For Immediate Release
June 8, 2004
Eradicating Poverty Briefing
BACKGROUND BRIEFING BY SENIOR ADMINISTRATION OFFICIALS ON THE GLOBAL ECONOMY AND ENTREPRENEURSHIP TO ERADICATE POVERTY
International Media Center Savannah, Georgia
11:04 A.M. EDT
SENIOR ADMINISTRATION OFFICIAL: Thank you. President Reagan was
instrumental in raising the profile of this summit and using it as a
forum for leaders to discuss global economic issues. This summit will
continue this tradition by highlighting the critical role of raising
and sustaining economic growth in order to advance freedom and make the
world safer and more prosperous.
Reflecting the importance of these issues, the G8 leaders'
discussions will formally begin on Wednesday morning with two full
sessions dedicated to global economic issues. The first of these
sessions will focus on raising global economic growth and promoting
trade. The second session will focus on a set of initiatives to
harness the power of the private sector to reduce poverty.
My comments will provide an overview of the first session on global
growth, and my colleague will then step in and talk about the second
The first formal session between the leaders will focus on the
global economic and measures each of their countries are taking to spur
and sustain global economic growth, especially through free trade.
This will largely be an unscripted, informal discussion.
President Bush, as host of the summit, will frame the discussion by
highlighting the positive outlook for the global economic. Although
much attention is paid to existing risks and political uncertainties,
the global economy is in its best shape in years. Global growth is
expected to be faster in 2004 and 2005 than in any two-year period
since the late 1970s. A major reason for this recovery is the sharp
rebound in the United States, which has grown at about five percent
over the last four quarters, faster than in almost 20 years.
Japan appears to have rebounded from a decade of slow growth, and
is also in the midst of a strong recovery. Canada and the UK are also
on a clear upward path, and Russia continues its strong growth. Many
emerging markets that have struggled over the past decade are also
finally improving due to fundamental domestic economic reforms and the
support of global economy.
The exception to the strong outlook for global growth is the Euro
area. Growth in this region recovered slightly in the first quarter,
but is expected to continue to lag back in the rest of the G8. The
leaders may also discuss other risks to overall strong global growth,
such as high oil prices or rising interest rates.
After this general discussion of the global economy, leaders will
discuss some of the steps they have already taken and plan to take in
the future to sustain and raise global growth. President Bush will
discuss the strong recovery in the U.S., most recently evident not only
in its robust growth, but also in the creation of about a million jobs
in just three months. President Bush will also discuss how this U.S.
recovery largely results from aggressive and timely policy actions such
as a series of tax cuts and decline in interest rates. For example,
without the tax cuts, U.S. employment would be about 1.5 percent higher
by the end of the year, and GDP in the U.S. would be about four percent
lower by the end of the year.
President Bush will also discuss the need for the U.S. to continue
to move forward on these reforms to strengthen the economy and to
sustain strong growth and job creation in the future. For example, the
President has proposed a budget that will half the deficit within five
years by limiting politically popular discretionary spending. The
President may also discuss his six-point plan to raise growth through
measures such as reforming the tort system and reducing inefficient
Other leaders will also be encouraged to discuss steps they plan to
take to raise and sustain growth in their own economies, even if these
steps are politically unpopular. Blue chip forecasts predict that
growth in 2004 will be 4.6 percent in the U.S., about 3.1 percent in
Japan, and 1.7 percent in the Euro zone.
It's critically important that countries, in addition to the U.S.,
take steps to stimulate growth and job creation at home, thereby
contributing to a broader and sustained global recovery. For example,
countries should take steps to reform labor markets, pension systems,
health care, regulations and tax systems.
G8 finance ministers have already held several discussions on the
importance of making these types of structural reforms through their
Agenda for Growth. In particular, an important step for all countries
in the G8, as well as in the rest of the world, is to progress on the
ongoing negotiations in the WTO Doha development agenda.
The stakes are high, especially in the developing world. The World
Bank estimates that the elimination of trade barriers could result in a
gain of over $500 billion for developing countries. This is a great
opportunity. A global reduction in barriers to trade can help deepen,
broaden and extend the current global economic expansion.
