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As prepeared for delivery...
U.S. Policy Toward Cyprus: An Agenda of Cooperation
Remarks by Ambassador Michael Klosson
CyABA Dinner, Hilton Hotel, Nicosia
October 24, 2002
Thank you, Chris, for that introduction.
Your Excellencies, Ladies and Gentlemen:
Let me thank CyABA for its kind invitation to address such a distinguished gathering. Supporting business is important to me. American business for sure, but not just American – also, I would add, a robust, interconnected globalizing economy. The reason is simple: there is a connection between peace, freedom and economic development.
I welcome this opportunity to continue the Embassy's strong support for CyABA. Under the capable leadership of Kyriakos Kolkinos and the Board, and with the assistance and support of KEBE, your association is playing a tremendously important role by promoting bilateral business relations. You provide a focal point for strengthening economic ties between the United States and Cyprus. Your motto – “The Cyprus American Business Bridge” – is right on target, and I am anxious to help you lay more trestles!
In the brief two months since my arrival in Cyprus, I've seen first hand the rich and complex interactions between our two countries. I've seen the web of economic, commercial, educational, social and political connections that constitute our relationship. And I've seen the benefits that flow to us both from deeper and stronger cooperation between our two countries.
I've also been told repeatedly that I've arrived in Cyprus at an "interesting time." That indeed is an apt observation, but perhaps not just for the reason my new friends here have in mind. When one surveys the landscape, both on and off the island, these indeed are "interesting" times. There is plenty of work for American and other diplomats:
-- We are fighting to win the war on terrorism;
-- We are seeking to ensure all countries realize the benefits of globalization;
-- We are working to advance trade liberalization on all fronts, which in turn helps promote prosperity and sustainable development for everyone;
-- We are pressing forward as advocates of democracy, good governance and the rule of law in places like China, the Balkans, Central Asia and Africa;
-- We are working to eliminate weapons of mass destruction, including compelling Iraq to comply with its UN obligations by disarming;
-- NATO, the cornerstone of transatlantic security and a pillar of the United States relationship with Europe, will take on new partners, new capabilities and new relationships at its summit meeting in Prague next month.
-- The European Union continues to deepen integration in Europe, and the Irish “yes” vote Saturday has cleared the way. It too is set to take on new members in December that would boost its population to nearly a half billion and extend prosperity further to the East.
-- We are working on many fronts – with NATO, the EU, the OSCE, as well as active diplomacy on regional and ethnic conflicts – to realize President Bush’s vision of a Europe “whole, free and at peace.”
So what does all this have to do with Cyprus you might ask? The United States does not approach its relationship with Cyprus from a single dimension. Our interests are broad; the relationship is wide-ranging, and poised to become even more so; and our expectations are high. These are the themes, which guide overall American policy, and shape our efforts here in Cyprus as elsewhere in Europe and beyond.
Tonight, I would like to discuss with you four areas where these strands come together and where the Embassy seeks to make a difference. First, of course, is U.S. support for efforts to achieve a lasting, peaceful settlement of the Cyprus problem. Next is counter-terrorism. As the events of recent weeks illustrate only too vividly, global terrorism remains a worldwide threat. A related third priority is law enforcement cooperation. Finally, I will focus on the U.S.-Cyprus business relationship.
First Priority: A Lasting, Peaceful Settlement of the Cyprus Problem
My first priority is to extend US support for efforts to achieve a lasting, peaceful solution to the Cyprus Problem. No surprise there. Indeed, this has been a consistent theme of U.S. diplomacy and the Embassy’s mission for several decades. A solution would make a vital contribution to regional peace and stability as well as unleash energy for Cypriots to contribute in many areas.
But there is a difference now. The coming months present an historic opportunity -- one that may not repeat itself -- for the two parties to make a breakthrough. EU accession, both for Cyprus and eventually for Turkey, can be a positive and unifying force for the entire region.
