U.S. DEPARTMENT OF STATE, BUREAU OF INTER-AMERICAN AFFAIRS, OCTOBER 20, 1998, Remarks by Peter F. Romero, Acting Assistant Secretary for Inter-American Affairs to the Canadian Importers Association, Toronto, Canada, October 20, 1998


TRADE OPPORTUNITIES FOR THE AMERICAS


It is a real pleasure to be with you in this beautiful city. My theme
this afternoon is the growing ties of both Canada and the United States
with the other countries of the Western Hemisphere -- and the
extraordinary opportunities this opens up for all of our countries.

As a long-time observer of events in this hemisphere, I am struck that
we have already entered a "new age" in our relationships -- well before
we actually enter the new century and the new millennium.

Most importantly, there is an unprecedented wide-ranging consensus
throughout the Western Hemisphere on basic political and economic
values, on democracy and free markets. We are no longer engaged in
bitter ideological battles -- capitalism vs. socialism, democracy vs.
authoritarianism. The challenge today is how to build institutions which
are efficient and responsive to the needs of our citizens. More and
more, these needs consist of issues which cross boundaries. Keeping our
schools and our streets free of drugs, protecting our environment for
future generations, fighting terrorism and crime, fighting the spread of
disease -- these and other issues require the countries of the
hemisphere to work as partners as never before to develop solutions.

Two Summits of the Americas -- in Miami in December 1994, and in
Santiago, Chile this April -- have developed a broad action program to
turn this new unity of purpose into real improvements in the quality of
life of our citizens.

The most dramatic of the initiatives coming out of these summits has
been the Free Trade Area of the Americas (FTAA). But it is important to
place the FTAA in the proper context: it forms part of a comprehensive
and mutually reinforcing plan of action which contains many initiatives,
all aimed at strengthening the institutions which form the foundation
for resilient democratic societies and market-based economies. The
initiatives range from measures to improve the administration of justice
to improving capital markets; from stronger cooperation in counter-
narcotics to improving the quality of and access to basic education. I
could give many more examples, but my point is that there is underway in
the hemisphere a degree of multilateral cooperation which is
unprecedented in scope and intensity.

Canada, more than ever, is not only active, but a leader in hemispheric
affairs.  As the current chair of the FTAA negotiations, it will host a
critical FTAA meeting of Trade Ministers next year. Canada will also
host the third Summit of the Americas sometime around the year 2000, as
well as the General Assembly of the Organization of American States
(OAS) in 2000. Reflecting Canada's growing leadership role in the
region, Secretary Albright decided this summer to establish a new Bureau
of Western Hemispheric Affairs which will cover Latin American
countries, Caribbean countries, and Canada. This follows the Canadian
Government's decision to reorganize along the same lines several years
ago.

This new bureau in the State Department reflects the broadening and
deepening of our common hemispheric agenda, and will preserve and
strengthen our long-standing and vital partnership with Canada in
transatlantic, transpacific, and global affairs. The U.S. and Canada
will remain close partners in NATO. We together constitute the western
side of the Atlantic Alliance, and our common efforts in support of
security will not diminish. Canada continues its partnership with us in
contributing to European stability as a member of the Organization for
Security and Cooperation in Europe, and as a participant in peacekeeping
operations around the world. We remain partners in many fora to tackle
trade issues, shape the economic policies of the next millennium, and to
expand open market principles throughout the globe. The U.S. and Canada
will, of course, continue to work together on global issues of common
concern, such as arms control, nuclear non-proliferation efforts, and
counter-terrorism.

We are living through an unprecedented process of economic integration
throughout the hemisphere. The rapidly increasing trade among the
countries of Latin America mirrors the huge surge in trade among Canada,
the U.S., and Mexico.

Since the signing of our Free Trade Agreement barely 10 years ago, trade
between the U.S. and Canada has more than doubled. Virtually all tariffs
on trade between our two countries have been eliminated as of the
beginning of this year. A mind-boggling total of $1 billion in trade
crosses our border every day. The importance of this trade to our
economies is enormous. Exports to the United States account for one-
fourth of Canada's gross domestic product. And U.S. exports to Canada
exceed every other trading relationship, including our trade with the
European Community. Just the two-way trade that crosses the Ambassador
Bridge between Michigan and Ontario equals all U.S. exports to Japan.

