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Embassy of the United States
Caracas, Venezuela
Public Affairs Office
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The U.S. and Globalization
Remarks of Richard M. Sanders
Economic Counselor of the Embassy of the United States
Before the World Future Society of Venezuela
July 15, 2003
Mr. Jose Luis Cordeiro, President of the World Future Society of Venezuela, Mr. Antonio Nicolas Briceno Braun, Vice President of the Society, Mr. Aldo Spallone, General Manager of the Society, distinguished participants in this seminar, members of the World Future Society, my friends.
I have been asked to provide a U.S. perspective on globalization. "Globalization" is a word that has been used a great deal, perhaps, over-used. I recently typed the word into Yahoo! in the internet and was told that there were 1.71 million hits!
Perhaps the definition which most closely captures the way this term is most often used comes from U.S. journalist Thomas Friedman in his well known book "The Lexus and the Olive Tree: "The inexorable integration of markets, nation-states, and technologies to a degree never witnessed before-in a way that is enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper than ever before . . . . the spread of free-market capitalism to virtually every country in the world "
This is an important aspect of globalization, and it is one that I wish to speak about in greater depth. However, I believe that we have to look at this process from a broader perspective than the purely commercial. Just to provide a few examples from recent months.
-- Soon after the Severe Acute Respiratory Syndrome, (SARS) appeared in China, it quickly spread to other Asian countries, and to North America. Public health experts from around the world, including, experts from the United Nations, the U.S. government's Center for Disease Control, and from other countries, became rapidly engaged in the global effort to understand and contain this infirmity, which appears to be having success. Here you have an example of the globalization both of threats to public health and of the response to them.
-- Just a few days ago, both the U.S. and Mexican Attorneys General filed indictments against the three Arellano Felix brothers and eight of their subordinates. They are accused of ordering murders to consolidate their control of the flow of narcotics into the United States.
Federal authorities also cited evidence that the Arellano Felix cartel tried to send weapons to Colombian guerrillas in exchange for drugs. Here you have an example of the globalization of narcotics and terrorism on one hand, and of law enforcement cooperation to combat them on the other hand.
-- This April, in the harshest crackdown on dissent in nearly four decades, the Cuban government jailed 75 opposition activists and independent professionals for allegedly conspiring against the state. Sentences of up to 28 years were handed down this month in a series of summary trials. This action sparked a worldwide outcry, from human rights organizations, journalists, and parliamentarians and governments. The international reaction to the Cuban government's arrests was vivid proof of way in which concern for human rights can rapidly be mobilized, another dramatic example of globalization.
Globalization of the effort to combat threats to public health, to fight terrorism and narcotics trafficking, and to uphold human rights. These all seem perfectly logical, and indeed inevitable. Illness, criminality, and tyranny are global phenomena, and require a global response.
But what about the other globalization, the globalization of trade, transportation, and investment into ever larger markets? This globalization has become the target of a wave of criticism -- and has generated protests, generally peaceful, but sometimes violent, when institutions associated with the globalization process meet: The World Trade Organization, the International Monetary Fund, the Summit of the Americas Process.
And, of course, for those suspicious of globalization, there is no entity like the government of the United States, as an object of criticism.
I want to be clear. My government supports the expansion of international trade and investment. Historically, they have proven to be the key engines of growth and development. Larger, more open markets benefit producers and consumers alike.
This organization is devoted to looking at the future. However, I think it is important that we look at the past, and in particularly the history of modern economic science. We start with the father of neo-classical economics, David Ricardo, whose famous "Principles of Political Economy" demonstrated more than two hundred years ago the basic logic of comparative advantage - that in the final analysis, it is always in a nation's interest to produce the items in which it is best at doing, and trade those items for those products which other countries that are better at producing. All of us who studied introductory economics remember those examples of how Ricardo's thesis works.