That is why these next few months are so crucial for all Cypriots. So much is possible between now and the end of the year. Both a settlement and EU membership are on the horizon. This is an historic moment when all sides must focus creatively and squarely on the greater and long-term good. There can be no doubt that a Cyprus settlement will benefit Cypriots from one end of the island to the other, economically, politically and culturally.
There is, of course, another important set of developments that will impact the negotiations between the two leaders and those relate to Turkey, which in just 10 days will vote on a new government. We have long believed that Turkey’s future is in Europe. It is strongly in our interests that the EU and Turkey take the steps necessary to build the closest possible relationship. Turkey has carried out major economic and political reforms in recent months that were evaluated in positive terms by the EU Commission. With continued progress on these and other issues, the EU’s December Copenhagen Summit now looms large as a key milestone in taking that relationship to a new stage.
For our part, the U.S. is continually engaged at all levels in support of a comprehensive settlement in Cyprus. We strongly support the UN Secretary General's Good Offices mission, including the critical work of his Special Adviser, and welcome the direct, personal involvement of Secretary General Annan. Our Special Coordinator for Cyprus, Ambassador Tom Weston, will be coming to Cyprus next week for more talks with the parties. We stress to both sides the need for urgency in these negotiations in order to reach an equitable and enduring agreement by the Copenhagen summit.
A comprehensive settlement that meets the legitimate interests of both sides is feasible. Time, however, is not unlimited and the process will have to be intensified.
As businessmen you understand that political and economic security are important catalysts for prosperity. If both sides choose to take advantage of this unique opportunity for a settlement and EU membership, then Cyprus' full economic potential can and will be unleashed.
Second Priority: The Fight against International Terrorism
To protect peace, we must confront the enemies of peace. We must confront international terrorism. With victims from over 80 countries, September 11 was a shocking reminder that no nation is immune from the threat of international terrorism. As such, 9/11 galvanized global action. An unprecedented international coalition removed Al Qaeda and the Taliban from power in Afghanistan, and returned that country to its people. Governments around the world have frozen tens of millions of dollars in terrorist assets, denying terrorists access to the funds needed to carry out their indiscriminate attacks. In countries from Europe to the Far East, terrorists have been pursued, captured and brought to justice. Over 2600 suspected terrorists, for example, have been detained in 90 countries.
Much has been accomplished. Much more remains to be done. Any nation that ignores the threat of international terrorism does so at its peril. The recent attacks in Bali, against a French tanker in the Gulf and against US forces in Kuwait leave no doubt that Al Qaeda is alive and active not just against the US, but against all those who cherish freedom and democracy. The threat is real and it is transnational. It is defuse. It is insidious. None of us can combat it alone. We must cooperate. To prevail, we must go after not only the terrorists themselves but also the regimes that harbor them.
The world has definitely changed since September 11. This is not a figure of speech. The connection between terrorists and weapons of mass destruction has moved terrorism to a new threat level. Al Qaeda's efforts to acquire nuclear, chemical and biological weapons should be a wake-up call for all. We cannot permit rogue regimes to acquire weapons of mass destruction, much less allow them to supply such weapons to terrorists. That is why the US believes the time has come for the UN to say to Saddam Hussein: No more deception, no more defiance, no more games. The international community must insist on Iraq’s full compliance with UN Security Council Resolutions, including new, strengthened requirements for complete, unfettered access for UN weapons inspectors. Saddam Hussein must understand that his failure to comply will bring down on him the ultimate sanction of the international community.
Cyprus has been a valuable partner in the international effort to combat terrorism. Its geographic position and regional links make it an especially important member of the international coalition. The Government of Cyprus has risen to the occasion. We have enjoyed its strong support on a multitude of levels: from upgrading the physical security and police presence around Embassy facilities; to improved security measures at ports and airports; tighter Customs controls; and cooperation from the Attorney General and the Central Bank on stemming the financing of terrorism. We deeply appreciate this level of commitment, just as we look to strengthen our cooperation even further. The nature of the threat leaves no room for less than an all-out effort.
