|Secretary of State Madeleine K. Albright
and Secretary of the Treasury Lawrence Summers
Question and Answer Session following the Plenary Session "The U.S. in the 21st Century" at the World Economic Forum
Davos, Switzerland, January 30, 2000
As released by the Office of the Spokesman, January 31, 2000
U.S. Department of State
MR. JOHN H. BRYAN (Co-chairman of the Annual Meeting 2000, Chairman and Chief Executive Officer, Sara Lee Corporation, USA): Thank You. We are joined on our stage here this afternoon by the World Economic Forum's managing director Claude Smadja. He is an eminent political and economic speaker with a very worldly perspective. Claude is going to pose the first questions to our speakers after which we are going to turn to the audience. So Claude, you may begin, Sir.
MR. CLAUDE SMADJA (Managing Director, World Economic Forum): Thank you John. In fact, I would like to start with Secretary Albright. Mrs. Secretary, you alluded to my question in fact in your remarks. You said at some stage that the United States was not interested in making others into Xerox copies of ourselves. And in fact, what strikes me in my activities -- I spend 50 percent of my time traveling all over the world meeting business leaders, political personalities, people from the intelligencia -- in the last two years I have been struck by a growing sense of ambivalence towards the United States. There is of course this kind of awe with respect to the power of the United States, not only militarily but the financial aspect, the IT aspect, etc., etc. There is the feeling in many regions about the need for U.S. support and sometimes protection. And there is, and I think we can sometimes use the word, resentment, towards this kind of situation. Resentment and frustration. And maybe some of this ambivalence is unavoidable because of the present balance of forces on the international scene. But nevertheless it is maybe a factor which needs to be addressed and dealt with. And my question is two-fold. How much of the awareness of that trend is there at the State Department and is it a concern for you? And if that is the case, how do you address that concern? What is your view of dealing with this, I would say, at the same time psychological and political issue?
SECRETARY ALBRIGHT: I think you have asked a question that is probably on a lot of people's minds, because as you have put it, it is a question that comes up for all of us. It does for me and I think Larry also alluded to it in his remarks.
First of all, it is very strange but the United States did not ask to be the world's only superpower. And when we were not on the world stage, as both the President and Larry and I alluded to, and in a war period, there were events that took place that I think all of us wish had not. And our absence, I think, was a huge vacuum which was filled by forces that led to even greater horrors.
I believe that we have a responsibility as the world's largest economy to do our share on issues such as Larry was describing, on dealing with the highly indebted countries or dealing with problems of health or dealing with various inequalities that happen or when we see horrible things happening, such as in Kosovo, to put our military strength behind the alliance that we created with our partners to try to make sure that those kinds of things don't happen. What concerns me, and I gave a speech on this just two days ago at the European Institute in Washington, where I was happily honored along with Javier Solana, and I think our relationship is an example of good transatlantic relationships, saying that we are at a very delicate period where there are many Americans who would just as soon pack it up and stay at home and worry about ourselves. Because whenever I give a speech about my budget, somebody will say, well, why aren't you dealing with housing in x-area, or why aren't you worried about the fact that there is poverty in the United States? Why do we need to help all those countries that aren't grateful to us anyway? And that view was well expressed by the Chairman of the Foreign Relations Committee recently. And I happen to believe that we need to go counter to that trend which is to say that we have a responsibility, internationally, but to be shared with others.
And I think this is the important point that I think is often missed in those who resent the United States, and that is that there is not an activity, whether it is in the economic field, or in the technological field, or in the economy, or in health, or in environment, that we one, don't want to, or don't have to, share with others. None of these issues, as powerful as we are, can we deal with alone. So what I am doing -- the State Department is very aware of the problem, believe me -- but I am doing something else which is going off to speak in America to tell people that we can't avoid our responsibility and that it is essential for us to be out there and we hope very much that others will do it with us. As Larry said, the U.S. is not an imperial nation. And as we went out to help in Kosovo, we didn't do it to conquer any territory. We did it on behalf of a principle which was that people should be able to live freely and not be killed or raped because of their ethnic background. So I am proud to be able to represent America, and as someone who wasn't born in the United States, very proud to talk about the goodness of American power.
