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U.S. Department of State

Diplomacy in Action

U.S. Economic Policy in Central America and the Caribbean


Remarks
Krishna R. Urs
Deputy Assistant Secretary for Transportation, Bureau of Economic and Business Affairs
Caribbean-Central American Action
New Orleans, LA
November 29, 2012

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Introduction

Good morning. Thank you, Ms. Yearwood for that kind introduction. I am delighted to be here in New Orleans today and am looking forward to participating in the rest of the conference. This morning, I’ll talk a bit about the State Department’s economic agenda broadly and also about how specifically we’re working to strengthen our economic and commercial relationships in the Western Hemisphere to spur growth in the United States and overseas.

In order to address the opportunities and challenges of a rapidly globalizing economy, Secretary of State Hillary Clinton launched what she has called her economic statecraft agenda. You might ask what does that mean? It’s an acknowledgment that there are no sharp boundaries between our more traditional role in the political spheres of diplomacy and our economic influence. Now this isn’t brand new. We’ve always known economic policy has significant political and strategic implications – think of the Marshall Plan. Economic Policy is a currency of influence in the international arena, and economic power is a critical bargaining chip for all countries. While the idea isn’t new, it is newly urgent given the economic challenges currently facing us at home and abroad. Economic statecraft is a recognition that in an increasingly interconnected world, we must move economic tools to the center of our diplomacy abroad and also use our diplomatic power abroad to reinforce our economic position at home.

Instead of giving you a long list of all the great cooperation and projects we have with partners throughout the region, let me frame my remarks by defining three overarching goals for U.S. economic policy in the region. First, we want to foster socially inclusive economic growth. This means helping individual economies grow and contribute to the international system and also working to ensure citizens from all walks of life, both men and women, can participate meaningfully in and benefit from those economies. Supporting strong, open economies creates more opportunities for U.S. businesses by fostering stability, strong intellectual property protection and enforcement to promote innovation and economic growth, as well as developing more customers and investors. And we are taking concrete steps to ensure that both men and women are equally able to benefit from the economic growth in the region.

Second, we seek to further regional integration. Our economies and our hemisphere will be more competitive when we break down barriers to doing business amongst ourselves and think together about how we can keep pace with the global economy.

Finally, we want to continue to achieve a level playing field for U.S. companies. We believe a fair and transparent, rules-based international economic system best promotes continued growth for all.

Socially Inclusive Economic Growth

How do we keep the economies of our hemisphere growing in a way that meaningfully includes all citizens and brings them into the international economic arena as good trading and investment partners?

One way we have engaged on these issues in the Western Hemisphere is through a partnership called Pathways to Prosperity in the Americas. Through Pathways, the United States and partners around the region, including from Central America and the Caribbean, share experiences and discuss how to spread best practices in the region, focusing on: small business support, trade facilitation, workforce development, and environmentally sustainable practices.

One of the United States’ priorities under Pathways has been to advocate that one of the most effective ways to accelerate a nation’s economic productivity and prosperity is to facilitate women’s inclusion. This theme has since been reflected in our work through the Hemisphere. At the Summit of the Americas in April 2012, the President announced and the Secretary launched the Women’s Entpreneurship in the Americas (WEAmericas) initiative, which takes concrete steps to address three barriers women entrepreneurs face when starting and growing their own businesses: 1. Access to training and networks; 2. Access to markets; and 3. Access to Finance.

Through Pathways and through WEAmericas, we have partnered with WEConnect, a corporate-led non-profit organization, to provide training, certify small businesses as high-quality and women-owned, and facilitate introductions with interested buyers. Through our WEAmericas activities, we have already hosted two separate capacity building programs to help foster a generation of women entrepreneurs who will help to make their communities and economies more prosperous and stable. One woman who participated in WEAmericas activities this fall owns a handcrafted paper products business in Honduras. Before she joined the WEAmericas network, making paper crafts was just a hobby. Now it is her livelihood. She has a business plan, a web presence, and four employees. And the connections she made through WEAmericas already landed her a month-long display agreement with Walmart. We will soon be announcing a series of small grants under the WEAmericas initiative that will help to foster what we’re calling the “entrepreneurial environment” for women in the region.

