THE WHITE HOUSE
Office of the Press Secretary
(Denver, Colorado)

---

For Immediate Release

June 21, 1997

PRESS BRIEFING
BY
SECRETARY OF THE TREASURY ROBERT RUBIN


The Convention Center
Denver, Colorado


4:41 P.M. MDT

SECRETARY RUBIN: Good afternoon, I'm Bob Rubin, United States Secretary of the Treasury. And I'll be joined in about four or five minutes by Dan Tarullo who, as you know, is the United States sherpa and was in the leaders meetings. What I'd like to do is to say a few words about the meetings today and about 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 help foster a stronger, healthier global economy and, by so doing, also very much contribute to the economic well-being of the United States. The United States is speaking at this summit from a position of solid credibility on economic issues as a consequence 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's leadership, the G-7 leaders have reached agreement on a series of proposals to help accomplish three major economic objectives: one, to promote growth in the G-7 industrial nations; two, to enhance global financial stability; and, three, to promote growth and economic reform in the developing and transitional nations.

To promote growth in the G-7 industrial nations, the leaders called for strong macroeconomic policies, increased trade liberalization, structural reform to increase jobs -- a matter that was discussed at great length at the finance ministers meeting -- steps to equip the least skilled in all of our countries to join the economic mainstream, and completion of a good WTO financial services agreement by year end.

To promote global financial stability the leaders endorsed a report of the G-7 ministers laying out a plan for greater cooperation amongst the supervisors of the global financial institutions that operate across international borders and a plan to improve financial regulations with respect to emerging countries' financial systems.

The leaders' final objective is to promote growth and economic reform in developing and transitioning economies, a group of nations which account for roughly 42 percent of United States exports. In that regard, the leaders agreed on a series of actions to fight corruption which is a major impediment to economic growth in developing and transitional nations.

The leaders urged all -- all -- of the OECD nations to fulfill their OECD commitments to criminalize bribery of foreign officials and to eliminate the tax deductibility of bribes. The leaders also agreed to increase the efforts of a financial action task force to fight money laundering and called on the international financial institutions to expand their recently increased activities with respect to combatting corruption.

In keeping with the initiative announced by the President this week, the leaders also urged a new emphasis on trade and investment in Sub-Saharan Africa, including both bilateral action and increased emphasis by the international financial institutions on supporting the nations that have themselves undertaken reform programs and opened their economies.

Let me conclude by emphasizing how important the G-7 meetings are to the economic well-being of all the nations involved, very much including our country. With millions of Americans working in jobs that are directly and indirectly affected by trade, and all Americans in their capacity as consumers benefiting from trade, our economic success is very much affected by the economic health of the global economy. Fostering a healthy global economy in turn requires the largest industrial nations to work together to address critical economic issues of the global economy.

The meetings taking place this weekend in Denver are an important step in the effort to promote global economic strength and to benefit the citizens of our nations, but also of all 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 in taking questions.

Any questions? Yes, sir.

Q You had said that there was a good or a lively discussion among the finance ministers about structural change. Can you give us a little bit more flavor of that discussion and some of the disagreements between the U.S. and the Europeans on that?

SECRETARY RUBIN: Yes. I don't think there were disagreements so much between -- in fact, there weren't -- between the United States and the Europeans. It was actually a very interesting discussion. It occurred in the context of what do the nations of the G-7 need to do if they're going to grow in the years and decades ahead. And there was a broad-based feeling amongst the Europeans that greater flexibility with respect to labor markets, removing disincentives to work, and matters of that sort were central to competitiveness.

And then the question was, what kinds of changes would you make and how would you go about doing it and what are the political obstacles and impediments to doing it, how doable politically is the achievement of such objectives. And it was really around those kinds of issues that we had our discussion. And while there weren't a long list of specifics, there was a lot of discussion about the importance of accomplishing these objectives and the political difficulty of accomplishing them.

But I must say also, I think a pretty much universal view 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 social objectives and meeting social needs.

Q The whole world is watching with great interest this Summit of 8. What good news or bad to tell the people of the Middle East and Africa about your summit, sir? And to be specific, was there any agreement to set a Middle East fund and stability for peace and stability in the Middle East, as President Clinton said that he will ask the G-7?

