THE WHITE HOUSE
Office of the Press Secretary
|For Immediate Release|| ||June 21, 1997|
SECRETARY OF THE TREASURY ROBERT RUBIN
The Convention Center
4:41 P.M. MDT
SECRETARY RUBIN: Good afternoon, I'm Bob Rubin,United States Secretary of the Treasury. And I'll be joined inabout four or five minutes by Dan Tarullo who, as you know, isthe United States sherpa and was in the leaders meetings. WhatI'd like to do is to say a few words about the meetings today andabout the G-7 statement, and then we'll open it up for questions.
The G-7 leaders had very successful meetings today,discussing with our partners core economic issues that will helpfoster a stronger, healthier global economy and, by so doing,also very much contribute to the economic well-being of theUnited States. The United States is speaking at this summit froma position of solid credibility on economic issues as aconsequence of the economic conditions of the last five years,which have been the best in this country in many decades.
Now, at Denver, under President Clinton'sleadership, the G-7 leaders have reached agreement on a series ofproposals to help accomplish three major economic objectives: one, to promote growth in the G-7 industrial nations; two, toenhance global financial stability; and, three, to promote growthand economic reform in the developing and transitional nations.
To promote growth in the G-7 industrial nations, theleaders called for strong macroeconomic policies, increased tradeliberalization, structural reform to increase jobs -- a matterthat was discussed at great length at the finance ministersmeeting -- steps to equip the least skilled in all of ourcountries to join the economic mainstream, and completion of agood WTO financial services agreement by year end.
To promote global financial stability the leadersendorsed a report of the G-7 ministers laying out a plan forgreater cooperation amongst the supervisors of the globalfinancial institutions that operate across international bordersand a plan to improve financial regulations with respect toemerging countries' financial systems.
The leaders' final objective is to promote growthand economic reform in developing and transitioning economies, agroup of nations which account for roughly 42 percent of UnitedStates exports. In that regard, the leaders agreed on a series of actions to fight corruption which is a major impediment toeconomic growth in developing and transitional nations.
The leaders urged all -- all -- of the OECD nationsto fulfill their OECD commitments to criminalize bribery offoreign officials and to eliminate the tax deductibility ofbribes. The leaders also agreed to increase the efforts of afinancial action task force to fight money laundering and calledon the international financial institutions to expand theirrecently increased activities with respect to combattingcorruption.
In keeping with the initiative announced by thePresident this week, the leaders also urged a new emphasis ontrade and investment in Sub-Saharan Africa, including bothbilateral action and increased emphasis by the internationalfinancial institutions on supporting the nations that havethemselves undertaken reform programs and opened their economies.
Let me conclude by emphasizing how important the G-7meetings are to the economic well-being of all the nationsinvolved, very much including our country. With millions ofAmericans working in jobs that are directly and indirectlyaffected by trade, and all Americans in their capacity asconsumers benefiting from trade, our economic success is verymuch affected by the economic health of the global economy. Fostering a healthy global economy in turn requires the largestindustrial nations to work together to address critical economicissues of the global economy.
The meetings taking place this weekend in Denver arean important step in the effort to promote global economicstrength and to benefit the citizens of our nations, but also ofall the nations of the world.
With that, I would be delighted to take questions. And then when Dan Tarullo joins me, he will be glad to join me intaking questions.
Any questions? Yes, sir.
Q You had said that there was a good or a livelydiscussion among the finance ministers about structural change. Can you give us a little bit more flavor of that discussion andsome of the disagreements between the U.S. and the Europeans onthat?
SECRETARY RUBIN: Yes. I don't think there weredisagreements so much between -- in fact, there weren't --between the United States and the Europeans. It was actually avery interesting discussion. It occurred in the context of whatdo the nations of the G-7 need to do if they're going to grow inthe years and decades ahead. And there was a broad-based feelingamongst the Europeans that greater flexibility with respect tolabor markets, removing disincentives to work, and matters ofthat sort were central to competitiveness.
And then the question was, what kinds of changeswould you make and how would you go about doing it and what arethe political obstacles and impediments to doing it, how doablepolitically is the achievement of such objectives. And it wasreally around those kinds of issues that we had our discussion. And while there weren't a long list of specifics, there was a lotof discussion about the importance of accomplishing theseobjectives and the political difficulty of accomplishing them.
But I must say also, I think a pretty much universalview amongst the Europeans that the difficulty notwithstanding,it was essential they be achieved. And then the other question,of course, is how you weigh those against achieving socialobjectives and meeting social needs.
