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 Western Hemisphere at the Top of Bush's Agenda

State Dept.'s Larson discusses plans for regional free trade

Remarks by the Secretary for Economic, Business Agricultural Affairs 
Alan Larson before the Institute of the Americas March 29, 2001. 

Expanding Prosperity Through Trade and Growth

Thank you, Ambassador Boeker, for inviting me to participate in such a
distinguished panel. My friend Ambassador Barbosa is an accomplished
diplomat representing a great nation. Professor Patricio Meller Bock
is an accomplished expert on the benefits of trade. I am honored to
join them.

We are here to explore how trade and growth can help us build a
stronger, more prosperous and more democratic hemisphere. I will
suggest seven reasons why this is a moment of unique opportunity to
make progress on that agenda.

First, this is a moment of unique opportunity because the stake of the
United States in the hemisphere has never been higher.
Last year, two-way trade of the United States with the nations of this
hemisphere amounted to $786 billion, or 39 percent of our total trade.
This region has been our fastest growing market for the last decade.
At least as importantly, our cultural and familial links with the
region are profound and are becoming even more so. The recent census
confirms that Americans increasingly have strong Latin and Caribbean
roots. And Americans are traveling to Latin American more than ever
before.  Our peoples are connected by vices as well as by virtues. Illegal drug
use here in the United States has joined forces with illicit
production and trafficking cartels abroad. Societies at both ends of
this sinister trade are threatened. Governments at both ends must
cooperate to promote legitimate trade, which will make it easier to
suppress illegitimate trade.
Second, this is a moment of unique opportunity because a new U.S.
president is giving unprecedented attention to the hemisphere.
President Bush made his first foreign trip as president to Mexico,
where he met with President Fox. During the past two months, the
President has met with Prime Minister Chretien of Canada, President
Pastrana of Colombia and President Flores of El Salvador.
in the next several weeks he will meet with President Lagos of Chile,
President de la Rua of Argentina and President Cardoso of Brazil. His
first major international event is the Summit of the Americas in
Quebec. The message is clear. This hemisphere is at the top of the president's
foreign policy agenda. He knows that the destiny of the United States
cannot be separated from that of our neighbors in Canada, Latin
America and the Caribbean -- and he will act accordingly.
Third, this is a moment of unique opportunity because the hemisphere
is ready to embrace freedom and democracy. Democratic forces and 
institutions are gaining ground in the hemisphere. The Quebec summit 
will set a new foundation for freedom. Strengthening democratic institutions 
is one of the three principal themes of the summit. Leaders will back it up by 
endorsing cooperative activities on elections, health, education, the 
environment, labor and combating corruption. Leaders will reaffirm the 
fundamental principal that the summit process is a sacred enterprise 
undertaken by free societies and democratically elected leaders. 
Dictatorships and dictators have no place in the summit process.
Fourth, this is a moment of unique opportunity because the economies
of the hemisphere are ready to shift from stabilization to rapid growth.  The 
1990s brought a welcome recovery from the economic troubles of the "lost 
decade." But the achievements of the past decade, important as they have 
been, did not create enough economic horsepower to rapidly reduce poverty
and income inequality.  During the 1990s, the average economic growth rate 
was 3.3 percent. That was respectable, but it is not good enough in my view 
to meet the needs or satisfy the aspirations of our people. We have to aim 
higher. To achieve higher growth, there must be reforms that unleash the
wealth-producing capabilities of our people. Clearly, we cannot, of course,
relax sound budget and monetary policies. Rather, we must use this foundation 
of solid macro-economic policies as a springboard for deeper structural 
reforms. We are ready for a second-generation reform targeted on privatization, 
deregulation and competition that can stimulate productivity and raise the
potential growth rates of our economies.

Fifth, this is a moment of unique opportunity because we are entering
the crucial phase of negotiations on the Free Trade Agreement for the
Americas.  Free trade is a powerful tool for stimulating growth and reducing
poverty. The experience of Chile is one of the best examples. Chile's
free trading policies have made it the fastest growing country in
Latin America and one of the fastest growing countries in the world.
And at the same time Chile has cut its poverty rate in half during the
last decade.In many countries, trade policies do not fully support growth.
Average tariffs in Latin America are on the order of 15 percent. When one
country eliminates or drastically reduces tariffs and other trade
barriers, it can stimulate its own trade and increase its own growth.
When all of the countries of our region join in reducing such 
barriers, the spur to trade, efficiency and growth reaches a
crescendo. And that is what we are trying to accomplish through the FTAA.

In Quebec, leaders will review the state of preparations of the FTAA.
Negotiators have made great progress and are in a good position to
move ahead rapidly. Leaders will want to consider how they can give
energy and direction to this process.

Sixth, this is a moment of unique opportunity because the United
States is rebuilding its domestic consensus on trade.
Everyone loses when the United States does not play a leading role in
promoting trade liberalization. The trading system then simply does
not operate well because no other country is able to exert that leadership. 
Trade Promotion Authority is important not only to facilitate U.S. leadership 
but also to assure achievement of vital economic goals here at home. 
Our economy will not achieve its highest potential, our children will not have 
the best possible jobs and our seniors will nothave retirements as secure 
as they deserve... unless the President has the authority to negotiate fair
treatment for our goods, services, investments and innovations.

For some, Trade Promotion Authority raises strong concerns. But we
can, must and will work through them this year. 
Meanwhile, I have a suggestion for trade negotiators throughout the
region. Make sure you have secured from your own government the
political mandate you need. Don't worry about the United States. We'll
be back at the negotiating table this year with trade promotion
authority in hand.

Seventh, this is a moment of unique opportunity because there is an
unprecedentedly large global pool of capital ready to be invested in the region.
Between 1990 and 1998, global flows of cross-border equity investment - that 
is, portfolio and foreign direct investment - more than quadrupled, growing from 
$460 billion to $1.6 trillion annually. FDI flows to developing countries grew 
six-fold, from $32 billion to $180 billion annually.
Starting from a low base following the debt crises of the 1980s, the
hemisphere as a whole attracted a respectable share of this dramatic
increase in global equity investment. Within the region, however, the
distribution of the inflows was uneven. Excluding the United States,
which is the world's leading destination for FDI, more than 60 percent
of FDI flows to the region in 1998 went to just two countries - Brazil and Mexico.

Foreign investments create jobs, spur innovation and stimulate growth.
We know. The United States is the world's largest recipient of inward
foreign direct investment -- and proud of it.
The FTAA should help ensure that foreign investment in the hemisphere
continues and grows. By creating larger markets for the goods and
services produced in the region, it should also make all of the 
countries of the hemisphere, not just the big ones, more able to
attract and hold on to new investment.

Ladies and gentleman, the moment is unique and the opportunities are
great, but they must be seized. Otherwise, it will be a lost moment
and they will be missed opportunities. Today's conference should
remind us all how important it is that Quebec lay a hemispheric
foundation for free trade and free people.
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