U.S. and Hong Kong (1998)

ASIA AND AMERICA: RESTORING GROWTH AND CONFIDENCE

Assistant Secretary Alan P. Larson

Hong Kong
September 26, 1998

It is a pleasure to be with you today and to share some thoughts on the economic challenges that now face Asia and America.

To begin, I would like to call your attention to President Clinton's very important September 14 speech on the worldwide economic situation. In it, President Clinton underscored in unmistakable terms the importance America places on resolving the Asian financial crisis and, more generally, on restoring strong and sustained global economic growth.

Our starting point is the assessment that the international community faces the biggest financial crisis in fifty years. We believe that the United States has a responsibility to lead in organizing an effective international response.

We are acutely aware that the economic disruptions of the moment have the potential to impose a heavy human cost. It is important that we not lose years of progress in alleviating poverty. It is vital that we tackle a problem that, if not addressed, could cause a loss of faith in those free institutions that have done so much to raise living standards and expand personal liberty around the world.

The economy of the United States is strong, but we recognize that America cannot expect to remain indefinitely an island of prosperity in a sea of economic turmoil. We recognize that the United States has a stake in working to restore financial stability and growth in economies whose people are our friends, customers, and security partners.

The United States is committed to an economic growth strategy. We are working with our G-7 partners on actions we can take together to spur global growth.

We will intensify our efforts to speed economic recovery in Asia. The President has asked Secretary Rubin to enhance efforts to explore comprehensive plans to help Asian corporations work their way out of debt problems that are preventing them from making products and creating jobs.

While we cooperate to put Asian corporations back to work, we also should cooperate to protect Asian families through strengthened social safety nets. During my trip to Asia I will look into ways that the international community can do more to support employment, facilitate the movement of workers from old to new jobs and to protect precious investments in education and health.

Trade has been an engine of growth for Asia and we must do everything we can to ensure that trade finance -- the lubricant for the trade engine -- is available. In this regard, the U.S. Export Import Bank is increasing commitments to provide critical inputs to development projects which augment growth in Asia.

As President Clinton said, we have to be ready to respond, with financial force if necessary, if the currency crisis spreads to other economies where nations have struggled to do the right thing. We stand ready, if necessary, to activate the General Arrangement to Borrow and we will leave no stone unturned in our effort to secure Congressional support for meeting our obligations to the International Monetary Fund.

We are committed to strengthening the trade and financial institutions that are so essential to the world economy. The United States looks forward to hosting the next ministerial meeting of the World Trade Organization and we will press for renewed commitments to trade expansion at the APEC Ministerial in November.

Next month the U.S. will host a meeting of Finance Ministers and Central Bank Governors from the G-7 and key emerging economies to develop a report on strengthening the world financial system. We must learn to tap the energy of free capital movements in a safe, sustainable manner.

In recent days, Treasury Deputy Secretary Summers described some of our views on this subject. He noted how financial innovations contributed to development and improved living standards for participants in the new international financial system but also noted the need for a new set of standards which would increase transparency and disclosure. Among the crucial issues is the need to develop steps to make the private sector more open in a world in which a single financial and corporate institution may have substantial cross-linkages with markets and institutions overseas. The task is not to deny the benefits of open, truly global capital markets - but to work out the best set of policies (international and domestic) for ensuring these are safe and sustainable.

Hong Kong can make a vital contribution to this international agenda. Your experience and expertise in trade and finance offer much from which the rest of Asia can learn.

In addition, there are three specific areas where Hong Kong could work with the United States and others on initiatives that would build confidence, promote prosperity and strengthen the connections between our economies.

First, growth and stability will be enhanced by committed, long-term foreign direct investment. FDI brings not only stable capital, but also technology and management know-how. Hong Kong and the United States are working to create a stable rules - based framework for foreign investment through the negotiation of a bilateral investment treaty and through the development of multilateral investment rules in the OECD. We should work together to bring both efforts to an early and successful conclusion.

Second, we need to cooperate to strengthen transparency, the rule of law and commercial integrity around the world. There is no doubt that corruption has been a corrosive force in many emerging economies, but one must acknowledge that any bribe requires an offeror as well as a recipient.

The United States has long believed that the major trading and investing nations have an obligation to do their part to curb corruption by making it a crime for their citizens to offer bribes to foreign government officials with the aim of gaining or retaining business. For twenty years, we have had a law - - the Foreign Corrupt Practices Act - - that accomplishes this.

Last year more than thirty nations joined the United States in signing a Convention that extends and multilateralizes the framework of the FCPA. In this region, signatories of the anti-bribery convention include Korea, Japan, Australia and New Zealand. I encourage Hong Kong authorities to join this effort to ensure that international trade is clean and fair, as well as free.

The third subject I wish to raise is transportation. International trade has been the engine for Hong Kong's economic growth. Transportation links, from your world famous harbor to the impressive new airport, are critical to trade.

It is anomalous and undesirable that the generally open economic ties between Hong Kong and the United States are handicapped by a civil aviation regime that restricts intra-regional aviation services that U.S. airline companies would like to offer using Hong Kong as a base. One of the purposes of my visit here is to urge Hong Kong to join us in a more liberal aviation partnership so that we each can enjoy the economic benefits that have so clearly followed America's Open Skies agreements with 31 countries around the world.

Dramatic U.S.-Europe traffic growth followed implementation of Open Skies and the integrated airline alliances that Open Skies made possible. In the Netherlands, passenger traffic between our two countries has doubled since our Open Skies agreement was signed in 1992.

In addition, each new international route benefits local economies through added airport traffic, fuel sales, food service, tourism and the like. And, as all of you are well aware, investors want the easiest possible passenger and cargo access to their operations. New routes provide that access.

The carriers of our Open skies partners have benefited from these agreements. A liberal air service regime will help Hong Kong fulfill its potential as a major global air service hub. The code sharing and alliance structures that Open Skies permits play to Hong Kong's considerable strengths: its regional economic ties, its new international airport, and the potential of companies such as Cathay Pacific. Now more than ever, Hong Kong should be an integral part of a global air services network.

A couple of years ago, everyone was looking confidently toward the "Century of the Pacific." Today, we hear voices of doubt and pessimism about the future. We must not give in to those voices. Le me assure you that America will work alongside you to overcome the current problems. We want to be Asia's partner in prosperity. Working together we can make the "Century of the Pacific" a reality.

* * *