Bill Clinton photo

Press Briefing by Deputy National Security Advisor Sandy Berger, Assistant Secretary Dan Tarullo, and Undersecretary Larry Summers

June 09, 1995

The Briefing Room

11:15 A.M. EDT

MR. MCCURRY: Good morning, everybody. As you know, next week, Thursday, President Clinton will depart for Halifax for his third G-7 summit since he has been President. And in advance of that and because many of you are preparing to write for this weekend, we thought it would be good if you could meet with some of the team that will work with the President at the summit.

I've asked Sandy Berger, the Deputy National Security Advisor, to kick off this briefing, to tell you a little bit about some of the President's thinking and objectives as we head for Halifax. And he will be joined by Dan Tarullo, who is the U.S. sherpa. He is the Assistant Secretary of State for Economic and Business Affairs. Joan Spero, who is the Undersecretary of State for Economic Affairs -- didn't they change your title at some point? Business and Agriculture -- right. And she is one of the sherpas; as is Larry Summers, the Under Secretary of the Treasury for International Affairs. And Bo Cutter is with us, too, the Deputy Assistant to the President for Economic Affairs. They are all available for questions. I'll let them divide up their presentation as they see fit, but we'll start with Sandy.

Thanks for all of you being here today.

MR. BERGER: Thank you, Mike.

Let me take just one minute at the outset before asking Dan to walk through the substance of the G-7 meeting to talk a bit about the context of the meeting.

Halifax is another building block in a sweeping enterprise that President Clinton has been engaged in since the beginning of his administration -- that is leading the international community to build the international economic architecture that will propel prosperity into the 21st century.

The pillars of that structure that the President has been working on since the early days of this administration are, first, opening and expanding the markets; second, assisting in the transformation of the former communist world into the mainstream of market economies; third, promoting economic reform in the developing world where five-sixths of the population resides; and, fourth, promoting the process of reform of the internationAL financial institutions to meet the new challenges of the global economy.

We've made enormous progress in building those structures over the past two and a half years. Through NAFTA we've created the largest free trade area in the world, with 370 million consumers and a $6.5 trillion GDP. After seven years the President brought to a conclusion the Uruguay Round, which will add $100 billion to $200 billion a year to the U.S. economy when it's fully implemented.

Looking ahead to regions of the fastest growing economies, the President launched a process in Asia with the APEC countries toward free and open trade in that region, and at the Summit of the Americas last year launched a process for a hemispheric free trade agreement by the year 2005. And we've been working over two and a half years for reform of the international financial institutions to meet the new challenges that we face.

Last year in Naples, the President suggested, and the other leaders agreed, that one focus of Halifax would be to review the international economic institutions to determine what further changes were necessary to meet new challenges. And that is a very important part of what the leaders will do at Halifax. They will address arrangements to prevent and deal with financial crises like Mexico. They will focus on streamlining U.N. economic and social agencies so that they can fulfill their mission more effectively and more efficiently. And they will address the priorities that they see for the multilateral development banks as we head into the 21st century.

This is a process Bob Rubin described this week of building modern institutions for a modern economy. It's a long-term process. Halifax is an opportunity to take stock of where the international community is in this process and to set some directions for future reform.

Let me ask Dan Tarullo now to go through more specifically the agenda of the G-7.


As all of you know, last year at Naples the G-7 leaders agreed to a proposal to review the international economic architecture to see where we are, to see where we need to be going. Obviously, this isn't a job for a single meeting, not even for a single year's review. And I think Sandy's introduction has put this in some perspective.

In the intervening months, the Mexican peso crisis, and indeed, to a lesser extent, the Barings Bank problems have focused particular attention on financial stability and the world financial structure. And I think what you'll be seeing in Halifax is agreement on a package of measures which will respond quite directly to what was clearly the most pressing problem in the international economic system, which is the need to avoid international financial crises and to respond effectively if a crisis does occur.

I think you will also see attention, as Sandy intimated, to development institutions, to the multilateral development banks to the U.N. economic institutions more generally. There has been, particularly with respect to the development banks, a good deal of progress, much of it spurred by the United States and U.S. requests and proposals for reform and change of orientation in the MDBs. There has been discussion in the preparatory work leading up to Halifax of what directions that the banks have now started to take should be ratified, should be moved forward, and what future steps are needed.

Third, I think what you'll see at Halifax is increasing attention by the leaders to some new problems which are emerging in the global economy. Environment is something that you're all aware of, but it is an issue of continuing concern and one which is increasingly global. Terrorism and international organized crime are not things that normally have been thought of as byproducts of a global economy, but, in fact, they are. And the leaders will be addressing those as well, coming to grips with the fact that these are transnational phenomena which need a multilateral cooperative response.

