U.S. Leadership in the Global Economy

As Prepared

I am delighted to be with you this afternoon to address a subject about which I have very strong - and proud - feelings. The subject of my passion is the extraordinary economic progress the world has seen thanks to the dynamic leadership of President Bush. During the last six years, the United States has achieved an outstanding record of vigorously promoting international economic freedom and prosperity, and in fostering development in emerging economies through innovative - and sustainable - new strategies.

To quote the Martin Wolf January article in the Financial Times, "the world economy is in a golden period of broadly shared growth, high profits, modest real and nominal interest rates and low prices for risk. It has ... adjusted with some ease to a series of shocks: the stock market crash after 2000; terrorist outrages of September 11, 2001; wars in Afghanistan/Iraq; friction over U.S. policies; jump in oil prices to levels not seen since the 1970s; cessation of WTO Doha negotiations; and confrontation over Iran's nuclear ambitions. It has coped, as significantly, with China's and India's economic resurgence."

This has been achieved in the face of great challenges to the world trading system from those who would undermine the security on which that system depends, and from those who fear that the increasing interdependence brought about by globalization will dilute their power or prestige. While we have all benefited greatly from this economic progress, too little public attention has been paid to the policies on which that progress has been founded. I would like to provide you with a brief description of some of the key components of this Administration's international economic policies.

Promoting free trade has been a top priority for this administration. Our global economic leadership continues to create more and better jobs for Americans, to achieve market gains for U.S. exporters, to generate economic growth and development opportunities for our free trade partners, and to enhance choice and purchasing power for U.S. consumers, farmers and businesses.

It is a virtuous economic circle: more trade results in increased competition and lower prices, which leads to more jobs and higher real wages, which results in more demand and increased supply, which leads to more trade. Free trade is a fundamental building block of the broader economic and political freedoms for which generations of Americans have sacrificed so much.

The Administration has played a vital leadership role in launching the Doha Round of multilateral trade negotiations of the World Trade Organization and remains committed to its successful conclusion. I know that you and fellow members of the business community consistently identify-the Doha as your highest international priority. I have been delighted to see that our European friends, among others, now share our sense of urgency that we get ambitious multilateral negotiations back on track quickly. I assure you that we are working very hard to that end.

When the President took office in 2001, the United States had Free Trade Agreements (FTAs) with three countries. Today, we have nine FTAs in force with 14 countries, including the just-completed FTA with Panama, and more are on the way. We have five percent of the world's population - leaving 95 percent as potential customers, and every time we break down barriers to trade and investment, we open up new markets for our businesses and farmers.

The United States is actively opening markets abroad for Americans with FTA negotiations in Latin America, Asia, the Middle East and Africa. Through 2006, exports to FTA partners with Agreements put into effect under this Administration are growing twice as fast as our exports to the rest of the world. Although FTA countries make up 7.3 percent of the world's GDP, exports to these countries comprise 42.5% of U.S. exports.

The Administration has not neglected the needs of poorer nations - the President's leadership was vital in securing Congressional extension of the Generalized System of Preferences program which provides duty-free access to the U.S. market for a wide range of goods from 133 developing countries. The same Trade Bill also continued the Andean Trade Preferences Act, an essential weapon in the War on Drugs, and the Africa Growth and Opportunity Act, a key part of U.S. antipoverty efforts in Sub-Saharan Africa.

Ladies and gentlemen, the United States has seen tremendous economic growth under the Bush Administration. In 2006, real exports of goods/services increased a strong 9.2%, outpacing growth of imports (3.1 %). Direct investment in U.S. by foreigners has averaged a strong $166 billion over the past four quarters, the highest 4-quarter average since 2001. And the good news continues on the broader economic front.

Chairman Bernanke of the U.S. Federal Reserve Bank recently reported that GDP growth expanded by 3.4% in 2006. Real consumer spending increased 3.7% last year. Real business capital expenditures jumped by 6.8% during 2006, including a 9% increase in investment in high-tech equipment.

