Press Briefing by Secretary of State Warren Christopher and Secretary of Treasury Bob Rubin

The Briefing Room

11:57 P.M. EDT

MR. MCCURRY: Good morning, everybody. I think it is useful to keep in mind as President Clinton heads to his third summit meeting of the G-7 group that, as he's often said, in order to be strong abroad, America really needs to be strong here at home. And it is, no doubt, true that the very sound economic and budget policies that the President has pursued over the last two and a half years have helped build that foundation upon which the President goes to Halifax to be in a strong position to make arguments about the necessity of American leadership in building global prosperity using the economic architecture that is available in this post-Cold War era to make the world a more sound and more prosperous place for all citizens.

The President's speech tonight, he believes, will contribute to the argument that he makes often in front of his counterparts in the G-7 that America is restoring fiscal discipline to its own economic and budget affairs. And that, in turn, allows America to be in a stronger position as it exerts its leadership on the world scene and in the global marketplace.

We're not, obviously, here now to talk about that, but that is a part of the context in which the President journeys to Halifax. So I would ask you in that spirit, knowing how thoroughly compliant you all are, that we try to confine our questions for Secretary Christopher and Secretary Rubin to the agenda that will be addressed at Halifax. There will be ample opportunity later today to talk about some of the issues in the news.

No deal, Helen says. (Laughter.) Not unpredictably, an objection is heard. But if you can respect both the Secretaries' time and their brief that they have here today.

We're delighted to have Secretary of State Warren Christopher and Secretary of the Treasury Bob Rubin here to add one more element to the briefing we're doing in the -- advance of the G-7 Summit. I'll turn it over to, first, Secretary Christopher, and then Secretary Rubin, and they'll take questions.

Thank you.

SECRETARY CHRISTOPHER: As Mike said, I'm not here to talk about the budget. Secretary Rubin and I on Thursday will accompany the President to Halifax for his third summit with the leaders of the G-7 nations. This summit, as the preceding summits, will address an array of economic and security challenges that require some global thinking and global strategies.

Most fundamentally at the summit, the President will continue to lead the effort to build a new global economic architecture, which has been one of his most important international missions. His overall objective, of course, has been to open and modernize the world's economic system and to expand it by integrating with it our former adversaries.

With the completion of the Uruguay Round, NAFTA, and the open trading commitments which were taken at APEC and then at the Miami summit, I think it is fair to say that the President has built the most significant record of accomplishment in the international economic arena in opening up international markets of any President in half a century.

At Halifax, we'll look for progress in three broad areas. First, we'll seek to strengthen our ability to address new challenges in global financial stability, such as the financial crisis in Mexico. Secretary Rubin will address this important topic in more detail.

Second, we'll follow through on an initiative that President Clinton proposed at last year's summit, namely to reform international economic institutions, especially those responsible for development and environmental issues. And, third, we will seek to improve international issues on new security challenges, such as organized crime, terrorism and nuclear smuggling.

The political part of the summit, which is traditionally on the second day, will also give us the opportunity to address several areas of continuing concern, especially Bosnia, the Middle East, and reform in Russia and Ukraine. The President will also hold important bilateral meetings with President Yeltsin and Prime Minister Murayama.

The need to revitalize the international institutions is a basic principle of our foreign policy. In this respect, the United States and the other G-7 nations share a strong interest in an effective and efficient United Nations. We expect the summit leaders to address the consolidation and streamlining of the United Nations economic, social and environmental organizations. They will consider what role these institutions should play in light of changing world conditions and in light of the creation of new institutions such as the World Trade Organization.

Most of the economic issues at the summit will be dealt with at the G-7 level. As there was last year, there will be a 7-plus-1 discussion on political issues which Russia will participate at the same level of engagement as they did last year. The summit Chairman's statement will reflect our consensus, together with Russia, in a number of key areas, beginning with our shared security challenges.

