Status, Prospects, and Challenges for Trade in the Western Hemisphere

At my Senate hearing, I made a point of telling Chairman Christopher Dodd (D-Conn.) that I grew up in North Wichita and attended Our Lady of Perpetual Help Catholic School. My point was that, while I know there have been ambassadors from Wichita before, there had never been an ambassador from Our Lady of Perpetual Help. Some of you may know the old but sturdy school building that still stands at 24th and North Market. I remember as a schoolboy running laps around that building at recess – running in circles for no particular reason – an activity that prepared me for a career in Washington.

The fact that I have the high honor of representing the United States at the Organization of American States is a tribute to this community and to our country – which bestows extraordinary opportunities to people from all walks of life.  In preparing for this presentation I realized that I would be addressing people who "get it" – folks who have demonstrated the vision to know that, even in the world of the Internet and virtual reality, geography is key to political and economic relationships.

In this room are visionaries who are carving out a place for Wichita on this international trade corridor. They know that, if we make simple but smart decisions today to forge strong bonds with our neighbors in the Americas, we are sowing the seeds of prosperity for generations to come. The 20^th century is known as the "American century;" we can make the next 100 years the "century of the Americas."

Opportunities abound in the Americas – not merely to build a trade area embracing 800 million consumers, but to forge a community of nations committed to common values of free enterprise, democracy, and the rule of law. More prosperous and stable democracies make better neighbors and partners in protecting our interests and confronting new challenges close to home.  At a time when serious people in Washington and around this great land are going to work on "homeland defense" and " perimeter security," it is imperative that we maximize the opportunities close to home.

U.S. Trade Representative Robert Zoellick has his eyes on the ball: "If the Americas are strong," he has said, "the United States will be better positioned to pursue its aims around the world. But if our hemisphere is troubled, we will be preoccupied at home and handicapped abroad."

This afternoon, I want to compare notes with you on doing "the right thing" for America and discuss how to do the right thing "the right way." It is not enough to build trade, we must use prosperity for a purpose: to cultivate common values that serve our political and economic interests for decades to come.

The Right Thing
You are not alone in thinking that we can build something special in the Americas: I am here to tell you that the freely-elected representatives of the people of the Western Hemisphere are eager to do the right thing. A new generation of leaders recognizes that democracy and free trade are mutually reinforcing – and both are indispensable to creating a more stable, more prosperous community.

Through the permanent dialogue at the Organization of American States, as well as through a series of Summits, our leaders have outlined a plan of action for building modern economies and forging 21st-century trade relations. Our neighbors have joined us in embracing democracy, the rule of law, and market-led, broad-based economic growth.  History and geography compel us to seize this precious opportunity.

My grandparents and many of your grandparents ended up here to lay railroad track from one end of this state to the next. Why? Because this land is the crossroads of a mighty nation. One hundred years later, Wichita and Kansas sit in the middle of the fastest growing trade relationship in the history of humankind: Canada has long been our largest trading partner, and, thanks to NAFTA, Mexico edged out Japan for second place about four years ago.

Since NAFTA took effect the positive gains have been dramatic and indisputable: Trade between the United States and Mexico has nearly tripled from $81 billion in 1993 to $233 billion last year. Yes, the U.S. trade deficit with Mexico has increased due largely to the 1994 peso devaluation, but despite that economic crisis our exports to Mexico have more than doubled due to NAFTA -- from $41 billion in 1993 to $101 billion last year.  Kansas Governor Bill Graves recently described Mexico as "Kansas’ fastest growing trade partner," and, of course, he’s right.

In addition to Mexico, more goods and services cross the U.S.-Canadian border every day than any other in the world: more than $1 billion each and every day. We export more to 32 million Canadians in a week than we do to 145 million Russians in a year.

Kansans know these benefits firsthand. Kansans export $470 million each year to Mexico and $880 million to Canada. Another $150 million in Kansas-made products go to Argentina, Brazil, Chile, and Venezuela. Seven of Kansas’ top 20 trade partners are in the Western Hemisphere. Indeed, from 1993 to 2000, overall U.S. exports to our two NAFTA partners have grown twice as fast as our exports to the rest of the world.

