Text: U.S. Commercial Diplomacy: the Challenge of the 21St Century by Alan P. Larson Assistant Secretary of State for Economic and Business Affairs
At no time in the history of the United States has economics played a more important role in foreign policy than it does today.
This increasingly interdependent relationship has two principal dimensions. The first is that U.S. participation in the world economy is more vital to domestic prosperity than it has been since the early 19th century. The second is that many of today's great foreign policy challenges -- integrating China and Russia into the community of nations, for example -- can be achieved only with the creative and effective use of economic policies and institutions.
During the Cold War, when containment of the Soviet Union was a cardinal objective, security alliances were preeminent policy tools. In the post-Cold War world, economic relationships have assumed at least equal significance. For instance, the International Monetary Fund (IMF) and World Bank have provided Russia extraordinary access to resources to stabilize its economy and to transform the institutions of central planning to those of a private sector-led, market-based economy. We are trying to integrate Russia into the world economy by fostering its effective participation in the World Trade Organization (WTO), in the Paris-based club of official creditor nations, in the OECD and in APEC.
The integration of China into the international political and economic system will be one of the great foreign policy challenges of the next century. If China's economy continues to grow at anything like its recent rates, its impact on the world economy will be profound. We welcome the growing economic strength and prosperity of China. We need to ensure, however, that as China emerges, it plays a responsible role in shaping, and abiding by, international rules. That is why we support China's entry into the WTO but insist that its entry be on commercially meaningful terms.
In the Middle East, economic tools and institutions have provided an indispensable foundation for a durable peace. In this regard, the World Bank has played a crucial role in funding and coordinating efforts to develop infrastructure in the West Bank and Gaza. In time, we hope that the Middle East Economic Development Bank will help overcome the economic fragmentation of the region by supporting transboundary infrastructure projects, private investment and economic policy coordination.
In both Haiti and Bosnia, U.S. foreign policy goals depend in large part on the efforts of bilateral donors, multilateral development banks and the IMF to rebuild political and economic institutions which will underpin the growth of civil society and stability.
This is not to suggest that military and regional security policies are no longer so important. Nothing could be further from the truth. Nevertheless, the effective use of economic tools -- particularly on a multilateral basis -- can forestall crises that could later require the United States, as the world's remaining military superpower, to intervene alone at much greater cost in blood and treasure.
In the domestic political arena, the Clinton administration is moving to rebuild a bipartisan constituency for U.S. economic leadership. It has appealed to Congress for negotiating authority to conclude trade agreements and for stable foreign affairs funding. Negotiating authority is necessary if the United States is to maintain its initiative globally and to regain it within the Western Hemisphere. The administration is also seeking bipartisan support to make good on U.S. arrears to international organizations and to international financial institutions.
At the same time, the State Department and other U.S. agencies continue to move decisively to open markets and expand trading relationships wherever possible.
The United States has reached Open Skies aviation agreements with Germany, 11 other European countries, Jordan and Singapore. We are actively pursuing similar agreements with key Pacific Rim economies and with the countries of Central America. Finally, we are engaged in watershed negotiations on Open Skies with the United Kingdom and Japan -- the gateways to Europe and Asia, respectively.
We are currently engaged in negotiations in the World Trade Organization that will ensure that the information superhighway extends throughout the world. Last December in Singapore, WTO negotiations resulted in the Information Technology Agreement, under which tariffs will be eliminated on over $500,000 million in products. And we have just this February completed a related WTO negotiation in which 68 countries agreed to open their basic telecommunication services markets to competition and international trade.
The United States is also supporting OECD negotiations to reach a Multilateral Agreement on Investment (MAI). Our objective in the MAI is to create new opportunities and stronger protections for foreign investors. We will make the agreement open to accession by non-OECD countries so that the agreement might lift investment standards throughout the world.
Finally, the United States is working to establish effective disciplines to combat overseas commercial bribery. OECD countries recently reached agreement to end the practice of granting business tax deductions for overseas bribes. Negotiations are underway for a similar agreement that would require U.S. trading partners to make overseas commercial bribery a criminal offense, a step the United States took nearly 20 years ago with the enactment of the Foreign Corrupt Practices Act.
Taken together, these initiatives will lay the foundation for a new world economy in the twenty-first century -- one that also advances democratic values. Disciplines on bribery will help prevent the corruption of fragile democratic institutions. Open skies and the information superhighway will speed the circulation of ideas and information as well as goods and services.
