For Immediate Release
Office of the Press Secretary
July 20, 2001

Background Briefing by
A Senior Administration Official
on Opening Meetings of the G7/G8 Summit
Filing Center
Genoa, Italy

8:45 P.M. (Local)

     SENIOR ADMINISTRATION OFFICIAL:  I'm here to brief you, following up on the briefing I gave yesterday, on the opening working sessions of the G7/G8 Summit.  I know, of course, that you have questions about the events in the streets today, so here's what I can tell you first about that.

     I understand that the President has been informed of the violence, of the injuries and the death.  The President regrets the violence, believes the violence is regrettable; the death is tragic; and the injuries to the protesters and to the police officers are highly regrettable.

     I am here to brief you about, as I said, the opening sessions of the summit.  And it, of course, began, as I noted yesterday, with a working lunch.  And that was followed by a working session, as well.  And you'll recall that today was devoted to the so-called G7, meaning that it was the most industrialized countries with President Putin from Russia arriving later in the afternoon, in time for the announcement of the HIV fund.  And I can brief you on that, as well.

     In terms of the opening sessions, you'll recall that, of course, the theme of the summit is poverty alleviation.  I noted yesterday the President has made it a priority of U.S. foreign policy as well.  We believe that poverty alleviation begins, of course, with global economic growth.  Traditionally, the G7 Summit has had a lively discussion about the economic situation in each of the G7 countries.  That, in fact, was the subject of today's opening working lunch, where we talked about the situation in each of the G7 countries and what each of us was doing to contribute to global economic growth.

     And the United States, of course, with its tax cuts and rate cuts, we noted, was taking decisive action.  And, in fact, the G7 statement that was released notes that while each of us is addressing a variety of different factors, that collectively it was the belief of the leaders that the fundamentals provide a solid foundation for stronger growth.

     That foundation, of course, is the foundation for the poverty alleviation strategies that they're discussing this evening, and that we're going to be discussing tomorrow as well.  But what we're doing in our own economies, as I noted yesterday, is only part of the solution to poverty alleviation and contributing to global growth.

     There is another big part -- again, a tradition part of G7 conversations, which is a close examination of the international financial architecture, the international financial system, and what can be done to improve it, because a sound, effective, healthy international financial architecture is, itself, one of the underpinnings for growth.

     The discussion this year focused principally on the World Bank and the multilateral development banks.  And in particular, with respect to the multilateral development banks and the World Bank, what they could do to focus their activities more on key social investments:  education, health care, issues that contribute to raising the standards of living and increasing productivity growth.  And, in fact, the G7 embraced a set of reforms of the multilateral development bank that require, among other things, better coordination among the banks, better internal governance and accountability in transparency within the banks, a review of their pricing policies and also a requirement that the banks look more closely at the governance situation in the borrowing countries -- good governance being one of the keys to growth itself; good governance being, of course, not only sound policies, but rule of law, respect for human rights, that sort of thing.

     The President, as you know, feels very strongly that it is important for the banks to focus their energies and their activities on these key social investments so that we are guaranteed a return on their investments, a measurable return.  And he's called in particular for increasing the amount of activities that the World Bank devotes to education.  Currently, only about 7 percent of the bank's resources are devoted to education. Bilaterally, the United States, in the President's budget this year we've increased our own bilateral international assistance to education by about 20 percent, to over $120 million, because we feel so strongly that literacy and learning lead to democracy and development.  And education remains a key input for that.

     In addition, after discussing the multilateral development banks and the reform proposal and endorsing that proposal, the leaders also talked about the debt relief initiative.  And, as I mentioned yesterday, that is the Heavily Indebted Poor Countries initiative, the so-called HIPC initiative, under which some 23 countries now have received or are receiving debt relief; the stock of debt being reduced by some $54 billion thus far.

     And that relief is part of an integrated program whereby they undertake economic reforms and commit to investing the savings from debt relief in key social sectors and priorities such as education and health, the sorts of things that contribute directly to poverty alleviation.

