Press Briefing by National Security Advisor Tony Lake and National Economic Council Advisor Bob Rubin

The Briefing Room

11:25 A.M. EDT

MR. LAKE: Good morning. I'm Tony Lake and this is Bob Rubin, and we are, I believe, on the record. Dee Dee, are we not?

MR. RUBIN: Well, since it's televised, it's pretty hard to -- (laughter.)

MR. LAKE: When I go like this, I'm on background. (Laughter.)

What we thought we'd do is, I will run through the trip in general terms as briefly as I can. And then Bob will concentrate more on the G-7 Summit in Naples and give you an overview of that in somewhat more depth. And then we can discuss it with you.

This is the President's third trip now to Europe this year. And during his stops in Riga and Warsaw, Naples, and then in Germany, he will be emphasizing again his vision of a broader, integrated Europe and the historic opportunity that we have before us to achieve such an integration in both security and economic and political terms -- the integration of a secure and democratic Europe.

His first stop will be in Riga. This is a truly historic stop. For 50 years, the United States refused to recognize the Soviet occupation of the Baltic countries, and this will be the first time that an American President has visited free soil of the Baltic nations.

He has, in many of his conversations -- in just about every conversation he has had with Russian leaders -- emphasized the importance of a complete Russian troop withdrawal from the Baltics by August 31st. And he will be discussing that, as well as ways in which we can integrate the Baltic states into the West in both economic and security terms.

In Warsaw, he will be again speaking of integration. Poland, of course, is a key to a strategy of enlarging the community of market democracies in Europe. He will be addressing a very broad agenda, both of security issues, Poland's very important participation in the Partnership for Peace, and economic issues, both is how we support market reforms in Warsaw but also on how we can work to help them overcome the stresses of the transition to a market economy -- social and economic stresses.

And in security terms, this will be a very important part of our showing the countries of Central and Eastern Europe that they can look to the West in confidence rather than having to look to the East in concern. And that involves, of course, both our support for democracy and economic reforms in Russia and elsewhere, but also reassuring the Pols and others in Central Europe that we do not see a kind of a gray zone in Central Europe in security terms between East and West.

As the President has said before with regard to the expansion of NATO, the issue here is not whether NATO will expand, but when and how. And we have been very pleased with the progress of the Partnership for Peace -- now over 20 nations have signed on -- as a vehicle for that expansion.

Next is the NATO -- the G-7 Summit in Naples. And here Bob will be speaking to you more about this. I think what's particularly interesting about this summit is, first of all, that in its format it will be more informal, more opportunities for direct discussions among the leaders. This is a view that they expressed last year, and I think we're going to do it this year.

Secondly, for the first time, on the last day President Yeltsin will participate in the discussions of political issues as a real participant. Last year he came as a visitor, as a guest at the G-7 in Tokyo. This year, for the political discussions, he will be a full participant.

Q: Tony, I was thinking that they had actually adjourned the formal G-7 meeting, and then Yeltsin came to visit.

MR. LAKE: That's right, he was there as a visitor. Now he is a participant in the formal political discussions on the last day. We can come back to that later.

Third interesting point, I think, about it is that last year's G-7 was, in important respects, an opportunity to try to create an impetus to cleaning up an existing agenda; for example, to help complete the GATT Round -- and that happened. This year's summit -- and Bob can speak about this in more detail -- is an opportunity to frame an agenda now for the future, even into the next century.

It will focus on four general areas: First, the issue of growth. Last year there was a call for more growth, an effort to create a strategy for growth. And that growth is taking place, led largely by the growth in our own economy. We'll also discuss the relationship in an integrated way among growth, jobs and trade -- and all three are very closely related -- looking at, for example, how you get more jobs created through growth. That comes not only through the growth itself, but through greater labor mobility. And that mobility, in turn, that kind of labor force that can compete and win in a global economy is very important if you're going to avoid the protectionist pressures that come from a labor force that is not able to compete flexibly.

Secondly, it will address questions of economies in transition; with a particular focus here on Russia and Ukraine. In Russia, in fact, progress has been made since the turn of the year --inflation is down, deficits are coming down. In Ukraine we have made real progress in the trilateral nuclear deal the President helped to put together last January. Now, we're around 300 warheads have been transferred from Ukraine back to Russia. We'll be talking about more assistance for Ukraine, multilateral assistance, as reform is made, accomplished within Ukraine. And we'll be discussing the question of Chernobyl.

