Daniel K. Tarullo
Assistant to the President
National Press Club
Washington, D.C.
June 16, 1997
Good morning. I appreciate the opportunity to preview the Summit of the Eight, to be hosted by President Clinton this weekend in Denver. The Summit is a milestone in two great successes of the Clinton Presidency -- the resurgence of American economic strength and the progressive incorporation of Russia into the community of market democracies. The results of these successes will be very much in evidence in Denver.
This morning I will begin by reviewing these two accomplishments through the lens of the Summit. Then I will discuss how the President is building on these successes at this year's Summit. With our economic fundamentals in order and with the foundations for a new relationship with Russia laid, the President is using this Summit to organize ourselves, along with our partners, to harness the opportunities of a globalized economy for all our citizens and to work together to counter new global problems.
The Resurgence of the American Economy
When President Clinton participated in his first Summit, at Tokyo in 1993, the U.S. budget deficit was -- at over 3.5% of GDP -- the central economic topic of discussion and concern. Our partners warned that chronic, growing deficits would inevitably lead to higher interest rates and a drag on world economic growth.
At home, unemployment was over 7%. Many feared that we faced a Hobson's choice. Either we could accumulate an ever growing national debt burden, or we could cut the deficit but endure slower growth and higher unemployment.
The President, true to his emphasis on economic revitalization in the 1992 campaign, returned home to push his budget reduction plan through a divided and partisan Congress. Today, the deficit has been reduced by over two-thirds, and will be less than 1% of GDP this year. This spring the President completed the task he had set for the country by forging a bipartisan agreement with the Congress to bring the federal budget deficit to zero by 2002.
Coupled with his commitments to open markets and invest in our people, the President's fiscal policies have yielded rich dividends for the country. Twelve million jobs have been created since 1993. As a result, unemployment is below 5% for the first time in a generation. Inflation is at a thirty-year low. Capital investment, productivity, and real wages have all risen.
In Denver, as in Tokyo, the American economy will be subject to much attention. But this year that attention will derive from the strength of its performance, rather than the risks it could pose to world prosperity.
Russia and the Market Democracies
In 1993 Russia was still a new democracy, which had only begun along its path of political and economic reform. In the intervening four years Russia has made great strides down that lengthy road. Having achieved macroeconomic stabilization and having held democratic presidential and parliamentary elections, Russia has renewed its commitment to reshape its economy and create the conditions for sustained growth.
President Clinton has worked with determination to bring Russia into greater participation in the community of market democracies. Earlier this year, at Helsinki, Presidents Clinton and Yeltsin agreed to a joint initiative to stimulate Russian economic growth, strengthen commercial ties between our countries, and continue Russia's integration into international economic institutions such as the Paris Club, the World Trade Organization, and the Organization for Economic Cooperation and Development.
The President has also sought to place on a new and more secure footing the security and strategic aspects of our relations with Russia. Last month in Paris this work culminated in the signing of the historic NATO-Russia Founding Act.
Together, these efforts have transformed the relations of the market democracies to Russia, even as Russia has transformed itself. Russia has participated in the latter part of the past several summits, and has increased its role in the preparatory work for them. This year, for the first time, President Yeltsin will be present from the start of the Summit, now known as the Summit of the Eight. This increased role reflects Russia's increased stature in the world and its growing cooperation with the Seven on a broad range of issues. This change shows that we are not simply dealing with the aftermath of past conflicts and relations, but that we are prepared to move on, in a new relationship, to confront the new economic and political challenges that face us today.
The Summit and Economic Growth
The strong U.S. economic performance has given the President, and the country, a credibility in international economic discussions that we lacked just a few years ago. We have a good story to tell, and people are listening. But the economic tasks before us are far from over. At Denver we will continue to champion economic policies that will promote sustained growth in our partners and bring the benefits of a globalized, dynamic economy to all. Let me now identify some of the economic concerns to be addressed at the Summit.
First, we have an interest in our partners achieving their own patterns of sustained growth that contribute to a healthy world economy. Thus we look forward to Japan's realization of Prime Minister Hashimoto's program for widespread deregulation in an economy that has stalled in recent years. A successful opening of the Japanese economy to more competition, domestic and foreign, will be good for both Japan and the world.
In the interim, we count on the Prime Minister achieving his stated objective of a strong domestic demand led recovery. Similarly, we have a strong interest in seeing Europe economies make the kind of structural changes that will lead to lower unemployment and sustained growth.
Second, the Summit will continue to build international cooperation to meet the increased risks that have accompanied the faster pace of integration in global capital markets. A crisis in one country, or in one globally active financial institution, can produce systemic consequences much more swiftly than could have been imagined just a decade ago.
In each of the last few Summits, we have identified measures to be taken by international financial institutions and by national regulators to reduce these risks. This year, we have agreed on the establishment of a network of supervisors for global markets and for a program to assist emerging economies in strengthening their own financial systems. The changes and improvements flowing from the financial stabilization agendas of the summits have already reduced risks to global markets. And, just as important, we have established a process to identify new risks and seek new safeguards.
Third, the leaders will discuss at Denver two major social and economic issues faced by all our societies -- adapting to the structural changes in our economies wrought by globalization and rapid technological development, and adjusting to the aging of our societies. They will compare their own experiences and thoughts, as well as considering new ideas for meeting these leading edge issues of the next century.
While our job creation performance in recent years has been enviable, the same cannot be said of all our partners. Unemployment remains high, and will remain high, until structural reforms are undertaken. At the same time, here and abroad, we must work to ensure that we preserve our social contract even as we cultivate an adaptable and prosperous economy. In reviewing these issues, the leaders will concentrate in particular on the potential for job growth in young, dynamic businesses.
