TRANSCRIPT: ALAN LARSON WORLDNET ON ASIA AND AMERICA
USIA
05 November 1998
TRANSCRIPT: ALAN LARSON WORLDNET ON ASIA AND AMERICA
(U.S. has stake in being part of Asia recovery) (8120)
Washington -- It is very clear to the Clinton Administration and to
the American people that the United States has an important stake in
being part of the recovery in Asia, according to Assistant Secretary
of State for Economic and Business Affairs Alan Larson.
During a USIA Worldnet interactive broadcast with audiences in
Jakarta, Singapore, and Guangzhou November 4, Larson stressed the
six-point plan to restore confidence and growth to the global
community presented by President Clinton in his speech to the Council
on Foreign Relations September 14.
"The president," he said, "emphasized the obligation the United States
has to lead the way in restoring confidence, stabilize the financial
system and spur global growth."
The six points, Larson said, include:
-- a growth strategy for Asia;
"The United States," Larson said, "has lowered interest rates twice in
order to ensure that the economy would be strong and help be a
locomotion for restoring growth in Asia."
-- the United States should take the lead in helping stimulate
corporate debt work-outs and bank structuring efforts;
-- dealing with the social dimension of the crisis;
"The United States has been working with the international financial
institutions as well as with development assistance agency to try to
be as responsive as possible to those social needs," he said.
-- the United States must be prepared to respond with financial force
to any new outbreaks of the crisis in countries that are following
good policies;
-- there must be ample trade finance available because it is part of
the engine that will pull Asian economies out of the economic slump;
and
-- the United States must ensure full funding for the programs of the
International Monetary Fund (IMF).
The United States is going to be in a position to respond in more
detail on each of the six points at the Asia-Pacific Economic
Cooperation (APEC) meetings in Kuala Lumpur, Larson said. 'We think
that if everyone comes to the meeting with that type of idea in mind,
we are quite confident that we can leave Kuala Lumpur, having sent a
very strong signal that working together we are going to be able to
pull through this difficult period and that the APEC economy can
emerge from this experience tougher, stronger, and poised for decades
of economic growth and social development. And that's certainly the
goal that we have going into the meeting."
Following is a transcript of the program:
(begin transcript)
WORLDNET "DIALOGUE"
UNITED STATES INFORMATION AGENCY
Television and Film Service of Washington, D.C.
GUEST: Ambassador Alan Larson
Assistant Secretary of State for Economic and Business Affairs
U.S. Department
of State
TOPIC: Asia and America: Restoring Confidence and Growth
POSTS: Jakarta, Singapore, Guangzhou
HOST: Doris McMillon
DATE: November 4, 1998
TIME: 20:00 - 21:00 EST
MS. MCMILLON: Hello, and welcome to Worldnet's "Dialogue," I'm Doris
McMillon. President Bill Clinton addressed the Council on Foreign
Relations in September and announced efforts the United States would
take to help implement a plan for financial stability around the
world. In presenting a strategy to help support struggling economies
get back on their feet the president emphasized the obligation the
United States has to lead the way in restoring confidence, stabilize
the financial system and spur global growth.
Joining us to discuss just how we restore confidence and growth to the
global community we are honored to welcome to our program Ambassador
Alan Larson, assistant secretary of state for economic and business
affairs. Now, prior to his appointment by President Clinton Ambassador
Larson served as deputy assistant secretary for international finance
and development. Ambassador Larson, welcome back to Worldnet's
"Dialogue."
AMB. LARSON: Thank you very much, good to be here.
MS. MCMILLON: And I understand you'd like to have a few words before
we begin our program.
AMB. LARSON: If it would be helpful to the audience, I could just
outline in a bit more detail the six-point plan that the president did
put out in his Council on Foreign Relations speech, because we have
been working hard since then to put that into operation.
As you highlighted at the beginning, the starting point is a growth
strategy for Asia. And since the president's announcement we actually
have lowered interest rates twice in order to ensure that our economy
would be strong and help be a locomotion for restoring growth in Asia.
A second part of the president's program was to take the lead in
helping stimulate corporate debt work-outs and bank structuring
efforts. We've had a team from our financial regulating offices in the
region recently, and we are working with the international financial
institutions to develop ideas to put some real muscle behind that
effort.
The third thing the president stressed was the social dimension of the
crisis. We're very much aware of the fact that this crisis has taken a
heavy toll, and we have been working with the international financial
institutions as well as with our own development assistance agency to
try to be as responsive as possible to those social needs.
