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Economic Diplomacy in the New Millennium

Economic Diplomacy in the New Millennium: New Priorities and Concerns

E. Anthony Wayne, Assistant Secretary for Economic and Business Affairs
Remarks to the Foreign Policy Teachers' Forum
Loy Henderson Room, State Department, Washington, DC
June 22, 2005

Thank you for that kind introduction.

I am really honored to be addressing a group of high school teachers, and in particular you who will teach foreign policy issues.

I think that it is critically important for young Americans to learn about foreign policy in high school, so they will gain an understanding of what the issues are and how the United States interacts with the world. I hope they will learn how to put current events and current policies into perspective. The ability for young people to think analytically about all that is happening in this world is crucial for the future of our country.

As teachers, you are helping to shape the character of your students for the better, and, through that effort, help shape the future for the better. As diplomats, we are also trying to shape the future and to make the world a better place.

Economic and business affairs are matters where diplomacy always has been and always will be crucially important, but they also touch lives of citizens daily, especially in our "globalized" world. Probably most, if not all, the goods and services we buy, sell and use are in some way influenced by economic diplomacy; and of course are the jobs of many of our neighbors.

Your clothes probably have tags saying Made in China or Made in Honduras or some other foreign country. This is a result of decades of multilateral and bilateral trade diplomacy that has gradually lowered tariffs and eliminated quotas on imported apparel in exchange for the exporting countries lowering their barriers to U.S. goods and services. A shirt that is "Made in Honduras" is almost certainly made from cloth fabricated in the United States a result of trade policies which give the best tariff treatment to foreign apparel made from U.S. supplied materials. The Chinese garment may also have some U.S.-made fabric or parts. This production sharing supports jobs in the U.S. in the fabric and machinery industries that sell to the foreign countries where the garments are sewed together.

You may have traveled abroad and found you could easily buy U.S. products such as music or medicines -- or go to a U.S. franchise restaurant. This is because of international agreements that have extended the protection of intellectual property -- copyrights, trademarks, and patents -- to foreign countries. Of course illegal copying of patented and copyrighted U.S. goods is still a major problem, so our diplomats are in constant contact with the governments where they are stationed to remind them that they must meet their obligations to protect registered copyrights, patents, and trademarks.

And, of course, you probably flew to your foreign destination. International air routes are also the result of diplomatic negotiations. The negotiators of the "Open Skies Agreements" that expand air services around the world work with me in the Bureau of Economic and Business Affairs.

Economic and business diplomacy is also playing an important role in the war on terrorism. I'm proud to say that my Bureau has been especially active in international efforts to stop the flow of funds used by terrorists.

We work on foreign economic policy with up to 40 other U.S. government departments and agencies, and of course we are in close consultation with the Congress. We also meet regularly with the private sector and nongovernmental organizations, ranging from business to labor unions to major environmental groups. Much of our work is done through international organizations, such as the World Trade Organization, the World Intellectual Property Organization, the development banks, and a wide variety of special organizations, include the Financial Action Task Force, the World Health Organization, and various United Nations agencies and committees that combat the financing of terrorists.

As we move forward in the new Millennium, we are focusing on three priority areas: economic security, economic growth and development, and trade and investment.

Economic Security

Since 9/11, we have devoted much of our time and energy to four issues that we group under the rubric "economic security": Supporting the front line states in the war against terrorism, stopping terrorist financing, ensuring the safety of transportation and information systems, and guarding against disruptions in the supply of energy, particularly petroleum.

To support the front-line states in the war against terror, we are helping the governments in Pakistan, Afghanistan and Iraq put in place policies that will encourage trade, growth and modernization. We worked to reach the international agreement to forgive most of the Iraqi government's official debt, and helped to organize an international conference at which other countries pledged more than $13 billion for Iraq's reconstruction and development. We are also working to promote the President's Broader Middle East and North Africa Initiative or BMENA, which encourages political and economic dialog and reform in the region.

To halt terrorist financing, we work through the United Nations to designate persons and entities with links to Al Qaeda and other terrorist organizations. We also help other governments around the world improve their capacity to search throughout their financial systems for terrorist assets and freeze them. As a result, millions in terrorist funds have been frozen, and organizations that previously funneled funds to terrorists have been put out of operation. We are also at the forefront of implementing the sanctions laws against Syria, Iran, Cuba, and other countries that have supported terrorism. We've led the Kimberly Process, an international mechanism to combat the misuse of the diamond trade to fund insurrections and terror.

To ensure the safe and secure transportation of people and goods, we work with the Department of Homeland Security to develop and implement aviation, maritime, and land security. We also work with other countries to assure the integrity of the Internet and to protect other telecommunications systems.