In October, at the regional conference “Power: Women as Drivers of Social Inclusion and Economic Growth,” in Peru, Secretary Clinton once again emphasized, how “Restrictions on women’s economic participation are costing us massive amounts of economic growth and income in every region of the world.” Latin America and the Caribbean have already done great work in this area, steadily increasing women’s participation in the labor market since the 1990s to above 50 percent now. So we were proud to announce a new Women’s Entrepreneurship Trust Fund with the Inter-American Investment Corporation, to help women access the training they need in their own countries (Note: Pilot countries are Peru and El Salvador; State is providing $900,000 End note.)

Small businesses, including those owned by women, are key drivers of economic growth. In the United States, women-owned businesses contribute nearly $3 trillion to our economy, and they are growing at more than double the rate of all firms. The United States, like so many of our neighbors in the region, tremendously values entrepreneurial spirit and applauds those willing to take the risk and begin a business. The U.S. Small Business Administration works with its network of small business development centers doing amazing, hands-on work to help small businesses grow and create jobs. Canada, Mexico, and Brazil have similar national networks of business support centers, with which we are working to further increase our cooperation. With support from Pathways, El Salvador has established 14 small business development centers since 2009, where El Salvadoran entrepreneurs have learned how to obtain product certifications, ensure compliance with sanitary standards, identify markets, and utilize technology to expand their businesses and create jobs. Robust small business growth in El Salvador reflects the positive impact these centers can have. These networks are also popping up elsewhere in Central and South America and the Caribbean, with over 2,000 centers now serving more than 2 million small businesses across the Hemisphere.

Just before the Cartagena Summit, President Obama launched the Small Business Network of the Americas to link these small business support centers together and create an interconnected infrastructure. The SBNA’s online component – sbdcglobal.net – will be a global web portal that will serve as a small business super-highway making it easier for entrepreneurs to get the training and financing they need to take advantage of new business opportunities in the region.

One other specific example of our work to promote sustained and inclusive economic growth is our work with El Salvador under the Partnership for Growth initiative (PFG) launched in November 2011. The PFG is an unprecedented bilateral collaboration and whole of government effort focused on promoting broad-based economic growth. A joint U.S.-El Salvador economic team conducted an analysis that identified crime and insecurity, and low productivity in tradeables as the two most critical constraints to growth in El Salvador. Based on this assessment, El Salvador and the United States developed a joint country action plan that identifies the most important activities to unlock these constraints.

Regional Integration

We are working hard to help open new market opportunities and promote protection for innovation and creativity for businesses of all sizes, owned by both men and women, throughout the region. On October 31 we celebrated the official entry-into-force of the U.S.-Panama Trade Promotion Agreement, which will immediately reduce or eliminate tariffs on U.S. industrial goods and agricultural exports, provide significant new access to its $22 billion services market, and remove other barriers to U.S. exports. This increased access and protection of innovation and creativity makes U.S. exporters even more competitive in one of the fastest growing economies in Latin America. Earlier this year, the U.S-Colombia FTA entered into force. With the addition of Colombia and Panama, our free trade agreements now stretch from the Arctic circle to the tip of South America and cover more than 70 percent of our trade in the region. U.S. and Latin American companies benefit from FTA commitments that facilitate transparent rule-making, predictable legal frameworks; strong intellectual property rights protections, and regulatory certainty. Our trade agreements, in a sense, provide a playbook for small companies about how to operate in these markets – they remove tariff and non-tariff barriers, protect intellectual property and provide transparency, predictability, and avenues for addressing disputes.

The Western Hemisphere’s economic platform already has some great examples of regional integration happening under NAFTA and CAFTA-DR. CAFTA-DR not only increased the total value of U.S bilateral trade with our six CAFTA-DR partners from $35 billion in 2005 to more than $58 billion in 2011, it also dramatically increased intra-regional trade among the CAFTA-DR countries. Exports within Central America and the Dominican Republic expanded from $4.2 billion in 2005 to an estimated $6.3 billion in 2010, a gain of 50 percent. Supply chain integration with our FTA partners yields mutually beneficial growth. Fabric produced in the United States, the Dominican Republic, Honduras, and Guatemala is used in apparel production in many of the CAFTA-DR countries, with final goods receiving duty-free treatment when they enter the United States. One recent Woodrow Wilson Center study revealed Mexican exports contain enough U.S. inputs that they actually create American jobs. According to the study, six million U.S. jobs depend on U.S.-Mexico bilateral trade.

