AMBASSADOR PORTMAN: Thank you, Mr. Osros.  Thank you very much for having me here today.  I really appreciate the opportunity to hear from my distinguished colleagues on the panel, and I want to thank them all for the leadership roles that they have played.  Mr. Khan, as you know, is the facilitator on NAMA, which is not a task that anyone would take happily, and we appreciate the work that you are doing there.

MR. KHAN: You see my condition deteriorating every day.

AMBASSADOR PORTMAN: Yes, you look pretty good actually, considering.  And my friend Mr. Malie from Lesotho has been a true leader on trade and development issues for many years and gives me and others good advice.  I appreciate that, and I got some more this morning.

I want to thank the World Bank, not just for having this, but also for the work they do in this area.  This is an example, having this conference, but I would say more important to me is the work they have done over the past several years in promoting Doha.

This is something relatively new, for the Bank to be taking such an aggressive stance on trade, and I welcome it.  I think it makes sense.  I very much appreciate the valuable contribution its economists have made.  Some of you I see are here from the media and others from international organizations that use the data to help us better understand the relationship between trade and development.  I think it is a thing that is extremely valuable.  It has helped all of us better understand the potential of trade to spur development.  The Bank's data has backed up a guiding principle of U.S. policy -- and I think it's widely accepted as I listen to this panel and heard the end of the last panel -- and that is, enhanced trade is absolutely key.  Secretary Benn said it well: unlocking the Doha potential.

The core negotiating areas are the single most important aspect to development.  I listened to the moderator from the last panel sum up, and I thought she said it well, by saying that aid for trade is a supplement to an ambitious result in the round, not a substitute for an ambitious result in the round.  I think that is exactly the attitude that we should be promoting this week in Hong Kong. We need to look no further than the city of Hong Kong to see a vibrant economy that has benefited directly from trade.  I read this morning that the per capita income in Hong Kong is now US$34,000 per person.  You see a city built on a rock that didn't necessarily have the blessings of natural resources, and yet has embraced trade in a way that has benefited all of its citizens.

So, if you will bear with me, I would like to talk for a moment about the trade aspects here.  I read some of the media reports in the last couple of days saying that this is sort of a classic confrontation here in Hong Kong of rich versus poor over market access, particularly in your area, GATT-NAMA, that you are facilitating in services and other areas, and I reject that. I don't think that's the case. The Bank itself says that 93% of the gains from agriculture trade liberalization, for instance, will come from market access. And if you look at that study carefully, for the least developed countries it is practically all to gain.  So market access is not something that the developed world wants or that the developing world wants; it is something we should both want.  When developing world farmers can sell their products in our markets, and when we can easily export goods and services to developing countries, we both benefit.

The developing countries, as you know, perhaps pay 70% of their tariffs through other developing countries, so south-to-south trade obviously has enormous development potential.  The World Bank stats have made it clear that opening trade flows can give tens or even hundreds of millions of people an escape from poverty, and that is one of the motivations that launched Doha and should keep us at the table working hard to ensure that we overcome our obstacles to coming up with an agreement.

The IMF World Bank Global Monitoring Report has been very interesting for me to look at.  I like it, perhaps, because it shows that the United States is the most open country in the world to the products of least developed countries.

The US has a score of 6, Canada 7, the EU 15 and Japan 24.  The lower score is better, by the way, unlike when you're in school.  And it reflects just not tariffs, but things like country of origin labeling, things like SPS – sanitary/phyto-sanitary -- and other potential barriers to trade.  So, this is extremely important to the development we are talking about today.  We can't separate trade from development.  We think it's core.

The U.S., as you know, has made a proposal in all the areas, and the aggressive proposal that we've made in agriculture does cut into our domestic support.  Our trade-distorting support would be reduced under our proposal, but we also insist on real market access for all the reasons that I've stated earlier, including the good analysis the World Bank has done.

Of course the U.S. also believes that in order to enable countries to take advantage of better flows of trade, enhanced trade, that aid is absolutely critical.  To reap the benefits of trade, you have to have a reliable telecommunications system, you have to have roads that are passable, you have to have ports that work, that are safe, that are efficient. You have to have legal and financial institutions that support trade. Otherwise, all the market openings in the world cannot help a least developed country.

We've got to continue, of course, to provide aid, development assistance and specific trade capacity building.  And we have to be smarter about it. We have to provide it in smarter and more focused ways, and there's been good discussion about that this afternoon.