     The discussion about the debt relief initiative, of course, centered not only on the countries that have gone through the program or who are going through the program, but there are a number of countries that are eligible, but have yet to go through the program; many in conflict.  And there was a discussion about how to draw them into the program, and of course, the prerequisite of that is they need to lay down their arms.

     We also talked about implementation of the program, ensuring better use of the savings from debt relief, and the need for better monitoring to ensure that, in fact, those savings were being used as the countries commit to using in their poverty alleviation strategies.

     The President, as you know, supports the debt relief program, but he's also gone beyond the debt relief program by proposing that more of the assistance that the World Bank provides to the poorest countries be provided in the form of grants rather than loans.  Because for many of these countries, debt relief ends up being only a temporary benefit because once they're relieved of the debt burden they still have to invest to grow, they still have to improve their educational systems, their health care delivery systems.  And if they have to borrow back up again in order to make those investments, they're back in the situation of again having potentially unsustainable debt.

     The President's proposal would shift up to 50 percent of the World Bank's activities with the very poorest countries from loans to grants. And we believe that grants provide a permanent solution rather than a temporary solution to the problem of unsustainable debt; and particularly if those grants are tied, as the President has advocated, to measurable performance goals, and he's advocated that they be particularly tied to, again, these key social sector investments, such as education, health care and various kinds of infrastructure.

     We were pleased that the G7 embraced this idea and, in fact, incorporated it into the G7 statement, which notes that the G7 will explore the increased use of grants for priority social investments, naming in particular education and health as well.

     I would also note that the grant proposal, interestingly enough, was endorsed today by Jubilee Plus, which is the successor organization to Jubilee 2000, which, as many of you know, was one of the motive forces behind the debt relief movement to begin with.  So we're gratified for the endorsement of the grant idea by Jubilee Plus, and we're really gratified that the G7 has chosen to embrace this notion and committed to exploring the increased use of grants for these very important social sector investments in education and health, among other things.

     One of the other fundamental strategies for achieving growth, once we get our own houses in order, which we've all committed to doing -- and the U.S. is leading the way -- once we have reformed the international financial system, the other big boost that the leaders agreed we could give to global economic growth is the launch of a new trade round.  And the leaders agreed to commit themselves, personally, and engage themselves personally and jointly to ensure the successful launch of a new round at the 4th ministerial conference of the World Trade Organization, which is scheduled to occur in November of this year.

     And, as you know, one of the things that the President committed to doing in his World Bank speech, before coming to the summit, was bringing the power -- was applying the power of markets to the needs of the poor. No better way to do that than through a new global trade round that opens markets not only throughout the industrialized world, but also among developing countries, where trade barriers tend to be much higher.

     And, in fact, 40 percent of developing country trade is with other developing countries.  So there's an enormous amount of economic benefit that can be derived from a global trade round and the leaders have endorsed the notion of launching that round at the end of the year.  And as many of you are aware, further impetus was given to the launch of that round earlier this week in Washington, when Ambassador Zoellick, the U.S. Trade Representative and his EU counterpart, Pascal Lemy, announced an increasing convergence of views with regard to the agenda, or the items on the agenda for the launch of the new round.  It's between the United States and the European Union.

     Later in the day, after Secretary General Kofi Annan arrived, the G8 leaders, together now with President Putin, joined Kofi Annan in announcing the formal establishment of something that was about a year ago, at the last summit, really a gleam in people's eyes -- namely, a global fund to fight HIV/AIDS, malaria and tuberculosis.

     The President announced in May of this year in a Rose Garden ceremony, together with Kofi Annan and President Obasanjo of Nigeria, who is at the outreach event this evening, as well -- the President announced U.S. support for the establishment of such a fund.  And he endorsed it based upon a set of principles that he articulated.

     Those principles included that the fund ought to be a public/private partnership engaging not only governments, but also the private sector, NGOs, faith-based groups and others.  He endorsed a fund that entailed an integrated approach, emphasizing prevention in a continuum of treatment and care.  He endorsed a fund that involved several layers of accountability, not only financial accountability, but a unique layer of scientific and medical accountability -- the point being, simply, that we need to ensure that we create a vehicle for these funds, that we'll invest those funds in proven, best practice programs so that we know we can get results in terms of individuals treated, infections prevented, orphans cared for.

