FROM THE OFFICE OF PUBLIC AFFAIRS

As President Clinton said yesterday, the Unites States has a vast stake in a prosperous, open, truly global world economy - and a special responsibility to work to create such a world. Today I would like to reflect briefly on key aspects of our engagement with the global economy that will be particularly important in the months and years to come.

But first, a few words about the broader context, and what is special about this new global economy.

Back in 1997, I had an experience that stayed with me. I was in a canoe, two hours outside Abidjan. Someone handed me a cell-phone - it was Secretary Robert Rubin. He had a question about the IRS budget. And no one thought anything of it. Just nine years earlier, I was in Chicago, in a car that had a phone, and it was a sufficiently novel event that I called my wife to tell her I was calling from a car, with a phone. Eight years from the backseat of a car in Chicago to a canoe two hours outside Abidjan. That says something about the changes that new technologies have brought.

The spread of market forces.

It cannot be an accident that Soviet-style communism, planning ministries in the developing world and large US corporations run by command and control all ran into a brick wall in the same decade and had to be restructured. Information technology probably has something to do with it. The breadth of opportunities in the world economy today probably has something to do with it. But it surely means a shift in the balance of economic advantage in favor of systems in

which economic power and opportunities are more decentralized, and in favor of incentive-based systems rather than the controls that worked in a previous era.

These two trends come together in the third and perhaps most spectacular aspect of the new global economy: the beginning of a global economy worthy of the name. When history books are written 200 years from now about the last two decades of the 20th century, I am convinced that the end of the Cold War will be the second story. The first story will be about the appearance of emerging markets - about economies where literally billions of live, moving toward the market and seeing rapid growth in incomes. For the first time in human history, living standards for huge populations have quadrupled or more in a single generation.

As the President made clear yesterday, the comparison of global experience after the first and second World Wars suggests the importance of international integration and of American leadership. These things are perhaps especially important at a moment when America's flexibility, diversity of population and capacity with technology all point to a crucial role for the United States that goes beyond American economic success or American economic power.

Perhaps the greatest contribution we can make to a global economy that realizes the potential that these developments hold out is to keep our own economy strong. And as the President said yesterday, a crucial element of building a strong domestic economy will be working to ensure that every American is included. Working Americans will not support a new global economy if they do not think it works for them.

At the same time, if global integration is to succeed, it has also to move forward. What does this require?

An underlying theme of the President's remarks yesterday was the need for a new paradigm for thinking about international trade and integration if the world is to move forward from the events in Seattle. The dominant post-war paradigm for trade negotiations might best be described as "reciprocal mercantilism", in which the national benefits of more open markets are measured by the effect on exports. One can debate whether this was the right model for that time. But it cannot be the right model for today.

Globally, our agenda today must be to make the case for imports in all our countries. And it must be to recognize that in an integrated world, trade cannot be divorced from other concerns. We need to promote free trade and serious global efforts with respect to common problems, even as we support every nation's right to chart its own course. As the President has said: "a legal framework of mutual responsibility and social safety is not destructive to the market; it is essential to its success." A crucial concomitant of any attempt at global integration through trade must be common agreements to make a global system work for people.

This is an ongoing national challenge for all of us, not a single battle that will be one or lost. But in the United States a number of upcoming decisions will provide important tests of our capacity to stay on the right track. One of these will be whether Congress votes to grant China Permanent Most Favored Nation (PMFN) status and essentially support its entry into the WTO. Another will be our capacity finally to pass the African Growth and Opportunity Act and the enhanced Caribbean Basin Initiative.

At a time when 99 percent of the world's labor force growth in the coming decades will take place in the developing world, and when the world as a whole is confronting so many economic and social challenges - it is crystal clear that a stable flow of capital from the industrial world to the developing world will be essential to a successfully integrated global economy.

In a new kind of global economy, we know that the lion's share of capital flows, to many developing countries, will be private capital flows. That motivated the President's call, at the Naples Summit, for a strong international financial architecture for a new century. And it must continue to motivate this broad-based global initiative going forward.

