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Strategic Goal 8: Economic Prosperity and Security

Enhance Economic Prosperity and Security by Promoting Global Economic Growth, Development, And Stability, While Expanding Opportunities For U.S. Businesses

Public Benefit

Americans have a vital interest in a strong international economy that enhances U.S. national security by advancing prosperity, freedom, and economic opportunity worldwide. Economic growth creates new jobs and higher incomes for Americans and for citizens of other nations. The Department works closely with other agencies, businesses, and NGOs to build a strong and dynamic international economic system based on free trade with new opportunities for American business, workers, and farmers, and to ensure the economic security of the United States.

The United States is the world's largest importer and exporter. Trade accounts for about one-quarter of the U.S. economy and reached $2.9 trillion in FY 2002. Export growth produced about 25 percent of U.S. economic growth during the past decade. One of every five U.S. manufacturing workers depends on exports for a job. Exports generate 25 percent of gross cash sales for U.S. farmers and ranchers. Imports make lower cost, competitive, quality consumer goods available, and supply components to American industries. The United States is the largest importer from developing countries, importing goods worth $564 billion in FY 2002 ‑‑ eight times greater than all official development assistance to developing countries from all donors.

An open international system of investments means increased jobs, productivity, and trade opportunities for Americans. In 2000, the total accumulated stock of foreign direct investment in the United States totaled $1,238 trillion, and the total accumulated stock of U.S. direct investment abroad reached $1,245 trillion. European direct investment in the United States amounted to $890.6 billion, and European affiliates employed 3.9 million Americans. U.S. investment abroad also increases economic growth there, increasing the global market for U.S. goods and services. Everyone wins, if the trading and investment systems are open.

The remarkable growth and prosperity of the developed economies have demonstrated that only a dynamic, open international trading system based on free trade and free markets, good governance, the rule of law, education, and health care can produce sustainable development. The new Millennium Challenge Account (MCA), when approved by Congress, will provide new resources to accelerate needed reforms for developing nations that have created the conditions for growth and the reduction of poverty by governing justly, investing in their people, and promoting economic freedom. America is determined that everyone will participate fully in a new era of prosperity.

The economic security and stability of the American and global economies are closely linked to U.S. national security. To ensure U.S. economic security, the United States is developing diversified and reliable supplies of energy and ensuring the stability of the international financial system and the economic stability of key allies. (See Goal 1, Counterterrorism, and Goal 2, Homeland Security, for discussion of the Department's efforts to cut off terrorist financing and protect critical infrastructure.)


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Performance Goal 1

Institutions, Laws, And Policies Foster Private Sector-Led Growth, Macroeconomic Stability, and Poverty Reduction

Summary: Projected FY 2004 Performance

The Department will work with other USG agencies, foreign governments, multilateral institutions (including international financial institutions and the UN organizations), to promote higher levels of economic growth and increased prosperity in developing nations.

The MCA initiative, announced in March 2002, will provide important incentives for key reforms needed to make growth possible. Current theory and vast experience show that development largely depends less on the volume of financial flows than on the efficiency and effectiveness with which official and private capital are used. Effective use of capital is only possible where sound policy and institutions attract and harness resources. Creating the right environment to enhance investment and trade flows requires a new effort to build the capacity of developing countries to participate fully in global capital markets and trading systems. Governments increasingly acknowledge the need for sound domestic policies. The United States will work with other nations and international organizations so that countries can build the institutional and legal systems vital to good governance that are critical elements for development today when private capital flows and trade are the primary sources of development finance.

Following Congressional approval, implementation and funding of the MCA "new compact for development" can start in 2004. With stair-step increases in the budget, its full funding of $5 billion will be reached in 2006. The MCA will help countries raise productivity and integrate their economies into global markets by investing in areas such as good governance, agricultural development, education, health, and enterprise and private sector development, as well as trade and investment capacity building. The Department will also work with other entities on initiatives such as the 2002 Agricultural Productivity Initiative to support international efforts to cut hunger and poverty in half by 2015, and a G-8 anti-corruption/transparency action plan.

