FROM THE OFFICE OF PUBLIC AFFAIRS

In less than a week, the President, Secretary Christopher and I leave for the G-7 leaders meeting in Lyon. Lyon offers a prism for seeing in a different way the enormous changes that have taken place over the past several years and are taking place that will profoundly affect the economic and national security future of our country.

First, we've had a sea-change improvement in our economy which is not only important in itself, but has dramatically increased our capacity to provide leadership in the world on international economic issues.

Second, the G-7 process has been re-energized and contributed significantly to America's ability to deal with what economic changes that some have described as the most significant since the industrial revolution.

Third, and finally, as America's economic prospects and security interests are increasingly bound-up in the success of the global economy, we must remain vigilant against those forces of isolation, protectionism and retreat which would pull us back from the world, diminish our credibility and leadership, and reverse the advances we have made in making our nation stronger economically.

This is a time of historic change in the world economy. Financial markets and trade have become globalized in ways and to degrees not imaginable fifteen or twenty years ago. There is a new economic consensus around the world in favor of market economies. People are striving for capitalism and democracy. Economies throughout Asia have emerged as powerhouses. Latin American economies are reforming and playing increasingly important roles. Technology is changing rapidly, and there are enormous practical advances in using technology.

In response to this time of historic change, the G-7 countries have led in reforming the international financial institutions to deal with risk in capital markets and to bring a new approach to development and reform. Moreover, the G-7 has rallied the world around a market-based economic structure and sound economic policies.

Let me be clear: the G-7 has been absolutely indispensable in advancing the long-term economic interests of the American people. We must remain fully engaged as leader in the G-7 process and in the international arena more generally.

It is worth focusing for a moment on the economic context in which the United States goes to Lyon. I can remember in years past that presidents went to summits and found their ability to exert leadership limited by our vast budget deficits and perceived unwillingness to address them, and because we had lost our competitive edge in a wide array of industries. Tokyo was this president's first summit. I was there and it was remarkable how different this all was. The President's deficit reduction program was on the threshold of being enacted by Congress and interest rates had reacted very favorably. The President was able to stand tall as a leader, and you could see the other leaders at the summit regarded him as the clear leader on economic issues.

Although many factors have contributed to our economic success in the past three and one-half years, in my view there is simply no argument that the President's leadership on deficit reduction has been the key and absolutely indispensable element.

To be sure, problems still remain. We need to do more to raise incomes and wages, though over the past year wage stagnation has started to reverse. We need to do more to improve and expand education. We need to do more to bring America's inner cities into the mainstream. And we must do these things as we complete the progress toward balancing the budget.

But today, in contrast to five years ago, America is back as the international economic power, healthy and strong. In many ways, the U.S. economy is, once again, the economy the world is looking at. In under four years, our economy has created nearly ten million new jobs. Unemployment has fallen to 5.6 percent from 7.3 percent three and one-half years ago. Inflation is near a 30-year low. We have enjoyed solid growth. Interest rates remain below the levels when the President first took office. And the deficit will have been cut in half and more than in half as a percentage of our economy by the end of this year.

Our situation looks even more favorable when you match our performance against that of our Summit partners. Our economy has created 7 times more jobs that all the other G-7 nations combined. Business investment in the United States grew 28 percent in real terms over the past three years while investment was falling in Japan and continental Europe. Our government sector budget deficit is the lowest among the G-7 in proportion to GDP.

Our progress putting our house in order and our strong economic performance has given President Clinton great credibility and leverage as we lead the world to policies that produce greater growth and security for all.

President Clinton has grasped the opportunities that the G-7 process provides to use the international fora strategically and comprehensively to advance America's economic interests. From the beginning of the Administration, the President understood that we could best realize our objectives if the G-7 process had the energy and credibility to address serious economic issues.

Through the G-7, there has been a major push on international trade to complete the Uruguay Round and to create the World Trade Organization. Through the G-7 we have led a major effort to mobilize conditioned support to spur reform in the former Soviet Union. In these areas, the G-7 has been successful.

The United States has also led through the G-7 to spearhead substantial changes in how the international financial institutions respond to the globalization of financial markets and in their approach to development and reform.