One point I want to emphasize strongly is that 96% of our trade with
Canada is trouble-free. It is just 5% of our trade that grabs all the
headlines whenever we have a bilateral dispute. It is important to
remember that even in the happiest marriages, differences among the
partners have to be settled. Rather than focus on the differences, we
need to bear in mind that we have established mechanisms for resolving
them.

Although NAFTA is just completing its 5th year, it also is a resounding
success.  From 1993-97, trade among the three partners boomed: Canada-
U.S. trade increased over 50%; Canada-Mexico trade was up over 80%; and
U.S.-Mexico trade climbed over 90%.

NAFTA has also had an immense influence on the overall economic
relationship among our countries, especially during times of economic
turmoil. When Mexico went through its financial crisis and depression in
the aftermath of the peso devaluation in December 1994, NAFTA reinforced
the commitment of Mexico's Government to the market model. Because of
this commitment, Mexico was able to recover the confidence of investors
and actually returned to world capital markets in about 7 months -- in
contrast to the 7 years which it needed after its financial crisis in
1983.

Indeed, NAFTA has become far more than a trade agreement. When the three
NAFTA Foreign Ministers met for the first time as a group in September,
they agreed that the commonalities created by integration provide
opportunities to work together on other issues. The ministers will hold
trilateral discussions on a regular basis.  Besides discussing free
trade and NAFTA, the ministers talked about ways to increase educational
and government exchange programs; coordinate for disaster preparedness;
and hold a separate meeting of their policy planning and public affairs
staffs, and of officials concerned with the Year 2000 computer problem.

Integration is also moving rapidly in the rest of the hemisphere.
MERCOSUR (the common market of Argentina, Brazil, Paraguay, and Uruguay)
is second only to NAFTA in market size. Trade among the MERCOSUR
countries has quadrupled from $4 billion in 1990 to over $17 billion in
1996. Other subregional arrangements in Latin America and the Caribbean
have been revitalized, including the Andean Community, the Central
American Common Market, and the Caribbean Common Market. And there are
growing linkages among these groups. Indeed, Canada's free trade
agreement with Chile is evidence of how Canada is working hard to make
the ideals of open markets and hemispheric prosperity a reality.

Of course, these events did not take place in a vacuum, but grow out of
more than a decade of market-oriented economic reforms. Outward looking
trade policies are central to Latin America's growth and development
strategies. Average tariffs in the region have fallen from about 40% in
1990 to about 11% today. Deregulation has helped substitute market
competition for statist intervention. And in response to the peso
crisis, over the past 5 years, the region has been moving steadily
toward more transparent and sound financial systems.

The FTAA will put an overarching structure over these subregional
arrangements.  Exporters today face a multiplicity of rules and barriers
within the hemisphere.  Together with the region's commitment to trade
liberalization, the new subregional arrangements are lowering some
barriers and simplifying some of the complexity of trade rules. However,
without common rules of the game provided by the FTAA, the hemisphere
would be split into trading blocks. Without an FTAA, U.S. and Canadian
exporters would face discriminatory trade barriers in many parts of the
hemisphere. After the FTAA is completed and fully implemented, however,
the next generation of U.S., Canadian, and other hemispheric exporters
will work in a market of more than 800 million people largely free of
tariffs, with dramatically reduced non-tariff barriers, and trade
regulations under international discipline.  This is a vision of
staggering opportunities.

Our path toward this vision is clear, although we can all see that there
are some bumps in the road.

The turmoil over the past few months in Latin American financial markets
is obviously a major concern. Will this instability reverse growth and
undermine the market model in Latin America? Is this the end of our
vision of a democratic and prosperous community of the Americas?

In searching for the answers, there are, of course, some troubling
signs. But I also find strong reasons for optimism. While I believe that
the region will face some difficulties, I do not believe in an
inevitable repeat of the Latin debt crisis of the 1980s -- the so-called
lost decade. Growth in the next year or two will undoubtedly slow from
recent levels. As a result, there will, tragically, be a worsening of
social conditions in some sectors in some countries. There will be
controversy -- as there always is -- about the difficult reforms which
remain to be implemented. But overall, I believe the principles of
democracy and market economics remain strong in this region.

First, although many investors look at emerging markets as if they are
all alike, the savviest ones differentiate the strong reformers from the
others, and evaluate each country on its merits. Even though the fear
factor right now has resulted in a sell-off across the board, over time
markets will reflect the actual strengths and weaknesses of individual
countries. Those countries that have embraced reform and have strong
domestic financial institutions will continue to attract foreign
capital. Latin America is moving strongly in that direction.