More specifically, the leaders will hopefully agree to complete
negotiating frameworks for agriculture, goods and services by July in
order to move negotiations forward through the Doha development
agenda. The G8 has a special responsibility to lead in pressing for
ambitious global trade liberalization.
Finally, a key theme throughout this discussion will be that the
strong global economy presents a strategic economic opportunity to
tackle difficult reforms, reforms ranging from reducing budget deficits
to improving labor markets, to removing barriers to trade. Although
many of these reforms are politically difficult, they are critically
important to broaden the current economic expansion, to improve job
creation, and to raise prosperity around the world. The strong global
economy presents a strategic economic op that should not be
And with that, I will turn to my colleague to discuss some of the
topics in the second session on the global economy.
SENIOR ADMINISTRATION OFFICIAL: Thank you. My colleague mentioned
that a main theme of the economic discussion would be enabling the
private sector to help poor people prosper. I think everyone here
knows certainly that we believe that the private sector is kind of the
main engine of economic growth and job creation and of poverty
reduction, and that there needs to be more integration of that idea
into a development assistant efforts, generally, bilaterally, and
through the international financial institutions and multilateral
So the leaders are going to be discussing several ideas,
initiatives to promote the private sector in development. One of the
first is remittances. The flow of remittances from workers in the
developed world to developing countries is growing rapidly; it's now
totally -- the reported flows are nearly $100 billion a year. We think
that given the way in which these remittances are transferred, there's
a lot of under-reporting, and you might actually have -- it's an
estimate, but as much as $150 billion a year flowing from the developed
world to the developing world. This is a size of flows that dwarfs
official development assistance. It's larger than other private sector
investment. In about 36 countries, it's larger than the two put
together, the official development assistance and private sector
investment. So it's a significant source of funding for countries, if
ways can be found to facilitate it and to improve the development
impact of those remittances, and there are a lot of ideas that will be
discussed as to how the G8 countries might be able to help that
The United States, some time ago, at the outset of the Bush
administration, had began a remittances initiative with Mexico, in what
we called our Partnership for Prosperity. And there were a number of
elements to that. But the remittances initiative was one of the most
successful. We managed, by promoting competition and increasing
awareness to the remitters of options for transmitting their money to
reduce the cost of remittance flows from the United States to Mexico by
about 50 percent in a short period of time. And one of the ideas that
we've had, in working with the G8 and preparing for the summit, is that
that might be replicable in other countries, in flows to -- where they
have particularly large remittance flows, and might be replicable by
the United States in other instances.
So there are lots of ways you can do that. There are financial
literacy programs that help the remitters become more aware of
options. You can promote competition among service providers. You can
even -- and this is something we did with Mexico -- you can make
changes in the payment system. The Atlanta Fed created a small
payments automated clearinghouse for payments between the United States
and Mexico, that actually was very helpful, again, in facilitating
competition and in reducing the cost of flows to Mexico. That's not
going to be replicable in -- among all of the G8 and their remittance
partner countries, but it's an example of the kinds of ideas that will
be being discussed.
In addition, there's going to be an emphasis on the steps that the
G8 can take to help countries improve the business climate for
entrepreneurs and investors. Businesses, and the private sector, can
only thrive if countries provide good regulatory and legal frameworks,
and if they lower the barriers to starting and operating companies. I
mean, it can take three, four months in some developing countries to
start a small business, and that's the time it has to be brought down
if you're actually going to improve the ability of these countries to
generate small businesses and economic growth.
So there are going to be discussions on ways to help the MDBs focus
-- the multilateral development banks -- focus on working with
countries to remove impediments to the business environment. As an
example, in the U.S., we've been very impressed with the way the
European Bank for Reconstruction and Development, the EBRD, has
introduced a successful small business program. It combines technical
assistance with actual funding with lending programs, focused on small
business, that's resulted in 500,000 loans to small and medium-size
enterprises in their area of responsibility over the last decade. And
again, we think that's the sort of result that can be replicated by the
G8 as members of the other multilateral development banks, emphasizing
that that's something we'd like them to focus on, as well, their work
with small and medium-size enterprises.
