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Remarks to the Department of State's Advisory Committee on International Economic Policy

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Location: Washington, DC

SECRETARY CLINTON: Well, first, let me say this is my first opportunity to welcome all the ACIEP members. And Ted, thank you for your continuing leadership and involvement. Thea, thank you for your work. And you've gotten to know Jose, who has been in the job a few months now. And we're very committed to the work of the E bureaus and to try to maximize the expertise and experience that all of you represent.

Economic issues, particularly here in the State Department with the international breadth that we try to reach in terms of both diplomacy and development are absolutely critical to everything we do. And I would like not to make a speech, but to have a conversation, because I see some very, very familiar faces whom I'm delighted to see here, and some new faces to me who I know are very committed to the work that we're trying to do on behalf of our country.

So if it's okay, Ted, I'll just throw it open and let anybody ask anything that they want to, make any suggestions. It doesn't have to be about economics. As I look around the table, I know some of you have great and broad interests across many different areas and I'd be happy to talk about anything that might be on your minds.

QUESTION: Madam Secretary, thank you so much. We were just engaged and hearing from a number of members. I think there are some who have their hands raised and others who have already spoken. It would be, I think, welcome.

SECRETARY CLINTON: Great.

QUESTION: I will turn to you to lead the discussion. (Laughter.)

SECRETARY CLINTON: Oh, okay. Well, I was going to ask that -- I know many of you, but not all of you, so maybe if -- when I call on you, if you just would say what brings you here, that would be great. So, Lewis, why don't we start with you?

QUESTION: My name is Lewis Cohen. I am a former Foreign Service officer, a former trade negotiator at USTR, currently trade consultant, and have watched this committee evolve. And I have to say it is wonderful to have you here. I think you're the first Secretary of State who has addressed us. I could be wrong, but I think not. We've been having a discussion about the various priorities that E and EB are going to be addressing. And the export initiative was top of the list.

As somebody who has served as an economic counselor and a commercial counselor in an embassy, I saw it from the ground up. As somebody who represented a large multinational with investments around the world, especially in Japan, I saw the potential for large companies to act as mentors for small companies -- for opening markets for small companies. The one I have in mind is Toys R Us. And in the process of building stores, it was amazing how much cheaper American counters, air conditioners, shelving systems, you name it were than their Japanese counterparts, and how it was difficult for the small American companies who actually produce these things -- how difficult it was for them to find markets, because it's expensive.

SECRETARY CLINTON: Yes, it is.

QUESTION: They don't have the personnel and so on.

SECRETARY CLINTON: Right.

QUESTION: Toys R Us worked with their suppliers. Obviously, they have those suppliers from here. But they opened doors in places like Japan, all over Europe, in the Middle East. And suddenly, their stores became showcases for these systems. And suddenly, other companies in those countries looking to build stores saw these systems and came to Toys R Us and said, "Can you introduce us to these partners?" And it worked. Toys R Us brought in a large quantity of product from these companies and they opened markets for them.

And I think sitting around the room, we have UPS, we have Caterpillar, we have a number of other large companies who operate around the world and who I think can open the doors and mentor smaller suppliers. That's one way to build business, because if you look at the numbers -- and we were talking about numbers earlier -- I suspect something like 80 percent of our exports can be attributed to something like 2- or 300 companies. And that's not surprising.

SECRETARY CLINTON: Right. Right.

QUESTION: They have the wherewithal to do it. So I think this committee can take a look at this from that angle -- maybe we could have a subcommittee addressing these issues -- and try to attract the larger American companies -- the supply chain operators, the people at the top of the supply chains who can reach down.

SECRETARY CLINTON: Right. Right. I think that's an excellent idea, and it's the kind of feedback we need as we really flesh out the export initiative. One of our goals behind the export initiative is clearly to create more jobs and more business for American companies. But it is also, as you say, to showcase. I think that all too often, we overlook many of our most competitive advantages because we don't have an organized methodology for hooking up big companies and small companies.

