Text: U.S. Secretary of Commerce Mickey Kantor Remarks before the Detroit Economic Club

BG9631E | Date: 1996-09-13

We are in the midst of the most fluid and far-reaching economic change since Americans left their farms for factories. The last 25 years have unleashed unprecedented and unparalleled domestic and global competition. Combined with the end of the Cold War and breathtaking technological innovation, we are confronting economic and social challenges that now link our national and economic security. We can no longer separate America's economic success from our strategic or political concerns at home and abroad. Keeping America economically strong is and will be a national security issue; in order to assure our national security we must have a growing and successful domestic economy and American companies competing and winning in the global marketplace. Our jobs, our standard of living, and the future of our children and grandchildren depend on it.

This is the centerpiece of the President's economic policy for America. When President Clinton took office three years ago, the economic challenges facing our country were staggering -- a sluggish economy, stagnant personal incomes, unemployment at 7.4 percent, a deteriorating competitive edge. The painful sum total was a nation with its confidence shaken and with a skeptical attitude toward the emerging global economy, a nation without a vision for the future.

The President's response was bold and decisive as he moved to restore our domestic economy. President Clinton cut taxes on small businesses and working families while reducing the growing deficit to free up money for savings and investment. He recognized the global nature of the post-Cold War economy and made trade opportunities and open markets the centerpiece of America's role. He targeted education and technology and R&D as national priorities and believed in the competitiveness of American industry. From the start, this Administration understood that the old rules -- the Cold War rules -- didn't work any more in a world driven by economics as much as geopolitics.

The proof is in a sound American economy:

-- GDP is up 2.2 percent in the first quarter this year, adding to a streak of 14 quarters of consecutive growth.

-- Investment spending is up over 12 percent this year, helping to fuel steady growth without overheated inflation.

-- Over 10 million new jobs have been created. 93 percent of them in the private sector. This is the highest percentage of jobs created by the private sector since Harry Truman was President and is four times the number of jobs created in the three years prior to the Clinton Administration.

-- The Congressional Budget Office said that by the end of this year, the budget deficit will be less than half what it was four years ago. In fact, we'd be running a budget surplus right now if not for the interest on the debt accumulated from the previous 12 years.

-- Average real wages are rising; for three years in a row, we have had a record number of new businesses started; our manufacturing industries are rebounding; and home ownership is at a 14-year high.

-- By the eve of 1997 we will have the smallest federal government since John F. Kennedy was sworn in on January 20, 1961.

-- Exports increased last year by $82 billion for the United States, the largest dollar increase of any nation in all of human history.

But all these encouraging statistics are only as good as the real impact they have day-to-day on households and communities throughout the nation. Michigan has been described as, "a place where the past, the present, and the future are all tied up together...It is the skyscraper, the mass-production line, and the frantic rush into what the machine will someday make all of us..." -- and so this state is perhaps an ideal place within which to view a resurgent America.

In three years under President Clinton, the unemployment rate in Michigan has dropped to a record-low 4.5 percent; new businesses have increased by 10 percent; over 330,000 new private sector jobs have been created, compared to 86,000 in the four years before this administration took office. And our auto industry is back. The U.S. auto industry is once again number one in the world. Quarter-after-quarter, the Big Three are reporting stronger-and-stronger sales -- in fact, the American auto industry is projecting a record 16 million car sales this year. In the last three years, the auto industry has gained 92,000 jobs; in the four years before that, it lost 49,000 jobs. A University of Michigan study is predicting there will be 130,000 new hires by Chrysler, Ford, and General Motors in Michigan alone in the next seven years. And a Commerce Department report ranks Detroit as the export capital of the USA, ahead of 256 metropolitan areas.

The strong economic record here in Michigan is paralleled by a strong America trade record around the world. In the last three years, this administration has concluded over 200 separate trade agreements. Every one of these trade agreements were built upon one basic standard put down by President Clinton in the earliest days of his administration: "We will continue to welcome foreign products and services into our markers, but insist that our products and services be able to enter theirs on equal terms."

Sales of American-made cars, trucks and vans overseas rose more than 225 percent between 1992 and 1995. Last year, worldwide sales for the Big Three auto-makers were up 20 percent, and American auto exports to Japan increased by 37 percent. Auto parts exports over the last three years jumped over 30 percent, to almost $40 billion in 1996. Much of that growth was found in the world's most aggressively growing economies. And we gained important ground in Japan as well, with auto parts sales up nearly 60 percent in three years to total $1.6 billion.