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Example of an FY 2002 Achievement:
The Monterrey Consensus --
As a result of strong leadership by the United States, more than fifty heads of state/government and 200 ministers adopted the Monterrey Consensus at the United Nations Conference on Financing for Development in Monterrey, Mexico in March 2002. This groundbreaking document states that, "Each country has primary responsibility for its own economic and social development, and the role of national policies and development strategies cannot be overemphasized." Monterrey launched a new, more balanced international partnership for development.

The Department will use bilateral contacts, international institutions, and public diplomacy to encourage foreign governments to privatize state-owned companies, eliminate unnecessary regulations, reduce trade barriers, battle corruption, and improve the investment environment through the rule of law and greater transparency. Progress here will lead to benefits on many fronts and promote sustained economic growth.

The scores for the average developing and transitional country Growth Competitiveness Index (GCI) of World Economic Forum are expected to increase. Changes in the GCI reflect changes in the capacity of national economies to achieve sustained economic growth over the medium term, controlling for the current level of economic development. The Department has chosen this indicator because the Department's engagement with the World Bank Group, and regional development banks, as well as U.S. bilateral efforts, all work towards strengthening the capacity of countries to achieve sustainable growth in the medium to long term.

In the information technology arena, the Department will unlock the global potential of e-commerce by promoting development and liberalization of telecommunications, transportation, customs, and product delivery systems, thereby promoting economic development and greater opportunities for U.S. firms. The Department will work closely with the United States Trade Representative (USTR), the Department of Commerce, the Federal Communications Commission, and other USG agencies to promote multilateral and bilateral trade liberalization in telecommunications and e-commerce.

The Department will continue to persuade foreign governments to eliminate monopolies, high access charges, and unnecessary regulations in these sectors, and to encourage market-based competition. To get out its message, the Department will use briefings for foreign media and digital video conferences with key opinion makers.

International Telecommunications Union (ITU) recommendations and decisions have been chosen as indicators because it is through such mechanisms that the ITU establishes the multilateral policies, technical rules, and standards that are critical to the global development of telecommunications and information technologies.

Summary: Indicators, Results, and Targets

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Baseline

Results

Targets

2000

2001

2002

2003

2004

Indicator #1: Average Developing Country Account (GCI).

4.78*

4.81*

Data not yet available.

Increase in average GCI.

Increase in average GCI.

Indicator #2: MCA Account. (New Indicator)[2]

N/A

N/A

Baseline:
The President announced the MCA. Agreement on indicators for MCA allocation.

Obtain Congressional support and legislative authorization for the MCA. Choose countries for initial MCA funding and establish an administrative mechanism.

MCA programs begin.

Indicator #3: International Telecommunication Union (ITU) Recommendations Adopted.

526

321

385

455

480

* Scoring: 1=lowest level of medium-term growth sustainability; 7= highest level of medium-term growth sustainability


Means and Strategies by Target

Increase in Average Developing Country GCI

• Broad-based USG efforts to encourage developing countries to adopt sound economic policies, invest in their people, govern justly, and promote economic freedom and enterprise through programs such as the MCA lead to higher economic growth rates. Meeting the target will depend upon developing countries' efforts, world economic conditions, and, to some extent, U.S. and other donors' support.

Begin MCA Programs

• In FY 2004, MCA implementation will begin, if Congress provides legislative authorization and funding. Implementation will consist of country selection based on independent criteria (FY 2003, if possible); consultation with selected countries on development of their MCA contract proposal; agreement on MCA country contracts which include objectives, benchmarks and controls; actual funding; and monitoring and evaluation for results and fiscal probity. Key areas of focus would include good governance, agricultural development, education, health, enterprise and private sector development, and trade and investment capacity building.

A total of 480 ITU recommendations adopted.

