*EPF104 01/24/00
Transcript: Summers Statement at Post-G-7 Meeting Press Conference
(G-7 favors balanced growth; U.S. dollar policy unchanged) (3340)

U.S. Secretary of Treasury Lawrence Summers says that continuation of the tentative global economic recovery cannot be taken for granted and will require a "proactive" policy.

In a statement issued after the January 22 Group of Seven (G-7) major industrialized countries finance ministers and central bank governors meeting in Tokyo, Summers said, "we must all seize this moment of opportunity to create an environment for strong and more balanced growth across all of our economies."

Summers noted that the G-7 statement, issued after the meeting, cited the need for "a more balanced pattern of growth" among the seven countries. The U.S. economy has expanded very strongly in recent years while Europe and Japan have lagged behind. U.S. authorities have sought to encourage the other countries to take steps to allow growth to resume.

On exchange rates, Summers said the U.S. policy of supporting a "strong dollar" as in the interest of the United States "remains unchanged." He added that the G-7 also supported the Japanese monetary authorities' reaffirmation of their readiness to "conduct policies appropriately in view of their concern, which we share, about the potential impact of yen appreciation for the Japanese economy and the world economy."

Following are terms and acronyms used in the text:

-- G-7: Group of Seven

-- G20: Group of Twenty

-- IMF: International Monetary Fund

-- OECD: Organization for Economic Cooperation and Development

Following is the text of Summers' statement as prepared for delivery and a transcript of the question-and-answer session that followed:

(begin text)

THE OFFICE OF PUBLIC AFFAIRS
January 22, 2000

STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
AT THE POST-G-7 PRESS CONFERENCE

Let me begin by saying a few words about today's meeting, and then I will be happy to answer questions.

Our discussion today essentially divided into two parts: our review of global economic conditions and prospects; and the broad agenda for international financial reform.

First: Achieving Sustainable Growth in the Global Economy

With the maintenance of a strongly supportive macro-economic environment, we are now seeing improved prospects for global growth. At the same time, we all recognize that continued improvement is not inevitable, and will depend crucially on proactive policy. At a time of dramatic advances in technology, we must all seize this moment of opportunity to create an environment for strong and more balanced growth across all our economies.

In view of the importance of this point I would like to quote in full the formulation in paragraph three of the Statement:

"We see improved prospects for non-inflationary growth in the major industrial economies and the world economy as a whole. The challenge remains to secure a more balanced pattern of growth among our economies that is so important to sustaining the expansion. We agreed on the importance of directing both macroeconomic and structural policies in all our countries at this objective, with particular emphasis on taking advantage of the investment opportunities created by new technologies."

As far as exchange rates are concerned, let me quote what we said in the Statement:

"We discussed developments in our exchange and financial markets. We welcomed the reaffirmation by the Japanese monetary authorities of their intention to conduct policies appropriately in view of their concern, which we share, about the potential impact of yen appreciation for the Japanese economy and the world economy. We will continue to monitor developments in exchange markets and cooperate as appropriate."

Let me also note that our policy with respect to the dollar remains unchanged: a strong dollar is in the interest of the United States.

Second: International Financial Reform Going Forward

We also talked about our broad agenda for international financial reform going forward. Let me highlight three areas that are especially important to us:

First, on the reform of the international financial architecture, we have made real progress since our meeting in September, including a successful inaugural meeting of the G-20 Finance Ministers and Central Bank Governors in Berlin in December. Obviously what is most important now is translating the consensus that has been reached into real change: for example, with regard to broader implementation of internationally agreed codes and standards, and working to find the right ways to ensure private sector involvement in forestalling and resolving crises.

In this context, we also agreed on the importance of measures to strengthen the functioning of the IMF to make sure that it is better able to meet the challenges of the 21st century. We agreed that there was a particular need for a greater focus on promoting the flow of information to markets and reducing liquidity and balance sheet vulnerabilities, and a comprehensive review of IMF facilities. In addition, we agreed to expand our discussions to include an examination of how the role of Multilateral Development Banks ought to evolve in a changing global environment.

Second, implementation of the HIPC (Heavily Indebted Poor Country) Initiative. We agreed that countries seeking relief under the Initiative should move quickly to put in place the more participatory process for developing national poverty reduction strategies that we have supported in this context. This will be crucial for meeting the target we set today, of three-quarters of the eligible countries qualifying for relief under this initiative by the end of 2000.

Third, we agreed that a priority for the Summit would be stepping up the international effort to combat financial crime, which poses a growing threat to the credibility and integrity of the international financial system. Especially important will be the Financial Action Task Force (FATF) moving quickly to complete its identification of non-cooperative jurisdictions; greater progress in implementing the OECD Anti-Bribery Convention; and continued IMF and World Bank efforts to strengthen governance and anti-money laundering safeguards in their programs with member countries.

Let me conclude by noting that we all expressed our deep gratitude to Managing Director Camdessus for his thirteen years of valuable service as the IMF's Managing Director and for his contributions to these G-7 meetings.

