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Archive Site for State Department information prior to October 31, 2000. This site is not updated. RETURN to the current State Department web site. |
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Advisory Committee
on International Economic Policy Summary of Discussion: October 31, 2000 Released by the Bureau of Economic and Business Affairs U.S. Department of State, Washington, DC |
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Meetings of the Advisory Committee are open to the public. However, participants' statements are not for attribution. Meetings of the Advisory Committee are open to the public. However, participants' statements are not for attribution. ACIEP Chairman Michael Gadbaw opened the meeting. Alan Larson, Under Secretary of State for Economic, Business, and Agricultural Affairs, welcomed participants and introduced visitor Astrid Thors, a member of the European Parliament from Finland. Emerging Market Economy/Democracy: Nigeria Al Larson opened the discussion by noting that Nigeria had been identified as a country needing concerted attention because it is in the midst of an important political transition and had considerable regional influence. The Paris Club meeting the previous week broke down when President Obasanjo pressed for debt forgiveness, but that the parties will meet again. Prof. John Paden, from George Mason University, gave a presentation on the current situation in Nigeria and the status of President Obasanjo's reform efforts. Obasanjo has had the consensus of the people that economic liberalization is needed to permit Nigeria to enter the world economy, but he is losing his political base as economic reforms are stalled. Economic liberalism also raises questions regarding who benefits as companies are privatized. The South has the money, but the North has the government and this is creating tensions. Prof. Paden noted that President Obasanjo had promised debt relief as part of his campaign, but rising oil revenues mean creditors are reluctant to cancel debt, although refinancing should be possible. Nigeria's trickle-down economy and over-centralization are typical of most OPEC economies. The business climate remains subject to political risk. Local violence and corruption must be brought under control. Underlying institutions tend to be weak, and the Sharia rule arising in parts of the country is a bottom-up response to the lack of rule of law. A Department of State representative noted that Nigeria had been a diversified, agricultural exporting nation in the 1960s, but that, with the quadrupling of oil prices in the 1970s, almost all new investment was redirected into Nigeria's hydrocarbon sector. By 1980, Nigeria earned $25 billion/year in oil income. The boom was short-lived, however. Per capita income, at a high of $1000/year in 1980 is down to $300/year. Oil accounts for 90 percent of Nigeria's export earnings. To realize its immense potential, Nigeria must undertake serious economic and political reforms. The representative identified five areas that need attention: (1) Nigeria's infamous corruption, which acts like a tax on development and makes investment seem futile; (2) crime, including white collar crime (it's impossible to safely use a credit card in Nigeria); (3) the judicial system, which is weak and corrupt and must be strengthened if public confidence is to be restored; (4) privatization, which must go forward, but with more attention paid to avoiding corruption of the process; and (5) delivery, even in a limited way, of the most basic government services. There are some positive signs of change. For example, there is a degree of honesty and openness in public debate about the need to combat corruption in Nigeria. Nigerian President Obasanjo is personally committed to this crusade. The U.S. role in Nigeria is to encourage this and other positive trends. U.S. annual assistance to Nigeria has risen from about $10 million two years ago to more than $110 million today. Emerging Market Economy/Democracy:Colombia Department speakers noted that Colombia's problems, which are long-standing, worsened in the last five years due to massive influxes of drug money. The U.S. is trying to foster the development of Colombia's institutions and promote broad-based economic growth. The Colombian government must provide social services and alternatives to coca, but the country suffered a contraction of growth in 1999. Some recovery is expected this year due to increased oil income, but more structural reform necessary. Plan Colombia is an integrated broad-based program to support the peace process. It includes microenterprise support, and civil rights components including money for the construction of courthouses. A government presence also needs to be built up east of the Andes where drug trafficking is most entrenched. Another Department speaker noted that drug trafficking follows a business model. Coca must grow for 18-36 months, so they need a farming location beyond government control. As the governments of Peru and Bolivia cracked down on coca production, traffickers withdrew to Colombia. They are well entrenched there with a security support structure. Drug money feeds corruption, and they do well during economic downturns. Plan Colombia is an aid package to support President Pastrana's proposals for a range of issues that need addressing: economic, government structure, and anti-drug measures. A committee member asked whether anything was being done to fight money laundering. A speaker responded that there were efforts to stop money laundering, including local efforts to identify front companies, such as Colombia shops that sell U.S. goods below market to launder dollars. In response to another question on human rights, a speaker said protection of human rights is fundamental to any U.S program. Any Colombian unit that engages in human rights violations will be cut off immediately. Members commented that labor leaders were also being killed. Another participant replied that there doesn't seem to be a Pastrana conspiracy against labor. There is just a lot of lawlessness. Paramilitary groups appear to be involved in the labor killings. The U.S. is targeting about $25 million to enhance human rights protections through new and better-trained prosecutors and witness protection programs. Not many have been prosecuted for killing labor leaders yet, however. The U.S. would support giving labor leaders the same protection as human rights leaders. Resource Considerations in Foreign Policy Tony Wayne, Assistant Secretary for Economic and Business Affairs, gave an audio-visual presentation on the Bureau of Economic and Business Affairs' (EB) activities and resource issues. He noted that the rapid integration of the global economy means international economic issues play an increasingly important role in foreign policy, and