*EPF517 05/23/2003
Text: Trade is Key to Growth, Sustained Development, USAID Official Says
(Agency implementing capacity-building programs in Peru, hemisphere) (2010)

Because trade spurs economic growth needed for sustained development, the U.S. Agency for International Development (USAID) is implementing comprehensive capacity-building programs in the Western Hemisphere to ensure that the benefits of globalization are enjoyed by all, says Adolfo Franco, USAID's assistant administrator for Latin America and the Caribbean at the agency.

In May 23 remarks before the National Convention of the Association of Peruvian Institutions in the U.S. and Canada, Franco outlined the importance and benefits of trade, as well as USAID's efforts to build the capacity of hemispheric nations to reap these benefits.

"Simply stated, trade and investment play a primary role in economic growth, and faster economic growth is essential to achieving the international development goal of reducing -- by one half -- the proportion of people living on one dollar a day by 2015," Franco said.

However, he warned his audience that ignorance of the benefits of trade could undermine support for continued economic liberalization in Latin America. To counter such a development, Franco explained, President Bush has stated the United States intends to "make sure the benefits of globalization are felt in even the smallest economies."

To meet this objective, he said, USAID is implementing a comprehensive trade capacity-building strategy in the Americas that will enhance nations' abilities to participate in trade negotiations, implement trade accords and take full advantage of expanding trade opportunities by strengthening productive sectors.

Moreover, to support this effort, USAID funding for trade-related assistance in the region more than doubled to $44.2 million in 2002, Franco noted.

Emphasizing that Peru stands to gain a great deal from USAID's efforts, Franco indicated that USAID's office in Peru recently established an initiative entitled "Creating Conditions for Economic Revitalization," or "CRECER" in Spanish. CRECER is a five-year, $18.5-million program that will support necessary reforms, increased productivity of Peruvian enterprises and increased competitiveness of the nation's businesses.

Among other USAID efforts that will affect Peru, Franco cited USAID Peru's implementation of the Andean Regional Trade Capacity Building program. This program will spend $2.5 million to help Andean nations comply with World Trade Organization standards in a number of areas.

Franco concluded by stressing that USAID's efforts in Peru and elsewhere in Latin America are "vital to ensuring the kind of sustained economic growth and economic interdependence that enhances the standards of living in both the U.S. and in all the countries of our hemisphere."

Following is the text of Franco's remarks, as prepared for delivery:

(begin text)

"Ties that Bind Communities: USAID Trade Capacity-Building Initiatives in Peru"

Adolfo Franco,
Assistant Administrator for Latin America and the Caribbean
U.S. Agency for International Development

Remarks Prepared for Presentation at the National Convention of the Association of Peruvian Institutions in the U.S. and Canada

May 23, 2003

Good morning, ladies and gentlemen. First, I want to add my greetings to those of my colleagues and welcome all of you to USAID. I am delighted to have the opportunity to share some thoughts with you on USAID's efforts to build trade capacity in the Latin American and Caribbean regions for which I am responsible as Assistant Administrator here at USAID. Groups like yours are important in building the ties which bring countries together.

At USAID we are also focusing on building ties; building economic integration ties among the 34 countries that will comprise the $12 trillion market and 800 million consumers of the Free Trade Area of the Americas (FTAA). FTAA promises to yield significant developmental benefits and is currently on track to be established by early 2005. President Bush, Secretary Powell, and USAID Administrator Andrew Natsios have all said trade is key to the economic growth that spurs sustained development, and the President has made conclusion of an FTAA agreement one of his top priorities for our region. On May 10, the President affirmed his commitment to free trade when he met with the presidents of the five Central American countries that are negotiating with the U.S. to establish a U.S.-Central American Free Trade Area, or CAFTA. Later, I will tell you about USAID's role in providing trade capacity-building assistance to complement the trade negotiating process.

As the President has said, in today's global economy and competitive marketplace, the message of free trade and its potential benefits for developing countries cannot be oversold. East Asia and Chile provide clear-cut and convincing examples of economic growth and reductions in poverty led by trade liberalization and economic reform. In the ten years since the North American Free Trade Agreement's (NAFTA's) implementation, free trade's win-win aspects have been demonstrated by stunning business growth and job-creation on both sides of the U.S.-Mexico border. Analysis by David Dollar and Arit Kray at the World Bank published in March 2000 has provided compelling evidence of the close links between increased trade competitiveness and poverty-reducing economic growth. Simply stated, trade and investment play a primary role in economic growth, and faster economic growth is essential to achieving the international development goal of reducing -- by one half -- the proportion of people living on $1 a day by 2015.

Risk

The benefits of free trade, however, continue to be neither fully understood nor appreciated by many in the region. In the wake of Argentina's difficulties and with the region's generally poor economic performance in recent years, there is a risk that ignorance of the benefits of free trade in the LAC countries could further undermine the strong political support the movement enjoys among the region's leaders.