There's also going to be discussion of the development of local
financial markets in the developing countries, as fundamental to
promoting a vibrant private sector. We'll be encouraging the G8 to
work with the MDBs to facilitate the establishment of the fundamental
components of a mortgage market. I think our local financial markets'
ideas are focusing on the housing area and the water area -- so helping
countries develop the fundamentals of a mortgage finance market. That
includes work with them on property rights, on title transfer, legal
and regulatory frameworks that can actually create the possibility of
that kind of financial market. It can involve providing opportunities
for recipients of remittance inflows, going back to the remittance
initiative, to use that income in domestic financial markets, including
for building and improving their houses.
And then, as well, there will be an emphasis on local, sort of
sub-sovereign bond markets, to provide water and sanitation, all of
this as part of seeking to achieve the goals of -- the development
goals of the millennium declaration that the international community as
a whole has been working towards and is attempting to achieve by 2015.
Finally, we expect that there will be a discussion of opportunities
to promote micro-finance. Micro-finance programs, I think everybody
here knows, will have provided small amounts of capital -- they loans
of a few hundred dollars to entrepreneurs. It's done this for many
years. It particular benefits women. Often it's the first step --
providing this micro-finance is the first step towards building small
and medium-sized enterprises. These micro-enterprises can grow into
larger enterprises, developing a -- sort of a virtuous circle.
So the G8 will be working with the World Bank base, the so-called
Consultative Group to Assist the Poor, the CGAP, to launch a global
market-based micro-finance initiative that can involve developing a
code of conduct to identify key principles for micro-finance lending,
encouraging the establishment of micro-finance investment funds, and
helping developing countries improve their laws for micro-finance so it
can become more widely available.
So there are a number of specific areas to promote the private
sector as an influence, indeed, as the key influence on developing
countries that the G8 leaders will be discussing during that particular
session of their meetings.
And then we would be happy to take any questions you have in the
Q What about petrol. Did you mention nothing about the risk
that could represent for the economic world about the increase in
price? Do you think tomorrow they will be able to discuss about that?
SENIOR ADMINISTRATION OFFICIAL: Sure. That's one of the issues
which could be raised in the first session which discusses the global
economy and potential risks to the global economy. At this point, we
don't know for sure if a leader will raise it or exactly how the
discussion will play out, but it's certainly a topic which could come
I can give you, however, the U.S. administration's view on the
risks of higher oil prices. The administration has said that we
believe that affordable and adequate energy supplies are critically
important to ensure continued prosperity in the global economy. We
also welcome the announcement by OPEC and oil producers to increase oil
supply in the near future, and we look forward to them fulfilling that
commitment and increasing production in the near future.
Q Will there be talk of measures on the demand side to deal
with the oil issue, or will it be mostly looking at supply?
SENIOR ADMINISTRATION OFFICIAL: Again, it's hard to speculate
exactly how this conversation will go, because it's meant to be
unscripted and to have the leaders discuss their own concerns. It's
likely, as they discuss the increase in oil prices, that demand will
come up, because there are many analysts who do feel that the major
reason for the increase in oil prices is increased demand, largely from
fast global growth -- not only in the G8 economies, but also in China.
So that's a topic which might come up in the discussion.
Q Global growth is obviously a big factor, but one way
without curbing growth that could be addressed is through conservation
measures. Do you think that may end up being one of the proposals that
they make, or --
SENIOR ADMINISTRATION OFFICIAL: It's certainly possible that the
leaders will discuss ways to ensure an adequate energy supply in the
future is to improve conservation methods and improve access to
alternate energy sources. So, again, it's hard to speculate exactly
how the conversation will go, but that's certainly a way the
conversation could lead.
Q Will there be any discussion on emerging markets, and
specifically on Argentina, the debt crisis, as the G7 was instrumental
in bringing Argentina back to the negotiating table with private
creditors? And also, I would like to have an assessment of the -- you
of the administration, of the latest proposals from Argentina on that?
SENIOR ADMINISTRATION OFFICIAL: Well, as my colleague has been
emphasizing, since the economic discussion is unscripted, anyone could
raise anything. It's not on the agenda for there to be a discussion of
Argentina or of emerging market issues.