     And we are very pleased that the fund that was announced today, this evening, follows those principles, and very, very closely, and in fact, the leaders committed to having the fund operational by the first of the year and announced the establishment of a task force or start-up group whose task it will be to get that fund operational.

     Finally, as many of you recall, the United States made the first contribution to that fund, what was then a founding contribution of $200 million in May.  Today, the G8 leaders reported that contributions total approximately $1.2 billion. And we welcome contributions obviously not only from the G8, but from the non-G8 countries and from the private sector and private foundations and charitable organizations as well.

     The task force itself will be managed by secretariat, which the United States will support, with roughly another $1 million in assistance, and one of the first tasks of that task force will be to find someone who can serve as the head of the task force itself in ensuring that the fund gets up and running on time, as scheduled.

     We think that that's a unique accomplishment, and obviously, the AIDS pandemic is ravaging many parts of the world, particularly Africa.  And at the outreach event tonight, which is going on as we speak, we have five leaders from Africa:  Nigeria, South Africa, Algeria, Senegal, Mali -- did I miss anybody -- how many -- well, Africa's.  South Africa, Nigeria -- I've got them all -- and we also have the leader of Bangladesh and the President of El Salvador.

     So we have countries, many of which, several of which are so-called HIPC countries.  They participate in the Heavily-Indebted Poor Countries program.  Most are WTO members; not all, however.  And each faces both some of the same challenges as the others, as well as a set of unique challenges.  And what the G8 leaders were looking for tonight was an opportunity to exchange views with those leaders about poverty alleviation strategies.

     Many of these leaders, of course, are the ones who have called for the establishment of a fund of the sort that was established today.  And they will, of course, be talking about the issue of health care.  But beyond the issue of health care, we expect them to be talking about education, about trade, about good governance and about the partnership that the President talked about in his World Bank speech -- namely a partnership based upon a sense of both mutual respect and mutual responsibility.

     Where we, the industrialized nations, recognize the needs of the developing nations and we recognize that as they put in place the right policies and move to take responsibility for those policies, we, in turn, have an obligation to try and provide them with the tools to help them benefit from trade, from the aid and assistance that we give, as well as from further integration into the global economy.

     So that discussion began in a working session, it then continues over dinner.  And in addition to the leaders at both sessions, the heads of the G8, as well as the invited leaders of the various developing countries are going to be joined by Secretary General Kofi Annan, as well as the Directors General of some of the major international institutions.  James Wolfensohn of the World Bank is here, as are the directors general of the World Health Organization, the World Trade Organization and the Food and Agriculture Organization.

     It was a full day, and for the leaders a productive day in terms of the launch of the fund, the HIV fund, the commitment to reforming the multilateral development banks, embracing the notion of exploring an increased use of grants as a way to stopping the debt permanently on the poorest countries, an endorsement of the launch of a new global trade round later this year, and a commitment to continuing to follow pro-growth policies at home.

     Happy to take questions.

     Q    I wonder, how satisfied did the President come away from today's meetings that the Europeans and Japanese will take measures to address the continuing deterioration in economic indicators?

     SENIOR ADMINISTRATION OFFICIAL:  As I mentioned, it's traditional at the G7 to have -- to lead off with a discussion of what each of the countries is doing within their economies, and today was no different.  It was discussed, and as the G7 statement reflects, while growth has slowed and we all acknowledge that, each of the countries is stepping up and addressing the needs in their economy, or the challenges in their economies that need to be addressed in order to ensure continued economic growth or renewed growth, particularly structural reform and various forms of market rigidities.  And the sense was that the right things and the right policies were being pursued not only in the United States, but also in the Euro area, Canada and Japan, as well.

     Q    When the President in the statement here says that the United States is leading the way in setting the conditions for global prosperity, does that mean that the President would like other countries to implement similar policies on his agenda -- lower taxes and so forth?  Was this discussed today?

