FROM THE OFFICE OF PUBLIC AFFAIRS

It is a pleasure to be here this evening with the men and women of our nation's armed forces, the Joint Chiefs of Staff and so many other distinguished guests. I am honored to accept this award from a group that is dedicated to preserving this famed aircraft carrier, which served our country so well for so long and is a proud symbol of our commitment to freedom. I am especially honored to be the first Treasury Secretary to receive this award. By honoring me, you honor President Clinton's entire national security and economic policy team, as well as the career men and women in the White House, the Treasury Department and throughout the government with whom I've had the privilege of working the past five years. Most importantly, you honor President Clinton, who, has brought to the new foreign policy challenges of today a deep understanding that the end of the Cold War does not diminish the importance of U.S. leadership for our national security and that the rise of the global economy means that the economic well-being of the United States depends on strong U.S. engagement on the international stage.

My presence here symbolizes how the nation's economic and national security interests are intertwined, a reflection of the rapid evolution of the global economy and global financial markets and the increased interdependence of the world. As Secretary Cohen said recently, "Security policy, very basically, cannot be separated from economic policy." For example, while the United States has key economic interests in Asia, we also have major strategic and security interests in the region and they are inter-related. On the Korean peninsula alone, we have thirty-seven thousand troops who have spent 45 years keeping the peace. History has shown that economic distress and financial instability can threaten political stability and security, so when we worked to restore financial stability in the region over the last several months, we were working to protect American economic and national security interests.

The emergence of the global economy and global financial markets have greatly increased this inter-relationship between our economic and national security interests and have created critical challenges to the United States that can only be met by spreading the benefits of the global economy and bolstering support for forward looking international policies.

Behind the growing connection between economic and national security interests is the rapid development of the global economy. Over the last twenty five years, vastly increased international flows of trade, capital, and information along with the development of new technologies, have all contributed to increased integration amongst the world's economies. Here in the United States, the percentage of our economy that accounts for trade has doubled in the last twenty-five years to 30 percent.

Perhaps the changes have been the greatest in developing countries. In 1996, about $250 billion in net private capital flowed to emerging markets -- compared to roughly $20 billion ten years ago. This has helped lift millions of people out of poverty in the developing world and turned these countries into important economic partners of the United States; for example, they now absorb more than 40 percent of our country's exports.

This new era of the global economy and global financial markets has brought tremendous benefits for U.S. workers, farmers and businesses. Millions of Americans owe their jobs directly or indirectly to trade, and all of us benefit through the lower prices and greater choice that international competition fosters. It is no exaggeration to say that our economic well-being is inextricably linked to the rest of the world.

To help our nation make the most of the opportunities in the global economy, President Clinton has pursued a coordinated international economic strategy with three basic components. First, is trade liberalization to create jobs and increase standards of living here at home. Second, is to promote growth in developing countries, especially in concert with the international financial institutions such as the World Bank and the International Monetary Fund. There is a relationship between financial stability and political stability and political pluralism and by helping these countries grow, we help foster the markets of tomorrow, promote political stability and protect our national security. Third, is to address financial instability when it occurs, again through the IMF, as in Mexico in 1995, and the current crisis in Asia, to protect and promote U.S. interests, and in the longer term, by developing an architecture of the international financial system that is as modern as the market.

Maintaining strong U.S. leadership on global issues is essential to our economic well-being and our national security and it follows on a proud tradition. U.S. leadership was critical to the fifty year movement toward freer trade begun following World War II. U.S. leadership was critical to the promotion of economic and political reform in developing economies over the same period. And more recently, U.S. leadership was critical in helping Mexico work its way out of financial crisis in 1995, just as it has been critical to the response to the Asian crisis over the last several months. Let me just note that in Asia, difficult times and many challenges lie ahead even in those countries where reform has taken hold, although in those countries where reform has taken hold there is a very good beginning to reestablishing financial stability. The key now is to sustain reform during the difficult period ahead. Our leadership during the Asian crisis, as in all such situations, is critically in our interest.

However, I am deeply concerned -- and I know the President shares this concern -- that public support for U.S. engagement in the world may be waning at a time when this country's economic, national security and geopolitical interests require just the opposite. We have all seen the signs over the past few years of a creeping tendency toward turning inward in America, and at times, even a rejection of the reality that what is happening in the rest of the world affects us. As I speak tonight, for example, the President lacks fast track trading authority to negotiate new trade agreements, and our trading partners are now moving forward with new agreements without us; we have failed to pay our arrears to the United Nations -- losing influence when we want to reform it; and we have failed so far to approve funding for the International Monetary Fund, at a time when a sufficiently funded IMF that can deal with potential crises is critical to our economic and national security interests.

This diminishing support reflects, in part, an erosion of the traditional bi-partisan base of support for international economic engagement in recent years, and, at the same time, a re-ignition of one historical strain in American thought, a rejection of the outside world. This has occurred for at least two reasons: anxiety brought by the rapidity of change in this era of the global economy and dramatic technological developments; and the end of the Cold War, wherein the foreign policy consensus lost its centerpiece -- the effort to contain Communist expansionism. With the disappearance of that powerful purpose, national security issues have become more complicated, and, questions concerning the importance of U.S. leadership have grown.

Consequently, a great task facing this country today is to rebuild public support for forward looking international policies. Our leadership in the world depends on it. Our economic well-being depends on it. Our national security depends on it.

Doing so requires meeting two basic challenges.

First is broadening participation in the benefits of the global economy. Global financial integration benefits the great majority of Americans, but one of the concerns often expressed -- and it is a concern that I share -- is that those who are well-equipped to compete in the global economy are doing better and better, and those who are not so well-equipped risk falling further and further behind. Moreover, the rapid changes of the global economy inevitably create not only great benefits for most, but dislocations for some.

The answer is not a futile effort to try to halt the incredible tide of globalization. Instead, the answer is to continue to strengthen a domestic counterpart to forward looking international economic policy, the promotion of the ability of all of our people to compete in the global economy, through education and training, special programs for those trapped in poverty as in our inner cities and distressed rural areas, health care, and the like.

The second critical challenge we face is to vastly improve the efforts of all of us -- public sector officials, the business community, foreign policy experts -- to communicate with the American public about the dynamics of the new global economy and the importance of U.S. leadership in the global economy to the economic well being and national security of the American people.

Unless there is broad based public understanding of the importance to U.S. interests of strong U.S. leadership in the global economy, we will fail to support the UN and we will lose our vote in the General Assembly at the end of this year; we will fail to support the IMF, and be more vulnerable to economic crises; and we will fail to pass fast track and stand by as the rest of the world moves forward and liberalizes trade, with us on the outside of the tent, rather than the inside. All of this has enormous consequences to our economic well-being and our national security.

The USS Intrepid is a testament to American leadership in the world. The need for carriers like this and for a strong defense is as great as ever, but our national security interests are evolving. In an interdependent world, leadership now requires an engagement in the issues of the global economy as well as traditional national security issues. But leadership must be grounded in public support. Making the most of the opportunities of the global economy, and minimizing the risks -- especially the risk that we will succumb to the temptation to withdraw from the world -- requires us all to work together to promote public support for our engagement in the world. Our success in meeting that challenge is critical to our country's economic well-being for the years and decades ahead. Thank you very much.