A third area that will be addressed is the question of an infrastructure, a global infrastructure, for the 21st century; Bob can say something more about it. And the fourth area would be the area of sustainable development and the environment, which the President addressed last night, for example. That will include issues of debt relief, the Cairo conference, et cetera.

There will then be a political declaration after the last day. For the first time, now, the Russians will join in, in a declaration on such issues as North Korea, Bosnia, the Middle East -- including the Arab boycott, sanctions against Iraq and Libya, Haiti, terrorism, crime, Nonproliferation Treaty, other issues.

And finally, the President then will go to Bonn and Berlin, where he will meet with Chancellor Kohl, emphasize the American commitment in Europe at a time of transition. Our partnership with the Germans, which has been extremely important, especially on addressing issues of democracy and the integration of Central and Eastern Europe into a broader Europe. And he will meet in a summit with the European Union leaders -- with President Delors and Chancellor Kohl. This will be the kickoff of the Germans' presidency of the European Union for the last six months of this year. And there will be at that meeting, I'm sure, discussions of growth and jobs and trade again, as well as foreign policy issues all coming out of the G-7 meeting.

MR. RUBIN: As Tony said, I'll expand a touch on the G-7 and also talk about a little bit about the relevance of some of this to the United States. But something struck me as I was listening to Tony, and that is that this has really been a joint enterprise. And I think one of the things that has helped us to focus effectively, and I think we've focused very effectively on these international economic issues, where you sort of get a nexus between economic policy and foreign policy, has been the fact that in this administration, the foreign policy team, the economic team, have been able to work together, in fact, have worked together, very closely and very successfully. And the result have been things like NAFTA, GATT, China MFN decisions and so forth.

If you think about it, there have been a very large number of international economic issues that could easily have given rise to all sorts of problems between the foreign policy and economic considerations. Instead, what you've had is an effectively melding together the points of view, successful handling, and I think very good decisions have been effectively implemented.

Let's turn for the moment to the G-7. The overall theme, as we see it, is global prosperity in the long run. As Tony said, the last G-7 was reenergized, and I think very largely the result of the President's approach to it. There were various successes that came as a result of -- came about as a result of the G-7 or flowed from the G-7. And now what we want to do is turn the G-7 into a focus or a forum, really, for focusing on global prosperity for the long run.

Tony's run through the four areas. I'll add a touch of detail to them. Before that, though, I think it's kind of interesting -- 1994 could very well turn out to have been the biggest year in international economics since the Bretton Woods Agreement 50 years ago. You've got the G-7; you've got the APEC conference coming up; you've got the Summit of the Americas, which is really implementation of the vision that the President announced with respect to NAFTA, which is a relationship with Latin America based on mutually beneficial trade rather than various other aspects of -- rather than the kinds of things that affected that relationship in the past. You have the 50th anniversary of the Bretton Woods Agreement. And you have the creation of a new international financial institution or economic institution, the World Trade Organization. And, of course, the passage of NAFTA.

As the President has said frequently in his speeches, this really is a new world. It's a world of a global economy. And you fundamentally have two choices. You can either try to protect the status quo, which he has said so often, as a path to stagnation, ultimately decline; or you can make change your friend, not your enemy. You can embrace change. And as he has so often said in his speeches, you can move forward with a constructive, forward-looking economic strategy, and that's precisely where he is, as you know. And that strategy, as you've heard many times, consists of fiscal order, which is deficit reduction; aggressive market opening, which is trade and export promotion; what he calls "empowerment," which is investing in the labor force, trading, education and the like; investing public investment in technology and infrastructure; and then health care reform and regulatory rationalization.

You put it all together and it is a powerful economic strategy designed for the world that we now live in. It's forwardlooking, and it's an effort to make this country productive and competitive so that we can be -- have the kind of economic future we want in the kind of global world that he envisions, the global economy that he envisions.

Although the overall purpose of this is to position us for the long-term, it has had rather dramatic effects in the hear and now, in the immediate. Take '93 and 1994 together, we've had the highest rate of growth in the G-7. Roughly 75 percent of all growth in GDP during that two-year period -- '93, '94 to date -- has occurred in the United States. Virtually all the new job creation in the '93, '94 period had occurred in the United States, roughly 3.1 million new jobs in the private sector. We have the fastest rate of growth in exports in the G-7 in the United States -- about 8 percent, something like that, this year.