If you'll bear with me, I'd like to talk for a moment about what is already being done. Because I think sometimes we forget about what's already happening in terms of aid for trade, or trade capacity building, and I welcome those who are here – because you are a self-selected group, interested in this issue – to give us your input, to critique what the United States is doing.

Today we're issuing a new document which is called "Participation, Empowerment, Partnership: Seeking Sustainable Results through U.S. Trade Capacity Building."  It tries to summarize what we are doing in terms of trade capacity building.  And again, I would encourage you to look at this, pick it apart and tell us what you think.  I've asked for this document in part because, frankly, this area is somewhat confusing because there are so many different elements to trade capacity building.

We've talked some about the lending institutions today.  We've talked some about the bilateral efforts.  But the United States this year will provide $1.34 billion dollars to trade capacity building, more than any other country in the world.  That's a 46% increase, by the way, this year as compared to last year, reflecting our interest in increasing this kind of aid.

I was interested to hear what the World Bank said.  Mr Leipziger talked about the fact that they are increasing their trade-related lending.  I think that's a good thing.

The United States wants to prioritize within our budget more on trade capacity building because we believe in the power of trade. We want to make sure people have the tools to access it.  The London announcement 10 days ago, I think, was helpful, that G7 announcement, the 4 billion dollar figure from the G7.

The least developed countries care a lot about the Integrated Framework (IF).  We heard something about that today.  Can it be improved?  Yes.  The United States is involved in the reform process.  We need to continue to work with international lending institutions including the World Bank to make those reforms so that it is more effective.  As one of two coordinating donors, we have now contributed $133 million to IF countries, and we are working again to enhance its effectiveness.

One thing that I think we should do is use it more as a way to show best practices, to hold best practices up, to enable countries to learn from other countries' mistakes and successes.  I don't think we do a good enough job at that.

One of the ways the U.S. now directs aid, as some of you know and others of you will perhaps learn more if you read this, is through our Millennium Challenge Account.  This is an attempt to provide aid in a more bottom-up approach, where countries are rewarded for a commitment they have made to investing in their people, their economic and political freedom.  But they are asked to design these compacts or contracts with the Millennium Challenge Corporation themselves.  Current compacts range from $110 million to $330 million.  These are grants, by the way, not loans, which is another part of our philosophy of giving foreign aid now, through direct grants.  The U.S. spent $367 million on trade facilitation activities this year; this is in addition to the other trade capacity building we've talked about.  That's an increase of about $90 million this year because we think trade facilitation, as was mentioned by Secretary Benn, talking about customs and trade facilitation, is an extremely important way to gain efficiencies, particularly in developing countries.  Immediate benefits that sometimes begin are even in excess of what we can do in terms of market access.

Everything doesn't have a price tag.  The U.S. provides for all of these, for instance, free access to the Market Access Map, which is a web-based tool for analyzing the impact of tariffs.  We should do more of that.  We also provide technical assistance needed to trade legal frameworks that encourage trade and investment.  As one example, we've worked with Jordan over the last year to ensure that Jordan enforcement of intellectual property rights enforcement is more efficient and effective.  Now, Jordan has become a leader in the entire region and again it's being emulated, it's intellectual property regime, and that's something where we can do more.  We also support the accession of developing countries into the WTO, particularly we want to move to provide technical guidance to help those countries meet the criteria of membership.  The idea is to make them stakeholders in the global marketplace.  I think it's good for them, and it's good for the global economy, good for the system.

Again, I encourage you to look at this publication. Tell us what you think.  I just thought it was useful to talk about some of the trade capacity building that is actually happening on a bilateral basis.

I will conclude by just renewing the call that I've heard here today that we use this week to make tangible progress.  We've got to take full advantage of this Hong Kong Ministerial.  They only come around every couple of years or so.  We have 149 countries represented here.  We need to take advantage of the meeting to both develop an effective LDC development package, but also to make progress on advancing development through meaningful new market access.  Let's not lose this opportunity this week to make some gains on the core negotiating areas so that we can complete the Doha round by the end of next year and make it a round that's truly worthy of its name.

Thank you.

After the session, there was a series of questions from the audience.  Below are Ambassador Portman's responses.

AMBASSADOR PORTMAN: I see a number of people lined up now, so I'll be brief.  But I appreciate your intervention and of course agree with you on the need for us to have a balanced result.  But not because of the need for some fairness as compared to the undertakings you might make or the United States might make, but because it's the right thing to do for development.