• Promote development of new technologies, particularly in the deployment of advanced services, and facilitate technical and policy support for the Information Society through pro-active diplomacy prior to and at ITU meetings, and the 2003 and 2004 World Summits on Information Society.


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Performance Goal 2

Increased Trade and Investment, Achieved Through Market-Opening International Agreements and Further Integration of Developing Countries into the Trading System

Summary: Projected FY 2004 Performance

The Administration is pressing aggressively to strengthen U.S. leadership on trade and investment because of its benefits to all sectors of the U.S. economy and its crucial role in global security and stability. The Department is working bilaterally, regionally, and multilaterally with USTR, the Department of Commerce, and other USG agencies to open markets for U.S. exports of goods, services, and investment capital. If these efforts are successful, U.S. exports will increase, creating more jobs for Americans. U.S. consumers and businesses will enjoy the benefits of lower-priced imports.

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Example of an FY 2002 Achievement:
U.S. Foreign Investment --
As a key part of the interagency advocacy and outreach process, the Department helped U.S. companies secure contracts and investments, including investments by PSEG Global in Peru ($227 million), General Electric in Kenya ($6 million) and Noble America in Colombia ($4 million). The Department supported the Export-Import Bank's $252 million financing for export of a satellite launch service project to Thailand. Working with Overseas Private Investment Corporation, the Department helped resolve an expropriation dispute in Indonesia on a $350 million oil and gas project.

U.S. exports of goods should rebound to nearly $800 billion in 2004 as the U.S. and world economies recover from the current economic downturn. U.S. exports of goods and services should amount to about $1.14 trillion.

The Department will vigorously pursue opening markets in a wide range of areas, such as industrial goods, aviation, financial services, telecommunications, agricultural biotechnology, and government procurement. Adequate protection for intellectual property will also be an important item on the U.S. agenda. The negotiations for the Doha Development Agenda of the World Trade Organization (WTO) have a January 1, 2005 target for completion.

The Department will devote significant effort to prepare developing and transition economies for accession to the WTO and for conclusion of the Doha Round. The adjacent chart shows that during FY 2004, the Department will work toward the accession of two additional members of the WTO. The Department will also contribute to efforts to monitor the implementation of accession commitments, including that of China. The United States hopes to conclude the Free Trade Area of the Americas (FTAA) by January 1, 2005.

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Performance Trend: FY 2000 - FY 2004 --
Number of WTO Members:
2000 (Result): 135
2001 (Result): 142
2002 (Result): 144
2003 (Target): 146
2004 (Target): 148

In 2003, the United States begins discussions on free trade and investment agreements (FTA) with Central America (CAFTA), Morocco, the Southern African Customs Union (SACU), and Australia. FTA negotiations with Chile and Singapore were concluded in January 2003. Other negotiations may begin before 2005 as well. In January 2003, the Department was discussing bilateral investment treaties (BITs) with Colombia, South Korea, Peru, and Venezuela. In FY 2004, the Department will continue its work with the Asia Pacific Economic Cooperation Forum (APEC) economies to reduce traditional barriers to trade and investment, and open "new economy" opportunities in e-commerce, information technology and agricultural biotechnology. The Department will also use unilateral trade benefit programs, such as the Andean Trade Promotion and Drug Eradication Act (ATPDEA), the Caribbean Basin Trade Partnership Act (CBTPA), and the African Growth and Opportunity Act (AGOA), to expand trade, regional economic integration, good governance, prosperity, and stability.

In FY 2004, the Department will conclude trade and investment framework agreements (TIFAs) and aviation liberalization agreements as appropriate. The Department will continue its efforts to improve access to foreign agricultural markets, especially for biotech agricultural products and telecommunications markets.

Advancing America's economic prosperity requires direct support to companies that are actively engaged in doing business abroad and are exporting to foreign markets. The Department will continue to support U.S. companies, especially those pursuing foreign government procurement and requiring assistance to resolve investment disputes, and to expand trade promotion activities (with particular attention to the more than 100 posts where there is no Foreign Commercial Service presence).

