29 March 2002

State's Larson Outlines U.S. Development Policy

Previews goals for summits on food, development

U.S. goals for the June 10-13 World Food Summit in Rome include making a "serious effort" to devise programs to raise agricultural productivity and help feed the estimated 800 million people in the world who remain poorly nourished, says U.S. Under Secretary of State Alan Larson.

"Our challenge is complex," he said in a March 29 speech to the Industrial College of the Armed Forces in Washington. "We are dealing with the least educated segments of society in rural areas."

The tasks facing aid donors and policy makers include helping countries define property rights, and promoting improvements in infrastructure, electricity and communication systems, Larson said. He also underlined the importance of providing information about science and new technology, "especially agricultural biotechnology -- that can help increase productivity."

Larson acknowledged that biotechnology has provoked "passionate exchanges" in some countries over whether it poses a threat to human health and the environment, but stressed that scientific innovation could be key to improving the lives of people around the world.

"Few technologies -- appropriately tested and safely applied -- have as much potential as biotechnology for reducing the number of hungry and malnourished over the next ten to fifteen years," he said.

"I'm in the group that believes that these technologies are in fact the way to spark a second 'green revolution,' and I think many in the developing world will agree with that," he added.

Larson also offered brief previews of other development-related meetings scheduled for 2002, noting that the June 12-13 Group of 8 (G-8) Summit in Canada would focus on spurring economic growth in Africa.

U.S. officials plan to "strengthen further this results-oriented vision for development poverty reduction at the World Summit on Sustainable Development in Johannesburg" scheduled for August 26-September 4, Larson said. "There we will try to build coalitions -- partnerships -- to balance social and economic growth with environmental stewardship."

Following is the text of Larson's remarks:

(Note: In the text "trillion" equals 1,000,000 million and "billion" equals 1,000 million.)

U.S. Department Of State
Washington, D.C.

Building Strength and Security Through International Economic Policy

Alan P. Larson
Under Secretary for Economic, Business, and Agricultural Affairs

Industrial College of the Armed Forces
Washington, D.C.

March 29, 2002

Thank very much, Ben, for that kind introduction.

I appreciate this great turnout -- even if attendance is mandatory.

I want to talk today about how we build national strength and national security through sound international economic policy.

My boss -- with whom some of you have a passing acquaintance -- sees the State Department as the "first line of offense" for promoting American interests overseas and for advocating on behalf of the American people.

That's truer today than it ever has been. The people with whom I've been privileged to work the last thirty years -- the people who staff over 200 posts around the world -- are like you. They have always recognized that serving their country is a privilege and, at the same time, entails some risk.

They do this best by advancing values which define America. Values like democracy and free markets.

And by moving forward with policies that:

• Combat terrorist financing;

• Aid in the reconstruction of countries like Afghanistan;

• Create a dynamic trade regime; and

• Promote deregulation, protect intellectual property, and devise policies that stimulate rather than constrain investment.

All of this in the cause of advancing the economic interests of American companies, workers, farmers, and consumers.

A strong, growing, and innovation-driven economy is the foundation of America's national security. By promoting free trade, addressing global financial crises, and fostering global growth, we help our economy grow and prosper.

You will certainly be aware of the President's commitment in the recently announced budget supplemental to have the best equipment, the best training, and an additional pay raise for those we put in harm's way.

The money to meet this important commitment comes from a strong and resilient economy. Even after the slowdown of last year and the shock of September 11, the economy has remained resilient.

And with an innovation-driven economy, we are developing many of the high-tech capabilities that give us an edge in our defense efforts and save lives on the battlefield.

A lot of people are concerned about protecting and controlling access to these new technologies. In attempting to do this, however, we need to take care so that we do not suppress the creativity and capacity to generate newer and even more superior products and services. Excessive concern with controlling yesterday's technologies can deprive our companies of the revenues and market leadership necessary to develop the civilian and military technologies of tomorrow.

As we seek to enhance the economic security of our nation, we need to draw key countries into rules-based economic and social systems that promote opportunity and jobs and give hope for the future. While I've never believed that countries with McDonald's restaurants never go to war with one another, it is true that countries that have a stake in a rules-based world are more likely to seek a peaceful rather than a military resolution of their differences.

China and Russia -- to mention a couple of countries that provide a home for our most well-known fast-food franchise -- have changed dramatically in the past decade. China will be further transformed by its accession to the World Trade Organization, and I look forward to Russia's eventual accession.

I am not under the illusions that these will be an easy transformation. But I do believe that new habits of economic and business cooperation will tend to bring new habits of cooperation in other areas as well. We've already made a pretty good start in relationship building in talks that the President has had with Presidents Jiang Zemin and Vladmir Putin and in the willingness of both of these countries to be active partners in the war against terrorism.