The president said that -- and this was his fourth point -- that we
need to be prepared as the international community to respond with
force if necessary -- financial force -- to any new outbreaks of this
crisis in countries that are following good policies. Therefore we are
very gratified that there has been support for his subsequent specific
proposal for a precautionary facility housed in the International
Monetary Fund.
Fifth, we have stressed the importance of keeping trade finance ample,
because we believe that trade is part of the engine that will pull
Asian economies out of this economic slump. And we have made sure that
our Export-Import Bank is in a position to play a full role in
contributing to the expansion of trade in the region.
Finally, the president told the American people that we have an
obligation in the United States to play our part by ensuring full
funding for the programs of the International Monetary Fund, and I am
very pleased that before it left session the U.S. Congress did just
that -- we approved our $18 billion contribution for the IMF. So we
feel like we've made a good starting implementing the president's
program. We know that working with our partners in Asia we have a lot
more to do. We are very much looking forward to the APEC summit
meeting as an opportunity to push this growth strategy forward.
MS. MCMILLON: All right, thank you, ambassador. And now let's join
today's participants in Jakarta, Singapore and Guangzhou. We'll start
with a question from Jakarta. Please go ahead.
Q: Good morning, Mr. Larson. I am Linda -- (inaudible) -- Indonesia
daily in Jakarta. I have special questions for you. First, in this
time of crisis, what do you think the Indonesian government should do
to improve confidence from our trade partners so they will come and
put their money back here again? And the second: What will be the
United States' proposal in the APEC meeting to help Asian countries as
for the economic crisis? Do you have a concrete proposal? For example
a financial package to help Asian countries? Thank you.
AMB. LARSON: Thank you very much. And let me say that I had a great
experience paying a short visit to Jakarta just a month ago to consult
with the Indonesian government about how best to tackle some of the
issues identified in President Clinton's speech.
On the issue of confidence, I think first of all that the Indonesian
government has made some very important strides. In recent months
there has been a strengthening of the rupiah. The food situation,
which was a source of great concern over -- about two months ago --
seems to have been addressed, both by the vigorous effort to deliver
food to needy families and by the effort to make sure that there were
ample stocks available in the marketplace. I think those are very
positive steps.
For business investment to return in substantial volumes to Indonesia,
I think it is going to be important to make progress on several
fronts. One is to ensure that there is full transparency about the
rules of the game in Indonesia. I think the way that the Indonesian
government deals with past investors whose contracts haven't been able
to be implemented will have an important effect on the confidence of
new investors. I think it's going to be important for the Indonesian
people and the Indonesian government to make progress on the election
reform laws, so that there is a clearer sense of how the process of
new elections is going to take place.
But I think in all of these areas there have been important steps
forward, and we look forward to continuing our dialogue with the
Indonesian authorities and trying to be as helpful as we can where we
can.
MS. MCMILLON: Thank you, Jakarta. And now let's go to Singapore for
our next question. Please go ahead.
Q: Ambassador Larson -- (inaudible) -- from the Strait Times in
Singapore. My question is about the impact on the U.S. economy from
the Asian crisis. Do you think the United States will be able to avoid
a recession? Sorry, I should rephrase that. First is the Asian crisis
impacting on the U.S. economy, and by how much? Second question: Will
the United States be able to avoid a recession do you think? And,
third, what are the trends that you are seeing in U.S. consumer and
business confidence?
AMB. LARSON: Thank you. First of all the Asia crisis is having an
impact on the U.S. economy, but it has been somewhat smaller so far
than we have expected, and it's occurred in a somewhat different way
than we might have predicted. We have had somewhat stronger economic
growth than I would have expected a year ago. In the most recent
quarter, the third quarter of the calendar year, we recorded 3.3
percent growth for example. One reason that we have been able to avoid
a stronger impact has been that first of all our economic fundamentals
were quite strong going into the economic crisis. And, secondly,
consumer confidence has remained quite strong, and therefore consumer
spending has remained relatively strong. Having said that it is clear
that our exports to Asia have really been devastated by the economic
difficulties in Asia itself. And I have met with many, many groups of
businesses here. I accompanied Secretary Albright on a trip to the
West Coast last week where we heard first-hand about how this crisis
is affecting our businesses, particularly those that have been
dependent on the Asian market.
A second way that the crisis has affected us has been in its impact on
financial markets. Just as many Asian countries have seen a drying up
of credit and a flight to quality, so we have seen some contractions
of credit in our own economy, particularly to companies that are seen
as somewhat riskier than others. So it is having an impact. We think
that the action of the Federal Reserve in reducing interest rates
twice now since mid September, and the overall strength of our
economy, will allow us to continue to grow and certainly to avoid a
recession. But it is very clear to us and to the American people that
this -- we are not an island of prosperity -- that we have a stake for
many, many reasons in being an important part of the recovery in Asia,
and that's what we intend to do.
