FROM THE OFFICE OF PUBLIC AFFAIRS

It is a great pleasure to be in Seattle and I appreciatethis opportunity to speak to you. You have a beautiful city, but, unfortunately, I am hereonly briefly: Later today I will fly to Hong Kong and then go on to Beijing.

The international financial community gathers in HongKong this weekend for meetings of the Group of Seven industrialized nations and of thegoverning bodies of the International Monetary Fund and the World Bank. After thosemeetings, as a I said a moment ago, I will travel to Beijing where I will meet with theChinese leadership just named at the Party Congress, to work to strengthen our economicrelationship with this most important nation.

It used to be that when Treasury Secretaries traveledabroad, they visited London, Paris, Bonn, or perhaps Tokyo. In my tenure as TreasurySecretary, my travels have included India, Brazil, the Philippines, Indonesia, Argentina,Vietnam, Ukraine and now, China, reflecting the dramatic change of the past couple ofdecades; today, our economic health is substantially and increasingly a function of thatof the rest of the world and the developing economies are enormously important to our owneconomy. Twenty years ago, the developing economies were viewed almost entirely asrecipients of foreign aid; now, they purchase more than 40 per cent of our exports ofgoods and services.

In Seattle, you have lived this new reality on a dailybasis, as a city that is thriving on the increased commerce between the United States andthe rest of the world, and a city focused on the dynamic Pacific Rim.

Today, the importance of U.S. leadership in fostering astronger, more prosperous global economy is greater than ever. That is why PresidentClinton has pursued a vigorous international economic strategy to advance U.S. nationalinterests by promoting global economic growth in developed and developing nations,strengthening international financial stability, and fostering economic integration andopen markets. The nations of the Asia Pacific region have been central to this strategy,as evidenced by President Clinton's re-energizing of APEC at Blake Island in 1993.

For a variety of reasons, including the internationaleconomic strategy, the powerful deficit reduction progress of 1993, and the increasedcompetitiveness of our private sector, the United States has had the strongest economyamong the industrialized nations for the past five years. And I believe that by continuingto pursue the policies of deficit reduction, investing in our people, and promoting openmarkets and global economic growth, we have a very good opportunity to sustain thesestrong conditions. However, we can not allow our current prosperity to create even amoment of complacency in the highly competitive and rapidly changing global economy, thatwould lull us into failing to meet our many challenges. One of the most important steps wecan take now is for Congress to grant the President the authority, known as fast track, tonegotiate new trade agreements with other countries under a procedure which provides foran expedited Congressional approval process. Countries will not negotiate agreements withus if those agreements are subsequently subject to the usual Congressional processes ofchange and amendments, as opposed to the simple up or down vote under the Fast Trackprocess.

Since entering office in 1993, the ClintonAdministration's efforts to open foreign markets to U.S. goods and services have played amajor role in our current favorable economic conditions. The next steps are to expandtrade further through strong multilateral agreements in the World Trade Organization andwith regional partners in Latin America and Asia.

Already, countries around the world are moving to expandtrade with each other. There is no question this is going to continue. The only questionis will we part of the process of market opening, or on the outside looking in. We mustmake sure US companies have a level playing field as markets around the world continue toopen their doors to trade.

Moreover, our effort to renew the President'straditional negotiating authority is about more than one trade agreement or set of tradeagreements. It is about U.S. leadership in the growing global economy. Congressionalenactment of fast track authority is, as you know, the subject of intense debate in theother Washington, but a favorable outcome is of the greatest importance to the people ofyour state, which is home to companies like Boeing and Microsoft, and to our country'slong term economic well being.

But our future prosperity depends not only on openingmarkets, but also on global growth, and this will be a key focus of my meetings in HongKong with our G-7 partners, as well as the IMFmeetings and the many bilateral meetingsthat I will have with leaders from Southeast Asia, Africa and other regions.

The G-7 alone account for roughly 50 percent of theworld's GDP, and growth in the G-7 has a great impact on the prospects for economicprosperity around the world. Looking at the G7, we have a strong interest in seeing Europeestablish a stronger recovery and effectively reduce unemployment -- and structural reformwill play a vital role in that. Obviously it takes much more than words from financeministers for economic growth to occur, but these meetings are important for encouragingpolicies for each of our governments that will foster growth.

In Japan, which chairs this G-7 meeting, Prime MinisterHashimoto established an objective early this year, which we welcomed, of encouraging astrong domestic demand led recovery, and avoiding a significant and sustained rise in theexternal surplus. It is important to Japan and the United States that Japan succeed inthese objectives. Recent developments have reinforced concern in financial markets aboutthe strength of domestic demand growth and the risks of significant sustained rise inJapan's trade surplus.

Our meetings with the International Monetary Fund andthe World Bank will focus on how best to strengthen international financial stability. Aswe have seen in recent months, the global economy, and the massive daily internationalflows of capital offer both opportunities and challenges. To make the most of theseopportunities and manage the risks requires efforts on two fronts. First, theinternational community must continue to improve safeguards against crises that are asmodern as the markets. Second, and most important, all nations must maintain strongmacroeconomic policies and develop and sustain a strong and open legal and financialinfrastructure.

Thailand experienced a serious currency crisis thissummer, and the effects reverberated through financial markets around the Southeast Asianregion. The international community has played an important role helping to move towardrestoring stability, by making substantial medium-term financing available to thegovernment conditioned on a strong policy program. We strongly supported the IMF'sprogram; as in the Mexico peso crisis of 1994, significant financial support, combinedwith an IMF-supported program of comprehensive reform, offered a step toward restoringconfidence -- and limiting contagion effects in other markets. Let me absolutely clear:the U.S. has a profound interest in the restoration of financial stability in Asia.Developing Asia accounted for more than one fifth of U.S. exports last year, and we nowexport more to Asia than Europe.

