REMARKS AS PREPARED FOR DELIVERY - SANDY K. BARUAH, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT - SOUTH SAN DIEGO COUNTY ECONOMIC DEVELOPMENT COUNCIL ECONOMIC SUMMIT - SAN DIEGO, CALIFORNIA

THURSDAY, OCTOBER 5, 2006

AS PREPARED FOR DELIVERY

Thank you, Ben, for that kind introduction. It is an honor to be here today on behalf of Commerce Secretary Carlos Gutierrez who sends his best regards to all of you gathered here today in beautiful San Diego.

He appreciated the opportunity to be here in Southern California not long ago, and for those of you who had the chance to visit with him during that trip you know that the bi-lateral relationship between the U.S. and Mexico is of personal interest to him and he is committed to advancing the competitiveness of our economies on both sides of the border. I hope you are not too disappointed to be hearing from the Assistant Secretary of Commerce for Economic Development today.

It’s also a pleasure to join Alan Bursin, California Secretary of Education and California Secretary of State Bruce McPherson. I applaud you both for your commitment to California and public service. Secretary McPherson, please pass along my and Secretary Gutierrez’s best wishes to the Governor.

In the 21st Century, we are truly living in a Global Economy, or as New York Times columnist Tom Friedman says, the world is…flat. And while competition and the pace of change continue to accelerate in the 21st Century economy, so too are the opportunities to build valuable business partnerships to expand our markets and increase our economic competitiveness. One of America’s most important such partnerships is with Mexico, and today I would like to offer a few thoughts on the status of the U.S.-Mexico economic relationship, particularly the issue of balancing security and commerce.

Our shared challenge is how can we continue to increase the competitiveness of our economies and take fuller advantage of the North American Free Trade Agreement economies in an increasingly efficient, dynamic and fast-moving global business environment?

Of course, we begin this discussion from a position of strength. There is a lot of good news in the U.S.-Mexico commercial relationship. To begin with, trade volumes and investment flows have increased significantly since NAFTA was launched a dozen years ago. U.S.-Mexico bilateral trade was more than $290 billion in 2005, and is expected to be around $350 billion this year. That is more than four times the volume of twelve years ago.

To give this number some perspective, our trade with Mexico today is larger than the U.S. trading relationship with France, Germany, Italy, Spain and India combined. Just the amount of annual growth in our trading relationship alone is more than the entire trading relationship we have with Brazil. Look at it this way, America’s trade with the entire world in 1977 was less than U.S. trade with Mexico today.

And, both countries are firmly committed to build on this positive relationship. For our part, the Commerce Department can point to the recent cement agreement with Mexico as evidence of continuing progress. The Bush Administration has been very pro-active in its efforts to foster a good bi-lateral relationship and has been aggressive in working with our Mexican counterparts to resolve sensitive security and trade issues.

Our close and unique relationship has spawned great working groups that have helped take advantage of the NAFTA framework. The Security and Prosperity Partnership of North America (SPP) is a great example of this kind of forum. Through the SPP, Canada, Mexico and the U.S. are implementing the Sea Cargo Initiative, which will allow for the electronic collection of data from shipping lines 24 hours prior to loading at the port of origin. This will help create a more efficient movement of goods between our three countries.

All of this takes place within the context of the challenges of a post-9/11 environment. Our security cooperation has been enhanced, our economic ties have become closer and we have found other ways to work together better.

Yet even with all this good news, challenges remain. As our trade volume has increased, the number of opportunities to enhance the competitiveness of our region has also grown. And we have not fully capitalized on these potential advantages.

There are 5 steps the U.S. and Mexico can take that will bolster our trading relationship and better the lives of citizens in both nations and promote business growth:

1. Take further steps to reduce delays at the border;

2. Enhance the compatibility of our standards;

3. Properly enforce the rule of law;

4. Break down further barriers to trade and investment; and

5. Enact comprehensive immigration reform.

First, in an environment where just-in-time delivery of goods and seamless supply chains are the norm, our border systems and regulations aren’t designed to handle the demands placed upon them. We should be able to have every single business activity in Mexico and the U.S. that takes place today take place on a cross border basis without obstructions tomorrow. We are increasingly doing a better job of making our border secure, but we also need to be oriented towards processing the increased volume of traffic and merchandise flowing across the border. The border need not be a barrier to trade.

