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. |
Remarks by Alan P. Larson, Assistant Secretary of State for Economic and Business Affairs, to the National Conference of Editorial Writers, Washington, DC, February 14, 1997
Good morning. It is a pleasure for me to talk with you this morning about the increasing significance of international economic issues on our foreign policy agenda. I am interested in hearing your thoughts and perspectives. I also view this session as a valuable opportunity to let you know what we are doing overseas. The State Department needs to make as great an effort at reaching out to you and your readers as we do to communicating with our counterparts overseas and inside the beltway.
We are at the start of a new world era in which America's security and prosperity will depend greatly on how effectively we integrate economics and foreign policy. It is America's vocation to lead in the establishment of new policies and institutions. Fifty years from now, we may look back on the initiatives we have underway now and see them as part of the historical continuum that includes the establishment of NATO, the Bretton Woods institutions, and the Marshall Plan.
The Centrality of Economics
There is no time in our history as a nation when economics has been more important to our foreign policy than it is today. There are two principal dimensions to this relationship. The first dimension is that successful American participation in the world economy is now more vital to prosperity at home than it has been since the early nineteenth century. The second dimension is that many of the great foreign policy challenges of the day--for example, integrating China and Russia peacefully into the community of nations--can be achieved only with the creative use of economic policies and institutions.
For most of our national history, international trade and investment had a relatively small impact on income and jobs at home. In the nineteenth century, territorial expansion, immigration and, to a lesser extent, the inflow of foreign capital drove the growth of the economy. During most of this century, industrialization and technological change dominated. During the post-War period, this began to change, and the international economy began to intrude on the domestic economy, at first negatively but later more positively.
After the collapse of the fixed exchange rate system in 1971, foreign exchange fluctuations began to influence the domestic economy. The oil shocks of the seventies demonstrated the potentially dangerous aspects of energy interdependence, while the debt crises of the eighties made clear that financial developments abroad could disrupt markets at home.
More recently, however, the positive aspects of economic interdependence have been most noticeable. The share of trade - exports plus imports - in America's gross domestic product has grown from 14 percent in 1970 to nearly 30 percent in 1995. The United States is now the world's largest trader, the world's largest exporter, the world's largest foreign investor and the world's largest recipient of foreign investment. The weight of European Union and Asian shares of trade has also grown.
During the last ten years, growth in real exports has accounted for roughly one third of the nation's growth in jobs and output. On average, these export jobs pay 15 per cent more than jobs unrelated to exports.
You are no doubt aware of this trend. Last Christmas, the Wall Street Journal ran a story explaining that outward-looking states more closely tied to foreign markets will be better prepared to both grow and effectively navigate business cycles than states not adequately diversified. It pointed out that between five and fifteen percent of the gross state product of every state on the east coast was generated by merchandise and commodity exports alone - excluding services - in 1995.
American competitiveness overseas is therefore crucial and has to be met head on. Our industries are competitive because of the vitality of our economy and its high productivity. We have the world's best technology, motivated and trained workers, and probably the world's most competitive economic environment at home. These industries have also been strengthened in the rough and tumble of our deregulation processes, which has made them tougher competitors. These are what make our products and services competitive globally as well. Our foreign policy sets the ground rules so that companies have the chance to compete or collaborate, all on an equal basis.
Our Foreign Service, from Ambassadors to our cadre of economics advisors and commercial experts, serves on the front lines to make sure the playing field stays level. There is growing interest, enthusiasm and energy from our overseas diplomats to effectively engage in commercial advocacy.
These activities will continue. Ninety five per cent of the world's consumers live outside our borders. Many of them are in dynamic markets in Central Europe, Latin America and Asia, markets that are integrating with the world economy and are growing faster than our traditional export markets. We have a responsibility to be present in these regions, especially since our economy has a stake in the success of those countries' stability and productivity.
As a result, American prosperity in the future will depend on whether peace and prosperity reign in these dynamic regions of the world. Our interest in fostering peace and prosperity abroad will be increasingly based on economic interests, and not only on security or humanitarian concerns. Our prosperity will also depend on whether we are able to ensure that the markets of these emerging economies remain open to our products and investments. In short, our prosperity will depend increasingly on the success of our foreign policy and our international economic policy.
But the relationship runs deeper than that, and I will give you some examples. During the Cold War, when containment of the Soviet Union was a cardinal objective, military preparedness and security alliances were pre-eminent policy tools. In the post-Cold War world, when integration, and not containment, of Russia into the world community is a cardinal objective, economic tools loom larger. The International Monetary Fund and World Bank have provided Russia extraordinary access to resources to stabilize its economy and to transform the institutions of central planning to those of private sector-led, market-based economy. We are trying to foster Russia's effective participation in the World Trade Organization, in the Paris-based club of official creditors, in the OECD and in APEC. Our overall level of security will depend on how successful these economic endeavors turn out to be.
The integration of China into the international system will be one of the great foreign policy challenges of the next century. If China's economy continues to grow at anything like its recent very high rates, the impact on the world economy will be profound.
