FROM THE OFFICE OF PUBLIC AFFAIRS

Since the beginning of the Administration, President Clinton has spoken often and forcefully about the importance of U.S. leadership in the world and in the global economy. He understands that now more than ever, the United States is inextricably linked to the rest of the world; that our economic success is a function of a healthy global economy; that we are affected by what happens in distant places on issues ranging from political instability to environmental degradation; and that the United States is truly the only nation in the world that can provide leadership in the global economy. With this understanding, we've had a coordinated strategy that has enabled us to advance our interests by promoting growth and reform in the global economy.

Opening markets and expanding trade have been a large and highly visible part of this effort. Passage of NAFTA, GATT and scores of other trade agreements has been an important result.

Yet beyond trade, there is another part to our strategy in the global economy. It receives far less attention but is absolutely vital to our interests. That is our effort to promote growth and reform in the developing world, particularly through instruments such as the development banks and the IMF.

Bringing developing countries into the economic mainstream raises living standards, promotes political stability, extends the reach of democratic institutions and ideals, and contributes directly to human dignity and promise. Many would argue that for these reasons alone America's enormous effort and support over the past fifty years have been justified and worthwhile -- and they are probably right. But economic growth and development abroad also increase markets for U.S. products and ideas and promote our own national security.

It is vital for all of us in the economic development business -- public officials, practitioners, legislators and investors -- to appreciate fully these crucial linkages. The developing world now absorbs about 42 percent of America's total exports. Between 1990 and 1995, exports to the developing countries surged 75 percent, twice as fast as exports to other industrialized countries. Developing Asia now accounts for nearly a quarter of world GDP, with imports growing at an average annual rate of percent. In 1995, U.S. exports to the 79 countries eligible for IDA funding from the World Bank totaled approximately $26 billion. During the same period, countries that have graduated from IDA funding imported roughly $60 billion worth of American goods and services.

Maintaining this progress, and extending the reach of free markets, democracy, and equitable prosperity, are therefore not some abstract policy objectives with little apparent connection to the lives of ordinary Americans. They are a real imperative, with concrete benefits for each of us here today as well as future generations, benefits in the form of jobs, profits, new companies, new markets and new ideas.

The international financial institutions have never been more central to this effort, nor more uniquely suited to the task at hand. The last half century of progress has been due to many things. But surely U.S. leadership has been a key factor; and surely these institutions have been--and remain--at the core of much that we have achieved. We need not look far to see the evidence of this leadership, and from that to conclude that America's continued leadership role in the multilateral system must remain a top priority.

Under U.S. intellectual and financial leadership, the international financial institutions have become the leading force for market-oriented policy reforms to create the conditions for private sector-led growth and development. Around the world, the institutions are promoting financial, legal and regulatory reforms to bring the power and opportunity of the market to ordinary people.

Multilateral bank environmental policies are widely acknowledged as state-of-the-art, bringing the most up to date practices to infrastructure investments worldwide. Information policies based on the presumption of disclosure, and the direct participation of affected people in project design and execution, is giving a voice to millions of people who effectively have never had one.

Each of the banks has conducted a top-to-bottom review of its structure, operations and policies. The result has been sweeping reorganization, budget and administrative reform, and major operational changes. The overall picture is one of institutions that recognize that challenges and expectations have changed dramatically and that are moving determinedly to change with them. Is the job finished? Far from it. But has real progress been made? Absolutely.

It has been my privilege as Treasury Secretary to visit multilateral bank projects in India, the Philippines, and Brazil.

I've seen these institutions working at the ground level. In the Philippines, I spoke with a woman who used a micro-enterprise loan through the Asian Bank to buy a taxi, enabling her to dramatically improve the life of her family. In India I visited a village that had learned through a World Bank program how to conserve water in a parched area, and, as a consequence, had dramatically improved its standard of living. Efforts such as these are not only having an enormous effect on those people. They are also enhancing political stability enormously, which is in our national security interest. We can replicate these successes across the developing and transitional world.

Africa, in particular, faces huge development challenges and must be the focus of intensified efforts.

There are those who say that the institutional reforms I referred to were long overdue, and they are right. But these reforms are now firmly in place, and they are directly shaping the institutions in new and fundamentally constructive ways.

U.S. leadership will remain vitally important in the years ahead. One priority, for example, is to continue to clarify the proper role of the state in the development process.

In far too many cases the real obstacles to development and prosperity are legal and regulatory barriers that permeate the economy and poor choices by governments that are not sufficiently accountable for their actions.

Looking ahead, there are other, even more fundamental ways for the institutions to contribute. For developing countries, just as for developed countries or corporations, budgets are an expression of a strategic vision. Fiscal choices give substance to strategic priorities.

When budgets provide three times more funding for loss making state enterprises than for primary health care, a basic choice has been made. When unnecessary military spending dwarfs spending for clean water or rural development, a basic choice has been made. And these choices are not only about today, or this fiscal year; they are about the future.

I believe very strongly that these are issues on which the international financial institutions must be directly engaged.

The International Monetary Fund and the World Bank must concern themselves with more than the quantity of public spending, though that surely is important. They must work on the central issue of the quality of fiscal choices.

In all of these areas, continued U.S. leadership will be critical. But to exercise this leadership it is vital that we meet our financial commitments to the institutions. We cannot continue as the only major nation in the world with large scale arrears to the World Bank, the Asian Bank, the Inter-American Bank and the Global Environment Facility.

The Clinton Administration, and I personally, are committed to working with the Congress to obtain the resources necessary to fund these key programs and institutions, particularly IDA, within the constraints of our balanced budget goals. I have spent an enormous amount of time personally going up to the Hill, to work with Congress toward these ends.

But frankly, it won't be easy. There is a growing resistance in this country, and elsewhere, to engagement in the global economy.

When we came forward with our Mexican support program, because it was in our economic and national security interest to do so, we nevertheless encountered vigorous Congressional opposition. There is great unease in the American public about American engagement in the global economy. There is a large segment of the public -- maybe not a majority, hopefully not a majority, but nevertheless, a large segment --that believes international financial institutions and trade agreements don't work in their interest. I believe that simply is not so.

But the burden is on us to show this, to build the domestic constituency necessary to maintain America's commitments to these programs. The imperative is there, the case for US leadership is clear, and long-term U.S. interests are on the line. In my view, if we all work together -- we in the Administration, you who understand these issues so well, and a new Congress -- it is doable.

We rose to the challenge before. After World War II, even though the American public was exhausted with international engagement, we did not turn inward -- and the result of that decision was prosperity in the United States and growth in many countries in the developing world.

Let us rise to the occasion again. Let us renew our commitment to the institutions that have served us, and the developing world so well. Let us remember one of the great lessons of the 20th century: withdrawal from international affairs cannot work. When we withdraw, we suffer; when we engage, we prosper.

I thank you and I look forward to working with all of you in the months ahead.