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Assistant Secretary of Commerce Michael C. CamuÑez

Market Access and Compliance

APEC SME Ministerial: SME Working Group Luncheon
May 14, 2011
Big Sky, Montana

As prepared for delivery

INTRODUCTION

Thank you for your kind introduction, Lynn. Good afternoon SME delegates, members of the private sector and distinguished guests.  On behalf of the United States host delegation, I want to again welcome all of you to Big Sky.  It is a genuine privilege for the United States to be hosting APEC this year.  Our staff has worked very hard to meet your needs and to exceed your expectations.  We are honored to welcome you to one of the most beautiful parts of the United States, and I hope you will take full advantage of the beautiful setting that Big Sky offers.

Thank you all for being here today, and special thanks to AdvaMed for hosting this luncheon.  I want to especially recognize Chris White, AdvaMed’s Senior Vice President and General Counsel:  Chris, thank you for your leadership and partnership throughout this process.  In addition to being a generous host, AdvaMed is a global leader in the medical device sector, and a great partner of the Department of Commerce. I say that from firsthand experience. Beyond working with AdvaMed on market access issues worldwide, I recently had the pleasure of leading an AdvaMed delegation where I had the chance to spend time with several senior executives who help lead this sector.  I have a deep respect for the important role that AdvaMed plays in advancing the interests of the innovative companies it represents and the vast opportunity that the medical device industry offers for all of our economies.

WHY PROMOTING ETHICAL BUSINESS PRACTICES IN THE MEDICAL DEVICE SECTOR MAKES SENSE

I could not be more pleased that, collectively, we have chosen the medical device sector to pilot the development of industry-specific ethical guidelines in the APEC region. As you know well, this industry is one of the most innovative sectors in our economies—bringing life saving medical technology that delivers important health care to our citizens.  It is also an engine of innovation, helping our economies grow in diverse and dynamic ways, and that innovation is driven, in large part, by the majority of small businesses that comprise the sector.  Promoting ethical business practices in the medical device sector will yield, I believe, three important results: First, it will improve the quality of healthcare we provide to our people through the delivery of state-of-the-art, life saving technology; Second; it will encourage innovation in our economies, with spill-over benefits that go well beyond the sector itself; and third, it will promote SME growth.  Let me say just a brief word about each aspect of these benefits, because I think it’s important that we keep the work that we are doing in a proper perspective.

Medical devices are vital to providing high quality healthcare. The medical device industry provides fundamental resources for healthcare professionals worldwide, ranging from the basic tools of the trade used by primary care physicians in rural settings to the most advanced technology being deployed in research hospitals throughout the APEC region. The speed with which medical device companies innovate and introduce new and improved medical technology into the market is startling. And the consequences this innovation has for our peoples’ quality of life cannot be overstated. Thanks in part to the development of innovative medical devices, from 1998-2000, mortality declined by 14%, disability by 25% and hospital stays by 56%; there has also been an increase in overall life expectancy of 3.2 years. Enhancing competition and innovation in this sector will ensure that the meaningful improvement in our people’s health continues.

As we discussed yesterday, and as I will describe further in a moment, promoting ethical business practices in the medical device sector will ensure that valuable resources are not diverted to nonproductive ends but instead are made available to further innovation in the sector.  This is especially important in this particular sector, as rapid change through innovation is its defining characteristic. The rapid pace of innovation in the medical device sector will also promote innovation in our economies and ensure vibrant economic growth. This is true in large part because companies in the sector lead the way in investment in research and development.  R&D represents an impressive 12% of revenue on average, which is four times the average for manufacturers in other sectors.

But the growth and wellbeing of this nearly $220 billion global sector will yield more than just direct benefits like improved health. It will also have spillover effects on other sectors. In the United States, for example, each medical technology job generates an additional 1.5 jobs.
A final important benefit of focusing on this sector is that it is a sector that is dominated by SMEs, and it is precisely these SMEs who stand to benefit the most from the important work you are pursuing here in Big Sky.

ENCOURAGING OPEN AND TRANSPARENT BUSINESS ENVIRONMENTS THAT BENEFIT APEC SME’s

We are all here because we share a common goal: to create jobs and expand opportunity for our citizens. When we think about how best to do that, it is tempting to focus on the multinational corporations whose names we all know. But it is SMEs that, in many cases, make the real difference in people’s lives. SMEs are the engine of economic growth around the world. They have been and will continue to be a key driver in the global economic recovery. But they can only be a driver if they are able to operate and innovate in open and transparent business environments.

