Interview
Robert D. Hormats
Under Secretary for Economic, Energy and Agricultural Affairs
Washington, DC
November 16, 2011


MODERATOR: (In progress.) Today, we’ll be discussing the U.S. multilateral economic engagement, and we would – I’d like to take this opportunity to tell you that if you have any questions, you can start asking those now in the lower left hand portion of your screen. Just go ahead and type those. We have about 30 minutes today, and we’ll get to as many questions as we can in the 30 minutes we have.

With that, I would like to turn it over to Under Secretary Hormats. Thanks for joining us.

UNDER SECRETARY HORMATS: Well, thank you very much. It’s great to be here at Live at State. I’ve just returned from Honolulu, where I attended the APEC meeting. And as all of you know, I’m sure, President Obama and Secretary Clinton were also major participants because the United States was actually the host of that meeting this year.

And I think what’s important about this meeting, in addition to the detailed elements of the communiqué that was put out, or what’s known as the leaders’ statement, was the fact that it demonstrates in a very, very personal way, but also in a very important policy sense, that the United States is going to be playing a much more proactive role in Asia going forward. This was one of several meetings that the President and the Secretary have had in Asia and are going to have over the next several days as they move around. They’re going to be going to different countries, they’re going to be going to a leaders’ summit in Bali in a few days, and this is a very strong indication of how the United States sees itself and is activating as a participant, as a resident power in Asia in terms of security, political, and economic relations.

So we see this as important, in part because we see Asia as extremely important, also because we think, in the past, there has not been sufficient weight given to Asia in the way American policy has been pursued in the region and we’re trying to up our game, and in part because, from a domestic political point of view and from an economic point of view in particular in this country, Asia represents an area for growth. And the more cooperation there is between the United States and Asia, and the more opportunities American companies have in Asia, the better it is for our economy.

On the same wavelengths from this perspective, we also see growth in Asia as very beneficial to the United States. And therefore, we have a very strong interest in institutions that support economic growth in Asia, for Asian reasons but also because, as I say, it’s important to our own economic interests. So the two are mutually related – our security, our political and economic relations are really tied up as one and we see them as being pursued through these various contacts and institutions.

MODERATOR: Great. Our first question comes from Raymond Karmuja (ph) from Shalang, India. Do you see India as an investment opportunity for American business?

UNDER SECRETARY HORMATS: Well, I think American business has to make its own decisions as to where it invests, but I personally am very, very impressed by what I’ve seen in India. I’ve gone to India many times. When I was a graduate student, I took a bus ride all around India, so I’ve seen India from various perspectives. And I just went there very recently with Secretary Clinton, where we were in Delhi to begin with and then we went down to Chennai.

India’s growth, the dynamism of the Indian economy, the strength of India’s very dynamic entrepreneurial sector, a very vibrant group of younger people creating new businesses and new business opportunities, I think India’s going to be a major economic player in the 21st century. And the United States is certainly doing all it can to strengthen our economic ties with India through an increasing number of bilateral groups and conversations, a very strong relationship between Prime Minister Singh and President Obama, Secretary Clinton and her colleagues. All of these, I think are important because we see India not just as playing an important regional role; we see India as a valued partner in the Group of 20 and as one of the major players shaping the global economy in the 21st century. So American business should be looking hard at India as a great opportunity because of India’s growth and because India is going to be playing a much greater role in the global economy.

MODERATOR: Next question is: I understand that Secretary Clinton has been pushing a new focus on international economics as part of the State Department’s core mission. As the State Department’s senior official in charge of economics, can you tell us more about this focus on economics and why it’s so important now?

UNDER SECRETARY HORMATS: Yes. What we’re calling it is economic statecraft. The Secretary gave very recently in New York, at the New York Economic Club, a very comprehensive speech on economic statecraft. Why it’s so important is, first of all, if you go back a couple of decades, the way countries saw themselves in the world was the prime objective was to accumulate and project military power, not for all countries but for a number of countries. What is really important now for many countries is the ability to build domestic economic strength and project that economic strength around the world. And increasingly, countries are using their international economic diplomacy and their domestic economic strength as major factors in bolstering their foreign policy and supporting their international security policy.