As you can appreciate when you fill your car with gas, international petroleum markets continue to be tight. Growing demand in China and in other newly industrializing countries has permanently changed the international petroleum market. We work with other countries to increase the supply of oil by encouraging polices and regulations that promote additional investment in the sector. We also facilitate the development and construction of new pipelines for new sources of petroleum, such as from the Caspian Sea basin. On the demand side, we work with other consuming countries in the International Energy Agency on ways to avoid major oil market disruptions.

Economic Growth

Our second main priority in this new Millennium is economic growth and development in the poorest countries. President Bush is an ardent supporter of increased assistance and debt relief for developing countries especially in Africa. From 2000 to 2004 U.S. development assistance more than doubled, reaching $19 billion. Assistance to Africa almost tripled, reaching $3.2 billion in 2004. The administration also seeks to encourage trade with developing countries. We have supported the enhanced Africa Growth and Opportunity Act, which offers special access to U.S. markets, and increased assistance to build the capacity to take full advantage of the market access offered.

President Bush has stressed, however, that aid can only really help if the recipient countries can use the assistance effectively. Hence, the President supported the creation of the Millennium Challenge Account (MCA), a program that channels aid to countries that have implemented good policies by ruling justly, investing in their people, and encouraging economic freedom. The MCA program began operation in 2004, and so far two countries Madagascar and Honduras have signed compacts to get aid to help with specific projects that will increase domestic growth and productivity. Two more Cape Verde and Nicaragua have been approved and should sign their compacts soon.

We encourage the international development banks -- the World Bank and the regional banks, like the Inter-American Development Bank -- to continue to encourage reforms, as a condition for their lending.

We have also helped with the recovery from the tsunami that struck countries in the Indian Ocean at the end of last year. We have coordinated the U.S. government effort to help the people of Indonesia, Sri Lanka, Thailand and the Maldives recover from that disaster and are working regionally to put in place a multi-hazard warning system to prepare for possible future disasters.

Trade and Investment

Our third priority is to promote increased international trade and investment, which will stimulate the global growth that benefits developing and industrialized countries alike.

The Administration's number one trade objective right now is to win Congressional approval for the U.S.-Central America/Dominican Republic Free Trade Agreement better known as CAFTA. This agreement will greatly benefit the United States and the five Central American countries and the Dominican Republic by slashing tariffs, improving the investment environment, and protecting intellectual property. The agreement also has requirements for the Central Americans and the Dominicans to enforce their labor laws that are more strict than in any other U.S. trade pact. These six countries are not a minor market. They bought nearly $16 billion in U.S. products last year more than our sales to India, Russia and Indonesia combined.

We are also committed to the broader multilateral trade agenda in the World Trade Organization, the Doha Development Round, which will further reduce barriers. We are in particular hoping to make progress in agricultural talks, cutting back the lavish, market distorting subsidies that the Europeans and others give their agricultural sectors.

We also seek to resolve trade disputes, such as the one with the European Union over subsidies to Airbus Industries, their commercial aircraft giant, which they counter with claims against alleged subsidies to Boeing. This dispute has been sent to the World Trade Organization's dispute settlement mechanism. It will be by far the largest case every reviewed there. Our goal is a ruling that rolls back the EU's subsidies and creates a more level playing field in the world commercial aircraft market.

We work to open up and make more secure global transportation markets. The State Department leads negotiations to expand aviation rights, which bring lower costs to travelers and shippers and boosts employment for airport communities. In the past year, we have concluded five Open Skies agreements, including one with India in January, as well as a nearly Open Skies deal with China last July.

We also encourage countries to improve their investment climates and to resolve investment disputes. We negotiate bilateral investment treaties with other countries to ensure that foreign investors are treated fairly. At the moment, we are negotiating such an agreement with Pakistan.

In order to protect intellectual property patents, trademarks and copyrights which encourage innovation and foster economic growth, we created a special office in the Bureau devoted to the enforcement of international obligations on this subject.

We also advocate for policies that expand access to information and communication technologies, improve efficiency in the worldwide Internet and telecommunications markets through greater reliance on free-market forces, and provide opportunities for U.S. companies to compete and invest.

We also explain the benefits of agricultural biotechnology to government officials and audiences overseas, and last but not at all the least we advocate for U.S. companies that have problems in foreign markets. Those of us in the Department and our embassies overseas work hard to ensure that American companies are treated fairly and transparently and are able to overcome regulatory and investment problems.

These are our international economic priorities: Assuring our economic security, promoting economic growth and development and increasing international trade and investment. I hope this will help you to discuss these issues with your students.

Thank you, very much. I will be happy to answer questions.

Released on June 24, 2005


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