NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein.
| The State Department web site below is a permanent electronic archive of information released prior to January 20, 2001. Please see www.state.gov for material released since President George W. Bush took office on that date. This site is not updated so external links may no longer function. Contact us with any questions about finding information. NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein. |
Mr. Chairman, members of the Subcommittee, I appreciate the opportunity to appear before you in support of the State Department's FY 1997 budget request and to discuss our foreign economic policy and the critical role played by the State Department in the promotion of U.S. economic interests.
I am especially pleased to be joined today by my colleagues with whom I work very closely on a number of trade policy and business promotion issues, ranging from Middle East economic development to export controls. Via the Trade Promotion Coordinating Committee (TPCC), we have become increasingly efficient at coordinating our efforts in these areas, allowing each agency to play to its strengths in a complementary approach to business promotion. For instance, on a day-to-day basis, TPCC agencies work together through the Advocacy Center at the Commerce Department to ensure that virtually every business advocacy project receives the most efficient application of U.S. government leverage, depending on which agency or agencies are best-positioned to lead support efforts. Overseas, our Ambassadors, leading the country team members from the various agencies at post, develop best strategies for promoting U.S. economic interests. We've made great progress in developing a comprehensive national export strategy. I look forward to working closely with my colleagues to build upon our efforts.
I'd like to begin by taking a moment to consider the context in which the State Department budget request is being addressed. Our major challenge today is to redefine the objectives of U.S. foreign policy for the post-Cold War world. We live today in a world without a clear common enemy, a world with pressing global problems like terrorism, health and the environment, and a world where national borders are increasingly blurred by economic interdependence.
Today, our foreign economic policy has become an integral part of our broader foreign policy vision. Economic tools have become increasingly important mechanisms for projecting American leadership and influence and increasingly vital components of U.S. foreign policy.
First, we use economic diplomacy to support peace and democracy. While politics is necessary to negotiate peace or to launch democratic rule, economics is crucial to sustaining them. In Bosnia, Haiti, Russia, the other New Independent States of the former Soviet Union, and the Middle East, we have understood that increasing prosperity buttresses lasting peace and progress toward democracy. This is why the Department and our overseas missions -- in close coordination with other agencies -- are promoting and pursuing economic revitalization in trouble spots around the world, via traditional economic assistance policies, but also through on-the-ground promotion of domestic economic reforms, regional economic cooperation, and open foreign investment and trade regimes. The logic behind our economic diplomacy is simple: economic development is essential for peace to take root. And, it is business, not government, that is the true engine for economic development.
A second major goal of our foreign economic policy is to build and modernize what we call the new economic architecture for the post-Cold War world. Our goal is to create an international system for the 21st century, one that is more open, more market-oriented, and better suited for world prosperity and peace.
There is also a political dimension: the new economic architecture is a way for the U.S. to project its power and influence in key regions of the world. We have long used political influence to advance our commercial goals; we can also employ economic tools to further political goals. The presence of American traders, investors, and financiers -- and the importance of the American market -- can be as effective instruments of foreign policy as military power.
To this end, the Department and our embassies are working closely with other U.S. government agencies to strengthen international economic institutions and to level the international trade playing field. At the global level, we have worked to launch the new World Trade Organization and to modernize the IMF, the World Bank, the Organization for Economic Cooperation and Development (OECD) and the United Nations. We are also promoting new trade agreements on issues such as investment -- negotiating a Multilateral Agreement on Investment among OECD states -- and anti-corruption and anti-bribery, in both the OECD and the Organization of American States (OAS).
Our multilateral efforts are complemented by regional approaches, where we are focussing on building new economic relationships with our neighbors in the Americas, through the "Free Trade Area of the Americas"; with our long-time allies in Europe, via the broad-based "New Transatlantic Agenda;" and with the booming economies of Asia, through the Asia Pacific Economic Cooperation forum.
The third key principle of our foreign economic policy is to promote the prosperity of the American people by opening foreign markets and supporting American exports and overseas investment.
Our economy and our standard of living have never been more dependent on trade. In 1970, the value of trade equaled just 13 percent of the value of U.S. GDP. Last year, that figure was an estimated 30 percent. Eleven million American jobs now depend on exports -- jobs that pay 13 to 17 percent more than non-trade related jobs. Thus, it is vital that we maintain the momentum we have generated toward more global and more open trade because our economic well-being, our influential position of economic leadership, and our national security depend on our efforts to secure and protect new opportunities abroad for U.S. businesses.
Our future hinges on our ability to compete successfully in the international marketplace. Secretary Christopher has made the promotion of U.S. economic interests one of our highest foreign policy priorities. At his confirmation hearings, he made it clear that he wanted an "America Desk" at the State Department -- a desk dedicated to supporting U.S. economic interests and our global economic competitiveness. He expects every one of our ambassadors and officers to sit behind the "America Desk."