MR. SMADJA: Let me turn to Secretary of the Treasury Summers, and let me again play a little bit of the devil's advocate. Everybody concurs with respect to the need for greater integration. Everybody I think today agrees about the need for opening up economies, liberalization, etc, etc. But the concern today in many countries in the world is about the pace of this process. And in many circles the United States is seen as maybe pushing too hard with respect to the pace of this process of opening up and liberalization. And pushing too hard in a way that maybe the system in these countries cannot sustain because the legal institutional framework is not there. But in addition to that there is a kind of suspicion, and I would like your reaction to that. I guess you heard it already on many occasions, which is the fact that in pushing hard now, when the United States has this kind of supremacy in many domains, IT, or financial services and so on and so forth. In some respect it is a way of locking in America's very prominent position in these sectors. How do you react to that?
SECRETARY SUMMERS: Let me first say that it is difficult to argue with perceptions and I think that your question articulates something that is a real concern in many people's minds. I think there is a question of motive, and there is a question of substance. And I can tell you that in the seven years that I have been in the U.S. government, the U.S. government's policy recommendations to other countries have been motivated by a sincere desire to see those countries succeed economically and to succeed and prosper. For all the reasons that we believe that more prosperous nations are greater threats to us, they are greater opportunities for us. And so U.S. economic advice has been motivated by judgments as to what would represent the most effective economic strategy. It is difficult in the abstract without talking about specific cases, to talk about the question of the pace of economic change. But I think that a reading of the economic experience would tend much more to suggest that it was the failure to reform, and the failure to open up, and the failure to focus the state on core state functions, that had laid behind economic problems, than the idea that those things were done in too rapid a way.
Let me cite two areas that may be suggestive. First, with respect to trade policy, I think it has now been documented many times over that countries that were more successful in reducing their tariffs and quotas have seen more rapid growth than countries that were less successful, within the emerging markets.
Second example, goes to an area that you cited which is financial services. There is room for debate about the appropriate pace of liberalization of a capital account. But I think the evidence is quite clear that countries that have had a larger presence of foreign financial services firms have benefited in terms of increased stability. They have benefited because there was diversification. They have benefited because there was external capital. They've benefited because there was a transmission of knowledge. So that would be an area where I think most observers would say that greater foreign participation had been good without trying to do some detailed exercise in telegeography, I think it will generally be found that countries that have lower long distance telecommunications rates and greater Internet access have been more successful over time than other countries have been. So no one would be so foolish as to defend every recommendation that had been given in every context, but I think it would be a serious error to suppose that in some systematic way the gradual changers have been more successful economically than the more rapid changers.
MR. BRYAN: Thank you. We are now going to turn to the audience, and I would ask that when you rise, a microphone will be brought to you, you tell us your name, and then something about yourself, your occupation or whatever. Do I see a hand anywhere?
QUESTION: A question for Mr. Larry Summers. My name is (Alberto Tessiero de Quatro) from Brazil. You refer very properly to the importance of healthy international markets particularly to help the financing of developing economies. I would like to point out, Mr. Secretary, that as important as it is to have an international capital market, is also to develop local capital markets, because not all companies can access the international capital markets, and I think also those local capital markets are fundamentally important for the internal savings to play a role in the reconstruction of an economy. And I think if all companies go to the United States, you create a two-tier market where good companies go abroad, and bad companies stay in their country.
SECRETARY SUMMERS: I couldn't agree with you more. And I think that that is one of the central tasks of domestic economic development, as I spoke about economic reform. And indeed, if I might, give me an opportunity to give one more answer to Claude's question, those countries that have been more successful more quickly in creating domestic capital markets have benefited from the diversification they provide relative to banks whereas those who have maintained systems based on financial repression have on average performed less well. That doesn't mean there aren't risks in indiscriminate and overly rapid financial liberalization, but it does point to the desirability exactly as you say, of domestic financial liberalization.
QUESTION: I'm Bill Drozdiak from the Washington Post. A question for Madam Secretary. You seem to suggest that in spreading democracy, the United States and Western democracies should reach out and engage with other countries that have had authoritarian pasts. That has been evident I think in the initiatives that this administration has made toward China. How do you reconcile that with the absence of an effort to engage countries such as Iran and more specifically Cuba in order to spread democracy? Why isn't the United States making an extra effort to engage those counties?