You may have heard of a strategic rebalance toward the Asia Pacific and wondered what it means for Latin America. I know there is a session later on this topic, but let me assure you we are not turning away from our deep and close relationships with our closest neighbors. Remember the Pacific also has an American side. In fact, countries in the region have already recognized the critical importance of their own Pacific linkages and are moving ahead to explore these opportunities themselves. For example, the Alliance of the Pacific, which currently includes Chile, Colombia, Mexico, and Peru, with Costa Rica, Panama, and Australia serving as observers, is leading the way on regional economic integration in the Western Hemisphere while also looking east to Asia. Canada, Chile, Mexico, and Peru are also partners, along with the United States and six others, in the Trans-Pacific Partnership negotiations– an ambitious trade agreement for the 21st century that we hope will be the gold standard for future FTAs and a platform for broader regional integration on both sides of the Pacific. And again Canada, Chile, Mexico, Peru, and the United States are all members of Asia Pacific Economic Cooperation (APEC) where the core mission is to support sustainable economic growth and prosperity throughout out the Asia-Pacific region by championing free and open trade and investment, promoting and accelerating regional economic integration, encouraging economic and technical cooperation, enhancing human security, and facilitating a favorable and sustainable business environment.

Liberalization of Air Services

Let me turn to my full-time job – transportation, specifically aviation. We all know that international aviation is essential to furthering our economic ties. Our experience demonstrates that the best way to develop international aviation to its fullest potential is to allow airlines not governments to decide where to fly, with what aircraft, how often, and at what price. We work to promote competition by expanding worldwide air services through Open Skies air transport agreements. Open Skies agreements facilitate the growth of an efficient market-based international system with enhanced potential for increasing commercial and business exchanges, investment, exports, and tourism. Growth in aviation also benefits the broader economy and promotes integration with the world economy. International air links are as important for cargo as they are for passengers. It is estimated that air carriers carry two percent of the world’s trade by weight but 40 percent by value.

Since 1992, the United States has concluded Open Skies agreements with more than 100 partners in Europe, the Middle East, Africa, Asia, the Pacific, Latin America, and the Caribbean. We have six Open Skies partners in Central America: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. We also have five Open Skies agreements with Caribbean partners: Barbados, Jamaica, St. Kitts & Nevis, Surinam, and Trinidad and Tobago.

Regional airlines, such as COPA and Avianca-TACA, have thrived with the growth of air liberalization in the region. According to Department of Transportation statistics, the U.S. experienced 52% growth in passenger traffic with countries in Central America in the three years following conclusion of Open Skies agreements, and the U.S.-Caribbean passenger traffic grew an average of 15% with Caribbean countries in the three years following the conclusion of our agreements.

Level Playing Field

Through our FTAs and elsewhere, we work with our partners to create economic opportunity and a fair, transparent international arena, fostering a healthy investment climate. All of us are better off with more players in the international trade arena, provided everyone understands and respects the rules of the game. This means both encouraging everyone to play fairly by all rules and having enforcement mechanisms in place when it doesn’t happen.

For example, the TPP will address cross-cutting issues not covered in prior trade agreements, such as how to help small- and medium-sized businesses participate in and take advantage of international trade. We are also working to ensure the TPP includes the most modern protections for worker rights, the environment, and intellectual property. The TPP aims to promote a level playing field so all companies – private or state-owned – compete in a fair and transparent system.

But it is not just a level playing field for companies, our work through the Summit of the Americas, the G20, and APEC have put mechanisms in place to ensure that governments and the private sector take concrete actions to allow for women’s full economic participation, as well. As Secretary Clinton has pointed out the Asia Pacific region is losing over $40 billion dollars a year due to barriers that inhibit women from participating in the economy. And as key component of our economic statecraft we are working alongside governments throughout the region to decrease barriers and increase opportunities and mechanisms that allow women to participate more fully in the economy.

Conclusion

The increased tempo of globalization in recent decades has brought economic opportunity but also exacerbated the effects of the global financial crisis and forced us to relearn the lessons of old – you cannot separate economics from politics or strategy. This is why we at the State Department are working so hard to implement Secretary Clinton’s economic statecraft agenda by updating our foreign policy priorities to reflect our economic priorities and vice versa. As you can see from the examples I’ve described, the United States and the countries of Central America and the Caribbean have a robust and varied agenda for working together to expand trade, investment, and economic opportunity for all in the region. We look forward to continuing that work in the future, and I welcome your questions and comments.



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