MS. MCMILLON: Thank you, Singapore. And now we invite our guests in
Guangzhou to go ahead with their first question. Please go ahead.
Q: Mr. Larson, I would like to ask a question -- my question is that
it seems that the ideology turning against financial liberalization --
Yes, I am -- (inaudible) -- University in Guangzhou. Mr. Larson, I
would like to ask you a question. It seems that ideology turning
against the financial liberalization is escalating in Asian countries
and regions in recent days which might be in breach of the principle
of further liberalization in financial and economic sectors in the
world. And under the current economic globalization, is the financial
liberalization the rational choice when approaching the 21st century?
AMB. LARSON: Well, thank you. And first of all let me say that I
understand this is the first Worldnet broadcast to Guangzhou, and if
that's correct I am very honored to be participating in it. To answer
your question, I don't really believe that there is a trend against
financial liberalization or support for financial liberalization
around the world or within Asia. Most of the people that I talk to
believe that financial liberalization is extremely important for any
country that wants to be a modern, efficient country. And in fact they
say it's really impossible to have a modern, efficient economy in the
manufacturing and services sector without having a modern and
efficient financial services and banking sector. The two just have to
go together. Interestingly, I just read this afternoon a statement
from the Pacific Basin Economic Council, which is an independent
private sector council that includes all APEC members, and they put
out a very strong statement in favor of continued progress on
financial liberalization. Having said that, I would agree with anyone
who said that financial liberalization has to be accompanied by
adequate prudential regulation. And it may well be that in some
countries the pace of liberalization in the financial sector moves
more quickly than the capabilities of the prudential regulators. So
these are things that have to go together, and I think that is a
lesson that most of us would agree on. But thank you very much for
your question.
MS. MCMILLON: Thank you, Guangzhou. And we'll continue our discussion
and return to Jakarta for more questions. Please go ahead.
Q: Good morning, Mr. Larson -- (inaudible) -- CSIS Jakarta. My
question relates to I think what we feel especially in Indonesia and
many of the crisis hit countries -- a very complex problem of the
corporate debt restructuring which was also mentioned in President
Clinton's speech. And you know specifically we have not seen what a
concrete program would look like on the corporate restructuring. So I
would like your views on that. And specifically I noticed by reading
from the media that there was a plan to create an agency that would be
funded by G-7 that supposedly would buy up debts issued by overseas
creditors by private companies in Asia at a discount of 20 to 30
percent. That's quite a specific plan. I was just wondering how far we
are with those plans. I understand this came out of the G-7 meetings
and it is a plan that is being worked out by the Japan and the U.S.
AMB. LARSON: First of all, our starting point is that the issue of
corporate debt work-outs and bank restructuring are two different
problems, but they are problems that need to be addressed
simultaneously. It now appears with 20/20 hindsight that in a number
of countries there was a problem where banks were extending too much
credit to corporations that weren't in a position to pay it back, and
now these problems need to be worked out in order for the financial
system to be restored and to do its job of providing credit to viable
businesses. That probably means that some loans will have to be
written off or there'll have to be debt equity swaps between banks and
their debtors, their corporate clients. What is important is for this
to happen very quickly. And in some cases it may require substantial
amounts of public funds to recapitalize the banks that now don't have
an adequate capital base to engage in lending. This is something that
is being tackled by the World Bank and the Asian Development Bank,
with a lot of interest and support from our U.S. Department of
Treasury and other interested governments.
I think that each country's situation is different. I know from my
travels in the region -- although I am not an expert in this field,
but that the situation in Indonesia is different from that in Thailand
and different from that in Korea. And that means that any program has
to be built around the plan that each country is developing. But there
is a great deal of interest in finding ways where the international
financial institutions and others can provide help, technical
assistance, and in some cases financial assistance, to make sure that
this process moves efficiently and quickly so that again banks can
resume doing their job, which is to provide credit to the companies
that produced goods and employed people and get the economy back on
track.
Q: Good morning, Mr. Larson. I am -- (inaudible) -- from the
coordinating ministry of economic finance and industry. I would like
to have a comment on President Clinton's remarks to the Council on
Foreign Relations. He mentioned that to face the problem of the global
financial crisis we must create a stronger and more accountable global
trading system and to accelerate reforms in the international
financial system. More specifically he mentions something like this:
we, the United States, must work to lift the (weight ?) of private
sector debt that has frozen the Asian economy. To follow up my
colleague's question -- (inaudible) -- I would like to know what
specific steps has the United States taken to -- (inaudible) --
private debt relief of Asian countries? Thank you very much.
