U.S.-EU Cooperation for Renewed Growth and Security

It is a great pleasure for me to be here today and to have the opportunity to begin a dialogue and exchange ideas about the theme of the whole conference, our shared values, and what we should do with those shared values. This session’s topic is also very important. As you know, we had a fairly impressive run at economic growth in the 1990s on both sides of the Atlantic, but that growth has slowed. We also know from the events that have taken place over the past year -- and certainly were brought home to Americans -- that more than ever our economic prosperity and our global security are inextricably intertwined.

In exploring these themes, I would like to first briefly review the lessons that we learnt from our economic prosperity over the past decade and some of the challenges that we are going to face in renewing that growth. I will then explore how we might jointly address the threats that face our economic security. Also, how we need to expand the circle of development – development in which we have already greatly shared. But there are many others in the world who very much need to be included in the rising tide of what we hope will be our continued economic growth.

I will talk first a little bit about prospects for renewed growth. As many of you know, the global economic performance during the past two years has faltered. Look at IMF [International Monetary Fund] estimates. They estimated that the growth was about a percent and a half less than the experience of what we all benefited from in the last half of the 1990s. This kind of sluggish growth is not at all conducive to the ability of our economies on both sides of the Atlantic to face up to economic and other kinds of shocks that might affect our societies, our nations, and our economies. In fact, the United States and the European Union are the engines for the world’s growth, and we have to keep that in mind as we set and take the responsibility for setting a renewed agenda for global economic prosperity in conjunction with others around the world.

The spectacular growth of the last half of the 1990s, fueled in large measure by strong investments in high-tech equipment, has given place to a slower period. In fact, the United States economy, as you know, fell into a mild recession in 2001, from which we are now recovering.

In Europe, the average growth in economies in the early 1990s was below the previous trend by your own estimation in Europe. It then returned to something at a level closer to the potential growth in the last half of the 1990s. Again using IMF estimates, growth in Europe slowed to just over one percent on average during the past two years. Moreover, domestic sources for demand in the European area were particularly weak. This makes a recovery desirable in Europe, but also, given the overall situation in the world these days, particularly challenging. A lot of the prospect for growth in Europe will depend on stronger domestically generated demand and structural reforms that will encourage investment and job creation.

Therefore, as we both think about re-igniting transatlantic economic growth, we really have to consider how we can make more efficient use of all the factors that go into producing goods and services on both sides of the Atlantic. In all likelihood, many governments, including our own, are going to have to implement what are at times politically painful policies in order to find more efficient ways to use those factors. A shopping list of these measures which we are both considering on each side of the Atlantic include:

• Free trade oriented policies;
• Promoting more high-tech investments for productivity enhancement;
• Freer transmission of technological innovations;
• Investing in human capital through education and training;
• Sound fiscal and monetary policy management;
• Significant reductions in regulation of labor and business;
• Structural reforms in our corporate and financial sectors;
• Promoting the rule of law for property and contract enforcement;
• Deepening the sometimes criticized process of globalization for trade and finance;
• Achieving more growth of oriented tax structures.

That is a lot to do, and it is a lot that we are mulling over. There will be lessons that we can learn from each other; there will be best practices that we can take from different corners on both sides of the Atlantic. However, it is cluster of policy areas that we need to develop – and we need to act on – if we are going to energize our economies to get back to their growth potential.

Similarly, in transitioning into the area of threats to our economic security, we certainly learnt from the events of September 11 of last year that global growth is inexorably linked to global security. In a world where there is violent conflict, threats of terrorism, and threats of war, the growth prospects for all of our economies are shaken. Over the past year we thought there were four tasks that we can work on together in the year ahead if we are going to help insure our economic security.

First, I would say, there is energy security. In this area, there is much that we can do to strengthen our energy security by working cooperatively to expand sources and types of global energy supplies, especially in the Western Hemisphere, in Africa, in Central Asia, and the Caspian region. We can also work together to develop cleaner and more efficient energy technologies. I know Greece and Turkey recently have been playing, and continue to play right now, an historic leadership role in establishing a link between their gas networks that, when coupled with the planned east-west pipeline, Shah Deniz, can create exciting new possibilities to make Caspian gas exports available to Europe.

Second, an area where I think we need to have a lot of focus is transportation security. Safe air travel, maritime transport, and secure borders are crucial to our efforts to ensure collective economic security and prosperity. There has been a lot of work that we have put in this area over the past year, but there is much more that we can do and need to do to ensure the safe flow of goods and people across our borders. We are continuing work right now to make our airports even safer. We also need to look more intensely at what terrorists might try to do to surreptitiously transport either hazardous materials or themselves across our sea or land borders. Just at our lunch table, before we came in here, we were talking about an exercise that Ambassador Miller had read about in the United States. It looked at the possibility of putting a dirty nuclear device in a shipping container with a three-week delayed explosion fuse and having that arrive in a major port and go off – what would the reaction be? Of course the reaction would be far more than just the damage that that container might cause in that one port. It would send repercussions though ports all around the world.