The South Asia subcontinent is a particular challenge. We are fortunate to have in Pakistan a leader who is dedicated to a modern -- and moderate -- Islamic state. The Administration is committed to finding ways to promote trade and provide debt relief to Pakistan to recognize the commitment it is making in the war against terrorism.

As for India, we are working to strengthen our cooperation with the world's largest economy. I would much rather see it exchange goods and services with its neighbors than engage in military skirmishes across the Indo-Pak border or in Kashmir.

The key to our economic security and prosperity is a strong economic partnership with our allies and close friends in the hemisphere. We seek to promote stronger growth and resolve trade tensions. Some of our disputes with the EU and Japan -- over agricultural subsidies and biotechnology, for example -- are of long standing; others, like differences over the President's steel decision, are of more recent vintage. With Japan, in particular, we need to find a way to help revive an economy that has been flat -- or worse -- for the past decade.

Security begins in our own neighborhood. The President's recent trip to Mexico, El Salvador, and Peru demonstrated yet again the Administration's commitment to reducing poverty, eliminating illegal trafficking in drugs, and creating secure borders.

We've gone a long way in the past decade in this direction. With NAFTA, we've created an integrated North American market that provides a model for a broader Free Trade of the Americas. Our success with NAFTA translates into our ability to develop an even stronger partnership with our Canadian and Mexican friends, one in which we can build up smart border management and infrastructure systems to facilitate the secure flow of people and goods so vital to our national well-being. Specifically on Mexico, Presidents Bush and Fox are dedicated to a Partnership for Prosperity which will promote investment in poorer regions of Mexico, equalizing opportunities among regions.

Today, one of our foremost tasks is to find innovative ways to bridge the gap between the small percentage of those who live in relative wealth and prosperity and the overwhelming number of those who do not. Protecting our own national security also demands that we find ways to provide economic opportunity for those who have little or none.

As the President affirmed in Monterrey last Friday, economic development lifts people out of poverty. It expands personal freedom, supports rule of law, changes country's behavior inside its own borders, and receptivity of ideas.

The international coalition the Administration so successfully built to help fight the war against terrorism will be complemented by an international coalition to fight for economic growth. We have a strong national security interest in a strong development assistance policy.

As the President said, "poverty doesn't cause terrorism. Being poor doesn't make you a murderer.... Yet persistent poverty and oppression can lead to hopelessness and despair. And when governments fail to meet the most basic needs of their people, these failed states can become havens for terror."

It is time, as the President said, for us to close the divide between wealth and poverty, opportunity and misery. It is time for governments to make the right choices for their own people. President Vicente Fox of Mexico had it right in Monterrey: it is time for us -- developing and developed nations -- to embrace a new vision for the common future of humanity, to work together to tackle our differences and build productive and mutually beneficial partnerships

And frankly those who pursue sound economic policies will attract more resources. They will build the institutions of freedom and not subsidize the failures of the past.

We will not -- we can not -- provide assistance to countries that do not accept the challenge to enact sound policies, build sound institutions, and unleash the entrepreneurial spirit in their societies. But within limits, we will certainly respond to humanitarian disasters -- in fact, we were the largest contributor of food aid to the Taliban during that regime's brutal existence because of the immense suffering of the Afghan people. And we have been generous as well to North Korea, another failed society, in its time of human need.

As you know, prior to the Monterrey meeting, President Bush announced in his speech on March 14 at the Inter-American Development Bank that he planned to establish a new Compact for Development. He reiterated the call in Mexico for developing and developed countries to come together in this compact to free people around the world from the prison of poverty.

The President believes that America must lead by example. So, as America's contribution to the compact, he plans to seek Congress' support for a Millennium Challenge Account to be funded at a level of $5 billion annually by FY '06 over and above our current development assistance programs. This 50 percent increase would be the largest jump in recent memory.

With this compact, our intent is simple -- we will link greater contributions by developed nations to greater responsibility by developing nations.

Traditional development assistance or ODA is just part of this compact -- a key part, but just a part. After all, the combined value of development resources from domestic savings (now almost $2 trillion a year), FDI (now $180-$200 billion a year), and trade (the U.S. imports $450 billion a year in goods alone from developing countries) dwarfs the $50 billion that finds its way into ODA channels each year.

Developing countries are mindful of this change in the composition of resources. As UN Secretary General Kofi Annan has said, developing countries know that the way out of the poverty trap is "to embrace the market, ensure economic stability, collect taxes in a transparent and countable way, uphold the rule of law and protect property rights."