Reflecting the Secretary's commitment, our Ambassadors at posts around the globe act as our representatives in support of U.S. economic interests. Ambassadors work through "country teams" that bring together the interests, and where possible, the representatives, of different U.S. agencies overseas. Our embassies and State Department officers overseas don't just serve the State Department. Our embassies are the platforms from which we distribute U.S. government services and launch U.S. government policy initiatives overseas. There are no officials from USTR, Treasury, USDA, or even the Commerce Department at many of our embassies, so State officers are the on-call eyes, ears and in-country expert negotiators for the entire spectrum of U.S. government agencies.
Let me describe the State Department's activity in a little more detail. One of our the main missions is to influence foreign governments' laws and policies on economic issues affecting the United States. Working closely with and on behalf of other U.S. government agencies, State Department officers engage foreign governments on issues such as tariff and non-tariff barriers, investment policies, currency and tax regimes, intellectual property rights (IPR) protection, and landing rights for U.S. carriers in foreign airports. They are forceful proponents for open trade and investment rules and they press for legal and regulatory regimes favorable to U.S. business. For example, embassy officers are the front-line troops battling for IPR protection for U.S. computer software, music, films, pharmaceutical products, and trademarked goods and services. They urge improvements in host country laws, and in the way those laws are enforced. For instance, recent embassy efforts produced a clamp-down on audio visual piracy in two Middle Eastern countries, and in Europe, led to the passage of anti-piracy laws in one country and improved implementation of enforcement measures in others.
Our officers, experts on host country policies and politics, are critical in developing strategies for and pursuing negotiations -- often leading them in country -- to lock in foreign IPR protection for U.S. products and services. They maintain close contact with USTR, which depends on their in-country expertise and their host government contacts. And, they work closely with local representatives of key U.S. companies seeking IPR protection.
State Department officers also play an important role in negotiating a myriad of global, regional or bilateral international economic agreements -- and ensuring that they are adhered to. Building on their efforts to set the appropriate climate, State Department officers apply their on-the-ground presence and expertise -- often on behalf of other U.S. government agencies -- to participate in or lead the negotiation of market liberalizing agreements.
For instance, the State Department has led U.S. efforts to combat international business corruption. In 1994, we worked in Washington, Paris, and other capitals to achieve an OECD agreement on a recommendation to combat bribery. This year, we have achieved OECD agreement on a recommendation to eliminate the tax deductibility of bribes. And, we continue to work with our OECD partners toward their criminalizing illicit business transactions. In our own hemisphere, we worked with the Department of Justice on an Organization of American States anti-corruption convention proscribing international bribery.
We also lead -- with USTR -- negotiations of Bilateral Investment Treaties (BITs) intended to protect U.S. investment abroad and to encourage foreign countries to adopt market-oriented domestic policies. BITs lock in equal treatment for U.S. companies, ensuring fair compensation in cases of expropriation, the right to timely transfers of funds, international arbitration, and the discretion to engage top managers, regardless of nationality. Since 1982, the U.S. has signed 37 BITs, 21 of which are now in force. BITs were signed last year with countries ranging from Albania to Honduras, from Latvia to Nicaragua, and we have ongoing negotiations with many other countries all over the world. Our embassies also monitor implementation of BITs and State Department officers are usually the first point of contact for American investors who run into problems in BIT partner countries. They advise investors of any rights under the BIT, and, when necessary, press officials of the BIT partner government to try to resolve problems.
Civil aviation is another area where State, working closely with the Department of Transportation, leads in both setting the appropriate climate for and locking in market access for U.S. business. One of our highest economic priorities is to help our highly-competitive aviation industry meet expanded demand for affordable international air service. Our officers in Washington and in capitals around the world negotiate aviation agreements known as "Open Skies Agreements" that let marketplace competition, not government intervention, determine the variety, quality, quantity, and price of air service. They also defend US air carriers' rights and help them resolve any problems they encounter in exercising these rights. These air service rights benefit not only an important US industry, but also US cities, for whom air services mean new prospects for international trade and tourism. Just since the beginning of 1995, we have negotiated: a Transborder Open Market Agreement with Canada, our largest single aviation market; Open Skies Agreements with ten European countries; a phased Open Skies Agreement with the Czech Republic; liberalized arrangements with Brazil, China, Fiji, India, Hong Kong, Macau, Peru, the Philippines, Thailand, and Ukraine and significant new commercial opportunities for U.S. all-cargo carriers to Japan and other Asian markets.
