Statements by U.S. Officials
Remarks of Ambassador James F. Jeffrey to the Turkish-American Business Council
January 23, 2009
Istanbul, Turkey
Thank you very much. It’s a pleasure to be here today. I want to thank DEIK, I want to thank all of you, not only for organizing this event for us, but also for coming here today. I think the bottom line is that we have friends in this discussion. I think they hit the nail on the head, as we say, and that is the question of hope. The message I have, that the American government has, is hope and optimism. That may seem a bit out of place in the current situation, but it’s the only approach that makes sense. It’s good business, it’s logical, and in a moral and in a factual sense right. And that’s how we’re going to be conducting our relations with Turkey, be they economic, commercial, or political. I’d like to touch briefly on three separate components of this, and then I would be happy to take a few questions from the audience.
First of all, no discussion these days can begin without a bit of commentary on the international economic situation. As you’ve just correctly heard, it began in the United States. Our intention is to put out this fire in the United States and make a contribution to putting out this fire throughout the world. The Bush Administration and the U.S. Congress committed $700 billion for immediate relief to the banking system and to other under-stress elements of the economy. Congress has just released the second tranche of that. President Obama is now working for a program of over $800 billion in investments and public spending to stimulate demand; because aside from a crunch in credit, the problem we have right now is that private sector demand, which normally drives two-thirds of the American economy and much of the world economy as well, is not working. And this means that yesterday’s toxic loans, that spread into even the most productive, the most efficient, the most effective, the smartest firms, the most – even at the best companies of the world – can’t sell their products because nobody is buying anything, then you have a problem.
So, our goal is to stimulate the economy. This is not going to be easy, ladies and gentlemen; it isn’t easy here in Turkey, it isn’t easy in the United States. There are political worries. There are many Americans who are wondering what this money will be used for. How are we going to deal with paying for such a program? If our debt level increases to perhaps seventy percent of GDP – compared to some countries, not too high, but in historic American terms extremely high and extremely worrisome. Will we be able to continue to finance this debt through international placement of it, which has been the tradition up until now? What effect will it have on the dollar? These are our concerns that we worry about as policy makers, that you worry about, of course, as business leaders. But we have to take aggressive, courageous action.
Turning to Turkey, last week I meet with the IMF group that is here. There is – I think – encouraging news. From our standpoint, Turkey is one of the countries in the best possible shape. And I’ll get back to the reason why that is so, but I think most of you know it’s because of the reforms you took in 2001 in your banking and financial and monetary sectors. They are paying off today. And, as I said, we’ll come back to that particular lesson, because it is a lesson.
So, the IMF program is extremely important. Some of the details still have to be worked out, complicated ones that go far beyond my ken of economic and financial affairs, but I think there is good will on both sides. But one of the important things that I know the IMF is supportive of is continued investment in ways that will help the economy, both short-term in terms of stimulus and long-term in terms of the development of your infrastructure, the development of your basic economic roadmap. This is a negotiation between the IMF and Turkey. We’ll be supportive in any way we can – talking to both sides, seeing if there’s anything we can do to make a contribution.
But it is very important, as well as Turkey has done, despite the superb situation of your financial sector – and it’s amazing compared to almost any other country in the world – despite the effectiveness of your international business sector in boosting exports, an export-driven developing economy like Turkey is going to have difficulties if the international market, international demand drops precipitously, which is the problem we have now. So while Turkey needs to do a great deal – and is doing a great deal – the larger problem this time is not inside Turkey. The larger problem is external.
In 2001, when I was here and was working with the Turkish government, with the IMF, with the World Bank, and all the others participating in the bailout, the problem was not the global (inaudible), the problem was the situation in Turkey, which was able to be helped by the willingness of the rest of the international community – not just the international financial institutions – to bail Turkey out. So, that’s a very, very important factor, and it’s a factor that we all have to take into consideration.
We were very appreciative of the role that Turkey played in the G20; President Bush and his advisers felt that one of our strongest allies in supporting free trade and supporting the role of the continued necessity of the private sector being at the center of economic activity was Turkey. I won’t give a list of who was on one camp and who was on the other. I will simply say that we were particularly appreciative of Turkey’s support for private sector, international trade, trading-oriented approaches to getting out of this crisis.