As we step in to counter financial crises, internationalaction must not be seen as an attempt to insulate countries from the consequences of badpolicy decisions. In fact, countries that have experienced these crises have paid a heavyeconomic price even as they have recovered with the aid of good policy and internationalfinancial support. Investors, too, should be subject to the discipline of risk and that isan issue not yet fully solved in these support programs. Global capital flows have been anenormous boon to growth in countries around the world, lifting millions of people out ofpoverty-- and this is especially true in the dynamic, rapidly industrializing countries ofEast Asia. The turbulence which can occur during a crisis should not cause us to seek toreverse the trend toward closer integration and greater openness in global financialmarkets, which is benefiting so many people around the globe. Instead, it should lead allof us to re-commit to the sound policies that create confidence and encourage steady flowof capital. The path to recovery lies in their continuing with the formula of soundmacroeconomic policies and open markets that has been so central to that region'ssuccess.

This is only one example of the international consensusthat has emerged in the past fifteen years over the best ingredients of macroeconomicpolicies needed for sustained economic growth. I can remember a time when in large partsof the world governments were committed to protectionism, state enterprise, and closedmarkets. Today, there is broad-based agreement on strong free market fundamentals such asopen markets, privatization, reduced deficits, and rule of law. Part of what we are goingdo in Hong Kong is to reinforce with our trading partners the importance of thatapproach.

Strong disclosure rules are also critical to confidence.In our meetings in Hong Kong with the IMF and the World Bank, the United States willpropose a new initiative to strengthen disclosure requirements to achieve greatertransparency in central banks balance sheets and transactions and in the underlyingconditions of the banking system, building on the US-led initiatives which was started inresponse to the Mexican crisis. Making these disclosures is often difficult in the shortrun, but it builds credibility in a nation's financial system and avoids much moredifficult problems in the long run.

Crises such as this one have underscored the need ofnational authorities to get ahead of the curve quickly in strengthening domestic financialsystems. The international community can help reinforce efforts by these countries tostrengthen their supervisory and regulatory systems, and we're involved in a majorinternational effort now to help them achieve this. As we've learned from our ownexperience, this is not easy. But it is necessary.

Our final objective on this trip is to strengthen tieswith the most populous nation on earth, China. My visit will be the first by anAdministration official to China after the conclusion of the 15th Party Congress which isnow under way and is an important step before President Clinton's meeting with PresidentJiang Zemin in October. We have a broad range of issues to discuss with the Chinese, andwe hope to make progress toward solving economic problems of joint interest as part of ourmaturing relationship.

We believe that a strong and steady relationship betweenthe world's biggest developed economy and largest emerging one is vital for the new globaleconomy of the 21st century, and in the interests of both the United States and China.

To promote both countries' interests, our economicagenda with China includes two important issues.

We have a strong stake in seeing China succeed in itseconomic reform process and its move to a more market oriented economy. This transitionposes strong challenges to the Chinese leadership, challenges which they recognize. Theseinclude: restructuring and privatizing state-owned enterprises, where very importantannouncements were made at the Party Congress a few days ago; reforming and strengtheningChina's financial system through stronger regulations and more competition so thatfinancial institutions operate on commercial principles; and creating a full set ofinstitutions for a modern economy, including a sound legal framework which promotes therule of law, and the free flow of information. Preserving and strengthening the conditionsthat made Hong Kong the engine of China's economic growth is also vital, and we will bediscussing this with Hong Kong officials.

Our second interest is to help speed the integration ofthe Chinese economy into the world economy. A major aspect of this is China's opening itsmarket to foreign goods and services, an opening that is a necessary element for China'sadmission into the WTO. A further aspect is the implementation and enforcement of existingagreements, such as the intellectual property rights agreement, which is so critical toindustries such as the computer industry and companies such as Microsoft. China would alsobenefit by opening itself more widely to foreign investment, allowing foreign firms tobring their expertise and capital to the Chinese market. Let me add that China has madesignificant strides in integration into the global economy; for example, by eliminatingrestrictions on current account transactions. We look forward to further progress,including through the liberalization of capital transactions.

Make no mistake: we have serious disagreements withChina on human rights, religious freedom, security issues, as well as economic issues, andwe will discuss all of these when I meet with the Chinese leadership. The question is whatis the best way to advance our interests and beliefs. We believe that the process ofengagement is the most likely means to make progress on all of the issues we have withChina.

Let me conclude with a final point. Perhaps the mostimportant purpose of this trip is to increase understanding between the United States andthe representatives of the nations with which I will be meeting. I have found in myexperience as Treasury Secretary that these types of meetings -- the G-7, the World Bankand IMF governing board, and bilateral meetings -- are extremely important asopportunities to build personal relationships, exchange points of view and betterunderstand the views of others. That, in turn, is enormously valuable for dealing withissues as they arise. This is time consuming, but in my view it is indispensably importantin the new global economy.

As I said earlier, our economic health is increasingly afunction of that of the rest of the world. That is why U.S. leadership, and buildingcommon ground with our trading partners is so important to our prosperity. This must becombined with sound policies at home -- fiscal discipline, investing in people and openmarkets -- and efforts to strengthen the global economy -- the strategy that has put us onthe right track. Now is the time to move forward with this effort, both by what we do athome, and by our leadership in the global economy. Thank you very much.