(end text)

(begin Q&A transcript)

Treasury Secretary Lawrence Summers
Post G-7 Press Conference
Questions and Answers
January 22, 2000
Tokyo

[NOTE: many questions inaudible]

Q: In reference to the yen...the comprehensive review of IMF facilities... [inaudible]

SUMMERS: It's always a possibility that when you ask three questions, I'll answer only the ones that I prefer. Let me say on your first question that I don't have anything to add to the communique, which references the policy intentions of the Japanese authorities in paragraph five, where it says in these circumstances the Japanese authorities were implementing the second supplementary budget and announced fiscal year 2000 budget proposal maintaining stimulus to ensure domestic demand-led growth. They reiterated their intention in the context of the zero interest rate policy to provide ample liquidity to ensure the deflationary concern are dispelled, and then it subsequently addresses Japan's concerns and policy in the context of exchange rates, and I don't have anything to add to what is there.

With respect to the IMF I think the question of longer term financing, the question of repeat use of financing will be among the issues considered; in looking at facilities, I suspect there will also be examination of the relative pricing of different facilities, including the contingent credit line. I should note that the IMF board on Friday took some first decisions pursuant to the object that we had set of streamlining the IMF's facilities by eliminating the buffer stock facility and certain other of the little used procedures for compensatory finance. With respect to the multilateral development banks I think there is a sense that as we look at the financial architecture -- as we look at the development agenda, as we look at the kind of longer-term issues that are faced, that as we recognize that we are in the context of the IMF, the growing role of private sector in finance -- that it is important to look at how best the multilateral development banks can support and promote economic growth, but to my knowledge no one had the merger question that you had in mind.

Q: Can you tell us something about the discussions in the meetings or outside of the meetings about a successor to Mr. Camdessus, whether or not this group was any closer to consensus on a candidate?

SUMMERS: There was as you might expect a certain amount of discussion of that issue in the corridors but I don't have anything new to report to you on that.

Q: On the same issue as a matter of practical fact, if Mr. Camdessus leaves in the middle of February does it seem likely that Mr. Fisher will take over as a interim managing director, is it possible that he may take over for quite some time in that role?

SUMMERS: As I said before, it's to be hoped that there will emerge a consensus on a candidate who is satisfactory to a wide range of countries and who has the necessary attributes in term of capacity to lead a complex organization at a crucial moment, in terms in ability to carry out the very difficult financial missions of the IMF, and in terms of the ability to work with and earn the confidence of all the IMF shareholders -- both industrial and developing country shareholders -- and I think our focus should be on coming to consensus on such a person.

Q: [inaudible]

SUMMERS: I think we are involved in a process of seeking a candidate who can command widespread consensus, and who can and who would be widely endorsed and I don't want to get into comments on any personalities.

Q: In sense of the distinction between cyclical growth and the potential that you talked about in particular in detail last night. How was that greeted during the meeting, did the finance ministers ask you more about how you see potential grow, how you measure it, how you achieve it, was it that sort of a discussion or was it sort of, yes that's a great idea but that's try to make our economy grow faster.

SUMMERS: I'm not sure what the distinction is; we certainly didn't get into the econometrics of measuring potential growth. But I think that, as the paragraph I quoted in the communique suggests, I think there was a shared awareness of the importance not just of having cyclical expansion in all our countries but also of working to achieve greater and more balanced growth in all of our countries. And I think there was a feeling that efforts to make room for investment opportunities though structural policies that increased potential growth would be particularity availing in raising potential growth rates around the world and also creating a more balanced -- in the sense of being more equal -- pattern of global growth which would in turn be constructive in terms of increasing this sustainability of economic expansion.

Q: Discussions on the U.S. stock market...[inaudible]

SUMMERS: As is I think becoming increasingly clear over the years, the practice in the G-7, the focus, was on policies and economic fundamentals because that what's ultimately most important for economic performance and that's what ultimately drives economic outcomes; I don't think stock markets in any of our countries -- stock markets were not our primary focus in the discussion.

Q: With Japan on the economic policy front... [inaudible]

SUMMERS: I think we had a very good discussion and I'm encouraged by the indications Japan has given of its commitment to domestic demand-led growth and to avoiding deflationary pressures. What will be most important going forward would be the way in which those comments are carried through.

Q: One of the issues that impinges on Japanese growth, particularly in the long-term, is the strengthening of the labor force and I'm curious if that issue came up at all during these discussions; the Japanese government as I'm sure you've been aware, recently issued a statement endorsing the notion of opening itself up to more immigration and labor coming in from outside to help offset the problem. Does the U.S. have a view as to whether immigration policy should be considered a part of Japan's microeconomic -- solving Japan's microeconomic problems and did that issue come up at all?

SUMMERS: Immigration issues were not discussed today. I think that as one looks at this question of balanced growth across countries one component of it is the demographic consideration, with different rates of population growth driving different rates of labor force growth, although because of changes in participation behavior it's more complicated its than that. I know that this is an issue with which the Japanese authorities have been concerned but we haven't sought to prescribe with respect to immigration policy.

Q: Two and a half years ago there was this idea of setting up an Asian Monetary Fund. Now recently this idea is being revived around Asian countries, to which the Japanese finance ministry is favorable and supportive. What is your question on this idea?