When I was representing New York, I did a lot of work on procurement for small companies because the procurement rules for the federal government were so complicated. And large companies had full-time people just trying to follow the rules so that they could make it clear that there was an opportunity and they would pursue it. And we brought in -- and it's amazing, the opportunities that were all of a sudden born because people connected. So let's follow up on that. I think that's an excellent thought.

QUESTION: I think your friend Joe was ready to speak.

SECRETARY CLINTON: Hi Joe. (Laughter.)

QUESTION: Hi, Madam Secretary. It's just an honor to be here and I thank you for allowing me to participate. I saw on the listing of people that the president of the American Farm Bureau is part of this group, so I'll be careful with my comments.

SECRETARY CLINTON: (Laughter.) Well, some of us think of Long Island as America. (Laughter.)

QUESTION: Awesome. Two areas which you are very familiar with, and they came up in earlier comments by the presenters that have already spoken -- two things of concern to us in American agriculture that are highest priority. One is the immigration debate.

SECRETARY CLINTON: Yeah.

QUESTION: We know that the State Department that's -- you know, the Congress has got to take some action. We're working with Senator Schumer, obviously, on trying to come up with a white paper. Right now, there isn't anything. So the first step that the Congress got to do is come up with a white paper. But you already know how important that is to American agriculture. We employ 1.5 million farm workers across the country. And the biggest thing that we want is a legal program to employ the people that we need in our industry.

Second point that I wanted to make was about free trade. And you've heard me speak on this many, many times over the years. Free trade does not constitute fair trade. And we're talking about job, you know, creation, but also we need to worry about job retention. I'll use New York because we -- I know it best. The dairy industry lost a thousand dairy farmers last year -- not all related to trade.

Absolutely, our trade balance in the United States -- one of the most positive parts of it is American agriculture. And that's great. But the flip side is what is the impacts of the trade agreements on our small farmers, whether it be on Long Island, New York or California or anywhere. And that's the unanticipated consequences of the trade agreement, is that we're seeing the impacts. Fruit and vegetable sector -- 37 percent of our fruit and vegetables are now imported.

So the consequences of that are we're hurting small businesses and small farmers, which -- then, that impacts when you lose a farm -- the truck drivers, the equipment dealers, the bankers, all the other mechanisms that keep agriculture alive in communities. So that's one of the thoughts that I have, is that as we discuss trade and job creation as though we don't lose sight of retaining our job, our people in our own country. So thank you.

SECRETARY CLINTON: Well, Joe, you know how sympathetic I am to that. For people who may not realize it, Suffolk County, which is the far eastern end of Long Island, is the most productive farming county in New York and one of the most productive in the country, because it's a lot of high-value fruits, vegetables, ducks, horticulture --

QUESTION: Wine.

SECRETARY CLINTON: -- wine -- very good wine. And what Joe says is very much the case. Agriculture is one of our bright spots in our balance of trade challenges. And so many other countries provide subsidized inputs and even some support for export and market access. And it just gets increasingly difficult for even medium size -- not just small, but even medium size American agriculture to compete.

And it's just -- it needs to be kept in mind because it is a big employer. And we tried for years just to get an exception for a legal program for farm workers and it got all caught up in the immigration debate and we never got that done, so --

QUESTION: Great. You have time for --

SECRETARY CLINTON: Oh, yeah, I do. Absolutely.

QUESTION: Please. Deborah.

QUESTION: Madam Secretary, I'm Deborah Wince-Smith and I'm the president of the Council on Competitiveness here in Washington, and our members are CEOs and university presidents and labor leaders. And we're, of course, focused on our productivity, our job creation, and we're very much now involved in the revitalization of manufacturing.

But also, I wanted to share with you -- because the Department's played such a role in this -- we've really pioneered a new economic development model to bilateral innovation labs that we're doing at a very senior level with our main trading partners, from Brazil and Saudi Arabia to Korea, as well as the Nordic countries. And this is a very interesting model because we're able to address issues such as intellectual property and rule of law and transparency and capital issues through the lens of competitiveness and innovation.