Corporate profits in the non-financial sector continued to rise as the ratio of pre-tax profits to sector GDP reached nearly 14%, the highest level since 1969! After rising by 3.3% in 2004 and 3.4% in 2005, consumer price index (measured December-over-December basis) increased only 2.5% last year. And the 2006 fourth-quarter unemployment rate was below 4.5%, its lowest level since the second quarter of 2001.

Real hourly labor compensation includes wages and employer-paid benefits, increased 3% in 2006 after rising an average of 1% in 2004 and 2005. The economy has added 7.4 million jobs since August 2003, more than the EU and Japan combined. Thanks to all these new jobs, tax receipts rose by 11.8% in FY 2006, following an increase of 14.5% in FY 2005, the highest receipt growth in consecutive years since 1981.

As President Bush stated February 12 when the White House released the Economic Report of the President with the telling headline, "Economic Growth in the United States has been Above the Historic Average and Faster Than Any Other Major Industrialized Economy in the World": "Our economy is on the move and we can keep it that way by continuing to pursue sound economic policy based on free-market principles."

The United States has also recognized that the true value of assistance provided to emerging economies is much more than just official development assistance, or ODA. In 2005, non-trade private financial flows from the U.S. excluding ODA - i.e., personal remittances, net private investment, and NGO grants - totaled some $119 billion, over four times the size of U.S. ODA flows. Development assistance of $27.6 billion in 2005 made America the world's largest donor nation. At a March 2002 UN conference held in Monterrey, Mexico, the U.S. pledged to increase its foreign assistance by 50 percent over 2000 levels by 2006. I am proud to say the U.S. met that pledge three years early.

While we are on the subject of poverty alleviation, I should note that the United States has dramatically enhanced the effectiveness of development assistance programs through the Millennium Challenge Account and the Millennium Challenge Corporation, or MCA and MCC. In 2002 President Bush, calling for a "new compact for global development," proposed this innovative foreign aid model. The MCA was to be the mechanism to implement a new model for providing foreign aid to those developing countries that agreed to three criteria: to rule justly, to invest in their people and to encourage economic freedom. The U.S. Congress, with strong bipartisan support, established the MCC in January 2004.

The MCC is a United States government-owned corporation responsible for the stewardship of the MCA, and is purposely designed as a small corporation to promote, support and ensure accountability for the foreign assistance strategies it administers. Developing countries that meet MCA compact conditions design and implement their own programs with MCA support. In its first three years, the MCC has selected 26 countries and signed 11 compacts totaling nearly $3 billion in aid. An additional 11 countries have signed Threshold programs, worth over $168 million, which are designed to help countries improve their policy performance and become eligible for larger Compact grants.

Several other countries are at different stages on the track to signing an MCA compact. The reality is that the MCC has worked to "reduce poverty through growth with over 700 million people in 38 counties throughout the world." And there are more to come.

The President's Emergency Plan for AIDS Relief (PEPFAR), the largest international health initiative dedicated to a single disease in history, is providing record levels of support to the fight against the AIDS pandemic. This generous and unique effort is designed to support and strengthen the AIDS-fighting strategies of many nations, including 15- heavily-afflicted countries in Africa, Asia and the Caribbean. President Bush has committed $15 billion over five years to support treatment for 2 million people, support prevention for 7 million, and support care for 10 million. Nations around the world are fighting for the lives of their citizens - and, I am delighted to say, America is now their strongest partner in that fight.

The President's Malaria Initiative (PMI) -- announced in June, 2005 -­devotes $1.2 billion over five years to cut deaths from this debilitating disease by 50 % in the 15 most-affected African countries.

Of course, economic isolationism and debilitating diseases are not the only impediments to economic growth in poorer nations. Corruption is the most persistent obstacle to international economic growth and development, particularly in emerging economies. The United States has been a leader in the multinational effort to end these practices. Our efforts are supported by the United Nations, the G-8, the Organization for Economic Co-operation and Development (OECD), the Organization of American States, and other multilateral organizations and institutions.

President Bush has improving governance accountability and transparency around the world is one of his Administration's most important foreign policy objectives. At last year's G-8 meeting in St. Petersburg, leaders called for stronger international efforts to deny refuge and access to financial systems to kleptocrats. They also vowed to strengthen efforts to combat fraud, corruption and misuse of public resources.