So from our point of view in the United States, we see international economic policy and foreign policy and national security policy as interrelated, as do most countries in the world. And our goal in economic statecraft is to utilize our domestic economic strengths and dynamism to strengthen our ties with other countries in the world and to support our foreign policy. At the same time, we want to use our diplomacy, our foreign policy, to take measures that will also strengthen our domestic economy. So we’re working very hard to open markets in other parts of the world. We’re working very hard to support proper treatment of intellectual property around the world, to make sure there’s a level playing field between state enterprises and non-state enterprises around the world, to make sure that countries play by the global trading and investment rules of the WTO and work within global institutions.

What we also see, and it’s very important, is the – we see a well functioning global economy as in the interests of the American economy. We are not looking for special preferences in the world; we’re looking for a global trading and financial system that works well for everyone. We believe we can compete very effectively within that overall framework, and that’s really what we’re trying to do.

Since World War Two, the United States has been a leader in building up – starting and building up the IMF, the World Bank, the GATT, now the WTO, other groups like the OECD, but also APEC and, as I mentioned, other institutions in the Pacific. So we see global international economic cooperation as important for all countries. And to the extent other countries prosper and the global system prospers, it benefits the United States, which is a big trading country. We want to attract foreign investment from around the world, and we see a harmonious global economy and a well functioning one as in our interests, so long as the playing field is level so that all countries and all businesses have the same competitive opportunities.

MODERATOR: Our next question comes from Indira Kanan (ph). Are you concerned that the U.S.-Indian civilian nuclear agreement seems to be stalled? And what is the status on the assurances expected to be given by the Indian Government for the Part 810 licenses?

UNDER SECRETARY HORMATS: Well, the Part 810 licenses, I will sort of leave to – the discussion to the experts. We would like to see more movement in this area. We have been working with the Indians on civilian nuclear cooperation for some time. We have been very supportive of closer ties between our two countries. We would like to see more progress on this so that American companies will have the opportunity to compete in this sector in India. And there are lots of conversations going on, but we would like to see more progress in this area.

MODERATOR: The next question comes from Tikooyoo (ph) – I’m not going to even try the last name; I don’t want to butcher it. President Hu of China expressed his willingness to join TPP. Do you welcome China in TPP, and what would be the best conditions for it?

UNDER SECRETARY HORMATS: Well, I wasn’t aware that President Hu had expressed an interest in joining TPP at this point, but perhaps I’ve missed something. The goal of TPP, as we see it, is to create across the Pacific – and we have the United States, we have a number of Latin American countries, we have a number of Asian countries participating in these negotiations. And a lot of progress has been made, as the President indicated in Honolulu when he met with the countries that are active participants in this process.

We see this as a 21st century trade agreement that will, first of all, increase trade opportunities among a number of Pacific nations on both sides of the Pacific. Second, we see it as a way of strengthening the rules that will make for not just increased trade but higher quality trade – strengthening the rules on intellectual property protection, strengthening the rules on investment so that investors all have a level playing field on which they can operate, making sure that there is not a distortion between state enterprises that receive government support that could distort trade and private sector enterprises that don’t receive such government support. In other words, we want a level playing field between state enterprises and non-state enterprises. We also want to see a greater degree of regulatory convergence so that regulations across the Pacific do not distort trade or distort investment.

So we look at this as a very positive development. We also think that it demonstrates once again America’s long-term commitment to the Pacific by participating in this negotiation. And hopefully, having these negotiations concluded by next year, the United States and other countries in the region will make even more closely together on trade and other economic issues, which strengthens the position of the United States as an active participant in Pacific economics, which complements what we’re trying to do in the political and the security realm as well.

MODERATOR: Just a quick reminder, if you’d like the latest information from the State Department, you can follow us on Twitter by using the Twitter handle @StateDept. (Inaudible) s-t-a-t-e-d-e-p-t.

The next question comes from Mary Berger (ph). At the APEC meeting in Honolulu over the weekend, several major economies, including Japan and Canada, said the want to join the ongoing Trans-Pacific Partnership negotiations. Is there any concern that bringing on major new players now will slow down the negotiations and make it more difficult to get an agreement next year, as the Administration has said it hopes to do?

