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Advisory Committee
on International Economic Policy Meeting Highlights: November 23, 1999 Released by the Bureau of Economic and Business Affairs U.S. Department of State, February 7, 2000 |
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The Advisory Committee on International Economic Policy (ACIEP) met in open session from 9:00 a.m. to 1:00 p.m., on November 23, 1999, under the chairmanship of Michael Gadbaw. Following were key topics of discussion. 1. Financial Crisis: Latin American and Indonesia The Committee discussed Latin America and Indonesia, areas that have not fully participated in the global recovery from the financial crisis of 1997. Edwin Truman, Assistant Secretary for International Affairs, Department of the Treasury, and Melinda Kimble, Deputy Assistant Secretary for International Finance and Development, Department of State, made brief remarks. Truman said there are a number of countries in recession in Latin America, but there are bright spots. The Argentine government is following prudent fiscal policies. Brazil is engaging in active fiscal consolidation and macroeconomic fundamentals in Mexico are relatively favorable. The Mexican government will need to avoid a budget crisis during the election cycle. Indonesia was badly hurt by the crisis, but inflation has stabilized and it is possible that there will be some limited economic growth this year. Kimble noted that the crisis exacerbated social problems in many countries and accelerated poverty. Rural-urban demographic shifts could set the stage for political problems and a possible backlash against necessary economic reforms. Members of the Advisory Committee expressed optimism about post-election Indonesia and asked what the U.S. could do to improve social and economic issues in emerging markets generally. There was some criticism that the stabilization policies advocated by the U.S. Government and the IMF increased poverty. Kimble explained that the U.S. Government was encouraging countries engaged in economic restructuring to continue funding for social expenditures. Alan Larson, Under Secretary for Economic, Business, and Agricultural Affairs, Department of State, noted that certain decisions were ultimately sovereign decisions and that the IMF could not force changes in income distribution. 2. International Affairs Resources Ambassador Wendy Sherman, Counselor, U.S. Department of State, described the outcome of the FY 2000 budget negotiations between the executive and legislative branches. Foreign affairs funding was a top priority for the Administration and critical to the final overall budget agreement. Sherman said that while success had been achieved in the most critical areas, significant shortfalls limit the ability of the Department and the USG to support important initiatives, including advocacy and other support for American business abroad. Advisory Committee member Ambassador Richard Gardner, of Morgan, Lewis & Bockius, praised the outcome but said projected international affairs budget requests for the future are too low. Rather than maintaining the FY 2000 level of $21 billion through 2004, Gardner argued the Administration should be gradually increasing the budget to $30 billion over the next four years to cover high-priority needs, including the Balkans and the Middle East peace process, as well as to provide additional resources for the State Department and sustainable development. He lamented the severe underfunding of State Department operations, which was clear from the recent Overseas Advisory Council Report. Gardner called for creation of a presidential panel to report by January 2001 on foreign affairs needs for the decade ahead. Advisory Committee members noted improved services to American companies. At all layers, management is the State Department's weakest point, one member observed, with practices and technology stuck in the 1970s. One committee member suggested that Department could improve use of information technology and streamline services greatly by contracting out more administrative functions. Another said the export control licensing system was slow and caused US firms to lose contracts. Labor participants said they support increased funding for foreign affairs in principle, but find it hard to justify higher spending levels when workers believe industrial jobs are going overseas. Moreover, budget battles are about trade-offs, and for most workers, domestic programs carry more weight. Sherman said security concerns had to be taken into account and sometimes complicated efforts to introduce new technology, but the Department could still improve in this area. She added that we are working to improve service to business, including a better export control regime. On the general question of resources, the trade-off between foreig" she said, because the foreign affairs budget represents only 1% of the total. Under Secretary Larson challenged labor's notion that increased trade means loss of U.S. jobs; rather, he said, it means better jobs. 3. World Trade Organization and the New Round Under Secretary Larson described the U.S. agenda for Seattle-- see also http://1997-2001.state.gov/issues/economic/ 991013_fswhouse_wto.html for more detail. Discussion focused on how to bring labor and environmental issues into the international trade agenda. Committee member Norman Holmes pointed out that efforts to integrate labor issues go back as far as the early Uruguay Round, when then-USTR Clayton Yeutter proposed a negotiating group on worker rights. Over time, reasoned argument has failed to advance the issue, which is why some parts of the labor movement see Seattle as a chance to "strike," to bring labor back to the table. Another advisor argued that labor is a moral, not an economic issue: job security affects real people in daily life. The labor movement sees worker rights as a long-term project and has devoted resources to working with developing countries through the AFL and International Federation of Labor Unions. Still, another member commented, the prevailing sentiment was that without some movement on labor, environment, and transparency issues in Seattle, anti-globalization pressures will build and further erode any organized labor support for WTO. One participant said that U.S. business fully realizes that it must set standards of operation overseas that are identical to the way its treats its workers in the United States. U.S. business cannot operate abroad by exploiting foreign workers. If this were really the case, asked another member, then why is there an inferred conflict between U.S. business and the labor movement over inclusion of labor issues in our international trade agenda? Why do developing countries oppose including labor in the WTO? Thea Lee, Assistant Director, American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) saw two kinds of opposition to a serious labor dialogue. One is fear of the unknown and misuse of information. This can be addressed through persuasion, education, and fair rules. The other develops when a government or business community has built its development strategy around repressed