U.S. Department of State 
Dispatch Volume 7, Number 29, July 15, 1996 
Bureau of Public Affairs 


1.  U.S.-Russian Relations: The Next  Phase--Deputy Secretary Talbott 
2.  Promoting a Peaceful Transition to Democracy in Cuba--President 
3.  Advancing NATO's Adaptation--James B. Steinberg 
4.  Iowa and the World Economy: The Importance of U.S. Economic 
Leadership--Alan Larson  
U.S.-Russian Relations: The Next Phase  
Deputy Secretary Talbott 
Remarks to the U.S.-Russia Business Council, Washington, DC, July 11, 
I am grateful to all of you for the chance to be here today. I can't 
imagine a more appropriate group to address on the subject of U.S.-
Russian relations. The American Government and the American private 
sector are, in a very real sense, partners in a joint enterprise to 
promote, participate in, and benefit from reform in Russia. You have a 
business interest in seeing Russia succeed in its transition from Soviet 
communism to democracy and market economics and to full integration with 
the rest of the world.  We have a national security interest in seeing 
the same thing.  From our different vantage points and with our 
different resources, we are cooperating to support that transition.  
Over the past several years, and particularly over the past several 
months, we've followed the ups and downs, the twists and turns, of 
Russian politics.  Together, we've followed, with varying degrees of 
skepticism, the conventional wisdom about Russia--laced, as it has often 
been, with pessimism, even panic, and the counsel of despair.  Just 
since January, we've listened to experts predict confidently--first, 
that Boris Yeltsin would lose the election; then that he would cancel 
it; then that he would steal it; then that he would not survive it.  
From the outset, and throughout this long period of suspense and tumult 
and controversy, President Clinton and Secretary Christopher made sure 
we were prepared for any outcome.  But they also maintained an 
underlying confidence in democracy--and in the wisdom of active, patient 
engagement with a reforming Russia.  In choosing that strategy and 
staying with it, they rejected advice from prophets of doom, who called, 
in effect, for a return to a Cold War policy of containment and 
Here is how we see what happened in Russia last week.  For the Russian 
people, the election was a chance to express their hopes and fears on 
many subjects--from crime and corruption, to Chechnya, to privatization, 
to social security and insecurity.  But in the broadest and deepest 
sense, it was a vote about whether to maintain the difficult course on 
which they've been embarked for the last five years or whether to turn 
back the clock.   
President Clinton framed the choice succinctly 21/2 years ago.  During 
his first visit to Moscow as President, in January 1994, he posed for 
the Russian people a fundamental question.  "How will you define your 
role in the world as a great power?" He asked. "Will you define it in 
yesterday's terms, or tomorrow's?"   
Last week a clear majority of the Russian people answered that question 
with a vote for reform, for the future, and against a candidate 
representing a party whose very name is a synonym for the past.  And as 
they chose their head of state for the first time in their 1,000-year 
history, Russians also voted resoundingly for democracy itself.  More 
than 72 million citizens--over 67% of the eligible voters--turned out at 
96,000 polling places from Kaliningrad to Vladivostok, across the 
Russian Federation's 11 time zones.  Those figures are as impressive and 
significant as the 14-point margin of victory. 
So Russian democracy and American support for Russian democracy have 
both come through an important test.  But it was not, of course, a final 
test--far from it.  Reform is a difficult work in progress.  It will 
take a generation or more.  It is marked by imperfections and what 
Marxists--remember them?--Might call "internal contradictions."  Plenty 
of Russians still identify reform with hardship and peril.  After all, 
40% of them did vote for Gennady Zyuganov.  And not all those who voted 
for Boris Yeltsin are content with life today.   
Nonetheless, as President Yeltsin begins his second administration, he 
will have an important new asset with which to meet the daunting 
challenges he faces.  He now has a clear mandate from the Russian people 
to continue his program of reform.  As he capitalizes on that mandate, 
he will be able to count on our continuing engagement.  He can also 
count on our total candor about the terms of that engagement.  Our 
support for Russia is not unconditional.  It never has been.  As 
President Eisenhower once said, "I have one yardstick by which I test 
every problem:  Is it good for America?"  President Clinton uses that 
same yardstick.  Every time we face a new issue, or the recurrence of an 
old one, we take the measure of our own interests, and we calibrate our 
policy accordingly.  
The first high-level chance we will have to engage the second-term 
Yeltsin administration will come this weekend, when our Vice President 
goes to Russia for the seventh meeting of the Gore-Chernomyrdin 
Commission.  The Vice President will take with him Secretary Perry, 
Secretary Kantor, Secretary O'Leary, Secretary Shalala, and a number of 
other senior officials.  They include two colleagues well-known to this 
group:  Jim Collins and Dick Morningstar, who, by the grace of recent 
Senate actions are now to be addressed as Mr. Ambassador, or--if you 
prefer--Your Excellency.  As you all know, the GCC, as we call it, has 
been an invaluable mechanism.  The strong personal and professional ties 
that the Vice President has developed with the Prime Minister have been 
a force both for stability in U.S.-Russian relations and for progress in 
Russian reform.  
We regard it as significant and encouraging that President Yeltsin began 
the process of forming his new government by asking Mr. Chernomyrdin to 
continue as his Prime Minister.  Viktor Stepanovich has proved to be 
steadfast in his advocacy of reform and effective in its implementation.  