Q The whole world is watching with great interestthis Summit of 8. What good news or bad to tell the people ofthe Middle East and Africa about your summit, sir? And to bespecific, was there any agreement to set a Middle East fund andstability for peace and stability in the Middle East, asPresident Clinton said that he will ask the G-7?
SECRETARY RUBIN: I can only speak for the financeministers meeting, that's where I was, and at the financeministers meetings, there was a lot of discussion about promotingeconomic growth and reform in Africa, centering around theinitiative the President of the United States announced last weekI guess it was -- maybe it was earlier this week; I've forgotten. At the meetings I was at there was no discussion about MiddleEast stability fund. But you'd have to ask Mr. Tarullo when he'shere because that would have taken place at the leaders meetingand only the leader and the sherpa were at that meeting.
Q There's been a lot of talk at this particularsummit with the leaders about the role of Russia. You talk aboutG-7; behind you is Denver Summit of the 8. How confident are theG-7 finance ministers that the progress on inflation and otherthings that the Russians are really crowing about is meaningful?
SECRETARY RUBIN: Well, we just had a -- AnatolyChubays, who is, as you know, head of the economic team inRussia, joined us for lunch, and then after -- oh, about an hourafter lunch I guess, Anatoly Chubays joined three of the officialin the Treasury Department -- myself and Larry Summers and DavidLipton -- to discuss just amongst the four of us conditions inRussia. And I must say, I think it's an encouraging picture.
They obviously have enormous challenges they'regoing to have to deal with -- these kinds of issues don't getdealt with quickly. But I think that there are signs of realprogress. Clearly, inflationary conditions are better. Theyhave worked out their issues with the IMF and that program is ingood shape again. They did a -- I think it's -- check my number,because I may be wrong -- but I think it's a $2 billion, 10-yearissue the other day in the private market on terms that I cantell you, as a former investment banking, I thought wereremarkably favorable. And that's an expression of the views ofthe global capital markets with respect to their evaluation ofwhat's going on in Russia.
All that notwithstanding, there are enormouschallenges ahead. But I'd have to say, having now been involvedin this process for four and a half years -- with Russia, that is-- that my sense was a team that was functioning well, that wasmaking progress and that had a good sense of where they needed togo and a feeling, in themselves at least, that they were on theway toward getting there.
You noticed that the Duma had a first reading on atax bill the other day and approved it -- at least in the firstreading. I think this was a very positive report at thismeeting.
Q What were the biggest challenges?
SECRETARY RUBIN: I'm sorry, I couldn't hear you.
Q One or two of the biggest challenges?
SECRETARY RUBIN: Oh, I think that certainly one ofthe challenges will be to complete the work of putting in place alegal system, including contract enforceability, so that there isreliability and transparency and predictability in the legalsystem, which I think is enormously important in terms ofattracting foreign capital. Developing deep and liquid andtransparent and reliable capital markets and markets in whichpeople have confidence would be another major challenge, to listtwo.
Q Mr. Secretary, we understand the leaders willissue a statement on Hong Kong tomorrow. And I wonder whetherthe finance ministers discussed this issue with an economicapproach? In other words, do you believe the transition of HongKong will affect the future trade relations between China and G-7 countries?
SECRETARY RUBIN: The finance ministers did discussChina and Hong Kong. Actually, it was quite an interestingdiscussion. I'd say that the gist of it was that Hong Kong isvery important to China; it's very important to all of us becauseof its economic role in Asia; and that the Chinese -- at least itwas the view of those there that the Chinese were extremelycognizant of the importance of Hong Kong and also the importanceof maintaining the kinds of liberties and rule of law in HongKong that all of us believe are necessary if Hong Kong is goingto remain an effective market center.
And there was also a feeling that Hong Kong as anopen economy and also as an open society, it will be a two-waystreet -- that that will also affect in positive ways, China. And then, of course, as you say, the leaders will be speaking tothis tomorrow.
Q In other words, the success of Hong Kongtransition will not affect the future trade relations between theG-7 countries and China?
SECRETARY RUBIN: Well, you're saying if thetransition doesn't go well? We did not discuss that. But, asyou know, the United States has always taken the position thatit's very important for China and very important for the rest ofthe world the transition does go well; and that if Hong Kong isgoing to remain the kind of economic and market center that ithas been, it's requisite that the law remain that a free exchangeof information remain because that's integrally related toeffectiveness as a market center.
Q Mr. Secretary, in the last couple years therehave been examples where rogue traders have almost brought down,in one case almost destabalized a key commodity market, and alsobrought down a major global financial institution. Can you giveme an example, a concrete example of how, based on the workyou've done here, would deal with a crisis like that differentlythan it's been dealt with in the past, and whether or not you'rebetter able to prevent or identify those problems?
