PRESS CONFERENCE BY UNITED STATES SECRETARY OF TREASURY

Press Briefing

PRESS CONFERENCE BY UNITED STATES SECRETARY OF TREASURY

Overall, global economic conditions and prospects were good, but there was no room for complacency, the United States Secretary of the Treasury, Lawrence Summers, told correspondents at a Headquarters press conference this morning. Achieving a more balanced pattern of global expansion, through more rapid and solid growth in Japan, sustained expansion in Europe and continued expansion in the United States, would be an important part of the upcoming discussions of finance ministers and world leaders to be held in Japan.

Introducing Mr. Summers, who had just addressed the opening session of the Economic and Social Council meeting on information technology, United States Ambassador Richard Holbrooke said that it was the first time a Treasury Secretary from his country had come to the United Nations. It also happened to fall on the same day that United States President William Clinton was at the United Nations. Those two facts spoke for themselves, he said.

Mr. Holbrooke said that underneath the United States efforts was an attempt to bring more congruence and convergence between two universes -- the international financial institutions and the United Nations structure. While there was some overlap between the world that Mr. Summers worked in and the United Nations, and while the United Nations often got paid much "lip service", the two bureaucracies usually worked independently of one another and not always in a way that was maximally reinforcing.

Mr. Summers said that he would be going tomorrow to Fukuoka, Japan, to meet with the Group of Seven finance ministers and a representative of the European Commission in advance of the leaders’ summit in Okinawa. It was striking to consider how different the world looked now as compared to the last time the Summit was held in Japan in 1993. The situation of the United States economy had looked very different and there had been recognition of the profound opportunities that new technologies afforded the global economy. That awareness would be an important aspect of the discussions in Japan.

Developments in the world economy would also be reviewed at the meeting, Mr. Summers said. He would be meeting with Russian colleagues to hear about their new programme to deepen macroeconomic stabilization and advance structural reform. Issues of poverty reduction, reform of the international financial architecture questions relating to the abuse of the international financial system by certain jurisdictions and the impact of information technology would also be among the issues playing a key role in discussions.

Would a slow down in the United States economy and worry on Wall Street about the debt of both corporations and consumers affect the movement of the country in the next few months? a correspondent asked. Mr. Summers said he believed that the fundamentals in the United States continued to be sound for economic expansion. The combination of the profound change from large budget deficit to budget surplus, the investment-led capacity-creating expansions that had resulted from that dramatic change in fiscal policy and the resulting

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increases in productivity growth all pointed to strong prospects for the period ahead. As always, there would be fluctuations from quarter to quarter in rates of economic growth, and it was important to avoid complacency. Still, he believed that there was every prospect for continued strong economic expansion in the United States.

A correspondent asked Mr. Summers to describe the elements of a global consensus on world economic development. What kind of specific proposals would he expect to come out of the talks in Japan?

Mr. Summers said that questions would inevitably focus on areas of principle concern to the finance ministers. He thought there would be further development of the work on the international financial architecture, emphasizing the importance of transparency and vulnerability in national balance sheets. He also expected a focus on effective implementation of the debt-reduction programme, in particular assuring that adequate resources were made available to meet crucial health and education needs.

Focus on questions of pricing policy were important both in respect to assuring that international institutions supported rather than supplanted the flow of private sector capital, and that they had the resources available to meet crucial concessional needs, he continued. He thought that they would also discuss some of the global public goods challenges.

The Bank of Japan had indicated that it was considering an interest rate increase, a correspondent said. Did Mr. Summers think that the timing for that was appropriate? He said that he did not have comments on either the United States Federal Reserve or any other country's central bank.

In terms of the global growth picture, if the United States economy did begin to slow, as one would hope with interest rate increases, was Mr. Summers confident that Europe and Japan were doing enough to raise their potential growth rates? a correspondent asked.

He said that balance continued to be a challenge for global expansion and there was a common desire to see "balance up" rather than "balance down". That pointed to the importance of domestic demand-led growth both in Europe and in Japan.

A correspondent asked if the Japanese Government was doing enough to maintain the pace of domestic-demand led growth. Mr. Summers said that he looked forward to the discussions that he would be able to have while in Japan. It remained an appropriately important area of focus for the Japanese Government.

Could Mr. Summers give an outline of the presentations that the United States was going to make at the United Nations, in Fukuoka and in Okinawa on HIV/AIDS? a correspondent asked. Was the United States at a point where it had a programme to put on the table, or was it still trying to sell the idea of more concerted global action?