There will be few societal changes more striking than the accelerated aging of our populations in the next century. While there is already much attention to the strains that could be placed on public pension and health care systems, there has been less attention to the opportunities for what gerontologists call productive aging. Declining disability rates among the elderly offer continuing active lives, including work lives, for those who want them, but our economic and social institutions will have to adapt to the needs and attributes of an older population.
Fourth, the Summit will turn the attention of the leaders, and hopefully the world, to a piece of unfinished business in bringing the benefits of the global economy to all regions of the world. Sub-Saharan Africa has, in the main, been left behind as trade, investment, and growth increased rapidly across much of the developing world in the past twenty years. While we must recognize that growth depends, in the first instance, on sound economic policies by the developing countries themselves, we must also recognize that we can support adoption and maintenance of those policies. There are already numerous success stories in Africa. At the Summit we will both highlight those successes, and commit ourselves to providing debt relief and greater trade access so as to encourage more success.
Meeting New Global Problems
When you look at the Summit Communiqu‚ that is released on Sunday, I think you will be struck by the simultaneous breadth and detail of cooperation among the Eight in addressing issues such as transnational crime, terrorism, infectious diseases, nuclear safety, and proliferation. These problems are not new, to be sure, but they are assuming increasing importance as the security threats of tomorrow, precisely because of the greater integration, cheaper communications, and rapid transportation that define the global economy. They defy solution by any one nation acting alone, and thus demand a cooperative response.
President Clinton has thrust these issues onto the agendas of many international gatherings, from the United Nations General Assembly to the Summit of the Americas. He has, in the last few years, encouraged the Eight to take the initiative in organizing to deal with these new problems. This year, in Denver, we are seeing the consolidation of this agenda as a core part of Summit work.
The hallmark of this new agenda is that it is built on action by networks of officials from our countries. Comparison with how the world is organized to deal with economic problems explains this orientation. In the economic realm, we have a well- functioning set of international institutions such as the IMF and the WTO, supplemented by looser groups such as the Basle Committee and still more informal linkages among national regulators and policy-makers. Periodically, of course, these organizations, and the policies they pursue, need revision, sometimes quite far-reaching revision. But the structures are there to adjust.
Because they have only recently become truly global problems, the items on our global agenda are not the object of established, effective international organization. In some areas -- such as the environment -- there are international organizations, but they are not working as well as they must. In other areas -- such as infectious diseases -- a problem has intensified so rapidly as to outstrip the capacity of the existing organization to deal comprehensively with it. In still other areas -- such as crime and terrorism, which as law enforcement matters are central to the sovereign prerogative of nations -- there are only the weakest of international institutions.
In each instance, the Summit identifies a set of problems and either suggests their resolution within existing institutional frameworks or, more frequently, instructs officials of the Eight governments to act on these problems through building or extending their own networks. Thus, for example, we are now establishing a point of contact system to investigate and pursue nuclear smugglers. Similarly, our law enforcement officials have acted in concert to combat money laundering.
This year, we have taken concrete steps to implement the cooperative aims that have been established by the Eight in the areas of crime, terrorism, nuclear safety, and nuclear security. Senior experts groups from our countries meet regularly throughout the year to implement proposals on which the leaders have agreed, and to develop new proposals and practices to deepen cooperation.
At Denver we will also announce a program for responding to the spread of emergent infectious diseases. Popular culture has recently caught up with the fact that, in today s highly traveled world, infectious diseases can spread rapidly before they are even identified. And some of the old diseases have returned, sometimes in drug-resistant strains, to pose renewed threats, particularly to the world s poor, sick, and uneducated.
Finally, the global agenda at the Summit will include extended discussion of one of the signal global challenges of the twenty- first century -- the environment. This is a very significant year for global environmental efforts, from the special session of the United Nations General Assembly to the Kyoto conference on global warming. It is thus fitting that the leaders address the topic, not to replicate negotiations that are proceeding in other fora with other countries, but to seek common understandings as to how we will approach these issues, which will be with us into the indefinite future.
The Evolution of the Summit Process
People frequently refer to the mid-year summit as the "annual economic summit." Economics remains important, to be sure, but it should be clear by now that the summits are about more than economics. Indeed, the global agenda I have just described is but the latest stage in the evolution of the summit process.
As you recall, the first summit in 1975 was a specific response to the very specific energy crisis and the serious worldwide recession it had spawned. Within a few years the summits had evolved into a vehicle for economic management, insofar as crises fortunately do not occur regularly. The capacity to respond to financial or economic crisis is maintained by the institution of the Summits, as well as by the work of finance ministries year round.
But fairly quickly in summit history the leaders naturally turned their attention to non-economic issues and problems as well. At times the dividing line between economic and non-economic may have been unclear. It soon became clear, however, that quite traditional foreign policy problems were usefully discussed as well.
The recent attention the President has given to global problems has not displaced either economics or traditional foreign policy discussions and decisions from summits. Through his initiative in placing these issues on the summit table, he has moved the summits into their next stage, using them as a catalyst for efforts -- first by the Eight and then by the world as a whole -- to join forces to combat problems that threaten all nations. Like the economic problems of twenty years ago, these issues are pressing problems that demand cooperation if we are to protect the well-being of our citizens.
CONCLUSION
Perhaps there have been times when the United States was more needed on the world scene than it is today. It seems unlikely that there has ever been a time when we had more to gain by playing a world leadership role.
Our economy has restructured so that we are better equipped to prosper in a post-industrial economy than anyone in the world. As the world's preeminent political power, we can exercise leadership to promote our own interests. And we need the cooperation of others to cope effectively with the economic and non-economic byproducts of a global economy.
The Denver Summit will build on our economic and political successes to date -- the completion of the unfinished business inherited by the President -- to move forward to organize for the next set of tests we will face.
Thank you very much.