I'll give a bit more detail on some of the things that we expect at Halifax. With respect -- and I'll go down the little three points that I just gave you. With respect to the financial crisis, as Secretary Rubin stated earlier this week, our sense of what is needed has really focused on four kinds of factors.

First, we need a new emphasis on transparency. We need to make sure that economic and financial data is published in a timely and adequate fashion by countries throughout the world. Why is this important? Most obviously because if data and information are continuously available, the market has an early opportunity to see growing problems and to react to them. If the market reacts soon because it has information, the chances of a crisis developing over time are much lower. Bad policy cannot continue when there has already been a market reaction.

Second, crises will occur. We think they will be rare-- if the kind of transparency and surveillance proposals that we would like to see adopted are adopted, they will indeed be rare. But crises will occur. And it's important that the multilateral financial community have adequate resources that are available in a timely fashion with proper conditionality upon potential recipients so that when a crisis does hit there will be a quick and effective response.

Those are what we think are the two immediate needs which should be met. But there are also the need to look forward some, to look forward to potential new measures which might be taken to respond further or to elaborate upon our responses to international financial problems. One of those is exploration of possible orderly workout mechanisms to deal with international debt crises. There is not

-- let me hasten to add -- a proposal on the table which has been discussed within the sherpa process. So you should not anticipate that there will be any sort of discussion or agreement of such -- on such a proposal. But what I think and hope that you will see is some sense from the leaders that this is an exploration, this is an inquiry which ought to move forward. We ought to see whether there is a way to deal with debt problems and short-term liquidity problems that have arisen in a fashion that makes adjustment easier on all sides.

Finally, as I mentioned at the outset, there are private financial challenges that are posed, as well as sovereign financial challenges. There is a good deal of cooperation in the world today among bank regulators and among securities regulators. But as the Barings Bank incident showed, it is vital that the financial regulators in the world be vigilant about potential gaps in the system, and inquire once again as to whether there are gaps or weaknesses in the web of regulatory systems that exist for financial institutions.

So I expect again that there will be some discussion of these issues and I would hope some charge to our financial and securities regulators to pay further attention and enhance their cooperation to make sure that the safety and soundness of the world financial system is protected.

As I said, achieving these kinds of results, meeting these kinds of aims will mean that we will have been able to address the most pressing problem in the world economic system today. But we also have been trying to pay attention to development issues generally, the importance of promoting development in a sensible fashion to ensure continued growth around the world, continued growing markets for U.S. exports.

The multilateral development banks, as I said, have made real progress. And what we are hoping for at Halifax is that we can gain agreement on a kind of set of principles or guidelines for the operation of the MDBs as we move towards the 21st century. As many of you know, we have promoted an agenda at the MDBs to put people first -- more emphasis upon basic human needs on things like education, to make sure that one is really fighting the root sources of poverty and providing a better possibility of long-term development.

Second, we hope for some increased attention and ratification of the need to incorporate environmental considerations into all the activities of the MDBs. Sustainable development is not just a catch phrase, it's an imperative for countries as they move forward in the development process.

And finally, but by no means least importantly, it's very -- it's almost indispensable that what the multilateral development banks do is to support private sector growth and to help create the conditions for sustained private sector growth, not to supplant it or not to compete with it. I think helping with basic human needs and with education and health is a way in which the banks can do that. But again, all of their operations need to be keyed towards that guideline and that end.

And with respect to the United Nations economic and social institutions, here, too, our expectation is that there will be a set of guidelines for adjustment of these institutions and, hopefully, some sense of internal adjustment of these institutions because they have a vital role to play. And it's important for the countries which are the recipients of their aid and for those of us from countries which provide resources that these institutions be as effective and as efficient as possible.

If I can turn to the third point that I began with new issues. These almost by definition are not issues or areas that are susceptible to some grand new multilateral structure. As I said, this is a process. It's not a single meeting. It's the need, really, for continuous adjustment to meet a continuously changing world economy.

But in areas like the environment, like terrorism, like international organized crime, it's important that the leaders themselves focus on these issues and, in essence, charge their national governments, their administrations to come to grips not just by themselves, but in cooperation to deal with what are, after all, international problems. What we would anticipate is a fairly lively discussion on these kinds of issues and a charge to specific expert groups to deal with problems, to deal with crime issues that cross national boundaries, and to be able to produce some concrete measures over the course of the next year or proposals for measures to deal with those problems.

If I can sum up, this is a step forward, but it's an important step forward. It's almost an unprecedented occasion, I think, certainly within the last 15 or so years, for leaders to try to step back and to say, where do we need to take some action now and how can we think about an ongoing agenda for reform, which necessarily is going to involve more discussion, bringing in governments from the rest of the world and operating within the institutions themselves.

But I think what you'll see at Halifax is a resolve to address these issues in an ongoing basis. I think you will see a financial stabilization package which ensures that the United States need not be left in a position of being the lead or the sole actor to deal with the financial crisis. And I think you'll see increased momentum for continuing these kinds of changes and these sorts of reviews on an ongoing basis.