AMB. LARSON: Well, thank you. I'd like to respond to two aspects of
your question. Secondly, the -- I mean, first of all part of President
Clinton's speech that you parted, the part about lifting the burden of
private sector debt, was really the part that deals directly with the
issue I outlined in responding to the last question. It is this whole
point about how you can get banks and corporate debtors to work
together to resolve the gridlock that now exists in many countries.
We are vigorously supporting the work of the international financial
institutions. We sent a team from the Treasury Department and the U.S.
Federal Reserve to the region to make a country-by-country examination
of how this process was working out, and to help us develop ideas for
how it could be stimulated further. And we are continuing to work on
that, and I think we will have some ideas that we can share with you
in the future. I don't have a plan that I can share with you today,
but I can assure you that the president's remarks are being followed
up very, very vigorously, and I think we will be in a position to put
forward some ideas on this issue.
You also mentioned a couple of other points that I think are very
important I want to comment on briefly. The president did say it's
very important to have the trading system strengthened -- and that
means we need each of us to reaffirm our commitment to open markets
and to press ahead in doing so. We have an immediate opportunity to do
that in the APEC early voluntary sectoral liberalization activity, and
we hope that that is going to be one of the big outcomes of the
meetings in Kuala Lumpur.
Secondly, the president did talk about the need to address the overall
issue of the financial architecture -- and there is a lot of hard work
going on about how to strengthen the international financial
institutions.
Q: Mr. Larson, regarding the APEC meeting in Malaysia, what will be
the U.S. proposal in the APEC meeting to help Asian countries? Can you
tell me your concrete proposal -- like for example a financial
package?
AMB. LARSON: I think it will be the job of President Clinton and
Secretary of State Albright to lay out the details of our proposal
when they come to Kuala Lumpur for the meeting. It's really not my
responsibility to do that in advance of their arrival.
What I can say though, to try to be responsive to your question, is
that we do tend to be in a position to have a lot of things --
specific things to say about the elements of the president's recovery
plan. Each of the six points that I outlined are points that we think
are very, very important -- points on which we continue to work. And
we are going to be in a position to respond in more detail on each of
those points at the meetings in Kuala Lumpur. We think that if
everyone comes to the meeting with that type of idea in mind, we are
quite confident that we can leave Kuala Lumpur, having sent a very
strong signal that working together we are going to be able to pull
through this difficult period and that the APEC economy can emerge
from this experience tougher, stronger, and poised for decades of
economic growth and social development. And that's certainly the goal
that we have going into the meeting.
Q: Hello -- (inaudible) -- again. I'd like to ask two questions which
I think bear very much -- where the U.S. leadership is very important.
One is what your view is now with regard to the balancing role of
Japan in overcoming the crisis, and in particular perhaps the greater
leadership in APEC after they have now also adopted this --
(inaudible) -- package as well as the banking reforms? And second, now
that the U.S. Congress has approved the $18 billion to the IMF, I
think everybody agrees that everybody has got to change -- the
governments have to change, countries have to change their policies,
and therefore the IMF also has to undergo changes of those crisis.
What are some of the changes that in your view are important for the
IMF to also go through towards a better global financial architecture?
AMB. LARSON: Well, thank you, those are two good questions, and I hope
my answers are as good as the questions.
First of all, Japan is a very important large economy in the APEC
region, and we believe that the role that Japan plays and the strength
of the Japanese economy will have a big influence on how quickly the
region itself -- the region as a whole can pull out of the difficult
economic problems that we now face.
I agree with you that it is very encouraging that the Japanese
authorities have now agreed to a stimulus program, and they have
agreed to a bank restructuring program that provides a substantial
amount of money to support banks and recapitalize banks.
The important thing now is to have quick implementation of this
program by the Japanese authorities so the Japanese economy can grow.
We have experienced a period where quite uncharacteristically Japan
has gone for almost a decade without experiencing any kind of
significant economic growth, and that's a very bad thing for the
Japanese people and a very bad thing for the region, and we hope that
through quick implementation of the measures that the Japanese
government has announced that that can change.
It's also going to be important for Japan, as for the rest of us, to
push ahead with trade liberalization, including the APEC voluntary
sectoral liberalization program, and we hope that's a contribution
that Japan will be able to join the rest of us in making.