SECRETARY RUBIN: Yes. I think one of the issues --this is actually a subject I know a little bit about -- I wasn'ta rogue trader, let me quickly say -- (laughter) -- but I was inthat world, or at least I was in any way anybody ever observed. (Laughter.)
The global financial institutions really are todayexactly that -- global financial institutions. And I think ifyou look at some of the failures of the last few years, I thinkif the regulators in each of the major market centers had had aneffective exchange of information with each other and had trulyknown what was going on in each of those centers -- I'm thinkingof one particularly I happen to know a lot about -- I think thatthere was a heightened possibility that the problem would havebeen, or the potential for problem would have been spotted aheadof time and the problem would have been averted.
And one of the things it's provided for -- it'sreally a work plan, if you will. These things are very difficultto get done, they take -- none of this happens quickly. But thework plan is to expedite the exchange of information amongstregulators in different market centers.
There's also going to be discussion about -- there'salso in that work plan the question of focusing on capitalrequirements and making sure you don't have enormous disparity incapital requirements between different market centers,transparency issues with respect to derivative, which I think areextremely important if investors are going to know what the trueexposure of the financial institutions are.
Q I'm representing here a Russian newspaper. Allof us were very happy last night and this morning knowing thatRussia is a full power member among G-8. You were talking aboutG-7. And just recently we have heard about a new formula, whichis 8 minus 1. So can you please explain to me the realdifference -- no, without any jokes -- the real differencebetween 7 plus 1 and 8 minus 1. Thank you. (Laughter andapplause.)
SECRETARY RUBIN: Well, I didn't grow up as adiplomat and foreign affairs person, so I don't -- I'm sure theyhave all kinds of ways to speak. Let me tell you what I thinkthe realities of this thing are.
There is a Summit of 8, and that's what this was.And it represented an enormous step forward in terms of Russia'sintegration with the major industrialized nations with respect tothe full panoply of issues that we all have to deal with in theworld that we now live in -- a far more integrated world thanused to be the case. The consequence is that Mr. Yeltsin was afull-fledged member of the Summit of the 8 in this meeting.
There are issues, there are financial and economicissues in which the industrialized nations are in a differenteconomic position than Russia is now -- although, it is all ofour hope that Russia gets there as quickly as possible -- andwith a commonality of conditions, as such, that it is morefruitful to have discussions amongst those who share thatcommonality. And that's why the Finance Ministers met as a G-7.
It is also the case that the positions of these G-7nations and Russia with respect to the IMF and the World Bank aredifferent, because Russia is still in a position of receivingassistance and help from both the IMF and the World Bank. So,once again, there's a commonality amongst the G-7 and Russia isin a somewhat different position. So for that reason it wasconcluded that the Finance Ministers should continue their G-7process and the leaders should take an hour out of their fullschedule to have a G-7 economic discussion with respect to thekinds of matters in which terms I just described are relevant.
But I think, myself, the most noteworthy aspect ofthis summit period, if you will, is that it is a Summit of 8,number one; and, number two, that Russia has joined the ParisClub, which is an enormous step forward.
Q In light of the globalization process and yourparticipation as a G-7 Finance Minister, and with the BIS, whatsteps remain to bring the U.S. into full harmonization withregard to financial conglomerates in the U.S.? Has Glass-Steagelbeen effectively repealed with the merger and acquisitionactivity in the banks and insurance markets?
SECRETARY RUBIN: I'm sorry, are you asking me thequestion about financial modernization?
Q Yes, I am.
SECRETARY RUBIN: Okay. The answer is that over thelast -- oh, I don't know -- roughly, a decade, I suppose, at anever increasing rate, the regulators, the Office of Control ofthe Currency and the Federal Reserve Board, have made exceptions-- well, I shouldn't say made exceptions -- they've allowed moreand more non-bank activity by financial institutions -- non-bankfinancial institutions. And the result is that the Glass-Steagelwalls have eroded.
Having said that, Glass-Steagel is still in effect. And so there is something very substantially short of a completeelimination of the walls between banking, insurance, brokerage,investment banking and other financial services. Legislation isnow working its way through Congress to repeal Glass-Steagel todeal with the bank holding company act so that these walls willbe completely torn down, and I believe that the House BankingCommittee reported out legislation yesterday toward this end.
Q Will that then complete financial harmony orglobalization for the U.S. with regard to the other countries ofthe world?