And I think the World Bank has been exemplary in providing some of that data. Others have as well.  The latest Foreign Affairs magazine I saw had a lot of good analysis of the benefits to development that come from increased market access.

I appreciate what the Netherlands, the Swedes and the British and others have done.  I love all my EU friends who are here, because they're all market access friends.  But you need to talk to some of your colleagues because we've got to have a breakthrough here in market access.  If we don't, my fear is that exactly what you want and what I am suggesting is the right thing to do for development in opening up on NAMA or services or other issues simply won't happen.

So we need to see an undertaking -- not about the EU market but about a global framework for market access reductions including south-to-south trade. I just think we've missed a huge opportunity if we have a watered-down Doha round that does not provide real market access across the board.

Again, not so much for our economy.  The analysis shows the United States may benefit or may not, but the real beneficiaries in the end will be those developing countries that again pay 70% of their tariffs to other developing countries where the tariffs tend to be quite high.

On food aid, I walked into Peter Mandelson talking about food aid, and then you talked about food aid.  I must say, maybe I don't understand all the implications, but I sense a sort of European obsession right now with cash-only in food aid.  And I would just caution those of you who have decided this is the issue of the day.  We're talking about less than 1% of agricultural trade.

Look what's happened in the EU, as you've gone to cash-only.  Has your food aid increased?  No.  It's gone down.  So we have tens of millions of people going hungry every day, demanding more food.  There's not enough food to go around.  Does the United States think we should deal with the commercial displacement issue?  Absolutely.  We're committed to do that.  But this sort of obsession with "how do we stop food aid?" seems to me to be a little bit misplaced.  I think there are other priorities that are much more important, and I would hope that at the end of the day we would have more food and not less food, going not just for emergencies but to the poorest of the poor countries that have chronic food shortages.

So I appreciate your comments, and I hope we can work something out on food aid that makes sense in terms of commercial displacement.  But let's not, as we say in the U.S., "throw the baby out with the bathwater."  Let's be sure that we supply more and not less food to those who need it.

In response to a separate question:

AMBASSADOR PORTMAN:  First of all, I want to thank the World Bank again for putting this together and for the interest here to the South China Morning Post question – I don't know if the gentleman is still here.  Are you still here?  Okay, I would just comment that it is always a danger to take on the media because they buy ink by the barrel, so I shouldn't be saying this but I will anyway.

Your headline this morning in the South China Morning Post – it said something about cotton and how the U.S. is jeopardizing the talks maybe by linking cotton to the agricultural negotiations generally.  That's the decision we made back in July of 2004. This is not a new U.S. position; it's the position of the membership.  So just to be clear about that.  This is a good story, by the way, and it is a very balanced story, but I thought the headline….  You don't write the headlines, so I guess I can't complain to you about the headlines.

But the headline was just inaccurate.  In July 2004, we agreed to deal with cotton expeditiously, ambitiously and specifically within the framework of the agriculture negotiations, not separately – that was a big discussion.  I wasn't here then, but it was a major negotiation and that's how we ended up.

So, that's not a change in the U.S. position or a new U.S. position.  It's a membership decision, and if we could resolve something this week with regard to cotton, that would be great.  But, at the end of the day, it just isn't the case of aid -- and maybe this question has already been answered, but I didn't hear it answered directly to the gentleman from Aid Watch and also to the Reuter's question.

What we are talking about here today is incredibly important to making sure countries have the tools to take advantage of enhanced trade flows, but if the round doesn't come together at the end, I think it's lost.

There's no separate undertaking just on aid.  The aid is connected with Doha.  That may not be the answer that you wanted, but I think that's the reality and it leads back to, I guess, where we all started in this discussion, which is ultimately, we need to be sure that the overall package comes together.

I don't necessarily agree on the cotton price issue, by the way.  I think it could result in just the opposite because it could result in more cotton being produced and therefore lower prices for the inputs for the textiles.  We can talk about that afterwards if you'd like.

The point is, coming together with lowering the barriers to trade, increasing efficiency, will be good in the aggregate for our global economy, and particularly good for developing countries, based on all the analyses including the World Bank analysis.

Are there bumps along the road?  Yes.  And that's where the aid is supposed to come in.  But they are complementary.  They work together.  I don't think it's fair for us to sit here and suggest to you that we could go ahead with the aid package if the trade package doesn't come together.  I think they have to work in a complementary way and therefore we must, at Hong Kong and certainly right after Hong Kong, redouble our efforts to get to the core negotiating issues in Doha.

Thank you.

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