Monday, November 16, 1998
It is an honor for me to address the APEC Business Summit at this critical time in Asia's economic history. As all of you know, the crisis in Iraq has prevented President Clinton from attending this meeting. But I can assure you that APEC, and APEC's central mission - stronger growth, greater integration, and deeper cooperation among the economies of the region - remain at the very heart of America's agenda.
Five years ago this month, when President Clinton convened the first APEC meeting on Blake Island, it was a time of great opportunity for this region. Asia had the fastest growing economies in the entire world. Living standards had quadrupled in just one generation. Millions were rising out of poverty and into the middle class each year.
Today we meet at a very different time - a time of economic uncertainty. The high tides of investment that had flowed into this region have now temporarily ebbed, and millions of families have fallen back into poverty. Children are dropping out of schools by the thousands to seek work.
One year ago, many thought this was a purely regional crisis; we now know it to be global - affecting Russia and raising serious concerns about the economies of Latin America, as well.
All of us have learned lessons - hard lessons - in the past year. For one thing, this crisis is clearly not just about weaknesses in particular nations; it also demands that we strengthen and improve the operations of the entire international financial system.
In a very real sense, we are the victims of our own success. The international financial system fashioned near the end of World War II has dramatically expanded prosperity, deepened democracy and freedom, and reduced hunger, disease, and illiteracy around the world. But in the midst of new wealth and opportunity, we have found new risk and challenge.
We can now move capital around the world at the touch of a computer key. But when that capital flows into weak financial systems whose dangers are obscured by poor transparency, the same capital can flow out just as fast - leaving debt and dislocation in its wake. The resulting contagion can then unfairly damage even sound economies.
And in too many places, democratic institutions have not caught up with democraticaspirations. Instead, we find cronyism, corruption, and social unrest - adding to the problem of attracting world investment.
But what we have learned also gives us reason to be hopeful. After all, we are the nations that, together, created an economic miracle for Asia and the whole Asian-Pacific region. From Seoul to Shanghai to Singapore, from Sydney to Santiago to Silicon Valley, our businesses, our workers, and our governments had the skills, the creativity, and the drive to make it happen. Our people have not lost their abilities or their energies - and they have certainly not lost their will. Weaknesses in financial structures have taken a toll, but the solid backbone - the entrepreneurial spirit, the manufacturing strength, the dedication of our workforces - remains.
So I come before you with this simple message: just as our nations built an economic miracle for this region, now we must build an economic recovery. Just as today's economic crises are global in scope, the solutions must be global as well. And for my country's part, I assure you that the United States is determined to remain a strong partner - both for the sake of jobs and growth in our own country, and for the sake of freedom and prosperity around the world.
This much is clear: just as the global financial crisis started here in Asia, the global economic recovery can and must start in Asia as well. Tonight, I challenge the Asian Pacific nations to lead the way.
I want to discuss what I believe are the three central elements of renewed economic growth in this region: first, an aggressive recovery strategy for the short-term, built upon strong action and leadership by individual nations around the world.
Second, the steps we must all take together, as a family of nations, to build a stronger financial architecture and ensure sustained growth and stability into the 21st Century. And third, a deeper shared commitment to the fundamental human and political freedoms that are the surest foundation of free markets everywhere.
First, let us begin by recognizing the great progress that has been made to stem the current crisis - and the crucial next steps that must be taken toward immediate economic recovery.
Since the onset of the crisis last summer, we have worked with the international community to mobilize unprecedented support for countries in crisis. The IMF, the World Bank, and the Asian Development Bank have committed $65 billion to the affected countries in the region. To date, some $44 billion of this has been disbursed to the countries in crisis. These strong reform programs, backed by financial support from the international community, have helped to restore stability and lay the foundation for recovery in the region.
We are seeing progress: for example, interest rates in Korea and Thailand have now returned to - and in some cases even fallen below - their pre-crisis levels. Governments havebegun the hard task of reforming financial systems and restoring banks to health. There are real signs that both output and demand may be bottoming out.
But let us not underestimate the challenge which still confronts us. Optimism can be our ally; realism must be our guide.