SECRETARY RUBIN: Well, for one thing, the financialmodernization legislation has a long way to go. We came out ofcommittee yesterday with a slight affirmative -- I think the votewas something like 28 to 26, or 26 to 24, something like that. It was a two-vote margin. And it has to work its way through theHouse and it has to go through the Senate. We've got a lot to doon this, and banking bills, as you know, are always verydifficult to get.
Secondly, even if this passes sometime this year ornext year, there are a lot of other issues that exist if we'regoing to get a WTO financial services agreement. And at leastfrom our point of view, the point of view of the United States,we're going to have to have offers if we're going to into that. We're going to have to have offers from a number countriessubstantially better than the offers that were available lastyear.
Q Mr. Secretary, during the run-up to the summit
SECRETARY RUBIN: How did you sneak over to theforeign press side?
Q I'm sorry -- I'm in the wrong line?
SECRETARY RUBIN: I'm kidding.
Q I apologize for that.
SECRETARY RUBIN: I was told one was one and one wasthe other, but I --
Q No one told me anything -- that's sort of theway it is at these summits. (Laughter.) Mr. Secretary, duringthe run-up to the summit, you and other U.S. officials were quiteoutspoken in expressing your concerns about the trend towards alarger Japanese surplus, and yet there's at least a perceptionthat the issue was somewhat back-peddled at the summit. Certainly Japanese officials have expressed the sense that theissue was downplayed, put on a back burner. In that context, I'mwondering, are you satisfied with the statement in the financeministers communique regarding the Japanese economy, and have youreceived sufficient assurances from Japanese officials that theywill indeed achieve some progress on the deregulation anddomestic-led growth agenda that the U.S. put forward?
SECRETARY RUBIN: Well, I don't think that the issuewas either downplayed or upplayed. I was at the bilateral withPrime Minister Hashimoto and the issue was discussed there. Itwas discussed in the finance ministers meeting. I don't thinkthere was any expectation that this would be a central issue --there's no reason why it should have been -- of any of themeetings that took place, bilateral or multilateral. But thestatement, as you say, reiterates the statement that Japan hasthe objective of achieving strong domestic-led growth andavoiding significant increases in its external surplus.
And we continue to feel that that's very importantfor Japan and very important for the rest of the world. As youknow, Japan feels they're on their way to accomplishing thatthrough a program of deregulation. It's certainly our view thatderegulation, once again, is very good for Japan, very good forthe rest of the world. If it accomplishes that objective,despite the rapid rate of deficit reduction, then that objectivewill have been satisfied. If not, then they have the challengeof figuring out how to deal with meeting that objective.
Q Do you share that sense that the Japanese aremoving on the right track in that regard?
SECRETARY RUBIN: Oh, I think my view on this simplyis that they have adopted a -- Japan has adopted a strategy thatthey think will meet that challenge, and I don't -- I think Iwould limit myself to saying that if they do, then that problemis solved and if they don't, then they've got the challenge ofhow to get there.
Let me just announce Dan Tarullo who's joined us. You missed my opening statement. (Laughter.) Now we can expandthe range of questions, because I've been dealing with theministers meetings and the like, and Dan can deal with what tookplace at the leaders meeting.
Q Good, I'll take advantage of that. The Clintonadministration has made repeated assurances that its trade andinvestment policy would be consistent with environmentalprotection. But there has been growing evidence in the lastcouple of years, since NAFTA took effect, that such is not reallythe case. Let me just point out a few examples.
First, a Virginia-based corporation, Ethel Company,has sued under NAFTA rules and an international trade tribunalfor alleging a taking of its property because Canada attempted toban a toxic gasoline additive -- point one.
Point two, the Clinton administration has argued,and successfully argued in the World Trade Organization againstEurope's ban on hormone treated beef. The arguments AmbassadorBarshefsky was making are directly contrary to assurances madeabout what the trade rules made by her predecessor, MickeyKantor.
Third point, the border clean-up plan under theNAFTA has generated only about one percent of its clean-up fundof the promised clean-up funds. So the question is, is theadministration really serious about environmental protection inthe context of trade and investment policy? Thank you.
MR. TARULLO: Well, first off, just with respect tothe hormone issue that you mentioned a moment ago, I'm not sureI'd characterize that as an environmental issue. It's more of ahealth and safety issue. And the dispute there, as I understandit, is more whether there is any demonstrable scientific basisfor the action that the European Union has taken.
With respect to trade and the environment generally,the United States has been at the forefront of the countrieswithin the WTO pushing for working parties and efforts to developunderstandings on the relationship between trade and theenvironment.
