Remarks by Under Secretary Grant Aldonas
Carnegie Endowment for International Peace and United Nations Environmental Project
"Workshop on Capacity Building on Environment, Trade and Development"
Tuesday, July 16, 2002; 8:30-10:30AM
B-369 Rayburn House Office Building

Thank you, John [Audley, Sr. Associate at Carnegie]. It is a pleasure to be here. It is a pleasure to see John again - I was here just a couple of weeks ago talking about the Oxfam report. Congratulations again on the new addition to your family. I had opportunity to work with John previously during his tenure with the National Wildlife Federation. I appreciate his commitment to encouraging new voices in the debate on trade.

I am also honored to appear with Congressman JC Watts. As most of you know, Congressman Watts recently announced his retirement from Congress and I want to take this opportunity to thank him for his work on behalf of our country. You have made an outstanding contribution to our nation. Your exemplary work in founding the TradeAid Caucus has really helped Members reassess US aid programs and to recognize the vital link between aid, development and trade. The old stovepipe way of looking at things is no longer effective. We all hope that, wherever you are next, you will continue working in this area.

Political Logic of Trade is Broken

Working on the Trade and Development Act of 2000 was one of the most rewarding points of my career -- and working on TPA one of the most challenging. We have seen an interesting phenomenon on trade in the United States: broader support for a bill -- the African Growth and Opportunity Act (AGOA) -- that unilaterally grants preferential access to our market than for further trade negotiations.

The fractured consensus over TPA is a symptom of a larger problem -- that the political logic that has driven trade negotiations for the last 70 years is broken. Trade, as practiced in the GATT and WTO, is driven by a mercantilist political logic of trading market access. Politically, we sell trade deals on the basis that our exporters are getting an equal or better opportunity than we are giving up to foreign exporters who want access to our market.

Two problems with that approach: Trade is not a zero sum game, and the cupboard is relatively bare, except for tariff peaks, which happen to fall in the most politically sensitive categories for the United States and for the rest of the developed world. We already have some of the world's lowest barriers to imports -- which our economy clearly benefits from, no doubt about that.

• As the ITC has just found in its study on "The Economic Effects of Significant U.S. Import Restraints" released this month: our average tariffs (in 1999) were among the world's lowest -- but we have much higher tariffs on some import-sensitive commodities.
  
  
• That's part of the reason why it is so important that President Bush made it clear that there is nothing that is off the table in the next round of WTO talks, and that includes agriculture subsidies and our tariff peaks.
  
  
• The key points found by the ITC were that removal of all U.S. import restraints in 1999 would have resulted in a gain of $29 billion in imports, $15 billion in exports, and a net gain in employment of 35,000. The report estimates the economic gain to the United States to be $14.5 billion annually.

Given this, we have to wonder why is it so hard to build a consensus? The key is that we need to build a stronger base of support for the benefits that trade liberalization can undoubtedly offer the developing and developed world alike. We need to broaden our thinking and expand the debate to understand that trade, investment and development are linked: each plays a role in creating economic growth and freedom.

We need to find a way to marry what this Administration has started in one area -- what the President accomplished in Monterrey (where development was put at the center of financial policy) and Secretary O'Neill in Africa -- with what we do in trade policy, and the private sector needs to be part of the process.

For our part at the Department of Commerce, we are planning several initiatives and missions designed to forge greater links between the US private sector and the private sectors of developing world economies. In the fall, Secretary Evans has committed to lead a business delegation to several sub-Saharan countries and President Bush has already indicated his plans to participate in the second AGOA Forum in Mauritius in January of 2003 and to visit several other countries as part of his swing through Africa. To date, we have seen several cabinet members - Zoellick, Thompson, O'Neill and Powell - visit the region.

Trade As a Tool for Sustainable Development

Trade has helped lift more than 400 million people out of poverty since the mid-1970s. As the Oxfam report, "Rigged Rules and Double Standards", points out, even a small increase in the developing world's share of world exports could have a dramatic effect on their economic prospects, vastly outstripping, but not replacing, all forms of bilateral and multilateral assistance.

Globalization is not a new phenomenon. Technology and trade have advanced it, to be sure, but what is often overlooked may be the most fundamental fact, that the political divisions that persisted in the world, at least since the onset of the World War I, largely came to an end with the demise of the Soviet Union.