SECRETARY RUBIN: I can only speak for the finance ministers meeting, that's where I was, and at the finance ministers meetings, there was a lot of discussion about promoting economic growth and reform in Africa, centering around the initiative the President of the United States announced last week I guess it was -- maybe it was earlier this week; I've forgotten. At the meetings I was at there was no discussion about Middle East stability fund. But you'd have to ask Mr. Tarullo when he's here because that would have taken place at the leaders meeting and only the leader and the sherpa were at that meeting.

Q There's been a lot of talk at this particular summit with the leaders about the role of Russia. You talk about G-7; behind you is Denver Summit of the 8. How confident are the G-7 finance ministers that the progress on inflation and other things that the Russians are really crowing about is meaningful?

SECRETARY RUBIN: Well, we just had a -- Anatoly Chubays, who is, as you know, head of the economic team in Russia, joined us for lunch, and then after -- oh, about an hour after lunch I guess, Anatoly Chubays joined three of the official in the Treasury Department -- myself and Larry Summers and David Lipton -- to discuss just amongst the four of us conditions in Russia. And I must say, I think it's an encouraging picture.

They obviously have enormous challenges they're going to have to deal with -- these kinds of issues don't get dealt with quickly. But I think that there are signs of real progress. Clearly, inflationary conditions are better. They have worked out their issues with the IMF and that program is in good 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-year issue the other day in the private market on terms that I can tell you, as a former investment banking, I thought were remarkably favorable. And that's an expression of the views of the global capital markets with respect to their evaluation of what's going on in Russia.

All that notwithstanding, there are enormous challenges ahead. But I'd have to say, having now been involved in this process for four and a half years -- with Russia, that is -- that my sense was a team that was functioning well, that was making progress and that had a good sense of where they needed to go and a feeling, in themselves at least, that they were on the way toward getting there.

You noticed that the Duma had a first reading on a tax bill the other day and approved it -- at least in the first reading. I think this was a very positive report at this meeting.

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 of the challenges will be to complete the work of putting in place a legal system, including contract enforceability, so that there is reliability and transparency and predictability in the legal system, which I think is enormously important in terms of attracting foreign capital. Developing deep and liquid and transparent and reliable capital markets and markets in which people have confidence would be another major challenge, to list two.

Q Mr. Secretary, we understand the leaders will issue a statement on Hong Kong tomorrow. And I wonder whether the finance ministers discussed this issue with an economic approach? In other words, do you believe the transition of Hong Kong will affect the future trade relations between China and G-7 countries?

SECRETARY RUBIN: The finance ministers did discuss China and Hong Kong. Actually, it was quite an interesting discussion. I'd say that the gist of it was that Hong Kong is very important to China; it's very important to all of us because of its economic role in Asia; and that the Chinese -- at least it was the view of those there that the Chinese were extremely cognizant of the importance of Hong Kong and also the importance of maintaining the kinds of liberties and rule of law in Hong Kong that all of us believe are necessary if Hong Kong is going to remain an effective market center.

And there was also a feeling that Hong Kong as an open economy and also as an open society, it will be a two-way street -- that that will also affect in positive ways, China. And then, of course, as you say, the leaders will be speaking to this tomorrow.

Q In other words, the success of Hong Kong transition will not affect the future trade relations between the G-7 countries and China?

SECRETARY RUBIN: Well, you're saying if the transition doesn't go well? We did not discuss that. But, as you know, the United States has always taken the position that it's very important for China and very important for the rest of the world the transition does go well; and that if Hong Kong is going to remain the kind of economic and market center that it has been, it's requisite that the law remain that a free exchange of information remain because that's integrally related to effectiveness as a market center.

Q Mr. Secretary, in the last couple years there have been examples where rogue traders have almost brought down, in one case almost destabalized a key commodity market, and also brought down a major global financial institution. Can you give me an example, a concrete example of how, based on the work you've done here, would deal with a crisis like that differently than it's been dealt with in the past, and whether or not you're better 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't a rogue trader, let me quickly say -- (laughter) -- but I was in that world, or at least I was in any way anybody ever observed. (Laughter.)

