*EPF109 05/07/01
Text: Asst. Sec. Romero Highlights Benefits of Trade in the Americas
(Romero says FTAA will address region's real needs and concerns) (2460)

The Bush Administration believes that free trade creates new jobs, provides more resources to meet social needs, and fosters the sustained growth necessary to confront poverty, says Peter Romero, assistant secretary of state for Western Hemisphere Affairs.

In May 7 remarks to the Council of the Americas at the State Department, Romero said there is a deep commitment on the part of the region's 34 democratic leaders to creating free trade, and also a collective recognition that democracy and prosperity go hand-in-hand.

Romero noted that at the recent Summit of the Americas in Quebec City, hemispheric leaders agreed that negotiations on the proposed Free Trade Area of the Americas (FTAA) should conclude by January 2005, and that the FTAA should enter into force no later than December 2005. The leaders also established specific deadlines for interim steps in the negotiations to achieve this "ambitious" timetable, Romero said.

Romero argued that the FTAA will reflect the "real needs and concerns" of all communities in the Americas.

The assistant secretary called on business leaders in the audience to expand their role in building stronger democracies in the region. Romero said business investments that aim to improve the health, working conditions and skills of workers pay off in increased productivity. Moreover, he added, investing in communities helps build stable societies within which businesses and workers can flourish. The benefits of engagement "are far greater" than the costs, said Romero.

Following is the text of Romero's remarks:

[Note: In the text, "billion" = "1,000 million."]

(begin text)

Remarks to the Council of the Americas
By Peter F. Romero
Assistant Secretary for Western Hemisphere Affairs
U.S. Department of State
Washington, D.C. -- May 7, 2001

This is my fourth time speaking to the Council of the Americas. It has always been a pleasure. But it is special for me today because it will be the last time I will address you as Assistant Secretary. So I ask your indulgence for a valedictory moment! I want to give you an overview of how I see the Americas today, and follow up on the points just made by the Secretary about the achievements of the Quebec Summit of the Americas and about President Bush's goals for U.S. foreign policy toward Latin America.

As the Secretary has noted, this hemisphere is at the center of the President's worldview. His interest reflects the growing interdependence of events in "the neighborhood". From earthquakes in Central America to the fluctuations in Argentina's interest rates, events in the Western Hemisphere have an immediate impact upon both Main Street and Wall Street.

Part of the reason for this interdependence can be seen in the most recent census figures. A large -- and the fastest growing -- segment of the United States' increasingly diverse population has ties to the region. Events in the Caribbean and Latin America are no longer something happening to distant strangers. Increasingly, they are something happening to members of our own extended family.

Those events also have a huge economic impact in the U.S., Mexico and Canada are now our largest trading partners. Our exports to Latin America and the Caribbean exceed our exports to the European Union. An economic slowdown anywhere in our hemisphere has "bottom line" implications for business, workers and consumers everywhere in the U.S.

In a sense, the hemisphere's commitment to negotiate the Free Trade Area of the Americas by 2005 is merely an acknowledgement of the "business facts on the ground," or more appropriately, the "facts on supermarket shelves" from Calgary to Buenos Aires. The economic fates of the Americas are as inextricably linked as are our peoples and our cultures.

To one who has spent the bulk of his adult life working on hemispheric relations, the growth of these linkages is certainly welcome. Equally encouraging is a look at a political map of the region, where one sees a virtually unbroken chain of elected, constitutional democracies.

Although democracy is weaker in some countries than in others, the only real break in this chain is the anomalous dictatorship in Cuba. Fidel Castro's outmoded Marxist state has been able to withstand a variety of challenges during its forty-year existence. I am convinced, however, that democratic and increasingly prosperous neighbors are an inexorable force for change within Cuba which Castro and his successors will not be able to resist.

