Paulson Speaks Before US-UAE Business Council

by Mike Godfrey, Tax-News.com, Washington

03 June 2008

US Treasury Secretary Henry Paulson Jr on Monday addressed the US-UAE Business Council on the importance of open investment.

Opening his speech, Mr Paulson stated: "I am here today to discuss the benefits of open investment and trade policies and to reaffirm the United States' commitment to an open economy."

After briefly addressing the subject of soaring oil prices, he went on to observe that:

"Investment flows to the region are growing rapidly: there has been a three-fold increase in foreign direct investment over the past decade, and US foreign direct investment grew by 120% between 2001 and 2006, in part due to liberalization of investment policies in the Gulf. However, the potential is much greater and, in many Gulf countries, investment barriers persist in key sectors, such as energy and real estate."

He continued: "Further investment in the Gulf will bring innovation, technology, create new jobs, improve services and contribute to a widening economic base. I understand that as economies change, uncertainty can create resistance to openness."

"It is critical to understand, however, that in the long run, openness to trade and investment will not only bring prosperity, but will also improve stability by better enabling economies to manage external shocks and smooth out business cycles."

"Remaining closed to investment will have the opposite effect, by inhibiting growth and magnifying domestic economic vulnerabilities. The Gulf's past is a reminder of this lesson -- when oil prices were low the region endured years of lackluster growth and declining living standards."

"Open economies also introduce greater competition, and many US companies have become industry leaders in part because of this competition. If our companies weren't investing in markets overseas, they would lose that global presence and their leadership position. If multinational companies can't grow in markets around the world, they will shrivel up at home too. And US companies that invest abroad create at least one job at home for every job they create overseas."

Speaking with regard to the US economy, the US Treasury Secretary suggested that:

"Maintaining open investment and free trade policies is especially crucial now, as the world economic landscape changes. As you know, the US economy is going through a rough period – after six straight years of almost 3 percent average annual growth, our growth rate slowed significantly late last year."

He continued: "We are facing a trio of headwinds – a housing correction, capital markets turmoil and high and rising energy prices."

"We have acted quickly to respond to the housing downturn through a series of public and private initiatives to help financially-able homeowners stay in their homes and to keep mortgage finance available. President Bush and the US Congress also came together in February to enact a USD150bn fiscal stimulus package that is providing support to individuals and businesses this year, when it's needed."

"This fiscal stimulus will provide support to the economy as we weather this period. Unemployment remains low and increased exports are partially offsetting other less positive factors. Overall, I believe that the United States is on the right path to resolving market disruptions and building a stronger financial system. Our long term prospects remain strong."

"One thing is very clear to me – whatever our current difficulties, I wouldn't bet against the US worker or the US economy," he added.

Mr Paulson went on to conclude his speech by assuring the Council that:

"I am committed to promoting policies that enhance the underlying competitiveness of the US economy and ensure that the dollar remains the world's reserve currency. And, as I have emphasized today, these include being a strong advocate for open investment and trade, and working to address the current challenges in our economy, including the housing correction and stress in our capital markets."

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