Text: Commercial Service Officers Work with African Partners in Five Countries

Commerce Department's Bodman offers aid in drafting laws, regulations

The U.S. Commerce Department's Deputy Secretary Samuel Bodman addressed the AGOA Forum in Mauritius on the importance of making trade a vehicle for development.

He said that the barriers of insufficient infrastructure, inadequate protection for intellectual property and lack of political stability must be overcome before direct investment in Africa would rise appreciably.

"Quite frankly, for some countries, it will be a long and arduous journey to reach that point," Bodman said, "but it has been done, and will be done again, and again, and again in Africa."

"The United States government stands ready to partner with developing nations as they make this difficult journey," he said. Toward this end, "the Commerce Department has about 50 Foreign Commercial Service officers and staff in sub-Saharan Africa located in five capitals. In addition, our Commercial Law Development Program (CLDP) is working with its African partners to design action plans for legal reform, and offer assistance for drafting laws and regulations, establishing and supporting implementing bodies, and increasing public awareness of laws."

Following is Bodman's text as prepared for delivery:

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Deputy Secretary of Commerce
Samuel W. Bodman

Remarks to the AGOA Forum Plenary on
Overcoming Obstacles to Trade and Investment

January 16, 2003,
10:30 AM-Noon

TEXT AS PREPARED FOR DELIVERY

Thank you for that warm welcome. It's a pleasure to be here in Mauritius for the first time, and I would like to add my thanks to the government of Mauritius for hosting this event. As others have mentioned, given all that Mauritius has done, and will do, under the African Growth and Opportunity Act (AGOA), it is a fitting setting for this Forum.

Since its independence more than three decades ago, Mauritius has undergone a remarkable transformation. It shed its historical reliance on agriculture and embraced trade and investment -- in the two years since AGOA implementation, investment in Mauritius has increased by almost $100 million.

And trade and investment in the region should continue to grow - especially after the proposals that President Bush announced last night have had time to take effect. I'd like to share with you a few highlights: The President will ask the U.S. Congress to extend AGOA beyond 2008. During the first AGOA Forum, the Administration promised to create regional "hubs" to ensure that African businesses can take advantage of new opportunities to sell goods abroad. You heard at yesterday's plenary on agricultural productivity just how important agriculture is to the lives of so many in this continent. So, in the spirit of trying to reduce trade barriers to provide real benefits to people, the Administration soon will assign U.S. agriculture officials to the regional offices in Botswana, Kenya, and Ghana to assist African farmers in selling abroad. We are working towards a free trade agreement with the Southern African Customs Union - and trade capacity-building will play a key role in the process.

I am honored to host this event with Minister Erwin. Since the change of government in 1994, South Africa has initiated difficult, but very necessary, reforms . . . holding free elections, investing in the health and education of its people, and opening its economy to trade and investment. In doing so, it signaled to the world its commitment to freedom, stability, peace, and prosperity for all its citizens. Political and economic freedoms are, after all, fundamental to development and growth - and that is what AGOA is all about.

President Bush is determined to realize the vision that AGOA represents . . . he has called AGOA a "road map" for the United States and Africa to tap the power of markets to improve people's lives. As you heard from Ambassador Zoellick, we have notified Congress of our intention to negotiate a free trade agreement with the Southern Africa Customs Union. This will be our first-ever trade negotiation with the SACU countries, and it conveys our strong commitment to trade and growth in this region and throughout Africa.

I think the key question that we should examine today is: how can we make trade an effective and efficient mechanism for development? It seems clear that the political logic that has driven trade negotiations for the last 70 years is broken. Negotiations often have been focused on trading market access . . . in other words, on securing for our exporters equal or better access to foreign markets without giving up too much domestic market space. I think we need to shift that mindset and focus instead on the many benefits of trade liberalization to both developing and developed nations.

We should consider what we can achieve for those in need if we focus on liberalizing trade, particularly in sectors with the greatest potential impact. Health care is one such sector . . . as are agriculture, energy, capital markets, information management, and education. As government leaders, we have a responsibility to make improvements in these areas . . . beyond that, as human beings, we have a moral obligation to improve the quality of life and living standards for everyone in the world.

AGOA is an important tool for accomplishing these goals. Over the past few years, AGOA has resulted in increased U.S. imports of sub-Saharan African products; the United States purchased more than one-quarter of the region's exports in 2000 and 2001. And AGOA has facilitated substantial increases in investment in many African nations. For example, as we heard yesterday, new and planned investment in Namibia in the apparel and textile sector alone totals more than $250 million. As Under Secretary Larson noted this morning, a total of $1 billion has been invested in the region because of AGOA.

But while progress has been made, trade between Africa and the United States remains low and vulnerable to external shocks (total trade with 36 AGOA countries in 2001 was $23.8B). In the first nine months of 2002, U.S. exports to the region fell 19% and U.S. imports 24% from the same period in 2001. And, U.S. trade to Sub-Saharan Africa is highly concentrated in a very few countries.