In September, President Clinton called for specific, additional steps to spur growth and help those countries most in need. I am proud to report that nations around the world have risen to this common cause. The United States has now met its obligations to the IMF. The U.S., Canada, Japan, and some nations in Europe have cut interest rates. The G-7 industrial nations have agreed to establish a new precautionary line of credit, anchored in the IMF, to help nations with sound economic policies ward off global turmoil. Brazil is addressing its fiscal problems, and the international community is providing meaningful support.
Now, we must advance this agenda, and that means all nations must redouble their efforts to restore growth right away - to lift the lives and the livelihoods of both this region and the world. Tomorrow, I will discuss with APEC leaders an urgent strategy to stem the financial crisis - strengthening social safety nets for countries in distress, promoting trade and investment, and getting the corporate and financial systems back on their feet.
To begin with, let us not forget those who have been hit the hardest by the crisis: the poor and unemployed, children and the elderly. After so many years of dynamic and seemingly endless growth in this region, many nations were unprepared for the human cost of contraction.
While the IMF has allowed for critical increases in social investment in these countries, we must do more. That is why I am so pleased that the World Bank and the Asian Development Bank will more than double their support to strengthen social safety nets in this region. And I am pleased to announce a new U.S. initiative - a social framework for growth that will combine bilateral assistance, technical assistance, and micro-credit - so that we can help ease human suffering, and build the kind of stability and shared prosperity that are essential to free market economies.
To achieve a rapid recovery, we must also channel more investment and trade back into this region - and America will continue to do its part.
Tonight, I am pleased to announce that in addition to the $5 billion in short- and medium-term trade financing that our Export-Import Bank made available in the wake of the crisis, it will now provide an additional $1 billion in medium-term financing each for Indonesia, Thailand, and Korea, to augment the existing short-term programs in these countries and help them meet their needs while at the same time encouraging trade between our nations.
I am also pleased to announce that our Overseas Private Investment Corporation will provide over $2 billion in insurance and financing to support new private investment in Asia, and will create innovative new financing products to bring more private capital to this region. We want to do all we can to encourage trade and investment here, so American business can bean active partner in your growth and recovery.
Next, short-term recovery demands that we revitalize the region's financial systems. That means lifting the mountains of bad debt that are crushing many banks and corporations throughout the region - leaving them struggling to pay workers and creditors, and leaving them unable to secure the financing to keep factories open and economies humming.
I have the honor to announce to you that this evening, President Clinton and Prime Minister Obuchi are formally launching a joint initiative - along with the Asian Development Bank and the World Bank - to help nations obtain the financing to revive their banking systems and remove obstacles to serious restructuring.
There is a reason recovery must begin with the removal of obstacles to private sector growth. Ultimately, our best hope is to allow free markets to work their magic. That is why, six years ago, President Clinton and I worked so hard to eliminate the chronic deficits that had blocked our own private sector's borrowing and investment.
But once the private sector in this region has the freedom to grow, it must rise to the responsibility that comes with that opportunity. We need your active involvement in global economic recovery. We need your sustained investment in emerging markets. We need your support for the education, training, and workplace conditions that ensure a strong workforce. The Asian Pacific region needs a strong and engaged private sector to replace bad debt with sound investment, once and for all.
Before I move to the systemic, longer-term issues we must address, I want to make one further point. In 1993, other nations rightly asked the United States to get our fiscal house in order. We have done so. And just as the world looked to America then to play a more powerful role in the global economy, so today the world looks to Japan.
One of the reasons we do so is that we know what Japan can do when it is at its best. After all, Japan's achievements have been extraordinary - building the world's second largest economy, forging a broad prosperity and security for its people, and leading the way toward international development and peace. Even in the midst of recession, Japan generates more than two-thirds of Asia's combined GDP.
The region cannot recover without Japan boldly and strongly leading the way. I believe Japan can do so - and I believe it must. But Japan's economy has now been stalled for five years. If Asia is to prosper in the 21st Century, Japan needs to restart its economy in this century: by moving promptly on bank reform - as it has begun to do - by further spurring domestic demand; by deregulating key economic sectors; and by opening more markets.
By achieving strong growth, driven by domestic demand, Japan can provide the spark to restart every economic engine in the region. If Japan meets this challenge, it can lead this entire region into the 21st Century.