Earlier this year, the President visited a showroom outside of Tokyo featuring right-hand drive American cars made by American workers in American plants. Japanese consumers are now buying tons of thousands more American cars than ever before. And recently I traveled to Korea, Malaysia, and Indonesia where increased access to those nations' automobile markets was at the top of my agenda. The one-two combination of innovative American car-makers and an administration committed to expanding trade on fair terms throughout the world is what has driven the success we've had thus far and will fuel our continued growth in new, lucrative market's overseas.

And therein lies one of the greatest challenges of the 21st Century global economy -- establishing open and fair trade in newly-emerging and dynamic markets around the world that is built on a truly level playing field. Too often, potential trading partners are eager to build 21st Century economics based on 21st Century technologies while relying on 19th Century trade rules and laws.

That is a scenario we cannot and will not accede to. America is happy to help our partners fulfill their ambitious development goals, but only within the scope of mutual responsibility and comparable obligations.

Once the biggest barrier to trade was tariffs -- in fact, as recently as 1979, at the Tokyo Round of the GATT, nearly the only issue covered was tariffs. In the years since, discussions on trade have expanded to cover areas like intellectual property rights, environmental and labor standards, market access, and investor protection.

The President laid out his willingness to tackle serious impediments to trade in every available and effective way, saying, "...multilateral, regional, bilateral...the fact is that each of these efforts has its place..." And this Administration has taken its cue from the President, working wherever there is a legitimate avenue for positive change.

The greater reach of trade issues reflects the growth of economic interdependence that is the reality of the day -- as nations count on one another for trade and for business opportunities, laws matter beyond borders.

Not just laws, but lawlessness as well. Business leaders I have met around the country have told me, almost without exception, that the number one issue they are concerned with in international trade is corruption -- extorted bribes, lack of transparency, the routine offering of illicit payments, and the overall effect these have on business.

Business newspapers and magazines almost read like police blotters at times: reports about public contractors rigging bids, state-owned industry officials demanding bribes, corporations making payments to politicians in return for contracts, costs of projects being inflated to cover kickbacks, competitive bids being undermined by graft. The problem of corruption is proliferating around the world. A European firm used inside information and illicit funds to cut an American firm out of a $2 million telecommunications deal in Asia. A Latin American official received a bribe from a European firm in an effort to help sign a $4 million telecommunications contract. An American company offered the best price for a Latin American project only to have a European competitor re-bid after the process was supposed to be closed -- and after paying bribes to officials involved In the decision-making. A European defense firm beat out an American competitor for a $3 billion vehicle sale in the Middle East simply with illicit payments.

Where corruption and bribery occur, they are serious impediments to political and economic development. They distort trade and investment. They waste resources. They subvert fair trade. They erode trust in institutions and leaders. And at the core, bribery and corruption sacrifice the gains to be had from skilled workers, quality craftsmanship, experience, and innovation.

Think about the ripple effect: American workers lose out on a new chance to earn salaries while an American company loses a new, profitable undertaking. The project in question is completed in an inferior manner by a less qualified enterprise. The rule of law is diminished and fair trade practices rendered obsolete. And the bribe-paying company reaps the rewards of its dealings, perhaps even deducting the expense of paying bribes on its annual taxes. Other than the partners in corruption, everyone touched by this project loses.

Let me give you some sense of what is really at stake here. Last year, the Commerce Department presented a report to Congress indicating that we had learned of 100 cases of foreign firms using bribery to undercut American firms' efforts to win international contracts worth about $45 billion since 1994. Already this year we have learned of about $20 billion in additional lost contracts. Bribery continues to be key in many export competitions, with companies offering illicit payments winning 80 percent of the decisions.

Thankfully, American business leaders are not alone in being outraged by such goings-on. As bribery and corruption infect more and more business dealings and squander more and more resources, the worldwide business community has begun to give voice to its concerns.

A group called Transparency International is a global coalition against corruption that is supported by some of the world's largest corporations. Over fifty chapters from around the world -- as far afield as Nigeria, Bolivia, Nepal, Argentina, as well as the United States and throughout Europe -- are working with government, business, and academic leaders to confront the issues and Transparency International is doing some of the most ambitious research on bribery and corruption.

The cumulative result is that the issue of bribery and corruption is a front burner issue. This Administration has recognized the need for a multi-faceted strategy to address the problem, we've made serious progress internationally, and we will continue to pursue effective solutions and responses.