Q: Dan, I want to talk to you for a second about your second point, this rapidly deployable emergency fund. In April, the Europeans, particularly the British and the Germans, had some reservations about who was going to pay for this. I wonder if this has been worked out already. And as sort of an adjunct question to that, Secretary Rubin mentioned on Tuesday that perhaps you are going to head up the rising Asian countries. And I wonder if there's been any discussions with them, whether they've supported this idea and whether they're going to be forthcoming with additional funds.

ASSISTANT SECRETARY TARULLO: Let me give an initial response and then let Larry address it as he sees fit.

I think what we are seeing is a convergence of views among all the G-7 on the way in which we need to have an emergency financing mechanism and the need for being able to deploy additional resources.

I hasten to add that, as with everything in the communique that will come out next week, these are issues and matters and points which the leaders really do look at, and, thus, there are still gaps, there are still unresolved questions, and there is still need for the leaders to ratify what we at the working level have done.

But the short answer is there is a convergence, and I think that you'll see that reflected next week.

Q: And the agents -- have they been -- they won't be there, obviously, but have they been approached on this?

ASSISTANT SECRETARY TARULLO: Well, in the context -- there have been discussions, certainly, in the IMF context. But, Larry, you should address that.

UNDERSECRETARY SUMMERS: I think you certainly are seeing some convergence of opinion. It's important to understand the role of the G-7 in this and other contexts. It's a special group because it is the mature industrial democracies who have a whole set of common interests in global stability. But to address many of these issues -- the development issues, the question of financial emergencies -- that is done through other fora in which they are very -- play a very major role, but are not the sole actors -- the G-10, the IMF, the World Bank.

And so what the G-7 is able to do is express an opinion that provides -- has historically and will continue to provide very important guidance, but not to take final decisions. I expect that there will be, as I say, some convergence on both the G-7's own efforts and on their preparedness to mobilize -- and I think they will succeed -- support from countries outside the G-7.

Q: -- Mexico will play such a major role of the G-7, how do you visualize at this moment the Mexico situation?

UNDERSECRETARY SUMMERS: Secretary Rubin has really addressed that a number of times recently, and he's indicated that he is encouraged by the policy changes, the budget surplus, monetary policy that's resulted in a reduction in the money stock in Mexico and the signs that adjustment is taking place -- in particular, the move to a trade surplus and the more developments in markets. It's a long road in Mexico, but the signs recently have been encouraging.

Q: In previous G-7 summits, President Clinton has been able to boast about his progress on reducing the deficit. But this year you have a lot more of the action being taken by Republicans in Congress. Will that undercut his ability to take some type of a leadership role at the G-7?

UNDERSECRETARY SUMMERS: I think the President will go to this summit as the leader of the economy that has had the strongest performance in the G-7 over the last two and a half years, that has the smallest budget deficit in the G-7, and that every day shows its dynamism and its ability to compete around the world. And I think that will put him in a very strong position.

Q: On the point of the Asians are on board, I didn't get clear on what your answer is. Are they on board for this, or not? Have you made some kind of agreement or is that --

UNDERSECRETARY SUMMERS: At this point the G-7 is going to indicate the direction in which we'll move and the question of involvement of the other countries will be pursued through the appropriate fora.

ASSISTANT SECRETARY TARULLO: Let me supplement the answer to that by saying this is something that applies to all of the institutional recommendations and proposals. The G-7 is an important entity for giving some leadership and some direction to the global economy, but it's by no means the only relevant entity. And as I indicated, for each set of proposals we will be going to other countries and working with specific international institutions within the integrity of their own processes to try to realize these proposals and recommendations.

Q: Last year in Naples the President came in with a proposal to rev up a post-Uruguay Round of global trade talks, and that didn't occur. Is that suggestion going to be renewed in Halifax? Where do we stand on that? And, also, could somebody give us some indication of the bilaterals the President is going to have?

ASSISTANT SECRETARY TARULLO: On the issue of proposals for future trade initiatives, I think what you'll find is that, in fact, these proposals have been accepted. They've either been done -- there's been more attention given to financial services and other kinds of negotiations to try to make more progress and liberalizing services trade. That was an important element of our proposals.

We also -- we're very keen on trying to get international investment negotiations started in the OECD. As you may have seen in this year's OECD ministerial statement, we are moving quite forthrightly in that direction. So the major components of what we were proposing a year ago have actually occurred, or in some cases I think you may some reference to those components in the outcomes of the summit itself.

Q: But you don't foresee a new round?

ASSISTANT SECRETARY TARULLO: No, there was never a proposal for a new round of negotiations as such. There's no talk of which I'm aware of a new what would now be called WTO round of negotiations. These were some proposals for some discreet areas of liberalization and investment, government procurement and services which we continue to pursue and we think are very much worth pursuing. But that's a different thing from a large round of negotiations.