SECRETARY ALBRIGHT: Well, first of all, let me say that I believe, as I have said in my remarks, that democracy is the best way to try to engage large numbers of people in the activities of their country and to be able to give them the kinds of possibility to answer or to deal with questions, such as are being posed to the Secretary of the Treasury, which allow them to find their fullest expression. I think, frankly, we would like to be able to have those kinds of engagements with every country. That would be the wish of the United States, but for a variety of reasons cannot be done differently for different countries. As far as, let's take Cuba for instance, is concerned. We have tried very hard, the embargo is the law of the land. And it is the custom of the administration to abide by the law of the land. But what we have been doing is trying to develop people-to-people programs, and create some space for the Cuban people by taking what we are calling a set of measures to allow Cuban Americans first, and now all Americans, to send remittances back to the Cubans, to try to expand humanitarian travel there and a variety of issues that would allow the Cuban people space between them and their authoritarian government.
With Iran, I think that we have looked at the situation there very, very carefully and have been frankly involved, I think, since you follow me around the world, and I get various questions from you at various places (laughter) that we have been having kind of an interesting verbal duet with the Iranians over the last several years since President Khatemi was elected and there is an attempt to probe the possibility of a dialogue and we are waiting to see what happens in the Majlis elections that are coming up next month. And to see the extent to which the wishes of the Iranian people are reflected in those elections, because we can see, for instance, that there are segments of the population which are looking for areas of reform. However we do have certain endemic problems with Iran which are their support for terrorism, their desire to acquire weapons of mass destruction, and their lack of support for the Middle East peace process. But those are kind of benchmarks that we look at. But as a question, we would very much like to engage with all kinds of countries as they move through to a democratic process.
QUESTION: My name is Linda Swain, I'm from the United States, and my company is Swain Travel. And this is a question for Secretaries Albright and Summers. I think you answered a bit of it with this last question, but when you come across governments that you feel sure are corrupt -- not like there are any or I am singling anyone out -- but how do you assist the people and their infrastructure when you know that their governments are siphoning their resources for their personal gain?
SECRETARY ALBRIGHT: First of all I think that is obviously a great concern, and what we do is demand, various, when it is government assistance, transparency, and accountability in the money that is given to them. For the most part, often countries that we are concerned about the government itself, we in fact then give assistance to various aspects of their civil society, to non-governmental organizations or to local entities, where it is easier to be able to track where some of the money goes. But we are generally working in government-to-government fashion to try to work to get rid of corrupt practices and this anti-bribery convention that I was talking about, I know that American businesses have found it very hard to operate in competition with countries that practice bribery, or in terms of their business practices, so we are working systematically to try to get rid of corruption in various countries and business practices that then do require transparency to the best possible way. Larry.
SECRETARY SUMMERS: Yeah, I think there is no greater corrosive with respect to economic growth than corruption. And it seems to me that in fighting corruption we have a number of tools at our disposal. I think the most important one is actually economic reform. When you don't have price controls, you don't have black markets. When you don't have quotas, there are no customs inspectors to bribe. When you don't have directed credit, there are no bank loan officers to bribe. So economic reform is an important antidote to corruption. I might suggest an important example from our own country's experience. The single greatest thing that we ever did to reduce corruption in the United States was the repeal of prohibition. As Secretary Albright emphasized, transparency is central with respect to corruption. Someone once said that conscience is the knowledge that someone is watching. And if that is even closer to right, then transparency can make a great deal of contribution. Choosing the right providers is very important. But I would make one caution in this area. Someone once said that it was the essence of diplomacy to distinguish degrees of evil. And I think it is not realistic for any of us to aspire to policies in which we don't engage with any countries where there is the possibility of any corruption, because such a policy would cut us off from the world, and so what is necessary in this area is to always have the fight against corruption at the center of our assistance policies, but also to remember that there are millions of innocent victims of corruption whose interests we also have to pay attention to.
QUESTION: Hello, my name is (Carole Piwnica) from Belgium working for an agribusiness in Europe and Central and Eastern Europe. I have a question for the Secretary of State. On your comment that the United States wants to share bringing democracy to new countries, why hasn't the United States been more enthusiastic about the enlargement of NATO to more countries, and I am thinking about Bulgaria and Romania which have armies and of course need more financial needs, but could be very helpful in the Balkan area?