What we have undertaken is an effort to work one-on-one with our trading partners around the world to deal with bribery and corruption by convincing them that such conduct is not in their best interests. We are taking the issue head-on by dealing individually with trading partners so that a de facto multilateral stand against bribery and corrupt practices emerges; if we persuade nations to take their own stand against corruption then we have constructed a truly far-reaching, international wall against it. We have begun to see a shift in the winds where bribery and corruption are concerned, and slowly but steadily the makings of effective, meaningful changes are taking shape:

1) In May, the Organization for Economic Cooperation and Development in Paris, with strong American support, agreed that every Member State must eliminate tax deductibility of an overseas bribe. We will continue to press forward so that by the May 1997 Ministerial, every Member State will have actually eliminated these tax deductions or have pending legislative or regulatory changes to do so. And at the G-7 Ministerial in Lyon this month, there was agreement that the G-7 would lend its weight to this end as well.

2) Closing tax loopholes will hardly end corrupt business practices, so we have pushed for the criminalization of this kind of conduct. Currently, only a handful of our trading partners have joined the United States in providing criminal sanctions for bribing foreign officials. However, also this May, all OECD Members agreed to make foreign bribery illegal. By the OECD Ministerial next May, members will agree on the overall principles that will guide them, and the means by which every OECD member state will do what America has done. Some member states believe the best route to this goal is through a multilateral convention. But I see no legal or practical reason why every OECD member state cannot enact legislation to achieve the same result as the U.S. Foreign Corrupt Practices Act.

3) Recent success in the OAS on a Convention Against Corruption indicates bribery is not just an American concern -- it is a hemispheric issue that our OAS partners also recognize as a priority. Among other achievements, this convention -- which the U.S. signed in June -- is the first time countries agreed to criminalize bribery and extradite offenders. The OAS Convention is an important stepping stone to one of our major goals for the coming year; an interim arrangement negotiated with all WTO members.

4) American leadership has initiated the WTO's Government Procurement Agreement, which would promote transparency, openness and due process as a step towards a comprehensive WTO Procurement Agreement. Still, many key markets in Asia, the Americas, Eastern and Central Europe, and Africa are not subject to the rigorous disciplines of the agreement. Estimates of the value of procurement markets in these countries approach $1 trillion or more. So we will continue to work in this forum so that U.S. firms can compete for contracts without the impediment of bribery and corruption.

At the Kobe Ministerial this April, the Quad Countries -- the United States, Japan, the E.U., and Canada -- agreed to pursue an interim transparency agreement in government procurement that would be formally initiated when all WTO members gather in Singapore in December for the WTO's first Ministerial Conference. The G-7 also endorsed this goal this July. The WTO can and should play a role here, and agreement in Singapore is one of our priorities for the WTO's work program.

But this Administration will not rest on what we have accomplished so far. We are intent on assuring that American exporters are not put at a competitive disadvantage by such practices, and that they have the full support of the U.S. government in the fiercely competitive global marketplace.

We will build on our progress with additional steps to address this increasing problem. We intend to maintain our momentum in the OECD, including vigorous reviews of possible next steps on tax deductibility and criminalization issues. We will seek agreement at the December Singapore Ministerial to launch negotiations on an interim agreement on procurement transparency. We will work with the World Bank and other multilateral development banks to assist them in establishing procedures that guard against bribery and corruption in their projects. And we will be looking at other effective measures the government can take -- such as making American expert assistance dependent upon commitments by principles not to bribe, and establishing a confidential hotline for reporting cases of bribery -- that will be meaningful for American firms and workers.

In the face of the seriousness of the corruption problem -- a problem that crosses cultural and ideological and geographic lines -- a piecemeal approach will not succeed. But taken as the sum of its parts, the Administration's efforts to turn the tide against an unwritten-but-tolerated place for corrupt practices in the business world is making definite headway. On other issues, we have not hesitated to rely on American trade laws to head off unfair practices; on bribery and corruption we will put into use the available tools that will strengthen our hand. Our efforts must be equaled by the WTO, the IMF, and regional development banks to lower the threshold for tolerating such behavior so that bribery and corruption are eliminated from acceptable business practices. While there is no silver bullet to tackle this issue head on, there is plenty of incentive to put in the hard work and intense negotiations: American jobs, American paychecks, American families, and American growth.

For all we have achieved on trade and on getting our economic house in order, to squander billions of dollars in overseas opportunities because the issue -- bribery and corruption -- is complicated, entrenched, and delicate, would be foolish and very costly. I can promise you that the President and his Administration will do our part to ensure that bribery and corruption is the exception, not the rule, in international commerce. Our efforts will be meaningless, however, without your support. The private sector has worked with us hand in glove in determining the extent of the problem and developing solutions that will work. We will need your continued support as we join together to complete our work for the next American century.