In the wake of the bombings at Oklahoma City and the World Trade Center, as well as the recent incidents of nuclear smuggling, it is absolutely clear that problems like proliferation and terrorism and organized crime intersect to pose a clear threat to our society and our nation's security.

In Naples, the leaders addressed the threat of nuclear smuggling for the first time. Now in Halifax, we'll urge that we develop concrete plans to develop systems of control, accounting and fiscal -- physical security for nuclear materials, as well as to our expand our cooperation with other nations and customs, intelligence and law enforcement.

We must also seek to resolve -- seek to reinforce our resolve to defeat terrorism. The summit nations must work closely together to ensure that terrorists have nowhere to raise funds and nowhere to hide. We will be discussing measures to deter and investigate terrorist acts. We must be just as determined to combat organized crime which breeds corruption and undermines emerging market democracies.

The G-7 nations should cooperate to reinforce organizations like Interpol and the Financial Action Task Force, and to exchange vital information and to cooperate with other countries toward that end.

As always, the summit will deal with a number of important regional issues. We hope the leaders will reaffirm the support of the G-7 and Russia for the Middle East peace process and call for an end to the boycott against Israel. We will need to discuss the full implementation of the security council resolutions against Iraq and Libya.

The summit should also review Iran's record of terrorism and the backing of radical groups that seek to destroy and undermine the Middle East peace process. The President also intends to raise our grave concerns about Iran's nuclear ambitions

We also expect the summit's Chairman's statement to endorse the agreed framework between the United States and North Korea as the best way to achieve a non-nuclear Korean Peninsula.

I want to welcome the agreement achieved today with North Korea in Kuala Lumpur in Malaysia. That is a very important step forward. Under the agreement, the KEDO Consortium will take over direct negotiations with North Korea to implement the lightwater reactor project. The effect of this agreement is to confirm the central role of the Republic of Korea in the project and to confirm the South Korean origin of the reactors.

Let me say that this agreement reached in Kuala Lumpur opens the way to further implementation of a framework agreement, and, very important for our security, continues the freeze of the dangerous North Korean nuclear program.

I want to compliment the negotiators. It was a first-rate job of negotiation, and I think it moves this process a very important step forward.

In our first two years in office, these G-7 meetings have been very important in setting a global agenda and enforcing action. American leadership was important in Tokyo in mobilizing assistance to Russia and providing a strong impetus for the completion of the Uruguay Round. Our leadership last year in Naples was important in spurring our efforts to back reform in Russia, as well as in Ukraine. I think it will be equally important this year in advancing the agenda that I have outlined here very briefly today.

Now Secretary Rubin will elaborate on the financial and economic aspects of the agenda.

Bob?

SECRETARY RUBIN: Thank you, Chris.

As Secretary Christopher said, let me focus for a few moments, if I may, on the economic side. Halifax is the opportunity for the leaders to discuss the global economic challenges that are absolutely critical to our economic future -- jobs, increased standards of living for Americans, for all the members of the G-7.

It is an ongoing process. There was NAFTA and GATT, WTO, our G-7 involvement, our discussions with Latin and South American leaders about trade and development, similar discussions with the leaders of Asia and the Pacific. Halifax is very important, but Halifax is part of a process of meeting the great challenges of the global economy.

Let me briefly review these challenges, if I may. First, dealing with the problems that can arise in the vast and rapidly moving global financial markets; second, integrating the developing and transitioning world into a global economy by promoting reform and growth; and, third, continuing trade liberalization.

I believe in Halifax we will reach broad agreements on the principle of more timely disclosure of national financial information. That is a primary lesson of the problems that transpired in Mexico earlier this year. Disclosure is at the heart of the regulatory system in the United States, and we believe that disclosure could have an equally powerful effect if it is placed at the heart of the global financial markets.

In conjunction with seeking greater transparency, there will be a request to the IMF to develop an enhanced capacity for economic surveillance. In addition, I believe there will be general agreement on the requirement to rapidly mobilize larger amounts of multilateral conditional financial assistance than is now available, and from a broader array of countries. The United States clearly cannot be the lender of last resort.