In addition, the Department will engage in public-private and government-industry collaborations to ensure that business concerns are well represented in foreign policy considerations. The Department will build on the models of its successes in 2002 and 2003, such as the AGOA Business Roundtable, the U.S.-Jordan workshop on Qualifying Industrial Zones, and the conference on Caspian Basin Energy Development, as well as its wide-ranging and extensive political, economic, and consular risk briefings for U.S. business.

Summary: Indicators, Results, and Targets

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Baseline

Results

Targets

2000

2001

2002

2003

2004

Indicator #1: Status of Negotiations on Open Markets for Services, Trade, and Investment.*

WTO negotiations on agriculture and services began. Ten BITs sent to the Senate for ratification. Negotiations on FTAs ongoing.

Preparations for launch of new WTO round underway. Chile and Singapore FTA negotiations began. Congress approved Jordan FTA. Five BITs entered into force. APEC leaders agreed in Shanghai to liberalize trade and investment.

WTO launched new round in Doha. China and Taiwan joined WTO. Jordan FTA entered into force. Chile and Singapore FTA negotiations continued.

Morocco, CAFTA, SACU and Australia identified as partners for FTAs. BIT discussions continued with Venezuela, Peru, Colombia, and South Korea. China took concrete steps to remove trade barriers and open its markets; some shortfalls remained in areas of interest.

Conclude Chile and Singapore FTAs. Conclude two new BITs. Begin new FTA negotiations, with CAFTA, Morocco, SACU, and Australia.

WTO Doha Round negotiations continue (with January 1, 2005 target for completion). Conclude two new BITs. Conclude two FTAs. Continue FTAA negotiations, (with a January 1, 2005 target for completion).

*This indicator combines the Indicators on WTO, BIT, and FTA negotiations that were listed separately in the Department's 2003 Performance Plan.

Indicator #2: Number of Market Opening Transportation Agreements in Place.

Bilateral Open Skies agreements in place with forty-seven countries.

Five additional bilateral Open Skies agreements concluded. Multilateral Open Skies agreements with four countries concluded.

Five additional bilateral Open Skies agreements plus three other liberalized agreements concluded.

Conclude two bilateral Open Skies (or Multilateral accessions). Conclude three non-Open Skies agreements.

Conclude two bilateral Open Skies agreements (or Multilateral accessions). Conclude Three non-Open Skies agreements. Conclude shipping agreement with China.


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Baseline

Results

Targets

2000

2001

2002

2003

2004

Indicator #3: Number of Countries Allowing Commercial use of Agricultural Biotechnology.

Seven countries allowed commercial use of ag-biotech products.

Seven additional countries allowed commercial use of ag-biotech products. Acreage under cultivation increased.

India commercialized transgenic cotton. Philippines and Brazil took initial steps toward commercializing ag-biotech.

The Philippines and Kenya commercialize ag-biotech.

Three additional countries begin to commercialize ag-biotech. (Implement transparent science-based regulatory regimes.)

Indicator #4: Number of new Accessions to the WTO.

135 members.

7 new accessions

142 members.

2 new accessions

144 members.

2 new accessions

146 members.

2 new accessions

148 members.

Means and Strategies by Target

WTO Doha Round negotiations and FTAA negotiations continue (each with a January 1, 2005 target for completion); conclude two new BITs and two new FTAs.

Multilateral and bilateral negotiations, supported by public diplomacy.

Conclude two bilateral Open Skies agreements (or multilateral accessions), three non-Open Skies agreements, and a shipping agreement with China.

• Multilateral and bilateral negotiations, supported by public diplomacy.

Three countries begin commercialization of ag-biotech. (Implement transparent science-based regulatory regimes.)

• Multilateral and bilateral diplomacy, supported by public diplomacy and capacity-building.

Two new members join WTO.

• Bilateral diplomacy, supported by public diplomacy.


