Secretary's Speech

Secretary of Commerce Carlos M. Gutierrez
American Chamber of Commerce in Russia Annual Investment Conference
Moscow, Russia

Thank you for inviting me to this Conference.

Minister Gref, Ambassador Burns, it is an honor to join you in opening this conference. This is my second trip to Moscow as Secretary of Commerce. It has been nearly two years since my first visit and I’m pleased to be here today to discuss economic growth and opportunity between Russia and the United States.

As you know, this year marks the 200^th anniversary of diplomatic relations between the U.S. and Russia. Though there have been times of great challenge during that history, we are now poised to enter a new era of commercial engagement which will strengthen our ties, grow our economies and create prosperity for our citizens.

My visit this week reflects the considerable and growing value the U.S. places on our business ties with Russia, and our desire to find new ways to bring greater economic opportunity to the people of our countries.

While political issues between our nations tend to garner the most headlines, the economic relationship is a great untold story.

U.S.-Russia commercial ties are stronger and more dynamic than ever before. This creates great opportunity for our future.

In the past two decades, Russia has begun to reap the benefits of engagement in the global economy and take a place as one of the world’s great economic powers.

Today, Russia's nearly $1 trillion economy is in its 9th straight year of growth, and the Economic Development Ministry reported 8.4 percent growth in the first two months of this year. That is impressive.

With inflation below 10 percent, an 11 percent increase in real disposable income within the past year, early debt repayments and budget surpluses, Russia’s economy is indeed on the rise.

As the economy continues to grow, so does U.S. business. I know later today you will hear from executives of companies such as Alcoa, Boeing, Coca-Cola and Motorola. Their presence at this conference speaks to the growing environment for business and investment here.

• According to some recent surveys, 84 percent of foreign companies active in Russia report being successful in meeting their goals; 95 percent plan to expand.

Consistent with these figures, current bilateral trade and future prospects for U.S. businesses in Russia are expanding significantly.

In 2006, U.S. exports to Russia grew 20 percent to $4.7 billion. This growth is occurring in a wide range of merchandise and service categories, suggesting that Russia’s growth is having a positive impact in purchasing power.

Importantly, the growth in our trade is a two-way street:

• In 2006, Russian exports to the U.S. were more than $19 billion, 30 percent more than in 2005.

Russia is, for the first time, beginning to take on a notable direct investment profile in the United States, with investments in mining, steel-manufacturing, and retail-petroleum, helping support American jobs and supply American consumers. Russia’s direct investment in the U.S. is $3 billion. The U.S. has $11 billion invested in Russia.

As big as these numbers sound, they are actually quite small for two countries our size. Indeed, we are just getting started.

The next step for Russia is World Trade Organization accession. Russia is the world’s largest economy not yet in the WTO.

The United States has been working side-by-side with Russia to achieve WTO membership. Last November, Minister Gref and U.S. Trade Representative Susan Schwab signed a bilateral market access agreement.

Now Russia, working multilaterally with the U.S. and other WTO members, has the opportunity to take the necessary steps to bring this process to a close, and enable its economy, companies and people to fully participate in the world market.

Many U.S. multinationals regard Russia as a strategic market.

At the same time, their perception is colored by what they hear about political issues such as energy security and a challenging business climate.

Expansion of Russian commercial engagement with America and globally requires transparent markets that embrace foreign and domestic competition.

As the Organization for Economic Cooperation and Development noted in its 2006 economic survey of Russia, “Greater openness is essential to monitoring, accountability and anti-corruption efforts.”

The U.S. and other economies have greatly benefited from openness, transparency, competition and adherence to the rule of law. Democratic institutions fostering economic freedom and rule of law offer the best mix of economic and social justice.

We believe that companies and economies benefit from the accountability provided by a vibrant media and independent courts. They serve to ensure government agencies responsible for upholding the rules of commerce carry out their duties properly and evenhandedly.

As Russia becomes more prominent on the global stage, creating and maintaining a level playing field that encourages competition will attract more investment and ensure that Russian companies can successfully thrive at home and abroad.

It is crucial for Russia, just as it is for the United States, to maintain an open business climate for capital, goods and services moving back and forth with its trade and investment partners.

Transparency and predictability in regulations and laws governing investment would send positive signals to potential partners in both our countries. Capital allocators look for secure, predictable markets, and they watch with concern where uncertainty exists.

In every country with an aspiration of attracting capital, business law should be applied consistently across companies and never selectively.

Building in predictability, transparency and reliability for investors will give Russia a competitive advantage.

While we are mindful of countries’ interests in protecting so-called “strategic” aspects of their economies, policies which seek to cordon off broad segments of an economy are policies that carry risks of their own to a nation’s economic strength. Russia’s challenge will be to pursue “strategic sectors” while welcoming and encouraging foreign capital and avoiding protectionist policies.

Protectionism often has the unintended consequence of limiting access to capital, technology and know-how, and sheltering companies and entire industries from competition that sparks innovation and drives efficiency.

Protectionism doesn’t protect jobs—the only thing that does is to compete, innovate and grow.

The United States and Russia should have a stronger partnership in areas such as energy, aerospace, transportation infrastructure, and high technology, to name some examples.

There have been tremendous technological advancements from which Russian companies could greatly benefit.

Russians and Americans, like the rest of the world's people, stand to benefit from stronger enforcement of intellectual property.

Around the globe we have seen that stolen intellectual property is not only an economic hazard, stifling innovation technological innovation, and discouraging works of culture in music and the arts, but also a health hazard.

The World Health Organization estimates that 10 percent of global medicine is counterfeit. Tough IP enforcement will protect Russian businesses and their ideas, like this country’s resurgent film industry, and it will also protect Russian people.

Russia is doing better from an economic standpoint than it has ever done before. However, from my discussions with American business leaders, it is clear to me that there remains much unrealized opportunity.

This foregone potential is an opportunity cost upon Russia’s consumers, entrepreneurs, producers and workers, even as it also represents unmet potential for Russia’s suppliers, clients and customers.

With the maturity of our bilateral relations, we can afford to be frank and honest with one another about issues on which we disagree, in the economic realm as well as other areas.

It is important that we speak up when we find ways to unlock untapped potential for expanding and building upon our commercial and political relationships in ways that would serve the mutual interests of our two nations.

We have come too far in building a new foundation based on cooperation and mutual interests to turn back the clock. There is much work to be done, but the foundation has been laid for the future of U.S.-Russia relations to include economic growth, prosperity and opportunity for both our peoples.

I believe we are entering a new era of collaboration and prosperity for our two great nations, and I thank AmCham Russia for your leadership and commitment to that future.