Of course, the achievement of electoral democracy is not an end in and of itself. With democracy has come a set of heightened expectations for all levels of society that must be met if the democratic gains of the past twenty years are to be safeguarded. Sadly, these hopes have not been totally fulfilled.

The biggest gap between expectations and reality is continuing widespread poverty in Latin America and the Caribbean. More than 150 million people live on two dollars a day or less. The rate of poverty has fluctuated over the last two decades, but tragically it remains roughly the same today as it was in the early 1980's. In most countries the daily lives of average rural families and of the urban poor have changed very little despite a decade of economic growth and democratization.

This stubborn continuation of poverty is exacerbated by a highly unequal distribution of wealth and income, the most skewed among the major regions of the world. At a time when instant communications between the village and the city are increasingly common, the stark contrasts between rich and poor are creating growing political problems.

In many countries, another big gap between expectations and reality is the ineffectiveness and unresponsiveness of government services. People expect democracy to bring good government, in contrast to the corruption, inefficiency and arbitrariness of the past in some of the hemisphere's states. Indeed, the rule of law and respect for citizens' rights are growing throughout Latin America and the Caribbean. Just take a look at Mexico. Courts and police systems are improving; bureaucracies are becoming more efficient; human rights abuses have declined, and women have increasing access to leadership positions. But the rates of change are too slow in many countries. The countries of the hemisphere must work together to assure that democratic institutions win the trust of citizens by providing equity and demonstrating an ability to deliver the services people want. And as the Summit of the Americas amply demonstrates, they are working together as never before to tackle common problems.

The same is true for economic institutions. There have been lots of dramatic economic crises -- averaging about one per quarter it seems during my tenure as Assistant Secretary. And plenty of deep-seated problems that are not as attractive to the headline-writers but just as serious. But I feel that the most important feature of Latin America's economies is the continuity of market reforms. Obviously, there has been some ebb and flow in the pace of reforms, but just as obviously Latin American economies are now essentially market-based and increasingly open.

The opening of Latin America's markets and the expansion of trade are the most dramatic examples of the region's changed economic policies. The average tariff in the region today is somewhere in the low teens -- still high compared to the U.S. average of between two and three percent, but a major improvement when compared to Latin America's average in the 1980's, which was around 35%. This -- combined with continuing economic integration, bilaterally and sub-regionally -- has led to an explosive growth of trade. U.S businesses shipped $76 billion worth of goods to Latin America in 1992; last year we shipped more than twice that amount, over $171 billion.

Better policies and more trade have meant higher growth. During the 1980's, per capita income in Latin America fell by one percent per year. In contrast, during the 1990's per capita income grew by one and a half percent per year. Our goal for this decade must be to raise that growth path -- for example, to the level experienced in the recent past in some of the East Asian countries that doubled per capita income and halved the poverty rate in one generation. It can be done and it must be done! The region is rich in resources and talent. With wise policies, business can flourish there. Chile's achievement of five percent annual per capita growth, during the 1990's shows that Latin America is NOT inherently deficient in the business culture and habits that result in high growth.

Higher growth in Latin America is not just desirable but imperative for consolidating democracy. We need to make real inroads into the widespread poverty that I described above if Latin America is to stay free, stable and open to private entrepreneurship.

To achieve that higher growth and to dramatically reduce poverty, no one has a more important role to play than you, the investor, both foreign and domestic. Virtually all Latin American governments have recognized this, and are implementing economic policies that are now far more investor friendly than in the past. As a result, total capital inflows into the region have increased dramatically since the 1980's. Especially reassuring is the strong increase in foreign direct investment, which amounted to $57 billion last year. This demonstrates that, despite the volatility of portfolio investments, there are many investors willing to make a long-term commitment to Latin America, and to believe in the sustainability of the region's market reforms.

