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.

Jeffrey Davidow, Assistant Secretary for Inter-American Affairs Testimony before the Trade Subcommittee of the House Ways and Means Committee Washington, DC, July 22, 1997

Thank you, Mr. Chairman, for this opportunity to join my colleague, Ambassador Lang in testifying on this critical issue.

First, I want to emphasize that I agree whole-heartedly with Ambassador Lang's testimony that the Free Trade Area of the Americas is strongly in the U.S. interest, and will be good for U.S. workers, businesses and consumers. What I would like to add is that there are equally compelling arguments for the FTAA from the perspective of over-all U.S. foreign policy toward Latin America and the Caribbean.

Our policy toward Latin America is derived from three basic objectives established by the President and the Secretary of State for our overall foreign policy:

First, to keep the United States economically strong, internationally competitive and prosperous, and to preserve its position as the hub of an expanding global economy.

Secondly, to preserve and advance freedom by promoting the principles and values upon which this nation's democracy and identity are based.

Third, to establish a framework of cooperation that protects our citizens and our friends from the new transnational threats of environmental degradation, narcotics trafficking, migrant smuggling, terrorism, and international crime.

Construction of the FTAA serves each of these objectives. First, by promoting greater efficiency and economic growth in all the participating economies, the FTAA will strengthen our economy, providing new opportunities, and a better quality of life for U.S. workers, businesses and consumers, as demonstrated in the previous testimony. Further, the ability of the U.S. economy to create jobs, provide opportunities and project its strength globally is admired and envied throughout the world. That gives credibility to our nation as a model of democracy and market economics, and it gives our diplomacy a special strength.

Secondly, the FTAA will also strongly promote our values. The increased impulse to growth and investment in Latin America which will be provided by the FTAA will further consolidate market-based reforms underway in the region and strengthen democracy. Indeed, the commitment by the hemisphere's leaders to the principle of free trade has in itself been a catalyst accelerating reform and investment in the region.

The opening of markets and enhanced competition envisioned by the FTAA also serve as an impulse to social mobility--a key factor in long-term political stability. Closed economies allow the well-connected to grab and keep the best opportunities, and thus tend to perpetuate the positions of the privileged. But economies based on competition reward efficiency, innovation, and enterprise regardless of political or social connections. Indeed, the FTAA has come to symbolize Latin America's new open economic model; the FTAA's emphasis on growth, competition, efficiency, and innovation are exactly the qualities which the region's economic reforms are designed to encourage.

This brings me to a criticism often leveled at FTAA and trade liberalization in general, namely that freer trade may increase growth in the economy overall but only to benefit the rich. Recent research shows exactly the opposite. For example, an IDB study of 13 countries which significantly opened their trade regimes during the period 1985-95 showed that trade liberalization was associated with an increase in the real incomes of the lower 60% of the population. The increase was largest for the poorest 20%, and the richest 20% of the population experienced a small drop in real income. These are important findings that need to be better understood not only by policymakers but also by the public whose support must be maintained or won for free trade policies.

Thirdly, the FTAA will contribute strongly to the new cooperative framework between the United States and Latin America. Economic vitality is indispensable to protecting the environment for future generations and waging an effective fight against illegal migration, the drug trade and other forms of transnational crime. Without broadly-shared growth, citizens' trust in their governments and institutions deteriorate, state legitimacy erodes, the rule of law weakens and social ills propagate. The growth and opportunities provided by the FTAA will put a strong new weapon in the hands of those Latin American leaders who want to work cooperatively with us in addressing these problems.