The global financial institutions really are today exactly that -- global financial institutions. And I think if you look at some of the failures of the last few years, I think if the regulators in each of the major market centers had had an effective exchange of information with each other and had truly known what was going on in each of those centers -- I'm thinking of one particularly I happen to know a lot about -- I think that there was a heightened possibility that the problem would have been, or the potential for problem would have been spotted ahead of time and the problem would have been averted.

And one of the things it's provided for -- it's really a work plan, if you will. These things are very difficult to get done, they take -- none of this happens quickly. But the work plan is to expedite the exchange of information amongst regulators in different market centers.

There's also going to be discussion about -- there's also in that work plan the question of focusing on capital requirements and making sure you don't have enormous disparity in capital requirements between different market centers, transparency issues with respect to derivative, which I think are extremely important if investors are going to know what the true exposure of the financial institutions are.

Q I'm representing here a Russian newspaper. All of us were very happy last night and this morning knowing that Russia is a full power member among G-8. You were talking about G-7. And just recently we have heard about a new formula, which is 8 minus 1. So can you please explain to me the real difference -- no, without any jokes -- the real difference between 7 plus 1 and 8 minus 1. Thank you. (Laughter and applause.)

SECRETARY RUBIN: Well, I didn't grow up as a diplomat and foreign affairs person, so I don't -- I'm sure they have all kinds of ways to speak. Let me tell you what I think the 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's integration with the major industrialized nations with respect to the full panoply of issues that we all have to deal with in the world that we now live in -- a far more integrated world than used to be the case. The consequence is that Mr. Yeltsin was a full-fledged member of the Summit of the 8 in this meeting.

There are issues, there are financial and economic issues in which the industrialized nations are in a different economic position than Russia is now -- although, it is all of our hope that Russia gets there as quickly as possible -- and with a commonality of conditions, as such, that it is more fruitful to have discussions amongst those who share that commonality. And that's why the Finance Ministers met as a G-7.

It is also the case that the positions of these G-7 nations and Russia with respect to the IMF and the World Bank are different, because Russia is still in a position of receiving assistance and help from both the IMF and the World Bank. So, once again, there's a commonality amongst the G-7 and Russia is in a somewhat different position. So for that reason it was concluded that the Finance Ministers should continue their G-7 process and the leaders should take an hour out of their full schedule to have a G-7 economic discussion with respect to the kinds of matters in which terms I just described are relevant.

But I think, myself, the most noteworthy aspect of this summit period, if you will, is that it is a Summit of 8, number one; and, number two, that Russia has joined the Paris Club, which is an enormous step forward.

Q In light of the globalization process and your participation as a G-7 Finance Minister, and with the BIS, what steps remain to bring the U.S. into full harmonization with regard to financial conglomerates in the U.S.? Has Glass-Steagel been effectively repealed with the merger and acquisition activity in the banks and insurance markets?

SECRETARY RUBIN: I'm sorry, are you asking me the question about financial modernization?

Q Yes, I am.

SECRETARY RUBIN: Okay. The answer is that over the last -- oh, I don't know -- roughly, a decade, I suppose, at an ever increasing rate, the regulators, the Office of Control of the Currency and the Federal Reserve Board, have made exceptions -- well, I shouldn't say made exceptions -- they've allowed more and more non-bank activity by financial institutions -- non-bank financial institutions. And the result is that the Glass-Steagel walls have eroded.

Having said that, Glass-Steagel is still in effect. And so there is something very substantially short of a complete elimination of the walls between banking, insurance, brokerage, investment banking and other financial services. Legislation is now working its way through Congress to repeal Glass-Steagel to deal with the bank holding company act so that these walls will be completely torn down, and I believe that the House Banking Committee reported out legislation yesterday toward this end.

Q Will that then complete financial harmony or globalization for the U.S. with regard to the other countries of the world?

SECRETARY RUBIN: Well, for one thing, the financial modernization legislation has a long way to go. We came out of committee yesterday with a slight affirmative -- I think the vote was 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 the House and it has to go through the Senate. We've got a lot to do on this, and banking bills, as you know, are always very difficult to get.

