2006 Speeches

U.S. Support for Economic Development in the Caribbean

June 28, 2006

Dr. Roy L. Austin
United States Ambassador
San Juan Business Association
Dinner and Awards Ceremony

Her Excellency, Dr. Linda Baboolal, Acting President of the Republic of Trinidad and Tobago, and His Excellency, Dr. Michael Baboolal; The Honourable Anthony Roberts, Minister of Social Development and Social Services Delivery; Senator Professor Ramesh Deosaran; Miss Gail Merhair, President of the San Juan Business Association; Miss Heather MacIntosh, Ms. Lynette Lucess, Mr. Zaid Mustapha, Mr. Jerry Hospedales; Mr. Paul Quesnel, President of the Trinidad & Tobago Manufacturers Association;  Executive Members and Members of the San Juan Business Association; Members of the media; Mr. David Miller, Economic Chief of the U.S. Embassy; other distinguished guests; ladies and gentlemen. 

Good evening! I am happy to be with you as the San Juan Business Association celebrates 15 years of existence.  You have asked me to speak about our support for economic development in the Caribbean.  Perhaps, your Association is interested in regional economic integration. I applaud such an interest.  As a West Indian American born and raised in the Caribbean, I have seen development   in this region first-hand, often moving at a snail’s pace.  Yes, the experience of countries around the region with the process of development has been uneven.  Trinidad & Tobago is further along the road of development.  I was born in St. Vincent & the Grenadines, which has much further to go.  As business people, you evidently realize the importance of economic development to your professional success; and thus I am pleased to address you on this topic. 

In my presentation, I will speak first about U.S. development assistance from a global perspective.  There are a number of ways that we provide support for economic growth.  Then I shall touch on our assistance strategy for the Caribbean region.  Finally, I shall speak about trade and the Caribbean Basin Initiative, which for 20 years has been our primary way of supporting economic growth in this region.

It is not without some symbolism that we are meeting in the House of Angostura.  This place is home to perhaps the best-known export from T&T – though the Soca Warriors’ performance in Germany earlier this month almost took away that distinction.  But Angostura Aromatic BittersÔ is known almost the world over, and it serves as a good example of what is possible in this country. 

There has always been a close relationship between the U.S. and countries of the Caribbean – and we share more in common than a fondness for rum.  It is, rather, the satisfactory interaction between Caribbean peoples and Americans that explains the healthy relationship between our countries.  In recognition of this, the U.S. Government has proclaimed June as Caribbean-American Heritage month.  A resolution, recently passed in the U.S. Congress, stated that emigration from the Caribbean to America began as early as 1619 and continued during the 17th, 18th and 19th centuries.  The resolution adds that since the 1820s millions of people of diverse racial, cultural and religious backgrounds have emigrated from the Caribbean to the United States.  Caribbean-Americans have contributed to every aspect of American culture, including education, fine arts, business, journalism, politics, government, sports, science and technology. 

In addressing U.S. economic support in this region, it is useful to have a sense for the U.S. role worldwide in economic development.  Unlike many countries that focus largely on the UN or their governments to provide assistance, the U.S. has long believed in a broad approach that includes the importance of investment and market-opening programs to enable countries to help themselves. 

U.S. Development Assistance

The United States is deeply committed to helping the world’s poor. Development depends on putting policises in place to unleash growth.  Countries at the International Conference on Financing for Development at Monterrey in 2002 articulated a new model for development.  They called on developing countries to establish sound economic and social policies, and for developed countries to support these efforts through an open trading system, private capital flows, and additional development assistance.  We believe that U.S. foreign assistance best supports those nations that make necessary political and economic reforms.  Permit me to elaborate on the integral aspects of the results-oriented U.S. approach to development.  You may be surprised at how many areas of assistance there are.

First, trade, where the United States is the leading importer of goods from developing countries worth over $650 billion in 2004.  The agricultural sector is a major contributor to developing country economies, and agricultural liberalization is a direct and powerful antipoverty measure.  In 2005, Congress approved CAFTA – the Central America Free Trade Agreement.  The U.S. is negotiating or seeking congressional approval of additional FTAs with developing countries.  The U.S. has further demonstrated its commitment to helping developing countries benefit from the global trading system by pledging to double annual “Aid for Trade” assistance from $1.3 billion in 2005 to $2.7 billion by 2010.