It is no wonder then that the movement to free trade has become one of the cardinal points of U.S. strategy toward Latin America. From the very beginning, when President Bush first proposed the concept of hemisphic free trade in June 1990, this idea captured the imagination of people throughout Latin America and the Caribbean. The specific initiative by President Clinton and the other 33 democratic leaders of the hemisphere to negotiate the FTAA by the year 2005 was the centerpiece of the Miami Summit of the Americas in December 1994. Even though the Miami Summit endorsed an Action Plan of 23 initiatives, the FTAA was clearly one of the boldest and most dramatic initiatives and has remained so ever since. Indeed, for many in Latin America and the Caribbean, the FTAA--with its offer of an economic partnership among countries with juridically equal rights and obligations--has become the cornerstone of the new relationship between the U.S. and Latin America.

As you know, there has been considerable progress toward achieving the FTAA goal through technical working groups and ongoing meetings of the hemisphere's vice-ministers and ministers of trade. We are now reaching a critical juncture in this process--moving from the preparatory phase to the actual negotiations. As noted in Ambassador Lang's testimony, the hemisphere's trade ministers at their meeting in May in Belo Horizonte recommended to their presidents and heads of government that the FTAA negotiations be launched at the Santiago Summit in April 1998. The Ministers will meet again in February in San Jose, Costa Rica to make recommendations for the Summit on the structure, pace and venue of the negotiations.

Our efforts toward the FTAA are complemented by the joint effort of the Administration and the Congress to enhance trade opportunities for countries which are beneficiaries of the Caribbean Basin Initiative. I want especially to express my appreciation to this Subcommittee on this point. We have major strategic and economic interests in the countries of Central America and the Caribbean, which are among our closest neighbors and with whom we share many historical and social ties. Providing these countries with improved access to the U.S. market will stimulate increased trade and growth in their economies, which in turn will provide new opportunities for U.S. exports and investment, and protect our other interests in the region.

Clearly then, there is forward momentum, both in our overall trade relationship with the rest of the hemisphere, and in reaching the FTAA goal. But the ability of the U.S. to shape the upcoming FTAA negotiations and influence the way trade will flow and economies will work in the future will depend on our ability to lead, and to negotiate with credibility.

As has been pointed out by trade negotiators, academic experts, politicians and business leaders, this means that U.S. negotiators must be backed by fast-track. One of the clearest arguments made on this issue comes from one of your distinguished predecessors, Mr. Chairman. When he testified before your Subcommittee in March, former Congressman Sam Gibbons (who as Chairman of this Subcommittee was an official advisor to numerous international trade negotiations) said that, without fast-track:

"No foreign government will make a deal with us in a negotiation because they know from experience that Congress will ultimately re-write the agreement. No other country negotiates like the United States.... Their Parliaments only accept or reject, so they require us to do the same before they will sit down to serious negotiations with us."

For the United States to maintain our traditional leadership role in global economic policy, it will clearly require expeditious congressional approval of fast-track procedures. Without this, our negotiators in effect become glorified observers in the negotiating process, and we cede the initiative to other countries.

Let me emphasize also that there has been no lack of initiative among hemispheric countries. As Ambassador Lang pointed out, over the past few years, a network of free and partially free trade agreements has developed covering every country in the hemisphere. This network is now expanding beyond the hemisphere to include Europe and Asia. The rules and structures of these agreements are setting precedents which will have an increasing influence on the way trade and investment are conducted in this hemisphere, and on the internal policies and institutions of participating countries. In effect, this ship has already left port. If we want to maintain our influence in the hemisphere and protect the interest of U.S. workers, businesses and consumers, we must have the legislative authority to allow us to act with credibility.

Let me close by pointing out that political and economic leadership are inextricable in today's world. If we lose our ability to lead in the trade arena, we will increasingly lose our influence strategically, politically, and in other spheres of international relations. This is not just an issue of internal Congressional procedures, or of internal U.S. politics, this is nothing less than a question of our ability to protect our interests, our willingness to keep our commitments, and our ability to lead effectively around the world.

Particularly now, when democratic governments of the hemisphere have come to an unprecedented consensus, it would be tragic if we were to lose this historic opportunity to form a true and lasting partnership with our American neighbors.

[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.