There will be discussion of a cautious exploration of methods for an orderly working out of international debt crises and broadening the class of creditors at the table in a world where creditors are no longer half a dozen or a dozen banks, but rather the vast array of institutions that today invest in international securities.

There will also be discussion of greater cooperation amongst financial regulators and supervising financial institutions and financial instruments with respect to problems that can arise from the markets themselves.

There will be discussion of World Bank reforms to continue the emphasis on women's education, the environment, health, supporting the private sector and continued internal reforms and transparency at the banks themselves.

One final note: With the President's leadership, we are going into this G-7 meeting with a strong two and a half year economic record, despite current softness. Inflation is relatively low. The deficits our G-7 partners criticized us for so long have come down substantially. Our deficit to GDP ratio is now the lowest in the G-7, and we've had good job growth and job creation. I believe it is important that other nations consider steps that would sustain their expansions.

Meanwhile, we are continuing to work on our budget deficits and the other factors critical to a healthy economy, as the President will discuss in his budget address this evening.

Thank you.

Q: Why all the urgency behind that balanced budget speech tonight?

SECRETARY RUBIN: Oh, I don't think there's any urgency at all. The President has been involved in a lengthy process of focusing on the trade-offs with respect to all of the factors that will determine what kind of economy we are going to have in the year's ahead, job increases, increases in standard of living, and this is the fruit of an enormous amount of work about what we need to do for our economy.

Q: -- talking about --

SECRETARY RUBIN: He will be addressing that this evening, and I think you will find it of great interest -- and very thoughtful.

Q: If it's so important why wasn't it done in the first place? Why wasn't it done earlier? Why now?

SECRETARY RUBIN: Because he was committed to addressing this in an exceedingly thoughtful fashion and to look at everything that was relevant to how our economy performs, and then to put together his budget when he had completed his review. And that's what he has done now. And I think when you listen to him tonight, what you will hear is a man addressing in exceedingly thoughtful fashion the requisites for continued economic growth in this country.

Q: Secretary Christopher, can you tell us, does the President have anything new to say about Bosnia, any new initiatives? Have they gone back to the status quo ante? Are we going to get the hostages back? Where does it really stand now? There seems to be a real -- last weekend all the stories were that everything was on hold.

SECRETARY CHRISTOPHER: There are four or five questions there, but let me say that --

Q: It's all one question.

SECRETARY CHRISTOPHER: Well, the decisions that were taken in Netherlands last week are the same ones that we're being guided by now. That is that UNPROFOR will stay in Bosnia. That's a courageous decision taken by the British and the French. UNPROFOR will be strengthened through a rapid reaction support which the United States strongly supports.

I talked with my colleagues, the Foreign Minister of France, Mr. De Charette; and Foreign Minister Hurd this morning, of Great Britain, to assure him of our support for that, and we'll be working together on that project. But we'll also be renewing our efforts to seek a peaceful solution.

Tomorrow I'll be meeting for breakfast with Prime Minister Heris Silajdzic of Bosnia, and then later in the day with Carl Bildt, who is the new negotiator for the European Union. I'm sure that Mr. Bildt, who has a distinguished reputation, will take an important role in trying to move the negotiations forward.

So, essentially, this is nothing new that I'm saying here now, but the essence of it is -- UNPROFOR will stay; UNPROFOR will be strengthened. We hope and expect the hostages will be released promptly; they never should have been taken, and they ought to be released right away. And we will continue to seek the elusive but extremely important goal of a negotiated settlement, for that is the only sensible outcome to this tragic conflict.

Q: Why do you think the Serbs are still holding about 16 U.N. personnel? Do you think they're still trying to blackmail the U.S. and the European allies?

SECRETARY CHRISTOPHER: Well, I hope they don't do that. They've been releasing the hostages sequentially. They promise to release all of them. President Milosevic has indicated they will all be released, and they certainly should be, and I hope they will be.