Let me just note that as part of our ambitious results-oriented agenda, we also are working on key economic issues at a number of other meetings this year.

First, at the World Food Summit in June. There, we will make a serious effort to come up with programs that will raise agricultural productivity and reduce poverty -- programs that will feed the 800 million people in the world who remain poorly nourished and whose lives, as a result, are cut short.

Our challenge is complex. We are dealing with the least educated segments of society in rural areas. Our task: help better define property rights; create conditions for improvements in infrastructure, electricity, and communications; and provide information about science and new technology -- especially agricultural biotechnology -- that can help increase productivity.

I understand that a number of you were recently at the State Department for briefings on biotech and agricultural products. Few technologies -- appropriately tested and safely applied -- have as much potential as biotechnology for reducing the number of hungry and malnourished over the next ten to fifteen years. Few technologies generate such passionate exchanges in some countries over whether their use poses a threat to human health and the environment.

I'm in the group that believes that these technologies are in fact the way to spark a second "green revolution," and I think many in the developing world will agree with that.

A few weeks after the World Food Summit, at the G-8 Summit in Canada, we will address global economic growth and try to develop an Action Plan on Africa.

On the first issue -- global economic growth -- we will again focus on concrete ways to restore growth to industrial countries and accelerate economic development in lower-income countries.

On Africa, we will highlight the need to boost African agricultural productivity and capacity building. Africa has been a particular priority for this Administration, which has expanded trade there through the African Growth Opportunity Act, or AGOA. We will also push for wider access to high-quality basic education and encourage African engagement with the Global Fund for Infectious Diseases to ensure its success and effectiveness in Africa. If HIV/AIDS, malaria, and tuberculosis continue to take their terrible toll, no amount of development will reduce human suffering in that part of the world.

And then in August and September, we will strengthen further this results-oriented vision for development poverty reduction at the World Summit on Sustainable Development in Johannesburg. There we will try to build coalitions -- partnerships -- to balance social and economic growth with environmental stewardship.

Maybe the biggest weapons in our economic arsenal -- and the group most responsible for ensuring our economic security -- are American companies.

It is easy to be a booster for U.S. companies at any time, but even more so now after having watched the critical role they played in restoring confidence at home and abroad by "getting back to business" after the tragic events of September 11.

It is the private sector that provides the capital to fuel economic development and help create the conditions that improve the quality of life. In the process, American companies have become the models of good governance for many foreign businesses that want to succeed in the global marketplace as well as in their own local marketplaces.

Of course, the first responsibility of any corporate executive is to the shareholder -- if you're not increasing shareholder value, you're going to quickly become an ex-CEO. You can't be a philanthropist first and a businessperson second. You need to focus on the bottom line.

American companies vote with their dollars by investing where there are fair regulatory systems, transparency, and rule of law. You've all heard the line about capital being a coward -- and there are good reasons why that's so.

American companies also recognize that to be successful, they have to do more than simply sell a product. They have to become a part of the community as well.

I am particularly pleased that our companies have this kind of commitment. The Department provides annual awards for good corporate leadership and involvement in local communities to leading companies. This past year, awards went to Ford Motor Company in South Africa for its HIV/AIDS program and to a small solar energy company in Ho Chi Minh City which is bringing low cost solar electricity to the countryside -- and we all know from America's own experience what rural electrification means for farming, small business, communication, and education. In past years, awards have gone to corporations that have expanded educational opportunities, established programs for the homeless, organized disaster relief, and improved the environment. Private sector, profit-driven firms have clearly demonstrated that they can lead the way in building good governance environments and promoting community welfare.

Governments have a role in assisting business -- cheerleading, advocating -- and we do a pretty good job of that. Most government agencies that work with companies, large and small, have advocacy arms to help out with exports.

At State, the Secretary reminds Ambassadors in his letter of instruction and private meetings before they take up their post overseas that one of their main tasks is to assist American business. We work hard -- at State, at Commerce and elsewhere -- to ensure that American companies are judged fairly -- on the economic, not the political merits of their tender of goods and services -- in the competition with companies from other countries. And where there are problems, we work closely with the company to help redress their grievances.

In closing, I don't think I can do much better than the President. He stated in his March 14 speech that "as the civilized world mobilizes against the forces of terror, we must also embrace the forces of good. By offering hope where there is none, by relieving suffering and hunger where there is too much, we will make the world not only safer, but better." And in Monterrey, he called upon us to "draw whole nations into an expanding circle of opportunity and enterprise," to become true partners in development and add a hopeful new chapter to the history of our times.

I truly believe that the marketplace, our results-oriented development strategy, and the extraordinary role that American companies play in creating a global economy will contribute to a better and more secure world.

Thank you very much.

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