While these short-term steps are critical to stem the crisis, we must also work aggressively to address the broader, systemic causes of crisis - and that means working together to reshape our world financial architecture, so that we can build a strong and sustainable recovery for the long haul.
We must realize that meeting these twin goals - short-term recovery and longer-term growth and stability - requires a delicate balance. For the irony is that by addressing larger systemic problems too abruptly, or in the wrong way, we could actually slow the immediate recovery that is so desperately needed.
But that doesn't make these broader problems any less urgent. We absolutely must adapt the world's financial and trading institutions to the new and renewed economy they serve. In other words, we need a global financial architecture that is as open and inclusive - and just as robust and dynamic - as today's high-speed, hyper-linked information economy.
At last year's APEC meeting in Vancouver, President Clinton and other Asian Pacific leaders launched an international effort that gives emerging economies a seat at the table as we strengthen the world financial system. Our finance ministers and central bankers have been hard at work on this task; we need their candid assessments and boldest ideas.
Our challenge is to build a foundation for more stable and sustainable capital flows - not to halt or control the flow of capital, but to make sure it is used wisely and effectively, in the most productive ways possible.
Toward this end, we must give emerging markets more of the tools to manage risk - and help them to build financial systems that are strong enough to withstand adversity.
We must also improve our international financial institutions - including the IMF - so we can manage crisis more effectively, rely more upon the private sector for its resolution, and minimize its impact on the most vulnerable.
And obviously, it is urgent that we bring greater transparency and openness to our international economic system. Forget the gold standard - today's economy operates on the information standard. A nation's economic power comes from votes of confidence cast constantly in markets around the world that evaluate every government's policies every day, through billions of transactions. If investors think you're playing fiscal games, or if a nation's financial standing is hidden in a dense fog of secrecy or confusion or distorted by corruption, then interest rates climb almost instantly.
Our governments, banks, and businesses - as well as global institutions like the IMF, the World Bank, and the WTO - must also open more of their activity to public scrutiny. Openness, transparency, and greater disclosure are the surest path to economic strength and investment from around the world.
And let me add that while this global financial architecture is vitally important for itsown sake, we need to build confidence in global commerce and communication across the board. Together, we must avoid its pitfalls so we can seize its profound potential. For one thing, we must all meet the challenge posed by the Year 2000 problem, to keep our global computer networks strong.
We must continue to promote the growth of global electronic commerce - which is expected to grow to more than $300 billion in just a few years - and I am pleased that APEC has taken up this challenge. By the year 2010, we can triple the number of people who can support their families because they can reach world markets through the Internet.
To make even more progress, we should hasten the completion of the new Global Information Infrastructure, or GII - a network of networks that sends messages and images at the speed of light, on every continent. I hope APEC will continue to work toward this vision - to build a true global electronic village, to expand access to phone service and communications, to improve the delivery of education and health care, and to create new jobs and industries.
I'm reminded of the prophetic words of one of my country's great writers, Nathaniel Hawthorne. In 1851, inspired by the telegraph invented 16 years earlier, he wrote: "By means of electricity, the world of matter has become a great nerve, vibrating thousands of miles in a breathless point of time... the round globe is a vast... brain - instinct with intelligence!"
The simple fact is that in today's global economy, we are all connected. Global interdependence is not a policy - it is a reality. As Prime Minister Chuan has said, "no country can avoid being affected by what happens halfway around the world."
This is particularly true when it comes to our environment - which is why we need shared global leadership on challenges such as global climate change.
And it is also true when it comes to trade. One third of America's growth in the past five years has come from expanding trade with other countries. If Asian workers lose their jobs, they cannot afford American farm products, and our farmers suffer. If Asian stock markets drop, American investors feel the tremors, and our families suffer.
For this reason, expanded trade is a cornerstone of economic recovery. We must take great care to ensure that what began as a global financial crisis does not become a global trade crisis. I urge you to consider what has happened to Asian exports to America; they have gone up dramatically. And other major industrial economies have not absorbed nearly as much.
I want to make one point crystal clear: the United States cannot be the importer of only resort. All developed countries - whether in Asia, Europe, or the Americas - must play a role, and keep tearing down trade barriers. In the end, in this global economy, protectionism will only protect us from prosperity itself.
