*EPF504 09/05/2003
Text: Snow Urges Free Flow of Capital, Market-Based Exchange Rates
(Treasury Secretary Snow's September 5 statement at APEC) (920)

Secretary of the Treasury John Snow says the best way to help ensure economic prosperity is through free trade, with a free flow of capital and a market-based exchange rate between currencies.

In a statement September 5 following his meeting with fellow Asia-Pacific Economic Cooperation (APEC) forum finance ministers in Thailand, Snow also called on APEC members to take the necessary steps to increase growth in their domestic economies.

Snow called the free flow of capital "a fundamental component of our global system of international trade and finance."

The Treasury secretary reiterated the importance of allowing the market to determine the exchange rate of currencies.

"Market-determined floating currencies, with interventions kept to a minimum, are essential to a well-functioning international financial system," Snow said.

He warned against "rigid currency systems" that tightly tie one currency to another.

Instead of promoting stability, Snow said, such systems increase the risk that economies "cannot properly adjust, thereby escalating the impact of economic shocks."

Snow argued against the management of currencies at "unnatural rates."

Such actions, he cautioned, distort markets and tend toward "beggar-thy-neighbor policies," which in turn encourage protectionism.

"These are paths we must avoid," Snow said.

Following is the text of Snow's statement, as released by the Department of the Treasury:

(begin text)

STATEMENT BY JOHN SNOW
U.S. SECRETARY OF THE TREASURY
AT THE MEETING OF THE FINANCE MINISTERS OF THE
ASIA-PACIFIC ECONOMIC COOPERATION FORUM
PHUKET, THAILAND
SEPTEMBER 5, 2003

Department of Treasury press release

In my first meeting with the finance ministers of the Asia-Pacific Economic Cooperation Forum I come away impressed with the serious interest expressed by my colleagues on the important issues we came to discuss. I thank our hosts from Thailand for their hospitality and for providing this beautiful setting for our meetings.

Both in group discussions and in bilateral meetings, I took the opportunity to address issues important to our prosperity and our security. I stressed our view that the best international economic system - for the United States, for the Asia-Pacific region, and for the world - is one based on the principles of free trade, the free flow of capital, and market-based exchange rates. I also stressed the need for each of us to take steps to increase economic growth in our domestic economies. Raising productivity through structural reform and private investment is the most direct route to raising living standards for our people. I reported that the U.S. economy is returning to higher levels of growth, but that the global economy requires Europe and Asia - and Japan in particular - to attain higher levels of growth as well.

Throughout my meetings we had extensive discussions on the issue of currencies. I expressed my long-held view that market-determined floating currencies, with interventions kept to a minimum, are essential to a well-functioning international financial system. Only freely floating currencies bring the accuracy and efficiency necessary for proper pricing, account settlement and capital flows among our economies. Furthermore, rigid currency systems, rather than promoting stability, instead increase the risk that economies cannot properly adjust, thereby escalating the impact of economic shocks. The management of currencies at unnatural rates distorts markets, tending toward beggar-thy-neighbor policies, and encourages protectionism. These are paths we must avoid.

I was pleased with the reception of this view from my colleagues. Our agreement that flexible exchange rates are necessary to promote orderly and balanced external adjustments is significant. This principle is an essential first step toward the universal acceptance of market-based, freely floating currencies. We should move quickly to build upon this initial foundation of agreement.

The free flow of capital is also a fundamental component of our global system of international trade and finance. Barriers raise the cost and limit the freedom of investment capital to seek out the best opportunities. We should continue to eliminate restraints on investment capital in order to maximize our growth opportunities.

Trade among our nations has risen significantly in recent years, and this is to the benefit of all our economies, but I emphasized that we must continue to press for further trade liberalization in the Doha Round WTO negotiations. Our prosperity is enhanced when all nations have the freedom to bring to global, competitive markets the best goods and services their talents and abilities can produce, in compliance with the laws of international trade.

We also discussed our collective actions to halt the flow of funds to the agents of terror. I announced that the United States is designating 10 members of Jemaah Islamiyah, or JI, as terrorists, freezing any assets in the United States and prohibiting transactions with these individuals. We will also be submitting these names to the United Nations for action by all UN member states. I am encouraging my colleagues to take bold action against this terrorist organization and I look forward to working with our allies in the region to shut down JI's sources of financing and support, and to eliminate the threat they pose to the people of Southeast Asia.

We have had a successful series of meeting this week. We have broken new ground on important issues concerning our economic relations. I look forward to continue to work with my counterparts in the region as we work to put in place the building blocks of strong, sustainable economic growth.

(end text)

(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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