Business has a strong interest in the success of this campaign to combat terrorism, even if counter-terrorism measures entail higher transaction costs. No bank wants its international credibility undermined by the discovery of assets on its books used to finance terror. No port wants to face the catastrophic disruption to trade that would result if a container with weapons of mass destruction slipped through its controls. Airline security and immigration controls can be a drag on tourism, but, as we’ve seen, a terrorist incident that destroys confidence entails far greater costs. Over time, I believe, we will strike a balance between effective prevention of terrorism and business efficiency through the introduction of new technologies and improved international information sharing.
In addition, we in the Embassy are interested in improving our cooperation with American businesses on security matters. We have begun to discuss with the leadership of CyABA and others the establishment of a country council in Nicosia of the Overseas Security Advisory Council (OSAC). OSAC, headquartered in the U.S., provides a vehicle for greater cooperation on practical security matters between the State Department and overseas American business in more than 30 countries around the world. So if you are interested in such an initiative, please let me or the Embassy’s Regional Security Officer, Chris Schurman, know.
Third Priority: Law Enforcement Cooperation
Like terrorism, crime is a transnational threat with the potential to undermine economies and destroy institutions that govern our daily lives and international relationships. That is why law enforcement cooperation is another focal point for Embassy efforts.
Cyprus has long been an important regional banking center. As it prepares for EU membership, Cyprus is also modernizing its tax, insurance and securities laws to compete regionally in the full range of financial services. The same competitive advantages that make Cyprus attractive as a regional banking center may also attract financial crime. As recent stock market scandals have shown, those financial crimes may well involve related companies operating in both our countries under cross-ownership arrangements. Law enforcement cooperation is a critical element of any successful prosecution of international financial fraud.
Fortunately, the Government of Cyprus has undertaken several steps in recent years to raise its guard against financial crimes, especially international money laundering. A prime example is Cyprus' adoption of international standard anti-money laundering legislation. Cyprus has an active financial intelligence unit, which you know as MOKAS. MOKAS cooperates closely with leading international bodies and has an especially close working relationship with our own Financial Crimes Enforcement Network.
Cyprus has the tools in place. The next step is to strengthen enforcement with more dedicated resources. Here I speak from experience. While our own anti-money laundering legislation had its roots in the Bank Secrecy Act of the 1970's, it was not until after several high profile prosecutions in the early 80's that banks and financial intermediaries began to take compliance seriously. I intend to continue our close cooperation with MOKAS and the Central Bank aimed at detecting and eliminating money laundering. Full cooperation from the business community is obviously a requirement for success as well.
Our ability to cooperate was significantly enhanced last month by the entry into force of the Mutual Legal Assistance Treaty. The treaty is an important new tool for bilateral cooperation to combat money laundering, terrorism and other crimes. By formalizing and regularizing the channels of official cooperation, it improves the effectiveness of legal authorities in investigating, prosecuting, and preventing crime.
Law enforcement cooperation is also important for protecting intellectual property rights (IPR). Diversifying the economy away from tourism and towards a knowledge-based, information economy is a key part of the Government of Cyprus' long-term strategy for development. And in a knowledge-based economy, strong IPR protection is critical to protecting local entrepreneurs. The Business Software Alliance estimates that 61% of the software used in Cyprus last year was pirated. That's 50% higher than the European average of 40%. We have heard from many of you and your colleagues about similar piracy rates for audio and video materials and merchandise trademarks.
Cyprus has a big stake in the battle against piracy -- intellectual capital is one of Cyprus' strengths. Piracy costs you sales. It costs the government tax revenue -- VAT losses alone are estimated at 1.8 million pounds in 2000. It undermines Cyprus' ability to compete for high-tech investment and it discourages your best and brightest from creating and marketing here in Cyprus new intellectual property -- software, textbooks, music. Here too, enforcement is key to successful IPR protection. A number of years ago, Hong Kong, where I served for the past three years, was notorious for IPR piracy. Then the government got serious about strengthening and enforcing its laws. Suddenly, significant fines and jail terms became the norm. Pirates got the message. Piracy rates plummeted and Hong Kong is now a model for a successful effort to protect IPR. We stand ready to cooperate with Cyprus to improve enforcement of its well-developed IPR protection laws.