He has played a key role in dismantling an authoritarian, centrally 
controlled economy, privatizing the industrial sector, beating back the 
beast of inflation, developing capital markets, and giving Russians 
their first experience of private ownership.  He has dealt effectively 
with the leadership of the IMF as well as with leading officials of our 
own government.   
But much work remains to be done.  In the months ahead, we will use the 
GCC and other forums to roll up our sleeves and get to work with the 
Russians.  We will concentrate on three broad areas:  security, regional 
cooperation, and economics and trade.  Let me say a very brief word 
about each but with particular emphasis on the third.   
First, security--which really should come first, since it concerns the 
most fundamental of all issues: our safety, indeed, our survival as a 
nation.  Over the past 3 1/2 years, we have already reduced our two 
nuclear arsenals by 9,000 warheads.  We're going to press ahead to cut 
another 5,000.  We will continue to cooperate with the Russians to 
reduce weapons stockpiles, to end nuclear testing, and to prevent the 
spread of nuclear weapons and weapons of mass destruction throughout the 
Second, we are, whenever and wherever possible, cooperating rather than 
competing in troubled regions of the world.  The best example is Bosnia, 
where American and Russian troops are serving side by side.  Secretary 
Perry will address issues of security and regional cooperation in his 
own talks in Moscow next week.   
Let me turn now to the area of most direct and immediate concern to you.  
In a very real sense, the fate of Russian reform in general hinges upon 
what happens to Russian economic reform in particular.  The increased 
security, stability, and prosperity that millions of Russians called for 
with their votes last week will remain out of reach if Russia does not 
succeed in the transition from a command system to the open market.  The 
American business community has a crucial role to play in helping Russia 
complete that transition.  You possess the necessary resources and 
Boris Yeltsin knows this.  When he and President Clinton spoke on the 
telephone last Friday, Mr. Yeltsin had one main message to convey.  He 
urged that the United States help mobilize private investment on a 
massive scale.  President Clinton replied that the United States will do 
everything it can to help Russia reach this goal.  He mentioned two 
institutions in particular:  first, the American Government will work 
through the Gore-Chernomyrdin Commission, and second, as investment 
conditions improve, the American business community will intensify its 
engagement through many channels, including this one:  the U.S.-Russia 
Business Council.  Just to make sure Mr. Yeltsin understood, the 
President added that he was referring to Bob Strauss's outfit.  Mr. 
Yeltsin responded not just with recognition, but with enthusiasm at the 
name of his old friend.  Gene, please pass my report on this exchange 
along to Bob.  
Now, all of us here today are, I'm sure, as realistic about remaining 
challenges as we are encouraged by recent developments.  We in the 
government know that we've got our work cut out for us on a wide variety 
of very tough diplomatic and security issues.  You in the business 
community are coping with obstacles that seem sometimes to be permanent 
fixtures on the Russian landscape.  The Vice President will meet next 
week with representatives of the more than 600 American companies that 
have offices in Moscow.  He knows that only about a third of them are 
engaged in trade and investment--and only half of those have made 
significant investments.  And he knows why that is.  While Russia has 
made impressive progress in removing the state from the management of 
the economy, it has yet to build the institutions and legal structures 
that will bring order and efficiency to its burgeoning free market.   
The Vice President also knows that there are limits to what Prime 
Minister Chernomyrdin and his government can do to accelerate and guide 
that transformation.  As my friend and colleague at the Treasury 
Department, Larry Summers, has said, "Setting up [a stable business 
climate that inspires investor confidence] requires not just top-down 
reforms, but bottom-up changes in the way Russia works.  It's not just a 
question of writing new rules, but of knowing that they'll be applied, 
and who to turn to if they aren't."  
Still, the climate in Russia is more conducive to that kind of bottom-up 
reform now than it was even 10 days ago.  In the immediate wake of the 
election, Russia's financial markets are already showing signs of new 
life.  Stock prices are rising steadily, and bond prices indicate 
greater confidence in government.  President Yeltsin and Prime Minister 
Chernomyrdin are acutely aware that this trend must continue.  They 
realize that investment capital must not just come home from abroad, 
where so much of it has fled; it must stay home and go to work creating 
jobs and raising the standard of living for the mainstream of society.   
This is an issue of politics as well as economics.  After all, only if 
the economy improves in ways that tangibly improve the lives of the 
Russian people can Russia's leaders be confident that the next time 
there's an election, there will be a decline, rather than an increase, 
in the number of Russians who vote against reform.   
For much the same reason--that is, because it's an imperative of 
political survival as well as a matter of good government--President 
Yeltsin, Prime Minister Chernomyrdin, and their colleagues must bring 
under control the epidemic of crime and corruption.  Widespread 
lawlessness in Russia today constitutes a major threat to public 
confidence in government, a threat to reform, and a threat to the 
political fortunes of reformers.  The strong showing of General Lebed in 
the first round of the election reflected this public concern. I need 
hardly add to this audience that crime and corruption are also a threat 
to the willingness and ability of firms like yours to do business there.   
Let me summarize what we'll be doing on our end to deliver on President 
Clinton's commitment to help Russia move ahead with economic reform.  