Q: Secretary Rubin, since Mexico is high on the agenda, can you tell us when do you expect that the United States will renew its exports to Mexico? And what are your expectations this year for the recovery of Mexico, the economic recovery?

SECRETARY RUBIN: We think that Mexico has adopted a --and I've said this -- we've said many times -- adopted a very sound and politically courageous program. They are doing the things they need to do. We are very encouraged by the signs that we see, and we think the prospects for Mexico are quite good.

We, meanwhile, have put out an announcement, I think it was a couple of weeks ago, saying that we have $10 billion of additional assistance available if needed, and assuming Mexico continues to meet their conditions.

To get back to Halifax, for the moment, what is so important about -- one of the many things that's important about Halifax is, from Mexico the world learned that these very large global financial markets that are so important to economic development around the world can also from time to time create problems. And at Halifax the leaders will be considering what kinds of measures can they take that will be preventive -- that's transparency and surveillance -- and what kinds of measures can be cured if problems develop -- and that's the enhanced financing mechanism.

Q: But do you think that the plan of the United States and the front is working, the backing is working, which is also what this G-7 is about -- the backing that they have to give to --

SECRETARY RUBIN: We believe that the signs in Mexico are very encouraging. And we are very encouraged by the prospects.

Q: -- now the likelihood of real deficit reduction almost guarantees, as the President is now coming on board in a strong fashion, it seems, is it now incumbent upon the Federal Reserve to take a second look at interest rates since we may have a fiscal drag?

SECRETARY RUBIN: The President has always been on board. In 1993, after roughly 15 years or thereabouts of increasing deficits, we put in place a powerful deficit reduction. The President has been the national leader on deficit reduction. And as he will discuss tonight, he is now going to discuss the next --

Q: --

SECRETARY RUBIN: Oh, that's not true -- A, continued deficit reduction; and, B, as he said in his remarks around the budget that we put in, the next major step was in the area of health care, which are the only health -- only expenditures on the budget side increasing more rapidly than the rate of inflation. And he is now continuing his position as the one political figure we've had who really has done something about the deficit.

Q: -- propose this --

SECRETARY RUBIN: Why don't you -- may I make a suggestion? Secretary Christopher and I are to discuss what really is very, very important, which is Halifax. The challenges of Halifax are going to determine what kind of economies we have in the world.

Q: I want to ask about that G-7 summit --

Q: What steps are you asking your G-7 allies to take to sustain the economic growth that we have seen?

SECRETARY RUBIN: There is a slowdown in the G-7 nations. And what we're going to be saying is that we really have, since President Clinton took office, addressed the issue that we were most criticized about which was our enormous deficits. We now have the lowest deficit-GDP ratio in the G-7. And we think each of the nations should look to its own fundamentals and do what it thinks is necessary.

I think it's fair to say, because we've said this before, that in Japan where you have now very low growth -- possibly no growth, depending -- and falling prices -- you actually have deflation now -- that macroeconomic stimulation would seem to be an appropriate measure to be taken.

Q: -- budget stimulus from Japan. Are you looking to interest rate cuts from Germany?

SECRETARY RUBIN: I think each nation should look to its own economic circumstances and decide what -- just as we are doing and as the President has done very forcefully. I think each nation needs to look at its own economic circumstances and determine what it needs to do to continue to have solid growth and moderate inflation.

Q: Secretary Rubin, one of the questions -- one of the things that we were told this morning about the so-called urgency for the President to deliver this budget address was its effect on the other attendees at the G-7. Can you tell us in what area this is going to have influence other than to bolster Mr. Clinton's image as someone who is concerned about the deficit?

SECRETARY RUBIN: I don't think it's a matter of image at all. I think the President has been, as I said a moment ago, a forceful leader in bringing this deficit down in this country. We projected something like five percent of GDP at the end of the last administration; it's now about 2.7 percent, heading south. And this discussion tonight will continue that process.