Secondly, even if this passes sometime this year or next year, there are a lot of other issues that exist if we're going to get a WTO financial services agreement. And at least from 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 countries substantially better than the offers that were available last year.

Q Mr. Secretary, during the run-up to the summit

SECRETARY RUBIN: How did you sneak over to the foreign 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 was the other, but I --

Q No one told me anything -- that's sort of the way it is at these summits. (Laughter.) Mr. Secretary, during the run-up to the summit, you and other U.S. officials were quite outspoken in expressing your concerns about the trend towards a larger Japanese surplus, and yet there's at least a perception that the issue was somewhat back-peddled at the summit. Certainly Japanese officials have expressed the sense that the issue was downplayed, put on a back burner. In that context, I'm wondering, are you satisfied with the statement in the finance ministers communique regarding the Japanese economy, and have you received sufficient assurances from Japanese officials that they will indeed achieve some progress on the deregulation and domestic-led growth agenda that the U.S. put forward?

SECRETARY RUBIN: Well, I don't think that the issue was either downplayed or upplayed. I was at the bilateral with Prime Minister Hashimoto and the issue was discussed there. It was discussed in the finance ministers meeting. I don't think there was any expectation that this would be a central issue -- there's no reason why it should have been -- of any of the meetings that took place, bilateral or multilateral. But the statement, as you say, reiterates the statement that Japan has the objective of achieving strong domestic-led growth and avoiding significant increases in its external surplus.

And we continue to feel that that's very important for Japan and very important for the rest of the world. As you know, Japan feels they're on their way to accomplishing that through a program of deregulation. It's certainly our view that deregulation, once again, is very good for Japan, very good for the rest of the world. If it accomplishes that objective, despite the rapid rate of deficit reduction, then that objective will have been satisfied. If not, then they have the challenge of figuring out how to deal with meeting that objective.

Q Do you share that sense that the Japanese are moving on the right track in that regard?

SECRETARY RUBIN: Oh, I think my view on this simply is that they have adopted a -- Japan has adopted a strategy that they think will meet that challenge, and I don't -- I think I would limit myself to saying that if they do, then that problem is solved and if they don't, then they've got the challenge of how to get there.

Let me just announce Dan Tarullo who's joined us. You missed my opening statement. (Laughter.) Now we can expand the range of questions, because I've been dealing with the ministers meetings and the like, and Dan can deal with what took place at the leaders meeting.

Q Good, I'll take advantage of that. The Clinton administration has made repeated assurances that its trade and investment policy would be consistent with environmental protection. But there has been growing evidence in the last couple of years, since NAFTA took effect, that such is not really the 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 tribunal for alleging a taking of its property because Canada attempted to ban a toxic gasoline additive -- point one.

Point two, the Clinton administration has argued, and successfully argued in the World Trade Organization against Europe's ban on hormone treated beef. The arguments Ambassador Barshefsky was making are directly contrary to assurances made about what the trade rules made by her predecessor, Mickey Kantor.

Third point, the border clean-up plan under the NAFTA has generated only about one percent of its clean-up fund of the promised clean-up funds. So the question is, is the administration really serious about environmental protection in the context of trade and investment policy? Thank you.

MR. TARULLO: Well, first off, just with respect to the hormone issue that you mentioned a moment ago, I'm not sure I'd characterize that as an environmental issue. It's more of a health and safety issue. And the dispute there, as I understand it, is more whether there is any demonstrable scientific basis for 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 countries within the WTO pushing for working parties and efforts to develop understandings on the relationship between trade and the environment.

In the context of this summit, where that set of issues has not specifically been discussed, the United States has suggested that that pattern which the Ex-Im Bank follows in the United States of doing an environmental assessment of its major exports before it exports is one that could profitably be looked at by the other countries and perhaps considered within the OECD.

So I think looking at the export side of trade we have, in fact, been out in front of the rest of the industrialized world in trying to bring some environmental assessment to our activities.

SECRETARY RUBIN: On your third item, which I think was the border clean-up in Mexico -- is that right, under the NAD Bank -- was that your --

Q Yes, sir.

