PROSPERITY THROUGH COOPERATION

Speech by U.S. Secretary of Commerce Carlos M. Gutierrez
American Chamber of Commerce, U.S. Commercial Service Meeting
Kyiv, Ukraine, Thursday, June 5, 2008

Thank you. Ambassador Taylor, thank you for your kind introduction.  On
the fourth day of a trip, there are very few people that can get me out at eight
o'clock in the morning, so I thank you for your interest in being here and
the very special interest that you've taken while we have been here in
Ukraine.

It has been a tremendous experience, and a real vital one.  We can look at
countries on a map, and read all kinds of things, but not until you get on
the ground do you start developing a clear picture.

I want to thank Jorge for putting this together and for bringing the
business community together.  I think that's the role of a good leader is
putting things together for a common cause and Jorge does a good job of
doing that.

I also want to recognize the President's Export Council sitting over here on
my left.  This is a presidential advisory group for President Bush.  They
advise the president on matters related to exports, trade and foreign
investment.

This is a very important group, a very influential group, and I think it
also demonstrates the importance of Ukraine in the fact that they want to be
here, that they want to know more about Ukraine, more about business
opportunities, so I'm thankful for your time in being here.

I understand this is the first visit by a U.S. Secretary of Commerce, and I
can assure you this will not be the last.  This is an area with an amazing
history, rich, extraordinary, and a people whose love for liberty has
persevered. What a great view throughout many centuries.

The great Ukrainian poet and nationalist, Taras Shevchenko, wrote of the
"great, new family of the free," and that has been, based on my limited
knowledge, a dream of Ukrainians for many, many generations.

Our two nations, as President Bush said, have built our friendship on our
love of liberty, and our love of freedom, and our love of independence.  I'm
here today to talk about expanding trade and investment as cornerstones of
free and democratic societies.

I'd like to begin by thanking the American Chamber for 16 years of promoting
U.S.-Ukraine commercial ties.  With a membership of 600, you are a key
resource for the business community, and you're a powerful voice for the
benefits of a market economy. You are living proof of what the market
economy does for the population, for the country as a whole.

Today, I'd like to discuss how we can build on the momentum generated by
President Bush's recent visit to move our economic relations forward and
generate an even more mutually beneficial trade and investment relationship.

We believe that as much as we've done, and as much as we've achieved, that
from a country to country standpoint, I think history will show that we're
just getting started.  We're just really getting started on our way to
building a large and significant, strategic economic relationship.

As President Bush said, Ukraine is a friend, and it has demonstrated its
commitment to democracy and to free markets.  The U.S.-Ukrainian Trade and
Investment Cooperation Agreement, signed in April, provides a framework for
further expanding our commercial partnerships.  With AmCham's help,
U.S.-Ukrainian bilateral trade and investment is strong and growing.

In 2007, our two-way trade exceeded $2.5 billion, with U.S. exports up more
than 77 percent, which is well above our average and at the top of the list
of export growth in terms of countries.

And these are not just consumer products like we saw yesterday, these are
exports like agricultural machinery, high-tech machinery, machinery for
construction, products that will help efficiency, productivity, it will help
infrastructure, it will help the country. We're very pleased that we get to
be making contributions to the development and growth of Ukraine.

Ukraine is America's second largest trading partner in the region, and U.S.
firms have invested more than $1 billion in Ukraine.  I heard yesterday that
the total foreign direct investment last year was close to $9 billion.

$9 billion.that's a tremendous amount, and I think very few countries come
close to that level of investment around the world.  These investments play
a significant role in such sectors as electricity generation, electronics,
agricultural processing and consumer goods.

We believe that as Ukraine continues its progress toward openness and
reform, that everything will show results, that the results will be
tangible, and that it demonstrates that we are just literally, literally
getting started.

We believe that the key is openness, and countries that have had the will to
open to ideas, open to investment, open to trade, open to foreign ownership,
are the ones that are growing faster, they're the ones that are creating
more jobs, they're the ones that have higher per capita income, they're the
ones that are creating more prosperity for their people.

That is a big challenge.  It is how far can we go toward openness, and will
there be a will to have confidence in opening up the economy?  And so far,
Ukraine has demonstrated that that is a direction in which you want to go.

The U.S. supported Ukraine as a full-fledged member of the WTO.   Ukraine's
membership reflects its commitment to trade based on market forces,
transparency and the rule of law.  I'm pleased that the Commerce Department's
Commercial Law Development Program was able to assist Ukraine in navigating
the long road to WTO accession.  For Ukraine to ensure complete compliance,
with its accession commitments and its obligation under our bilateral
agreement, there are still some pending items.

We believe that it's very important to send a signal, to send a message not
just to us, but to the whole world, about how Ukraine will participate and
will contribute to WTO standards and rules.  We hope Ukraine will move
quickly to pass the five laws that will fulfill these obligations and put it
on the path to realign with the rest of the WTO members.  A great
opportunity to do that, just as Ukraine moves on.