He has, as Secretary Christopher said, he had at the Tokyo summit a position that no President has had in a long, long time -- he was able to go to the Tokyo summit as a President who was attending to the affairs of his own country and then speak to the other countries about attending to their affairs. That will continue to be the case at the summit we're going into.

But this announcement tonight, the discussion he's going to have tonight, is not something that was done in a hurried basis. This was a function of an enormous amount of thought on his part about what is necessary for economic growth in this country in the years ahead.

Q: -- record, theoretically, going into this summit, he would have still had that stature as one leader who wanted to cut the deficit. So why was it important to come back with something like this before he left for Halifax? Is there some specific reading you're getting from the other participants, or some specific proposal?

SECRETARY RUBIN: No. He felt that, number one, he wants to make sure that we do not run into a train wreck at the end of this year, and he felt it was very important to assert his leadership. And, secondly, he has continued, as he has done ever since he took office, to focus on what we need to do for our country, or for our economy over the long run -- increasing jobs, increasing standards of living. And having now gone through that process, he was ready to address the nation.

Q: Can you explain to us why he was not capable of doing all that thought and going through that process in time for February when he made his original budget proposal?

SECRETARY RUBIN: Clay, I think that he presented an exceedingly thoughtful budget in February. But the budget process, as you know from having watched it now for some time, is a process that moves through time. And as this process has moved through time and he has continued to think about the factors that affect the United States economy, what needs to be done, he has moved the process along, and the results of that thinking is what he will be discussing this evening. And I think what you will find is a very, very thoughtful discussion and weighing and balancing of all of the factors that will determine what kind of economy we're going to have in the years and decades ahead.

Q: He was also expressing his concerns about Medicare and health care costs last year when he was putting the budget together --

SECRETARY RUBIN: That is correct. And as you will recollect, we came forward with a comprehensive health care program. People may not have liked all aspects of it, but the opponents, instead of coming to the table and trying to work something out, defeated it.

So what he said this year was, I'm going to give you the parameters, I'm going to give you the conditions, and within those conditions, we need to get a control of the federal health care entitlements within the context of health care reform; it's got to be done on a more step-by-step basis. Since my leading didn't work -- since my going ahead last year didn't work, let me give you the framework, let me give you the policy framework; have Congress come back.

Let me say that he's going to discuss a lot of this tonight. We're going to have days and days to discuss this. Halifax is really critically important to what this country's going to be like in the years ahead. And you've got the two of us here. I'd recommend we get back to Halifax.

Q: In terms of Bosnia, what kind of concrete statement do you expect the summit to produce? And also, do you expect the summit to take up the war in Chechnya, the fighting in Chechnya?

SECRETARY CHRISTOPHER: Well, with respect to Bosnia, I would expect the leaders on the so-called political day, the second day of the summit, to discuss that. And I would expect the Chairman's statement after that to address Bosnia in pretty much the terms that I have here -- the importance of UNPROFOR staying, the importance of strengthening UNPROFOR, and the importance of seeking a negotiated settlement in the new context that we're in.

Q:

SECRETARY CHRISTOPHER: With respect to Chechnya -- no, I would not anticipate -- I would not anticipate that this summit would break new ground on Bosnia. But when the leaders meet together, one of the reasons they meet together is to have a free-flowing and informal conversation. So I don't want to rule out some action along those lines.

As you know, the President will be meeting with President Chirac tomorrow, and I'm sure that Bosnia will be a subject of that meeting. But, generally speaking, we're on course with respect to strengthening UNPROFOR, assembling a reaction force. We're working together with our allies with respect to a U.N. resolution which will reflect our support for that rapid reaction force. I think that's the context in which Bosnia will be addressed.

With respect to Chechnya, as I've said before, I think that circumstances like Chechnya affect, at least in part, the degree to which Russia will participate in these G-7 meetings. And I -- so it may come up in that connection during the final day of the summit.

Q: Secretary Rubin, you mentioned --

Q: -- has to be addressed before Russia or those types of issues can be addressed before they're allowed into a G-8?