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Performance Goal 3

Secure And Stable Financial And Energy Markets

Summary: Projected FY 2004 Performance

The Department will work closely with other USG agencies, business, and U.S. friends and allies to secure stable and secure financial and energy markets to protect America's economic security, ensuring that neither terrorist actions nor the policies of other governments nor unexpected financial events fundamentally damage the U.S. or global economies.

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Example of an FY 2002 Achievement:
Forestalled Financial Crisis --
The Department and the Treasury Department coordinated with the IMF to secure an agreement providing $16.3 billion in emergency financing for Turkey, forestalling an economic crisis in this important European ally bordering the Middle East and Central Asia. The Department performed in-depth analyses of Turkey's domestic and foreign economic problems, and devised and built support for optimal solutions.

In the war against terrorism, the Department will continue to secure the support of nations around the world; its efforts are designed to ensure that front-line states are not threatened by economic and financial instability and that the global economy enjoys reliable supplies of energy at reasonable prices. The Department will work actively with other countries, international financial institutions (IFIs), and the private sector to ensure that front-line states receive the support necessary to prevent financial crises or to resolve them more effectively when they occur. Promoting regional trade will also play an important role in promoting economic growth among key front-line states, including Afghanistan and Pakistan.

To prevent financial disruptions from undermining the economic stability of emerging markets, the Department will work with the IFIs to provide advice and support to countries trying to pursue sound macroeconomic policies, provide greater transparency, adopt prudential standards, and keep debt levels manageable and inflation low.

Unpredictable financial crises will continue to drive much of the Department's activity in this area. Continuing activities will include work with the Department of the Treasury to assess and implement better sovereign debt restructuring mechanisms and to enhance international implementation of stronger anti-money laundering and terrorist financing rules.

The Department will continue to work closely with the Department of the Treasury to strengthen international financial systems. The Department will strongly support Treasury's efforts to increase transparency and information-sharing among international financial institutions, increasing their efficiency and public support for their work. The Department will also continue to play a vital role in working with individual governments - particularly in developing and transitional economies - in support of better-regulated, more transparent financial sectors, essential to reducing the vulnerability of these countries to financial crises.

The Department will secure reliable supplies of energy at reasonable prices in order to foster economic growth and prosperity, and to ensure that oil cannot be used as a weapon. The United States must deal with some hard facts about the international oil markets. Two-thirds of proven world oil reserves are in the Middle East. Aftershocks from global oil supply disruptions can ripple through the global economy because Europe and Japan, like the United States, rely on imports to meet a growing portion of their oil needs.

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Example of an FY 2002 Achievement:
Energy Dialogue --
A commercial energy dialogue with Russia, launched by the Department and the Departments of Commerce and Energy, broadened private sector cooperation to increase production/export of Russian oil and gas. The privately owned and run Caspian Pipeline Consortium oil pipeline opened, a major milestone in developing an East-West corridor linking Caspian energy producers with world markets.

Finally, reliability of supply from some producing states is a major concern. U.S. energy security will continue to require a robust international strategy and close cooperation with other countries. Working with and through the International Energy Agency (IEA), the Department will use its well-tested approach to prevent sudden disruptions in the oil market from damaging the world economy. The United States will maintain its own Strategic Petroleum Reserve at appropriately high levels and ensure that other nations do so as well. In the mid to long term, America must continue to increase and diversify energy production in reliable producing countries. As part of this effort, the United States will improve the climate for oil sector investment in many countries, and actively help improve the infrastructure necessary to gain access to relatively new suppliers in Latin America, Africa, and the Caspian and Central Asian regions.

Summary: Indicators, Results, and Targets

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Baseline

Results

Targets

2000

2001

2002

2003

2004

Indicator #1: World Emergency Oil Stocks.

IEA stock level was 111 days of net oil imports.

IEA stock level was 112 days of net oil imports.

Higher stock levels in the United States, Japan, and South Korea (a new IEA member), increased overall IEA stocks to 114 days of net oil imports as of 12/21/02. China (a non-IEA member) actively engaged with the IEA, APEC, and the United States to create emergency oil stock reserves and has formulated a plan for holding significant stocks.

