Press Briefing by National Economic Advisor Gene Sperling

National Stadium

Bandar Seri Begawan, Brunei Darussalam

8:02 P.M. (L)

MR. SPERLING: I'm Gene Sperling, the President's National Economic Advisor. Tomorrow will be the main session of what will be the President's eighth APEC. As you know, the history of APEC leaders' meeting started with President Clinton at Blake Island in the state of Washington in 1993. Since then, this is the eighth consecutive year that the leaders have met.

The focus, obviously, has been very much on global integration and the progress that has been made forward. In this one we will be continuing that progress. Much of the focus on this one will be on issues involving the new economy. Many of the things that will be discussed here today, or that will be in the leaders' statement, include maintaining the moratorium on the customs duties, on e-commerce. There has been a significant focus on how electronic commerce should be handled; an agreement that we should try to focus on the least restrictive means of doing that; to study how the WTO should apply those rules to e-commerce.

In Auckland of last year, one of the things that was done here was a focus on having an e-commerce readiness assessment. That was done -- that was carried on at Okinawa and has led to the private sectors and the governments going through the entire list of structures dealing with the Internet economy and e-commerce and the degree that the countries are up to speed on those. As we listed here, 19 of the 21 countries have completed their e-commerce assessment tools.

One of the other things that developed very much out of the discussions going into Okinawa is to put all of the different things that are being done on the digital divide -- you can count 16,600 web sites on the digital divide -- to put them in an organized forum so that a developing country who wanted to know something that a Cisco or an America On Line were doing, had a way of accessing and having interactive access going forward.

We also, as the President mentioned today, put forward these trade plans on the Internet so, as the President said, one can compare and contrast them. Focus also is on adopting standards to promote technology trade, particularly a one-test, one standard, so that the countries -- so the companies dealing with computers or the modems, et cetera, don't have to go through 21 different standards, 21 different testings for each country, but can work towards a self-regulated, one-test, one standard approach.

And then we also are launching this anti-piracy software initiative, which is to ensure that the governments of all the APEC countries ensure that they will purchase and use non-pirated software in their government offices. In APEC as a whole, the number of pirated software ranges anywhere from 50 to 90 percent in most of the countries. And so in doing this, this would be a major step forward, not only for protecting the intellectual property rights of American and other companies, but also for developing indigenous software companies within those countries.

Obviously, as the President mentioned today, people wonder about whether the phrase digital divide is over-used. But there is an Australian government study that is out, which the President referred to today, that shows that 11 of the 21 countries by the year 2005 will average only 4 percent Internet use, while eight will average 72 percent by 20005. That is a dramatic divide. Yet, Korea -- the President just met, obviously, with Kim Dae-Jung, and one of the things they spoke abut when they weren't talking about North Korea, was the amazing development of the Internet in South Korea; where South Korea breaks all the records and is predicted to have 75, 80 percent of their people on the Internet by the year 2005. Teenagers in Korea go to PC shops instead of playing video games. Their housewives, by almost 2 million are waiting lists.

So there is the ability when a country has the right competition, et cetera, to make that progress, and this will be one of the main focuses that the President and the leaders will talk about.

Concerning launching a new WTO round, this obviously consumed much of the trade ministers' meeting and it will be much of the focus of the afternoon session. It's no secret that we would very much like the leaders' declaration to stress that the launch take place not only as early as possible, but specifically next year, in 2001. And that is a point that we will be pressing hard for.

We are also announcing today -- will be announcing in the leaders' document as part of this a multilateral aviation open skies agreement with Brunei, Chili, New Zealand, Singapore and the United States. It is our belief that this will be a path-breaking agreement. There is an enormous number of bilateral agreements, open sky agreements that exist in the world today, which has helped to open both commercial and passengers, as well as cargo.

Nonetheless, the new frontier will be whether or not this can be brought together. And while these five countries is just a start, it is our belief that this will be infectious in a positive way and it will lead to greater, more open skies agreements at a larger, multilateral level in the future and will put more pressure on other countries to want to join.

Obviously, it will help streamline the process, not make people have to do separate negotiations for every form of competing travel. It liberalizes the degree of equity investment that can come in to countries, which will be particularly helpful to lesser developed countries who are trying to bring in equity investment. Finally, we'll be launching the chemical trade dialogue, just very much like the auto dialogue that we did in the last year's.

