FTS-COMMERCE LTA

November 1, 2006

1`:00pm CT

Bill Marriott: This is Bill Marriott, and I want to welcome all of you to the call this afternoon and to call the meeting to order.

Today, we’re gathering to discuss the letter of recommendation on the Asia Pacific Economic Cooperation (APEC) Summit, which will be held later this month.

As you know the Council’s been very active on Asia related topics because of their vast and expanding markets.

And the PEC has written letters on China, Russia, and Korea, all of which are APEC members.

Initially, the APEC economics are written on World Trade Organization (WTO) negotiations.

There's no doubt that the APEC region is crucial in expanding our export.

And I'm pleased we have two individuals on the call today with a lot of experience in the region.

The Council’s Executive Director and Under Secretary of Commerce for International Trade Frank Lavin has a long history in the region. He was an ambassador to Singapore and was an investment bank in Singapore and Hong Kong.

Also joining us Ambassador Michael Mihalik, Senior U.S. official to APEC.

Before we introduce our letter of recommendation, I’d like to call on Under Secretary Lavin, who would share some of his thoughts.

Frank?

Franklin Lavin: Thank you Mr. Chairman and welcome also to everybody. We were just chatting a minute ago.

The President leaves later this month for Vietnam. It's a historic trip because of the history of U.S.-Vietnam relations and it's where Vietnam formally joins the WTO, so it's really a step ahead for them and good step up for all of us.

But this is an APEC oriented letter. And it's great to have the President going there with this letter in hand where we’re showing that I think the U.S. business community is serious about APEC, serious about Asia. And he's going to negotiate with the full support of the pack.

Ambassador Mihalik can walk through the goals but, you know, we've got a set of security goals in the region - regional economic goals. There's a natural disaster pandemic element in the APEC agenda, there's a governance corruption element, and then also we’ve got to look at reform within the APEC institutions.

So there are four or five key goals that the President has got on his agenda for APEC. This letter I think is just a useful instrument, a tool in his toolbox.

I appreciate people’s support for it.

Bill Marriott: Okay. Thank you very much.

I’d like now to call on Lee Raymond who is Chairman of the Subcommittee on Trade Promotion and Negotiations to report on the letter.

Lee?

Lee Raymond: Yes. Thank you, Bill. Chairman Marriott, Under Secretary Lavin and Council members.

Thank you for the opportunity to present the Trade Promotion and Negotiations Subcommittee’s letter on APEC.

The upcoming Asia Pacific Economic Cooperation Leader’s Meeting in Hanoi offers an important opportunity for the President to advance policies that will promote economic liberation, to bolster our trade and investment in the region.

The PEC’s letter suggests a number of areas where U.S. led initiatives to help to improve the business climate in the Asia Pacific region.

In particular, the letter calls for an expanded APEC Secretariat supplied with the resources it needs to enhance the implementation of APEC initiatives.

There are several additional important initiatives that the United States could reinforce during the APEC forum.

First, the administration should encourage countries to adopt technical standards that are consistent with international norms, reducing barriers to market entry.

Second, the United States should promote government procurement policies that encourage competition and do not discriminate in favor of domestic supplier.

Third, U.S. efforts to ensure intellectual property protection being a top priority for APEC and the PEC recommend the adoption of a region wide model for IP enforcement.

Fourth, the United States should address current and potential delays and disruptions in immigration and border management system.

The temporary entry of foreign business travelers remains a top issue for many U.S. businesses.

The PEC urges the administration to push APEC partners to open up financial services and capital markets and provides U.S. firms the rights and benefits of national treatment.

Sixth, the APEC life science innovation forum, which is intended to promote biomedical innovations, should be actively supported.

And finally, the PEC encourages continued dialogue on trade negotiation. APEC leaders should renew their call for ambitious results in the WTO Doha round negotiations.

At the same time, the United States should insist that ongoing bilateral free trade agreements be comprehensive in nature and include all products and all sectors.

