AMBASSADOR JEFFREY: Thank you very much Chairman. It is a great honor tonight to introduce our guest speaker Mr. Robert Hormats. Mr. Hormats has been an Under Secretary of State for about a week now. He was just confirmed a little over a week ago as the Under Secretary for Economic, Energy and Agricultural Affairs at the U.S. Department of State.
First of all, I'd like to say a few words about the ABFT (American Business Forum in Turkey). I take my responsibilities as Honorary Chairman [of ABFT] very seriously. This is an important organization. It brings together representatives of American firms including many Turkish citizens. They deal with us - the American government and the American business sector back in the States - and the Turkish government on issues of great concern. From our standpoint, you have an open door to my office as well as to the offices of my staff here in Istanbul and in Ankara at any time as we work on so many issues in our economic, trade and investment relations.
These relations of course received a great boost during the visit of President Obama back in April. During that visit, President Gul and President Obama agreed that we needed to raise the level of our economic, trade and investment profile. This is critically important given the potential in Turkey and given the potential in the United States, but also given the critical importance from a political and strategic standpoint of bilateral relations. We need to strengthen the third pillar, the pillar of economics. Governments can only do so much. They have to establish a framework. That is very important, and we are in the process of doing that. There are things that we can do, such as with GSP, such as with the potential joint work that the U.S. is looking at in Afghanistan and Pakistan. Some things may not be possible right away, particularly new trade legislation with any country, but we are leaving no door closed.
On the other hand, we will look to the Turkish government to also participate. I know of no government that has been more successful in the past 15 to 20 years in stimulating entrepreneur-friendly, export-oriented economic growth. But even here there is more that could be done. Sometimes arbitrary government decisions, a complicated court system, the lack of transparency in some decisions, and, as the EU recently pointed out, very heavy tax assessment situations can all intrude upon business relations and are of concern to the international community.
That is why we want to work with you folks here tonight to resolve these problems while working with the government. The business sector ultimately is the motor of success, be it in the United States, be it in Turkey.
In going forward, we have a strong ally, and a new Under Secretary. Robert Hormats is known to everybody. He has got one of the most illustrious portfolios in Washington and New York. He was from 1969-1982 in several Administrations - Democratic and Republican - serving in the National Security Council, as the Assistant Secretary of State for Economic Affairs, and as the Deputy Trade Representative. He also was a leader in the private sector, working for Goldman Sachs where he rose to the very top. And now we are very fortunate to have him returning to government. Mr. Under Secretary.
UNDERSECRETARY HORMATS: Thank you very much Mr. Ambassador, Madame Consul General, Rahsan hanim [ABFT Chair Rahsan Cebe] and everyone who has taken the time to come tonight to share a few thought about U.S.-Turkish relations. What I will try to do, and I am conscious of the time and I will try not to keep you very long, is give you a few thoughts about the new Administration in Washington - from a very new addition to that Administration, which is me - and to share a few ideas about the world we live in and how U.S.-Turkish relations fit into that world.
One thing is very clear to me and that is that the world after this financial crisis cannot be the same as the world that existed before this financial crises. First of all, the world was changing anyway. What has happened is that over the last 10-15 years the old power group, the Group of 7 or the Group of 8 that was the "steering committee" of the global economy was no longer representative of the power shifts and the economic shifts that had taken place in the global economy or the world at large. You now have in the global economy a number of very significant emerging economies that are playing a greater role and deserve a seat at the table. Among those countries is Turkey. What we have today is a desire on the part of countries that want to see the global economy succeed to have the seats at the table apportioned in such a way that these newly emerging economies play their rightful role in the global system. You have China, you have India, you have Brazil, you have Russia and you have other important countries that have and deserve a seat the table. Turkey is among those countries.
And I think it's a tribute to Turkey, to the leadership that has been shown by this country, to the economic success demonstrated by this country, that Turkey is a member of the G-20. Just like the United States. Just like Britain. Just like Japan. An equal seat, an equal say, and equal opportunity to have its voice heard. And in fact, having attended the Pittsburgh Summit, I was very impressed by the very powerful role and the very effective role your Prime Minster played in this dialogue. He was part of this Group of 20 and a very important part of this Group of 20.
