Clinton 1998-09-14 Remarks to Council on Foreign Relations

[Robert Weissman <rob@essential.org>]

Following are President Clinton's remarks yesterday alleging that passage
of IMF funding is crucial to continued U.S. prosperity. More interesting,
though, is his call for the IMF to tap its General Agreements to Borrow to
provide funds to Latin America if needed. This is an acknowledgement of a
crucial point of IMF critics: that the Fund has untapped sources of money
that put the lie to claims that its coffers are running dry.

Robert Weissman
Essential Information			|   Internet:	rob@essential.org


                            THE WHITE HOUSE

                     Office of the Press Secretary
                          (New York, New York)
________________________________________________________________________
For Immediate Release                                 September 14, 1998
 

                        REMARKS BY THE PRESIDENT
                  TO THE COUNCIL ON FOREIGN RELATIONS
                                       
                 Council on Foreign Relations Building
                           New York, New York


12:00 P.M. EDT

  
  THE PRESIDENT:  Thank you very much, Pete.  Hillary and I are
delighted to be here with you and Joan, and I'm glad to be joined by
Secretary Rubin and Jim Harmon, Gene Sperling, other members of our
team.  I'm glad to see Dick Holbrooke over here.  I hope, if we can
overcome the inertia of Congress, he will soon be a member of the team
again.  (Applause.)  And I thank David Rockefeller and Les Gelb and
others who welcomed us here today.

  The subject that I want to discuss -- let me just say one thing in
advance -- I'm going to give you my best thoughts.  We have been working
on this for three years at some level of intensity or another, going
back to the Naples G-7 meeting in the aftermath of the Mexican financial
crisis.  I have done everything I could do personally to reach out
across the country, and indeed across the world, for any new ideas from
any source.  I'm going to give you my best thinking today about what we
can do, but I want you to know that I'm here, and if I had my druthers,
this would be about a three-hour session where I'd give this talk and
then I would listen for the rest of the time.

  So I want to encourage you, if you think we're right, to support us.
But if you have any ideas, for goodness sake, share them, because I
agree with what Pete said: this is the biggest financial challenge
facing the world in a half-century.  And the United States has an
absolutely inescapable obligation to lead, and to lead in a way that's
consistent with our values and our obligation to see that what we're
doing helps lift the lives of ordinary people here at home and all
around the world.

  The Council on Foreign Relations has always stood for political and
economic freedom, since right after World War I.  And I think one of the
things that has impacted all of us, and it was implicit in what Pete
said, is that for the last decade the growth of freedom around the
world, with more than half the people in the world living under
governments of their own choosing, more than half the villages, the one
million villages in China now, even electing their own governments, and
this sweeping replacement of command and control economies by market
economies.  I think it seems to have happened so easily, so
effortlessly, so inexorably, that I think we think the trend is
inevitable and irreversible.

  But if you consider today's economic difficulties, disruptions, and
the plain old, deep, personal disappointments of now tens of millions of
people around the world, it is clear to me that there is now a stark
challenge not only to economic freedom, but, if unaddressed, a challenge
that could stem the rising tide of political liberty as well.

      Obviously we have profound interests here.  It is a great irony
that we are at a moment of unsurpassed economic strength at a time of
such turmoil in the world economy.  We, I think all of us in this room,
know that our future prosperity depends upon whether we can work with
others to restore confidence, manage change, stabilize the financial
system, and spur robust global growth.

      For most of the last 30 years, the United States and the rest of
the world has been preoccupied by inflation, for reasons that all of you
here know all too well -- and it was a good thing to be preoccupied
with.  Today the low and stable inflation we enjoy has been critical to
our economic health, and low inflation has also contributed to that of
many other nations as well.  But clearly the balance of risks has now
shifted, with a full quarter of the world's population living in
countries with declining economic growth or negative economic growth.

      Therefore, I believe the industrial world's chief priority today,
plainly, is to spur growth.  It seems to me there are six immediate
steps we should take to help contain the current financial turmoil
around the world, and then two longer-term projects in which we must be
involved.

      To take the immediate first, we must work with Japan, Europe, and
other nations to spur growth.  Second, we will expand our efforts to
enable viable businesses in Asia to emerge from crippling debt burdens
so they can once again contribute to growth and job creation.  Third,
we've asked the World Bank to double its support for the social safety
net in Asia to help people who are innocent victims of financial
turmoil.  Fourth, we'll urge the major industrial economies to stand
ready to use the $15 billion in IMF emergency funds to help stop the
financial contagion from spreading to Latin America and elsewhere.
Fifth, our Ex-Im Bank, under the leadership of Jim Harmon, will
intensify its efforts to generate economic activity in the developing
world immediately, in the next three months.  And sixth, Congress must
live up to its responsibility for continued prosperity by meeting our
obligations to the International Monetary Fund.