On your second question, our view is that the IMF has played and is
playing an indispensable role in helping all of us work our way
through this global economic crisis. But we also agree with you that
all of us must improve, all of us must reform, and that goes for the
IMF as well. I think three examples that I could identify would be
first of all we believe the IMF, like other international economic
institutions, should be more open and transparent. We think that there
should be more information available to citizens about the types of
programs that countries are embarking on in cooperation with the
International Monetary Fund. Secondly, we think the IMF could improve
its capabilities in important areas relating to structural or
microeconomic policies. Many times in the past countries that have
gotten into trouble have gotten into it because of overspending --
excessive budgets or excessive balance of payments deficit. Now, in
many respects the Asian crisis was of a different sort, and many of
the roots were structural or microeconomic in Asia, and I think that
the IMF is going to need to strengthen its capabilities in dealing
with some of these structural issues. And so those are two examples
where I think reform would be useful, and where the United States is
certainly pushing for reform.
MS. MCMILLON: Jakarta, we thank you for your question. Now let's go
back to Singapore. Please go ahead Singapore.
Q: Professor Larson, my name is Alan Tun (sp). I am from the
television operation of Singapore. My interest is also in the United
States agenda at the upcoming APEC summit. Given that the view is that
a few countries are taking a few steps back with regard to
liberalization, in your personal opinion is the APEC's voluntary
liberalization scheme in jeopardy?
AMB. LARSON: I think that the early voluntary sectoral liberalization
scheme is vital. It's very important at a time of economic distress to
send a very clear signal that market opening is going to continue, and
that the commitments that we have made to each other in the past are
going to be kept.
We all know the sad history of the past where countries in times of
economic distress turn to beggar-thy-neighbor policy. We know it
doesn't work. We know that we need to avoid it if we are to not make
the current situation worse. And trade is like, as has often been
remarked, it's like riding a bicycle -- you can move forward, but you
can't stand still. If you try to stand still you tend to fall over. So
we believe quite passionately that it's important to maintain the
momentum for opening the markets and to maintain the commitments we've
made to each other in the early voluntary sectoral liberalization
program.
Q: Ambassador Larson, this is -- (inaudible) -- Strait Times again.
You know, one of the reasons why the Asian recovery seems to be a bit
slow is because exports haven't really taken up, at least the U.S.
dollars -- they are low. Now, trade finance is a key issue here. The
Japanese have come forward with the Miyazawa initiative. Does
Washington have anything specific in mind to help keep trade going in
the region, like the Miyazawa initiative, or are you just content
leaving it entirely to the Japanese to do something about it?
AMB. LARSON: First of all let me comment on the basic premise of your
question. I think that trade is vital to helping pull the region out
of its current difficulty. And it is heartening that in many countries
trade has -- exports have actually expanded rather dramatically -- at
least in local currency terms. One of the things -- and in volume
terms. One of the things that has happened is that the prices of many
of the products that are exported by the region have declined rather
dramatically. If you take Korea for example, it's export volumes are
up -- quite significantly - -it's been almost a miraculous increase in
exports. But many of the things that Korea exports, including
semiconductor chips, the prices have fallen in half because of
overcapacity around the world. And so measured in dollar terms the
export levels are roughly static. And although the products differ
from country to country the story is much the same as you go around
the region.
We -- nevertheless, we do think that it is crucial to maintain an
adequate -- a supply of trade finance adequate to meet all of the
needs of trade in the region. We have developed some very large
programs by the U.S. Export-Import Bank, totally roughly $5 billion so
far -- programs for different countries in the region. So far -- so
far Korea is a country that has drawn down a great deal of that
finance that has been available. Many other countries in the region,
including Indonesia and Thailand, have not drawn down yet even the
finance that we have made available. And I think much is the same
about the so-called Miyazawa plan. There's a large number out there
but the money isn't moving yet. And I think in part that's because the
Japanese are still figuring out exactly how they want to spend that
money. But it's also in part because the actual demand for traditional
trade finance surprisingly hasn't been there. As I say, we -- only a
fifth of the trade finance that the United States has made available
so far has been drawn down.
Q: Could I ask another question? On Japan again, last year the
Japanese politely put forward a plan for a nation monetary fund -- I
think similar to that. The United States was not very happy about it.
In fact, it resisted it. If that idea were to come forward again would
you have a second guess on it, given the current situation?
AMB. LARSON: Well, one of the points that Secretary Albright makes in
her public remarks is that although we sometimes use the phrase "Asia
economic crisis," or "Asia financial crisis," this is not an Asian
crisis alone. This is -- we have countries all over the world that are
experiencing the effects of this crisis. This is a global crisis. And
I think it's important for us to keep that in mind when we think about
regional proposals or regional proposals for particular funds.