UNDER SECRETARY HORMATS: Well, we clearly would like to see an agreement next year, as the President has indicated. We’re very interested in the fact that these countries have indicated an interest in this, and welcome their interest. But we need to make sure, first of all, that we consult with various domestic constituencies in the United States – the Congress and business groups, the so-called stakeholders in this process, and others as well, to get their views. And we also want to be sure that these countries have the will and the capability to take the kinds of measures that are needed in order to be full-fledged participants in the TPP negotiating process.

But the fact that they’ve indicated an interest is certainly a positive thing. We and they have to do a lot of work, a lot of consultation to make sure that their participation is possible, given the rules that have been established, and the high standards that have been established for success in the TPP process. And we don’t want to slow the process down, and we want to be sure that if these countries were to join, (a) they could meet the high standards and were willing to meet the high standards, and (b) would not slow the process down. Those would be very important criteria.

But the principle that they have indicated that they are interested in this process is very much to be welcomed. The President did welcome it in his press conference in Honolulu, and now we have to do some detailed follow-up to see whether and when and to what degree their participation in the process will be possible over coming months to achieve the high level objectives we want in the time frame we want it.

MODERATOR: Our next question comes from Ana Baron. The IMF thinks that the Argentinean statistics concerning GDP and price index are not accurate. How problematic is this issue for the economic and financial mutual monitoring between members of the G-20?

MR. HORMATS: Well, it’s very important. I think that part of the proper functioning of the global economy these days is to have a clear idea through the IMF and other institutions of the statistics of information available about individual countries. And if the IMF has serious doubts about the validity of information that Argentina or any other country is providing, that does present a problem, a very important credibility problem for Argentina. If the IMF, which is a distinguished institution, does not think numbers are credible, that’s a problem Argentina needs to address.

And I think we have a number of other concerns with respect to Argentina – on, for instance, Paris Club negotiations and a number of other things. So Argentina is a member of the Group of 20. It should comply with the high standards of conduct that the G-20 has made a critical part of its own functioning and address issues raised by the IMF, or issues that emerge from the Paris Club, or issues that emerge from other claims that have been made vis-à-vis Argentina.

So we want, and the President has indicated to the president of Argentina when he met with her, a very good relationship with Argentina. We consider Argentina a friend, a partner in the G-20. But to be a good partner in the G-20, and to be a member in good standing in the G-20, complying with its high standards, there are certain obligations on the part of Argentina. And those, in the interests of the Argentines themselves, need to be complied with, and that is something we want to have conversations with the Argentines about. The President indicated to the president of Argentina that there would be follow-up conversations on some of these difficult economic issues, and we hope Argentina will do the kinds of things that it needs to do to comply with what the IMF has asked, and also what other international institutions, such as the Paris Club, have worked out with the Argentine Government. And also, another group called the International Center for the Settlement of Investment Disputes, there are a number of outstanding issues, and we hope Argentina will take a very constructive view on these. That will be good for Argentina, it will strengthen Argentina’s role in the G-20, and will help to strengthen the friendship and the ties between our two countries.

QUESTION: In the Middle East, can you speak to the role that the U.S. is playing in helping to promote democracy and increased opportunity for the citizens of the Mideast, especially for the regions of young people?

UNDER SECRETARY HORMATS: Yes. This is a very important objective for the United States. We have been big supporters, and strong supporters, of the reforms that are going on of the Arab Spring. I myself, this very afternoon, am going to Paris to follow up on what was known as the Deauville Declaration. This is a declaration that was engaged in by the Group of 8, plus a number of the countries that have been part of the Arab Spring, plus a number of other countries in the region, in the Gulf area, Turkey, and others, to support the developments that are taking place in Egypt, Tunisia, now Libya, and other parts of the region, like the reforms in Jordan and Morocco. So we regard this as extremely important.

Second, we are mobilizing resources in the United States to be supportive of this process. It’s not all about money, although we obviously want to provide contributions that will be helpful, but it’s also about increasing trade, it’s about increasing investment, it’s about support for small and medium-sized enterprises in the region, and as the question correctly points out, it’s certainly about support for the aspirations of younger people in the region.