Next week in Moscow, Vice President Gore will urge the Yeltsin-
Chernomyrdin administration to move ahead with the laws, rules, and 
institutions necessary to give investors confidence to expand their 
activities.  He and the other members of the American delegation will 
focus on four issues of particular concern to international business.   
The first is taxation.  The current system is confusing; it lacks 
predictability and is often excessive and unreasonable.  Businesses will 
not invest in Russia if they can't make a profit, and they can't make a 
profit if earnings are going to be confiscated.  That's why Russia must, 
in its own interest, move without delay toward a new tax code that 
encourages investment.   
Second, the Vice President will urge that Russia adopt new laws and 
regulations for the energy sector.  Right now, there are too many 
conflicts in the existing legislation and inadequate means of 
arbitration.  A stable legal and tax framework would unblock the $50-60 
billion in unrealized oil and gas investments.   
Third, this seventh round of the GCC will be the first to address the 
growing concern over commercial crime.  With the recent passage of a 
criminal code, the Russians have already made progress in this area.  
Yesterday, in a major speech promising that reform will continue, 
President Yeltsin vowed that "fighting corruption at all levels will be 
a most important part of my work." Vice President Gore will encourage 
the Prime Minister to enact a criminal procedure code, laws on 
corruption and money laundering, and other key pieces of anticrime 
legislation soon.  After the GCC sessions in Moscow, we will continue to 
work with Russian law enforcement to insure that this new legislation 
will be vigorously enforced.  
And, finally, the Vice President will reaffirm our commitment to work 
closely with the IMF and multilateral development banks.  Since 1993, 
when the U.S. led the effort to mobilize IFI support for reform 
throughout the former Soviet Union, these organizations have helped 
design and finance programs that are needed for both growth and 
stability.  These include the daunting but essential task of stabilizing 
the currency and maintaining low inflation rates, as well as continuing 
structural reforms like privatization, banking reform, and easing the 
shock of industrial downsizing.  
In conclusion, I would underscore that last week's election was a big 
step for Russia--a step very much in the right direction.  It was also 
an affirmation--I'm tempted even to say a vindication--of our 
Administration's policy of supportive engagement with Russian reform.  
It was an incentive for us to stay the course with Russia as long as 
Russia itself keeps on course.  And finally, it was a fresh incentive 
for the American Government and the American private sector to redouble 
our own cooperation--our own joint venture--in helping Russia succeed, 
for its sake and for ours. 

Promoting a Peaceful Transition to Democracy in Cuba 
Statement by President Clinton, released by the White House, Office of  
the Press Secretary, Washington, DC, July 16, 1996.  
From the outset of my Administration, I have been committed to a 
bipartisan policy that promotes a peaceful transition to democracy in 
Cuba. Consistent with the Cuban Democracy Act and with the efforts of my 
predecessors, I have maintained a tough economic embargo on the Cuban 
regime while supporting the Cuban people in their struggle for freedom 
and prosperity. Often, the United States has stood alone in that 
struggle, because our allies and friends believed that pressuring Cuba 
to change was the wrong way to go. 
Five months ago, the world was given a harsh lesson about why we need 
more pressure on Cuba. In broad daylight and without justification, 
Cuban military jets shot down two unarmed American civilian aircraft 
over international waters, taking the lives of four American citizens 
and residents. I took immediate steps to demonstrate my determination to 
foster change in Cuba, including the signing into law of the Cuban 
Liberty and Democratic Solidarity--LIBERTAD--Act, which strengthens the 
embargo, advances the cause of freedom in Cuba, and protects the 
interests of American citizens whose property was expropriated by the 
Cuban regime. And I called on the international community to condemn 
Cuba's actions. 
Now the time has come for our allies and friends to do more--to join us 
in taking concrete steps to promote democracy in Cuba. That is why today 
I am announcing a course of action on Title III of the LIBERTAD Act to 
encourage our allies to work with us and accelerate change in Cuba. 
Title III allows U.S. nationals to sue foreign companies that profit 
from American-owned property confiscated by the Cuban regime. The law 
also provides me with the authority to suspend the date on which Title 
III enters into force, or the date on which U.S. nationals can bring 
suit, if I determine that suspension is necessary to the national 
interests and will expedite a transition to democracy in Cuba. I have 
decided to use the authority provided by Congress to maximize Title 
III's effectiveness in encouraging our allies to work with us to promote 
democracy in Cuba. 
I will allow Title III to come into force. As a result, all companies 
doing business in Cuba are hereby on notice that by trafficking in 
expropriated American property, they face the prospect of lawsuits and 
significant liability in the United States. This will serve as a 
deterrent to such trafficking--one of the central goals of the LIBERTAD 
At the same time, I am suspending the right to file suit for six months. 
During that period, my Administration will work to build support from 
the international community on a series of steps to promote democracy in 
Cuba. These steps include increasing pressure on the regime to open up 
politically and economically, supporting forces for change on the 
island, withholding foreign assistance to Cuba, and promoting business 
practices that will help bring democracy to the Cuban workplace. 
At the end of that period, I will determine whether to end the 
suspension, in whole or in part, based upon whether others have joined 
us in promoting democracy in Cuba. Our allies and friends will have a 
strong incentive to make real progress, because with Title III in 
effect, liability will be established irreversibly during the suspension 
period, and suits could be brought immediately when the suspension is 
lifted. And for that very same reason, foreign companies will have a 
strong incentive to immediately cease trafficking in expropriated 
property--the only sure way to avoid future lawsuits. 