In the context of this summit, where that set ofissues has not specifically been discussed, the United States hassuggested that that pattern which the Ex-Im Bank follows in theUnited States of doing an environmental assessment of its majorexports before it exports is one that could profitably be lookedat by the other countries and perhaps considered within the OECD.
So I think looking at the export side of trade wehave, in fact, been out in front of the rest of theindustrialized world in trying to bring some environmentalassessment to our activities.
SECRETARY RUBIN: On your third item, which I thinkwas the border clean-up in Mexico -- is that right, under the NADBank -- was that your --
Q Yes, sir.
SECRETARY RUBIN: I think it's fair to say the NADBank has geared up more slowly than we would have hoped. On theother hand, that is not unusual for these kinds of programs. AndI think what you're going to find now is a much more rapiddeployment of funds through the NAD Bank and the environmentalfacility -- not the domestic window, but the environmentalfacility. That has been the case up to now.
Q Mr. Secretary, in your discussions about EU andEuropean economic outlook, did you get any sense from theEuropean leaders that there was any backing away or de-emphasison deficit reduction as part of their effort to integrate Europe? And is the U.S. concerned that a de-emphasis on deficit reductionin Europe actually may backfire, to the detriment of the overallworld economy?
SECRETARY RUBIN: Let me ask Dan to respond withrespect to what the leaders said because I was not in thatmeeting. And then I'd be happy to respond with respect to thefinance ministers meeting.
MR. TARULLO: The leaders reviewed the Europeanmonetary union developments fairly succinctly within the contextof their overall review of macroeconomic conditions in the world. President Santer, of the European Commission, had been invited bythe President to give an update based on developments inAmsterdam.
There was not the kind of discussion that yousuggested. There was, I think, a fairly uniform view on the partof the European leaders that monetary integration would goforward on its present schedule. There was some mention of theadditional measures to potentially increase employment, which hadbeen agreed to at Amsterdam. The discussion really didn't getinto the details of those to any considerable extent.
SECRETARY RUBIN: I don't really have much to add tothat. We had what I suspect was a somewhat more extendeddiscussion, but the gist of it was exactly the same. The sense Igot was -- well, not the sense I got, they clearly expressed aview that they'd be going ahead on schedule and then the issuewas how to deal with employment and social needs and other thingsintegration context of meeting the deficit reduction targets ofmaster.
Q -- de-emphasizing deficit reduction as part ofthis increased emphasis on employment that's been --
SECRETARY RUBIN: No, my sense was that their focuson employment, as we discussed before Dan came, was very muchmore a focus on structural reform -- as, indeed, we think makessense.
Q I'd like to ask a question about the leadersmeeting also. Can you give a sense of how the discussion wentabout the performance of the U.S. economy versus the Europeaneconomy, whether the U.S. model is better -- the Anglo-Saxonmodel, to be more general; and how the Europeans reacted to this? I gather there was a discussion, especially over lunch on thatsubject. And can you give a sense of how the -- more broadly howthe delegations have interacted with each other on this question?
MR. TARULLO: There were two discussions during thecourse of the day in which the general issue of performance ofeconomies came up. The first, as you correctly suggest, was atlunch where the leaders were discussing the challenge ofstructural reform and assuring adaptability in both labor andproduct markets. The second came up in the discussion to which Ijust alluded, which was the general macroeconomic survey, whichis a characteristic feature of G-7 meetings.
In neither instance was there much comparison. There was more of a focus on common problems, in the case of thestructural discussion. In the case of the macroeconomicdiscussion, as you can imagine from looking at the statement,there was more of a focus on particular positions that particularcountries occupied.
I think it's fair to say that there is a consensusthat the rigidities in parts of the European economy haveproduced structural unemployment problems. There is still aconcern I think in most, if not all of those economies, thatvalues of social cohesion, social inclusion, of what we in theUnited States would call the social contract, must be preserved. And I think that a number of those countries and indeed all ofthe leaders, including those, as you say, from the Anglo-Saxoncountries, are struggling with not just the right balance, butthe right set of affirmative measures to promote both sets ofvalues.
There was not in the least a kind of comparativegame. I think to the contrary. There really was an effort toengage on what they could do, for example, about promotion ofsmall and medium-sized enterprise job creation. Prime MinisterProdi from Italy made the presentation on that topic, and as youmay know, the northern part of Italy has got perhaps the mostsuccessful and innovative string of small- and medium-sizebusiness creation and networks in the world. So that was thekind of thing on which they were focused, not who is doing betterthan whom and why.
