We discuss type I -- heterotic duality in four-dimensional models obtained asa Coulomb phase of the six-dimensional U(16) orientifold model compactified onT^2 with arbitrary SU(16) Wilson lines. We show that Kahler potentials, gaugethreshold corrections and the infinite tower of higher derivative F-terms agreein the limit that corresponds to weak coupling, large T^2 heteroticcompactifications. On the type I side, all these quantities are completelydetermined by the spectrum of N=2 BPS states that originate from D=6 masslesssuperstring modes.