Today, we celebrate the decisive action we have collectively taken on behalf of SMEs to create business environments free from corruption. In drafting the “The Kuala Lumpur Principles” for the Medical Device Sector, we have demonstrated our ability to come together to collectively combat the corruption that threatens our SMEs and their ability to compete throughout the region. When adopted by our ministers, these principles—framed by the five basic tenets of integrity, independence, appropriateness, transparency and advancement—will represent an important step toward addressing one of the top barriers to trade facing SMEs in the APEC region. They will also significantly advance one of the key areas of emphasis for the APEC USA 2011 host year: strengthening regional economic integration and expanding trade.

THE COST OF CORRUPTION

I want to congratulate you all on advancing this important work, because in doing so you are taking on one of the most intractable and difficult issues that affects each of our member economies. For, as we all know, corruption is costly. According to the United Nations, corruption adds upwards of 10% to the cost of doing business in many parts of the world and adds as much as 25% to the cost of public procurement. We all bear these costs.

Companies bear these costs. A recent World Bank study indicates that companies who engaged in bribes to gain contracts did not realize benefit over the long term, but instead earned less than those companies that adhered to ethical practices and followed internal and external codes of conduct.

Governments bear these costs. When public officials engage in corrupt practices, trust between the private sector and government is broken. Public loss of confidence in government undermines all aspects of civil society.

And most importantly, SMEs disproportionately bear the costs of corruption.  As I mentioned yesterday, SMEs are disproportionately affected by bribe demands and other forms of illegal requests because they lack the bargaining power and influence to oppose such requests.  An estimated 25% of SME operating capital is lost to bribery, which is really a staggering statistic when you consider its implications.

If we do not redouble our efforts now, it is likely that these costs will increase. The global marketplace is growing increasingly competitive. In the past 10 years, world trade in goods and services has grown 180%, according to the International Monetary Fund. As companies fight for any competitive advantage, engaging in corrupt practices will only become more tantalizing.  Unless, that is, we do something about it.

COLLECTIVE RESPONSIBILITY REQUIRES COLLECTIVE ACTION

As you know, APEC member economies account for the majority of global trade. As leading world economies, it falls to us to take decisive action to address this challenge of corruption, or else we risk allowing it to undermine the legitimacy of international trade. None of us are free from fault and thus from responsibility. And of course, corruption is a challenge for all of our economies, the U.S. included.  Successfully addressing it requires action on the part of all of us, because it is a challenge bigger than any one of us.

As President Obama has observed: “What is required of us now is a new era of responsibility - a recognition . . . that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task”.

NEXT STEPS:  MAKING THE KL PRINCIPLES A REALITY

“The Kuala Lumpur Principles for Medical Device Sector Codes of Business Ethics” are a step in the right direction.  I want to give special recognition to Dato’ Hafsah Hashim, our distinguished SME Delegate from Malaysia, and her team for their leadership in bringing these principles to fruition.  Much work has gone into the development of the principles to ensure broad consensus and buy-in.  But the work is not done yet.  It now falls to all of us to make them meaningful. To do that, we first have to work collectively to ensure that they are adopted by the by the SME Ministers.

Personally, I am looking forward to serving as the head of the US delegation when the SME Ministers convene next week to consider and adopt these principles.  Second, we have to make sure that they are disseminated and utilized by industry throughout APEC economies, lest these become nothing more than words on a page. The United States stands ready to work with APEC and each of you to help ensure these principles are implemented throughout the region.  Third, we have to consider these principles as an important model and framework for replication in other sectors. I am pleased to see that work is going forward here in Big Sky on the development of ethical principles for the construction sector, and I understand that the SME Working Group members are in the midst of a robust discussion to select a third sector as well. Finally, I believe our ultimate goal should be movement towards the adoption by APEC economies of robust codes of ethics.

Friends, combating corruption is never easy. But in taking the first step on behalf of SMEs in APEC’s history you have shown courage, resolve and genuine leadership. And for that, we are grateful. Thank you to all of you who believe in this work. Thank you, again, to AdvaMed for your support. I am looking forward to working with all of you and your ministers to ensure that these principals are formally adopted as an important deliverable for APEC USA 2011 and that we continue on the path to eradicating corruption.