FROM THE OFFICE OF PUBLIC AFFAIRS

You're focussing on international economic issues, and in many respects the developments in that arena are becoming among the most important factors in economic life in the United States.

I want to talk today about American leadership with respect to the global economy, and in particular, the role you can play in that leadership.

We have a very difficult situation with respect to American leadership in the international economic arena. On the one hand, America's economic self-interest and our national security interests absolutely require us to be actively and energetically engaged internationally.

In fact, one of the things that has so struck me in the course of my three and one-half years in the administration is how in so many economic and national security issues, the only country in the world able to provide leadership is the United States, and if we don't act nothing will happen. On the other hand, very large numbers of Americans have experienced wage stagnation over the past 15 years, very large numbers feel greater job insecurity, and too often they blame the global economy and view the global economy not as a source of opportunity but a threat. You and I know that is absolutely the wrong perception.

I'm not going to deal in my remarks with domestic economic policy. But clearly part of the solution to negativism is to have economic conditions that restore the belief on the part of the vast preponderance of the American people that the economy will work for them, and that forward-looking international economic policies -- like trade and open markets -- will also work for them. I believe that achieving such conditions requires fiscal discipline, and within that context, heavy emphasis on education, training and technology, and then independently of the budget, pension and health care portability, and other reforms.

So one part of reversing the negative attitude about the global economy is a policy challenge. But there's also the challenge of explaining the importance of leadership and engagement in the global economy to Americans at a time when there are so many powerful voices of protectionism and economic isolationism.

Developing the constituency for American leadership and engagement is enormously in the interests of all Americans. You all know as well as anyone that we are now in a global economy and there can be no turning back. The Luddites couldn't stop the industrial age any more than isolationists will prevent increasing globalization. But the isolationists can make it extremely difficult to win the kind of public support and congressional support that forward-looking policies require. I can tell you having spent a great deal of time on the Hill, on broad array of economic issues, that they not only can but they are. NAFTA, GATT and the Mexico support packages are sound agreements and policies for this country. But most observers would tell you that today you couldn't get NAFTA through Congress. They'd tell you you couldn't get GATT through Congress. They'd tell you that the Mexico support program would likely be overridden in Congress today.

Let me just stop for a moment and say there is no question about the President's commitment to engagement and leadership in the international economy. He has taken action after action, very often against the current political winds. One clear example is NAFTA. Let me tell you a story that makes the same point in the context of another issue. I went into the Oval Office one Monday night in January of last year and told the President, "Mr. President, we believe that within two or three days, Mexico is likely to default, and that has enormous consequences for the United States, but the polls are running 80 percent against assisting Mexico." And his response was that we had to act because it's the right thing to do. Having said that, I can remember someone asking me what surprised me about serving in government. My answer was the difficulty getting a message across, even when you have access to the press the way one does at the top levels of government. I can tell you that the President has used the bully pulpit powerfully, and that is absolutely critical, but we need to have more.

Those who understand our nation's self-interest is at stake in fully engaging in the international economy and in exerting the leadership of the United States in the international economy must join together in creating the support amongst the public and Congress for the kinds of forward-looking international economic policies that are required for America to succeed in the global economy of the 21st Century.

I'd like to focus now on three specific areas of our international approach. First, trade. Second, the important role that promoting development in the developing and transitional economies can play in our future. And finally, I want to discuss how the administration is actively working to strengthen the international financial system.

On trade, the President has been for free markets, reducing trade barriers, and opening markets abroad -- as evidenced by NAFTA, GATT, and the financial services agreement with Japan. His record is clear and substantial.

Going forward, we have a powerful trade agenda. We're looking at developing free trade throughout this hemisphere by 2005, and that's something I spoke with my counterparts about at a hemispheric meeting of finance ministers two weeks ago in New Orleans. We're also looking at developing a free trade regime throughout Asia and the Pacific region by 2020. While obviously we need to maintain strong trade relations with Europe, we must fully energize our public and private sector focus on the rising importance of Asia. Our exports to the region are up 65 percent in five years. We now send one-third more across the Pacific than the Atlantic, and in about 15 years there are estimates that the Asian economy could be larger than ours and Europe's combined. As we work on the broader trade agreements, in the meantime we're working bilaterally and multilaterally wherever possible to facilitate trade. However, for us to be able to move forward requires public and congressional support.