Our allies and foreign business partners know from our actions over the 
past four months that my Administration is determined to vigorously 
implement the LIBERTAD Act. For example, Title IV of the Act bars from 
the United States individuals who profit from property confiscated from 
American citizens. My Administration has already begun to notify several 
foreign nationals that they could no longer enter the United States. 
Rather than face this prospect, a significant number of foreign 
companies already has chosen to leave Cuba, thereby reducing the flow of 
resources the regime uses to maintain its grip on power. 
Today's action is the best way to achieve the bipartisan objectives we 
all share: to isolate the Cuban Government and to bring strong 
international pressure to bear on Cuba's leaders, while holding out the 
very real prospect of fully implementing Title III in the event it 
becomes necessary. By working with our allies--not against them--we will 
avoid a split that the Cuban regime would be sure to exploit. Forging an 
international consensus will avert commercial disputes that would harm 
American workers and business and cost us jobs here at home. And it will 
help maintain our leadership authority in international organizations. 
We will work with our allies when we can. But they must understand that 
for countries and foreign companies that take advantage of expropriated 
property the choice is clear: They can cease profiting from such 
property; they can join our efforts to promote a transition to democracy 
in Cuba; or they can face the risk of full implementation of Title III. 
As our allies know from our implementation of other provisions of the 
bill over the last four months, my Administration takes this 
responsibility seriously. 
For the past four decades, Republican and Democratic administrations 
alike have worked for the transition to democracy of the last 
nondemocratic regime in our hemisphere. This is a cause the 
international community should be prepared to embrace. As implemented 
under today's decision, Title III of the LIBERTAD Act provides us with 
powerful leverage to build a stronger international coalition for 
democracy in Cuba if possible--and with a powerful tool to lead that 
struggle alone if necessary. This is in the best interests of our 
country and in the best interests of the Cuban people. 

Advancing NATO's Adaptation 
James B. Steinberg, Director, Policy Planning Staff  
Address to the Atlantic Council, Washington, DC, June 13, 1996 
Thank you for that kind introduction. For decades, the Atlantic Council 
has performed an invaluable service promoting greater understanding of 
America's stake in Europe. I particularly want to take this opportunity 
to salute you personally, General Goodpaster, for your own service to 
our country and your continuing commitment to a strong transatlantic 
You mentioned my predecessor, George Kennan. The hardest part of my job 
is coming into the office every morning, seeing his picture on the wall 
and being constantly reminded of the high standard he set. I try very 
hard to live up to it. That standard was particularly high on matters of 
European security, where the extraordinary efforts of Mr. Kennan and 
General Marshall left a lasting legacy for the United States' own 
security. In that spirit, I would like to discuss with you our 
Administration's recent transatlantic initiatives and how they 
contribute to advancing President Clinton's goal of a democratic, 
undivided Europe.  
Let me begin by recalling another June day, just seven years ago, when 
Austrian and Hungarian leaders gathered at their border, snipped the 
first holes in the Iron Curtain, and transformed the continent. Over the 
next months and years--only a blink of history's eye--the Berlin Wall 
fell; the Soviet empire collapsed; new democracies were born; and the 
sharp, chiseled lines of the Cold War dissolved into a Jackson Pollock 
These changes posed both opportunities and challenges for NATO. After 
all, the Atlantic alliance was conceived as a bulwark against Soviet 
expansionism. But NATO always has been more than just a defensive 
alliance. Even as NATO held the line against the Soviet Army, it drew 
France and Germany together. It helped integrate Italy and, eventually, 
Spain into the community of democracies. It gave shattered economies the 
confidence to recover. And it provided the essential framework for 
transatlantic cooperation on a wide range of common concerns.  
Throughout its history, NATO has shown a remarkable ability to adapt to 
change. It enlarged to take in Greece and Turkey in 1952, Germany in 
1955, and Spain in 1982. The Harmel Report of 1967, with its parallel 
strategy of defense and detente, was a creative response to the changing 
European landscape of the mid- to late 1960s, just as NATO's double-
track decision on theater nuclear forces was an effective response to 
the challenges of the late 1970s and early 1980s.   
It was in this spirit that the alliance quickly began to respond to the 
tumultuous changes released by the end of the Cold War. Only eight 
months after the fall of the Berlin Wall and 17 months before the end of 
the Soviet Union, the alliance set forth new goals at its London Summit 
in July 1990. NATO declared that it no longer considered Moscow an 
adversary and announced a new program of cooperation with the states of 
central and eastern Europe. Just as important, alliance leaders called 
for a restructuring of NATO military forces and a reorientation of NATO 
strategy. One year later, in Copenhagen, NATO foreign ministers declared 
"we do not wish to isolate any country, nor to see a new division of the 
Continent." At the Rome Summit of November 199l, alliance leaders 
approved a new strategic concept that dropped containment from the NATO 
strategy, declared no country to be an opponent or enemy, and made clear 
that crisis management would become an important mission for the 
alliance in addition to its core responsibility for defense of its 
members. At that same Rome Summit, alliance leaders created the North 
Atlantic Cooperation Council--the NACC--and invited Russia and the other 
states of the former Soviet Union and Warsaw Pact to join.  