But the promising opportunities reach beyond our immediate neighbors to the rest of the Hemisphere. Even though the envisioned "Free Trade Area of the Americas" is not yet in place, U.S. exports to Latin America in the last decade have increased by 137%, while exports to the rest of the world have seen gains of only 96%. That figure is important to Kansans because 40% of the transportation equipment that you export stays right here in the Western Hemisphere.

Wichita’s and Kansas’ natural market reaches beyond NAFTA to the rest of the Americas, and that is good news, indeed:

• The United States sells more to Brazil than we do to Russia, Italy, and Greece combined – almost as much as we export to France.
• Most Americans think of Venezuela only as a source of oil, but we sell more goods to Venezuela than we do to Spain.
• U.S. exports to Jamaica are twice that to Hungary.
• We export about $1 billion more in U.S. goods every year to each of the relatively small states of Costa Rica, Honduras or Guatemala than we do to either Greece, Finland, or Denmark.
• In fact, total U.S. exports to Central America ($10.7 billion) are nearly twice as much than to all of Eastern Europe - $5.9 billion).

I have focused on export figures because they spell j-o-b-s: jobs for American workers. During the 1990’s, about one-quarter of U.S. economic growth came from our exports. Every $1 billion in exports generates 12,000 good jobs right here at home. The numbers tell the story: the future of American prosperity lies close to home – in the fastest growing, dynamic markets of the Western Hemisphere.

Our neighbors in Latin America are not without worries, but in spite of their troubles – indeed, because of their troubles – they have made educated choices in favor of free-market policies. Indeed, friendly reformers have taken or are taking the helms in Peru, Colombia, Bolivia, Mexico, and throughout Central America – eager to forge mutually beneficial bonds with you and me.  The steps we take in the next few months to promote free markets through free trade may prove decisive in shoring-up our key trade partners at a critical hour.

Since the approval of NAFTA in 1993, the United States has been "running in place." There are 130 free trade agreements in the world today; we are party to only two. Even our NAFTA partners have moved ahead without us, cutting dozens of deals in this Hemisphere and beyond, while the United States has lost ground.

President Bush is running to make up for lost time in securing trade advantages to benefit American workers and American consumers. He has made the United States a zealous and effective advocate to going even further in lowering worldwide barriers to American goods by launching the "Doha Round" of negotiations with our World Trade Organization partners.

The U.S. trade team has all but completed talks with Chile for a free trade agreement, and we have announced a similar initiative with the five nations of Central America.

The President can, must, and will lead. But without "trade promotion authority" – TPA – from Congress it will be difficult to close deals to win new trade advantages for U.S. exports.  TPA allows the President to negotiate trade agreements with nations and bring those complex accords back to Congress for up-or-down votes – without deal-breaking amendments.

Each of the last five Presidents has had this authority. It lapsed in 1998, and President Clinton was unable to convince the Congress to renew it. The House recently passed TPA renewal by a landslide: 215-214. The Senate approved a different version by a comfortable margin. Now, representatives from both houses must meet to agree on a bill that will then go back to both houses for final approval. President Bush has expressed his hope that Congress will grant him TPA before it adjourns this year.

The President notes, "Every day we go by without [TPA] is another day we are missing opportunities to help our economy, to help our workers, to help our country. I will use [TPA] for higher-paying jobs for American workers." In the mean time, the President has made crystal clear to our competitors in the world that we will use all of our authority within WTO rules to defend American agriculture and industry from unfair competition.  Still, the President has underscored his commitment to break down the barriers to free trade, because he is convinced that doing so is good for all nations – most important: it is good for American workers and consumers.

The Right Way
As I said at the outset, most of the people in this audience "get it": you know "the right thing" to do to secure a century’s worth of prosperity for our nation. But there is a "right way" to get it done: trade agreements cannot be "values-neutral."  President Bush put it emphatically when he said, "Open trade is not just an economic opportunity, it is a moral imperative…. Open trade helps us all adhere to values that we share."

For the first 50 years after the Second World War, the United States had to guard its flanks to the East and the West, during several hot wars and a long, cold one. In this period, our neighbors to the South, in Latin America, became a concern only when the Soviet Union or its Cuban surrogate made hostile moves against our interests – particularly in the Caribbean basin. Many Americans regarded military dictators in Latin America as lesser evils than Soviet stooges.