SECRETARY RUBIN: I think it's fair to say the NAD Bank has geared up more slowly than we would have hoped. On the other hand, that is not unusual for these kinds of programs. And I think what you're going to find now is a much more rapid deployment of funds through the NAD Bank and the environmental facility -- not the domestic window, but the environmental facility. That has been the case up to now.

Q Mr. Secretary, in your discussions about EU and European economic outlook, did you get any sense from the European leaders that there was any backing away or de-emphasis on deficit reduction as part of their effort to integrate Europe? And is the U.S. concerned that a de-emphasis on deficit reduction in Europe actually may backfire, to the detriment of the overall world economy?

SECRETARY RUBIN: Let me ask Dan to respond with respect to what the leaders said because I was not in that meeting. And then I'd be happy to respond with respect to the finance ministers meeting.

MR. TARULLO: The leaders reviewed the European monetary union developments fairly succinctly within the context of their overall review of macroeconomic conditions in the world. President Santer, of the European Commission, had been invited by the President to give an update based on developments in Amsterdam.

There was not the kind of discussion that you suggested. There was, I think, a fairly uniform view on the part of the European leaders that monetary integration would go forward on its present schedule. There was some mention of the additional measures to potentially increase employment, which had been agreed to at Amsterdam. The discussion really didn't get into the details of those to any considerable extent.

SECRETARY RUBIN: I don't really have much to add to that. We had what I suspect was a somewhat more extended discussion, but the gist of it was exactly the same. The sense I got was -- well, not the sense I got, they clearly expressed a view that they'd be going ahead on schedule and then the issue was how to deal with employment and social needs and other things integration context of meeting the deficit reduction targets of master.

Q -- de-emphasizing deficit reduction as part of this increased emphasis on employment that's been --

SECRETARY RUBIN: No, my sense was that their focus on employment, as we discussed before Dan came, was very much more a focus on structural reform -- as, indeed, we think makes sense.

Q I'd like to ask a question about the leaders meeting also. Can you give a sense of how the discussion went about the performance of the U.S. economy versus the European economy, whether the U.S. model is better -- the Anglo-Saxon model, to be more general; and how the Europeans reacted to this? I gather there was a discussion, especially over lunch on that subject. And can you give a sense of how the -- more broadly how the delegations have interacted with each other on this question?

MR. TARULLO: There were two discussions during the course of the day in which the general issue of performance of economies came up. The first, as you correctly suggest, was at lunch where the leaders were discussing the challenge of structural reform and assuring adaptability in both labor and product markets. The second came up in the discussion to which I just alluded, which was the general macroeconomic survey, which is 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 the structural discussion. In the case of the macroeconomic discussion, as you can imagine from looking at the statement, there was more of a focus on particular positions that particular countries occupied.

I think it's fair to say that there is a consensus that the rigidities in parts of the European economy have produced structural unemployment problems. There is still a concern I think in most, if not all of those economies, that values of social cohesion, social inclusion, of what we in the United States would call the social contract, must be preserved. And I think that a number of those countries and indeed all of the leaders, including those, as you say, from the Anglo-Saxon countries, are struggling with not just the right balance, but the right set of affirmative measures to promote both sets of values.

There was not in the least a kind of comparative game. I think to the contrary. There really was an effort to engage on what they could do, for example, about promotion of small and medium-sized enterprise job creation. Prime Minister Prodi from Italy made the presentation on that topic, and as you may know, the northern part of Italy has got perhaps the most successful and innovative string of small- and medium-size business creation and networks in the world. So that was the kind of thing on which they were focused, not who is doing better than whom and why.

Q Mr. Secretary, the President's initiative on Africa 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 and investment, and that they feel that more is needed in terms of the development aid side, in particular with regard to physical infrastructure, like roads, railroads, and the like, which traditionally have not been the domain of private enterprise but rather a precondition for attracting private enterprise. I was wondering if there was any balance struck at either of the meetings today with the finance ministers or the leaders on this.