Of course, economic science has advanced vastly since the days of Ricardo. We all recognize that the real world is much more complex than a simple, albeit logically elegant model. It is understood that the gains from international trade are aggregate - a nation as a whole surely benefits, but not all its citizens.
The reallocation of capital to more efficient uses can translate into permanently lower income for those who are not prepared to take advantage of new opportunities. Hand in hand with basic factors of economic wealth - labor, capital, land, are education, technology, and the quality of judicial systems and public administration.
All of these factors are crucial, but they should not obscure the basic reality -- without trade none of them can be converted into wealth creation, and in turn development and diminution of poverty.
The United States is committed to progress on trade liberalization and is proceeding on a wide range of fronts. This is good news, not only for Americans, but all our trading partners. There is no economy on earth that combines the size and dynamism of the U.S.economy.
Free trade agreements grant other countries increased access to this vast market, and encourage the vast pools of capital which exist in the U.S. to look outward for investment opportunities. Thus they can be powerful incentives for growth, particularly among developing economies.
Let me briefly sketch out the different fronts on which we are seeking progress on trade. First, at the most general level, we look for forward progress on the "Doha Development Round" of multilateral negotiations at the World Trade Organization. This effort, launched in November of 2001 has an ambitious agenda. It covers implementation of existing trade commitments under the earlier "Uruguay Round" of trade negotiations, plus agriculture, services, market-access for non-agricultural products, intellectual property rights, competition, government procurement, investment and such complex issues new to the international trade agenda such as the environment, and the interrelation of trade, debt and finance.
While we look for progress on the Doha agenda, the United States is at the epicenter of a series of regional trade liberalization efforts.
The one best known here is the Free Trade Area of the Americas (FTAA). But before we think about that, we should remember that there are other equally important, although admittedly not as advanced, trade liberalization processes going on.
In 1989 when former President George H.W. Bush was President of the United States, the Asia-Pacific Economic Cooperation (APEC) forum was established to promote economic integration around the Pacific Rim and to sustain economic growth. APEC currently has 21 members: Its member countries make up half the world's GDP and 43% of its trade.
APEC's agreed-upon a goal is the creation of an open trading system in the Pacific, with a target of 2010 for full trade liberalization by the rich countries, and 2020 for its developing countries.
While the APEC process continues to mature, in another part of the world the U.S. has unveiled a similarly bold commercial initiative, the creation of a "U.S.-Middle East Free Trade Area" by the year 2010. The goal, as President George W. Bush, has said, "is to bring the Middle East into an expanding circle of opportunity, to provide hope for the people who live in that region."
And, while we look at broad multilateral trade liberalization efforts through the WTO negotiations, FTAA, APEC, the Middle East Free Trade Area, we have, or are in the process of negotiating Free Trade Agreements with individual countries or groups of countries which through their commitment to economic reform and modernization have shown themselves to be especially good candidates.
Agreements with Singapore and Chile have already been signed and await Congressional approval. An agreement with the five Central American nations is at an advanced stage of negotiation. Negotiations are also taking place with Morocco, Australia, and the five countries of the Southern Africa Customs Union..
But as we reach out across the Atlantic to the Middle East and across the Pacific to the APEC countries, and work with key individual countries, at the heart of our trade agenda is the creation of the Free Trade Area of the Americas.
The Free Trade Area of the Americas is historically and conceptually heir to the North America Free Trade Area -- NAFTA. Thus it is building on a remarkable success. As a result of NAFTA, Mexico has tripled its trade with the United States and doubled its trade with Canada. Mexico has surpassed Japan as the United States' second-largest trading partner. NAFTA has led to the tripling of the annual flow of international investment in Mexico.
It is generally recognized that as a result of NAFTA, together with its prudent macro-economic management, Mexico has been able to navigate periods of global financial turbulence much more easily than in previous periods. And although its harder to quantify, I believe that by anchoring its economy to the modern, developed economies of U.S. and Canada through NAFTA, Mexico created an important stimulus for its own political development - deepening its democratization and its respect for human rights and the rule of law.