So the other exciting thing that I wanted to share is our leader, chairman, who is the CEO of John Deere, we've just established the new global federation of competitiveness councils. And the councils all around the world have come to us -- I think it's a good example of U.S. leadership -- to put this first-ever network together to stimulate growth in our countries, but also for the world at large. So we very much appreciate that Jose and Bob Hormats and many -- and Nancy Smith-Nissley have been great partners in creating all that. So --

SECRETARY CLINTON: Thank you. Well, thanks for those very kind and well-deserved words. Let me go over there.

QUESTION: First of all, it's always fun to come to State Department because we agree with you across the board at Caterpillar. The -- you don't always prevail --

SECRETARY CLINTON: We don't hear that very often. (Laughter.)

QUESTION: You know, I have to tell you, you don't always prevail in the interagency process, but you're always right. (Laughter.) So --

SECRETARY CLINTON: You've got that on tape, everybody, right?

QUESTION: As you know, when we look at this issue of doubling U.S. exports -- and Caterpillar is one of the country's largest exporters, we're one of the most successful manufacturers -- just two things to keep in mind. One is when you look at the U.S. trade deficit, we have a big trade surplus in services. We have a big trade surplus in agriculture. We have a huge trade deficit in manufactured goods and a huge trade deficit in energy.

But when you look at the trade deficit in manufactured goods with the 17 countries with which we have FTAs, as a group, we have a very sizable trade surplus. And no one focuses on that.

SECRETARY CLINTON: That's (inaudible).

QUESTION: So where you really have open markets, American manufacturers not only hold their own; we really succeed. So the goal there is we need more open markets. I know where you are on the free trade agreements. Please prevail within the interagency process. We need that market access as soon as possible.

And then secondly, the last two years were the first two years in Caterpillar's history where our exports to non-OECD countries was larger than to OECD countries. The developing world is our future. And to the degree -- you know, we still have some of the highest trade barriers against the poorest countries. If we really want to get serious about seeing economic growth worldwide and more U.S. exports, we need to eliminate those trade barriers. We need duty-free, quota-free access for the poorest countries, the LDC countries, and the acid test on whether we're really serious about that will be on Haiti.

So if we can get the rest of the countries participating in the global economy, doubling U.S. exports will be a walk in the park and -- because the demand will be for infrastructure products and medical products and what-have-you. So please make that a priority, and that includes sugar, that includes textiles, that includes ethanol. But we've got to give Haiti a chance and we can't have high trade barriers against the poorest country in the hemisphere that needs help desperately. And your husband has been terrific on this for as long as we've known him, and we really want this to work.

SECRETARY CLINTON: Well, thank you on both counts. We do have a duty-free, tariff-free arrangement with Haiti and we're using it as one of our principal tools for redevelopment and to try to entice other countries to come to Haiti to make their same commitment so that they can then export back into their own countries duty-free. So we see that as a real tool.

Yes.

QUESTION: Madam Secretary, thank you for being here. My name is John Duke Anthony. I'm the president of the National Council on U.S.-Arab relations. Nine months ago when this committee met, that very day you were in India smoothing over some of the last remaining rough edges of that special relationship with India. At that time, oil was $42 a barrel. It had dipped down that far. We had some questions then for which there were no answers, and that was what would be that situation if the price went up to 70. It's now past 80. The atmosphere was receptive when you were there and we were here. The moment was propitious to be optimistic.

But we also asked another question of India's Reliance refining giant, which is a major source of inputs for refined products into Iran. Now, all this links back to the economic situation and the sanctions issue and your visit to India and which you're focusing on with regard to Iran. Could you address where we are now in comparison to where we were then?