Second, there are some critical differences between today's crisis and
the "lost decade" of the 1980s. A decade of market-based reforms has
made the economies of Latin America stronger and more resilient than
they have ever been. In 1997, Latin American economies as a whole had
their best performance in a generation, with real growth of 5% and
inflation of 11% -- the lowest in 50 years. As Secretary Rubin said when
he met with Latin America's finance ministers and central bankers
several weeks ago, this region is the world's "most forward-looking" in
carrying out reform.

We are working closely with friends in the region and the international
financial institutions to help stabilize financial conditions and to
assure that the contagion effects of the Asian and Russian "flu" do not
imperil the impetus to continue reforms. President Clinton's success in
getting Congress to approve $18 billion for IMF replenishment is a
critical component of our strategy to be able to manage the world
financial crisis and support those countries committed to economic
reforms who have been hurt by spillover effects from Asia and Russia.

Inevitably the new spirit of partnership in the hemisphere will be
tested as we address the lower growth and social problems resulting from
this crisis. But by working together in bad times as well as good, we
will develop an even stronger partnership and trust among us.

Another big "bump in the road" is the public perception of the costs and
benefits of trade. So much of the public debate on trade is based on the
fallacy that trade is a zero-sum game, where one country's gains are
offset by another country's losses. Somehow we -- and in that "we" I
include all of you in the audience -- need to get across to our
respective publics that trade is a win-win game, where all the
participating countries win, with increased efficiency, higher growth,
more jobs, and more consumer choice. Although there are costs to trade
liberalization -- just as there are costs to any economic change -- the
benefits far outweigh the costs.

And we must continue to mitigate these costs where they do occur. Our
task in the U.S. is above all to maintain the U.S. economy's
extraordinary job -- creating power by continuing sound economic
policies. And we must continue to invest in our workers, both through
retraining and other assistance to help them adjust, and through
education to prepare our young people with skills for the 21st century.

The final "bump in the road" which I would like to mention today is the
challenge of concluding and implementing the FTAA. In April, the
hemisphere's leaders agreed to launch the negotiations with a target
date of 2005 for concluding them. The actual negotiations began this
fall, with the establishment of nine negotiating groups, under the
general supervision of a Trade Negotiations Committee formed by vice-
ministers of trade. The negotiations cover the full range of
international economic activity. Further, for the first time in any
trade negotiation, a Committee on Civil Society will provide a formal
mechanism for labor, business, consumers, environment, and other sectors
to provide their views to trade ministers. The task before the
negotiators is huge and complex, but they have begun well, and the trade
ministers have agreed that we must achieve some "concrete progress" by
the year 2000 in order to maintain the momentum and build public
support. One of the promising areas for such "concrete progress" is
business facilitation, which would include such measures as
simplification and harmonization of documentation.

In this connection, we in the U.S. Administration face the challenge of
getting "fast-track" legislation passed. The legislation would assure
that any trade agreements brought by the U.S. Executive to the Congress
would be subject to rapid action; the Congress could approve or
disapprove the agreement but could not amend it. This authority is
crucial to the credibility of U.S. negotiators by assuring our
negotiating partners that a painstakingly negotiated and carefully
balanced package does not have to be re-negotiated with the U.S.
Congress.

The lack of U.S. fast-track authority is not an obstacle to progress at
this stage of the FTAA negotiations. But it will become increasingly
important as we move further in the negotiations. Let me reassure you
that President Clinton remains strongly committed to getting
Congressional approval of fast-track; indeed, it will be one of the
Administration's top legislative priorities in the new Congress which
will be formed after next month's elections.

Let me conclude by stressing that there is a growing habit of
multilateral cooperation as governments address the major problems of
this decade and the next.  Issues which were not so long ago considered
to be purely domestic -- like the environment, terrorism, or crime --
are now seen as clearly transnational. And areas which were considered
too sensitive even for international dialogue -- like human rights,
corruption, or judicial reform -- have now become the subjects of
multilateral cooperation.

I began my remarks by noting that we are entering a "new age" in
hemispheric relations characterized by broad-ranging cooperation to
address common problems. I want to close by noting that this is nothing
new with regard to U.S.-Canadian relations. Nowhere in the world is
there such a long tradition of such deep cooperation as exists between
our two countries. My goal is to both broaden and deepen that
cooperation.


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