We're pleased to see movement in a number of areas:

As you know, Ukraine's progress in improving intellectual property
protection has resulted in removal from the U.S. Trade Representative's
Special 301 Priority Watch List.

We hope that Ukraine will continue to build on these successes and continue
its efforts to stem production and import of pirated goods.  Not too many
countries that I know have gotten from the priority list to the watch list,
so it's a big, important accomplishment, and I hope that it becomes a
motivation to continue down that direction.

If Ukraine can develop a reputation for being a unique place for
intellectual property protection, then Ukraine will have a significant
advantage over its neighbors to attract investment.

We appreciate the progress Ukraine has made on clearing arrears on Value
Added Tax repayments.

A more transparent and reliable system will bring in more investments, and
will create more jobs and will create more flow of trade.  If there is
something that businesspeople look for in today's world it's transparency.
Not all business people may like the rules, but the only thing we ask for is
that we know what the rules are, and that the rules be predictable.

Again, we may not like all the rules, but as long as we know how they will
be applied, we know that they are predictable, that is what really attracts
businesspeople and investment.  So, to the extent that Ukraine can continue
to make progress in transparency, in predictability, and the reliability of
its system of rule of law, that will help attract more investment.

Beyond the VAT, passage of a comprehensive tax code is critically important
to build a stable and predictable business environment.

We're pleased that the Government of Ukraine and AmCham have agreed to
establish a working group on customs Issues.

We'd like to help with Ukraine to find ways to boost high technology and
value-added manufacturing by accelerating customs clearance for the needed parts and technologies. We also encourage Ukraine to move toward adopting international standards related to customs clearance.

We also commend Prime Minister Tymoshenko for establishing the Council of Investors and requiring them to report to her and to give her direct, candid feedback and advice as to what the government can do to create a better environment for investors and also to create more jobs, to create better jobs, and to create a better standard of living for the development of
Ukraine.

It's very important that she understands that is also your vision of the
future.  That's what business does.  You create jobs, you develop people,
you build an infrastructure, you make a better society.  And that, of
course, is her goal.

I know that U.S. companies, including members of AmCham and the U.S.-
Ukraine Business Council, are eager to work with the government to identify and
resolve key business issues. We have a number of these dialogues around the
world, with a number of countries.

The ones that work, because not all of them work, the ones that work are the
ones where decisions are made, there's a sense that decisiveness is a key
attribute of these councils, where there's action and where there's a joint
commitment to results as opposed to perceiving that results are writing a
report or having a meeting, but it's getting things changed, it's getting
things done, it's deciding, it's acting, it's being action-oriented.

If you will do that, if you can make that council that type of a body, then
you will be tremendously successful, and you will be able to contribute to
the direction of the economy.

For Ukraine to unleash its economic potential obviously good policy
decisions are critical and input from the private sector is very helpful.
This is an opportunity for the private sector to be open, to be candid, to
be helpful, to be cooperative and collaborative, to be part of the team, and
to advise the Prime Minister on how the government should continue to create
policies that move the country forward.

We believe that Ukraine has great opportunity.  We believe that there are
few countries that have the kind of opportunity and future that can be
boasted by Ukraine, and we also believe - I don't think this is an
exaggeration - that Ukraine can become one of the most attractive economies
in the world.  It all depends on the policy, it all depends on what policy
is chosen, what choices are made.

Here are some areas that will take the country in that direction:

·        Streamlining the regulatory environment - If the regulatory
environment becomes an obstacle, because it's so cumbersome that it becomes
an obstacle that will scare off business investors, and they will take their
money some other place.

·        Resolving inconsistencies in commercial laws - Businesspeople get
very nervous when they have the perception that the law is quite different
depending on circumstances, depending on specific situations.

·        Passing the Joint Stock Company Law to improve corporate
governance, and

·        Completing the privatization process through transparent tenders.

Those are four things the government can do that will be a major leap
forward in giving Ukraine the status of very, very attractive country in
which to invest, not just in this region, but around the world.

In spite of the large foreign direct investment, Ukraine's per capita
foreign direct investment is low by regional standards.  So that's the main
problem.  In spite of the amount of money that's coming in, Ukraine is still
low on a per capita basis compared to regional standards, so there's room to
grow.  Ukraine ranks 139 out of 178, according to the World Bank's "Ease of
Doing Business" Index.

And I think is a reflection of the regulatory environment, the number of
regulations, the amount of time it takes to start a business.  The quicker
it is to start a business, the easier it is to get things done, the faster
the economy can grow and the more jobs that will be created.

There is a huge opportunity to create small businesses.  Many countries
around the world believe, and I will say wrongly, that it is all about big
multi-national firms.  I'll tell you in our country, the U.S., seventy
percent of our economy is driven by small- and medium-sized businesses.