There are a number of very talented people in this region. I was in Jordan several months ago and saw some very talented kids who were entrepreneurs who were writing software for iPad2 apps – very inspirational kids, these were high school kids. You can see this all over the Middle East. There is an enormous amount of talent just waiting to have an opportunity to succeed in various economic endeavors. And what we’re trying to do in our relations with these countries is provide assistance and help them to attract investment, increase trade opportunities, so that all people in these countries, particularly younger people, can achieve their economic aspirations.

I’ve been to the region several times. I intend to go back. Secretary Clinton has made this a very high priority. So it’s something we need to do, first to support the reforms in the region, but it’s really part of who we are as a country. We’re a country that believes in democracy, we believe in free markets, we believe in opportunity, we believe in upward mobility, and we have to, in our own interests in terms of a country that believes in these things and keeping faith with our own principles as a country, provide support for other countries that are embracing these same kinds of objectives.

So we’re doing this through USAID. Through other programs, we’re going to be providing financial assistance to Egypt through swap agreements that will forgive them their interest and debt for capital repayments for a number of years. The President’s indicated he would do this for three years to help them. We’re providing, through the Overseas Private Investment Corporation, guarantees so that they can provide – obtain money for small and medium-sized enterprises. We have a lot of other programs. We’re working with the World Bank, the European Bank for Reconstruction Development, the African Development Bank, and a number of the Arab funds to be helpful to this region, and of course with the IMF.

So we’re trying to mobilize multilateral institutions, our own institutions, our business community, our trading community to be supportive of this region. These changes won’t take place overnight. They take time. They’re difficult. We know that reforms are difficult in the region, but we’re very supportive and we want to continue to demonstrate our support for this region. It’s an enormously strong commitment of the President, the Secretary of State, and other government officials in our country.

MODERATOR: Our next question comes from Indira Kinai (ph). What is the status of the internal review of the model BIT? And do you have a timeframe for concluding a BIT with India?

UNDER SECRETARY HORMATS: Well, we are working on this. It’s taken, I should say candidly, longer than I had hoped to come up with our model BIT. But we are working on it within the Administration; we’re having consultations with the Congress as well, since obviously, any final BIT, being a treaty, would have to get approval in the Congress. So we want to make sure that there is a broad consensus behind the model BIT. That, we hope, will come soon, although I would have hoped it would have come even before now.

The point with India is a very interesting one. When we were in Delhi and had these meetings, Secretary Clinton with her counterparts, and I met with a number of senior Indian officials, we indicated that we were interested in resuming technical talks on a BIT. We can’t actually begin formal negotiations until we have gotten support for this new model BIT. But we can have technical level consultations on what a model – or what a new BIT might look like between the United States and India.

We are very interested in doing this. We have told the Indian Government that this is important. It’s important to the Indian Government. It will help investors in India and American investors, and therefore, to the extent it creates common rules and a common set of principles, it will increase investment. And increased investment increases jobs on both sides. And even more broadly, let me just emphasize that with respect to India and with respect to other countries, the United States is very open and feels that we’re very attractive to foreign investment. We are open for investment from India and from around the world. And part of having more BITs is our way of demonstrating to India and to other countries that we are open for investment.

We also, not just at the federal level, but our state governors are very actively going around the world searching out investment opportunities for their states. So I think you can see this interest on our part. The President has come up with a new program and announced very recently a new program called SelectUSA, which is designed to encourage investment in the United States. And the National Governors Association is going to be setting up an office which will enable people who are interested, or companies that are interested in investing in the United States, to contact that office and they will in turn give you information on individual states, who to talk to, and those people in turn can help companies work through regulations and the laws of the various states to be more encouraging and make it easier to invest.

MODERATOR: Our next question comes from Kasuke Ito (ph) from Jiji Press Japan. What is U.S. – what is the U.S. FTA strategy on the transatlantic side, and could you compare it to the Trans-Pacific partnership?

