FROM THE OFFICE OF PUBLIC AFFAIRS

It is a pleasure to be with you this evening. Let me begin by thanking the National Foreign Trade Council for inviting me. Tonight I would like to speak with you about the importance for the economic well being of all nations, including the United States, of remaining open and engaged in the global economy, despite increased suggestions to do otherwise in response to the economic disruption over the last year and a half. And, I will also speak about the imperative to build and strengthen public support for that economic philosophy of openness and engagement, in the face of this increased opposition.

Let us first spend a moment on the crisis itself. The financial crisis of the last 18 months has often been referred to as in some ways the most significant financial crisis of the last 50 years. It has presented enormous challenges to the international community, and just as the problems that gave rise to the crisis took years to develop, re-establishing financial stability and growth in the affected nations will also take time and much effort. While interest rates have fallen and currencies strengthened in Korea and Thailand, nations that have taken ownership of reform, these nations still face enormous challenges ahead. And the nations that have failed take ownership of reform face severe difficulties.

More broadly, there have been a number of significant positive developments over the last few months. For example, the Japanese have passed important banking legislation to provide over $500 billion in public funds for its banking sector, though effective implementation of that legislation still lies ahead, the U.S. Congress approved funding for the International Monetary Fund, and there has been a greater emphasis by the developed nations on promoting their own growth.

In recent months, as a result of the massive disruptions that have occurred, voices around the globe opposed to globalization and open markets have grown louder. Recently a developing country finance minister who is committed to open markets told me of the greatly increased pressure in his country for restrictions on both trade inflows and capital outflows. And, in the G-7 industrialized countries we are seeing similar calls. In the United States, as our trade deficit rises as a result of declining exports to Asia and increasing imports, there are increased expressions of concern about the openness of our markets, despite our healthy economy, remarkably low unemployment, and rising wages.

During the 26 years I spent on Wall Street and the 6 years in the Administration, I witnessed great movement -- just as many of you have over this period -- toward a global consensus on market based policies and integration with the global economy as the best path toward prosperity. That consensus is now being more forcefully challenged. Having said that, I don't think there is any question that a market based system and global integration is the best avenue for prosperity. It has produced enormous benefits for vast numbers of people around the globe, even after taking into account the current crisis.

Many Asian nations -- like the Phillippines, Korea, Thailand, Singapore, and the list goes on and on -- have had twenty to thirty years of strong growth, lifting millions from poverty, in part by greater opening to the rest of the world for trade and investment. That notwithstanding, many people are suffering terribly as a result of this crisis, and it is imperative that the international community and the affected nations focus on strengthening social safety nets as a component of building a market based system. But developing nations around the globe have prospered by embracing the market system, engaging in trade, and attracting private sector capital -- and their long term economic growth depends on them continuing to do so.

Here in the United States, we, too, have greatly benefitted from the development of the global economy through expanded trade and investment with the rest of the world. Expanding exports is critically important to our nation's prosperity, but less widely recognized is that imports, too, contribute greatly to our economic well being. Americans, as consumers, benefit from the lower prices and wider choice which imports provide; American producers similarly benefit from lower costs and wider choice for inputs; and productivity is enhanced through greater competition. Moreover, trade is not a zero sum game. The whole world benefits when each country produces the goods and services where its comparative advantage is greatest.

The United States has over the last six years enjoyed its best economic conditions in a long, long time: strong growth, low inflation, unemployment now at 4-1/2 percent, and rising real wages at all income levels. There is no doubt in my view that our open markets have contributed substantially to these economic conditions, and, while not dispositive, it is interesting to compare our economic performance of the last six years with the economic performance of other industrialized nations that are less open. Trade restrictions result in higher prices and less efficiency.

But we must also recognize that trade, like technological development and all change, also produces dislocations, and it is essential to have strong programs to help those who are dislocated successfully re-enter the economy as rapidly as possible, both to minimize the human and economic costs and also to help sustain political support for open markets. We must also insist that trade not only be open but fair, to make the system work best for all nations. And, when this does not obtain, we must vigorously enforce our trade laws.

While the market system does offer the best path to economic well being for a nation, and the global economy, it is clear that the global financial crisis has provided far more political room for opposing voices. Against that backdrop, let me offer three suggestions for strengthening the market system and, strengthening public and political support for that system.

First, we must substantially improve the architecture of the international financial system to better prevent crises in the future, or better manage them when they do occur. That process began several years ago, and has greatly intensified since the current crisis began. However, many of these issues are extremely complex -- for example, how to accomplish appropriate private sector burden sharing when a crisis occurs -- and the thinking, the development of international consensus, and the implementation on the large host of issues involved will be going on for a long time to come.

Second, we must greatly broaden participation amongst the people in all of our nations in the benefits of the global economy. That is a complex subject unto itself, in both developing and industrial nations, and involves education and the other requisites for success in that global economy; appropriate social safety nets; workers rights; and the list goes on. But, this is not only the right thing to do economically, it is absolutely requisite to building and maintaining public support for open markets that the great preponderance of our people feel that the global economy works in their interest.

Third, and finally, we need to greatly increase understanding here at home of the importance of American leadership on the issues of the global economy to our economic well being, and of the importance of trade-exports and imports -- to our economic well being. Although the Congress finally approved IMF funding this fall, we are still the only major nation in arrears to the United Nations, and we lack fast track authority to negotiate new trade agreements, even though expanding trade is very much in our interest. After almost six years in government, I have become deeply concerned that public support for forward-looking international economic policies may be waning at a time when our country's economic, national security and geopolitical interests require just the opposite.

There needs to be a redoubled effort by 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 to our economy of trade, open markets, and leadership on issues like dealing with financial crisis abroad and promoting growth in developing nations. Unless there is broad public understanding of these matters, we risk moving backward, with potentially serious economic and national security consequences.

The National Foreign Trade Council, and its members, have been a strong and important voice in a number of debates related to international economics: approval of the IMF funding, the use of unilateral trade sanctions, and a host of other important international economic issues. But in the world today, your active participation has never been more needed -- as individuals, in the businesses and firms for which you work, and as an organization -- in developing public support for forward looking economic policy. The history of this century has clearly demonstrated the folly of our turning inward. Let us work together so that we do not turn inward, but instead realize the opportunities of the global economy to the benefit of all our people. Thank you very much.