What we may not have realized was that the end of the Cold War required a political and economic strategy that would rival the end of either the first or second World Wars. But we did not act to ensure that the seeds of global integration found fertile soil and that the benefits of globalization were broadly shared.

The last decade has been disastrous for the poorest of the poor. It was a decade when the AIDS epidemic became the AIDS pandemic; when the AIDS crisis reached more than 65 million people without an international strategy to stop/slow/deal with it. At the UN International Conference on AIDS, which just closed last week, it was revealed that of the 40 million people with AIDS around the world, two-thirds of them live in sub-Saharan Africa. Globalization clearly did not reach those who most needed it.

I believe that the idea of trade in the narrow sense - trading market access for market access (the zero-sum game that I mentioned earlier) - is no longer sufficient. Only trade, investment and development together can create the kind of economic growth that leads to sustainable development and the ultimate elimination of poverty. A multi-disciplinary approach is needed to address multi-faceted problems with complex causes.

We, as the developed world, need to work in concert, as we never have before - in a truly multilateral spirit -- to build developing countries' ability to engage in regional, inter-continental and, ultimately, global trade, attract investment, and develop their economies from within. We need to use trade and investment as a tool for creating sustainable development.

Sustainable development: what does it mean?

What does sustainable development mean? It is the ability to achieve development that does not undermine life support systems like environmental sustainability, creating a livable planet. Developing world poverty is poverty that kills: a 50-year life expectancy versus 80 years.

Poverty is a major factor in sustainability. People can't afford to save and invest in their children, their environment, their country. Instead they take as much as they can just to survive. The result is deforestation, compromised air and water quality, food supply shortages, low/no food standards. And the unfortunate consequence is that nobody is looking out for future generations. Already the AIDS orphan problem in sub-Saharan Africa is creating a new generation of parentless children. Who will care for them and prepare them for the responsibilities of adulthood?

The Need for A Comprehensive Trade Capacity Building Program/ Millennium Challenge Grant

Helping countries meet the challenges of globalization places new demands on capacity building programs.

• Need demand-driven, results-oriented system
  
  
• US agencies must work together with the goal of creating economic growth
  
  
• We must lead by offering our intellectual capital and lend technical expertise
  
  
• Must be multilateral effort: developed nations must understand that it is in the global interest to help eliminate poverty
  
  
• Linked to global security: Al Qu'aeda was the effect, not the cause, of Afghanistan's problem and this could happen everywhere

In March, President Bush took the lead in committing the resources of the United States to the fight against poverty by announcing the we will increase our core assistance to developing countries by fifty percent over the next three years, resulting in a $5 billion annual increase over current funding levels by FY 2006. This increased assistance will go to a new Millennium Challenge Grant Account that funds trade capacity building initiatives.

President Bush wants to close the growing divide between nations that are making it and those that are falling deeper into need and despair. He has pledged to include every African, Latin American, and Muslim country in an ever-expanding circle of development. From the Doha agenda to the conclusions drawn in the G-8 Summit just concluded in Canada, this Administration has demonstrated its commitment to the developing world. So it is clear from the highest levels of our government that the United States understands that global poverty is everybody's problem.

Building a New Consensus on Trade

Should we be discouraged? No, for the answer is close at hand. One of my heroes, Amartya Sen, in his most recent work, Development as Freedom, concluded that the basis for all economic development was human freedom. Sen's definition of freedom is broader than we tend to think about it in Western democracies. It includes the freedom from any limitation that undermines human potential.

Trade is ultimately consistent with that definition. At its root, it is about human freedom -- the freedom to interact and exchange goods and services for one's own purposes, and to do so without the interference of the state.

You can build a far more compelling case for the benefits of a global trading system intent upon reducing barriers to trade if you focused on those areas that are most likely to lead to rapid improvement in the prospects not only for the developing world, but for the poor in the developed world as well.

Conclusion

As we approach the World Summit on Sustainable Development in Johannesburg, South Africa in August, my hope is that we can reach a global consensus on the need for a comprehensive strategy designed to spur economic growth - and confront a broad range of issues including environmental sustainability, standards for food safety, AIDS and other communicable diseases -- in the developing world.
I hope that you'll work with me so that we can rebuild the consensus on trade and make the commitment to eliminate poverty in the world's most impoverished communities.