2008 Latin American Cities Conference
I would like to thank Susan Segal, President and CEO of the Americas Society and Council of the Americas, Daniel Ferrere, President of the Chamber of Commerce Uruguay – USA, and Luis Enrique Berrizbeitia, Vice-President and Deputy Chief Executive Officer, Corporación Andina de Fomento, for bringing us together this morning for a thoughtful conversation about the common future and interdependent fate of all the nations and 900 million people comprising the Americas.
I would also like to express my appreciation to Danilo Astori, Uruguay’s Minister of Economy and Finance, and Daniel Martinez, Uruguay’s Minister of Industry, Energy and Mines, and the other distinguished speakers, for their informative presentations. But, I especially want to extend my gratitude to our Uruguayan hosts, particularly the public officials, private sector leaders, and the citizens of Montevideo, who have greeted us so warmly and accommodated us with exceptional hospitality.
Uruguay has a way of ushering some of the world’s most ambitious initiatives. Two in particular are relevant to what I’d like to discuss this morning. In 1961, in Punta Del Este, President John F. Kennedy signed the charter for the Alliance for Progress. In describing the 10-year plan, President Kennedy said, “we propose to complete the revolution of the Americas, to build a hemisphere where all men can hope for a suitable standard of living and all can live out their lives in dignity and in freedom. To achieve this goal political freedom must accompany material progress . . . Let us once again transform the American Continent into a vast crucible of revolutionary ideas and efforts, a tribute to the power of the creative energies of free men and women, an example to all the world that liberty and progress walk hand in hand.”
Two and a half decades later, in 1986, also in Punta Del Este, the Uruguay Round of trade negotiations was launched with the most ambitious goals for trade integration that the world had ever seen. Uruguay is evidently the place to be something new!
This morning I would like to discuss the importance of cultivating a stronger connection between Latin America and the United States. Because trade is one of the most durable linkages between us, I will focus on what gets in the way, and what is most likely to lead the way of deepening our economic ties.
Let us hope that the spirit of our spirited discussions will pervade the deliberations taking place throughout the Americas about our common destiny. We cannot pursue a path to a peaceful, progressive, and prosperous future with platitudes. The hard work of blazing a trail to a better life for our families, our countries, and our region requires practical policies and pragmatic politics anchored to core principles that to every extent possible are based on consensus.
I believe a durable yet flexible and meaningful consensus - whether within a country or between countries - derives from mutually beneficial cooperation. This principle is an essential component of the positive economic currents that are reinvigorating much of Latin America. Please take my presence at the Latin American Cities Conference here in Montevideo as an expression of my personal commitment to help my country construct a policy toward Latin America consistent with this concept.
Let me add that the United States and the world could learn a lot from the example Latin America is setting. Unfortunately, the collapse of the Doha Round shows that the world’s most significant global powers have not absorbed the Latin American lesson. Rather than achieve an outcome that would have boosted economic growth worldwide, members of the World Trade Organization (WTO) walked away from Geneva with the current networks of erratic and often incoherent tariffs still firmly in place and the strong likelihood that global trade will further fragment into regional and bilateral agreements.
But, let us not give up hope that the Doha Development Round can be revived. After all, it took nearly 8 years for the Uruguay Round to be concluded. It’s not surprising that what would be the largest trade deal in history, covering everything from AIDS treatment to recreational boats to agricultural subsidies, would encounter enormous difficulties.
The question is what happens now in the absence of an agreement? What should we do in the Americas? What steps should be taken to at least partially fill the vacuum the collapse of the talks creates?
When I was growing up, the kids in my neighborhood would divide up and play baseball or basketball against each other, but when kids from another neighborhood came by my friends and I knew came together as one team in order to effectively compete with the other neighborhoods. The nations making up the western hemisphere are from the same neighborhood. Despite whatever differences we may have among ourselves we need to come together as a team.
While playing sports in my youth I learned the importance of not taking one’s team mates for granted. I made this mistake during my first years on the House Foreign Affairs Committee. I focused on Africa, Asia and the Middle East but not the western hemisphere. Then it dawned on me that all of the region’s independent states and 900 million people could become a championship team. This neighborhood has an abundance of what U.S. foreign policy seeks in other parts of the world: shared values, imaginative leadership, innovative entrepreneurs, common security needs, potential for extraordinary economic integration, and enormous possibilities of implementing a mutually beneficial agenda of social advancement.
Most western hemisphere countries are striving to modernize their economies and infrastructures. Most are endeavoring to achieve environmentally sustainable and equitable social and economic development. Their quest for higher living standards, accessible health care, adequate housing, universal quality education, reasonably-priced information technology, the eradication of poverty, and elimination of inequality represents one of the largest, long term markets in history.
The challenge we face as a region is how to turn these needs into markets. How to link domestic want to the upside of globalization while minimizing the impact of the downside of globalization. While aid from the more developed neighbors to the less developed neighbors is important and ought to be increased, I submit that trade is underutilized as a vehicle for meeting development challenges.
Trade has long been one of the strongest linkages between Latin America and the United States. Latin America is the fastest growing U.S. regional trading partner with the exception of Africa, which has had strong export growth due to the rise of petroleum prices. Between 1996 and 2007, total U.S. merchandise trade (exports plus imports) with Latin America grew by 137% compared to 110% for Asia (driven largely by China), 114% for the European Union, 294% for Africa (petroleum driven), and 120% for the world as a whole.