A third area that I think we need to focus on even more intensely as we move forward is terrorist finance. The United States and the European Union worked very, very closely over the past year to disrupt the flow of money to terrorists and to their supporters. As a result of this cooperation, a number of terrorists have been arrested, a number of terrorist financiers have been arrested, a number of terrorist funds have been found and it has been made much harder for terrorists to raise money and to move it through formal channels. But there still are, we believe, significant amounts of money being transferred around the world through both formal and informal channels to make terrorism possible. There is a lot of cooperative work that we can still do. There is a lot of improvement we can each make on both sides of the Atlantic in our systems, working between us and in helping other countries around the world develop their own capacity to stanch the flow of funds to terrorists. We very much hope that Greece will make this one of the priorities of its presidency – to keep developing this cooperation and keep reaching out to third countries to help them in this aspect of the fight against terrorism.

Fourth, there is the financial stability of key friends and allies that we have in the war against terrorism. As Greece itself knows from its own experience, there are economic costs when you are in the front line in fighting terrorism. That is certainly true of other countries around the world that are on the front lines of the battle against terrorism. Working with our friends in Europe over the past year, we have put a great deal of effort into working with these countries, working with the international financial institutions, working with the private sector to prevent financial crises in these countries and to more effectively deal with financial problems as they come up. We are going to have to keep doing that as part of our on-going cooperation over the years ahead.

As I mentioned, we have a lot to do for our own prosperity. We have a lot to do to help secure that prosperity from threat of war and terrorism. We have a lot to do to reach out to the rest of the world to expand the circle of development. Last March in Monterrey, Mexico, at the UN Financing for Development Conference, President Bush unveiled a new and a very bold approach for the United States in working to expand the circle of development. Allow me to just give a quote from something he said at that time:

The whole international community came together in Monterrey, Mexico last year at that conference. They agreed that it is the developing countries themselves that have the primary responsibility for their own development, but that we all need to be partners in that success and in making success possible. That success, everybody agreed, requires that all the resources of development be unlocked and used well; they include domestic savings in these countries, public sector resources, trade and investment, and human talent and innovation.

Productive investment is essential for development. Foreign and domestic private capital far outweighs official development assistance as a source for development investment. It is amazing if you look at some of the figures that we have out there that just the capital flow out of Africa – domestic capital leaving African countries – is larger than all of the international assistance coming into Africa. Private investment coming into the developing world dwarfs the amount of official development assistance coming into the developing world. The value of trade to developing countries much more than dwarfs the amount of assistance coming in. All the leaders of the world agreed in Monterrey that what we have to work on is making sure that all of this capital, foreign capital, domestic capital, stays and is attracted to the countries striving to develop. As my boss, Secretary of State Colin Powell, is fond of saying:

To help create the kind of environment that will bring that investment in, we very much believe we need to encourage developing nations to live by the rule of law, to implement sound economic policies, to fight corruption with transparency and accountability, and to invest wisely in their people. For example, for putting money into their education system, money into their healthcare systems. The United States and Europe can have a big impact both in the encouragement of governments to do the right thing, and also through official development assistance. Because there is an important role that development assistance plays in putting countries on the right road to prosperity and political stability.

In that context, as many of you know, at Monterrey President Bush also unveiled his proposal for a Millennium Challenge Account Initiative (MCA), which is extremely innovative in the history of the United States. What he proposed and what he is going to propose in the next budget to Congress, is an increase of our assistance to poor nations over the next three years to a level which is 50 percent higher than it is today. That eventually will total $5 billion annually in new money that will go each year to accelerate lasting progress in developing nations. These are nations that are governing justly, that invest in their people, and that promote freedom and economic enterprise.

There are two basic innovations. One is that this extra tranche of development money will go to countries that are really trying to do the right thing already. That are fighting corruption, that are putting what resources they have into their education and their health systems, that are promoting the kind of economic policy that will allow the entrepreneurship of their own citizens to take hold and to bloom. With this extra money, we would encourage those countries that are doing the right thing, and then we would work out together with them the results that we both agree need to come out of a certain project or a certain program that we put money in. So, it would be results-oriented. We are going to continue and add to our other $10 billion worth of development assistance that we already provide, which will go to countries at all different levels of good performance, or bad performance and need. But this new proposal is specifically to encourage countries that do the right thing. For us, it is an innovative approach.

I know that Greece also is playing its role in this effort to expand the circle of development. I remember well the commitment by Greece of 550 million Euros in bilateral development assistance for its neighbors in the Balkans. This is especially noteworthy and very important. We of course look forward to seeing the results of that effort flow out in benefits for the whole region, the broader area as well. It just underscores how important it is that Europe and America need to be effective global partners in achieving our mutual development goals.

The other part of this, of course, is opening markets. This is an important part of accelerating development. Many of us know how many countries want to sell into Europe and to the United States. That is an important part that we look at in trade liberalization. Often what is not noted is how many barriers there are between developing nations, often between neighbors, that inhibit the trade and the growth that would naturally come if those barriers were taken down. So there is a tremendous potential for development as well as global prosperity riding, for example, on the Doha Development Round in the World Trade Organization negotiations that are going on right now. It demands concerted leadership by the United States and the European Union if this development round is going to succeed in bringing all the potential benefits it can to every side.

In conclusion let me just underscore that the United States and Europe can and should lead the world in strengthening our economic security, in expanding trade and investment, and in promoting economic development. I am confident that we can do that, and I look forward to the steps we can take together to that end during Greece’s presidency of the European Union. Thank you.