explained how the Bureau's activities and responsibilities have increased dramatically in recent years. He cited as examples the 25 new bilateral investment treaties and 50 recent Open Skies agreements the Bureau has negotiated, as well as new bilateral and regional trade agreements, and continuing engagement with the EU that has led to agreements on data privacy, sanctions and mutual recognition of standards. Wayne also noted the Bureau's efforts to preserve and encourage open markets in the 1.3 trillion global telecommunications market, its efforts in numerous fora to increase global economic growth and stability, particularly in developing and transition economies, to assist U.S. business abroad, and to increase the level of public involvement in the discussion of international economic policy. However, while the Bureau's workload has burgeoned, resources to support these activities have not. Economic Bureau's operating budget remains only 0.1% of the Department's total budget. Some participants commented that the audio-visual presentation should be seen by a wider audience and might be improved by more concrete anecdotes and cases. Others commented that the USG's effort to support consumer rights should be highlighted. One participant said that a more nuanced approach to support for open markets would improve the presentation, and that free trade objectives should be balanced with support for consumer and labor rights, and environmental objectives. Another participant agreed saying that because there was often no consensus on labor and environmental issues, some were reluctant to support more resources for U.S. agencies that may only reflect a segment of U.S. interests. Participants agreed that more consensus was needed and that the EB website could be used as a forum for communication. Paul Hagen, a Director at Beveridge and Diamond, P.C., offered a private sector perspective on the need for adequate resources and support for U.S. international diplomacy. Noting that many issues addressed at the international level ultimately have significant impact on U.S. trade, including the environmental issues he frequently works on, he described the ways in which the U.S. often fails to fully support the efforts of the State Department and other U.S. agencies in international fora. For example, the U.S. has a backlog of overdue treaty ratifications, and it cannot play a leadership role in the decision-making within international bodies if it does not have a seat at the table. The USG also needs to increase staff and funding for international diplomacy that affects our economic interests, including environmental diplomacy, and maintain its engagement with the developing countries by expanding development aid for good government and regulatory capacity building. By failing to adequately support international activities, the U.S. is ceding leadership to other countries with adverse impacts on our own interests. The Foreign Policy Implications of Rising Oil Prices A Department speaker described the USG's efforts to promote energy security and stability both domestically and for our economic partners. Attention is currently focused on increasing production and a gradual alignment of supply and demand, through talks with key consumers and producers. The goal is to make the market work better by working with all the players. Robert W. Haines, Manager of International Relations, Exxon Mobil Corporation, made a presentation on the industry's response to the prices changes and shortages. Noting that the low oil prices in the 1990s were also a problem in that they led to under-investment in production and processing capacity, Haines said industry's principal response to changing markets was to try to keep their costs low so they could operate competitively in any market. Rashad Kaldany, Director, Oil, Gas and Chemicals Department, World Bank/IFC gave a presentation primarily focusing on the impacts of higher energy prices on developing countries. The economies of developing countries have been affected differently depending on their dependence on imported oil. Developing countries as a group could experience an average reduction of one percentage of GDP. The World Bank is using a base case scenario that predicts prices will continue to fall for the next several years, reaching $28/bbl in 2001 and falling as low as 18-19/bbl over a number of years. Although a special program to offer funds for energy costs was approved, no country has yet made an application under that program. Overall, the impact of this round of price hikes appears manageable. The price shock has been smaller than it could have been, in part because output is less dependent on oil than in the past. He advised developed countries against cutting taxes on petroleum products, because that would not help reduce demand, and only reductions in demand would ultimately help developing countries by allowing prices to fall. OECD Corporate Guidelines The Committee received a briefing on the recently adopted OECD Corporate Responsibility Guidelines. A Department spokesperson said the OECD, and the U.S. in particular, are seeking input on the rules. Several committee members commented that there were a few provisions of potential concern to industry, including provisions on supply chain responsibility and how labor/management issues would be treated, and that full support for the Guidelines was being reserved until they saw how they would be implemented. Some concern was also expressed about a proposal to link the guidelines to export credit arrangements, in which case they could cease being voluntary guidelines. Biotech Working Group The Biotech Working Group of the ACIEP reported that they had held the first meeting of this new working group, and that precaution dominated the discussion. One participant noted that it is easy to confuse the environmental and health safety aspects of agricultural biotechnology: food safety is easier to test, but the environmental impact may be more important. The group is open to participation by anyone interested in biotech issues. Membership is diverse and members recognize that they may not reach full consensus on all issues. The Working Group is seeking briefings on U.S. food and agriculture biotech regulation, biotech trade issues, and the impact of biotech on developing countries. Global Information Economy Working Group The Global Information Economy Working Group of the ACIEP held its first meeting August 7 and will meet again within the next few weeks. The group is considering e-commerce issues, such as identifying barriers to e-commerce and ways to optimize global networks, and other IT issues such as the DOT Force initiative to address the digital divide and the Cross Sectoral Initiative. The State Department coordinator is now Todd Chapman (ChapmanTC@state.gov). [end of document]
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