We think that there's a lot to be said for an international strategy
that has a global focus and that is centered in the global
institutions, which include the International Monetary Fund and the
World Bank. And it has nothing to do with being for or against a
particular country's proposals or for or against a particular region.
But the reality is we live in one world now, and this is a region
crisis, and we can't be developing little particularistic strategies
that are designed to try to put out the fire in one part of the world
while the fire rages elsewhere. The reality is we are all in this
together and it's going to take a concerted global approach in my
opinion for us to emerge successfully from it.
Q: Go back to the IMF question again. There's a bunch of economists
around the world now who are beginning to say that the IMF should not
combine two roles, which is one is to do triage on economies and the
other to act as a kind of therapist, and that these two roles are
ideally separated. Would you comment on that sir?
AMB. LARSON: Well, that's -- your question is put in a very graphic
and interesting way. I think that it's important that the surveillance
role not be a monopoly for any institution, and certainly we all know
that private credit-rating institutions play a very important role in
surveillance. Sometimes that role is not particularly welcomed. I've
talked with a number of finance ministers who are not always happy
with some of the judgments that the private credit-rating agencies
make. But I think that it is important to have a set of arrangements
where alarm bells go off and it's not just an agency like the IMF,
which as you rightly point out is a therapist or a provider of both
advice and money to countries in trouble -- to have them have a
monopoly on the alarm.
I think that there is more that needs to be done in perfecting this
system. We think that there is need for a great deal more transparency
in many different ways. We think government accounts need to be more
transparent so that investors have a clearer idea of the state of a
country's finances when they are considering making investments or
buying bonds. We think that there needs to be more transparency in the
private sector as well -- that includes in emerging economies where it
would be good to have better information on the balance sheets of
banks and of the major corporations so that one has a better feel for
their financial condition before making investments. But it's also
true of banks and financial institutions in the developed world as
well.
If information is more available and more open, then it's going to be
less likely that we have these swings in opinion that seem to have
been part of the financial crisis -- a situation where sentiment
changes very quickly based on new information, where if information is
constantly being made available to the market, then I think
adjustments that markets make are more gradual.
MS. MCMILLON: Thank you, Singapore. Now we'll return to Guangzhou.
Please go ahead.
Q: Mr. Larson, my name is -- (inaudible) -- professor in --
(inaudible) -- social sciences. I have one question and am hoping to
get your comments on. The American economy faces a very -- (inaudible)
-- for example, huge deficit of the -- (inaudible) -- exchange rate of
the U.S. dollar. The bubble of the financial markets and --
(inaudible). Wouldn't the financial -- (inaudible) -- and economic
perception take a price in America because of the larger roles of the
huge -- (inaudible) -- long-term capital means for LTCM and --
(inaudible) -- payments? What measures will the American government
take to overcome all these problems? Thank you.
AMB. LARSON: Well, I think you are right, and we would be the first to
admit that there are challenges facing the American economy. But I
would like to stress that we believe that the American economy is very
strong and will remain very strong, and that the issues or the
challenges that you mentioned are challenges that we're in a very good
position to deal with.
First of all, on the trade deficit it's important to underscore that
as uncomfortable as the current account or trade deficit is for the
United States -- and it will get larger next year -- it is an
essential part of the recovery of the Asian economy. It exists because
the United States is the market of last resort. We are continuing to
buy products from Asia. In fact, our imports from Asia are increasing
dramatically, and we buy far more imports from Asian economies than
either Japan or Europe. It's one of the very important ways that we
are contributing to recovery in Asia -- by keeping our markets open
and accepting increased imports of products from your countries.
We obviously can't do that forever at levels that are unsustainable,
but we do think that what is going on now is an appropriate response
to a very difficult economic situation in Asia.
Now, we actually -- I don't think that there is a bubble in our
financial markets. We've had a very strong stock market. There was
over the course of the summer a reaction to events around the world,
and that caused a decline -- some might say a correction -- in the
level of the stock market. What's been interesting is that for the
last several weeks, I think in response to some of the steps that
President Clinton has taken, response to some of the steps that have
been taken elsewhere in the world to address this crisis, our stock
market is actually going up again. And so I think that while one
always needs to be alert to the potential problem of financial
bubbles, I don't think we have a financial bubble now. I think we have
a financial market that has seen a correction, that has seen some of
the steps that have been taken to strengthen the economy in the United
States and around the world and is responding to that.
