Deputy Secretary's Speech

Remarks by U.S. Commerce Deputy Secretary David A. Sampson
Brazil-U.S. Business Council
Washington, D.C.

On behalf of President Bush and Commerce Secretary Gutierrez, I am honored to be here to talk about U.S.-Brazil relations. Secretary Gutierrez had wanted to be here today. But he is out of the country this week for meetings in Europe.

The best way to describe our relationship is that we are "close friends." That clearly was the message that President Bush conveyed during his visit to Brazil in November. In fact, those are his exact words: "close friends."

We have much in common. We share a history as nations of the New World. We were founded by empires but grew up as free democracies. We are united by geography. And we share a common vision for our hemisphere in the 21st century where freedom and justice are enjoyed by all the peoples of the Americas, and where our economies are linked by open and fair commercial trade.

Strong U.S.-Brazil leadership is important, not only for our nations, but for the entire Latin American region. Never has there been a more important time to unite the Americas in open trade and growing prosperity. Many of our hemisphere's democracies are young and fragile.

I think the region truly is at a crossroads. This is a moment in time where leaders need to decide where its future lies. It is in danger of slipping further behind other major developing regions unless we make economic progress.

When President Bush and President Lula met last November, they made a commitment to strengthen our relationship, through a new government-to-government dialogue on improving economic cooperation.

This dialogue will be led by the U.S. Commerce Department and Brazil's Ministry of Development, Industry and Trade. We're still in the early planning stages, but we hope to hold the first talks in Rio later this year. While the dialogue will be government-to-government, input from the private sector on the agenda for these talks is vital.

I would like to set up our discussion today by focusing on two key areas. The first is finding ways to improve bilateral and regional trade relations. And the second is how we proceed on completing the Doha Round of global trade talks.

In the Americas, we are pursuing comprehensive trade agreements. The U.S. wants to create the conditions for global competitiveness by negotiating trade agreements that eliminate barriers to innovation, investment and trade.

Beyond market access, we seek agreements containing broad commitments that provide a predictable climate for all businesses--manufacturers, service providers and investors.

This policy is working. For example, U.S. exports to Chile have nearly doubled since our Free Trade Agreement was implemented. We expect a similar increase in trade to occur when CAFTA goes into effect. And, of course, NAFTA has been very successful over the years.

On related fronts, the U.S. Congress will consider the Peru Trade Promotion Agreement later this year. And we're negotiating with Colombia, Ecuador and Panama.

When all is said and done, more than 90 percent of U.S. trade in the Americas will be covered by free trade agreements in the years ahead.

Still, as we look at a map of the Americas, Brazil and the rest of Mercosur stand out as the exception. But it would be a mistake to assume a lack of progress with Brazil on the FTAA means there is no cooperation on trade and other economic issues. Nothing could be further from the truth.

We look forward to making progress in other areas as our new trade dialogue unfolds. Both the U.S. and Brazil see this dialogue as an opportunity to make our economies more competitive by looking at concrete steps we can take to facilitate trade and investment.

One area we would like to focus on is customs. In today's global economy, manufacturers operate in one country, but source from multiple countries. So clearing customs quickly and easily--especially for intra-company trade which accounts for nearly one-third of total world trade--is vital to staying competitive because time, as we all know, is money.

We need to facilitate this market reality. A recent study estimated that every day saved in shipping time saves the equivalent of a 0.8 percent tariff on manufactured goods. That can add up to a lot of money that can be better spent elsewhere.

We would like to work with you on strategies to address the problems facing companies as a result of murky procedures, inconsistent interpretation of Customs regulations, and arbitrary clearance procedures that can cause lengthy delays for importing goods.

Progress in this area would be good for the United States and good for Brazil. Another area we want to cooperate in is opening new markets. As Brazilian companies seek new markets, including China, India, and Russia, and exports to China diversify beyond commodities, including technology, pharmaceuticals, and software, I would expect that our interests will become more closely aligned.

There are new opportunities for us to cooperate. For example, it is in our mutual best interest to disrupt the international supply chain of pirated goods.

Global illicit trade is a huge problem. It's getting worse every day. And the potential for undermining civil society is alarming. I just finished a book, "Illicit Trade" by the foreign policy expert, Moises Naim. He stated in no uncertain terms, that the very fabric of society is at stake. He believes that global illicit trade "is sinking entire industries--and destabilizing some governments and propping up others."

Intellectual property theft alone has huge costs. U.S. businesses lose some $250 billion per year, many American jobs are lost. Globally, estimates put the costs as high as $600 billion per year.

The toll in human terms could be far greater because of a rise in counterfeit drugs. A headline in The Wall Street Journal a week ago tells the story: "Fake Vaccines from China Pose Danger in War on Avian Flu." According to the World Health Organization, 10 percent of medicines throughout the world are counterfeit.

Clearly, cracking down on pirated goods would be a win-win for the U.S. and for Brazil.

These are the kinds of issues that I hope we'll be able to tackle in our new trade dialogue.

The second area I want to focus on is closely related to the first. Let me say it very plainly: We must cooperate on trade and investment issues in a global context. This is the point of the WTO and the Doha Round of trade talks.

This is so critical for a number of reasons. But I'd like to focus on one: closing the competitiveness gap.

The United States and Brazil today must compete in a global economy that includes 2.3 billion people in China and India. Both offer tremendous growth opportunities, but also the challenge of intense competition. China is attracting more than one billion dollars a week in foreign direct investment. We must rise to the challenge by creating open, fair, predictable and transparent trading regimes throughout the Americas.

The best opportunity to deliver the benefits of trade to every citizen in this hemisphere is the Doha Round of negotiations. A successful Doha Round will open up markets for farm products, services, and industrial goods across this hemisphere and across the globe. Under Doha, every nation will gain--and the developing world stands to gain the most. The World Bank estimates that if the Doha Round succeeds, 300 million people will be lifted out of poverty.

We know from history that developing nations who open themselves up to trade grow at several times the rate of countries that practice protectionism. And the stakes are very high. The lives and futures of millions of poor people across the globe hang in the balance. So we must bring the Doha talks to a successful conclusion.

One of the greatest obstacles to success are the countries that stand in the way of dismantling the tariffs and barriers, and trade-distorting subsidies that isolate the poor on this continent from the great opportunities of the 21st century. Only ambitious reforms in agriculture, manufacturing, and services can ensure that the benefits of free and fair trade are enjoyed by all people, in all countries.

We agree with Brazil that the agricultural negotiations will unlock the full potential of the Doha Round. President Lula has criticized the agricultural subsidies that the developed world pays to its farmers--trade-distorting subsidies that undercut farmers in the developing world. President Bush agrees. And the U.S. is leading the way to address this problem.

We offered a bold proposal for Doha that would eliminate agricultural tariffs over 15 years. Leaders who are concerned about the harmful effects of high tariffs must move the Doha Round forward. And leaders who want to make progress on agricultural subsidies must use their influence to help the WTO make progress on all aspects of the talks.

If we work together, the U.S. and Brazil, with other like-minded leaders around the world, we can succeed in reaping the benefits of open commerce that history has repeatedly shown over the years.

Let me conclude by saying how optimistic I am about achieving progress in our hemisphere. In the last half century, the people of the Americas have overcome enormous challenges: colonialism, communism, dictatorships and economic downturns.

But as you look across the hemisphere today, there are 34 democracies. All of them attended the Summit of the Americas last fall. And all of them came to talk about the future, about trade, and to work out their differences in open and meaningful dialogue. This is real progress. This is democracy.

Thank you. I look forward to hearing your views, and taking your questions.