As far as the U.S. position on the recent Argentine proposal, we do
think that it is very important for Argentina to work with its
creditors in order to have a successful debt restructuring. For a
variety of reasons, a debt-restructuring in which there has been a high
participation rate so that Argentina ends up with a sustainable debt
structure following the restructuring is something that we think is
important for their ability access capital markets in the future, and
that's important for their medium- and longer-term growth. So it's
very important that the operation be successful. It's also important
that Argentina comply with the commitments that it has made to the
international community and to the IMF in its IMF program, and so
executing this debt restructuring needs to be in line with those
commitments, and we will be looking at how all those fit together as
the process proceeds.
Q How much leverage Russia will have in these negotiations
with its huge oil resources? Thank you.
SENIOR ADMINISTRATION OFFICIAL: Well, these will not again be
negotiations, it will be a discussion of the global economy and risks
to the global economy. And in that role, Russia will have a very
important viewpoint to offer as one of the major oil producers in the
Group of Eight. So other countries will look forward to hearing
comments from Russia and their viewpoints on oil supplies and the
future of oil prices.
Q Yes, on remittances, I would like to know, a couple of
weeks ago when the report of the IDB came out of remittances for Latin
America, there was a proposal by Congressman Tom Tancredo to tax the
remittances maybe five percent. How do you see that? Do you see that
happening at all?
And my second question, also remittances, I don't understand quite
well how you intend to direct what people do with remittances, for
example, promoting that they invest in building houses because, I mean,
they can do whatever they want with it, right?
SENIOR ADMINISTRATION OFFICIAL: No. That's absolutely true, and
there -- certainly, from our point of view, we would not be promoting
or proposing or supporting ideas that would be coercive about the use
of the remittances. What we've been trying -- and that goes as well,
the tax idea is not one that I think has broad support in the
What we have been promoting and what we think has worked well in
the Mexican example, and I think could well in the future is giving
people options by increasing the options by investment at the receiving
end. In part, that can be done by bringing these remittance flows into
the formal financial sector. If you're receiving the remittance at a
bank and the bank can say you can keep this on deposit at the bank as
opposed to having to walk away with the cash and put it in a coffee
can, or -- you know, there are different types of, you know, obviously
some, perhaps even a majority of any particular remittance flow will
need to be spent.
But for the excess that doesn't immediately need to be spent, if we
had been creative in thinking of sort of financial instrument options,
not grand ideas, but options for the recipients to invest that money
and even for short periods of time, that can, as a cumulative matter,
have a very significant effect.
So our emphasis, again, on improving the development impact is by
creating more options for people as opposed to coercive direction of
those flows into one purpose or another.
Q Could I ask you about this first session on the macro-
economy? How long will that first session go on? And I gather from
your first remark that they go around the table, each leader giving his
perspective of his own country and commitments. Will the European
Union also participate in that so you really get nine people around the
table? And how much time, then, is left for discussion?
SENIOR ADMINISTRATION OFFICIAL: Well, I believe there is about an
hour and a half slated for this discussion on the global economy, and
that session will also include discussion of trade as well as the
global economy. It will not be as formal as you laid out.
President Bush, as the chair of this summit, will start off the
discussion and frame the discussion in the way in which I laid out.
Tentatively, he will probably then turn to Prime Minister Koizumi from
Japan to lead off the more informal comments. He will probably, before
he hands off the comments to the Prime Minister, will probably
congratulate Japan on their impressive recovery and their recent
turnaround in the Japanese economy. After that, there is no formal
So each of the European leaders and other leaders will have a
chance to chime in if they so choose, but it will not be moving around
the table in a specific order by any stretch.
And, actually, you said there will be nine people there; I believe
there will be actually 10. It's the G8 plus a representative from the
EC, plus a representative from Ireland as chair. So there will
actually be 10 people around the table, which will not leave an awful
lot of time for individual comments, but they do hope everyone will
participate in this very informal discussion.
Q The positions of the leaders are quite far apart on the
reduction of the debt of Iraq. I mean, how far are we from a
consensus, and could you explain the U.S. position on that, if you
could give a percentage of what you are asking in terms of debt
SENIOR ADMINISTRATION OFFICIAL: Obviously, discussions about Iraq
debt and the treatment of Iraq debt are ongoing. Many of you are
probably aware that the IMF has completed a detailed debt
sustainability analysis for the -- for Iraq, and has distributed that
to the Paris Club. It's been distributed to all the members of the
Paris Club. And the -- each of the Paris Club members, individually,
is in the process of looking that over. It's quite detailed.