The second change that has occurred is that we have seen a major financial crisis, which again has changed things dramatically. The global system after this crisis has to be different from what it was in 2006, 2007 and the first part of 2008. How does it change? How must it change? First of all, we need a better regulated international financial system and better regulations domestically. The Financial Stability Board, headed by Mario Draghi, who is also the Governor of the Bank of Italy, came up with some very positive suggestions, which were put forward at the G-20 Summit, and were accepted by the leaders at that summit. They include tougher regulations, restraints on compensation, and a greater degree of cooperation among the financial officials of the countries in the G-20 and other countries. That change I think is important to avoid, or at least to do the best we can to avoid, a repetition of the kind of financial crises we have seen over the last several years. But it is more than that.
I think there is moreover a generally held view that the global system has to look different in several other ways. First, the world cannot depend as heavily on the American consumer, in part because the American consumer depended very heavily on debt, huge accumulations of debt, mostly borrowing against the value of their homes in order to generate the kind of demand that they generated. This enabled lots of countries, particularly in east Asia, but also elsewhere, to take advantage of the opportunity to sell in the United States. We are going to see over a period of time that the American consumer is not going to be able to borrow as much as he or she could, and therefore we will have a more normal kind of demand in the United States, not a demand triggered by and supported by a large amount of borrowing against home values or with credit cards or other things. A lot of that demand was artificial.
We also think that, if the global economy is going to do well over the next several years, the role of the emerging economies and developing countries is going to be increasingly important. That is to say, you cannot rely only on the United States or only on Western Europe or only on Japan. Domestic demand, domestic economic activity, and productivity improvements in the emerging economies, the large emerging economies in particular, are going to have to play a greater role in the global system. And that means not just China, which is an obvious one, not just India, not just Brazil, but countries like Turkey. Our well being in the United States, and the well being of Europe and other countries, is going to depend on the strong growth and the sound policies in emerging economies like Turkey. And I think we have seen this - and we certainly saw this thought put forward in Pittsburgh - and I heard it today and yesterday and the day before. I had the opportunity to listen to a speech by your Prime Minister at the Institute for International Finance last night. I had the opportunity to hear [Economy Minister] Ali Babacan give a very effective speech on this issue today.
And I think what we have seen in Turkey is a country that understands that strong reforms are very powerful, not just in strengthening demand in Turkey, not just in stabilizing the economic growth in Turkey, not just in creating a sound base for the future, but also in enabling Turkey to play a very important regional role in this very significant region of the world. Turkey is at the crossroads of Europe and Asia. Turkey is able to play a very important role in the Balkans. Turkey is able to play a very important role in the Middle East. Turkey really is at the strategic center point of a lot of economic activity in various parts of this region and therefore a strong and effective Turkey is important not just to Turkey, but to a lot of other countries. It is an anchor of stability and an anchor of dynamism and an anchor of growth which can also help other countries in the world.
And from an American point of view, our goal and one of the reasons I am here today, and one of the reasons the Ambassador was kind enough to invite me when we met a few weeks ago in Washington, is to say that our Administration, the Obama Administration, values Turkey very highly as an economic partner. We have had, as the Ambassador has pointed out, a very strong political relationship, a very strong security relationship in NATO, but now we want that third pillar, that third leg of the relationship to be just as strong, and that is the economic relationship. That means much closer relations with respect to trade, much closer relations with respect to investment, and much closer relations with respect to technological cooperation.
We see enormous opportunities. Turkey is a G-20 partner of the United States. It is a NATO partner of the United States. We would like to develop over a period of time in this new Administration [the Obama Administration] a very close set of economic relations, not just with the government, which is obvious, but also with the Turkish business community. We would like to see ideas from the Turkish business community.
And we will provide ideas of our own. Just a few minutes ago a number of people who are involved in business here came to me and to our Consul General and to our Ambassador and others on the economic team with suggestions for how the United States and Turkey could improve our economic relations.