      Secretary Rubin has been working with his counterparts in the G-7
to get cooperative support for several of these measures.  I understand
Chairman Greenspan is also consulting with his counterparts on these
items as well.

      As we take these immediate steps, we also must intensify our
efforts to reform our trade and financial institutions so that they can
respond better to the challenges we now face and those we are likely to
face in the future.  We must build a stronger and more accountable
global trading system, pressing forward with market-opening initiatives,
but also advancing the protection of labor and environmental interests,
and doing more to ensure that trade helps the lives of ordinary citizens
across the globe.

      Above all, we must accelerate our efforts to reform the
international financial system.  Today I have asked Secretary Rubin and
Federal Reserve Board Chairman Greenspan to convene a major meeting of
their counterparts within the next 30 days to recommend ways to adapt
the international financial architecture to the 21st century.

      Over the past six years, our strategy at home of fiscal
discipline, investment in the skills of our people, and open trade has
worked for all Americans.  Unemployment at a 28-year low, inflation a
32-year low, wages rising at twice the rate of inflation after decades
of stagnation.  And on October 1st we'll have the first balanced budget
in 29 years.

      But the global economy brought a lot of that prosperity to us, and
now fast-moving currents have brought or aggravated problems in Russia
and Asia.  They threaten emerging economies from Latin America to South
Africa.  With a quarter of the world's population in declining growth,
we must recognize what Chairman Greenspan said the other day:  we cannot
forever be an oasis of prosperity.  Growth at home depends upon growth
abroad.  A full 30 percent of our growth, just since I became President,
has been due to our expanding positive involvement in the global
economy.
      
      That's why ordinary Americans should care if Asia or Russia or
South America is on solid economic footing.  These people are our
customers.  With one-third of the growth of our economy coming from
exports, much of it from emerging markets, we know that those markets
will falter as their economies flatten.  When the problem is widespread
and perceived to be moving in the wrong direction, we have seen that our
stock market can react, having a direct and immediate impact on the
wealth of the American people.
      
      These nations are also our competitors.  And under conditions of
decent equilibrium that is a very good thing, indeed.  But when their
currencies drop precipitously, the prices of their goods fall, they
could undercut the sales of our own goods here at home that are
otherwise profitable, dramatically increasing our trade deficit under
circumstances that could cause the American people to turn away from
open trade toward protectionism in a way that has terrific negative
consequences long-term for our global growth objectives.
      
      Finally, these nations are our friends, our allies and our
security partners.  Where economic turmoil plunges millions into sudden
poverty and disrupts and disorients the lives of ordinary people, the
risks of political and social instability and of a turn from democracy
clearly rise.  Just look at Russia.  Russia is facing an economic crisis
that threatens the extraordinary progress the Russian people have made
in just seven years, building a new society from the ground up.  The
ruble and the stock market have plummeted, banks are weak, tax
collections have slowed, the government has trouble paying its debts and
its salaries.
      
      Some Russians have become wealthy, but many, many more are
struggling to provide for their families.  I talked to some of them when
I was in Russia just a few days ago.

      Amid such political uncertainty and economic difficulty, some now
talk of abandoning the path of reform and returning to policies of the
past, even policies that have already failed.  At worst, adversity in
Russia could affect not only the Russian economy and prospects for our
economic cooperation -- at worst, it could have an impact on our
cooperation with Russia on nuclear disarmament, on fighting terrorism
and the spread of weapons of mass destruction, on standing together for
peace, from the Balkans to the Middle East.
      
      Now Russia has a new Prime Minister, Mr. Primakov, who's been in
office a grand total of four days.  He and President Yeltsin face one of
the great challenges of their time.  Never has there been a more
important moment to set a clear direction for the future, to affirm the
commitment of Russia to democracy and to free markets, and to take
decisive steps to stabilize the economy and restore investor confidence.
      
      But if Russia is willing to take these steps, we must do
everything we can to provide support to them.  Because again I say, as
long as ordinary people don't feel any benefits from this, in the end
it's going to be difficult to sustain the direction we think the world
should take.

      On the other hand, we need to be honest with Russia and everyone
else.  No nation, rich or poor, democratic or authoritarian, can escape
the fundamental economic imperatives of the global market.  No nation
can escape its discipline.  No nation can avoid its responsibility to do
its part.
      