Our businesses and workers can share in and contribute to China's prosperity. We need to ensure, however, that as China emerges, it plays a responsible role in shaping, and abiding by, international rules. That is why we support China's entry into the WTO but insist on commercially meaningful terms.
In the Middle East, economics is an indispensable foundation for a durable peace. We need to work with leaders in the region for a win-win agenda of economic growth and cooperation. In this regard, the World Bank has played a crucial role in funding and coordinating efforts to develop infrastructure in the West Bank and Gaza. In time, we hope that the Middle East Economic Development Bank will help overcome the economic fragmentation of the region by supporting trans-boundary infrastructure projects, private investment and growth of the private sector.
In both Haiti and Bosnia, our foreign policy goals depend on the efforts of bilateral donors, multilateral development banks and the IMF to rebuild political and economic institutions which will in turn foster a civil and stable society.
There are few places in the world not touched by international transactions, and we are also using economic policy as a way to project American values overseas. For that reason, we have led the fight to eliminate bribery and corruption in international transactions and level the playing field for international business. Corruption is very damaging to the young democracies we are trying to nurture. We are therefore urging the OECD nations to criminalize bribery, as we did twenty years ago. We are also demanding that as part of that criminalization the practice of allowing bribes to be written off as tax deductions, as is the practice in some OECD countries, be outlawed immediately. The OECD recommended this step last year and it should be enforced by legislation in the member countries.
Effective, early and multilateral use of economic tools can help us forestall crises that, left to fester, could later require us, as the world's remaining military superpower, to intervene alone at much greater cost in blood and treasure. That, I believe, is the operating assumption we must follow.
The Necessity of U.S. Leadership in the World Economy
One of the most important points that we have to drive home is that American leadership in the world economy is essential and desirable.
In international economic policy, the United States will continue to be the indispensable nation.
To exercise American leadership in the world economy we will need to rebuild a bipartisan constituency to support a sensible foreign policy. The two most immediate tests are trade negotiating authority and foreign affairs funding. The negotiating authority allows us now to conclude new trade agreements that open markets to our goods and services, maintain the initiative globally, and regain it in this Hemisphere. Without such authority, the United States is sidelined.
We also need bipartisan support for adequate foreign affairs funding to make good on our payments arrears to international organizations and to international financial institutions. Secretary Albright's recent efforts on this score are vitally important. The Denver Summit of the leaders of the G-7 countries, scheduled for late June, will provide a great opportunity for the President and the Secretary of State to stress to the American people the importance of U.S. engagement in the world economy and to demonstrate to the world the U.S. commitment to provide international leadership.
The State Department is the agency that must conceptualize an overall international economic policy, negotiate certain agreements, support negotiations of other agreements, and coordinate their implementation with strong input from our Ambassadors in the field. The Department has improved its ability to do this in recent years, and the result is that the U.S. Government is laying the foundation for a new world economy in which there is much freer movement of goods and services, of capital and travelers, and of information and ideas.
For example, during the past two years, we have reached liberalizing, pro-market Open Skies aviation agreements with Germany, eleven other European countries, Jordan and Singapore. We are actively pursuing similar agreements with key Pacific rim economies and with the countries of Central America. Finally, we are engaged in watershed negotiations on Open Skies with the United Kingdom and Japan, the gateways to Europe and Asia respectively.
In tandem with the U.S. Trade Representative (USTR), we are pursuing negotiations in the World Trade Organization that will ensure that the information superhighway extends throughout the world. Last December in Singapore, we provided key support for negotiations that resulted in the Information Technology Agreement. Under the ITA, tariffs will be eliminated on over $500 billion in products. We are now in the end game of a related WTO negotiation to liberalize basic telecommunication services. We are optimistic that an agreement will be reached tomorrow, February 15, which could substantially push privatization, liberalization, and investment in another $500 billion worldwide market, and allow US telecom firms greater competitive access to these markets. .
The State Department, with USTR, is leading negotiations in the OECD on a Multilateral Agreement on investment. Our objective in the MAI is to create new opportunities and stronger protections for foreign investors. We will make the agreement open to accession by non-OECD countries so that the agreement might lift investment standards throughout the world.
Taken together, these initiatives will lay the foundation for a new world economy in the twenty first century. American aviation and telecom firms, hardened by deregulation and accustomed to competition on a continental scale, are well positioned to benefit from these new market opportunities. Our investors, who are major conduits for our exports abroad, will have greater opportunities and protection as a result of the basic telecoms and MAI agreements. Contractors for major infrastructure projects will benefit from stronger disciplines against bribery.
These initiatives also advance our democratic values and political interests. Our international economic policies should have as one of their leading goals the encouragement of trends which can make the world more friendly to democratic values.
Conclusion
We are heading into the next century with energetic leadership from a new Secretary of State. We look forward to an ongoing dialogue about our goals in foreign policy and the crucial role now being played by international economic policies. We think that using our resources wisely in pursuit of these linked activities can help us successfully deal with the challenging new era of global competition and prosperity.
[end of document]
Return
to the DOSFAN Home Page
This is an official U.S. Government source
for information on the WWW. Inclusion of non-U.S. Government links
does not imply endorsement of contents.