The President reinforced our commitment by announcing the National Strategy to Internationalize Efforts against Kleptocracy. The strategy provides a framework to deter high-level, public corruption. The strategy identifies critical tools to detect and prosecute corrupt officials around the world, and return assets stolen from the people of emerging countries. He is committed to ensuring global economic assistance reaches the intended recipients.

The United States has been a leader in the United Nations Convention Against Corruption (UNCAC), which is quickly becoming a focal point for international anticorruption action. It is the most comprehensive anticorruption treaty ever developed, and will be the first international anticorruption agreement to be applied on a truly global level.

The right to freedom of expression -- including the freedom to seek, receive, and impart information and ideas regardless of frontiers -- is a universal human right. Although the Internet has become a lightning rod for repressive governments as they try to restrict or block freedom of expression and the free flow of information and ideas, the United States is determined to minimize the success of repressive regimes in censoring information and silencing legitimate debate on the internet.

The Administration is engaged in vigorous efforts to advance global Internet freedom and deter repressive regimes from stifling dissent. Secretary of State Condoleezza Rice has made Internet freedom a priority, establishing an internal task force that draws upon the State Department's expertise in many areas, including international communications policy, human rights, democracy, business advocacy, and corporate responsibility. Because we value Internet freedom, we have actively resisted efforts to turn over its management to the United Nations.

The United States has been leading international efforts to shut down terrorist finance networks. We have encouraged countries to take actions to freeze terrorist assets when they are found, we have developed new initiatives to strengthen international cooperation against terrorist finance, and we have supported efforts to provide technical assistance to foreign governments working against terrorist finance.

The 9/11 Commission scorecard gave its highest grade to U.S. efforts to combat terrorism finance, in recognition of the success we have had in cutting terrorist access to the international financial system. But much remains to be done: we are developing and deploying strategies to combat illicit use of alternate finance forms, such as cash couriers, charities, and stored value cards.

We are relying more on "targeted" sanctions directed at specific actors engaged in supporting terrorism, proliferation, and other criminal activities, rather than applying them to an entire country. Such sanctions draw distinctions between regimes and people; do less harm to U.S. commercial interests; and are more apt to be accepted by a wider number of international actors and governments. Targeted sanctions have had a positive impact in Libya, Iran, North Korea, and elsewhere.

By providing a steady hand to guide a strong domestic economy and by promoting the openness of the U.S. economy, President Bush has enabled America to contribute greatly to a strong international economy. Administration policies to expand international trade in goods and services have encouraged foreign companies to set up operations in the United States. As of 2004, foreign-owned firms directly employed more than 5.5 million workers in the U.S. -- jobs that might otherwise go to foreign workers - and this does not include the millions of jobs at companies that supply parts and materials to foreign-owned firms. Our economy has now experienced over 5 years of uninterrupted growth, averaging 3.1% a year since 2001 - over a full percentage point faster than either the EU or Japan average.

The U.S. economy is truly the engine powering global economic growth. As President Clinton's former Treasury Secretary Summers recently noted, `the world economy in aggregate grew more during the past five years than in any five-year period since the Second World War. Growth is not merely strong. It is also widely shared. In 2006, according to the World Bank, the economies of the high-income countries grew by 3.1 percent, with the U.S. achieving 3.2 percent, Japan 2.9 percent, and even the sluggish Eurozone 2.4 percent. Meanwhile, the economies of the developing countries, led by the rising giants, China and India, expanded by 7 percent, after 6.6 percent in 2005 and 7.2 percent in 2004."

This list of achievements does not suggest we should or can rest on our laurels. There is still a lot of work to be done over the next two years, including forward thinking on two critical issues key to our continuing prosperity: energy security and China.

The U.S. international energy security strategy promotes abroad the President's vision for energy security at home. Ensuring a sound energy future is one of the most critical challenges facing the world today. One of the most unexpected, indeed, disconcerting developments of recent years has been the warping effect that energy issues have had on the geopolitical landscape.