     SENIOR ADMINISTRATION OFFICIAL:  No, it doesn't mean that everybody needs to do the same thing.  What it means is that everybody needs to put in place pro-growth policies.  In the United States, that meant putting in place tax cuts and it meant moving decisively both on tax cuts and rate cuts.  That's been done here.  And I think the phrase, "leading the way," means precisely that, in terms of taking decisive action to put in place the kinds of policies that are going to ignite renewed growth and yield a new expansion of both one's own economy and the global economy.

     Other countries are doing -- some countries are doing similar things, others are doing different things.  Some have structural issues that need to be addressed, as well.

     Q    Does the President believe they're all doing all that they can?

     SENIOR ADMINISTRATION OFFICIAL:  Certainly, the leaders committed to doing all that can and to forging ahead with pro-growth policies.  And, as I say, I think the statement reflects the sense that you can just read the opening sentence of the world economy section -- while the global economy has slowed more than expected, sound economic policies and fundamentals provide a solid foundation for stronger growth.

     And that certainly was the sense of the session.  That doesn't mean we don't have challenges and it doesn't mean that a lot of hard work remains. But it certainly means that the leaders are committed to trying to meet all of those challenges.

     Q    If I can just go back to the protester.  Can you just give us a little more details of exactly who notified the President?  Any more details on when and what his reaction might have been?  And, also, in terms of the Italian radio reporting that there was some consideration of suspending the summit because of what happened on the streets -- has there been any discussion of that?

     SENIOR ADMINISTRATION OFFICIAL:  First of all, in terms of details, who informed the President, I don't have that information.  In terms of, you said --

     Q    -- that there was a consideration.  A, has there been any talk among the leaders --

     SENIOR ADMINISTRATION OFFICIAL:  I have not seen those reports, nor have I heard any talk along those lines.

     Q    There was no discussion about future meetings and maybe going to smaller cities, things like that?

     SENIOR ADMINISTRATION OFFICIAL:  Not that I am aware of.  But I was not in every session today, I have to add.  Some of the sessions, as many of you know who have followed summits in the past, some of the sessions are attended only by the heads; some of the sessions by the heads and the sherpas.  But to my knowledge, the schedule remains in place for tomorrow. I'm certainly planning on attending the meetings I'm scheduled for tomorrow.

     Q    Were you at the opening session where that subject --

     SENIOR ADMINISTRATION OFFICIAL:  No, I was not at that session.

     Q    What was the nature of the meeting that was thrown on at the end of the day here today that you had to attend?

     SENIOR ADMINISTRATION OFFICIAL:  The sherpa meeting?  It was -- actually, it never really occurred.  I, for one, didn't make it, nor did several -- I think at least one or two of the other sherpas.  Simply, the sherpas need to get together to clean up some of the text of the G8 communique, and we'll do that at some point tomorrow.  We were trying to take advantage of an opening in the schedule before the outreach session, but sherpas had to brief their leaders and prepared them for the outreach session, and it turned out not to be feasible to do it at that time.  But it was -- we had planned all along to try and get together at some point. We had hoped today; it looks like it will obviously have to be tomorrow at some point.

     Q    Could you tell us, short of any actual discussions about changes in the agenda, how the demonstrations have affected the conversations you're having with your counterparts, and the atmospherics behind the scenes?

     SENIOR ADMINISTRATION OFFICIAL:  We had a lot of important work to do today, and we forged ahead with that work and focused on the work that we were doing.

     Q    The Italian Prime Minister's spokesman quoted the President as telling his counterparts that the United States will experience an economic recovery in the second half of this year.  Did he, in fact, tell his counterparts that?

     SENIOR ADMINISTRATION OFFICIAL:  Again, I can't quote him directly because I was not in that session, but as you know, we do expect the tax cuts to inject approximately $40 billion into the economy in the third quarter; we do expect growth to accelerate in the second half of the year.

     Q    We were told earlier on that the President, while talking to the leaders, said that the U.S. slowdown has bottomed out, and that from now on things should start to pick up.  Can you confirm that?