Fourth Priority: Strong Commercial Relations
I have saved the best for last. My final priority is to enhance commercial relations between our two countries, in harmony with Cyprus' EU accession. Cyprus and the US already enjoy excellent commercial relations. Many of you can attest to that from personal experience. The US was the number one exporter to Cyprus last year -- nearly $370 million in exports. US brands, like Kellogg's, Athletes Foot, Nike and McDonalds are well represented on the island. US services also abound. US firms have expressed interest in or are bidding on government tenders worth over $2 billion. Next year, Eurocypria will take delivery of new Boeing 737s.
Even in the two brief months I have been in Cyprus, we have scheduled meetings with a steady flow of American business representatives from world-class companies such as Bechtel, Bell, Boeing, Pfizer, Raytheon, and Sikorsky.
All of these different relationships reinforce the economic bonds between our two countries. CyABA is a valuable ally in helping these ties grow stronger. By promoting Cyprus-U.S. commercial relations, CyABA helps expand Cyprus' horizons further.
In harmony with Cyprus' EU accession -- that is a key phrase. Cyprus' EU accession has the potential to enhance our relationship even further. Together the US and the EU represent 50% of the global economy. Trade and investment flows between us total some $1.4 trillion annually. As an EU member, Cyprus can leverage that relationship for its own benefit. US-EU negotiations cover a wide range of issues to facilitate two-way trade and investment. For example, we are working closely to establish mutual recognition of each other's regulatory and licensing standards on an industry specific basis to simplify the regulatory compliance burdens on businesses selling in both markets. EU harmonization itself sets predictable rules and standards that enhance the competitiveness of Cyprus and facilitate US-Cyprus trade and investment.
There is a potential downside to EU accession. EU rules sometimes raise new barriers to trade between the US and Cyprus. For example, Cyprus no longer buys US corn, despite its highly competitive price, because of EU restrictions on bioengineered foods. Many of you are spending substantial sums to manually apply Greek language labels to US brand products, or restricting your product line to US brands packaged for the Greek market, to meet EU labeling requirements. The result is higher prices and less consumer choice.
Clearly, Cyprus will be an important stakeholder in the US-EU commercial relationship. Issues like labeling and traceability requirements, Commission competency over investment and aviation agreements, even steel subsidies will now have a direct impact on Cyprus.
The United States looks forward to working with Cyprus, as it becomes an active participant in EU decisions. Many of your ministries in the future will see Embassy officers knocking on their doors to discuss a whole new agenda of issues. We have seen that even small countries play an important role in the full range of US-EU economic and commercial issues. There may well be opportunities for coalitions among other like-minded new members on issues of particular importance to Cyprus and the US. Together, we can ensure that Cyprus benefits from the vibrant and dynamic US-EU trade relationship.
Conclusion
The US and Cyprus have built a strong relationship. It is grounded on a foundation of peace, cooperation and economic development. It is multidimensional and shaped by many of the themes I mentioned at the outset. I hope to expand our relationship further, focusing especially on the four areas I have discussed with you tonight.
Cyprus, many say, is a small place. Yet already I have seen in Cyprus an energy, a richness of heritage and cultures, an economic vibrancy out of all proportion to its size. The next few years will bring momentous new changes to Cyprus. As business leaders, you know instinctively that change is not an enemy; it's an opportunity. You stand at the forefront of change, laying the economic cornerstone for peace on the island while capitalizing on the fruits of EU accession. I look forward to working with you to make those changes work for the benefit of our two countries and each one of us.
Thank you.
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