While AGOA has empowered countries to refocus on their internal barriers to trade, there is clearly much more work to be done. The laws and regulations of a country - and, more importantly, the mindset of its citizens - determine the extent to which a nation can participate in the world economy. Lawlessness, corrupt governments, and inefficient bureaucracies only stifle the freedom that trade can provide. U.S. companies frequently cite overwhelming deterrents to doing business in Africa, including the small size of markets, the severe inadequacy of infrastructure, the lack of transparency of procedures and contract sanctity, and inadequate protection for intellectual property. I know you heard about some of these barriers from Under Secretary Larson this morning, but I think this point deserves emphasis: Until these issues are resolved, there will never be sufficient foreign direct investment in Africa.

In order for citizens to benefit from the many advantages of free trade, a country must have political stability and a functioning legal system, with laws to protect basic rights of companies and people who engage in commerce. Quite frankly, for some countries, it will be a long and arduous journey to reach that point - but it has been done, and will be done again, and again, and again in Africa.

One pillar of a modern legal framework is a comprehensive property rights system. Perhaps you have heard of Hernando de Soto, who founded the Institute for Liberty and Democracy in Peru . . . he is a leading voice on the impact of property rights on developing economies and the poor. Mr. de Soto argues that the absence of well-defined, enforceable and transferable property rights is a key barrier to capital generation, particularly for entrepreneurs.

It is an argument that I find quite compelling . . . we know that in the United States, for example, second mortgages are the greatest source of start-up capital for entrepreneurs. People in developing countries often do have substantial property . . . what they don't have is a legal system to leverage that property into capital. Hence, capitalism, which accounts for America's great prosperity, utterly fails in some other parts of the world, including many parts of Africa. Mr. de Soto has said that capitalism would never have worked in the U.S. without a uniform set of property laws and commercial codes. And these laws were put in place in the 1850s - over 150 years ago. So this transformation certainly doesn't happen overnight. This fact is often lost on Americans. Our legal restructuring occurred so long ago that Americans often don't even recognize its importance. We often find ourselves unwittingly preaching reform to developing nations without an adequate understanding of how and why capitalism works so well in the United States. Mr. de Soto has cast a bright spotlight on that misunderstanding of our past.

Accessible and transparent property rights systems are a sort of "hidden" infrastructure, often taken for granted or overlooked, yet essential for commerce, services, and good governance . . . at the same time that these types of institutional reforms empower the poor to participate in the economy, they also facilitate financial market development and expand international investment and global trade. And, I would argue, until property rights are protected for individuals in developing countries, the rights of others, especially foreign investors, will not be respected . . . and this applies to intellectual property as much as to physical property. In other words, property rights are - especially for the poor - necessary for economic growth, wealth creation and increased living standards. Mauritius provides us with a good example of a country that is getting it right . . . With its history of good governance and respect for property rights, Mauritius has benefited considerably under AGOA, and is seeing large increases in trade and investment.

I want to emphasize that the United States government stands ready to partner with developing nations as they make this difficult journey. President Bush has said that combating poverty is a moral imperative . . . and he has proposed a new compact for development that increases accountability for rich and poor nations alike. The President's new Millennium Challenge Account (MCA) recognizes that economic development assistance is effective only when it is combined with sound policies. As such, the funds in these accounts will go to nations that demonstrate a commitment to good governance, the health and education of their citizens, and economic policies that foster enterprise and entrepreneurship.

I'd also have to point out that the Commerce Department has about 50 Foreign Commercial Service officers and staff in sub-Saharan Africa located in 5 countries. In addition, our Commercial Law Development Program (CLDP) is working with its African partners to design action plans for legal reform, and offer assistance for drafting laws and regulations, establishing and supporting implementing bodies, and increasing public awareness of laws.

Our governments will continue to work together to bring about much needed reforms . . . to increase trade and investment . . . and most importantly to raise living standards around the world. But governments are not the only players here . . . the private sector has a significant role in developing infrastructure and sound economic and regulatory policies.

Coming from the private sector, I have long held the belief that business makes the best friends. While it is common to criticize corporations, the truth is that business has been the basis of the U.S. economic miracle of the last 100 years. It is the rock-solid foundation of the strongest, most vigorous and vibrant free enterprise system in history. . . a system that allows people to innovate . . . to take risks . . . to create wealth for their families . . . and sometimes, to fail and start over. President Bush is fond of saying that the role of government is to foster a climate where companies and entrepreneurs can flourish. The counsel and activism of the private sector is essential in identifying and promoting government policies that encourage innovation, raise productivity, and support entrepreneurs.

For those nations willing to work with the U.S. to focus our attention on trade liberalization, I hope you see the United States government - and certainly our Department of Commerce - as your ally. We will promote the creation of fair and trustworthy governments and legal systems, free from corruption and bribery. We will advocate for the creation of marketplaces free from interference, burdensome regulations, and complex taxing schemes. We will continue to highlight the role of the private sector and the stewardship it carries, not just for the companies and their shareholders, but really for all citizens.

Principles of democracy, freedom, and prosperity are eternal and universal, but they are merely principles if not supported by action. Together, we can topple the walls of protectionism, hopelessness, and poverty. Together, we can build vibrant economies in Africa, the United States and other nations. And together, we can offer our citizens a better world. Thank you.

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