These strands of adaptation came together at the Brussels Summit in 
January 1994, when, at President Clinton's urging, alliance leaders 
adopted a broad strategy of cooperation with all of Europe and endorsed 
a three-point program for alliance reform.  
First, they called for adapting NATO's internal structures, including 
support for greater European visibility and capability within the 
alliance and approval of the concept of Combined Joint Task Forces. 
Second, they launched a strategy for external adaptation, including the 
Partnership for Peace, a strategy for enlargement and outreach to Russia 
and to Ukraine.  
Third, they directed an examination of the full spectrum of NATO's roles 
and missions in the new security environment. 
Of course, NATO's adaptation did not proceed in isolation. Since taking 
office, President Clinton has advanced a comprehensive strategy for 
European security. In addition to a revitalized NATO and a robust and 
permanent Partnership for Peace, it includes support for a broader and 
deeper European Union and a stronger OSCE. It includes giving Russia the 
opportunity to integrate into Europe's broad security and economic 
architecture. None of these is an end in itself, but each is critical to 
advancing the President's overall goal of a peaceful, undivided, and 
democratic Europe.  
That goal remains within our reach. But the early euphoria that 
surrounded the collapse of the Soviet empire has been replaced by a more 
sober appreciation of the challenges, none more vivid than the tragic 
conflict in the former Yugoslavia. The Cold War has ended, but more 
people have died violently in Europe during the past five years than 
during the previous 50. As Secretary Christopher said in Prague this 
„Europe's future will be shaped either by the divisive intolerance that 
left Bosnia in ruins or the democratic integration to which most nations 
in this region aspire.š 
This means that our definition of security must include--but also must 
go beyond--the military dimension. Security in Europe today is not only 
a matter of extending guarantees from the top down, it also is a matter 
of building democracies and market economies from the bottom up. That is 
why the international community's efforts at civilian implementation of 
the Dayton peace accords are so important and why we must continue to 
give the people of Bosnia a personal stake--a real interest--in peace.   
Bosnia is also a clear example of NATO's continuing relevance to 
Europe's new security challenges. One year ago, we were trying to end 
the horrors of war; today, we are focused on securing the benefits of 
peace. IFOR has not only brought hope to the people of Bosnia but also 
has demonstrated the possibilities of cooperation in support of peace 
and stability. IFOR has brought NATO allies together with 16 non-NATO 
countries from Europe, North Africa, the Middle East, and Asia in an 
effective and unified coalition for peace. And participation by Russia 
and the central European nations underscores both the ability of the 
alliance to build practical new partnerships and the essential role of 
these countries in the new security environment in Europe.  
Last week in Berlin, the alliance took important steps to fulfill 
several key aspects of the 1994 Brussels Summit mandate. The centerpiece 
of Berlin was NATO's internal adaptation. Here our efforts have been 
guided by three objectives: to ensure the alliance's military 
effectiveness in Europe's changing security environment; to preserve the 
transatlantic link; and to develop the European Security and Defense 
Identity within the alliance.  
As we have proceeded, we have rejected the false counsel of those who 
have argued that enhanced European capabilities would necessarily weaken 
America's engagement with Europe and undermine the effectiveness of the 
alliance. I believe that the results in Berlin demonstrate clearly that 
these three goals are in fact mutually supportive. 
Our decisions in Berlin give NATO the means to help provide stability 
throughout Europe by being able to respond rapidly and effectively to a 
spectrum of crises that are likely to happen but the details of which 
cannot now be foreseen. We established the new Policy Coordination Group 
to meet the need for closer coordination of political and military 
issues as NATO embarks on new roles and mission. And we are giving NATO 
a permanent institutional capacity to plan, train for, and deploy 
complex operations such as IFOR through the Combined Joint Task Force 
concept. By permitting a more flexible and mobile deployment of forces, 
CJTF will facilitate NATO contingency operations and make it easier for 
members of the Partnership for Peace to join with NATO forces when the 
alliance responds to emergencies.  
Our decisions in Berlin also will allow our European allies to 
strengthen their capabilities within the alliance. We agreed on a 
process by which we can make NATO assets available for military 
operations led by the Western European Union and to develop European 
command arrangements within the alliance that preserve NATO's unity and 
transatlantic foundation. Though much work remains to be done, we are 
confident that we can bring these decisions and commitments to life.  
Progress in Berlin came in part because of President Chirac's decision 
to have France participate more closely in the work of NATO--and to 
pursue ESDI within the alliance. France has now rejoined the Military 
Committee, and earlier today its Defense Minister once again 
participated in a meeting of NATO Defense Ministers for the first time 
in 30 years. France's soldiers have a critical role under NATO command 
in Bosnia, and France is playing an indispensable part in our common 
effort to build a new NATO in a secure and undivided Europe.  
Berlin also had important implications for external adaptation. First, 
we further strengthened the Partnership for Peace. We agreed to apply 
our experience in IFOR to future Partnership exercises and to its 
planning and training activities. We agreed to facilitate Partner 
participation in CJTF at an early stage. And we agreed to broaden and 
deepen the Partnership Planning and Review Process. This will advance 
our common efforts on interoperability, civil-military relations, and 
defense policy and planning. Second, by moving forward with internal 
adaptation, we enhanced our ability to include Partners in NATO 
activities and to implement the internal changes necessary to take in 
new members.  