In 1995, we are projected to have the lowest deficit-toGDP ratio in the G-7, which compares dramatically with where we were two, three and four years ago. We have the fastest growth rate for private investment in the G-7. And we have the lowest rate of inflation in 20 years.

As far as the outlook is concerned, Alan Greenspan testified, I think it was the week before last, that he felt that the outlook in the -- it was a paraphrase, not a quote -- the outlook in the fundamentals are better than at any time in many decades. The blue-chip indicators came out, I think it was on June 10th, and projected solid growth, moderate inflation for this year and next year.

Let's go back to the G-7 for a moment. As I said before, it is our view that a reenergized G-7 can focus on global prosperity for the long-term. It can be a forum over the years to focus on the issues that are most relevant to that theme in any particular year, or looking forward from any particular year.

This year, we want to segue from the Detroit Jobs Conference where, for the first time, labor and finance ministers got together to discuss, as Tony said, the combination of macro- and microeconmic factors and economic growth. This upcoming G-7 conference will be the first time that the G-7 leaders have discussed microeconomic economic policy at a G-7 conference. It's an opportunity both to exchange views and to exchange experiences; and also to figure out ways that we can work together in these areas to the extent that it's relevant.

On the trade area, while GATT is obviously an overwhelming accomplishment -- and of course, we still have the question of getting it enacted in this country this year. As you know the President is deeply committed to doing that. We also feel it's appropriate to begin discussion about using the G-7 as a catalyst for further trade liberalization. There's nothing more specific than that. But on the other hand, we think that's an important thing to do.

On infrastructure, there will be focus particularly on telecommunications as the key infrastructure development in the years and decades ahead; and within that context, on the information highway. This is also the 50th anniversary of the World Bank and IMF, and we are going to suggest that those two institutions look at themselves, at their mission, at their operations, review those, as would be appropriate for any institutions that have contributed so greatly to world growth over the years, and then report back to whoever they think is appropriate to report to.

Sustainable development, the Cairo conference -- that is an issue the President feels very strongly the issues involved in sustainable development are issues for all of us. The Cairo conference, as you know, is coming up. The thought is that the leaders, in their discussions, can set a framework for that, provide impetus for it and try to provide the broadest possible approaches to the population issues at the G-7.

To conclude, we do believe that last year's G-7 Summit was a reenergization of the G-7 process, and that G-7 can now, in going forward, be a forum for discussion of the issues that relate to global prosperity over the long run; a place for the leaders to get together once a year, take stock, and work with each other cooperatively in a global economy.

With that, we'd be delighted to respond to anything you all would like to discuss.

Q: You said you hoped that Poland could look with confidence to the West, instead of with concern to the East. How is that possible when they look to the East and see Russia in the same posture with regard to the PFP, roughly, that they are?

MR. LAKE: First of all, I think they have their own security stake in a Russia that is part of an integrated Europe; a Russia that is democratic; a Russia that is pursuing economic reforms. They have a tremendous stake, in short, in a Russia which is behaving, as democracies tend to do, in ways that respect the sovereignty and rights of its neighbors. So Russia coming into the Partnership For Peace is a good thing from the point of view of Central Europeans.

At the same time, we have made it clear that no other nation has a veto over the future membership of the nations of Central Europe in NATO over the coming years.

I think as they look to the East, and as they look at the progress that's been made in Russia, they should be somewhat reassured. And this is a part of the importance of the Russian performance now in removing its troops from the Baltics by August 31st, because that will send a very important signal to the other states in the region that Russia is, in fact, pursuing the policies that do create greater security.

Q: Tony, there have been a lot of doubts about Clinton's leadership and resolve on foreign policy. How do you see a trip like this addressing those questions, alleviating any doubts about the President?

MR. LAKE: Here I would refer you very strongly to the comments of European -- both European commentators and European leaders after the President's last two visits to Europe, which were very, very positive. The message that the President has been conveying about our longer-term purposes in Europe and the ways that we are pursuing them through the Partnership for Peace on the security side, through support for democracy everywhere, through support for economic reform, and quite an integrated strategy, has been very important to them and very welcomed to them, as was his performance at the NATO summit in January and in his meetings with the French and British and others -- Italians and others -- on the last trip.

So I would hope that the same view of the President that is taking hold in Europe can translate back all the more into the views of the performance of this President on foreign policy issues here at home.