Q Mr. Secretary, the President's initiative onAfrica has been generally received with universal acclaim. However, there has been a lot of question with respect to the,what many people think, one-sided emphasis on trade andinvestment, and that they feel that more is needed in terms ofthe development aid side, in particular with regard to physicalinfrastructure, like roads, railroads, and the like, whichtraditionally have not been the domain of private enterprise butrather a precondition for attracting private enterprise. I waswondering if there was any balance struck at either of themeetings today with the finance ministers or the leaders on this.
And secondly, in every summit that has occurredsince Halifax, there have been discussions of possible systemicrisks to the financial system. The measures that have been takenhave always been in the form of trying to keep on top of thingsso that we avoid surprises. However, the financial system in itspresent status seems to develop new instruments which give leewayto these kind of surprises. I was wondering, in addition to thequestion of increased monitoring and transparency, if there wasany discussion about possible long-term solutions of creatinggreater stability in the system than has been experienced in saythe last 10 years.
SECRETARY RUBIN: Let me take the questions inreverse order. On the second one, I think that the measures thatwe have taken since Halifax -- for example, the transparencymeasures that are involved in the IMF register that countriessign up for and then publish the data on their financialconditions, the measures I discussed a bit ago with respect toexchange of information amongst regulators -- all these kinds ofmeasures aren't simply monitoring. I think we might well haveaverted the problem that existed in Mexico if the kind ofinformation that the IMF is calling for -- and will be nowshowing I believe on the Internet, as a matter of fact -- hadbeen available to investors, because when investors see troublecoming, then they'll stop investing at an earlier stage of theprocess. And I think that the type of crisis we had in Mexicomight very well never have developed. So I actually think thisis preventive, not just monitoring.
Then with respect to new agreements to borrow,which, as you know, is a Halifax initiative, we there have, onceit's completed, a very substantial additional pool ofmultilateral money to deal with problems if they develop. Withrespect to the emerging markets' banking systems, the leadersagreed -- the finance ministers discussed today measures toimprove supervision of regulation, which is again a matter ofprevention.
On the question of Africa, the object was not to inany way reduce aid. Aid is very much needed for the reasons yousaid and many other reasons as well to build the underpinningsfor private sector involvement, but to add to that now increasedaccess to the United States and other markets so that Africa canbetter attract investment capital, can more effectively trade inthe world markets, and build its private sector. Also, theemphasis was on targeting aid to countries that have undertakenreform and are trying to help themselves.
MR. TARULLO: I think I might supplement that bynoting that at the conclusion of the Africa discussion in theleaders meeting this morning, the President noted that, in hisview, the formula was trade plus aid plus reform. All three ofthose elements had been discussed at some length in theconversation among the leaders, which on economics alone lastedabout 45 minutes -- on African economics.
The emphasis on aid, though, that we have put inboth working on the Denver Summit and also on the legislation onwhich we're working with the bipartisan group of members ofCongress has tried to emphasize the role of aid in such a way asboth to support basic human needs and to support the creation andsustenance of a sound market economy. That, for example, is why,in the legislation we'll be supporting, there is significantlyincreased money for OPIC, to ensure private capital flowsoverseas, to get the money flowing into Africa and to providegovernment funds in the form of insurance guarantees in thisinstance.
Q Yes, Mr. Secretary, as morally repugnant asbribery is, it pales in comparison with international taxavoidance as an economic issue. I'm curious to know whether,Secretary, the finance ministers discussed the possibility offull, forthright, and prompt reporting of the ownership ofgovernment bonds and other security instruments among themselvesin the G-7 and/or placing stricter reporting requirements onoffshore tax havens. If that wasn't discussed, might youenlighten us why it was not?
SECRETARY RUBIN: Well, it was not on the agenda ofthis meeting. I don't think I agree with your premise to thequestion, though. I think that corruption, both publiccorruption and the crime that exists because of the potential forpublic corruption, is a very serious impediment to economicgrowth and developing in transitioning countries. And I think ithas got to be a major focus of attention both amongst G-7 nationsand the financial institutions if we're going to have trulysuccessful growth and reform in the developing countries.
We did focus a lot in our Finance Ministersdiscussion at least on the questions of money laundering, whichhas some of what you're talking about -- some of that about it,though that is not -- some of that, of course, is directed towardtax evasion, some of it's just -- a lot of it is laundering drugproceeds. But there was no discussion of dealing with tax havenissues as such, though, as I say, there was a fair bit ofdiscussion about money laundering as an activity, which is withinthe purview of most of these finance ministers, as it is ours. And that is a requisite for organized crime to be successful, sothat if you can get at that, you really have a very new vantagepoint for effectively dealing with the leaders of organizedcrime.