Then, there are private financial flows, such as portfolio and direct investments.  The U.S. is an important source of private financial flows to the developing world.  Besides trade, the largest private financial flows in 2004 included personal remittances of $47 billion from the U.S. to developing countries, about two-thirds of which went to countries in this hemisphere.  The total net private sector flow of $6.5 billion between the U.S. and developing countries consisted of both net foreign direct investment and the net flow of securities.

The most common kind of assistance from one government to another is known as Official Development Assistance (ODA).  The U.S. Government under President Bush has dramatically increased ODA at a faster rate than at any time since the Marshall Plan.  The U.S. increased  ODA funding from $10 billion in 2000 to over $27 billion in 2005.  That’s an increase of 175%.

The Millennium Challenge Account (MCA) is an innovative mechanism that President Bush announced in 2002 for providing development assistance.  It is built on the principle that foreign aid yields better results when sound economic policies and good governance promote an environment to enable economies to grow.  The MCA supports countries that govern justly, invest in their people, and promote economic freedom.  Among the candidate countries in this region are Haiti, Jamaica and the Dominican Republic.  Since its inception, the Millennium Challenge Corporation has signed Compacts with Honduras, Nicaragua and six other countries, totaling over $1.5 billion.

The President’s Emergency Plan For Aids Relief, nicknamed PEPFAR, is the largest commitment ever made by a single nation to any international health initiative.  In 2005 we spent $2.7 billion to provide prevention outreach to 42 million people in 120 countries, and offer counseling and testing for almost 10 million more.  It also supported care for more than 1.7 million people living with HIV/AIDS and a further 1.2 million orphans and vulnerable children.  In 2006, PEPFAR is committing $3.3 billion to the fight against global AIDS.  You may be aware that the incidence of HIV/AIDS in the Caribbean is second only to that in Africa.  In this region PEPFAR is heavily targeted at both Haiti and Guyana.  Incidentally, the U.S. is also the largest contributor to the Global Fund to Fight AIDS, Tuberculosis and Malaria.  We provide one-third of Global Fund resources.  

Next, humanitarian and reconstruction assistance:  The U.S. was the largest donor country for victims of famine, war and natural disasters with $7.8 billion in 2005.  We give humanitarian aid to people without regard to political or military relations with their governments.  For example, we have offered assistance to both North Koreans and Iranians in the last two years.  Our emergency relief includes food, water, shelter, and medicines.  Often, the U.S. military is mobilized in order to deliver life-saving aid to victims as quickly as possible.  We did this after the Asian Tsunami of 2004 and the Pakistan/South Asian earthquake of 2005.

On debt forgiveness, the U.S. led efforts at the G-8 summit last year to obtain support for what is now the Multilateral Debt Relief Initiative for the group of Heavily Indebted Poor Countries, such as Guyana.  This bold initiative could result in the elimination of up to $60 billion of debt over 40 years.  Additionally, the U.S. government cancelled a total of approximately $4.2 billion in bilateral debt during 2005, including 100% of Iraq 's debt.

Turning to multilateral contributions,  the U.S. is the world's single largest contributor to the United Nations and to the multilateral development banks.  In 2005, U.S. donations to multilateral organizations including the UN, World Bank and other development banks, such as the Inter-American Development Bank, totaled $2.2 billion.  U.S. contributions to the United Nations totaled half a billion dollars ($531 million) last year.

Private charity is not to be overlooked.  Year after year, Americans are among the world’s most generous people.  During 2004, non-governmental organizations in the U.S. gave $6.8 billion to developing countries.  This total represented 62% of private contributions from major donor countries, but comprehensive data are limited on private giving, so estimating the total level of donations by private charities is difficult.   However, the Hudson Institute, an independent organization, placed the value of total U.S. private assistance in 2004 at over $24 billion.

Four years ago, the U.S. Agency for International Development (USAID) created a Global Development Alliance to use public-private partnerships to stimulate economic growth, address health and environmental issues, and expand access to education and technology. More than 1,400 governments and organizations, including international and local businesses, private foundations and NGOs, are alliance partners in 97 countries in the developing world.  USAID has funded nearly 400 alliances by leveraging over $1.4 billion in government funds with more than $4.6 billion in partner resources, a better than 3-to-1 matching ratio.   U.S. Government financing agencies OPIC, the Export-Import Bank, and the Trade and Development Agency also engage in public-private alliances.  I shall discuss USAID’s assistance to the Caribbean shortly.
 