A third and fundamental role of the State Department is advocacy. Our embassies play an important role supporting U.S. businesses and resolving specific business problems facing U.S. firms. Due to their close interaction with host government officials on policy issues, embassy officers have well-established contacts at various ministries, ranging from Trade and Industry, to Finance, to Customs. They are also experts on host country economies and business practices and they play a valuable role in resolving trade and investment disputes and overcoming business problems relating to local rules, laws, taxation, and import restrictions.
Bringing the unique skills and resources of different agencies at post to bear in these efforts is essential. For instance, State Department economic officers use ministry contacts to press for fair and transparent market access for U.S. goods and services. In concert with these efforts, Commerce Department Foreign Commercial Service (FCS) officers work with U.S. businesses to identify potential customers for their products.
FCS officers are key to making sure that U.S. companies know about and take advantage of new opportunities, while State Department officers are skilled at creating new business opportunities and resolving business problems growing out of local economic policies. For example, in one Latin American country, our embassy played a critical role in opening the oil sector to foreign investment. In Africa, one of our embassies successfully pressed for the resumption of U.S. courier services that had been shut down for competing with the local monopoly. And, in Asia, embassy officers helped a U.S. consortium break a traditional foreign monopoly on the sale of power generation equipment and win a multimillion dollar contract.
Our knowledge of countries and our network of contacts with host governments are perhaps our embassies' most valuable contributions to the interagency promotion of U.S. exports and business interests. Embassy insight, advice and hands-on assistance in country are valued by all U.S. government agencies working to open markets -- whether it's USTR carrying on a bilateral trade negotiation, the Commerce Department promoting a specific company's bid on a project, or the Treasury Department working on a complicated bilateral tax issue.
In an increasingly competitive international marketplace, the efforts of our embassy country teams -- including State Department economic officers and Commerce Department Foreign Commercial Service officers -- are of vital importance to U.S. business and to the promotion of our overall foreign policy goals. As U.S. companies continue to expand into new markets across the globe, and as foreign governments increase their support of their companies, U.S. firms need our on-the-ground expertise and support more than ever. We know that the Subcommittee is concerned about overlap. To the extent that there is any overlap, there is always room for improved coordination. We will work with the Commerce Department and the Subcommittee to eliminate any duplication.
If there's one thing that I learned in the business world, it's the need to talk to your customer. We've been doing that at State, and the input from our customer -- U.S. business -- has been both helpful and positive. U.S. businesses operating overseas regularly praise the assistance they receive from State Department and our embassy country teams. Business tells us that there has been a sea change in the level of cooperation between the U.S. government and American business in the last couple of years. It has become clear to them that our government and our embassies are on their side. U.S. businesses have helped us redirect our efforts and we continue to consult with them on what we should be doing to better promote their interests.
Our ability to continue to provide this level of support for U.S. businesses -- and ultimately the U.S. economy -- depends, of course, on Congress committing the necessary resources.
The State Department, like other federal agencies, is keenly aware that these are lean budgetary times. The President's international affairs budget request for the next fiscal year is the lowest dollar amount in recent history. At $19.2 billion, it represents the rock bottom minimum required by already-streamlined foreign affairs agencies to maintain American leadership. This request is barely one percent of the total federal budget, and represents a fifty percent cut in international affairs budget authority, in real terms, since 1984. Our request of $5.4 billion from this Subcommittee -- almost $200 million less than last year's request -- is the bare minimum we need to safeguard our nation's security and to promote American interests.
We are fully committed to doing more with less. To this end, we now have more than 70 embassies with combined economic and political sections and far fewer personnel. We have eliminated reporting that is not tied directly to our policy goals. We already have had to close 17 overseas posts since 1993 and are scheduled to close 13 more by the end of the current fiscal year. Despite dramatically increased demand for U.S. presence in areas such as the Newly Independent States and East Asia, we have reduced our workforce by close to 2,000 over the past three years. Indeed, by mid-1996, the overall number of overseas positions dedicated to full-time economic work will have declined by approximately 6.5% since 1990. And in Washington, streamlining of the Economic Bureau has resulted in a 20% staff reduction over the last three years.
There is a larger issue that bears mentioning here. By cutting back on resources, we compromise our efforts to promote peace and security around the world -- and to promote a stable climate for American exports and investment. In an increasingly interdependent global economy, U.S. security and prosperity depend on the success of our diplomatic investments in security and prosperity abroad. The short-term savings from further reducing the U.S. international affairs budget inevitably will have tangible economic and political costs. The consequences for our national economy and our vital national interests are too great to make it worth it.
This concludes my prepared statement. I appreciate the opportunity to appear before the subcommittee and I will be pleased to answer any questions or to respond to any of your concerns.
[end of document]
Back| Home Page| What's New| Hot Topics | Policy| Travel| Budget