MR. TARULLO: I should note the topic was not on theagenda of the leaders either, but there is -- if you flip throughthe statement, you'll note a provision making reference tostudies of tax competition. This is not tax evasion in any legalsense. But the leaders did identify this as an issue that theywould like to see more work on, more analysis of, to see whetherthere are particular problems which they should take up next yearin Birmingham.
Q Did the leaders discuss the Middle East at all? And President Clinton had suggested before coming to the summitthat he will suggest to the leaders of the summit that there is afund -- there's going to be a fund for the Middle East peace andstability. And what was the reaction from the leaders?
MR. TARULLO: The Middle East will be on the agendafor tomorrow morning, which is the political -- sort oftraditional foreign policy discussion. So it will be talkedabout then.
Q It's been widely reported, from citizens'groups and women's organizations, labor unions and public policygroups in Africa, that the 15 years of economic reform policiesthat will -- countries have to undertake in order to be able tojoin the Africa Trade and Investment Initiative have themselvesgreatly undermined Africa's capacity to produce. It hasincreased the exploitation of both human and natural resourcesand has drastically increased the debt.
And so the question is, number one, have any ofthese views been taken into account in the shaping of thisinitiative by the President? And if not, will they be taken inaccount in the future? Is there any scope for bringing in thisvery different point of view from that of the leaders of the G-7?
MR. TARULLO: Well, I guess maybe I have somedisagreement with the premise, or maybe it's just a differentperspective. I don't know that we would agree -- in fact, I knowwe wouldn't agree with the proposition that 15 years of economicreform has produced deleterious consequences. There is not doubtbut that a number of sub-Saharan African countries were caught ina cycle of not being able to develop, of accumulating debt, andof seeing impoverishment of their peoples and not economicdevelopment.
In many instances, in our view, that was not becausea sound set of economic reforms with good governance and movementtowards democracy was the pattern, but instead other patterns ofimperfect orientation towards growth policies, sometimes a gooddeal of protectionism which allowed pockets of wealth and a lotof poverty in between.
The countries on which we are focused are thosewhich in the last five to 10 years, by adoption on their own of aset of reform policies, have begun to show sustained rates ofgrowth which are carrying over into increased standards ofliving.
Now, when you ask about the specific perspective,there were several comments this morning among the leaders abouteducation in Africa. And in fact there were commentsspecifically about education of girls and young women. Thepremise there was that, in some respects, the biggest need inAfrica, as in many developing countries, is to get basiceducation disseminated through as large a part of the populationas possible; and that in many, though by no means all Africancountries, the education of -- well, primary and secondaryeducation is in general very imperfect, and primary and secondaryeducation of girls and young women is particularly imperfect.
So there was a good deal of emphasis on that issue.And indeed the World Bank has over the last five or six -- well,five years at least increasingly focused on support for basiceducation, particularly basic education for girls. When LarrySummers, who is now Bob Rubin's Deputy at the TreasuryDepartment, was the Chief Economist at the World Bank, he pushedvery hard to get the Bank lending to produce -- to supporteducation for girls. He used to cite the figure that if youwanted a return on your investment, probably about the best youcould get was the additional dollar spent on educating youngwomen in a developing country.
Q Could I just have a clarification? On thequestion of education and all that, education is a greatstrategy, but it's a 15-year strategy, and what the people that Ijust mentioned -- the women's groups, the labor unions, all ofthat -- are talking about is today. And their perspective istoday very different from yours. And the question is, if theirperspective is so different from that of the G-7 leaders, who --is it the G-7 leaders that are presuming the right to shape thepolicy for Africa, or are they willing to bring these voices intothe discussion?
MR. TARULLO: Well, look, no, to the contrary. Thepolicies of Africa or of any African country, it seems to me,ought not to be dictated by another government or another group,a private group from another country; they ought to be developedby the people of the country itself.
I don't know that I would disagree with theproposition that development takes time. But the corollary ofthat is that the failure to take these measures and the failureto create the basis for sustained growth in an economy means thatyou're always in a holding pattern, you're always just runningfaster to try to stay where you are.
In terms of consultation, people in -- certainlypeople in the White House and in Treasury and State, which havebeen working on our own Africa programs, have consulted quitewidely. I don't know specifically which of these groups they'vehave consulted with; I know we in general have consulted quitewidely with the African countries themselves and with officialsin many parts of the government.
Q Something a bit more specific on a similartheme. Earlier this afternoon in a briefing by the EuropeanUnion, they seemed to be casting some doubts over the Africaproposal, specifically talking about the conditionality that wasapplied to the process, saying any form of conditionality whenyou're talking about the least developed countries createsunacceptable delays.