Response

President Bush stated at the Quebec Summit of the Americas that the United States intends to "make sure the benefits of globalization are felt in even the smallest economies." This was echoed in the President's major address on development at the Inter-American Development Bank, and shortly thereafter in Monterrey, Mexico. Further, as U.S. Trade Representative Robert Zoellick recently noted: "It is a priority of this Administration to help developing nations build capacity -- by training cadres of trade negotiators, assisting with the implementation of technical agreements, and by linking trade and development planning."

To meet these objectives, USAID is implementing a comprehensive trade capacity-building strategy. Assistance directly addresses the needs expressed by developing countries and includes:

1. Participation in Trade Negotiations -- Government decision makers, in consultation with the private sector and civil society, need to understand fully the context and process of international trade negotiations. USAID is helping countries to understand the process, to analyze its impact on their economies, and to build domestic support for negotiating positions and the international commitments that result.

2. Implementation of Trade Agreements -- Strengthened human and institutional capacity are required to implement commitments made in the course of multilateral, regional, and bilateral trade negotiations. Generally, implementing trade agreements involves reform and upgrading of regulatory standards and practices across various trade disciplines such as customs, intellectual property rights, and sanitary and phytosanitary measures, to cite just three examples.

3. Economic Responsiveness to Opportunities for Trade -- In order for developing countries to transition to free trade, they need to learn how to take full advantage of expanding trade opportunities by strengthening the capacity of productive sectors and private businesses, particularly small- and medium-sized firms, to compete in local, regional, and international markets.

In response to this new strategy, USAID support for trade-related assistance in the LAC region doubled from fiscal year 2001 to 2002, from $18.8 million to $44.2 million. I am also happy to report that a growing number of USAID operating units -- in the Caribbean, in Central America, and in South America -- are continuing to expand their support for trade capacity-building.

Although I am directly responsible for USAID's programs in Latin America and the Caribbean, USAID is conducting trade capacity-building activities of the type I have described in other parts of the world, as well. In order to publicize all of the things the Agency is doing in this area, USAID recently released a publication entitled "Building Trade Capacity in the Developing World." I believe all of you have received copies of this important document. I encourage you to take some time to read about our important activities in this area.

Peru

Now, I know all of you are asking, "What does this mean for Peru?" The answer: a great deal, as Peru stands to benefit from free trade as much or more than any country in the region.

In spite of the fact that Peru's 2002 growth rate was 4.9 percent, one of the highest in the LAC region, long-standing structural obstacles to development persist in the country. These include unequal income distribution and endemic poverty (54 percent live below the poverty line); inadequate social service delivery, especially in rural areas (25 percent of children under 5 are malnourished, and 25 percent of rural women are illiterate); and environmental degradation. With 300,000 plus new entrants in the job market each year, GDP must grow by about 6-7 percent per year just to absorb the newcomers, let alone deal with the 60 percent of the existing workforce that is now underemployed or unemployed.

In this context, the expansion of domestic and external trade and investment must be key elements of an economic growth model that will create new and better opportunities for Peru's poor, and will create licit alternatives to coca production. The passage of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) recognizes the need to promote export diversification and broad-based economic development, and the FTAA will complement and expand the opportunities afforded under the ATPDEA.

USAID Peru recently established the new "Creating Conditions for Economic Revitalization" activity ("CRECER"). This five-year activity, funded at $18.5 million, will provide technical assistance to support economic policy, regulatory, and institutional reforms; support the efforts of Peruvian reformers, and provide other trade capacity-building support to increase the productivity of Peruvian enterprises, attract domestic and foreign trade and investment, and increase the competitiveness of Peruvian businesses. CRECER will address the structural, systemic constraints that inhibit trade and investment and result in high transaction costs and inefficiencies in the private sector. The key to the achieving these objectives will be the commitment of the Government of Peru to market-oriented reform. For example, USAID is working with the Government of Peru on the issue of intellectual property rights. A lack of prosecution and deterrent sentences has drawn significant criticism from industry organizations such as the International Intellectual Property Alliance (IIPA).

In addition to CRECER, USAID/Peru is implementing the Andean Regional Trade Capacity Building Program in close collaboration with the General Secretariat for the Andean Community (CAN) General Secretariat. This program, initially established and funded for a two-year period (FY 02 and FY 03), will spend $2.5 million to help the Andean Community countries to accelerate implementation of trade policy reforms in WTO sanitary and phytosanitary measures, WTO customs valuation, and competition policy. The program will promote reform through regional-level technical assistance. Both the CRECER activity and the Andean Regional TCB activity have components to help publicize the benefits of free trade and the FTAA. USAID/Peru also is implementing a $2.5 million program to help Andean artisans upgrade the quality of their handicrafts and increase artisan access to and participation in the high value handicraft gift markets in the U.S., Europe, and other high-income markets.

As I have said, organizations such as yours can play a vital role in fostering debate, building consensus, and promoting dialogue and discussion about the benefits of trade. In Peru and elsewhere, USAID is helping the countries of our region increase their capacity to trade. This is vital to ensuring the kind of sustained economic growth and economic interdependence that enhances standards of living both in the U.S. and in all the countries of our hemisphere.

(end text)

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

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