Recognizing the challenge of dealing with these issues, the President two years ago in Naples launched a fundamental re-examination of the roles and missions of our international financial institutions -- the World Bank, the regional development banks, the International Monetary Fund, and others.

At the Halifax Summit a year later, the G-7 endorsed a set of U.S. proposals in response to that mandate. We are now putting in place the broad elements of the strategy outlined in Halifax.

First, we have strengthened the international capacity to prevent future financial crises and to deal effectively with crises that occur.

The IMF has put in place a set of strong disclosure standards, which will help provide early warning of impending problems and allow governments and investors to react accordingly. I believe had this provision been in place at the time Mexico got in trouble, global investors and markets might well have stopped that situation way before it reached crisis levels.

The international regulatory community has agreed on ways to enhance regulatory cooperation, including an important initiative to provide a consistent approach to supervising activities of financial firms that operate across national boundaries.

We are working to strengthen banking systems in emerging markets to reduce one potential source of future crises.

We have reached agreement on a proposal to increase the resources available to the IMF in financial crises, building the General Agreements to Borrow, which raises a substantial share of the total from new participants.

And we have outlined specific proposals to change the way a future country debt crisis would be handled, with a view to putting more responsibility on market participants, that is, on private sector creditors, to prepare for and share the cost of problems.

Together, these changes will make the U.S. economy and the international financial system more resistant to crises, and they will help see that the United States does not bear a disproportionate share of the financial responsibility for dealing with crises.

Second, in addition to the proposals for strengthening the capital markets, we have made important progress in improving the effectiveness of the international financial institutions to promote development and economic reform. In the context of the global economy, the global financial markets and the new consensus for market economies, they will now be focussed on doing a better job in channeling assistance to the underpinnings for a successful market economy, including poverty alleviation, education, health and women's issues. In addition, they will also focus on dealing with post-conflict situations in areas such as Bosnia and the Middle East.

These accomplishments are critical to our economy and national security.

From Naples to Halifax, to Lyon and into the future, these actions mean the American economy will be less prone to shocks from crisis abroad. They mean that when there are crises, America does not assume a disproportionate share of the responsibility for responding. They mean that our national security is enhanced by economic growth and the greater likelihood of political stability. They mean more growth in the developing world and therefore more exports by the United States, which increases jobs and increases standards of living.

If I might expand for one moment on the economic significance of all this. More than 40 percent of our exports go into developing economies. More than a third of the real growth in our GDP in this decade is attributable to exports. In 1994, the United States sold $40 billion in goods to countries who have graduated from the International Development Association's economic reform programs. That same year, we sold more than $20 billion to countries currently in IDA programs.

Despite the critical contributions these institutions make to our economy and our national security, there is no domestic American constituency for them. They are not well appreciated by the public. They are opposed by the voices of isolationism and protectionism. They are not adequately funded by Congress. As a result we are falling further and further behind in our obligations, and our commitment to pay our obligations is being called into question. And that has the potential if not remedied to undermine our ability to lead in these institutions, to undermine the institutions themselves, and to more broadly undermine our ability to lead internationally. Great nations should not act this way.

There are polls that show some Americans believe we spend 15 percent of our budget on foreign assistance, when in truth the number is well under 1 percent. We spend less per capita -- sometimes two-thirds less --- than many developed nations. We are dead last among OECD nations in foreign aid as a percentage of GDP. Again, this is no way for a great nation to behave. And this is why the Clinton Administration has been and is committed to restoring the bipartisan coalition critical to international engagement.

In closing, over the past four years we have taken steps to greatly strengthen our economy, and a strong economy has given us great credibility in forums like the G-7. We have used the increased credibility to address changes in the global financial markets and focus the international financial institutions on new approaches to promoting development and reform to reflect the enormous changes in the world economy.

When the President and Secretary Christopher and I go to these international meetings -- from economic summits to our regional summits -- it is to continue the job of making our country economically strong and secure by strengthening the global economy. Over the long haul, the G-7 is making a difference not just for America but for the world as well.

If you look across the last half century, the American record is one to be proud of -- the Marshall Plan and the defeat of communism. That record is a great tribute to the generation that came before us. If we keep on the path I have described today and the President has pursued, this generation will not be put in the position of having to apologize to our children for failing to seize this opportunity to make the global economy work to the benefit of all Americans.

Thank you.