      But since all economies are increasingly interdependent, fear and
uncertainty about the economy of one country can prompt investors to
pull money out of other countries thousands of miles away.  Markets work
best when they are driven neither by excessive inflows or outflows of
capital based on indiscriminate optimism or pessimism.
      
      Regardless of what changes in policies or institutions may be
warranted, we have to say we'll only be able to help those countries who
are willing to help themselves.  If a nation chooses to print money
indiscriminately, to wink at cronyism or corruption, to hide bad loans
and protect corrupt or inefficient banks, then investors, foreign and
domestic, sooner or later, will withdraw their investments, with
consequences both swift and severe.
      
      That is why we support the fundamental approach of the
International Monetary Fund to extend assistance only when nations have
taken responsibility, strengthening their banking systems, introducing
honest accounting and open markets, awarding credit on merit instead of
connections.
      
      Still, what has been done is clearly not enough to reverse the
decline in particular countries, to douse the flames of the
international financial crisis, to support steady and sustainable growth
in the future.  In the face of this new challenge, America can and must
continue to act and to lead to take the urgent steps needed today to
calm the financial crisis, restart the engine of growth in Asia, and
minimize the impact of financial turmoil on other nations, and to make
certain that for tomorrow the institutions and rules of international
finance and international trade are prepared to support steady and
sustainable growth over the long term.
      
      First and foremost, the leading economic nations must act together
to spur global growth.  Our strong and growing economy here has made a
major contribution to global growth, just as our weak economy was
holding the world back six years ago when I attended my first G-7
meeting in Tokyo and every other country said, the first thing they
needed was for America to put its economic house in order.  We did that.

      Now I believe strongly we must maintain our fiscal discipline.  It
has led to lower interest rates and a huge investment and job growth.
Maintaining economic growth is the best thing we can do right now, not
only for the United States but for the global economy.
      
      I would also remember that back in 1993 we had a general agreement
that what was needed was America should get rid of its deficit, Europe
should lower its interest rates, and Japan should open its markets.
There was this general agreement that if we did all those things, we
would have a remarkable resumption of growth.
      
      Europe did moderate its interest rates and the then prime minister
-- now the finance minister -- Mr. Miyazawa, oversaw a significant
market opening trade agreement between the United States and Japan,
which also benefited others, not just us.  And of course we got rid of
our deficit.  The results were quite satisfactory for several years for
us.
      
      Now Europe has to continue to pursue policies that will spur
growth and keep their markets open because they, too, must be able to
provide markets for Asian goods as those nations seek to find their
footing.  But the key here is Japan, for the second largest economy in
the world, by far the biggest economy in Asia, has now gone several
years without any economic growth.  Thank goodness, a lot of their
ordinary citizens have been able to maintain a decent life because of
the wealth of their country and probably because of the enormous
personal savings rate they have enjoyed for many, many years now.
      
      But it is difficult to see how any actions of the world community
can be successful in restoring growth in Asia in the absence of the
restoration of growth in Japan, which would enable Japan to lead the
region out of its present condition.  Therefore, we must support Japan
and do everything we can to help create the conditions in which,
together, we can all lead again, just as we did in 1993.

      Their challenges are quite formidable.  They have to spur domestic
demand, revive a banking system, restore confidence, deregulate the
economy, and open markets.  And we all know all the forces that seem to
be working against these developments in Japan.  But I would remind you
that this is a very strong, sophisticated nation full of people of
knowledge and enormous achievement.  It is fully capable of playing its
world leadership role.  I believe its business leaders right now know
what needs to be done and would support it.
      
      Next week I'm going to meet with Prime Minister Obuchi here in New
York to discuss how America can support Japan's efforts to restore
economic growth and investor confidence.  And I will do everything I can
to try to make sure that as we go forward, we have America, Europe, and
Japan all doing our part to get beyond this present moment, just as we
did back in 1993.
      
      The second step we should take is to intensify our efforts to
speed economic recovery in Asia.  When countries like South Korea and
Thailand have taken strong and responsible steps, the freefall has
ended, progress is being made.  But the human cost of Asia's collapse is
only now being fully felt.  Recent press reports have described an
entire generation working its way into the middle class over 25 years,
then being plummeted into poverty within a matter of months.  The
stories are heartbreaking -- doctors and nurses forced to live in the
lobby of a closed hospital; middle class families who own their own
homes, sent their children to college, traveled abroad, now living by
selling their possessions.
      