The Quebec Summit gave our leaders the opportunity to review political and economic progress of the hemisphere and to approve a program of action to move the region further forward. As the Secretary noted, the leaders agreed on a strong "democracy clause". They also committed to new or expanded efforts in government transparency, anti-corruption, corporate social responsibility, disaster relief and mitigation, anti-narcotics, and HIV/AIDS. And, of course, the Summit gave new impetus to achieving a Free Trade Area of the Americas.

In Quebec, protestors claimed that freer trade and closer economic integration exacerbate the problems of poverty, and weaken the democratic process. As the Secretary stressed, we could not disagree more strongly. Freer trade is already creating new jobs, providing more resources to meet social needs and fostering the sustained growth necessary to confront poverty. Moreover, in the words of President Bush, "open trade reinforces the habit of liberty that sustains democracy over the long haul."

Despite the noisy street protests against free trade, despite the skepticism of some in the media, and despite a lack of agreement on many specific issues, there is a deep commitment by all 34 democratic leaders to achieving hemispheric free trade. There is also a collective recognition that democracy and prosperity go hand-in-hand.

It's important to note that the Summit agreed to specific dates for concluding the negotiations (by the end of January 2005) and for the FTAA agreement's entry into force (no later than December 2005). The leaders further established specific deadlines for interim steps in the negotiations to enable achievement of this ambitious timetable.

The leaders also agreed to help build public support for the future agreement by publishing the FTAA draft in its current form and soliciting comments on it from any interested parties. Contrary to the demonstrators' claims, this agreement will reflect the real needs and concerns of all communities in the Americas. The negotiators will listen to what they hear from these communities.

The Council has a big role to play in the future of the Americas over the next decade. Corporate responsibility has long been fostered by the Council, and you have been responsible for many positive changes in Latin America.

Indeed, some of your member firms have become models of positive engagement in their communities. Realizing this, in 1999 the Department of State launched the Award for Corporate Excellence to honor exemplary conduct and corporate responsibility by U.S. companies in their overseas operations. Selection criteria for the award include good corporate citizenship, providing a safe and healthy work place, maintaining exemplary employment practices, promoting environmental protection, and contributing to the overall growth and development of the local economy. Companies operating in Latin America have won awards in each of the last two years. The multinational winner in 1999 was Xerox Corporation for its outstanding corporate citizenship, innovation and international: business practices in Brazil. In 2000, the Uruguay subsidiary of Land O'Frost took the honors for small and medium enterprises. The call for 2001 nominations has just gone to our embassies and posts around the world. The program highlights how U.S. companies not only "do well" but also "do good" in our global economy.

In this connection, I want to note that the Summit Action Plan commits our countries to convene a meeting as early as feasible in 2002, with the support of the business community, the OAS, the IDB, and other relevant organizations, "to discuss ways to promote the development, adoption, and implementation of principles of good conduct that will advance corporate social and environmental responsibility." I hope that we can count on your support in this effort.

As shown by the Quebec demonstrations, many throughout the hemisphere still see business -- especially multi-national corporations -- as predators, exploiting their workers and despoiling the environment. But I believe there is growing appreciation An Latin America that U.S. corporations are usually the best employers, the most principled competitors, and major contributors to the modernization of their host societies. Public expectations of business are changing, and we need to increase awareness that many parts of the business community are committed to helping their host countries.

Let me add my voice to Secretary Powell's in urging you, as business leaders of the hemisphere, to strengthen your role in building stronger democracies and widely-shared prosperity in the region. As you understand far better than I do, your investments in improving the health, working conditions and skills of your workers pay off in increased productivity. Similarly, your investments in the community help build more stable societies within which business and workers can flourish. The benefits of such engagement are far greater than their costs.

And over the longer run, your engagement in building better societies in the hemisphere will give lie to the anti-globalization protestors and the anxieties of many of the public.

In closing, I'd like to repeat what President Bush said in his speech in Quebec: "We have a great vision before us: a fully democratic hemisphere, bound together by good will and trade. That is a tall order. It is also the chance of a lifetime. And it is the responsibility we share."

(end text)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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