February 11, 2006
JS-4023

TREASURY SECRETARY JOHN W. SNOW
PREPARED STATEMENT FOLLOWING THE MEETING
OF THE G-8 FINANCE MINISTERS

Good afternoon.  We had an excellent meeting with G-8 Finance Ministers today, hosted for the first time by Russia and Minister Kudrin.  We also had the opportunity to have a working lunch meeting with President Putin.  I think we all benefited from the discussion that included a review of G-8 agenda.   The primary purpose of the meeting today was to set the financial agenda for the G-8 Leaders Summit.  Based on the thorough preparation by Minister Kudrin and his staff, I think the leaders of the G-8 countries will have a meaningful and productive meeting in July.

I appreciated the hospitality of our hosts this weekend and look forward to a successful Russian Presidency.

Our first concern is strengthening economic growth.  The U.S. economy continues to be a major driver of the global economy, with solid growth expected to continue in 2006.  I was able to report to the ministers that the U.S. unemployment rate fell to 4.7 percent, which returns us to pre-September 11 levels.  Inflation has been restrained despite pressure from high energy prices.  The budget deficit fell in the past fiscal year, but the U.S. recognizes that there is still much more hard work to be done to bring it down in the medium- to long-term.  The deficit will likely widen this fiscal year due to spending on hurricane recovery, but we are committed to meeting President Bush's goal of cutting the deficit in half to about 2% of GDP by the end of his term. I have every expectation that we will meet that goal.

The global economy remains strong and there are signs that the expansion will continue.  However, relative growth performance, especially among the larger economies, continues to be uneven.  More progress is needed to implement reform policies that will raise growth potential and promote high sustainable growth of the world economy.  All countries, including the United States, but also the countries of Europe, Japan, developing Asia and even the oil exporters, bear a responsibility to help effect global adjustment in a way that maximizes and sustains global growth.  I continue to emphasize to my colleagues the importance of this shared responsibility.

The positive outlook for the world economy makes this an opportune time to push for progress on trade liberalization.  The potential rise of protectionism represents the most significant risk to the global economy.   In our discussions, we saw clearly the need to obtain an ambitious outcome from the Doha Development Round by the end of 2006.  I welcomed progress made at the Hong Kong Ministerial meeting but recognize that further urgent efforts are necessary.  We need to make significant progress on market access in agriculture and industrial products.  In addition, if this round is to be truly development-focused, substantial progress on services is essential, since gains from services liberalization are estimated to be over four times greater than the gains from goods trade alone.  Financial services trade, in particular, is important because it acts as a link to increased economic growth and development.

I think this it's appropriate that Minister Kudrin is placing a heavy emphasis on energy security in these discussions because of the risk high energy prices pose for the global economy.  There are many sides to energy security, but, as Finance Ministers, we emphasized market-based solutions, transparency, and the institutional framework necessary to encourage a friendly investment climate in energy development and infrastructure.  Energy is a high priority issue for President Bush, and I had the opportunity to review his ambitious new Advanced Energy Initiative to increase clean-energy research at the U.S. Department of Energy. In developing countries the lack of energy access is a critical obstacle to development.

We were all pleased with the recent implementation of the G-8 debt agreement at the IMF.  As a result, 19 poor countries have received 100 percent irrevocable IMF debt cancellation.  Ministers had extensive discussions on the importance of moving ahead with implementation at the World Bank and the African Development Bank.  We noted the unprecedented commitment provided to ensure that the Bank's financial integrity remains unchanged – including specific commitments by G-8 Heads of State to provide additional contributions to offset foregone debt repayments on a dollar-for-dollar basis.  The G-8 ministers encouraged World Bank President Wolfowitz to seize upon the shareholder agreement reached during the Annual Meetings and bring forward an acceptable final package for approval in the very near future.

Ministers also discussed ways to address infectious diseases, which have a significant economic impact on developed and developing economies.  We continued our discussion of the concept of Advance Market Commitments (AMCs) for vaccines and agreed to continue to work toward developing a workable proposal.  We also discussed efforts currently underway to prevent the further spread of Avian influenza.  The spread of this virus has potentially severe human and economic impacts, and we agreed that every nation must take all necessary steps to help prevent a pandemic from occurring and to help mitigate its impact.

A key item on the agenda was fighting the financing of terrorism and illicit finance.  Under Russia's leadership, we committed to push forward implementation of the action plan adopted last year.  This means continuing to improve multilateral asset freezing systems and to enhance information sharing.  It also means enhancing our financial tools for taking multilateral action against illicit activity like weapons of mass destruction (WMD) networks.  The fight against AML/CFT is a global undertaking, and we support the IMF and WB's continued commitment to this effort as a regular part of their work.  It will be particularly important that the IMF's commitment not waiver as a result of its internal AML/CFT reorganization.