labor standards, which she said is more insidious and harder to remedy. ACIEP Chairman Gadbaw said other issues have become part of the trade agenda, for example, intellectual property rights are now a component of trade accords. He suggested that a clear description of what is proposed for labor would be useful. The issue now facing the USG, one advisor suggested, is to convince the rest of the world to do the same for labor -- to make labor issues a standard part of any trade deal. It will take a lot of country-by-country work, we are not there yet. On the other hand, it was felt that USG work to bring environmental issues into our trade agenda is more advanced; the President's November 16 Executive Order creates a real expectation that the Administration will integrate environmental issues into the WTO. Under Secretary Larson acknowledged that we must still persuade many countries to support our labor and environment objectives; we have started and have worked hard, for example, with Egypt. Unfortunately, the labor issue has been fraught with considerable hyperbole and misunderstanding. Larson also pointed out that the WTO is not the only tool to deal with labor and the environment; indeed, we need to ensure effective use of all international organizations, such as the United Nations. He described Japanese and European agendas for the new round, the WTO accession process for China, and closed by discussing the U.S. proposal for technical assistance to help developing countries participate more fully in international trade. 4. Short Presentations/Discussion Southeast Europe Dan Hamilton, Special Coordinator for the Southeast Europe Initiative, U.S. Department of State, gave a status report on Stability Pact achievements between the Sarajevo and Istanbul Summits. He noted that the U.S. was in the process of forwarding to Congress unilateral trade preference legislation. Also, the Overseas Private Investment Corporation was preparing an equity fund and had made a new credit line available for the region. Hamilton said the EU had pledged over 5 billion euros to the Western Balkans for 2000-2006, part of its pledge of 12 billion euros for the region as a whole. He cited the Investment Compact and Anti-Corruption Initiative as concrete steps. Hamilton reported on efforts to establish a Business Advisory Council, and noted that a donors conferences would be held early in the new year to consider projects for the spring. Sanctions Peter Bass, Deputy Assistant Secretary for Energy, Sanctions, and Commodities, Department of State, said the President's April 28, 1999 decision to exempt commercial sales of food, medicine, and medical equipment from sanctions has resulted in U.S. commercial food sales to Iran and Libya. Easing of some sanctions against North Korea, announced by the President on September 17, should allow the export of most consumer and non-sensitive products to North Korea. However, U.S. and multilateral controls prohibiting the export of military and sensitive dual-use items to North Korea remain in place. Also, on October 27, Congress granted the President new authority to waive permanently all economic sanctions on India. Bass said the Administration will continue to work with Congress on comprehensive sanctions reform in the coming session. However, it had opposed the Ashcroft Amendment to eliminate all sanctions on food and medicine, which the Senate had passed, because the bill would have hamstrung the President's flexibility to use sanctions during conflicts involving the U.S. or its allies. Under Secretary Larson commented that the Administration continues to work with Congress to amend Title IV of the Helms-Burton law to include a waiver provision; the issue was recently discussed between Secretary Albright and EU Foreign Affairs Commissioner Patten. Biotechnology Carole Brookins, Chairman and CEO of World Perspectives, Inc., said the reduction in planting of biotech seed by U.S. farmers was an indicator of the need for a more vigorous defense of a sound, scientific approach on genetically modified organism by the U.S. Government. With the upcoming Biosafety Protocol negotiations taking place in late January 2000, this was a critical period. Some recent negative developments included continued EU suspension of biotech seed approvals, unanswered misinformation in the international press, risky proposals for handling biotech in the WTO, lack of real Codex working group progress, and the OECD decision to create a new task force on food safety. Brookins predicted that the Food and Drug Administration (FDA) listening sessions on biotech food labeling would lead to mandatory FDA prenotification of biotech seed development and more Environmental Protection Agency monitoring, lending credence to EU allegations that current U.S. Government regulations are inadequate to protect consumers and the environment. Brookins called for expanding the terms of reference for the WTO to include all "new technologies," such as ultraviolet, irradiation, and cloning, in order to counter the EU's narrow attack on genetic engineering. One member of the committee urged that the President form a national dialogue to define "precaution" and "risk assessment" in the SPS Agreement text and to prohibit new plantings of bio-engineered trees until impacts can be assessed over a full forest life cycle. Asia Pacific Economic Cooperation (APEC) Private Sector Initiatives Ambassador Richard Boucher, Coordinator for APEC, Department of State, described U.S. priorities in APEC. He said the immediate goal for the upcoming year would be to focus on implementation of earlier initiatives, including development of financial and market infrastructures through technical assistance, business plans, and other types of assessments; and focusing on key sectors, such as electronic commerce, trade facilitation, and natural gas. He added that that it was important that local private sector non-governmental organizations (NGO) and companies tell their own governments what needs to be done. He suggested that U.S. companies and NGOs needed to encourage their counterparts to participate in promoting this agenda. Anti-Corruption Developments Nancy Zucker-Boswell, Managing Director, Transparency International USA, emphasized that implementation of anti-corruption agreements is now key. Most importantly, she called for U.S. efforts to secure ratification of the OECD Anti-Bribery Convention by all signatories as soon as possible. She noted that the October 1999 Durban International Anti-Corruption Conference called for more supply-side efforts from aid donors, such as conditioning new assistance on anti-corruption programs, and improving anti-money laundering policies. Tom Delare, Chairman of the U.S. Delegation to the OECD Anti-Bribery Working Group, Department of State, reported that 19 countries have ratified the OECD Anti-Bribery Convention. He also noted that the OECD has raised the bar significantly in its reviews of ratifying country implementation. Four have been deemed inadequate to implement the convention, with Japan having particularly serious deficiencies. [end of document]
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