Finally, on the long-term capital market hedge fund, it's very
important to recognize that this was a very atypical and unusual hedge
fund, and I think that while it will be important for the financial
authorities here to keep an eye on some of these institutions, I am
not anticipating -- and I think it would be -- I think you would be
misled if you were to anticipate that there will be major new
financial disruptions among financial institutions in the United
States. I actually don't think it's going to happen, and I'm expecting
that the U.S. economy is still going to be a point of strength for the
world economy through the next year.
Q: Good evening, Mr. Assistant Secretary. I am -- (inaudible) -- daily
of China. As you know, the APEC meeting will be held in Kuala Lumpur
this month. Does the U.S. government have any specific plans to help
out the crisis in Asia? And how do you enhance economic and trade
cooperation between the United States and the Asian countries? Thank
you, Mr. Assistant Secretary.
AMB. LARSON: Thank you for your question. Let me respond to the trade
part of it first. I do think that the principal focus of the APEC
meeting on trade will be securing approval of the voluntary sectoral
liberalization program in nine sectors. And perhaps we've been talking
about this by its acronym. Maybe we should say a little more about it.
This is an effort launched at the last APEC summit meeting in
Vancouver to have APEC continue to be an important force for trade
liberalization by choosing nine sectors that are important in the
Asia-Pacific region, and sending out a program of trade liberalization
that APEC countries are prepared to endorse and implement among
themselves as part of their commitment to an open trade regime. It is
gratifying that the APEC countries have a track record of having
really driven and led the world toward greater trade liberalization.
It was at APEC that the idea for the information technology agreement
was really launched. This is a very important agreement. APEC is the
one place in the world right now where there is very active ongoing
effort to reduce trade barriers and to increase and expand trade for
the benefit of our economies. So I think that's a very important part
of the agenda that we will be dealing with at Kuala Lumpur.
I have said in response to earlier questions that I am not in a
position to go too far into the details of the proposals that
President Clinton and Secretary Albright and others will lay out at
the meeting. But I can say that in each of these areas that I
identified that were part of President Clinton's plan we are going to
come forward with specific ideas and proposals. We'll be interested in
looking at and hearing about the proposals of others, because we think
that if we can get together on action in these areas -- that is to say
corporate debt restructuring and bank restructuring, addressing social
safety net needs, addressing the issue of trade finance, making sure
we have in place effective means for dealing with any new outbreak of
financial turbulence that there might be. If we can deal with all of
these problems then we will have set out a very important platform for
renewed growth in Asia.
Q: Good morning, Mr. Larson. I am -- (inaudible) -- from Guangzhou. I
have a short question. As far as I know America is taking Southeast
Asia as one of its new and big market overseas products. Now for the
situation about Southeast Asian countries are faced now with, does
America still have confidence in the investment in this new market?
And it is said to restore the economic growth in Southeast Asian
countries one of the major factors is that it depends on the strength
of American economic growth. Once the American economic growth happens
to decline the financial crisis will affect the whole world economy.
Then do you think it's right if, yes, just now you said the American
economy is strong. But can we know the future strength of the American
economic growth is stable? Can America establish the confidence for
Southeast Asian countries to restore the economic growth? Thank you.
AMB. LARSON: Thank you for your question. I believe that the Southeast
Asian countries themselves shoulder the greatest responsibility for
restoring confidence in their economies. And I think that they
actually have made a great deal of progress in achieving that. I think
much has been accomplished in the last year. I think that any of
Southeast Asia's trading partners and investors recognize that the
medium and long-term prospects for that region are tremendous. They --
this is a region with talented hard-working people that has made a big
investment in high technology, and has some very strong fundamentals.
There are some problems to be worked out. They are being tackled, and
I think they will be worked out, and those of us who value our
friendship with these countries and value them as economic partners
need to be in it for the medium and long term. And we are. The United
States is in it for the medium and long term.
I believe that the United States economy will continue to be a pull of
strength for the world economy and for Asia. Our growth rate may
decline -- I am not an economic forecaster, but I know that many of
the international organization forecasts expect that the United States
economy may grow somewhat more slowly next year, but we will grow by
all of these forecasts. And I think therefore we will be making a
contribution to the resumption of growth in Asia, and we certainly
intend to keep our economy strong, because it's good for us and we
think it's also good for the world economy.
MS. MCMILLON: Thank you, Guangzhou. And now we'll go back to Jakarta
for your questions.
Q: I am -- (inaudible) -- Mr. Larson. I want to go back to my first
question. You mentioned that we would like to have the international
financial architecture. Since we have the Bretton Woods institutions I
would like to know what changes to that institution is being
considered now. And secondly I want to know what time the process --
the emerging market countries will be informed? Thank you very much.