A deeper look at the data reveals that in 2007 U.S. trade with Latin American nations grew faster than U.S. trade with Mexico, historically our greatest trading partner in Latin America. U.S. exports are now growing faster than imports. Total merchandise trade is an increasingly important part of the U.S. economy, rising from 8.2% of gross domestic product in 1970 to 25.4% last year. Exports have has been critical to keeping the U.S. economy afloat despite the difficulties it has experienced over the last year. Clearly, trade with Latin America is a crucial component of this trend toward greater reliance on global trade.
That so many Latin American countries are doing so much better than they have in the past is the result of hard work by a new generation of leaders who have laid the foundations for sustainable growth. A number of Latin American nations instituted innovative economic reforms that helped to enhance their participation in the global economy. On average, Latin American import tariffs declined from 45% in 1985 to 9.3% by 2002. I would argue that preferential trading arrangements (PTAs) and free trade agreements (FTAs) have been important components of this progress.
To a great extent, the breakdown of the Doha talks reflects divergent views between developing and developed nations. The mixed results of regional or bilateral negotiations between the U.S. and Latin American countries flow from this dynamic as well. These disputes usually play out this way: The United States clings to agricultural subsidies and antidumping policies while our Latin American neighbors want U.S. domestic subsidies reduced, its antidumping measures ended, and barriers to accessing U.S. markets removed, including tariff rate quotas.
I’m optimistic that we can break this deadlock if we focus on finding common ground. As an alternative to unwieldy and disjointed bilateral agreements, I believe the U.S. and its neighbors throughout the Americas should seek a broad agreement at the WTO or negotiate a mutually beneficial hemispheric agreement.
No one can say whether or when the Doha talks will be revived. The one thing that is sure is that uncertainty is unlikely to produce what countries participating in global trade need the most - stability and predictability in global markets.
I fear that the failure of the Doha Round could unleash protectionism. While every country’s legitimate interests merit protection, I question is whether protectionism in the age of globalization will achieve that goal. I am concerned about two things in this regard: How newly emerging economic powers and still-weak sectors of the economies of developing countries will fare over the long term. And, how given sectors of the economies of the developed countries, given the housing and financial crisis in the United States that is reverberating throughout the global financial system, will fare in the face of protectionism at home and abroad.
It seems certain that more and more countries are going to turn to bilateral and multilateral agreements. I suspect that this will be particularly true in the Americas. This may very well intensify the tensions that sometimes exist between the United States and its hemispheric neighbors. In recent years, many countries of the region have shown a growing interest in participating in preferential trading arrangements (PTA) in order to expand exports. I think in part this is become negotiations and mutually beneficial cooperation are a way of managing differences and minimizing tensions.
These arrangements and agreements usually are not controversial unless the United States is involved. The fact is U.S. participation in preferential trading arrangements or free trade agreements with Latin American, Central American, or Caribbean countries sparks controversy in Latin America and in the United States.
A climate has to be created conducive to developing the political will necessary for concluding trade pacts and forging economic and commercial ties between the U.S. and the rest of the Americas. This means doing a much better job of educating the public about the benefits of trade agreements. It also means to a much better job of fashioning policies and programs that overcome the legitimate disenchantment that many people in the U.S. and in Latin America have with globalization. Trade agreements have become a metaphor for the downside of globalization. Bitterness persists when everyday needs go unmet, when wages fail to buy enough food for the dinner table, when education seems relentlessly out of reach, when infant mortality continues to soar, or when a worker doesn’t make enough to afford the fuel he or she needs to drive to work.
The collapse of the Doha negotiations together with the coming inauguration of a new U.S. administration six months from now presents the Americas with an unprecedented opportunity to begin forging a new relationship, particularly with respect to trade and investment, and a chance to construct a new framework for hemispheric cooperation and renew our joint focus on hemisphere unity.
Elements or aspects of Re could include: expanding mutually beneficial trade; making greater use of capacity-building provisions to help accelerate social development and overcome internal inequality; collaborating on regional and hemispheric environment projects; creating cheap, clean alternative energy sources; undertaking joint efforts against poverty and disease; developing environmentally sustainable tourism; enhancing technology cooperation in ways that respect and fairly rewards intellectual property rights; and seeking a broad agreement through the WTO or via a mutually beneficial hemispheric agreement.
I realize that Washington itself is sometimes the most decisive obstacle to a sustained and comprehensive approach to the U.S. relationship with its regional partners. Domestic politics frequently intrude on trade negotiations. While protectionist rhetoric doesn’t make the task easier, much if not most of this has to do with a general fear of things many in the U.S. associate with globalization, particularly illegal immigration and outsourcing.
The problem is we have endured nearly a decade in which U.S. domestic politics have pivoted on promoting fear. The fact that we have enormous difficulty getting the U.S. Congress to pass FTAs that are clearly in the national interests of the United States reflects a void in political will.
But, as with all things, I am confident that this, too, will change. Indeed, change is already occurring. I was one of only 15 Democrats who voted for the Dominican Republic-Central American Free Trade Agreement in 2005. Two years, later House Democrats reached a compromise with the Administration on “A New Trade Policy for America.” The number of House Democrats who support FTAs has more than tripled. I ask you to exercise patience and persistence.
I assure you that I will do the same. My expectation is that our common task will be made easier should the American people elect an administration that is not fearful but fearless in tackling the challenges that confront the Americas and the world.
Thanks once again to our hosts and to the citizens of Montevideo.
I sincerely look forward to working with all of you in building a peaceful and progress present and future for the Americas!