Second, because some of our standards lack compatibility, many products that cross the U.S.-Mexico border need to be re-tested and re-certified. It is Mexican consumers who are penalized by this these inefficiencies. They have fewer choices, the cost of re-testing is passed on to them and they are no safer. For example, Mexico has not authorized U.S. conformity assessment bodies, such as Underwriters Laboratories, to operate in Mexico – in spite of a NAFTA commitment to do so. As a result, consumers in Mexico pay a price and our trade is less competitive.

A third area where the business community has expressed concern is the importance of the proper enforcement of the rule of law. Companies need to be sure that commercial disputes will be addressed through legitimate civil proceedings that occur in a transparent manner. Businesses want to know that their executives will not be subjected to personal criminal charges and threatened with jail time as a result of simple commercial disputes.

Fourth, there is the issue of Mexican economic reform. In the United States, the fact is that the least efficient sections of our economy tend to be those that don’t have international competition. In Mexico, there are still too many parts of the economy that U.S. businesses can’t participate in. For example, Mexicans don’t have the quality phone service they deserve. Opening more sectors of the economy to foreign investment, and liberalizing rules governing property ownership by foreign nationals would certainly make our relationship more competitive and efficient.

Finally, the Bush Administration is working to develop a comprehensive immigration reform policy, which Commerce Secretary Gutierrez believes to be the domestic social issue of our time – and a key to America’s future economic health.

America has dealt with difficult immigration issues in the past. There have been large waves of immigrants from Asia, Western Europe, and Eastern Europe, throughout our history. In fact, proportionately, we have fewer foreign-born people living in the United States today than we did in 1890. In 1890, 15% of our population was foreign-born. In 2004, 12% was foreign born. So, the challenges of immigration are not new for America, and I believe they create tremendous opportunities.

As we compete in a global economy, many countries, including Germany, China, and Japan, face declining populations in the future. But what separates us from other nations is our ability to attract, assimilate, and incorporate immigrants into our workforce.

From 2000 to 2004, the U.S. Census Bureau estimated that total U.S. population grew by more than 12 million. 44% of that growth is attributable to immigration. The United States has an incredible advantage. We can stand out from the pack by using our well-honed skills of assimilating immigrants as we have for 230 years.

But to benefit from this advantage – and to address the challenges of illegal immigration – we must show leadership. We must face reality. We must deal with immigration as it is, not as we wish it were. We must thoughtfully work through the issues, and avoid letting emotion take over the debate.

President Bush has a vision for comprehensive immigration reform. His vision protects our borders, because our immigration system can't work if we can't control our borders. And it recognizes the needs of a growing economy by creating a Temporary Worker Program that would establish a legal channel for foreign workers to enter our country in an orderly way for a limited period of time.

A recent article in the New York Times noted that California’s pear growers stand to lose $10 million because they can’t find enough immigrant workers.

The President’s immigration proposals will help address this problem, uphold our values, and increase the quality of life for peoples on both sides of the border. After all, the United States is both a nation of laws and a nation of immigrants.

Let me assure you that the U.S.-Mexico relationship is a key priority for President Bush and the U.S. Department of Commerce. But the responsibility to make the relationship work – and work better – is all of ours. It’s not just the U.S. and Mexican governments. It’s the private sector. It’s the non-profit institutions. It’s our educational institutions. While I pledge that the Department of Commerce will do our part, we are all responsible for this important relationship.

We should all be looking to address the 5 opportunities I just outlined and focus our work in three areas:

• Eliminate remaining barriers to trade.

• Enhance the environment for economic growth and innovation; and

• Clarify rules and regulations so that businesses can operate and products and capital can flow with greater ease between markets.

Our relationship serves as a model for the rest of the world of how trade can promote security. Let’s not forget that nations with strong commercial relationships simply do not go to war with each other. Nations that trade with each other have interests that are too intertwined – and that’s an important national security aspect to our trade relationship.

And a final thought about security and prosperity: they are not trade-offs. We can do both. In manufacturing, moving to a higher volume of production does not mean a reduction in quality. In fact, it’s the opposite – moving to higher levels of production is an opportunity to establish more modern standards and systems that increase efficiency and create a consistent, quality product. We have the same principle with our borders: a higher volume of traffic can lead to increased security and safety, as well as increased efficiency in commerce.

On behalf of President Bush and Commerce Secretary Carlos Gutierrez it has been my distinct pleasure to be here today. Thank you for your commitment to enhancing the important relationship between our two great nations.

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