If the United States and its partners confront the economic challenges ahead with vision and enthusiasm, we can all be participants in the creation of a new international economic system that will ensure our collective prosperity and security well into the future.
This increasingly interdependent relationship has two principal dimensions. The first is that U.S. participation in the world economy is more vital to domestic prosperity than it has been since the early 19th century. The second is that many of today's great foreign policy challenges -- integrating China and Russia into the community of nations, for example -- can be achieved only with the creative and effective use of economic policies and institutions.
During the Cold War, when containment of the Soviet Union was a cardinal objective, security alliances were preeminent policy tools. In the post-Cold War world, economic relationships have assumed at least equal significance. For instance, the International Monetary Fund (IMF) and World Bank have provided Russia extraordinary access to resources to stabilize its economy and to transform the institutions of central planning to those of a private sector-led, market-based economy. We are trying to integrate Russia into the world economy by fostering its effective participation in the World Trade Organization (WTO), in the Paris-based club of official creditor nations, in the OECD and in APEC.
The integration of China into the international political and economic system will be one of the great foreign policy challenges of the next century. If China's economy continues to grow at anything like its recent rates, its impact on the world economy will be profound. We welcome the growing economic strength and prosperity of China. We need to ensure, however, that as China emerges, it plays a responsible role in shaping, and abiding by, international rules. That is why we support China's entry into the WTO but insist that its entry be on commercially meaningful terms.
In the Middle East, economic tools and institutions have provided an indispensable foundation for a durable peace. In this regard, the World Bank has played a crucial role in funding and coordinating efforts to develop infrastructure in the West Bank and Gaza. In time, we hope that the Middle East Economic Development Bank will help overcome the economic fragmentation of the region by supporting transboundary infrastructure projects, private investment and economic policy coordination.
In both Haiti and Bosnia, U.S. foreign policy goals depend in large part on the efforts of bilateral donors, multilateral development banks and the IMF to rebuild political and economic institutions which will underpin the growth of civil society and stability.
This is not to suggest that military and regional security policies are no longer so important. Nothing could be further from the truth. Nevertheless, the effective use of economic tools -- particularly on a multilateral basis -- can forestall crises that could later require the United States, as the world's remaining military superpower, to intervene alone at much greater cost in blood and treasure.
In the domestic political arena, the Clinton administration is moving to rebuild a bipartisan constituency for U.S. economic leadership. It has appealed to Congress for negotiating authority to conclude trade agreements and for stable foreign affairs funding. Negotiating authority is necessary if the United States is to maintain its initiative globally and to regain it within the Western Hemisphere. The administration is also seeking bipartisan support to make good on U.S. arrears to international organizations and to international financial institutions.
At the same time, the State Department and other U.S. agencies continue to move decisively to open markets and expand trading relationships wherever possible.
The United States has reached Open Skies aviation agreements with Germany, 11 other European countries, Jordan and Singapore. We are actively pursuing similar agreements with key Pacific Rim economies and with the countries of Central America. Finally, we are engaged in watershed negotiations on Open Skies with the United Kingdom and Japan -- the gateways to Europe and Asia, respectively.
We are currently engaged in negotiations in the World Trade Organization that will ensure that the information superhighway extends throughout the world. Last December in Singapore, WTO negotiations resulted in the Information Technology Agreement, under which tariffs will be eliminated on over $500,000 million in products. And we have just this February completed a related WTO negotiation in which 68 countries agreed to open their basic telecommunication services markets to competition and international trade.
The United States is also supporting OECD negotiations to reach a Multilateral Agreement on Investment (MAI). Our objective in the MAI is to create new opportunities and stronger protections for foreign investors. We will make the agreement open to accession by non-OECD countries so that the agreement might lift investment standards throughout the world.
Finally, the United States is working to establish effective disciplines to combat overseas commercial bribery. OECD countries recently reached agreement to end the practice of granting business tax deductions for overseas bribes. Negotiations are underway for a similar agreement that would require U.S. trading partners to make overseas commercial bribery a criminal offense, a step the United States took nearly 20 years ago with the enactment of the Foreign Corrupt Practices Act.
Taken together, these initiatives will lay the foundation for a new world economy in the twenty-first century -- one that also advances democratic values. Disciplines on bribery will help prevent the corruption of fragile democratic institutions. Open skies and the information superhighway will speed the circulation of ideas and information as well as goods and services.
If the United States and its partners confront the economic challenges ahead with vision and enthusiasm, we can all be participants in the creation of a new international economic system that will ensure our collective prosperity and security well into the future.