The FTAA process aims to replicate the success of NAFTA throughout the 34 democratic countries of the Western Hemisphere. The goal, reiterated in the November 2002 meeting of Trade Ministers in Quito, is the conclusion of negotiations no later than January 2005 with the entry into force of the agreement as soon as possible thereafter, but no later than December 2005.
How are these negotiations going? It is worth noting that in the case of just about every successful trade negotiation, up until final agreement, there has never been a shortage of analysts prepared to predict failure.
From our point of view, the various negotiating groups are continuing with their work, as they were mandated to do at the November, 2002 ministerial meeting in Quito, and we hope to have continued forward movement, leading to the Miami trade ministers' meeting in November of 2003.
As is always the case in multilateral trade negotiations, nothing is agreed until everything is agreed. But the U.S., along with its other trading partners, is working hard, using a single consolidated text as a basis.
For instance, we have made a very bold proposal on consumer and industrial goods. We are prepared to provide duty-free treatment for almost two thirds of U.S. imports of consumer and industrial goods from the region's countries once the FTAA takes effect, providing our trading partners make reciprocal offers.
Under this proposal all consumer and industrial goods produced in the Americas should receive duty-free treatment throughout the hemisphere by 2015.
Will we reach agreement in the time frame mandated in Quito? Admittedly, a lot of work will need to be done. The FTAA covers a wide variety of issues such as investment, services, agriculture, government procurement, non-agricultural market access, dispute settlement procedures, etc.
But there seems to be some confusion on the part of those who say that 2005 is too soon. Reaching agreement by that date does not mean that there will be 100 percent free trade in all goods and services immediately.
There will be transition periods for different sectors and different countries, which naturally will vary depending on the structures of the 34 countries participating. Determining these transition periods will be a big part of the negotiation.
There is quite a bit of debate over whether countries are "ready" for FTAA negotiations, whether they should concentrate working within their existing sub-regional groupings or expand them to their immediate neighbors as a prelude, or even as substitutes for hemisphere-wide trade negotiations.
I would only note the words of the Secretary-General of the Andean Community at the recent summit of Andean leaders at Quirama, Colombia: "The aim of strengthening Andean integration is not incompatible in any way with the efforts of our countries today to give their products more access to world markets. On the contrary, the size and strength of our common undertaking will be largely put to the test in the different negotiating fronts that lie ahead."
And I would add that in a world of increasing globalization - to return to that so polemical word -- countries which are inactive or stay aloof from the process will inevitably find that others, more aggressive in participating in bilateral, regional, or global negotiations, and more interested in finding creative solutions acceptable to differing interests, are more likely to find their concerns reflected in final agreements.
As we work together to create the commercial architecture for the rest of the century, we do need to remember the inter-relation of this economic globalization with the other types of globalization of respect for human rights, of law enforcement, of public health, of the environment, of labor standards. This globalization is not opposed to the globalization of commerce. Rather, the two forms can be mutually reinforcing.
To me, a common thread in many of the different forms of globalization which we are seeing is the importance of respect for rule of law. The modern international trading system, which we are always trying to deepen and perfect, based on the idea of a rules-governed system, rather than one in which decisions are made on the basis of an individual trading state's short term interest.
The imperative to respect the rules becomes stronger and stronger as countries participate in the international trading system which we are building. Independent, judicial systems, and healthy, impartial public administrations, be they customs services, sanitary authorities, or intellectual property agencies will be required. The need to create these structures to benefit from free trade creates over time a dynamic in favor of democracy, honesty and respect for human rights, and against tyranny, corruption, terrorism, and criminality.
And equally, to the extent that countries work to strengthen their own democratic systems, they are in effect preparing themselves for trade liberalization.
So ultimately, I believe that free trade, globalization, respect for the rule of law really are different aspects of the same phenomenon. And that phenomenon also has another name -- the future!
Thank you.
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