And secondly, in every summit that has occurred since Halifax, there have been discussions of possible systemic risks to the financial system. The measures that have been taken have always been in the form of trying to keep on top of things so that we avoid surprises. However, the financial system in its present status seems to develop new instruments which give leeway to these kind of surprises. I was wondering, in addition to the question of increased monitoring and transparency, if there was any discussion about possible long-term solutions of creating greater stability in the system than has been experienced in say the last 10 years.

SECRETARY RUBIN: Let me take the questions in reverse order. On the second one, I think that the measures that we have taken since Halifax -- for example, the transparency measures that are involved in the IMF register that countries sign up for and then publish the data on their financial conditions, the measures I discussed a bit ago with respect to exchange of information amongst regulators -- all these kinds of measures aren't simply monitoring. I think we might well have averted the problem that existed in Mexico if the kind of information that the IMF is calling for -- and will be now showing I believe on the Internet, as a matter of fact -- had been available to investors, because when investors see trouble coming, then they'll stop investing at an earlier stage of the process. And I think that the type of crisis we had in Mexico might very well never have developed. So I actually think this is preventive, not just monitoring.

Then with respect to new agreements to borrow, which, as you know, is a Halifax initiative, we there have, once it's completed, a very substantial additional pool of multilateral money to deal with problems if they develop. With respect to the emerging markets' banking systems, the leaders agreed -- the finance ministers discussed today measures to improve supervision of regulation, which is again a matter of prevention.

On the question of Africa, the object was not to in any way reduce aid. Aid is very much needed for the reasons you said and many other reasons as well to build the underpinnings for private sector involvement, but to add to that now increased access to the United States and other markets so that Africa can better attract investment capital, can more effectively trade in the world markets, and build its private sector. Also, the emphasis was on targeting aid to countries that have undertaken reform and are trying to help themselves.

MR. TARULLO: I think I might supplement that by noting that at the conclusion of the Africa discussion in the leaders meeting this morning, the President noted that, in his view, the formula was trade plus aid plus reform. All three of those elements had been discussed at some length in the conversation among the leaders, which on economics alone lasted about 45 minutes -- on African economics.

The emphasis on aid, though, that we have put in both working on the Denver Summit and also on the legislation on which we're working with the bipartisan group of members of Congress has tried to emphasize the role of aid in such a way as both to support basic human needs and to support the creation and sustenance of a sound market economy. That, for example, is why, in the legislation we'll be supporting, there is significantly increased money for OPIC, to ensure private capital flows overseas, to get the money flowing into Africa and to provide government funds in the form of insurance guarantees in this instance.

Q Yes, Mr. Secretary, as morally repugnant as bribery is, it pales in comparison with international tax avoidance as an economic issue. I'm curious to know whether, Secretary, the finance ministers discussed the possibility of full, forthright, and prompt reporting of the ownership of government bonds and other security instruments among themselves in the G-7 and/or placing stricter reporting requirements on offshore tax havens. If that wasn't discussed, might you enlighten us why it was not?

SECRETARY RUBIN: Well, it was not on the agenda of this meeting. I don't think I agree with your premise to the question, though. I think that corruption, both public corruption and the crime that exists because of the potential for public corruption, is a very serious impediment to economic growth and developing in transitioning countries. And I think it has got to be a major focus of attention both amongst G-7 nations and the financial institutions if we're going to have truly successful growth and reform in the developing countries.

We did focus a lot in our Finance Ministers discussion at least on the questions of money laundering, which has some of what you're talking about -- some of that about it, though that is not -- some of that, of course, is directed toward tax evasion, some of it's just -- a lot of it is laundering drug proceeds. But there was no discussion of dealing with tax haven issues as such, though, as I say, there was a fair bit of discussion about money laundering as an activity, which is within the purview of most of these finance ministers, as it is ours. And that is a requisite for organized crime to be successful, so that if you can get at that, you really have a very new vantage point for effectively dealing with the leaders of organized crime.

MR. TARULLO: I should note the topic was not on the agenda of the leaders either, but there is -- if you flip through the statement, you'll note a provision making reference to studies of tax competition. This is not tax evasion in any legal sense. But the leaders did identify this as an issue that they would like to see more work on, more analysis of, to see whether there are particular problems which they should take up next year in Birmingham.