MR. BERGER: On the question of bilaterals, the President, in addition to time that he will spend with Prime Minister Chretien, will have two other bilaterals -- one with Prime Minister Murayama. As you know, we meet -- the two country's governments have agreed to meet twice a year. And so there will be a meeting between the President and Prime Minister Murayama.

That will be a general session reviewing a range of issues in the relationship -- clearly, political strategic issues involving North Korea and other issues on the strategic agenda. Clearly, on the economic side, I am sure the trade areas will be discussed, although I would emphasize this is not a negotiating meeting. There's no intent or expectation that they will be negotiating on trade disputes, including autos, although clearly, I'm sure, it will come up in the meeting between Murayama and Clinton and the range of other issues on our bilateral agenda.

The meeting with President Yeltsin will be a continuation of the discussions that took place in Moscow. It will be a brief meeting in which there will be some further discussion of both bilateral and European issues.

Q: What would be the political point -- I mean, the point of the political agenda from the U.S. point of view? What point --

MR. BERGER: At the summit?

Q: At the G-7 itself. Particularly, what kind of prominence do you plan to give to Iran?

MR. BERGER: There will be -- as you know, Prime Minister Yeltsin joins the summit after the G-7 meeting is over. He will join on Friday for dinner and then meetings on Saturday at which there will be some further political discussion. There will be political issues both at the 7 level and when Yeltsin is there. I would expect the President to raise Iran to be discussed and a very, hopefully, clear and strong statement the unacceptability of Iran's behavior with respect to terrorism and subversion of the peace process and the other issues that we have continually raised with Iran -- I suspect that the leaders will discuss that, and there will be some statement on Iran.

Q: What do you think -- the comment by Japan that they will not apply and embargo against Iran -- is it something that is a disappointment here?

MR. BERGER: Well, we will continue to urge our trading partners and the other leaders of the international economy to exercise the greatest possible restraint with respect to their trade with Iran. We believe that it is a regime that is the number one state supporter of terrorism, a regime that is sabotaging the peace process or seeking to in the Middle East, and not one that should be supported or reinforced by broad economic relationships, certainly in the nuclear area. And, in particular, we will continue to press our allies not only for general trade restrictions, but specifically with respect to concessional trade programs with Iran that gives them actually export credits or other kinds of financing that they could not otherwise get.

Q: You touched earlier on the constant goal at every one of these summits of more open and free trade with Asia. What kind of a backdrop is the current dispute with Japan going to provide when that discussion comes up?

MR. BERGER: Well, I think it is -- this is a President who goes to this summit with probably the most extraordinary credentials as a proponent of a strong multilateral open trading system of any President or any leader in recent history. This is the President who drove home the Uruguay Round after seven years, who initiated the idea of free and open trade in APEC, hemispheric free trade in this hemisphere. So this is an administration and a President whose commitment to a multilateral trading system, I think, is unquestionable.

As part of that, obviously, we insist that our trading partners open their markets. And where we have problems with closed markets, we've made it clear all along, including in the Uruguay Round, that we will reserve the right to try to take action within U.S. law to open those markets.

We've made a lot of progress with Japan on a number of issues. We've signed a number of agreements over the last two years. We have not made progress on the auto issue, the auto parts issue. It is a serious issue; we've been negotiating for 20 months. We would like to get back into substantive negotiations with Japan, but if there is no agreement by June 28, as the President and Ambassador Kantor have indicated, we will move ahead. I think that's perfectly consistent with a President who is insisting upon open markets.

Q: Again, what effect will that dispute, that current dispute, have on this area when it comes up at the summit table?

MR. BERGER: I don't think it will have -- as I say, there will be no negotiations on autos at Halifax. That will be -- those issues will be dealt with by our USTR and by Miti. There may be some technical discussions that take place next week around Geneva. Hopefully, there can be further substantive discussions after Halifax. This will not be on the agenda at Halifax, and I don't expect it to divert from the fundamental objectives that Dan and Larry and others have laid out.

Q: Are you concerned -- and perhaps Mr. Summers can respond -- about Japanese retaliation into these sanctions? And there's some concern in the bond market that perhaps the Japanese will withhold from buying U.S. Treasuries in retaliation. Are you concerned about that?

UNDERSECRETARY SUMMERS: No, I don't think that is a serious concern. As we've said often, a more open Japanese market and a reduced Japanese current account in balance would make an important contribution to the healthy evolution to the world economy.

THE PRESS: Thank you.

END 11:45 A.M. EDT

William J. Clinton, Press Briefing by Deputy National Security Advisor Sandy Berger, Assistant Secretary Dan Tarullo, and Undersecretary Larry Summers Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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