Q: You mentioned addressing North Korea in the political statement. How do you hope that the summit will address that, number one? And do you expect that it will also address Haiti?

MR. LAKE: On the first question, I would expect that the communique will be as supportive as the international community has been of our efforts now to, in a very steady and careful and verifiable way, work with the North Koreans first to lock in, as we have done, we believe, their commitment to freezing the major elements of the nuclear program during these talks; and to pursue in the talks then a broad range of issues, including the nuclear issues both for the future and about what has happened in the past. And I think the communique will be very supportive of that, as all of the member governments have been as we have worked along. And we've been proceeding in very close consultation with them.

I would expect that there would be some discussion of Haiti and the importance of a reconfigured and somewhat expanded U.N. mission in Haiti. But I don't think there will be a lengthy discussion of it.

Q: Have you had any communications with the new Japanese government? And what do you expect on the U.S. Japan trade fund? Is there any hope now for the framework or are we just going to have to junk this and go to a different approach?

MR. RUBIN: No and no. No, we have not -- I have not certainly had any contact with the Japanese -- the new Japanese government. Have we? No.

I don't think so, Tom. I think what we need to do is continue -- and we actually have been working, even this very day, working with the Japanese pursuant to the framework agreement. And I'll repeat something Lloyd Bentsen said the other day, which is that over time, I think we remain optimistic that within the framework, well the framework of the framework -- within the context of the framework that we can accomplish -- make serious progress.

Q: Secretary Bentsen said yesterday that he believes that a strong dollar is good for our economy and for the global economy.

MR. RUBIN: Yes, he said a stronger dollar actually.

Q: Right.

MR. RUBIN: No. He said a stronger dollar --

Q: That's what he said. Given that statement, what, if anything, will the G-7 do to implement that policy?

MR. RUBIN: Oh, I think that, as is true with every G-7, there will be discussion -- I don't think there will be anything specific in the sense that you've just suggested. I think there will usual discussions of macroeconomic coordination, as there was at the last G-7, as you remember. And I think that's probably what we'll have -- the usual kinds of discussions of macroeconomic coordination, things of that sort.

Q: Could you just follow on that, Bob? Do you think a strong dollar or a stronger dollar is good for the U.S. economy?

MR. RUBIN: Aside from the question, Tom, of what you think the difference between those two are, I think I'll really stick --

Q: You made the distinction.

MR. RUBIN: No, no, I didn't. Lloyd Bentsen did. I was just making sure that his comment was accurately reflected in our discussion.

Q: Well, is there no distinction?

MR. RUBIN: I didn't say either was or wasn't. I was saying that what he said was that a stronger dollar is in the interest of the United States and the world, and I think that's right.

Q: Do you look for a commitment from the leaders to say that --

Q: Would we welcome a discussion of the dollar?

MR. LAKE: Excuse me, if I could just add one point on Japan, very briefly. We expect very quickly to be establishing contact with the new Japanese government at all levels -- no, but at all levels and very quickly because we do expect to work with them on all the issues that we've been working with the last government.

Q: Forty-eight hours so far, right?

MR. LAKE: No, actually it's not. They were just voted in. And in short, I expect that the President will be talking to the new Prime Minister soon.

Q: Would it be fair to say that in Japan or with the President's meeting, actually -- is there going to be any real substance discussed in their bilateral talks, or is it essentially going to be a get-acquainted session?

MR. LAKE: Well, obviously it will be a get-acquainted session. But I would expect, yes, that there will be discussion of important bilateral issues, including the framework discussions; because it is very important that we continue to work on these issues -- they matter. I would expect there would also be a very serious discussion of North Korea.

Q: What about on the national security, given the fact that the Japanese Prime Minister comes from a party which has been very unsympathetic, if not hostile, to the U.S.-Japan mutual security treaty? And the new Japanese Prime Minister is known for being very sympathetic to the cause of North Koreans. What is the administration's stand on that? Would the administration seek reconfirmation from the Japanese that they will stick by the alliance, and also come in front against the North Koreans?

MR. LAKE: I think rather than seeking reassurance here, I think we expect that that will be the case. Bear in mind that this is a coalition government, and that many of the most important ministries -- including the Foreign Ministry -- are held by members of the LDP. And in any case, I would expect that the Prime Minister's party would abide by existing Japanese commitments and treaty obligations.