Q Did the leaders discuss the Middle East at all? And President Clinton had suggested before coming to the summit that he will suggest to the leaders of the summit that there is a fund -- there's going to be a fund for the Middle East peace and stability. And what was the reaction from the leaders?

MR. TARULLO: The Middle East will be on the agenda for tomorrow morning, which is the political -- sort of traditional foreign policy discussion. So it will be talked about then.

Q It's been widely reported, from citizens' groups and women's organizations, labor unions and public policy groups in Africa, that the 15 years of economic reform policies that will -- countries have to undertake in order to be able to join the Africa Trade and Investment Initiative have themselves greatly undermined Africa's capacity to produce. It has increased the exploitation of both human and natural resources and has drastically increased the debt.

And so the question is, number one, have any of these views been taken into account in the shaping of this initiative by the President? And if not, will they be taken in account in the future? Is there any scope for bringing in this very different point of view from that of the leaders of the G-7?

MR. TARULLO: Well, I guess maybe I have some disagreement with the premise, or maybe it's just a different perspective. I don't know that we would agree -- in fact, I know we wouldn't agree with the proposition that 15 years of economic reform has produced deleterious consequences. There is not doubt but that a number of sub-Saharan African countries were caught in a cycle of not being able to develop, of accumulating debt, and of seeing impoverishment of their peoples and not economic development.

In many instances, in our view, that was not because a sound set of economic reforms with good governance and movement towards democracy was the pattern, but instead other patterns of imperfect orientation towards growth policies, sometimes a good deal of protectionism which allowed pockets of wealth and a lot of poverty in between.

The countries on which we are focused are those which in the last five to 10 years, by adoption on their own of a set of reform policies, have begun to show sustained rates of growth which are carrying over into increased standards of living.

Now, when you ask about the specific perspective, there were several comments this morning among the leaders about education in Africa. And in fact there were comments specifically about education of girls and young women. The premise there was that, in some respects, the biggest need in Africa, as in many developing countries, is to get basic education disseminated through as large a part of the population as possible; and that in many, though by no means all African countries, the education of -- well, primary and secondary education is in general very imperfect, and primary and secondary education 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 basic education, particularly basic education for girls. When Larry Summers, who is now Bob Rubin's Deputy at the Treasury Department, was the Chief Economist at the World Bank, he pushed very hard to get the Bank lending to produce -- to support education for girls. He used to cite the figure that if you wanted a return on your investment, probably about the best you could get was the additional dollar spent on educating young women in a developing country.

Q Could I just have a clarification? On the question of education and all that, education is a great strategy, but it's a 15-year strategy, and what the people that I just mentioned -- the women's groups, the labor unions, all of that -- are talking about is today. And their perspective is today very different from yours. And the question is, if their perspective is so different from that of the G-7 leaders, who -- is it the G-7 leaders that are presuming the right to shape the policy for Africa, or are they willing to bring these voices into the discussion?

MR. TARULLO: Well, look, no, to the contrary. The policies 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 developed by the people of the country itself.

I don't know that I would disagree with the proposition that development takes time. But the corollary of that is that the failure to take these measures and the failure to create the basis for sustained growth in an economy means that you're always in a holding pattern, you're always just running faster to try to stay where you are.

In terms of consultation, people in -- certainly people in the White House and in Treasury and State, which have been working on our own Africa programs, have consulted quite widely. I don't know specifically which of these groups they've have consulted with; I know we in general have consulted quite widely with the African countries themselves and with officials in many parts of the government.

Q Something a bit more specific on a similar theme. Earlier this afternoon in a briefing by the European Union, they seemed to be casting some doubts over the Africa proposal, specifically talking about the conditionality that was applied to the process, saying any form of conditionality when you're talking about the least developed countries creates unacceptable delays.

And, about the substance of the Africa proposal, I heard other comments elsewhere saying that it's very small amounts of additional aid and there are delays in the HIPC debt initiative and that the trade preferences being offered are fairly minor. I wondered if you'd just like to expand on that.