What I have just gone through is not at all an infomercial.  All of these programs have relevance to this region, some more than others.  Clearly, T&T does not need debt forgiveness.  To the contrary, T&T is a lender in terms of debt that Guyana owes to the world.  But smaller countries in the region are significant recipients of U.S. assistance.  And all countries in the region are at risk from HIV/AIDS, which can hinder economic growth if it gets out of control. 

Since I started talking about USAID, let me tell you how USAID is working with countries of the region.  Many people think that USAID responds to emergencies and disasters.  That’s true; the more than $40 million of U.S. government assistance after the hurricanes in late 2004 flowed through USAID.  But it is active in more ways than just disaster relief. 

USAID in Region

A five-year sustainable development strategy for the USAID Caribbean Regional Program began last year.  It has a focus on the two most daunting challenges facing the region: how to compete in open markets and how to control HIV/AIDS.  The funding level for the five-year strategy between this year and 2009 is US$81 million.  The target area of the regional program continues to be the English-speaking member states of CARICOM. 

In the sphere of trade, USAID aims to help the region succeed in an open trade environment.  USAID is conducting programs on economic growth, trade and competitiveness that are aimed at helping the region meet requirements to participate in open trade regimes, reduce business constraints and leverage market opportunities, as well as strengthen the legal and environmental frameworks related to open trade. The program also focuses on reducing the region’s vulnerability to natural hazards like hurricanes.

USAID is also helping the region to better respond to the HIV/AIDS pandemic. Through targeted activities across the region USAID is focusing on expanding access to quality HIV/AIDS prevention and treatment services, improving the availability and use of accurate and reliable information to better target the pandemic, and targeting HIV interventions to most at-risk populations to reduce further transmission of the virus.

To complement the two objectives of the regional program, USAID is funding the Caribbean Center of Excellence for Teacher Training (CETT), one of three educational centers established by a U.S. presidential initiative in 2002.  An alliance among the public and private sectors, CETT is improving reading instruction in elementary grades 1-3 and upgrading the knowledge and pedagogical skills of teachers.

The Caribbean CETT, based in Jamaica, serves the English-speaking islands of the Caribbean by targeting rural and urban poor communities, especially those in remote areas.  Your Ministry of Education introduced CETT into T&T schools in 2005.  It is established in 47 schools in Trinidad and 14 schools in Tobago, covering all eight school districts, and also the teachers’ training colleges.  Reading specialists are assigned to each district and have an average of 6 schools.  The students go through a diagnostic test, which is administered by the teachers. Once problems are identified, the teachers then proceed to resolve the issues by using certain mechanisms, such as phonics, to assist the students in improving their reading, comprehension and so forth.

Trade - Motor of Economic Growth

Aid programs are far reaching.  They may help to promote democracy, defend human rights, fight poverty; help to protect the environment; strengthen the rule of law; and support growth-oriented economic policies.  But official government-to-government aid is dwarfed by private international economic interchange.  U.S. imports from Latin America reached $253 billion US in 2004.  Our imports that year from the Caribbean amounted to $27 billion.  They have increased each year since 2001 and are at the highest level in the decade.  The stock of private U.S. investment in Latin America and the Caribbean was over $300 billion at the end of 2004.  Family remittances from the U.S. to countries in Latin America were over $30 billion that year. 

For T&T, however, the amount of remittances from the USA was a mere $88 million US in 2004, which is less than 5% of the revenue from gas exports.  Even if the numbers for the eastern Caribbean are small in terms of our larger trade with Latin America, the point is that these flows are far larger than any conceivable aid the region might be able to receive from all the developed nations on earth.

President Bush believes that it is essential to continue progress toward the economic integration of the Hemisphere.  The experience of the United States, Canada and Mexico with the North American Free Trade Agreement (NAFTA) reminds us that relations based on free market principles benefit all partners to such accords.  Our free trade agreement with Chile is in force, and we have ratified CAFTA with our five neighbors in Central America and with the Dominican Republic.  Meanwhile, negotiations for free trade agreements are under way with Panama, as well as with three Andean countries.  I will add briefly here that the U.S. has not abandoned the Free Trade Area of the Americas.  As you can see, however, the lack of movement in that arena has not impeded our progress with our trading partners in sub-regional negotiations.

