TRANSCRIPT: ALAN LARSON WORLDNET ON ASIA AND AMERICA
(U.S. has stake in being important part of Asia recovery)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 StateTOPIC: Asia and America: Restoring Confidence and Growth
POSTS: Jakarta, Singapore, Guangzhou
HOST: Doris McMillon
DATE: November 4, 1998
TIME: 20:00 - 21:00 ESTMS. 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.
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