MR. TARULLO: Well, look, ultimately, the development of a sub-Saharan African country -- or, indeed, any African country -- depends principally on the policies and practices of that country and its people. And it seems to me that the most that international organizations can do is to buttress activities that are headed in the right direction, and to provide support for things like education and health, which are not going to be produced by the private sector.

With respect to the discussion today and indeed the attitudes generally, there is some disagreement over, as someone put it, conditionality in trade. I don't think there's any disagreement on the prospect that the IMF or the World Bank, for example, should have conditionality in their lending programs.

But our proposal with the Congress has been characterized as a trade conditionality proposal. I think it's actually something quite different. In the first place, the benefits -- a whole tier of benefits is applied to the least developed countries, no matter what their policies. A second, more substantial tier of benefits, trade and technical assistance, is made available to those countries which are adopting policies that are likely to produce the kind of outcomes that we've seen in a number of other African countries.

It is our judgment that -- two things are our judgment: one, that we should direct such resources as we have towards those countries with the greatest chances of success because of the policies that they have adopted; second, and this goes back to an earlier answer, I have found it quite interesting to listen to the number of African officials, economic officials, who have supported and indeed encouraged us to include expectations of sound economic policies as we constructed our legislation.

What that basically said to us is, look, we want to adopt these policies. They're not easy. They obviously entail some uncertainty. And so to have some outside validation and some independent valuable byproduct of those policies is a good thing for us at home. And that really I think was to some people the most surprising thing about this initiative. We've talked to economic officials from probably 30 to 35 Sub-Saharan African countries in the last few months alone.

Before I close, because I was delayed, I thought I would give something more in the form of a brief readout of a couple of the highlights today, a couple of minutes on that.

I think you've probably heard -- McCurry I'm sure has briefed on the agenda and what was going to be included in each session. What I thought I would do is give you some sense of the agenda items that took off a little bit, those that occasioned more discussion, more lively discussion, and those that seemed to have a little bit of a future orientation.

They were several-fold. First, I wasn't so surprised at the Africa economic discussion, but it did go on for quite some time. It was quite lively; actually ended up with leaders having multiple comments. That's usually in these things the indication of whether a discussion is taking off, is whether there's more than just a person's thoughts, but instead the counterthoughts and something else ensues.

Secondly, as the leaders reviewed the ongoing global agenda, which as you know, has really been consolidated at this summit as a core part of the work of the summit, the leaders focused in particular on crime and international organized crime. I would say that probably two-thirds of their discussion was on crime and the other topics were covered rather more briefly.

The comment was made that in this instance the public seems to be ahead of the governments in their apprehension of not just street crime but of international crime. There was a good deal of discussion of the interrelationships of crime, and we -- I specifically -- was tasked with focusing, for the remainder of the U.S. chairmanship, the work of our senior experts group on organized crime and getting a targeted, lengthy list of concrete additional measures that could be taken. And the leaders specifically said that if there are problems, if there are kind of bureaucratic resistances, they want the matters presented to them.

The infectious disease discussion was not lengthy so much as it was pointed. A number of leaders commented that it was inconceivable to them that infectious diseases would not be -- the spread of infectious diseases globally would not be a more and more significant problem as the years went on.

Finally, in the session this afternoon, there was a discussion of Ukraine, Ukraine energy needs, and assistance being provided thereto. And as you saw in the communique, the leaders agreed that the G-7 countries should provide an additional $300 million above and beyond what had been included in the memorandum of understanding reached with Ukraine about a year and a half ago -- that additional $300 million to be used, hopefully, to leverage sufficient funds to pay for the construction of a permanent sarcophagus on top of the Chernobyl plant in Ukraine. As you probably know, Ukraine under the terms of that MOU committed to close the plant by the year 2000.

Finally, I should say that although I was in and out of, rather than present for, the entire lunch discussion, it was as I intimated earlier -- and I was not surprised -- particularly broad-ranging, which was sometimes a euphemism for jumping around a bit, but also did indicate that the leaders are very much focused on the policy and political challenges of increasing employment, promoting the conditions for economic growth while not losing sight of what our President characterizes as the social contract.

Thank you very much.

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