NATO's progress on internal adaptation is thus a further demonstration 
that the alliance is on track to fulfill its decision to take in new 
members. At present, 15 interested Partners are engaged in individual, 
intensified dialogues with the alliance, continuing the process 
established at the December 1995 NATO Ministerial. These dialogues help 
Partners and the alliance to determine what they each must do to prepare 
for enlargement. Based on the results of these dialogues, the alliance 
will decide on next steps at the NATO meeting in December.  
NATO's external adaptation also means building new partnerships with 
Russia and Ukraine. We have a vital interest in integrating Russia into 
Europe's broad security and economic architecture. Since the collapse of 
the Soviet Union, NATO and the European Union have made progress in 
expanding cooperation with Russia. Russia has joined and participates 
actively in the Partnership for Peace. Russia and NATO have held 
consultations on key arms control issues, the proliferation of weapons 
of mass destruction, and the safe and secure dismantlement of nuclear 
weapons. Another positive note came last week with the agreement on 
equipment levels permitted on the north and south flanks of the CFE 
region. Cooperation in different fields of NATO activities is ongoing 
as, for example, in the signing of a Memorandum of Understanding on 
Civil Emergency Planning and Disaster Preparedness.  
Our joint efforts in Bosnia demonstrate how important--and how 
successful--cooperation between Russia and NATO can be. Who would have 
thought that American and Russian soldiers would be patrolling together 
or that NATO and Russian officials would be planning together in a 
common mission for peace? Today those unthinkables are a reality.  
Now we need to build on our practical experience in Bosnia to deepen the 
NATO-Russia relationship in a more formalized, broad-ranging fashion. 
Together, we should elaborate basic principles for security cooperation 
and permanent mechanisms for political consultations. 
There is much we can do together. But in the end, the choice is Russia's 
to make--a choice covering both Russia's internal policies and policies 
toward its neighbors and the world.  
This Sunday, the world will be watching as Russia holds its first 
presidential elections in the post-Soviet era. Far from fearing the 
result, we should welcome this important step toward consolidating 
democracy in Russia, which will benefit not only the people of Russia 
but also of Europe, America, and the world. Throughout this process, our 
interests and objectives remain constant: to keep our people safe and to 
lock in the gains for peace and freedom made possible by the Cold War's 
Ukraine's emergence as a sovereign and prosperous democracy is also 
critical. That is why we value Ukraine's participation in IFOR and PfP, 
and why we want NATO and Ukraine to build an enhanced relationship. 
These efforts are paying off. As we were meeting in Berlin, for example, 
the U.S., Russia, and eight other nations were participating in a joint 
military exercise in the western part of Ukraine. Thanks to the 
Trilateral Agreement between the U.S., Russia, and Ukraine, the last 
Soviet-era nuclear warheads left Ukrainian soil just two weeks ago. And 
President Clinton has galvanized the international community's efforts 
to support Ukraine's economic reform.  
Taken together, these initiatives underscore just how far we have come 
in our efforts to realize the full promise of the vision charted by such 
post-war giants as George Marshall and Jean Monnet. We are adapting 
Western institutions to meet the challenges of a new era. And we are 
working with partners to the east to extend the same benefits and 
obligations of the open economic and security order that has brought 
peace and prosperity to the West.  
For half a century, the Atlantic community has been the leading force 
for peace and prosperity--for ourselves and for the world. But at the 
threshold of a new century, there is a new world to face--with 
challenges no less critical than those faced by our counterparts half a 
century ago. Without a strong Atlantic community, the prospects for a 
safer, more prosperous, and freer world in the coming century will fade. 
The world is too dangerous and our opportunities are too great for us to 
take this partnership for granted.  
Let me once again thank you for this opportunity to speak and to 
encourage you in your own work to advance this important agenda. 

Iowa and the World Economy: The Importance of U.S. Economic Leadership 
Alan Larson, Principal Deputy Assistant Secretary for Economic and 
Business Affairs 
Address at Town Meeting, Des Moines, Iowa, July 11, 1996 
Good morning. I'm really glad tobe back in Iowa in this sesquicentennial 
year. In its own understated way, Iowa is making its mark in many 
fields: political leadership in the presidential caucuses; the many 
faces of community that were in evidence during the 4th of July 
celebrations on the National Mall in Washington; and most relevant for 
today's discussion, the state's growing involvement in the world 
Today I'd like to make three simple points: 
First, that Iowa's prosperity is tied to its ability to compete in a 
growing world economy; 
Second, that many recent and ongoing economic policy initiatives have a 
direct bearing on your ability to compete; and, 
Third, that it is important to Iowa that the U.S. continue to exercise 
leadership in the international economy. 
Consistent with the structure of the panel, I will draw mainly on 
examples concerning our economic relationship with Europe but will be 
happy to answer any of your questions. 
Iowa in the World Economy 
The importance of trade and investment to the U.S. economy has increased 
dramatically. In 1970, the value of trade equaled just 13% of the value 
of U.S. GDP. In 1995, that number was nearly 30%. With total trade of 
over $1.7 trillion (exports plus imports) the United States is the 
world's largest trader. 
Global trade is growing much faster than growth in output. World goods 
trade grew 8% in 1995, nearly three times than world economic growth. 