Energy is truly a global challenge - making a decisive impact on issues as diverse as security, diplomacy, development, and climate change. No one nation can address the global energy crisis alone. We need to work together to seize new opportunities to develop cleaner and more efficient sources of energy and to prevent the global and rapidly growing demand for energy resources from generating unnecessary confrontation in the years ahead.

This is one of President Bush's highest priorities, and he has identified five key goals that will drive our policies at home and serve as the beginning of our consultations with allies abroad. We seek:

(1) to diversify world energy sources through free, open, competitive markets;
(2) to encourage a variety of energy sources, including renewable and alternate fuels;
(3) to use energy wisely through efficiency and conservation;
(4) to expand strategic energy reserves; and
(5) to protect the world's critical energy infrastructure.

Our strategy employs every tool at our disposal: diplomatic engagements - including bilateral and regional activities; U.S. leadership and active participation in multinational institutions, like the International Energy Agency (IEA); energy-focused foreign assistance programs aimed at reducing energy poverty; and public-private dialogues to promote energy investment and innovative commercial activity President Bush has overseen investment of $12 billion for the development of cleaner, cheaper, more reliable energy. Last year he announced the "Advanced Energy Initiative" to provide a 22% increase in Department of Energy research funds to find clean energy alternatives.

We need to engage other major energy-producing and consuming nations (including China and India). In January 2006, President Bush launched the Asia-Pacific Partnership for Clean Development and Climate, which includes voluntary measures, new investment opportunities, local capacity­ building, and the removal of barriers to the introduction of clean, more efficient technologies. The U.S. also championed the International Energy Agency's recent adoption of a robust outreach program to China and India designed to facilitate market-based policies encouraging adequate energy investments, undistorted energy pricing, and greater energy efficiency.

We are pushing China to continue its integration as a responsible member of the global economy. We are encouraging China to increase transparency in its approach to development assistance and lending as it seeks markets for its products and looks for new or untapped sources of energy and other raw materials in Africa and elsewhere. Specifically, we are concerned that China's stepped-up lending to developing countries risks saddling them with additional debt, and would like China to do more to coordinate its aid programs with other donors. We encourage China to become involved overseas in ways that enhance rather than undercut international efforts to nurture good governance and sustainable growth.

China must also do its part in addressing global imbalances by stimulating domestic demand, reforming its financial markets, and allowing greater exchange rate flexibility. As Secretary Paulson has said, "strengthening and reforming financial markets will ultimately allow the Chinese to freely float their currency."

As part of that effort, we held the inaugural Strategic Economic Dialogue (SED) meetings with the Chinese in Beijing in December; under Treasury Secretary Paulson's leadership, we will meet again with Chinese economic leaders in Washington in May. We are using SED meetings to discuss longer-term, cross-cutting economic issues that affect US-China economic relations and the global economy, but we also want to make progress on more pressing issues that strain our relationship in the short term, such as China's inflexible currency and weak IPR protection.

In preparation for the May SED meeting, we are working closely with the Chinese on several strategic areas. We are discussing the development of efficient service sectors and the creation of an innovative economy. We are exploring the possibility of a bilateral investment agreement. We are considering ways to cooperate to promote sustainable and clean energy use and to better protect the environment. We are also discussing how China can rebalance its growth through a strengthened social safety net and increased household consumption. Progress on these issues will benefit not only China and the U.S. but will also contribute to stronger growth for the entire global trading community.

Other issues will require our sustained leadership and engagement, including:

• Translating the newfound urgency on WTO Doha by our European and other friends into concrete improvements in negotiating offers;
• Expanding policies and programs that alleviate poverty by providing conditions for economic development when feasible and assistance as needed;
• Remaining vigilant in the battle against HIV/AIDS;
• Intensifying our efforts in the fight against bribery and corruption; and
• Continuing to lead the international struggle against terrorist financing.

We must continue to consolidate and secure our achievements and show effective leadership to the community of nations on these issues. The Bush Presidency's international economic record of the past six years is one of great success that has set the conditions for even further robust economic growth and prosperity in America and the world. I look forward to your advice and assistance continuing these efforts and to spreading the message of these many achievements.

Thank you.