FROM THE OFFICE OF PUBLIC AFFAIRS

June 8, 2005
JS-2486

Prepared Remarks of Acting Under Secretary
for
International Affairs Randal K. Quarles
Press Conference: Pre-G8 Finance Ministers Meetings

Good morning. Secretary Snow will attend a meeting of Finance Ministers in London on Friday and Saturday to help prepare for the Gleneagles Summit.

Our primary focus in these discussions remains growth. The global expansion remains robust, yet there are challenges to be faced to sustain strong growth going forward.

The U.S. economy is on sound footing, and growth is strong. First quarter performance was robust at 3.5 percent. Solid gains in consumer expenditures, prompted by increased hiring and strong household net worth, have supported GDP growth. The labor market has improved substantially, with payroll jobs up 3.5 million in the last two years and the unemployment rate at its lowest level since September 2001. In sum, growth is well balanced, with expanding business and residential investment, and strong household demand each contributing.

America's economy is moving in the right direction. President Bush is committed to keeping the economy on the path of healthy growth. Fiscal consolidation is a top priority. Already, we are seeing progress. Increased hiring, growth in demand, and expanding profits have led to a sizable increase in tax revenue so far this fiscal year. As a result, the Federal budget balance is likely to come in well below the $427 billion that had been projected for fiscal year 2005. The Administration remains steadfast in its effort to create the conditions for strong growth well into the future by making the tax cuts permanent, reducing the burden of frivolous lawsuits, passing a national energy policy, and strengthening social security.

Japan's economy had a welcome rebound in the first quarter, although growth forecasts remain modest and deflation persists. Growth in Europe has been generally disappointing, and the outlook for domestic demand is weak.

As the Secretary has emphasized, global adjustment is a shared responsibility. The United States is doing its part by addressing the fiscal deficit. But our actions alone will not be sufficient to unwind global imbalances. Europe and Japan must continue to adopt and implement vigorous and necessary structural reforms to lay the foundation for vibrant growth.

During the course of the weekend, Secretary Snow and his colleagues will meet with Finance Ministers from key emerging market countries – India, Brazil, South Africa, and China. These countries represent an increasing share of the global economy and will play an ever larger role over time. They will bring important experience and perspectives to the discussion. The Secretary also looks forward to meeting bilaterally with a number of these Ministers.

I expect that development will be a key focus of discussions this weekend. The plight of the poorest countries is a high priority for all of us. The United States is keenly aware of the challenges faced by these countries, and we are actively engaged in supporting economic reform and promoting long-term growth in Africa and beyond. Through our Millennium Challenge Corporation, we have taken the lead in identifying and implementing more effective ways to provide development assistance. The MCC aims to assist countries that govern justly, invest in people, and encourage economic freedom – policies that are fundamental to achieving growth, catalyzing investment, and ensuring that foreign assistance has a real effect. Furthermore, through the President's Emergency Plan for AIDS Relief (PEPFAR), the United States is leading the international fight against the debilitating HIV/AIDS epidemic.

Helping low-income countries depends on ending the lend-and-forgive cycle, so that they can move into an era of sustainable debt. The Bush Administration has put forward a bold proposal to provide up to 100 percent relief on IDA and African Development Fund loans to the Heavily Indebted Poor countries. This plan also would include additional resources for low-income countries, which will both finance important new development projects and preserve the long-term financial strength of these international financial institutions. The removal of unsustainable external debt and the delivery of additional development resources will provide significant support for countries' efforts to reach the development goals of the Millennium Declaration.

Free trade is also fundamental to a vibrant world economy. Fully open financial services sectors can make important contributions for growth. I expect this is an issue that Secretary Snow will raise with other Ministers, with the goal of working together for an ambitious result at the Hong Kong WTO Ministerial. Similarly, the Secretary will likely also take notice of the role free trade can play in solidifying the gains in democracy, such as in the Administration's Middle East free trade agreements (e.g., Morocco, Bahrain) and DR-CAFTA, which is currently being considered by Congress. We will also address the importance of the financial services agenda with European finance ministries and key EU regulators in a trip to The Netherlands, Belgium, France and Germany immediately following our Ministers' meeting in London.

Let me close by drawing to your attention our ongoing work to combat terrorist financing. This will be another key item on the Ministers' agenda. I expect Ministers will review the progress made by Financial Experts to implement their Action Plan to strengthen the process of multilateral asset freezing, improve information sharing, and explore the possibility of broadening the application of new financial tools to disrupt serious crime. In regard to the latter, Secretary Snow will share with his colleagues the tools that we, in the United States, have available via Section 311 of the U.S. Patriot Act. These tools enable us to adopt a graduated approach, ranging from enhanced due diligence to the closure of correspondence accounts.

Thank you.