The most immediate trade issue is China. The President has now extended MFN status for China. There may well be a vigorous congressional debate over this issue. And there are many issues we need to work through where there are significant differences with China. But let me add one more word about the importance to the United States of extending MFN. While we are on the Atlantic coast today, we also are very much an Pacific nation. I was in Kyoto about two months ago for a meeting of finance ministers from throughout Asia, and it was clear from my discussions with my counterparts that the outcome of MFN is central not only to our relationship with China, but to our position throughout the whole of east Asia.

Having said that, my second point is that it is enormously in our economic and national security interests to support development and reform in the developing and transitional economies. It is unpopular, but it is not charity. We do it through our bilateral aid, but we also do it very powerfully through the international financial institutions such as the World Bank, the regional development banks, and the International Monetary Fund. Our contributions are enormously leveraged because of the contributions of all other donors and the tremendous influence we have on the policies of these institutions. I can tell you from my own involvement, both here and in visits around the world, that the World Bank and the other institutions are vital in promoting the economic growth that creates greater markets for our goods, and that contributes to democracy and political stability which furthers our national security.

However, these institutions have no natural political constituency in the United States. And at a time when they are contributing so critically to our interests, they are also subject to enormous reductions in congressional funding. Those reductions in turn are threatening both our influence in the policies of the institutions, and even the very institutions themselves because as we reduce our funding, others will tend to do the same, and switch their foreign aid to a bilateral basis. Diminishing our support for these institutions greatly diminishes out ability to shape the future economies of developing and transitional economies in ways that will benefit all Americans.

Too often even those who are focussed on supporting trade and global engagement have not focussed on the need to extend that support to these absolutely vital institutions.

The final point I would make today is to highlight the substantial accomplishments in the past two years in strengthening the global financial markets against shock.

I recall two years ago at the G-7 Summit in Naples, President Clinton outlined a vision of making the international financial institutions more reflective of the times -- making them as modern as the markets is the phrase we've used. Then, a year later at the Halifax Summit, the President proposed a series of specific measures. And now, as we go to the Lyon Summit at the end of this month, the G-7 leaders will be able to report that almost all those measures have been put into place. I might add that the President's vision at Naples was somewhat prescient because about six months later the crisis arose in Mexico, and that crisis in turn served to focus global attention on the very real need for the kinds of measures that are now being put into place.

These are programs that I believe will be of immense importance in preventing international financial crises and, if they occur, providing an effective multilateral response. They haven't received very much public attention, but I believe over time they will be vastly more important to our economy, as opposed to what does make the headlines on a day-in, day-out basis.

This includes a new disclosure regime implemented by the IMF that has the potential for effects similar to the disclosure system that is at the heart of our regulatory structure in this country. It also includes a mechanism for providing greatly increased official multilateral resources if a crisis does occur. There are reforms to improve cooperation amongst regulators to follow the activities of international financial firms. In addition, there is an approach that promotes burden sharing with the private sector in the case of financial crises. And, there are reforms affecting the World Bank and the regional development banks.

Let me close with this thought. Fifty years ago this country rose to the challenge of the post-war era and created the institutions that have seen us through to this point. At that time, people of vision, successful and respected in their communities, recognized that was the right course and worked to create public and political support.

Today, that understanding is not fully shared by the American public or the Congress. Just as people in government and business rose to the challenge then to carry the message of involvement to the American public, something the President does now at each opportunity, it must be done on a broad scale now by all of us in government and, I believe, by all of you and those like you throughout the country who understand our stakes in international engagement.

We have much to gain from that engagement, and much more to lose by staying on the sidelines.

Thank you.