U.S. exports rose by 14% in both volume and value in 1995, far outpacing 
growth in our economy overall.  
To provide some perspective, in 1970 total U.S. exports of goods and 
services were $42 billion. In 1995, total U.S. exports were over $783 
billion, up $82 billion over 1994. We estimate that every billion 
dollars of exports supports 15,000 jobs, which means that exports in 
1995 supported over 11 million jobs. 
Iowa has shared in this boom. In fact, Iowa's exports are growing faster 
than those of the U.S. overall. Exports of goods from Iowa grew 32% 
between 1993 and 1995, to $2.6 billion. U.S. merchandise exports grew 
25% over the same period. 
Canada buys over 50% of Iowa's exports. The European Community is Iowa's 
second-biggest trading partner, with exports up 92% between 1987 and 
Iowa produces a significant share of America's rapidly growing 
agricultural exports. Iowa's 1994 exports of $776 million in soybeans 
ranked second among the States. Iowa's $761 million in feed grain 
exports ranked third, and its $368 million in meat exports ranked fourth 
among the States. 
John Deere tells us that 80% of their U.S. exports are made in Iowa. Its 
increased exports moved Deere to 35th on Fortune magazine's list of the 
largest U.S. exporters in 1994, from 48th in 1992. In the U.S., jobs in 
exporters such as John Deere pay on average 15% more than non-trade 
Foreign investment in Iowa also has boomed--to $3.8 billion in 1993. 
Foreign firms operating in Iowa employed 30,900 people in 1993, compared 
to only 9,300 in 1977. Two percent of Iowan employees now work for a 
foreign-affiliated firm, with European and Canadian firms the leading 
investors in Iowa. 
These numbers lend solid support to the view that our ability to create 
jobs and growth here depends on the ability to open markets overseas. 
After all, 95% of the world's consumers are outside the U.S., most in 
fast-growing markets in Asia, Latin America, and Central Europe and the 
former Soviet Union.  
Economic Policy Initiatives 
Creating prosperous, open markets in these areas--and ensuring that our 
partners abide by the same trade and investment rules we play by--is at 
the root of our multifaceted international economic initiatives. Let me 
just mention a few of these that are of particular significance to Iowa. 
World Trade Organization. The successful conclusion of the Uruguay Round 
of the trade negotiations and the creation of the World Trade 
Organization strengthens the world trading system; reduces tariffs by 
40%, commits members to a cut in agricultural subsidies; and extends 
trade rules to agriculture, services, and international property rights. 
The European Union's commitment in the Uruguay Round to reduce export 
subsidies and its own tariffs on agricultural goods--and to provide 
somewhat greater access for certain agricultural products--should create 
greater opportunities for Iowa's agricultural exports. 
In the short-term, the greatest opportunities for Iowa producers likely 
will arise as European Union countries have to cut the use of export 
subsidies, which have been used heavily to support their pork producers, 
for example. 
Other factors in Europe, beyond the Uruguay Round commitments, are 
increasing pressure on subsidy programs. A major example is the need to 
slash budget deficits to meet the targets set by the EU's efforts toward 
monetary union.  
And while the EU's specific pledge to reduce domestic support to 
agriculture may leave big programs in place, for example, it is clear 
that the increased transparency and market access gains achieved are a 
huge step forward on the path to open markets and a more level playing 
field for U.S. exports. 
The U.S. economy is expected to gain $150 billion per year in GNP once 
the Uruguay Round is fully phased in. We are now working to ensure that 
our partners implement their Uruguay Round commitments, especially those 
on tariffs and subsidies.	 
Services. Part of the WTO's "built-in" agenda includes work to further 
liberalize trade in services, including financial services and 
telecommunications. We have set a high standard in the negotiations on 
these sectors, emphasizing that we expect others to offer the same sort 
of open markets we either already provide or are prepared to commit to 
provide. For example, the offers made by other countries in last year's 
negotiations on financial services weren't good enough for us to commit 
to allowing unrestricted access to our market in financial services. 
We want agreements that provide a balance of benefits. If we can secure 
a better deal in 1997, Iowa, as the second-largest insurance center in 
the nation, will be well placed to reap the benefits. 
As for telecommunications, we're working now to reach an agreement by 
1997 that will help lower the costs of basic telecom services worldwide. 
Again, Iowa, as a leading center for telemarketing and worldwide 
reservations, should benefit. 
We also have undertaken bilateral initiatives to improve market access 
for U.S. financial service providers, such as the Principal Financial 
Group. In October 1994, the United States signed an insurance agreement 
with Japan--the world's second-largest market for insurance--to open the 
Japanese market to U.S. insurance companies. 
The agreement commits Japan to undertake specific liberalization 
measures in its insurance market, and we have met with Japanese 
officials on numerous occasions to ensure that Japan fully implements 
the provisions of the agreement. 
Multilateral Agreement on Investment (MAI). U.S. investors' interests 
are the focus of negotiations for a multilateral agreement on investment 
that we helped launch in May 1995 with our European and other partners 
in the Organization for Economic Cooperation and Development. Our 
objective is an agreement that will establish clear legal standards on 
expropriation, access to binding international arbitration for disputes, 
and unrestricted investment-related transfers across borders. Such rules 
will benefit firms in Iowa that invest abroad.  