We look more and more to people who are actually here on the ground, who understand the business environment in Turkey, to give us suggestions for how we can enable Turkey to sell more in the United States, how we can help American companies to sell more in Turkey, and how we can also develop the kind of investment relationship which creates a lot of jobs in this country. In the United States today one of the biggest concerns is jobs. As you doubtless know, we have a relatively high rate of unemployment, around 9.5%. But one of the things that has helped to create jobs over the years is foreign investment. We have foreign investment from big companies like Toyota, Nissan, British Petroleum and many other companies. We also have investment from small and medium-size companies that produce various selected items in the United States. Turkey can be a place where a lot of these companies, American companies and other companies, come in order to find a place to invest in a dynamic country, but also in a dynamic region so that they can invest here and have the opportunity to sell in the Middle East or in the Balkans or increasingly in other countries that Turkey has a very close economic relationship with - Iraq, Afghanistan, and with many other countries where American companies are a little bit unsure as to when to come in. Working with Turkish business people, they might feel more confident about doing this.
We also find that this environment can be very positive for certain kind of industries, for instance, for the pharmaceutical industry in this country. We see Turkey as a very good opportunity for the pharmaceutical industry to invest. The pharmaceutical industry first of all produces things that save lives. Second, it produces items that require jobs and those are high quality jobs. While there has recently been an issue with respect to some measures which can over a period of time put enormous economic pressure on some of these companies that might discourage additional investment, our hope is that it is temporary and our hope is that the pharmaceutical industry of the United States that has chosen to invest here will be able to work out their differences with the government of Turkey so that the disincentives of ... downward pressure on prices can be alleviated to the point where they are encouraged to continue to make new investments. We think that if these issues can be resolved it can provide a very good opportunity for more pharmaceutical companies to come in to Turkey and to produce the kind of life-saving drugs they produce and also create a lot of jobs.
We think in a lot of other areas also, if the conditions are right, if the conditions are good, if the environment is conducive to investments, we will see a number of other companies coming here because this is such a good location. This is such a good opportunity for American companies to invest.
So we look over a period of time to a very productive relationship. I can assure you that the government of the United States, that President Obama in particular, who made his first overseas bilateral visit to Turkey and gave a very good speech here as you recall. He really believes that this is an important relationship. This is a country of the future where we think closer American ties can be very valuable to both sides.
In fact, this is the first visit abroad that I have made in my new job and here it is to Istanbul. So I look forward to many additional visits to Istanbul. However, it is not just coming here and it is not just talking about a relationship. One can always talk about a relationship and one can always talk about the desire of improving a relationship. The key is, on both sides, to make it work, to make it happen, to have the person-to-person relationships, the institution-to-institution relationships, the relationships with key groups like this, so that we can do two things. One, we can identify the barriers that exist, identify the problems that exist, and there are always going to be problems. Raising a problem is not a sign of criticism. Raising a problem really is a sign that you want to find answers. If you don't want to find answers, then you can sort of brush over things. The candid way of finding answers is to raise problems and work them out and if you do that over a period of time, then I think we will find great opportunities. If there is a problem that you have with the United States, please do raise it with our excellent Embassy and Consulate staff in Ankara and Istanbul. If we have a problem, we will feel willing and able to raise it with your government, and if we do this in an honest and open way and in a consistent way, we can reduce a number of these barriers over a period of time.
I worked for Dr. Kissinger when we started opening the China relationship. There was no trade - zero trade - between the United States and China in the early part of the 1970s. Nothing. Not a penny. And over a period of time, with very candid conversations on both sides, we now have a thriving trade relationship. Thirty-five years ago no one would have dreamt that we could have had the volume of trade we have today between the United States and China. And I think that illustrates a point. It is not just that China is a big country and that the United States is a big country. It is that we went at this to identify problems, and once we identified them, we didn't see them as criticisms. They would raise a problem with us. We never saw it as a criticism. We saw this as an opportunity, an opportunity to identify an issue and an opportunity to try to resolve this issue. And I look at our relationship the same way. We obviously have a much better relationship today than the United States had with China in 1971.
As everyone who is in this room knows, trade between our two countries is small compared to what it could be. It could be a great deal more and I think it will be a great deal more if we approach it in a candid way. If our business community and your business community, if our government and your government identify problems and pledge to try to resolve them in a very constructive, warm, friendly way as should be the case between two close friends like Turkey and the United States.
So I just wanted to tell you how much I have enjoyed the opportunity to meet a lot of you and how much I have enjoyed the opportunity to come here again. I have been here a number of times. Years ago I went up to the Dardanelles and went to eastern Anatolia. I have had a chance to see a lot of Turkey. I enjoy coming here. I assure you that I will come back again. And I just want to thank you again for your hospitality. "Turkiye Cumhuriyeti Yasasin."