And, about the substance of the Africa proposal, Iheard other comments elsewhere saying that it's very smallamounts of additional aid and there are delays in the HIPC debtinitiative and that the trade preferences being offered arefairly minor. I wondered if you'd just like to expand on that.
MR. TARULLO: Well, look, ultimately, thedevelopment of a sub-Saharan African country -- or, indeed, anyAfrican country -- depends principally on the policies andpractices of that country and its people. And it seems to methat the most that international organizations can do is tobuttress activities that are headed in the right direction, andto provide support for things like education and health, whichare not going to be produced by the private sector.
With respect to the discussion today and indeed theattitudes generally, there is some disagreement over, as someoneput it, conditionality in trade. I don't think there's anydisagreement on the prospect that the IMF or the World Bank, forexample, should have conditionality in their lending programs.
But our proposal with the Congress has beencharacterized as a trade conditionality proposal. I think it'sactually something quite different. In the first place, thebenefits -- a whole tier of benefits is applied to the leastdeveloped countries, no matter what their policies. A second,more substantial tier of benefits, trade and technicalassistance, is made available to those countries which areadopting policies that are likely to produce the kind of outcomesthat we've seen in a number of other African countries.
It is our judgment that -- two things are ourjudgment: one, that we should direct such resources as we havetowards those countries with the greatest chances of successbecause of the policies that they have adopted; second, and thisgoes back to an earlier answer, I have found it quite interestingto listen to the number of African officials, economic officials,who have supported and indeed encouraged us to includeexpectations of sound economic policies as we constructed ourlegislation.
What that basically said to us is, look, we want toadopt these policies. They're not easy. They obviously entailsome uncertainty. And so to have some outside validation andsome independent valuable byproduct of those policies is a goodthing for us at home. And that really I think was to some peoplethe most surprising thing about this initiative. We've talked toeconomic officials from probably 30 to 35 Sub-Saharan Africancountries in the last few months alone.
Before I close, because I was delayed, I thought Iwould give something more in the form of a brief readout of acouple of the highlights today, a couple of minutes on that.
I think you've probably heard -- McCurry I'm surehas briefed on the agenda and what was going to be included ineach session. What I thought I would do is give you some senseof the agenda items that took off a little bit, those thatoccasioned more discussion, more lively discussion, and thosethat seemed to have a little bit of a future orientation.
They were several-fold. First, I wasn't sosurprised at the Africa economic discussion, but it did go on forquite some time. It was quite lively; actually ended up withleaders having multiple comments. That's usually in these thingsthe indication of whether a discussion is taking off, is whetherthere's more than just a person's thoughts, but instead thecounterthoughts and something else ensues.
Secondly, as the leaders reviewed the ongoing globalagenda, which as you know, has really been consolidated at thissummit as a core part of the work of the summit, the leadersfocused in particular on crime and international organized crime. I would say that probably two-thirds of their discussion was oncrime and the other topics were covered rather more briefly.
The comment was made that in this instance thepublic seems to be ahead of the governments in their apprehensionof not just street crime but of international crime. There was agood deal of discussion of the interrelationships of crime, andwe -- I specifically -- was tasked with focusing, for theremainder of the U.S. chairmanship, the work of our seniorexperts group on organized crime and getting a targeted, lengthylist of concrete additional measures that could be taken. Andthe leaders specifically said that if there are problems, ifthere are kind of bureaucratic resistances, they want the matterspresented to them.
The infectious disease discussion was not lengthy somuch as it was pointed. A number of leaders commented that itwas inconceivable to them that infectious diseases would not be-- the spread of infectious diseases globally would not be a moreand more significant problem as the years went on.
Finally, in the session this afternoon, there was adiscussion of Ukraine, Ukraine energy needs, and assistance beingprovided thereto. And as you saw in the communique, the leadersagreed that the G-7 countries should provide an additional $300million above and beyond what had been included in the memorandumof understanding reached with Ukraine about a year and a half ago-- that additional $300 million to be used, hopefully, toleverage sufficient funds to pay for the construction of apermanent sarcophagus on top of the Chernobyl plant in Ukraine. As you probably know, Ukraine under the terms of that MOUcommitted to close the plant by the year 2000.
Finally, I should say that although I was in and outof, rather than present for, the entire lunch discussion, it wasas I intimated earlier -- and I was not surprised -- particularlybroad-ranging, which was sometimes a euphemism for jumping arounda bit, but also did indicate that the leaders are very muchfocused on the policy and political challenges of increasingemployment, promoting the conditions for economic growth whilenot losing sight of what our President characterizes as thesocial contract.
Thank you very much.