Mr. Chairman, the President’s Export Council believes that APEC provides a useful forum for countries in the Asia-Pacific region to coordinate on mutually beneficial economic policies.

The PEC’s recommendations identify areas that should be priorities of the administration in the upcoming discussion with APEC leaders.

I would like to thank the members of our subcommittee and their staff for their help with this letter, especially John Chen of Sybase, who developed the initial draft.

Thank you for your attention and I submit the Subcommittee’s letter for adoption.

Thanks, Bill.

Bill Marriott: Thanks Lee. I appreciate it. The Subcommittee on Trade Promotion and Negotiations has the letter now for the Council to consider and a copy of the letter has been sent to the council members and is of course posted online.

However, before I open for comments, I’d like to ask Ambassador Mike Mihalik to give us his perspective on the letter and how it relates to some of what’s going to go on at the Summit.

Mike?

Michael Mihalik: Good. Thank you very much Mr. Chairman.

First of all, thank very much for inviting me to be here today. I'm very honored and very pleased to do this and to respond to the letter, which I have in front of me now and I'm looking at.

And I must say I kind of wanted to stand up and cheer when Lee Raymond was talking there because a lot of the things that he said coincide very, very well with our ongoing and our future plans for APEC.

You know, Frank kind of went over some of the major goals of the President for APEC this year. We’re talking - one of the prime tenets of APEC is sustainable growth.

And you know, we’re aiming to create - to try to create more opportunities for sustainable growth and through our security agenda to protect ourselves from threats to that growth and that includes of course potential pandemic disasters and natural disasters such as avian influenza.

We’re also trying to work very much on corruption, facilitating trade, promoting market integrity, and good corporate governance, along with developing human resources, and very importantly SMEs.

And finally, the structure of the reform agenda, which comes fifth in the list that we talked about, but - which is going to be very high on our agenda going forward.

To get to the letter itself, I first of all want to underscore what Frank and Lee Raymond were saying about the Doha Round and the importance of international, you know, global trade negotiations.

This remains our number one priority and we look forward to a strong statement coming out of APEC this year much the same as we had last year out of Pusan.

Sue Schwab is working extremely hard to try and get the round kick-started and she's got all of the support not only of ourselves at the U.S. delegation, but there's a great deal of support around the region for moving forward with that agenda.

Additionally, there were some very good language in here about the act of U.S. engagement as being essential to promote economic liberalization, and we couldn’t agree with you more.

The President has said that he believes that APEC is the premiere economic cooperation organization in the region and we’re trying to reform the organization in order better enable it to meet those goals.

We’re trying to carry out reform in the policy sense, as well as in the institutional sense and most importantly in the resource sense.

So, we are going to be looking at the creation or - at the strengthening -- significant strengthening of the APEC Secretariat including some permanent hires.

We think that we got some agreement at the last senior official meeting on that and we intend to push for even more agreement at our final senior official meeting just prior to the Minister and Leaders Meeting coming up.

Resources are going to be very important. I just cannot underscore that enough.

We’re in the process now of trying to increase the amount of resources that we spend on APEC. And you can - all of you that have dealt with your CFOs -know what it's like trying to squeeze blood out of a stone. And we are definitely trying to do that.

So, any way that we can get more help from the business community in saying yes, APEC needs more resources, we would definitely appreciate that.

Particularly going to the standards section that you mentioned, we've got a very good initiative, which I think is going to be coming out this year, it's called the Pathfinder.

And we’re trying to get economies within the region to sign on to the principle of letting the market determine which standards are the successful ones rather than let governments try to determine that.

You can imagine that with certain of the economies in the Asia-Pacific region, this concept is not quite familiar. And so we’re working very hard on that, but we look forward to a very good outcome and your letter is going to help us achieve that, I believe.

Furthermore, regarding the government procurement, we have an ongoing initiative within APEC now to try to develop some model measures. These are not exactly FTA chapters, but they’re sort of guidelines and best practices that are closely related to FTA chapters.