Q: Tony, on the question of Korea -- since you were up there and can't get away that fast. (Laughter.) Do you expect that the communique would have anything to say about what will happen if the talks don't succeed and will specifically mention the word, "sanctions."

MR. LAKE: Frankly, I just can't tell you what the final text of the communique will say on this. But I would expect that it would be supportive of our position on this because it is a very important point. Throughout this whole process, the United States has been acting not only in the pursuit of our own security interests -- both long-term and in terms of the nuclear nonproliferation regime, but also our security interests in Northeast Asia -- but on behalf of the international community and pursuant to U.N. resolutions. And I think that the communique will be very much in that context.

Q: Well, is the United States seeking a reaffirmation of the need for sanctions if things do not go forward as you hoped?

MR. LAKE: Again, I think we need to work through the communique language. I am not implying that there is any division over this. I simply don't want, here, to start on this or any other issue talking about what the communique language exactly will say. I don't think that would be fair to our partners.

Q: Would it be realistic to assume that you could even begin to put the word "sanctions" in a communique with those partners?

MR. LAKE: I have no reason to believe that they would oppose that. But again, the issue before us right now, happily, is not the sanctions, but the third round of talks.

Our position on this has been very clear; which is during the third round of talks, we would suspend efforts at the Security Council to gain the sanctions. We have now agreed on the date -- July 8th -- for the beginning of those talks. And the South Koreans and the North Koreans have now agreed on the date for the first summit meeting in Pyongyang. We have seen nothing so far in North Korean behavior that would suggest that there will be any problem with entering into those talks.

Again, let me emphasize that during that period of a freeze on the major elements of their nuclear program, IAEA inspectors will be there to verify that, in fact, that agreement is being observed. And therefore, the issue right now is not sanctions, but during the period of the talks, the focus will be on the talks themselves.

Q? Can you talk about the trade agenda for a minute? Could you talk about the trade liberalization agenda? How is that going to work? What are the issues on this agenda? And how will other nations become involved?

MR. RUBIN: Yes, for the most part, I really don't have very much to say at this point. We have notified other nations of the view that this is something that seems worthwhile pursuing at the summit. There are no specifics yet. Mickey Kantor has been talking to his counterparts in the other G-7 countries, and there really is nothing more to report other than it is our view that you can use the G-7 as a catalyst for further trade liberalization beyond GATT.

And there really is nothing more to report, other than, I just spoke to Mickey before I came here. And he is continuing to talk to his counterparts as we see what will develop from that.

Q: After the meeting, would you expect a concrete agenda laid out at the meeting?

MR. RUBIN. I would think that it will be primarily -- I think it's premature, really, to discuss what will come of it, other than what I've just said, which is a discussion of using the G-7 as a catalyst for further trade liberalization.

Q: Mr. Rubin, on a macroeconomic side of things, last year the President had said -- I think it was in a speech at American University -- that when he went to the last G-7 Summit that he was going to say to Japan and Germany, okay, we've done our bit in cutting the budget deficit, now it's time for you folks to do your bit. Looking back now a year and a half later, have Japan and Germany done enough to stimulate their economies?

MR. RUBIN: Well, let me say in the first place, it's clear we are doing our part. And I think the President has taken enormous leadership in this country facing the tough political issues involved in getting this deficit down. And I think you very correctly said it, put him in a very different position than any President has been in a long time in terms of discussing macroeconomic coordination with the other parts of the world.

Europe clearly has created conditions which have allowed European interest rates to fall. I think German interest rates are going down by about 300 basis points, if I remember correctly, 350 basis points -- something like that. I would say that with Japan, we continue to discuss macroeconomic stimulation. And in Europe you have begun to see the effects of their lower interest rates. You know they now have a nascent recovery and we're very hopeful in that respect.

Q: Mr. Lake, one more question. Given that -- how much can we really get done at this summit? You have a couple of leaders with one foot out the door, you have a shaky coalition in Japan, President Clinton's poll ratings, numbers are down. How much can really get done in this meeting? And what kind of commitments can these leaders make given the political situations for a lot of reasons?

MR. LAKE: One of the wonders of democracy is that whatever the domestic political position of leaders, especially in a parliamentary system where things can move quite quickly, is that government's wonderfully are able to make commitments and abide by them. And we would expect that to be the case at the G-7.

Thank you.

END 11:57 A.M. EDT