That means more transparency in the public and private sector, nationally and internationally. It means working to discourage national policies and weaknesses that can make countries more vulnerable to crises. It means developing more and more effective ways of resolving crises when they occur. And, not least, it means working for change at the International Monetary Fund to adapt it the needs of this new time.

Russia and other transition economies in the Former Soviet Union continue to face enormous difficulties and uncertainties as we enter this new century. Indeed, in a number of respects these countries are probably less far along the road, ten years after the fall of the Berlin Wall, than many Western European countries were ten years after World War II.

Going forward we must continue to recognize our enormous stake in these country's success, even as we face up to the limits on our capacity to bring it about. If we have learned anything from the events of recent years it is that countries shape their own destiny. As Secretary Albright knows well, the international community as a whole cannot want economic reform and growth in a country more than its own government and people do. At the same time, we also know that where the domestic commitment to change is present, international support can make a powerful difference.

Even in a world dominated by private sector capital there remains a crucial role for public sector efforts, particularly in the very poorest countries. One particularly vital aspect of this work this year is implementing the enhanced Highly Indebted Poor Countries Initiative and the new approach to the provision of international assistance to the poorest countries that is at its center.

It is good economics and good accounting to write off debts that will never be repaid. And it is good economics and good accounting to reduce debts when the effort to collect those debts creates such an overhang that you reduce the amount you will ultimately collect. It is equally a moral imperative to reduce this burden when interest payments on foreign debt in some of the poorest countries of the world are greater than spending on basic education - and a child is more likely to die before the age of 5 than to go to secondary school.

With the support of the United States and others, a strengthened debt relief initiative is now moving ahead in the context of a new, more poverty-focused and participatory framework for the provision of assistance - one that puts investing in people, and better governance in these countries at center stage. What will be critical will be ensuring full implementation so that the poorest will see rapid results, and working in the United States to ensure that our commitments can be fully funded.

The President highlighted yesterday the need for global efforts - public and private - to support the development of vaccines to eradicate mass killers such as AIDS, malaria and tuberculosis. Finding a cure to these diseases is one of the most cost-effective ways there is to improve the well being and productivity of the poorest countries. We have the technology to achieve it. All that is lacking is the commitment. In his State of the Union address and here in Davos, President Clinton made clear our commitment. What is important is that others follow.

This is only one example of a broader class of global public goods problems that we will increasingly confront at both a national and international level: from money laundering, to global warming, to developing the right framework for supporting the global growth of electronic commerce. The right solutions to these issues are truly global public goods - ones that will require global cooperative solutions.

It has been the American challenge to succeed as a non-imperialist, outward looking Continental nation. We did this in the post World War II period faced by a common threat. In democracies, fear often does the work of reason. And the global economic security issues I have discussed today have the importance, but perhaps not the immediate salience of an earlier age.

From this perspective, the greatest threats to our economic security may lie within our country - in the form of economic insecurity that leads some to reject global integration. This is tragic. Because a strongly integrated global economy provides the best, and the most cost-effective, forward defense of United States core interests that there is. A world of prospering, ever-more integrating nations is much more likely to be a world at peace; a world a which democracy flourishes; and a world that respects the things we care about, from environmental protection to the dignity of workers and all mankind.

Making this case more effectively to all our people will be crucial to our capacity to move forward. But the policies we put in place domestically will be equally important. If we compare our time to the postwar period of remarkable American internationalism, the absence of a single, major threat is one major difference. But that postwar period was also a time when opportunity and protection was being given to the American middle class. To a degree that historians have perhaps under-emphasized, the GI Bill of Rights was an integral part of the strategy behind the Marshall Plan - just as our interstate highway system was partly the result of an effort to marshal our Cold War defenses.

The benefits to the United States from international integration with the rest of the world are greater today than they have ever been. With so much to lose, the risks of disengagement are equally larger than they have ever been. In a democracy, these are choices that we as a people will make. And not only Americans but all of the world's people have a stake in our making the right ones. Thank you.