At this juncture, permit me to turn to the hallmark U.S. program of benefits that is the cornerstone of trade relations between the USA and this region – the Caribbean Basin Initiative (CBI).

Caribbean Basin Initiative - CBI

Countries in this region have enjoyed Caribbean Basin Initiative benefits since its establishment in 1984 under President Reagan.  CBI is a broad program to promote economic development through private sector initiative in Central American and Caribbean countries.  A major goal of the CBI is to expand foreign and domestic investment in nontraditional sectors, thereby diversifying CBI country economies and expanding their exports.  It has been the policy of the U.S. to seek the participation of Caribbean Basin beneficiary countries in the FTAA or another free trade agreement at the earliest possible date, with the goal of achieving full participation in such an agreement not later than 2005.  Since that did not happen, we are waiting to see what Congress will do regarding renewal or extension of CBI in the next 24 months.

CBI has generated important benefits for the Caribbean and U.S. economies, as well as providing preferential access to the U.S. market for many Caribbean products.  One CBI category that is growing in importance is ethanol as a motor fuel additive.  Since the U.S. phased out other octane-boosting compounds for health and environmental reasons, ethanol has emerged as one of the most promising alternatives.  T&T and Jamaica are two countries in the region that are seeking to exploit the provisions under CBI that allow up to 7% of U.S. demand for ethanol to enter duty free into the U.S.  Those ethanol plants utilize raw ethanol from cane sugar.  Since we are sitting in the House of Angostura, I can tell you that this company has invested significantly in fuel ethanol production with the U.S. market in mind. 

While this sounds great for T&T, there are possibilities for other islands that are short on gas but long on bananas.  It is also possible to use the sugar in excess bananas for ethanol production.  It is very similar to using cane sugar for ethanol.  The amount of ethanol from a pound of bananas depends upon the sugar content.  The Website banana.com has an interesting formula for how to convert bananas into ethanol.  The Economic Section in the Embassy can share with you details of that analysis if you are interested.  The banana-to-ethanol information indicates that the benefits accruing from CBI are broad.  CBI can help to open up industries that do not exist at present if people are creative.  And since bananas are central to the economies of the eastern Caribbean, it is far from trivial to consider how bananas can be used for something in serious demand in the United States.

Because of devastating hurricanes in the region in 1998, the U.S. Congress revitalized CBI with new legislation.  The enactment of the Trade Partnership Act in 2000 expanded two-way trade and created incentives for the countries of the Caribbean Basin to continue reforming their economies so that they can participate more fully in the global economy.  By providing a more open U.S. market for Caribbean goods, the expansion of CBI affirmed the ongoing U.S. commitment to economic development in the region.  The renewed U.S. engagement with Caribbean countries offers an important opportunity for the region's countries to build the capacity it needs to benefit fully from free trade in the Western Hemisphere.  The U.S. wants its neighbors to be prosperous.  We realize that prosperity in the region promotes political stability, which benefits us all.  

Closing remarks

I draw my remarks to a close now with some final observations.  Trinidad & Tobago is a good case study of a country that has moved quite far along the path of development, a fact to which I alluded at the beginning of my address.  This country once shared some notable characteristics with other developing countries, especially in being a producer of basic commodities such as sugar cane and cocoa.  Later, it had some success as a manufacturer of textiles.  This is not unique – even the United States went through these phases.  Now we see sophistication entering the economy.  I have already spoken about the Angostura ethanol project.  This progress is likely to continue as T&T moves in the direction of entering the information age with the involvement of UWI and UTT. 

How T&T’s economic progress will benefit other Caricom countries remains to be seen.  T&T is a leader in Caricom, and it will have to play an increasing role as leader to assist other Caricom nations in speeding their development.  As for the U.S., our relationship with this region will always be important.  Our market is crucial for absorbing the region’s exports, and it will remain so for the foreseeable future.  As business people, your association’s members can also contribute to boosting development in neighboring countries.  By sourcing goods and services from other Caricom members, and by expanding operations within the region, you can do your part to promote both development of the non-energy sector and further integration of the region.  It is not an easy task, but with hard work and dedication, it is possible. 

I compliment the members of the San Juan Business Association on your contributions to the T&T economy, and I thank you for giving me the opportunity to share my views with you this evening. May the Almighty richly bless us all!