One of those is on government procurement. And we’re working very hard on that.

You can imagine again, probably the same economies that have a problem with that choice have a problem with government procurement, but we’re hopeful that we can get something out hopefully this year, but if not this year then definitely next year.

We also have last year in Pusan, we passed three different IPR guidelines. This year, we’re passing two more.

The two that we’re working on this year relate to IPR security in the supply chain, as well as public outreach, trying to raise consciousness within the Asia Pacific region on the importance of IPR and the importance to domestic economies for IPR.

I noticed that you also have secure trade in your letter, which I'm very, very glad to see. We've got a couple of very good initiatives on that.

We just finished doing a pilot project or it's going to be finished by the time of the leaders’ meeting, a pilot project on eManifest systems that we’re putting into the Hanoi Airport and the Ho Chi Minh City Airport.

And we hope to carry that on a Phase 2 where we will talk about authorized economic operators and other sort of trusted business partner-type programs there.

We continue to work on the STAR initiative, which is secure trade in the APEC region, and also work on the APEC secure trade framework, which is based on the WTO framework for secure trade.

So, we appreciate your support on that one.

You're also talking about liberalization of capital markets and financial services. We’ve got a very strong - well, we’ve got a financial administer process which I think is strong and which I know that (Bob Dohner) who’s also on this call, is working very hard to make even stronger.

And we’ll definitely take into account the things that you’ve said there.

On the Life Sciences Innovation Forum, I agree with you, I think that's an excellent forum for innovation. They’ve got some very good ideas on basically health system management.

They're working closely with the health summit which is an organization based out in Washington state. And they’ve done some excellent work. We do intend to actively support them.

On the advancing bilateral free trade agendas and making free trade areas more comprehensive and making high quality free trade areas, you’ve hit on a real core issue there.

We've looked around the area and we see the spaghetti bowl of regulations. We’re starting to hear from companies that even though they don’t feel disadvantaged by these preferential agreements now, by the time they all kick in, shifting parts and shifting subsystems around the region is going to become more expensive for people who are not in these preferential agreements.

So we think that it's time for APEC to come up with a response to the growing trend for bilateral and pluralateral free trade areas in the region. And we’re working hard with USTR and with the White House so that I think the President is going to have some very good words to say on that.

In general, I think we’re looking forward to unique time in APEC. The constellation has kind of lined up so that we've got a real opportunity here to make some significant changes.

Next year is going to be the Australian year. Year after that will be Peru and we’re not quite sure how that one’s going to turn out.

But following Peru, we've got Singapore and Japan. So we've got some very strong hosts coming up, people who tend to think pretty much along the same line that we do in terms of free trade and trade liberalization.

And we’re very much looking forward to working with them on a strong agenda going forward and a strong reform effort.

The other thing I would just mention is that on Vietnam, everyone was - before the Vietnam year, we were all saying, “Well, we’ll wait to see how that one turns out.”

But the Vietnamese have been just outstanding. They have put a lot of effort and energy and resources into their year. Everyone in the senior official meetings has so far just gone off like clockwork.

The proof of the pudding of course is when you get 21 leaders in a city the size of Ho Chin Minh City where the Hilton Hawaiian Village has more hotel rooms than the entire city does.

But we’re still quite hopeful that this is going to be a great year for the President, a great year for APEC.

That's all I'd care to say.

The only thing Mr. Chairman, I don’t know if it's appropriate or not, but since (Bob Dohner) is here, he might want to say a thing or two about the finance minister’s process since his agency is very much involved in that.

(Bob Dohner): Well thanks, Mike.

We've worked very hard to reorient the finance ministers’ process to make it less of a talk shop and more focused on policy initiatives on encouraging development of financial services, opening up market access in the region and promoting free movement of capital.

We've also worked hard on assuring that financial systems in the region are safe from abuse for money laundering or (terraced) financing or for procurement of weapons of mass destruction.