Now let me turn to the American-Turkish commercial relationship. This is very important to us; we know it is important to you. We also know that it is not as important as the European Union. (Inaudible) your trade relationships are stronger with the European Union, they’re stronger with Russia, they’re stronger with a number of other countries. Nonetheless, we’re proud of the progress that we have made: it’s about $15 billion dollars in this past year, and it wasn’t the best of all possible years. And one concern for us is that the trade is now less balanced than it used to be. Where it was very broadly, equally balanced – maybe twenty, thirty percent in our favor – now it’s more significantly in our favor. Some of that is due to the exchange rate between the Turkish and the American currencies. Some of it were [sic] other factors: the American economy actually in exports did very, very well last year because of the overall comparative position of the dollar. We, of course, hope globally that that happens next year; again, internationally, it’s down. But over the longer term, we do believe that our market (inaudible) be it for trade, be it for investments – and I’ll return to that in a second as well – be it for areas such as tourism, which we talked about that earlier, where American tourists (inaudible) about 500,000, (inaudible) most of them come right here to Istanbul, are not as many as some other countries, but the volume of purchases and services that they consume is highly competitive. And we want to continue to ensure that Turkey is a preferred location for American tourists, and I am very confident that it will be.
Direct investment: Turkey had a pretty good year, overall, last year, despite the international economic conjuncture, and we’re hoping to see some of that this year. As again Haluk Bey pointed out, this is a time for people to take a risk assessment and put their money where it will return. We believe in Turkey and we’ll be encouraging American firms to take a good look at opportunities here.
But there are a few things of concern in the area of foreign investment, and I want to share them with you because it’s something that (inaudible) and my government will be raising with your government, and that we’ll be talking about with our own American firms, and they talk about with us when the subject of investment comes up. Greenfields investment, where people actually bring technology and bring purchases and bring new jobs into a country, is relatively low in comparison to the overall good picture for investments. And it’s important to examine why that is so. I’ve spent considerable time, including in this trip to Istanbul and in meeting with American business leaders in Ankara, as well as in Washington before I came out here, looking at the possible reasons for that. And there are a number.
First of all, there are concerns about inefficiencies and inequities in the judicial system. There is a feeling that this is not as transparent as it could be. We have particular problems with intellectual property rights protection, and remember, America is very much an information and intellectual technology-based economy these days. So this is very, very important to us. We are not producers – well, we produce steel and automobiles, but our most effective, most (inaudible) and successful parts of our economy are those that are related to (inaudible) intellectual property rights issues, be it pharmaceuticals, be it literature, be it movies. You name it, these are very, very important industrial issues for American businesses. We’re concerned about the informal economy now, which perpetually forces many regular businesses to subsidize millions of workers. We’re concerned about the ability of American expertise to come here, (inaudible) because when firms begin investments, particularly investments that involve a lot of risk and capital injections, they usually want some of their own people in. It’s a temporary thing. Turkey is famous for producing extremely competent managers and extremely competent engineers and technical people, and they know the terrain and all-in-all it’s much less expensive to employ Turks. So investments produce more Turkish jobs. Period. But investments require priming the pump sometimes. That’s another message. Once again, Turkey has been making progress. We took Turkey off the Special 301 Priority Watch List this year because of tougher laws and stronger enforcement. But everything that can be done to make this system more transparent, more open to international investment and more subject to international rules and requirements – it’s better for us, the American business sector, and better for you.
Let me return to the issue of a few minutes ago: Turkey’s relative standing today in this horrific financial – and to some degree, economic – crisis. This is not an accident, as many of you know, as many of you were involved, directly or indirectly, advising or being affected by the events of 2001. I was in this country; I remember it was February, it was an American holiday. At 3:00 in the afternoon, my Ambassador, Bob Pearson, who was paying closer attention to the local news than I was, to my embarrassment, called and said, “What’s going on?” And then – I won’t go into the political events, the somewhat dramatic political events, that sparked this crisis in a meeting at Çankaya – I will simply say that almost immediately the country was in crisis and the international community, led by the World Bank, rather, led by the IMF, supported by the World Bank and supported by the U.S. Department of the Treasury, leaped into action. Let me just say that the financial and monetary policies and situation of Turkey in 2001, were they still to have continued to today, would have put you in a much, much more difficult situation. What is the difference? Turkey opened itself up to international norms, to transparency, to competition, to essentially following the rules. As we have seen, following the rules better than many financial institutions in the United States. And that’s the reason why your books are so good, it’s the reason why the IMF came here this time with smiles on their faces, seeing how much better shape Turkey was [in] then they even thought in October.
So my plea, not simply because it helps American businesses, but because it helps the Turkish economy: work on these international standards. Press for transparency. Many of you, growing up in Turkey, have learned ways to work the system. But everybody will benefit, just as everybody has benefitted from the IMF program in a more transparent, more open Turkey.
Two final things on this, and they’re related. The first is your vocation for the European Union. We do support it. Sometimes we get in trouble with our European friends when we say that. But that’s because we believe in the European Union, we believe in Turkey, and we believe that institutions that want to be world class have to make world-class decisions. And the European Union has taken the decision to work with Turkey for Turkish membership. This will have a huge impact – economic, financial, geopolitical, even philosophical – in this world. So that’s why we support it, and that’s why we encourage both sides to cross that bridge, to work out the differences and to move forward.