      It is in our interest to help these nations and these people
recover.  They will become once again our great markets and our great
partners.  It is also the right thing to do.  We've worked with
international lenders, like the IMF, to help these nations to adopt
pro-growth budget, tax, and monetary policies, but clearly we're going
to have to do more to restore Asian growth.  We must work to lift the
weight of private sector debt that has frozen the Asian economies.
      
      Today, I'm asking Secretary Rubin to work with other financial
authorities and international economic institutions to enhance efforts
to explore comprehensive plans to help Asian corporations emerge from
massive debt where individual firms have been swept under by systemic,
national economic problems, rather than their own errors.  We need to
get credit flowing again.  We need to get business back to making
products, producing services, creating jobs.
      
      Third, Asian businesses need assistance, but so do millions of
Asian families.  We must do more to establish an adequate social safety
net in recovering nations.  Wrenching economic transition without an
adequate social safety net can sacrifice lives in the name of economic
theory, and, I might add, can generate thereby so much resistance that
reform grinds to a halt.  If we want these countries to do tough things,
we have to protect the most defenseless people in the society and we
have to protect people who get hurt when they didn't do anything wrong.
I think that is terribly important.

      With our support, the World Bank and the Asian Development Bank
have started to deal with these challenges, but they have to expand
their efforts.  There is simply not enough being done.  I asked them to
double their aid through an expanded social compact initiative focusing
on job assistance, basic needs and economic transition, on children and
the elderly, on groups most vulnerable to economic change.  And I want
to commend Jim Wolfensohn for his efforts and his willingness to lead
this expanded initiative.  We have to be ready to respond immediately
with financial force if necessary, to the currency crisis, if it
spreads, especially if it threatens the economies of Latin America,
where nations have struggled to make progress to do the right thing,
only to find themselves buffeted by economic storms outside their
control.

      Therefore, the major economies should stand ready to activate the
$15 billion now in the emergency funds of the IMF, the general agreement
to borrow, to ensure that the IMF continues to support reform and fight
economic contagion.

      Fifth, our Export-Import Bank will increase its commitments to
specific economic development projects over the next three years --
three months -- projects which will have concrete benefits for ordinary
citizens in other countries, projects which will increase our own
exports and thereby help our economy, and ones which can help to restore
confidence in countries that they are not alone and that actual,
specific, positive developments can occur.

      Sixth, for the effort of the international community to succeed,
America simply must meet its own obligations to the International
Monetary Fund.  After a year of financial firefighting, the IMF's
resources are badly strained.  Every day we don't act, we undermine the
confidence the world badly needs that we are trying to restore.
Congress simply must assume its responsibility for our leadership in the
economy.

      In my State of the Union address, I said it was better to prepare
for a storm when the skies were clear than when the clouds were
overhead.  Well, eight months later, the clouds are closer, and you can
nearly hear the thunder.  Now, the Senate, by an overwhelming bipartisan
majority, has, thankfully, approved our obligation to fund our part of
the International Monetary Fund.  But with only five weeks left in this
congressional session, there is still no action from the House of
Representatives.

      Let me put this as plainly as I can: failure by this Congress to
pay our dues to the IMF will put our own prosperity at risk.  Failure to
act will send a sharp signal that at a time of economic challenge, our
lawmakers were unwilling to protect our workers, our businesses, our
farmers from the risks of global economic change, and unwilling to
maintain our leadership in building a global economy system that has
benefited us more than any other nation.

      Concerted action to spur growth, helping Asia through private
sector debt restructuring, and a strengthened social safety net, helping
to protect the rest of the world through the use of the IMF's emergency
fund, increasing the activity of the Ex-Im Bank, and meeting our own
obligations to the IMF -- these are the six immediate steps we want to
take.

      But we must also be willing to take action for the long run -- to
modify the financial and trading institutions of the world to match the
realities of the new economy they serve.  By creating the WTO, the World
Trading Organization, in 1994, we began to build a modern trading
system.  We must redouble our efforts to tear down barriers around the
world.  But as I said in Geneva last May, we must do more to ensure that
spirited economic competition among nations never becomes a race to the
bottom -- in environmental protection, consumer protection, or labor
standards.

      We are working to open the procedures of the WTO to participation
by the public and the full range of affected interests, so that people
will know and see and be able to do for themselves things which will
ensure that the trading system makes the world better for all the people
in all the countries.

      We've already completed 260 trade agreements, opening markets in
areas from autos to telecommunications.  Next year we will host the
meeting of the world's trade ministers to set the agenda for expanded
trade in the first decade in the new century.