In the 1970s, President Carter took a principled stand for human rights, and in the 1980s, President Reagan sided with democrats in Latin America who vowed to defend those rights against dictators from the left or the right. Slowly but surely, the people of the region struggled against tyranny, opted for democracy, and changed their history. Today, the vast majority of Latin Americans live under leaders of their own choosing – Fidel Castro is a lonely hold-out.

That rising democratic tide represents a quiet revolution. Americans can take considerable pride in the role we played in helping history along. Today, the region’s elected leaders face a new challenge: making democracy work for the general welfare of their people. We can help them – and also help ourselves – by doing the right thing in the right way.  As President Bush has said, "It’s a heck of a lot easier to promote human dignity and human rights through trade than through lectures." Of course, I agree with the boss.

Unless women and men from all walks of life have a stake in economic growth in Latin America and the Caribbean, the gap between rich and poor will widen, and genuine prosperity may prove illusive or unsustainable. We know the answer: democracy and the rule of law are essential to global development and trade, because they empower individuals to share the costs and the blessings of prosperity.  As the people of the Americas are free to exercise their essential political freedoms, they naturally will be able to claim their fair share of economic opportunity. In the long-run, broad-based economic growth produces greater stability and sustainability.

When President Bush talks about using trade to promote our "common values," he is making good business sense. He knows that representative democracy and the rule of law are indispensable to building modern economies, because they promote accountability, honest competition, and stability, and they spread economic opportunity without favor.  For example, you and I know that small business is the engine of economic growth, producing a disproportionate number of new jobs in America. But, in the developing world, most entrepreneurs cannot begin to hack through the red tape that is strung in their path for the precise purpose of stifling competition.

An upstart entrepreneur cannot compete with sweetheart deals or political favoritism. They cannot bear the hidden costs of corrupt bureaucracies. So he or she will stay in the gray market or the black market – jobs will not be created, taxes will not be collected, and the state will never claim the resources it needs to enforce the rules of the game for the common good. That is the cycle of corruption and inefficiency in which many nations of the Americas are trapped today.

In modern economies, the rules of the game must be applied equally, without fear or favor. If a government strives to deliver basic services, citizens will be more likely to pay their fair share of taxes, which strengthens a modern, efficient state that is better able to advance the whole society’s interests.  If a sound, reliable legal system exists to enforce a contract, secure capital, and protect private property (including intellectual property), commerce and investment will flourish. If not, economic growth will be stunted.

In the simplest terms, while states need markets to function, markets cannot function without effective, legitimate, and law-abiding states.

In Latin America especially, where large segments of society continue to struggle with issues of health, education, and poverty, trade with the United States is too often viewed with suspicion and fear. But the facts inspire hope, as free-market reforms in Latin America have achieved results:

Foreign direct investment in the region has increased dramatically, from just $9 billion in 1990 to $76 billion in 2000. Needless to say, this investment has begun to produce jobs and to improve the quality of life. Inflation has gone down region-wide, from an annual average of 500% to 7% last year. Real GDP grew from an annual rate of 1.2% in the 1980’s to 3.4% in the 1990’s. In short, the free market has proven that it can work for Latin Americans.

But our primary task is to make sure that the market serves our businesses and consumers. U.S. policymakers cannot pretend to be creating opportunities for American investors and exporters if they are unable to compete because of rampant favoritism or corruption.

By insisting that the Free Trade Area in the Americas be accompanied by a commitment to the rule of law, we ensure a more level playing field for U.S. investors and exporters. After all, we are not looking for sweetheart deals: we want fair competition. And when we insist that the rules of the game be applied fairly, everyone stands to benefit.  So, the "right way" means trade alongside democracy and the rule of law, to fight corruption and advance fair competition: that is best for consumers as well as workers.

Conclusion
Since I first encountered the U.S. team of the North American International Trade Corridor Partnership, I was convinced that you recognized "the right thing" and were busy doing it.  That is personally gratifying to me because of my longstanding commitment to advancing U.S. interests by forging closer relations with our Latin American neighbors. But the primary reason I am proud to be associated with this partnership is because of the good you are doing for the community that will always be home to me. You are doing the "right thing the right way."