SECRETARY CHRISTOPHER: It's never been a threat on our part. It just is a statement of reality that I think that the extent to which Russia participates in Western institutions is bound to be affected by their conduct in such circumstances as Chechnya. As you know, it's affected their acceptance in the Council of Europe. It's affected certain actions that were planned to be taken by the European Union. And I think it will inevitably affect that and other comparable issues and affect, in part, at least, their role in the G-7/G-8.

Q: Mr. Secretary, do you believe then that the Russians can be more effective in Bosnia?

SECRETARY CHRISTOPHER: Well, the Russians are a part of the Contact Group. We've always thought it important to involve them in these negotiations because of the influence that they have with President Milosevic of Serbia. And I continue to think that that's the proper strategy. And so we have involved them in our discussions, and we will, no doubt, involve them in the discussions both at the foreign minister level, as well as at the leader level in Halifax.

Q: Do you think they can be more effective?

Q: Do you think they've been doing enough, Mr. Secretary?

SECRETARY CHRISTOPHER: I hope that they will continue to use their influence and be even more effective in dealing with President Milosevic. He has shown in connection with the hostage matters that he does have influence with Mr. Karadzic, and I think that should encourage the Russians as well as others to try to put whatever pressure they can on President Milosevic to help achieve a negotiated settlement here.

Q: Secretary Rubin, you mentioned the economic slowdown in the G-7 countries. But aren't you going to aggravate that problem, particularly in the United States, with further fiscal tightening? If you look at recent economic indicators, a lot of the slowdown seems to derive from government spending less. If you reduce deficits further, aren't you going to contract -- have a contracting effect on the economy?

SECRETARY RUBIN: I don't think so. I think the slowdown is a function of inventories having built up and now coming back off. Interest rates, market-driven interest rates -- let me add, market-driven interest rates went up. That has an economic impact. They've now come back down. Our outlook, as you know -- I think it's very much my outlook -- is that the most probable outcome is that we will get back to a soft landing; that is to say, solid growth and moderate inflation after a period of softness.

If, in fact, this country can really get itself to keep on the road -- keep on the road that the President established in 1993, one of fiscal discipline, I think you can expect to have interest rates that are compatible with the continuation of growth.

Q: Secretary Christopher, how concerned are you about the overflow of the trade negotiations into the security relationship with Japan? And do you feel that the Japanese decision to not back up the United States on the embargo with Iran is the first sign of a disintegration of that bilateral relationship?

SECRETARY CHRISTOPHER: Not at all. I think the overall relationship with Japan is a very healthy one on the political side, on the security side -- for example, the common agenda we have with them as well on many issues such as the environment -- all of those things indicate a very strong relationship between the United States and Japan. We think that the economic side of that relationship should be strengthened so as to bring it into the same good situation as the other aspects of our relationship. But I do not think that these economic tensions between the two countries will affect the remainder of the relationship.

With respect to Iran, I think quite the opposite is true. I think the fact that the United States took a leadership position with respect with Iran, basically cutting off all of our trade with Iran, has been recognized around the world as an indication of the seriousness with which we view this problem. I would expect the leaders at Halifax to discuss the role of Iran and terrorism and undermining the Middle East peace process as well as our concern about their nuclear program.

I see Japan continuing to stop granting of the soft loans or concessionary credits to Iran, perhaps as a reflection of the United States' leadership. So I certainly don't see any disintegration in the overall relationship.

When the United States took the very bold and courageous action to cut off its trade with Iran we did not expect the rest of the world to comply immediately or do the same things that we're doing. But we hoped to strengthen their resolve to ensure that there's no nuclear cooperation, to ensure that they do not grant concessionary credits, to ensure that they do not sell weapons. Over time we hope they'll come into consonance with our overall program but this is a long-term effort we have to try to convince the rest of the world of our strong concern about what Iran is doing and what it means to the rest of the world.

THE PRESS: Thank you.

END 12:30 P.M. EDT