     SENIOR ADMINISTRATION OFFICIAL:  I think that's exactly what I just said when I noted that, again, we've taken decisive action with these tax cuts; they should inject -- when I say $40 billion into the economy in the third quarter, of course, they're going to inject more next year, as well, and that will provide further stimulus.  But in the near-term, we expect that injection from the tax cuts into the economy to be significant and we expect growth to accelerate in the second half.

     Q    But can you confirm those words from the President?

     SENIOR ADMINISTRATION OFFICIAL:  I can't -- as I say, I was not there for that session.

     Q    Who was at that meeting?

     SENIOR ADMINISTRATION OFFICIAL:  That was leaders only.

     Q    Was there any sense of urgency?

     SENIOR ADMINISTRATION OFFICIAL:  There certainly is a sense of determination to address these challenges.  I mean, there's a sense and a frank acknowledgement that growth has slowed and that we need to do something about it, and a commitment to doing something about it.  And if you look at the statement you'll see that each country or each area -- and the Euro area is addressed as such -- commits to taking certain actions. And in almost all cases, those are, in fact, actions that are already underway and that the leaders committed to continue and to intensify.

     Q    But, I mean, in using the word, "urgency," as opposed to "determination" -- meaning, you could be determined to do something and decide that it will take you a long time to do it and be resigned to following a timetable, as opposed to needing to get something going right away and get it done.  Was that a way to characterize what they --

     SENIOR ADMINISTRATION OFFICIAL:  Nobody -- let's put it this way -- nobody is dragging their feet in any way.  I mean, this is something that is important for all of their economies, and what's unique about the G7 meeting is it's a discussion at one and the same time not only about one's own economy, but about the global economy.  So there's a recognition that we not only need to take decisive action to renew growth and restore growth and to put in place pro-growth policies for our own countries, but also for global growth, because we know we benefit from that, as well.

     So as I say, I don't think that there could be any clearer determination to put those actions in place and certainly nobody is wasting any time in doing so.

     Q    Was there any discussion on the strong dollar --

     SENIOR ADMINISTRATION OFFICIAL:  Not that I'm aware of.

     Q    Any discussion of currency relationships, at all?

     SENIOR ADMINISTRATION OFFICIAL:  Not thus far.

     Q    Do you expect some?

     SENIOR ADMINISTRATION OFFICIAL:  The way these sessions are structured, and something the United States has encouraged is less structure, frankly.  What we would like to do is have these discussions follow where the leaders' interests lie.  So I wouldn't want to speculate on where they're going to go.

     I can tell you that tomorrow we're going to be turning to a fuller and more intensive discussion of these poverty alleviation strategies, with a particular focus on the poorest countries, looking at everything from trade capacity building, in other words, what we can do to ensure that the poorest countries have the tools they need to benefit from open markets.

     We're going to be looking at what can be done to encourage private investment in these countries.  We're going to be looking at what can be done to not only lower trade barriers, but also improve literacy rates, to improve health care delivery systems, to improve agricultural production. Hunger and nutrition are going to be topics tomorrow, including such things as the benefits -- potential benefits of biotechnology, which can increase crop yields while using less water and fewer pesticides.

     There are 800 million malnourished people in this world, 250 million of whom are children.  That's an urgent need.  We were talking about the word "urgent" earlier.  That is certainly an urgent need that the leaders will recognize and be discussing.

     So there's a whole series of social sector related issues that involve strategies that are part of this partnership that we're trying to build with the developing world.  Those are going to be the subject of the discussion largely tomorrow; whereas, today was about laying the foundation for global growth through sound policies, open trade and reforming the multilateral development banks and the World Bank.

     Q    Can we put your initial statement about the President and the death of the protestor on the record?

     SENIOR ADMINISTRATION OFFICIAL:  Up to the press folks.

     MS. COUNTRYMAN:  We can probably -- we'll type up the transcript of what he said and we'll put it out.

     Q    Can you get us some more on the tick-tock of how the President -- who notified the President?  Did he make these comments to the staff, or something?

     MS. COUNTRYMAN:  Yes, I'll try.

     Q    We're hearing from other countries that that was a subject of discussion among leaders, with Chirac leading a movement to try to solidify the European position, in opposition to the Bush rejection of Kyoto -- did that come up today?  Is it going to come up tomorrow?  Where does that fit in?