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Mr. Summers said he would rather be in a position of summarizing the discussions after rather than before they had taken place. However, there was a growing awareness not just in the affected countries and the international health community, but also in the development and financial community of the overriding importance of the AIDS issue.

Mr. Holbrooke recommended that the correspondent read the lengthy, detailed article in today's Washington Post on that issue. Later in the week, the United States would introduce the first Security Council resolution ever on a health issue [AIDS] in direct relationship to peacekeeping efforts. As United States Vice President Al Gore had said when he was at the United Nations on 10 January, it was the first time in history that a health issue had been discussed in the Security Council. Peacekeepers unfortunately helped spread that disease while trying to contain conflict. That was an unacceptable situation.

The United States would never again vote for a peacekeeping resolution that did not contain an AIDS section and had concluded that a separate comprehensive resolution on the subject was necessary, he said. President Clinton's AIDS Advisor, Sandy Thurman, would be in Durban, South Africa later in the week to attend the international AIDS conference, where she would also address the issue.

The United States would not let go of the AIDS issue, Mr. Holbrooke continued. He was particularly pleased that Mr. Summers was the first Treasury Secretary who had taken a direct personal interest in a health issue. He was not making the argument that enough resources had been deployed to deal with the AIDS issue. He understood that the resources required went far beyond the structure of even the richest nation of the world at the apogee of its wealth. But the United States must show leadership. He was sure that President Clinton would discuss the AIDS issue in the afternoon. Given its complexity, many considered AIDS to be the single most dangerous problem facing the world today, not just in Africa but throughout the world. The resolution would be introduced possibly as early as tomorrow, but certainly within the next few days.

In his opinion, had Japan already achieved a self-sustaining domestic demand-led economy, or was it still his position that the Japanese authorities should employ all available tools to achieve that end? a correspondent asked. Mr. Summers said that the achievement of sustained domestic demand-led growth was an absolute crucial priority for Japan. He believed that it was appropriate that the Japanese Government continue to maintain that priority as it set policy.

On the Russian economy, did Mr. Summers have any preliminary observations on what had been achieved by the new government in the economic field? a correspondent asked. He said that it was clear that there had been a substantial improvement in Russian economic performance in recent months. That had been manifest, in part, in a significant improvement in the Russian Federation’s budget situation and in an augmentation of its reserves.

The challenge going forward would be for growth to be sustained, he said, rather than a "one-off" adjustment to changed conditions. The successful

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bringing about of the rule of law was needed so that there could be reliance on secure property rights as well as confidence in contract enforcement and the general set of measures that went with an effective commercial system. Those were things that had figured prominently in the comments of the Russian Prime Minister and others regarding economic issues in the Russian Federation and would figure in the conversations he would be having with Russian officials in Japan.

How did the recent results of the Mexican elections affect Mexican economic policies? a correspondent asked. Mr. Summers said that the elections had been a major milestone in Mexico. The United States looked forward to working closely with the new Mexican Government on matters of common concern. The United States could look back now with considerable satisfaction at the cooperation that the United States enjoyed with Mexico during the time of President Ernesto Zedillo's administration.

That cooperation had begun when many were skeptical as to whether there were sound prospects for Mexico's economic recovery, he said. Many doubted the durability of Mexican democracy. It was an enormous tribute to President Zedillo and to the team of people that he worked with. That Mexico had performed as well as it had was also a reflection of the close relationship between the United States and Mexico, embodied in the North American Free Trade Agreement (NAFTA), and in the United States' preparedness to support Mexico in avoiding what could have been a catastrophic situation at the time of its financial crisis.

A correspondent said that the rise in interest rates was affecting the Latin American economy. What would Mr. Summers foresee in the next six months, and what was his outlook for Argentina? Mr. Summers said that he did not have anything to say on United States interest rates with the federal reserve in line with its longstanding policy. He had had the opportunity to visit Argentina and speak several times with President Fernando de la Rua and Economy Minister Jose Luis Machinea. They were very much committed to the fiscal structural policies directed at achieving a basis for sustained growth. The United States recognized the enormous stake that Latin American and the global economy had in Argentina's continued economic success.

Mr. Summers was then asked a question on the reform of international financial institutions. He said that there had been important agreements in a number of areas, including the central importance of transparency, the need for greater accountability and focus on questions of "leverage of national balance sheets".

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