SECRETARY ALBRIGHT: I am kind of surprised at your question, actually, because I consider myself the foremost advocate of NATO enlargement, and we believe very much that in order to make NATO relevant in the 21st Century, that it had to enlarge to take in those countries that were ready to take on the responsibilities of being members of the world's most powerful and historically important alliance. I think though, as I went around originally when we came up with the Partnership For Peace idea in 1994, it was very evident that what was important was that countries be prepared to take part in NATO. That NATO is not an organization that is strengthened by having weaker members. The strength of NATO is the fact that we all operate together and that each country has its responsibilities and is prepared to share the responsibilities as well as the privileges of NATO. So what we have done, the Partnership For Peace, has actually become one of the most popular organizations to be a part of because it provides the possibility for countries that are not yet ready to be a part of NATO, although it includes those that might never be, to participate in a number of activities that strengthen their security and the security of the region. While we have now made very clear, having taken in three new countries, that the door is open for additional countries, we have created what I think is an excellent -- it is called a Membership Action Plan -- which allows countries, Bulgaria is one of them, actually, to follow a road map, really to get ready for NATO accession. And so the door is open. We deal in a very inclusive way with countries that are members of the Partnership For Peace, and have developed this MAP, this Membership Action Plan, which allows countries to see their way towards becoming members of NATO. But I consider the Clinton Administration's pushing for NATO enlargement, and our success in getting it, one of the finest accomplishments of our administration.
QUESTION: Yes, for Secretary Summers, and then for Secretary Albright. My name is Walden Bello from the Philippines. Mr. Summers. The IMF and the WTO have been described as suffering from a very deep crisis of legitimacy. And I was just wondering in terms of the United States policy, the developing countries have raised issues regarding the decision making structure, the transparency, the inequality of various agreements and the fact that with the WTO in particular, the United States still has to live up to some of the agreements. What concretely are you going to propose in terms of dealing with these problems which really exercise people in the third world. And for Secretary Albright, let me just say that I was amused at your effort to rewrite history, because the United States was, both business and the State Department, was one of the backers of Mr. Marcos in the United States for a long time until the change in policy. My question here is, can I get you comments about the implications for U.S. policy of the current developments in Germany. The corruption scandal around illegal contributions. What are the implications for the stability and democracy in Germany, as well as the campaign that you have regarding corruption in the third world?
SECRETARY SUMMERS: Let me just say three things. First, the United States stands ready to join with any nation to pursue greater transparency in any reasonable form in the WTO and in the IMF and in the other international financial institutions and we have been pushing a transparency agenda for some time now and my hope is that others will come along more quickly, but I am proud to say that the United States is at the front of that particular parade. Second, I think there is a very important issue that you raise of global governance, and one of the things that we have tried very hard to do in the financial area has been to bring developing countries more into global governance in finance. And we have done that in two ways. We have done that through regional groupings that bring together financial officials from industrial and emerging market countries such as the Manila Group in Asia that was formed to address Asian financial issues. And we have done that through our leadership with respect to the formulation of the new G-20 Group which brings together the G-7 countries with a number of major emerging market countries, precisely because it is one world and it has to be and it does have to be governed collectively. Let me say with respect to the World Trade Organization, that there are important and difficult issues that have to be worked through, but I would say to you that if you look at exports from developing countries to developed countries, and you look at the rates of acceptance, you look at the market shares, you look at the quantities, in the United States and in the other major industrial regions, I don't think the United States has anything to apologize for in terms of the degree of openness in its market.
MR. BRYAN: I am going to use the chairman's prerogative to ask the last question if I may, and it is to Madam Albright, we would like to ask her about a meeting which she held today with Yassar Arafat this morning and see if she is willing to respond to that question.
SECRETARY ALBRIGHT: Well, as I said at a dinner last night, our Middle East talks are kind of a portable discussion. We try to have them wherever we can, because I think that trying to achieve a comprehensive Middle East peace is one of the highest goals, not only of the Clinton Administration, but has generally been of our predecessors.
My meeting today with Chairman Arafat followed on one that the President had yesterday and meetings that we had in Washington last week. We believe that the Palestinian track is at the core of the Middle East peace process, and that it is very important to keep the parties talking with each other, dealing not only with the permanent status issues, but also trying to carry out the various steps for the interim agreement that we reached at Sharm El Sheik. Also, when I meet with Chairman Arafat, we talk about the whole aspect of the Middle East peace talks. I am on my way to Moscow to have talks in the multilateral track which was called for by the Madrid Process. We haven't had those talks in a very long time. They deal with many issues that have to do with the region, such as water, refugees, economic development, and we consider those as a very good complement to the various bilateral tracks. And so Chairman Arafat and I talked about that. Every time I go by a camera, I am asked about how are we doing on the Middle East peace process, and so I have tried to come up with a clever answer, and being in Davos gave me some opportunities, which is that it is a lot like walking across the path here and slipping occasionally and then getting back on track, and then moving from summit to summit through valleys and basically trudging along through snow and ice and trying to get to an end which I believe is something that will not only be good for the region, but throughout the world, because it will really show the possibilities of these people that have had a very long struggle getting along. But it is not easy, and every meeting that I have had with either the Chairman or Prime Minister Barak or with President Assad or Foreign Minister Shara in some way or another points up one of the faceted aspects of this and the difficulties, but we are moving along.