     SENIOR ADMINISTRATION OFFICIAL:  I'm not aware and -- I'm not aware that it came up today.  Environment is an issue that we expect to be taken up tomorrow.  Not only the issue of climate change, of course, but there is another, very important issue which is environmental guidelines for export credit agencies like the Export-Import Bank, Hermes, Coface, many of -- virtually all of the industrialized nations have export credit agencies that are -- through their lending policies can have a huge potential impact on the environment.

     In fact, the export credit agencies tend to support more project capital finance -- five to seven times more than the multilateral development banks do.  The multilateral development banks, like the World Bank, has a set of environmental guidelines that it follows when it analyzes a particular activity, and it require an environmental impact assessment to be done.  It requires that assessment to be disclosed prior to financing, so that there's transparency.  Those are the same guidelines that the United States follows.

     The United States has been urging the other G7 countries to adopt those same guidelines and, in fact, it was the subject of a commitment made at the Okinawa Summit to adopt high standards in terms of common environmental guidelines for export credit agencies.  So we're going to be talking about that, as well as other environmental issues tomorrow.

     Q    Can I ask about the grants program?  The President's grants idea? Was there a discussion -- am I right that that would be a revenue loss for the World Bank?  And if so, was there a discussion of how to make up for that revenue, and would the U.S. put up money for it?

     SENIOR ADMINISTRATION OFFICIAL:  No.  I'm glad you raised that question.  The way the World Bank currently works is that World Bank loans to the poorest countries, the so-called IDA-only countries have a 10-year grace period.  So for 10 years, there's no difference between a loan and a grant.  In other words, if I put money out tomorrow in the form of a loan, or if I put it out tomorrow in the form of a grant, it doesn't make a difference to the cash flow of the bank.

     So the first part of the answer to the question is, there's certainly no cash flow issue early on.  In fact, there's no issue for roughly a decade.  And then what you would have to do is assess the impact of those grants.  We happen to think that grants make sense, first of all, because debts that aren't being -- loans that aren't being repaid aren't doing anybody any good, and we ought to recognize that fact, rather than ignore it.

     Secondly, we think grants can be very targeted and can be tied to performance, so they have an element of discipline that we also think is very useful for stimulating appropriate investments and ultimately growth. And that's the third point.  If these grants are successful, and these countries are growing more, 10 years out, you're going to have to sit back and look at the impact of those grants, and at that point assess what level of contribution is appropriate for the World Bank.

     But we think that grants is an idea whose time is come.  Debt relief is important; we support it, we'll continue to support it.  It has a critical role to play in relieving countries of unsustainable debt, but that's only half of the solution.  The other part of the solution is preventing them from getting into the situation where they have unsustainable debt all over again.  Grants solve that problem.

     Q    Can I ask you to characterize the discussion on Argentina, and developing countries in crisis at the moment, and whether there was any concern about contagion, any effects on other developing countries?

     SENIOR ADMINISTRATION OFFICIAL:  There was a discussion in general of the fact that we need to watch closely the way in which the international financial system is dealing with    these emerging countries.  And in fact, you may have noticed that the G7 statement itself speaks directly to Turkey and to Argentina.  And what it says, if I've got it here so that you're all aware, is it notes that in the context of emerging market economies in particular, it notes that it's very important that steps be taken to strengthen the international financial system to better prevent crises from beginning, not merely managing them once they occur but to better prevent them.

     The communique goes on to note that recent measures taken in Argentina and Turkey, the G7 believes, represent positive steps, and those countries are in the communique, commended for their efforts, and encouraged to continue implementation of their reform programs in close collaboration with the IMF.

     The whole notion of how to better prevent crises is one that, of course, has been long on the G7 agenda.  Progress has been made.  But in addition to what we can do in terms of the international financial architecture, there's also the critical element, which is alluded to here

in the statement on Argentina and Turkey -- namely that these countries have to continue with the implementation of crucial reforms, and to do so in collaboration with the IMF.

     I have to get to another part of town.

     Thank you.

                                                         END

                                                         9:22 P.M. (L)