UNDER SECRETARY HORMAT: Well, the Trans-Pacific Partnership, as I’ve mentioned, is moving ahead and we’ve made a lot of progress. With respect to the transatlantic relationship, there are a number of ideas that have been circulated by think tanks on both sides of the Pacific, and very creative ideas, I must say. We’re going to be taking a look at those. We would like to see, and I think if you look at – carefully, at the Secretary’s speech on statecraft, you will see some portion of that devoted to strengthening economic ties across the Atlantic. We have something called the Transatlantic Economic Council, the TEC, which is focused on dealing with some of the issues we have. One of them is to try to have a greater degree of regulatory conversions, or harmonization, or mutual recognition, so that on both sides, companies won’t face regulatory barriers to selling on the other side of the ocean. So we’re trying to harmonize the best we can, and as quickly as we can, regulations between the EU and the United States.

But even more broadly, we would like to work together in other countries. If we can come up with high standards and a higher degree of trade cooperation, that reduces barriers between our two countries – and tariffs are not the big problem; we don’t have very high tariffs between the United States and Europe. But there are a lot of behind-the-border barriers, or regulatory barriers, that do impede trade, to the extent we can harmonize those and develop very high standards between us, we can then encourage other countries to accept those very high standards as well.

And we don’t – what we don’t want is sort of a balkanization of regulations and a balkanization of standards where each country – where small groups of countries have their own. We would like to see global standards in as many areas as we can, of a very high level. And to the extent that is able to take place, it can facilitate trade, it can reduce barriers that individual companies face in selling in other markets. So we would like to see a much more ambitious effort between the United States and Europe to increase trade and to cooperate globally on a wide range of things – standards, regulatory practices, and other practices that can, if reduced substantially, enhance trade and enhance efficiency and fundamentally increase job opportunities.

MODERATOR: We have time for one more question: Women and girls obviously make up half the world’s population, but they are not always able to be full participants in their nations’ economies and education systems. Can you speak to the important role that they can play in building their own economies and societies, and how we can help them?

UNDER SECRETARY HORMATS: This is a very high priority for Secretary Clinton and for the State Department. The countries that do best in enabling women and girls to have maximum opportunities in education, business, and societies are the countries that are going to do the best in the global economy of the 21st century. You cannot be competitive in this world of the 21st century with one hand tied behind your back, and that’s what you would be trying to do if you did not give girls and women maximum opportunities to participate in their societies and their economies.

And what we’re doing in many programs is providing specific assistance to help education for women and girls, help them establish small and medium-sized enterprises, or other enterprises, have interaction among entrepreneurs – women entrepreneurs. We had a wonderful group of African entrepreneurs here just a few weeks ago. We’ve had that actually twice. I’ve spoken with them both times, they’ve met with the Secretary of State.

So we’re trying to do as much as we can on all levels. We’re certainly encouraging, for instance, in the Middle East, reforms that include women and give women maximum opportunities to contribute economic progress in these countries and benefit from economic progress in many countries, not just the Middle East, but many countries. Women are restricted from owning land, they have to consult their husbands in order to get visas or passports, or to buy companies. We want to unleash opportunities for women. We think not only is it good for women, it’s good for men and it’s good for their overall societies as well. And it would be very hard for societies and economies to grow without giving full opportunities for women. It’s both important socially and it’s important economically.

And in the world of the 21st century, you need to use all the brainpower you’ve got and all the power you’ve got, and if you don’t use women and enable them to fulfill their God-given talents and opportunities, then you, as a country, are not going to do very well. As a society, you won’t do very well. The women will be hurt, but the overall society will be hurt perhaps even worse, because it will not be able to use the talent of women. And women can do the same things men can do, in some cases even better, and men have to learn that it’s in their interest to empower women, and it’s in society’s interest that women be empowered, and we’re certainly supporting it on all levels.

MODERATOR: Well, that’s all the time we have today. I’d like to thank you, Under Secretary Hormats for joining us at Live at State in our studio here. And I would like to thank all of you for joining us as well. Please note that there will be a full audio and video copy of today’s program available for download, and we will send that link out to you as soon as we have it ready. If you’d like to get the latest information from the State Department, like I said, you can follow us on twitter @StateDept.

Thank you for joining us and have a great day.