That is our summary of events and deliverables.

Q: Gene, on the digital divide, what specifics can we expect the leaders to put forth, in terms of bridging the gap; In terms of more money for infrastructure, more money for software, more training, what can we expect specifics?

MR. SPERLING: Well, I think that as you know at Okinawa, we came forward with the digital opportunity task force. Since then we have had a number of meetings fleshing out the digital opportunity task force and, in fact, it has developed in a way that we think is very positive. The digital opportunity task force, or as we call it the DOT force, will have not only the G-8, but will have nine -- G-8 plus the EU -- but will have nine developing countries as well that will be part of that, including Indonesia, China, Egypt, Senegal, South Africa. So it will have broad representation, and it will have representation from NGOs and private sector, as well.

And so we have very much tried to, through that process, create a forum in which there can be greater coordination of the efforts, and more resources going forward. When you are talking about the digital divide in the United States, you're often talking simply about resources. When you're talking about it in the global context, you're talking about the basic infrastructure. And so as unglamorous as something like the readiness assessment may be, it has actually been the state of the art work that was done. What was developed out of APEC in the six areas is what private sector and companies are looking forward, working together to assess where they are, where the gaps have to be filled. And it essentially gives a road map for developing and developed countries alike as to where they have to go.

There's a large compendium of individual projects that are being done, some quite significant on the digital divide. As you know, Hewlett Packard has just launched a $1 billion initiative that they're doing on a commercial terms. But I think much of this has been uncoordinated, and that there's very little information sharing. So when you look at the knowledge network, putting all of the different sources of resources for the digital divide on the Internet so that any country could find out what every project is, how they could become involved, is one of the things. I don't think what you see out here, a specific commitment of this many billions of dollars, though I do believe that what we have done through the digital opportunity task force and pushed here will lead to billions of dollars in commitment.

Because as we met with the major companies, who again in their own ways, whether -- are doing significant amounts, they are looking very much for this type of coordinated effort. And I think that we can see more. Also the digital opportunity task force is going to be co-housed by the UNDP and the World Bank, both of which have resources available, and again we'd be looking for more support.

So there's no simple answer here, but I think when you look over the last year, there's been significant progress in coming together in the private sector-public sector commitment.

The other thing that's being done here is the -- is what we're calling the readiness partnerships. And we're doing one -- the United States is doing one with Indonesia. And there are others underway. And those would be the idea that now that you have the readiness assessment, that you would now ask for the private sector to partner, particularly with lesser developed countries, on ways that they could help spread the use of information technology more broadly throughout the economies.

Q: Gene, on the WTO talk issues, back in Seattle in December, President Clinton in his talk to the leaders who were there, the trade leaders who were there, said that he would support labor and environmental standards. And also said that under some conditions he would eventually support using sanctions against developing countries that failed to agree -- to live up to internationally agreed labor standards.

Is this an intention that he plans to repeat tomorrow during the course of the talks?

MR. SPERLING: Well, David, that's not exactly how I would remember that part of the Seattle part. The comment he made was, as you know, in an interview with Seattle where people were asking him over the long-term whether or not the trade labor issues would be, could be enforced at some point. And he did speak of including labor in his future vision.

But that was never our focus in WTO. What we were focusing on was a labor working group in which there would be at least two requirements. One was that it be an ongoing process. And, secondly, that the process report directly into the ministerials. And that is still our aspiration in trade. There is no question that this is an area of significant misunderstanding and I'm sure will be discussed significantly in the afternoon session tomorrow.

Many developing countries see the request for labor as being -- for labor standards or for a discussion of labor as a veiled means of protectionism or a way for advanced countries having reached a certain standard to hold back developing countries who are still trying to grow further. That has never been our aspiration. Our aspiration is simply to have a committee in which these issues could be discussed and discussed in a developmental context, so that they would not be stunting the growth, but ensuring, as the President often says, that you're not having a race to the bottom on labor and environment.

Q: How would you rate your chances of obtaining agreement for a start next year to the WTO round?

