Good Morning. It is a great pleasure to be with you this morning to participate in the inauguration of this VI Annual CAF-OAS-Inter-American Dialogue Conference on Trade and Investment in the Americas and US-Andean Community Relations.

A lot has happened since we met on September 6, 2001. Most notably an event that changed our world: the September 11 terrorist attack on the United States. This tremendous human tragedy has had important long-term effects on international relations and on the United States' perceptions about its role in the world.

In particular, it highlighted the fact that, despite unsurpassed global military, economic and cultural power, the US is not isolated but part of an increasingly interdependent world. Accordingly, it has led to a realization that to best protect it’s economic and security interests, the US cannot act by it but needs the cooperation of other countries. Some worry about a US distracted with crises and problems around the world. I see, instead, increased opportunities for collaboration and engagement with partners that share values and aspirations for a better, more prosperous, more democratic and peaceful world. And this is precisely the agenda of the Summit of the Americas process and the core of what the inter-American system is about.

The launching of a new round of multilateral trade negotiations in Doha in November, 2001 is a positive and remarkable development. Positive because, as much research has shown, the potential gains for all participants, particularly developing countries are significant. But the Doha result is also remarkable because it reflects a new international consensus that reasserts the role of trade in development and places the broader development issues and institutional capacity building at the center of the international cooperation agenda. New exercises to mainstream trade into national development plans are being adopted by the WTO and the World Bank in partnership with regional institutions, including the GAS. This will allow additional mobilization of resources to help countries take advantage of the new market access opportunities and to participate fully in the world trading system.

Unfortunately, economic and political trends in Latin America have deteriorated to some extent since we last met, increasing the risk of a populist, anti-globalization backlash that would put into question trade liberalization and market-friendly policies. This trend towards economic deterioration in some countries cuts both ways: on the one hand it exacerbates the constraints (fiscal, social, political) binding even those forward looking governments committed to freer trade, and on the other, it makes progress towards the completion of the FT AA more necessary as a way to anchor economic policies, attract investment and promote growth.



This is why progress in the FT AA is so important for the economic and political future of the Americas. And I am glad to report that the process continues to move forward. Market access negotiations have started on agricultural and non-agricultural products, services, investment and government procurement under agreed methods and modalities and within defined calendars. A new draft of the FT AA Agreement will be presented to Ministers at their next meeting in Quito, Ecuador on November 1st, 2002, reflecting consensus achieved during the past negotiating period. A Hemispheric Cooperation Program (HCP), designed to provide support to the smaller economies to ensure their full participation in the FT AA, is expected to be one of the main outputs at that same meeting. The Trade Negotiations Committee, at its meeting in Dominican Republic this past 28-30 August, gave further momentum to the negotiations by taking important decisions regarding the base tariff for market access negotiations and by considerably advancing the preparatory work leading to the Ministerial Meeting in November.

The negotiations have thus entered the most sensitive and complex stage, one that requires full engagement by all parties. In this context, the adoption of Trade Promotion Authority by the US Congress in August, 2002 goes a long way to ensure that the market access talks in the FT AA will advance in earnest and that the political commitment will be there for all participants to show their cards at the negotiating table. Likewise, a renewed U.S. leadership and engagement in the region, building on the shared Summit of the Americas values of peace, security and prosperity, can make an enormous difference in pushing the process forward and ensuring that the FT AA be completed successfully and on time.

This past year, the economies of the Andean Community countries were hard hit by the global slowdown in the world economy, the weakening of commodity prices and, in some cases, political instability or other internal factors. Growth was modest with the only exception of Ecuador where GDP grew by 5.4 %. In contrast, GDP grew only by 0.98% in Bolivia, 1.7% in Colombia, 0.2% in Peru and 2.7% in Venezuela.

Prospects for recovery in the Andean Community will be influenced by economic performance in developed economies. In particular, dynamism in the US economy and, most importantly, an increasingly open US market for Andean exports will undoubtedly be critical to support growth and shore up reform efforts in those countries. In this respect, the enactment of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) is a very welcome development.

For ten years, since the Andean Trade Preference Act was enacted in 1991, Bolivia, Colombia, Ecuador and Peru exported some $1.7 billion worth of goods under the program. As was acknowledged by Congress in its findings, "Two-way trade has doubled, with the United States serving as the leading source of imports and leading export market for each of the Andean beneficiary countries. This has resulted in increased jobs and expanded export opportunities in both the United States and the Andean region."



When the program expired last December, the consequences were soon felt throughout the region. As representatives of the cut flower industry have pointed out, for example, during the six-month period after December 5, 2001, the industry had to bear the burden of nearly US$ 18 million in tariffs to enter the US market. This had disastrous effects on a sector composed of around 500 businesses that account for annual exports of more than 140,000 tons of the product, a US$ 500 million value.

Beneficiary countries have welcomed not only the renewal of the program until December 31,2006 (retroactive to December 4,2001) but also its expansion to areas not previously covered such as textiles, apparel, leather and leather goods. Government and private sector sources in beneficiary countries have projected important gains both in increased exports to the US and in the creation of new jobs as a direct result of the expanded market access.

In addition to those tangible economic benefits, some important lessons can be drawn from the process that led to the renewal and expansion of the program. I would like to highlight a couple.

First, the positive outcome of the process owes a lot to a very active and engaged negotiating strategy on the part of beneficiary countries that brought together governments and private sectors with a well-defined set of objectives. It also made good use of partnerships and strategic alliances with private sector groups within the US and with government and congressional counterparts that shared a common interest and Vision.

Second, the complexities of the process of renewal and expansion of the program highlighted the fragility of unilateral preferential schemes. Businesses that were established or expanded during the ten-year period of application of the previous program based on preferential market access were hard hit with its expiration. A sound business strategy cannot continue to rely on the possibility of a further renewal after 2006. The focus needs to be placed now on ensuring access to the US market that is permanent, protected by the appropriate trade rules and not subject to the uncertainties of unilateral preferences. The Free Trade Area of the Americas negotiations represents an unique opportunity for the Andean countries to achieve just that.

The Andean countries are facing important challenges in several fronts. This Conference is very timely because it provides an opportunity to these countries and their partners in the Hemisphere to explore together policy options and to propose new ways to ensure the attainment of a more prosperous, democratic and peaceful region. I wish you all a very fruitful exchange of ideas.

Thank you very much,