We've also gradually moved the APEC Finance Ministers towards support for more flexible exchange rate regimes within the region and within China in particular.

So we continue to very –work very hard on the Finance Ministers process of APEC.

Michael Mihalik: And then I just want to say once more that we depend very much on the input and the support of the private sector.

So once again, I very much appreciate the opportunity to do this. We think we’re doing a good job, but we can always do better and having a push from you guys is most welcome and you know, from our aspect, please keep up the good work.

Bill Marriott: Thank you. Thank you, Mike. Thank you, Bob.

Any comments by the members of the Council?

John Chen: Hi. This is John Chen, if I may say a few words. You know, thank you, Bill, for setting up the meeting and then Lee for still being so gracious in mentioning my name.

The idea is being generated by a lot of people, not just by myself. The great - the most comforting thing for me, the most exciting thing for me, is in the last couple or so – every time I hear about Asia, I always hear about China and I hear about India somewhat.

And this is the first time that we’re looking at it rather comprehensively because it is the APEC that's important. It's not just China or it’s not, you know, one country. It's just not China and India.

So - and a lot of them obviously hit on these two major economies soon to be powerhouses. And the two key things that I thought that the letter conveys and that the President and the administration can emphasize, it would be really helpful to the economic well being of all, you know, U.S. companies, one is the government procurement that's been talked about.

The other one is there - what they should be hands-on and what should be hands-off. And the standard has been discussed, and obviously corruption, they need to be hands-on.

And so, those I think, you know, our administration, Department of Commerce, USTR, all have done a great job, APEC we saw has done a great job and so there's nothing new in this letter. It's just a good place to collect all the thoughts and everybody’s, you know, visions and things that's already being worked on.

So, I commend the letter and strongly support it. And I thank everybody, all the staff to help work this letter.

So, that's all I have to say.

Bill Marriott: Thanks, John.

Any one else have any comments?

(Jim Morgan): This is Jim Morgan.

Bill Marriott: Hi, Jim.

Jim Morgan: The Ambassador mentioned sustainable growth - I support the letter. I think it's a great letter. All of you should be commended.

When we talk about sustainable growth in Asia, one of the significant issues if they aren’t going to choke to death is the issue of how they deal with their environmental and conservation and how business can help with that.

And so, you might just be alert when you're at this meeting about how the - it fits in, there can be assistance to them in those efforts because they clearly are - many of them I’ve met with -- the leaders -- are very concerned and very interested in that. But they don’t have a lot of experience in dealing with, at the same time, they are growing their economies.

So, anything you could do to pickup and kind of give us some feedback I think would really be helpful.

Franklin Lavin: Thank you, Jim. I'll do that.

Bill Marriott: Thanks, Jim.

Any one else have any comments?

Franklin Lavin: Just congratulations to everybody on the good piece of work.

John Chen: Yes. It’s good job.

Bill Marriott: That is a good job.

All right. I guess everybody’s in general agreement, and if there's no objection, I propose the letter be transmitted to Secretary Gutierrez for submission to the President.

Any objections?

Hearing none, the letter’s approved.

I'll open the floor now for any comments, discussions on any other item.

Okay.

Thank you Lee, the subcommittee and the staff for all their hard work. This concludes our business.

Our next meeting is about six weeks away on the 14th of December. I hope you'll be there for here in Washington.

Under Secretary Lavin, any other parting comments?

Franklin Lavin: Mr. Chairman, just that the - I think that Secretary Gutierrez is about to shift his China schedule because of the strategic economic dialogue initiative.

They’re still a little bit of dust in the air on that, but we might be coming back to you and the other members of the Council in the next few days with alternate days because he might have to be in China December 14 and 15.

Bill Marriott: Okay. Well, we’ll look to hear from you.

Franklin Lavin: Right.

Thank you, sir.

Bill Marriott: Thanks, everyone. This meeting is adjourned.

END