In the past five years, the United States has been party to 260 new trade agreements, helping to open global markets in everything from agriculture to automobiles. At the 1994 APEC summit in Indonesia we resolved to eliminate all trade barriers in the region by 2020. Wehave made strong progress, particularly with the 1996 Information Technology Agreement, which lowered both tariffs and prices for computer and telecommunications equipment. That agreement - a proud moment for APEC - has now been embraced in other regions, just one example of how our progress has sparked free trade around the world.
Following the model of that agreement, just yesterday, APEC trade ministers agreed to move toward opening trade in nine key sectors, worth more than $1.5 trillion a year in global trade - and to build broader support for free trade in these sectors through the World Trade Organization.
These are not easy steps to take; all of us have faced pressure in our own nations to turn inward; and embracing openness takes leadership and vision. But in a tough financial environment, it is more important than ever. Each and every APEC economy must do its part.
And as we open the doors to global trade wider than ever before, let us build a trading system that lifts the fortunes of more and more people. Let us include strong protections for workers, for health and safety, for a clean environment. For at its heart, global commerce is about strengthening our shared global values. It is about building stronger families and stronger communities, through strong and steady growth around the world.
That is why the future of free and robust global markets depends so strongly on a third challenge - one that surpasses all the others, even as it supports all the others. It is democracy, and the growth of self-government around the world.
History has taught us that freedom - economic, political, and religious freedom - unlocks a higher fraction of the human potential than any other way of organizing society.
And that means it is the best guarantee of prosperity in the future. As President Kim Dae Jung has said: "Only a democratic society will be able to take full advantage of the benefits of the information age." If governments try to suppress the creative potential of their people by denying them access to information, they will undercut their own efforts to build their economies. Any government that suppresses information, suppresses the economic potential of the Information Age.
Some take another view. They cling to the belief that authoritarian rule makes it easier to impose the fiscal discipline and financial sacrifice often necessary to weather economic storms and spark growth. The facts refute that view.
People will accept sacrifice in a democracy, not only because they have had a role in choosing it, but because they rightly believe they are likely to benefit from it. The message this year from Indonesia is unmistakable: People are willing to take responsibility for their future - if they have the power to determine that future. From Thailand to South Korea, Eastern Europe to Mexico, democracies have done better in coping with economic crises than nations where freedom is suppressed. Democracy offers a stamp of legitimacy that reforms must have in order to be effective. And so, among nations suffering economic crises, we continue to hear calls fordemocracy, calls for "reformasi." We hear them today - right here, right now - among the brave people of Malaysia.
Citizens who gain democracy also gain the opportunity and the obligation to root out corruption and cronyism; to support fair regulation that protects consumers and businesses; to press for sustainable development that protects the environment; to gain access to education and health care; to uphold impartial justice and the rule of law. And the citizens who launch these reforms will help their countries prosper - as investors put their money and their faith in democracy, and pull it out of nations where decisions are rigged, where bloated bureaucracies sustain only themselves, where contracts are not honored, and where government swallows up tax revenues without working for the people.
All who love freedom are obliged to redeem people's faith in self-government. Investments move in the direction of strong and deep democracy - and so, too, has our world history. That is one reason why President Clinton and I have worked so hard to make American government work better and cost less, applying the lessons of private sector management through a program of streamlining, reform and targeted deregulation called Reinventing Government.
In closing, let us realize that more than ever before, the world's eyes are upon APEC -because so much of our economic future rests in this region.
In the coming days, the leaders of APEC will have an opportunity to meet the challenge of this crisis - to revitalize enterprise; to lift our citizens to greater prosperity; to not merely heal the contagion, but to eradicate it. If we take the right short-term actions, if we build a 21st Century financial architecture for this 21st Century economy, and if we find in free markets the more fundamental freedoms they nurture, I believe we can weather this global crisis together. But it will take hard work - and it will take strong leadership from the Asian Pacific nations, as well as from the United States and Europe.
Fortunately, across this region, over a generation of extraordinary progress, you have shown the world what is possible.
That is why American resolve is unshakeable - and we will stand with you for growth and stability at every step of the way. So let us reaffirm the partnership and the purpose upon which APEC was founded. Let us work even harder to fulfill it. With so many hundreds of millions of jobs and families depending on it, we certainly don't have a moment to waste.
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