the WTO and its agreements give businesses like those many of you operate - new ventures and small family firms - the same opportunities they create for larger firms.

1. Technical Assistance and Capacity-Building

To take the first point, some of the WTO's agreements -- on intellectual property, services, sanitary and phytosanitary standards, or dispute settlement -- demand considerable expertise from participating governments. We are therefore committed to a program of increased technical assistance and capacity-building to build understanding of the agreements; help governments comply with them; and equally help countries assert their rights and interests in negotiations.

This is especially important for the least-developed countries, which come to the WTO with less experience and resources. Last year we joined Bangladesh, Lesotho, Nigeria, Senegal and Zambia, as well as Bangladesh, in a proposal to improve the WTO's current program, known as the Integrated Framework, in these areas.

More broadly, we have already begun a series of workshops and sessions in several different regions of the world -- on our own, and together with colleagues from the Agency for International Development, the Federal Communications Commission, the Department of Agriculture and elsewhere -- to offer advice and assistance on the WTO, as well as on our own market access programs. This will help to make sure that governments, businesses and academics are familiar with and can take advantage of all the options the WTO offers.

2. Electronic Commerce and Trade Facilitation

At the same time, we believe that new information technologies, together with practical trade facilitation measures, can offer a fundamentally better world for smaller and newer businesses.

One of the most profound and exciting trends today is the development of the Internet and a worldwide telecommunications network. Internet access requires little capital, helps entrepreneurs find customers and suppliers quickly, and eases technical and paperwork burdens that can slow participation in trade. Thus electronic commerce is ideally suited for developing countries. We are working to ensure access to these technologies through programs like the Leland Initiative in Africa and the Internet for Economic Development program, which help developing countries gain information technology skills and ease access to the Internet.

At the same time, we are capitalizing on these new opportunities through a greater focus on trade facilitation. Here the work is very practical: in the Free Trade Area of the Americas talks, we have a hemispheric agreement to post all visa and customs requirements on the Internet, and are also implementing streamlined customs procedures for express shipments and commercial samples. Similar initiatives are underway in APEC. And at the WTO, we can build on this work to reach worldwide commitments that make it easier for you to find customers, deal with paperwork and customs regulations, and thus win the benefits trade can provide.

Conclusion

Altogether, what we hope to create is a system that does more to support long-term growth and export opportunities for developing countries -- which is easier for governments to use and takes account of the special problems of smaller businesses and new entrepreneurs -- broadly speaking, which gives people a broad sense that the world economy offers opportunity to anyone who is willing to work.

The challenge is complex, and we do not pretend to have all the answers. But we are very confident that we are on the right course: in our own open market policies at home; in the work we have done, in partnership with 135 other WTO members, to build a trading system of shared responsibility and shared benefit; in welcoming every country to its rightful place in this system.

These are the historic commitments of American trade policy. That is the record which we and our trading partners have built together in fifty years of progress toward freedom, prosperity, the rule of law and strengthening peace. It must be our record in the decades to come.

Thank you very much, and let me now take your questions.