By the same token, simply the journey to this goal is helping Turkey so much. Obviously the trade agreements that you have made now for many years with the European Union have been instrumental in the growth of the Turkish export sector and the whole Turkish economy. There’s even more of that in store. But it’s also the introduction of outside norms into the political system and into the social system that will have a tremendous effect in the future. Just, again, we have supported this in the past, and I’m very confident that American will continue to be a friend of Turkey’s vocation to the European Union.
Lastly, energy. As we saw last week, and as some Turks in Istanbul may have experience if the situation had continued – the energy crisis, the energy shortages are going to be upon us soon. We got a taste of it (inaudible) market this month. And it is very, very important for the world, for Europe, for Turkey, and for the producer nations to the east, to the southeast in Iraq to take collective action. This is so vital for the energy independence of Europe, for its role in the world, and it’s equally vital, again, for Turkey. You have seen the benefits of your prior decisions. And those were hard decisions at the time: Baku-Tbilisi-Ceyhan, the gas pipeline, the extender into Greece, and the Kirkuk-Ceyhan pipeline, which for many years for political reasons and military reasons, was not being used, is now in operation, pumping hundreds of thousands of barrels of oil a day to the benefit of Turkey and to the benefit of Iraq. And it leaves open the possibility of more hydrocarbons flowing from Iraq into Turkey. That’s crucially important for strategic as well as for economic reasons.
And it’s very important to help Turkmenistan, Kazakhstan, and Azerbaijan find secure, friendly ways to move their hydrocarbons westward. So we look forward to working with you on that. And it is another way, again, to open Turkey up. To ensure that we have situations – about the only way – who would have thought twenty years that during the gas crisis there would still be gas flowing from Turkey to Greece – less gas because of the situation you had with much of your gas cut off. But still, this is an example of how economic, commercial, and political affairs can all play a role together.
Finally, let me turn to political affairs, specifically the new administration. As a diplomat, our bread-and-butter is to talk about our country’s policies toward country X or region Y. It’s easy; we can do it in our sleep. On day three of a new administration with a change of parties, that is not routine. It’s high adventure for me to get up here and talk about my country’s policies beyond what you saw in the Inaugural Address.
I will say a few things. And bear in mind that any new administration needs time to develop very complex policies on very complex issues. First of all, my experience has been, working in the White House, that only one person in the end decides foreign policy: that’s the President. That’s political reality, it’s the legal situation, and it’s simply is the way things happen. Not just in the United States, but certainly in the United States. Secondly, the President has an extraordinarily experienced, extraordinarily broad-based group of advisers who will bring him a wide variety of well-informed views. I can’t say, what all of our policies will be. I can’t even promise you that they will be right or wrong. What I can predict today is that we’ve got the best people in America sitting in there, people who are not shy about their views, giving the President all the information that he will need to take these decisions.
In terms of his priorities, he took an extraordinary step yesterday in going to the Department of State. We diplomats are always used to the President going off to the Pentagon, and there are flags and there is a band of 400 people and a meeting with the Joint Chiefs. Well, he’s already met with the Joint Chiefs. But his first foray into the diplomatic/security world was to the modest State Department building, where he appointed two special advisers – Ambassador Holbrooke and Senator Mitchell – to take charge of, if you will, the bookends of what is clearly going to be a major Obama initiative, and that is – and was in the last administration – the broader Middle East. The Arab-Israeli conflict over here, and on the other hand Pakistan/Afghanistan. There are other issues that we will focus on: Iraq, that I’ll mention in a second, and Iran, of course.
But it is an important signal that the President has decided to orient himself on these two in such a dramatic way. In both of these areas we are working closely with the Turkish government; we’re very appreciative of where the Turkish government is today, and where it has been since 2001, on Afghanistan, and we see chances for even stronger cooperation. And we’re very appreciative because Turkey is setting an example for other countries.
Turkey has also played a key role in the recent Gaza situation. It is important that the various countries in the region stand up and work together. We’re working closely with Turkey every day as well as with Egypt, with the UAE, Israel, with Jordan, and the Palestinian Authority and with others. It is absolutely vital that we find at least a long-term ceasefire to remove the immediate problem and then start working, as Senator Mitchell was chosen to do, on the underlying problems. He is an expert in this region, he’s worked this issue before, and we have, again, high hopes in his work.
So, again, before we go to the questions, just perhaps an admonition. Not everything has been decided, in this as with any new administration. We’ll all require a bit of time; we’re all aware that decisions have to be made quickly. But we’re going at this with a spirit of optimism; we’re going after this with a belief that in Turkey, we have one of our most important friends and allies.
Thank you very much.