Increase IEA and non-IEA emergency oil stocks above FY 2002 stock levels.

IEA and non-IEA emergency oil stocks are at or above FY 2003 levels.

Indicator #2: Percentage of Debt Crisis Countries on IMF Programs / Successfully Reforming.

61%

57%

63%

(Indonesia, Brazil, Uruguay, Russia, Thailand, Ukraine, Pakistan, Turkey, and former Yugoslavia implemented IMF reform programs.)

60%

60%

Means and Strategies by Target

Successful reform by 60 percent of Debt Crisis countries on IMF Programs.

• Multilateral and bilateral negotiations, supported by public diplomacy.

World Emergency Oil Stocks.

• Multilateral and bilateral negotiations focused on IEA members.


Summary: Verification/Validation and Crosscutting Activities

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Performance Goal 1

Institutions, laws, and policies foster private sector-led growth, macroeconomic stability, and poverty reduction

Indicator 1: Average Developing Country Account GCI.

Verification and Validation

World Bank information is widely used and available to the public.

Crosscutting Activities

The Department will work with USAID and other USG agencies, foreign governments, IFIs, and the private sector to promote capacity building and development.

Indicator 2: Millennium Challenge Account.

Verification and Validation

The Department will provide reliable information on its website about the status of the MCA.

Crosscutting Activities

Department will work with Congress, USAID and other USG agencies, foreign governments, IFIs, and the private sector to promote a successful MCA program.

Indicator 3: International Telecommunications Union (ITU) Recommendations.

Verification and Validation

The ITU provides reliable information to the public on its recommendations and activities.

Crosscutting Activities

The Department will work with other USG agencies, foreign governments, the private sector, and the ITU to develop and implement ITU resolutions that expand telecommunications liberalization and development.

Performance Goal 2

Increased trade and investment, achieved through market-opening international agreements and further integration of developing countries into the trading system

Indicator 1: Status of negotiations on open markets for services, trade and investment.

Verification and Validation

The WTO, USTR, and the Department provide reliable information on their websites.

Crosscutting Activities

The Department will work with USTR and other USG agencies, foreign governments, and the private sector to promote successful conclusion of new agreements.

Indicator 2: Number of market opening transportation agreements in place.

Verification and Validation

The Department and the Department of Transportation provide reliable information on their websites.

Crosscutting Activities

The Department will work with the Department of Transportation and other USG agencies, foreign governments, and the private sector to promote successful conclusion of new agreements.


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Performance Goal 2

Increased trade and investment, achieved through market-opening international agreements and further integration of developing countries into the trading system.

Indicator 3: Number of countries allowing commercial use of agricultural biotechnology.

Verification and Validation

The Department provides reliable information to the public.

Crosscutting Activities

The Department will work with USTR, the Department of Agriculture, USAID, and other USG agencies, foreign governments, the private sector, and the scientific community to promote open markets for biotech agricultural products.

Indicator 4: Number of new accessions to the WTO.

Verification and Validation

WTO provides reliable information on its website.

Crosscutting Activities

The Department will work with USTR, other USG agencies, and foreign governments to enable countries to make the reforms needed to enter the WTO.

Performance Goal 3

Secure And Stable Financial And Energy Markets

Indicator 1: Percentage of Debt Crisis Countries on IMF Programs / Successfully Reforming.

Verification and Validation

The IMF provides reliable information on its website.

Crosscutting Activities

The Department will work with the Department of the Treasury, other USG agencies, the IMF, and foreign governments to enable countries to reform successfully.

Indicator 2: World Emergency Oil Stocks.

Verification and Validation

The IEA provides reliable information to the public on its website.

Crosscutting Activities

The Department will work with Department of Energy, other USG agencies, the IEA, foreign governments, and the private sector to maintain appropriate global levels of emergency oil stocks.



[2] Once the MCA is established following Congressional approval, more specific targets will be developed.

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