AMB. LARSON: Well, first of all, the emerging market countries have
played a very important role in the discussions on financial
architecture. Many of these discussions have taken place in the
context of the so-called G-22, which was an idea which actually was
developed within APEC at the last APEC summit meeting in Vancouver.
And a number of the governments in Asia are full participants in this
process, and the United States welcomes that very much. We think that
it is not going to be possible to make any refinements or improvements
in the international financial architecture that are not improvements
that have the imprimatur and the support of emerging market economies.
Now, on the ideas, the actual idea that might be part of this, the new
financial architecture, this is certainly a work that is in progress
-- it's still underway. I think in the United States we believe that
part of the answer is to improve the openness and transparency, and I
commented on that in response to an earlier question. We think that
part of it has to do with ensuring that there's strong surveillance
mechanisms -- and we also talked about that a little bit during this
broadcast.
One of the issues that clearly has arisen and that we'll need to work
hard on together is the issue of large short-term private capital
flows. We think that short-term private capital flows play a very
important and positive role in the international economy. Certainly
there are times and circumstances when rapid movement of this type of
money can pose problems. We need to know how to capture the benefits
without suffering all the difficult consequences.
Part of that -- part of the answer to that problem may involve a
combination of strengthening prudential financial regulation in
emerging market economies. It may require some refinements and
strengthening of regulation in advanced economies. And it may require
a certain degree of increased cooperation among financial authorities
and regulators around the world. These are issues that need to be
discussed and deliberated on, but this is part of the agenda that we
think about in the United States when we think about strengthening the
international financial architecture.
Q: (Inaudible) -- again from CSIS. I think that we all know that this
crisis is not just due to weak fundamentals in the economic systems,
but also weak or closed political systems and lack of accountability
in the government. And I think what's happened in the crisis has
changed the way we donors -- multilaterals, neighboring countries --
approach how we respond to issues and crises. In particular, the
sacred principle of noninterference I think is being tested, because
what one country does affects another country, and because we are
talking about huge amounts of money -- assistance being given to these
countries. My question is how will -- how should we balance now the
external pressure to ensure economic and political reforms are
undertaken in these countries to get them back on the road of
recovery, while allowing these countries to get their house in order
themselves? And I was very curious to note that John Wolfe, in a
speech on APEC, actually does mention politics -- countries that
restructure and reform economically best are those with broad
political support.
AMB. LARSON: Well, thank you for your question. What Ambassador Wolf
said is something that we believe very fervently. It is our experience
and our conviction that countries that have broad-based open
democratic systems are also countries that have the strength, the
political strength to embrace economic reform, and they have the set
of values that allows them to operate a dynamic market economy as
well.
You know, many of the -- much of this goes back to the rule of law. We
believe in the United States that rule of law is very important in the
economic sphere -- it is important to have clear rules that guide
investors, it's important that contracts be honored. So it's important
-- very important for the conduct of business to have open,
transparent systems based on the rule of law.
But this is very important also for political systems. It's important
for human rights and civil rights. It's important for people to be
able to feel secure in exercising those rights. So we believe that
these two things go hand in hand.
transparency is one of the important watch words here. We think that
both private and public institutions need to as open and transparent
as possible. And that in the private sector may mean improved
corporate governance, it may mean improved accounting standards. It
the public sector it may mean publication of government notices,
opportunities for the public to contribute to decision making by
offering comment. And these are all things that we think make a
society stronger.
We are living in an information age, and that means that the free flow
of information is not only an important political value but it's
important to the well functioning of the economy.
MS. MCMILLON: Thank you, Jakarta. We'll move on to Singapore. Please
go ahead Singapore.
Q: Ambassador Larson, what is the key element of stability of the
market that can be caused by the leverage that these hot money
operators bring to the operations, specifically the hedge funds and so
on? Now, does the U.S. administration think that it's important to
restrict the leverage these hedge funds have? Are you thinking on
those lines?
AMB. LARSON: I think the issue of leverage is very important. Most
hedge funds were not anywhere near as leveraged as the long-term
capital markets fund. And I think that part of the responsibility for
making sure that leverage is appropriate lies with those who provide
money to funds. And we do think there is a scope for attention to that
question.
MS. MCMILLON: And with that I am afraid we have run out of time.
Ambassador Larson, thank you once again for being with us on
Worldnet's "Dialogue." And also we'd like to thank our participants in
Jakarta, Singapore and Guangzhou for joining us. From Washington, I'm
Doris McMillon.
(end transcript)