MR. BRYAN: There is an extremely eager person on the front row here. I'm sorry will someone bring a microphone and see if she has got a brilliant question?
QUESTION: It is not brilliant. Don't expect anything new. I am (inaudible) from the FXB association. I have a question for both Secretaries of State. I felt Mr. Summers expressed so beautifully...
MR. BRYAN: Please ask the question, because we are running out of time.
QUESTION: I have to make a point, the importance of sharing the bounty of the global economy, and you stressed the value of the workers globally and you mentioned GAVI, which is the Global Alliance for Vaccines Initiative, so we have been dealing with orphans for the past ten years in the world, and there are as you know 100 million all the time chronically, there are going to be 40 million more. So as they are out of the system they are lost workers, they are an emergency to reel back into sustainable society, not only morally as you talked about.
MR. BRYAN: Come to your question.
QUESTION: ...but also because it is a danger to all of us and don't you feel that, and this is my question, that we need a global coalition for orphans, starting with the orphans of the AIDS epidemic, to address this problem of reintegration into society as an emergency?
SECRETARY SUMMERS: I think much greater attention to the problems of orphans is imperative along with what is a broader and profound challenge which is the children of the developing world. I spoke about the need for vaccines, and that is very important because it will save children's lives, but the meaning of that accomplishment if we are able to do it, will be much greater if they are able to learn to read, if they are able to find opportunity in the new global. So I share your sense of urgency for the poorest children all over the world.
SECRETARY ALBRIGHT: Let me just add, I think you have touched on a very tragic part of what has happened in the world, and one aspect of it that I have focused on are the orphans that have been created as a result of rape because of ethnic fighting. And that those are children that are abandoned doubly, because they are the products of hate whose mothers are afraid to even deal with them because of the shame of having been raped in the first place, and then also because of dealing with a child of a different ethnic background. And so as I go around in many different countries I go to visit orphanages and I see this as kind of a double tragedy. But it goes to the point that Larry has made that ultimately everything we are doing is for the children. Either those with parents, or orphans. That is what all of us do here all day long. And unless we focus on the fact that whether we are developing the newest high tech product or talking about being a public servant or a journalist, all of what we are doing every day has to be focused on the fact that the 21st Century has to be the Century of the Children.
Thank you. (Applause)
MR. BRYAN: Finally, I am going to ask Claude Smadja to offer a brief summary or commentary or whatever he wants to say about these stimulating presentations this afternoon.
MR. SMADJA: I think you mentioned at the beginning of our session that it is extremely seldom that we have the Secretary of State and Secretary of Treasury sharing the same podium in that way. And I think it is one of the true uniqueness of Davos that we have that. And I think it is quite useful, because listening to both of you, we could see how much we have here a very coherent and at the same time complementary view of how the U.S. is in fact seizing the moment. This unique situation today in a post Cold War era where we have at the same time, the post Cold War era and the emergence of the new economy, and in fact the U.S. is seizing the moment by focusing on two aspects, promotion of democracy, promotion of free markets, and promotion of an integrated global economy. So in a way, the U.S. position is itself in a very forceful way, acting as a kind of force for political reform and for economic reform. Now what was very interesting also was to see, how this unique position of the U.S. and this unique role of the U.S. is also put in a kind of benign approach taking into account more and more I realize, the concern and ambivalence which were expressed on many occasions and the rejection of the kind of one-size fits all policies whether on the diplomatic front, or whether on the economic and financial front. Now, adding to that I would like to mention two points which I think both of you raised which are very important. The need in the U.S. to keep and strengthen the support for U.S. global involvement. And, "B," as Secretary Summers mentioned, the need to strengthen the support for an even more open and integrated global economy, and I see the need for strengthening this support internally and globally as very complementary but at the same time very crucial both of them.
MR. BRYAN: Thank you very much. Ladies and Gentlemen, let's give a round of applause to these ... (applause, inaudible).
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