MR. SPERLING: I feel confident we did not achieve that. In the trade ministerial the focus was on setting the agenda and launching at the earliest possible date. But that was done with the understanding that we would re-litigate that for the leaders' declaration in the hope that we would get a clearer statement of launching in 2001. And I feel -- we feel optimistic about that, but that is a matter in which there is some controversy.

Obviously, going back to David's issue, what's important here is that you are seeing in the post-Seattle environment a renewed commitment to launching a WTO round. In APEC, which is the most diverse, or one of the most diverse organizations, not the G-8, but one in which you have a mix of advanced and lesser economically advanced countries. For APEC to come together and make this as a clear statement shows a renewed political will to go forward. Obviously, that will still mean having to work out the sensitive issues on agriculture, on labor, et cetera, but I do think it shows more of a willingness to -- on the countries to seek a practical, achievable new round.

And so I think there is renewed interest, and I think the United States' action in passing the African CVI initiatives and some of the actions done around the world to show more of a willingness by the advanced countries to ensure that this would be a round that would be favorable to developing countries has helped push things forward.

So, again, I think it is significant for an organization this mixed to express that type of renewed will.

Q: Gene, what makes you think that your anti-piracy addition would be any more effective than agreements that are already on the books on this particular issue in this part of the world?

MR. SPERLING: Well, what you're doing is you're going to the area that the governments can control directly. I think that the governments would say that the piracy is so widespread that it is difficult for them to get a handle on. By focusing on the use of non-pirated software in government offices, you're having not only the government set a standard, but you're also creating a market in those economies for software production there. And it is our hope, too, that countries will realize more of the benefits.

Most of these countries are loosing anywhere between $50 and $200 million a year in tax revenues by not having -- by relying on pirated software that is not taxed, not collected. It means that the jobs that are being -- the jobs associated with software are jobs of people selling things on street corners, as opposed to jobs -- high-paying jobs as programmers, as developers.

So it is an important start and it is one in which the governments, themselves, have the most direct control. And so it's not the full answer; it's a positive start.

Q: Gene, there are a number of bilateral trade agreements being signed and being negotiated now by APEC members. Does it worry you that this is a sign that the APEC trade liberalization itself is slowing down, becoming moribund?

MR. SPERLING: Oh, I'm sorry, moribund. I thought you said more, so I was waiting for more what. (Laughter.)

No, not necessarily. But I think that this will be an important issue, and one of the most important issues -- this will be an important issue in the afternoon, and I think if you were looking at what is one of the most important new debates in the global trading arena, it is whether or not free trade agreements or regional trade agreements can be building blocks to support the multilateral trading system, or whether they are diversions and obstacles.

And I think that -- I think that is an issue for debate and discussion. I think many people would answer, it depends on the form they take. If these free trade agreements are ones in which people cherry pick their best areas, they're not comprehensive, then I think that economists would say that they're trade diverting and not efficient, but also they -- I think that would be a move away from supporting a multi-lateral trade system.

The question really is, if you have standards for them which insist that they are comprehensive, and open, the type that others could come join in, can that be a building block for going forward? I think in the United States we are certainly open to the latter interpretation, that free trade agreements that are open and comprehensive can be potentially building blocks in the multilateral trading system. But I do think that is -- I do think that is one of the most important debates in the global trade area right now.

So, again, I think the answer is that you really have to look at the nature of the agreement, itself, and whether it fits well into the values that are within the GATT and the WTO system.

Q: Is there an explanation for why there are so many of these bilaterals taking place?

MR. SPERLING: Well, as Mike Moore likes to say concerning the WTO, its' greatest strength and greatest weakness is its' reliance on consensus. So I think in a very simple sense the ability to work out one's -- a comprehensive agreement with one country or two countries is far easier than a consensus movement, as we saw in Seattle, when so many different countries are going forward.

If the countries are coming together and doing comprehensive agreements that are consistent with what an ultimate new launch of the round would be, then I think one could argue that those could be promoting. If, again, they're simply just countries kind of cherry picking products, then I think it is starting to move away. Clearly, Chile and a couple of other countries have made great use of these, and have proliferated several.

But the afternoon session is actually on both the WTO and regional and free trade agreements. And, again, I think one of the major topics will be whether or not they are building blocks or stumbling blocks to the multilateral trade system.

THE PRESS: Thank you.

END 8:24 P.M. (L)