Our view is that -- I think that analysis supports the position
that -- it supports strongly the position that we have been taking for
sometime, that the vast majority of Iraq's debt needs to be reduced. I
mean, simply as a financial matter, if you look at what the
reconstruction obligations are, if you look at the size of the debt
load, if you look at any sort of reasonable GDP projections -- and the
IMF has done all of this in this document that's been distributed to
the Paris Club -- it just shows that the numbers add up to the need for
the vast majority of the debt to be reduced, in order for Iraq's
situation to be sustainable, and we continue to hold that position.
There will be discussions with the other members of the Paris Club,
with non-Paris Club members about how to proceed then to resolve the
debt. And I think that -- I just think that the weight of analysis is
going to be on supporting the need for a vast majority of the debt to
Q Just following up, I wanted to check: Is the Iraq debt
actually going to be discussed as part of the -- is there a plan for
that to be discussed at the G8? Also, in your plan for helping
developing countries, is it only discussions of how private enterprise
can help developing countries, or are you also talking about cutting
debt in Africa?
SENIOR ADMINISTRATION OFFICIAL: When you have the G8 leaders
together, someone may raise the issue of Iraqi debt. It is not on the
agenda for that to be a discussion item or for there to be some
resolution of it. There may be a discussion of it. They are the
leaders of the world and they can do what they want.
As for debt relief for poorer countries, countries in Africa or
other poor countries, the finance ministries of the G7 and G8 have had
ongoing discussions about the HIPC Initiative. I think most of you in
the room are probably aware that the Heavily Indebted Poor Countries
Initiative would expire by the end of the year, and there have been a
number of options that have been discussed that are preliminary -- in
preliminary ways, a number of ideas as to how to further this
initiative given where it stands now. None of those have been
resolved. I think we will continue discussing them. It's certainly
possible, too, that that is a topic of discussion. But it is not a
specifically identified agenda item for the meeting.
Q You said before that President Bush is going to
congratulate the Japanese because of the strength of his growth. What
is he going to say to the European Union? Do you see that the European
economy is a threat for the global growth, and what do you think they
have to do more?
SENIOR ADMINISTRATION OFFICIAL: Again, it's hard to predict
exactly what he will say, but there is a chance he may mention that.
As I said in my initial comments, growth next year in the -- this year
in the U.S. is expected to be about 4.6 percent, and the Euro zone is
probably going to be less than 2 percent. And this may be a way to
highlight that. It is important for Europe to undertake some difficult
structural reforms in order to raise growth so it can contribute its
share to growth in the global economic, going forward.
And the President is likely to discuss again the need to take
advantage of the strong global environment and strong global growth to
actually move forward on some of these politically difficult reforms.
In particular, he will raise this issue that this really is an
important strategic economic opportunity. Countries around the world,
including the U.S., as well as Europe, should take advantage of strong
global growth to tackle these difficult reforms, and it's particular
important for Europe because growth is lagging, to undertake these
reforms now to raise growth, going forward.
Q One of the things that helped the United States grow faster
is the huge debt, huge deficit. Do you think the European Union will
have to follow this same example, and increase the deficit, as you
SENIOR ADMINISTRATION OFFICIAL: I don't think that will be one of
the President's specific recommendations. (Laughter.)
Q On this share of remittances, how do you think the
discussion will result? I mean, do you think there will be some kind
of concrete program that will come up at this summit? And also, how
long will be the discussion on issues of development and policy?
SENIOR ADMINISTRATION OFFICIAL: With respect to the first
question, I do think so. There's been a lot of work among the finance
ministers preparing the summit in analyzing specific steps that each
country can take to facilitate remittance flows to its partners, and so
I think -- I think a likely outcome is that each of the G8 countries
will identify and announce steps that they can take and are taking to
promote this remittance initiative, and that those will be quite
concrete. I mean, the remittances area is something that, while rather
technical, the benefits can be significant. I think that the G8
countries have become convinced of the potential benefits.