SUMMERS: It wasn't something that was discussed today. We have a number of reservations about proposals for a Asian Monetary Fund because we have believed it is best for the response to financial problems and global financial markets to be a global response, because we have been concerned about issues relating to the greater intrusion of political factors in regional financial groupings to respond to crises. And so it's been our judgement and, I think, a judgement that has been shared by a number of other Asian countries, that strengthening the IMF capacity for crisis response -- in particular for response to contagion problems such as through the contingent credit line -- and these issues we will be looking at as we look at facilities, and working within the Manila framework is probably the best way to strengthen crisis protection.

Q: What kind of response do you get from your European colleagues, what do you make of their economy. Do you get the impression that they are willing to move in the direction that Washington moves?

SUMMERS: I think that counties pursue their own interests, and often the successful pursuit of their own interests represents the pursuit of the mutual interest. I think there was a shared sense in the G-7 of the desirability for more balanced growth, of the importance of investment-led growth as the healthiest kind of growth and of the importance of structural reform as a route to promoting investment and to promoting more balance and therefore more sustainable growth; and I certainly sense that those views were shared quite widely in by all the countries we've discussed them with.

Q: In terms of structural discussions, especially with Japan, what about the issue of things like tax rates, those sort of developments, did you get down to that particular consideration?

SUMMERS: I had a good discussion with Minister Miyazawa about bilateral tax issues in the context of our bilateral meeting, and we agreed that the tax treaty that had been reached between the United States and Japan in the early 1970s was antiquated and that it would be appropriate for our officials to consider its modernization. I know that there have been a number of concerns expressed -- very strong concerns -- expressed by businesses operating in both countries, both American and Japanese businesses, with respect to the workings of that treaty and so I was pleased that we were able to agree on charging our officials to look at its modernization.

Q: ... progress in this area, debt, and... [inaudible]

SUMMERS: There are a range of debt services indicators so I don't think their is any single ratio that can be depositive with respect to your second question. With respect to your first question, I think that the progress we are seeing is that in this quarter we are going to see a number of countries -- perhaps as many as eleven -- by the spring who are actually going to qualify for debt relief under the initiative. The further steps that need to be taken are in a number of areas; they include the developing countries desiring to take advantage of the initiative of participatory frameworks and anti-poverty strategies. They also include resource mobilization where a start has been made in terms of a bilateral contribution from the United States and other countries but where there is more to be done, and it is also important for the international financial institutions, particularly the regional development banks, to look very hard at how their resources can be best used to support debt reduction. I'm encouraged that a number of other countries seem to be following President Clinton's lead in agreeing to give a hundred percent to debt relief on bilateral commercial debt for selected cases.

Q: In paragraph five and six -- about the exchange rate and Japanese policy, the wording is almost identical to the wording in the communique in September regarding in terms of a spell that about the rate of the yen; one gets the impression that they were unable to get out of you a stronger statement about the yen's strength; that you were unable to get out of them a stronger statement about monetary policy, is that accurate?

SUMMERS: I think the communique which particularly in paragraph six does differ in some ways from the language in September speaks for itself, and I'd rather leave it at that.

Q: To what extent did Indonesia come up in the conversation, I'm speaking about their current battles, political instability, social instability -- was that a source of concern at the G-7 level about what it means for the economies and for Asia as a whole?

SUMMERS: Minister Miyazawa and I discussed for a few minutes the situation in Indonesia and we agreed that Indonesia's first democratically elected government provided an enormously important opportunity for Indonesian and for Asia; we recognized that there were important political challenges in Indonesia in that government being able to carry out a program effectively; and we agreed on the importance for both our countries of doing everything we could to stand with President Wahid and to support the economic reform effort in Indonesia.

Q: The statement mentions approvingly the Japanese government spending; some Japanese are starting to get worried...[inaudible] about greater government spending.

SUMMERS: I think what's most important for Japan and what's important for the global economy is that sustained domestic demand-led growth be achieved in Japan. That is partially a matter of microeconomic policy [which includes] fiscal policy, but as you recognize there are limits to the efficacy of fiscal policy --- that's part of the reason why the communique and the Japanese authorities have placed increased emphasis on the importance of structural policy. What's particularly important in terms of structural policy, it seems to us and to many in Japan, is reform in sectors like telecommunications where you make possible a substantial volume of investment that has a number of benefits; it is demand in the short run that helps the economy grow. It is greater capacity in the medium term that expands the economy's capacity to produce and it carries with it very substantial benefits to consumers, so it seems to us that as part of a stimulus agenda an acceleration of structural reforms is particularly important.

Q: In your discussions with the German finance minister...the question of slave workers, did that come up?

SUMMERS: It did come up, and the minister and I congratulated Graf Lambsdorff and Stuart Eizenstat on the work that they had done together towards an agreement in this area; but we recognized that it was very important that that agreement be shaped and that the details of that agreement be worked out in a way that was satisfactory to all of those who were involved.

Thank you.

(end Q&A transcript)

(Distributed by the Office of International Information Programs, U.S. Department of State.)
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