      History teaches us that at a time of worldwide difficulty, it
would be folly to retreat into a protectionist shell.  We must keep
trade flowing among nations, but I will say again, if we want to do
that, we have got to give ordinary citizens and the groups that
represent them in countries all over the world the sense that it is
going to be done in a fair way, consistent with nations' obligations to
advance the interests of their working people and protect not only their
national, but the global environment.

      This November, when I meet with the leaders of the Asian economies
at the APEC meeting, we will move forward to further open markets in
Asia.  And when Congress returns next year, I will work to pass
legislation to open markets further --from trade negotiating powers to
the African Trade Initiative.  I will do so in a way that I believe will
win broad support from a majority of both parties.

      From the G-7 meeting in Halifax in 1995 in the wake of the Mexican
financial crisis, to the Birmingham meeting this year, we have been
working, also, with our major economic partners to plan for new
financial architecture for the 21st century.

      For the first time, this year we included key emerging markets in
the process in a new Group of 22, recognizing their important stake in
the global economy.  This group has been working together for nearly a
year now to improve the global financial assistance with a special focus
on improving financial sectors, on transparency, and on private sector
burden sharing.

      I just want to emphasize again that even as we respond to the
urgent alarms of the moment, we must speed the pace of this systemic
work as well.  That is why I have asked Secretary Rubin and Chairman
Greenspan to convene the finance ministers and central bankers of the
G-7 and key emerging economies in Washington within 30 days to develop a
preliminary report to the heads of state by the beginning of next year
on strengthening the world financial system.

      We must develop policies so that countries can reap the benefits
of free-flowing capital in a way that is safe and sustainable.  We must
adapt the IMF so that it can more effectively confront the new types of
financial crises, minimizing their frequency, severity, and human cost.
We need to consider ways to extend emergency financing when countries
are battling crises of confidence due to world financial distress as
distinct from their own errors in policy.  We must find ways to tap the
energy of global markets without sentencing the world to a cycle of
continued extreme crises.

      For half a century now in our national economy, we have learned
not to eliminate but to tame and limit the swings of boom and bust.  In
the 21st century, we have to find a way to do that in the global economy
as well.
      
      I've discussed this in recent days with Prime Minister Blair of
Great Britain, who is now the Chair of the G-7.  He shares my belief
that this is an urgent task.  It is critical to the mission that he and
I and Prime Minister Prodi of Italy will be discussing next week at the
New York University Law School in a very interesting meeting that the
First Lady and others in our administration helped to organize on how to
extend the benefits of the world economy to all and how to strengthen
democracy in a time of such sweeping economic change.
      
      Now, let me just say it all again very briefly: in short, we must
improve our ability to address the current financial emergency, and we
must build a system to prevent such future emergencies, whenever
possible, and to blunt their impact when they do occur.  There is no
mission more critical to our own strength and security.
      
      And let me say this again, what is at stake is more than the
spread of free markets and their integration into the global economy.
The forces behind the global economy are also those that deepen
democratic liberties: the free flow of ideas and information, open
borders and easy travel, the rule of law, fair and even-handed
enforcement, protection for consumers, a skilled and educated work
force.
      
      Each of these things matters not only to the wealth of nations but
to the health of freedom.  If citizens tire of waiting for democracy and
free markets to deliver a better life for them, there is a real risk
that democracy and free markets, instead of continuing to thrive
together, will begin to shrivel together.  This would pose great risks
not only for our economic interests but for our security.
      
      We see around the world the international aggressors, the
harborers of terrorists, the drug lords.  Who are these countries?
They're authoritarian nations without democracy and without open
markets.  Nations that give their people freedom are good neighbors;
when nations turn away from freedom, they turn inward toward tension,
hatred, and hostility.
      
      We now have a chance to create opportunity on a worldwide scale.
The difficulties of the moment should not obscure us to the advances of
the last several years.  We clearly have it within our means, if we do
the right things, to lift billions and billions of people around the
world into a global middle class and into participation in global
democracy and genuine efforts toward peace and reconciliation.  That is
a possibility, but recent events show it is not a certainty.

      At this moment, therefore, the United States is called upon once
again to lead -- to organize the forces of a committed world; to channel
the unruly energies of the global economy into positive avenues; to
advance our interests, reinforce our values, enhance our security.
      
      In this room, I think it is not too simple to say we know what to
do.  The World War II generation did it for us 50 years ago.  Now, it is
time for us to rise to our responsibility, as America has called upon to
do so often so many times in the past.  We can, if we do that, redeem
the promise of the global economy and strengthen our own nation for a
new century.

      Thank you very much.  (Applause.)
      

            END                        12:34 P.M. EDT