And the steps that one can take are very discrete and direct and
measurable, the sorts of things that you can make a difference on. So
I do think that that's going to result in something definite coming out
of the summit.
As far as the amount of time that will be devoted to these
development issues, I think there's about an hour and a half for this
particular entrepreneurship to help eradicate poverty session, and then
there will also be, on Thursday, discussions of development issues.
Q How much emphasis do you think the President needs to put
in convincing his G8 contemporaries that the pace of U.S. growth is
sustainable, meaning as we enter sort of a rising interest rate
environment and rising commodity price environment, that we aren't
risking sort of a repeat of 10 years ago, where across the globe the
interest rate response had to be abrupt, according to some? With U.S.
rates so low, what will the President need to do to convince the G8
that this pace is sustainable and that there won't be disruptions?
SENIOR ADMINISTRATION OFFICIAL: Again, this is one topic we're not
sure will come up in the discussions. But if it does, the
administration believes that growth in the U.S. undoubtedly will slow
next year. Growth is on a pace in the U.S. to grow at a bout 4.5
percent this year, roughly, probably slow down to roughly 3.5 percent
next year. But that's a natural adjustment as we close the output gap,
and that's a rate that we could grow close to over a longer amount of
And we feel that the U.S. economy is well-positioned to handle an
increase in interest rates. The Federal Reserve Board has done a very
good job of preparing the markets and preparing investors for a gradual
increase in interest rates. And the U.S. economy is currently so
strong that it should be able to handle slightly higher interest rates
and still maintain a very strong rate of growth, albeit slightly slower
than this year.
Q Perhaps I missed this while I was out of the room, but you
just said that there's a chance that the President might suggest that
it's important that the Europeans undertake some structural reforms.
Could you please reiterate, if you've already said before, what those
reforms might consist of?
SENIOR ADMINISTRATION OFFICIAL: This discussion will build on an
extensive discussion that's been held by finance ministers as part of
what they call the agenda for growth. And this agenda for growth
focuses on the need for all countries, not just Europe, but definitely
including the Euro zone, to undertake structural reforms, to increase
productivity, and raise long-term growth rates in their economies.
And some of the specific steps that are discussed as part of this
agenda for growth are reforming labor markets to make labor markets
more efficient; reduce rigidities in labor markets; in particular, make
it easier for firms to hire and fire. Another set of discussions
focuses on pension reform and ensuring that pensions are viable over
the longer-term, and funded over the longer-term, especially in many G8
countries, as the population is aging and the fiscal pressures to
finance existing pensions are increasing.
Another set of discussions will be on health care reform, on
ensuring affordable and reliable health care service in different
countries. Another set of discussions will be on reducing regulations,
and -- or reducing inefficient regulations, I should say. So, making
sure that the regulatory burden is necessary and efficient. And that's
also something that President Bush is working on in the United States.
Another set of reforms which could be discussed is efficient tax
systems; ensuring tax rates are levied in an efficient way. And part
of that may be reducing budget deficits, also. So that's just a sample
of the whole host of issues which could come up.
Q As you may well know, that some of the emerging economies
right now are playing a bigger and stronger role in the global
economy. How is the G8, in this session, going to address this issue,
embrace this new phenomenon? And also, how would you invite input from
those economies, such as the example of China? Thank you.
SENIOR ADMINISTRATION OFFICIAL: Obviously, the role of the
emerging markets in the global economy is something that is of great
significance, as you say. In the finance ministries, it's a topic that
we have been sensitive to for some time. When the finance ministers of
the G7 and G8 -- when the deputies of the finance ministers of the G7
and G8 meet, they frequently invite the Chinese finance deputy to meet
with them, as a way of integrating the Chinese into this global
economic discussion and making sure that the G7 are aware of
developments in China and have the opportunity for exchange.
We are, in the G8 process as a whole, I think everyone is always
thinking of ways to try to improve those opportunities for integration
and involvement of increasingly important countries to the world
economy, and that will be sort of ongoing, reflecting on how to achieve
that. Up to now, that's how it's been done.
Thank you very much. And also, we will be available for additional
questions or briefings through the U.S. delegation in the IMC down on
the first floor.
END 11:40 A.M. EDT