SECRETARY CLINTON: Well, I think the short answer would be that we have made a lot of progress in persuading a significant number of countries to see the threat from Iran as we see it. Certainly, when I became Secretary of State, that was not the case. Even our European allies were not as convinced as they are today. And I think that President Obama's commitment to demonstrate engagement with Iran that he was willing to put out a hand to try to get the Iranians to reciprocate, and their failure to do so, their election which they reacted to so violently, has opened a lot of eyes. I'm not going to sit here and tell you that we have an easy path ahead of us, because it's challenging to get everyone to agree on the wording of what this kind of tough sanctions regime out of the Security Council looks like.

But through very intensive, persistent work at many levels with our counterparts across the world, we have a very solid, strong base in the European Union. Russia has moved further than anyone thought it would. China is now actually engaged in New York -- something that nobody thought they would be. The proof is in the pudding and trying to get the exact terms is challenging, but I feel like we've made progress.

Now, the question that is fair to ask is: So, if we get what would be credible sanctions, Iran's been sanctioned ten times and they're resilient. They withstood the rigors of the Iran-Iraq War for all those years. They took enormous losses. And they have a regime that has a very different world view and sense of their own place in it. But I am firmly of the belief that pursuing the sanctions track that we are now in New York is absolutely necessary, and we hope to be able to make a lot of progress this month.

Yes, Barry.

QUESTION: Madam Secretary, thank you. I'm a new member of the committee and I look forward to participating on it. And just pursuing this on Iranian sanctions, as you mentioned, I'm all for what you're doing. I think it's great and for nonproliferation reasons particularly. But there's one way to do it, I think, that can make it more palatable to American business and less attractive to the Iranians. And you probably have this in mind already, but the -- as you move forward, if the rules against participating with countries who -- or companies that do business in Iran, if the rules are clear and legal, then when companies have to break contracts -- because the new sanctions are going to require people to break contracts. If the rules are clear, the companies that break the contracts, American companies and all, can claim force majeure in arbitrations or foreign courts -- there's my law professor hat -- and they won't have to pay damages; while, if they don't claim that, or if they can't claim that because it's suggestions -- if all it is is encouraging them to do it, then the countries will be on the hook for broken contracts with companies that want to still deal with Iran or people that deal with Iranian entities. And then they'll pay damages and they'll go to Iran or to people that are doing business with Iran. Why enrich Iran with the kind of sanctions that don't have real bite? Rather, by having force majeure, you're protecting U.S. companies around the world in foreign courts, arbitrations, and all. So I just --

SECRETARY CLINTON: Well, Professor Carter, I appreciate that very much. (Laughter.)

QUESTION: Well, I'm sure Harold [i]Cohen, your lawyers -- you've really got an outstanding legal advisor.

SECRETARY CLINTON: We've got a good lawyer, but I haven't talked about force majeure since I taught law school, so I've got to get my head back in that. (Laughter.)

QUESTION: Okay.

SECRETARY CLINTON: Yes.

QUESTION: Thank you so much, Madam Secretary, and it's such a pleasure to see you and I'd like to thank you for your leadership here at the State Department. And I just wanted to say a few words about the unique role of the State Department and how we appreciate that role. I'm going to agree with Bill Lane on that one piece, just to take him off balance a little bit -- (laughter) -- that in the context of the interagency process, only the State Department really brings together all those different pieces. U.S. Trade Representative has the trade piece, and Commerce, and Labor, and so on, have the different pieces, but the State Department really can bring together the interests of U.S. business, U.S. job creation, development, democracy, human rights, worker rights. And that really is that nexus that I think is so important that I know you understand, that the important role of worker rights is not simply an extraneous issue when we talk about our international economic relationships, but it is crucial to our long-term goal of building durable democracies and building a trade relationship that will not just increase the flow of trade but will also make sure that working people all over the world are able to benefit from and appreciate and support the increased globalization.

And so we look forward to working with you on the national export initiative and all the many, many issues that the State Department's involved in. We thank you so much for your leadership.

SECRETARY CLINTON: Well, thank you all for letting me come by and thank you for serving. And we're going to make you work, so I'm glad I see a lot of rolled-up sleeves here. (Laughter.) Thank you very much.


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