Illicit Payments. Iowa's exporters and service providers also will 
benefit from our efforts to combat bribery in international business 
transactions. U.S. firms have long been disadvantaged by the outrageous 
policies of European governments in this area, such as making bribes tax 
In a significant victory, we pushed through an agreement among OECD 
countries to deny tax deductibility for bribes and to find a means to 
criminalize the bribery of foreign officials. We have also put forward 
an initiative in the WTO to enhance transparency and openness in 
government procurement as a means of combating bribery and corruption in 
government contracts. 
New Transatlantic Agenda. I mentioned earlier that Europe is Iowa's 
number-two export market. Despite the fast growth in markets in Asia and 
Latin America, the European Union remains a close second to Canada as 
our leading trading partner. 
We want to reinforce these ties and further reduce barriers to trade 
between Europe and the U.S. The New Transatlantic Agenda, launched by 
President Clinton at the U.S.-EU Summit last December, is designed to 
take concrete steps to create a transatlantic marketplace. These steps 
include, among other things, further tariff reductions, particularly in 
the area of information technology, and the negotiation of agreements on 
mutual recognition of product certification and testing procedures. Such 
mutual recognition agreements, or "MRAs" for short, are designed to 
enable U.S. firms to sell their products in the European Union without 
redundant product certification and testing both at home and abroad.  
U.S. and European negotiators already have achieved substantial progress 
in negotiations on MRAs in the telecommunications, electrical safety 
equipment, electromagnetic compatibility, pharmaceuticals, and 
veterinary biology sectors. Discussions on medical devices are ongoing. 
Assistance to Transition Economies. While the New Transatlantic Agenda 
focuses on new market-opening initiatives with the European Union, we 
have undertaken a comprehensive range of programs to assist the former 
communist countries of central Europe and the former Soviet Union in 
their transition to stable and prosperous market democracies. This has 
included substantial assistance, both bilaterally and through the World 
Bank and the International Monetary Fund, in areas from laying the legal 
foundation for property rights and a market economy to economic 
restructuring and privatization. 
Bringing these new partners into the WTO on commercially meaningful 
terms will reinforce this by ensuring that they abide by the same trade 
rules as others, especially in the agricultural area. Our assistance is 
aimed at helping our new partners through the profound changes that will 
help provide the prosperity that will provide expanded markets for U.S. 
exports and investment. 
Middle East. This same objective--building stability and prosperity--is 
also central to an initiative in another region. Our efforts to 
establish a Middle East development bank will help build a strong 
foundation for an enduring peace in the region by ensuring that new 
economic opportunities can be fully realized. This innovative 
institution would provide a catalyst to private sector growth and, in 
turn, will help nurture increased trade and investment opportunities for 
U.S. firms. 
U.S. Leadership Remains Key 
All these initiatives are premised on U.S. leadership in the global 
economy. As President Clinton said, we must compete, not retreat. 
Trade and Investment Liberalization. We know from everyday experience 
that competition makes us stronger. American farmers or workers like 
those at John Deere don't need protection from foreign competition. Our 
farmers and our workers are the most productive in the world. What they 
need are international rules that give them the opportunity to compete 
in foreign markets on equal terms. 
However, unless the United States takes the lead, those international 
rules will not be established. The European Union is not in a position 
to exercise global economic leadership. It is preoccupied with its 
internal efforts to establish monetary union and to deal with expanded 
membership. It is demoralized by failing efforts to reduce double-digit 
unemployment rates. Japan's economy is troubled with financial 
vulnerabilities and weaknesses. In short, if the U.S. doesn't take the 
helm, there will be no one steering the global economy through the 
challenges ahead. 
Support for Change. As I noted earlier, U.S. leadership has been 
instrumental in central Europe, Russia, Ukraine, and other states of the 
former Soviet Union as they make the transition to successful market 
economies--and in the Middle East as we build the economic foundations 
of an enduring peace. Among the best tools we have for promoting peace, 
stability, and economic prosperity are well-targeted bilateral 
assistance programs and our participation in multilateral financial 
institutions such as the World Bank and the International Monetary Fund. 
We led the creation of these institutions, and they are heavily engaged 
in activities that support key U.S. foreign policy goals in Russia, 
Mexico, Bosnia, the West Bank/Gaza, and Haiti. 
Foreign assistance also brings concrete benefits to the United States, 
in the form of contracts with and purchases from U.S. businesses and 
universities as part of specific development projects. Multilateral 
development banks spent around $20 million procuring products and 
services from entities in Iowa in 1994, the latest year for which data 
is available. 
In fiscal year 1995, the U.S. Agency for International Development 
awarded contracts worth a total of $14 million to businesses and 
universities in Iowa, including Stanley Consultants, the University of 
Iowa, and ISU. USAID purchases millions of dollars in agricultural 
products from Iowa farmers for use in food aid programs. 
Yet it is ironic that support for such help is waning at a time when our 
future prosperity depends so heavily on enlightened U.S. leadership. 
Foreign assistance accounts for less than 1% of the U.S. budget. Our 
assistance on a per capita basis ranks near the bottom of the major 
industrial countries. We are now more than $1.6 billion in arrears on 
our assessed contributions to multilateral development banks. 
Our ability to lead is being undercut. Our friends understand our need 
to balance our international obligations against domestic priorities. 
They face the same pressures and are prepared to work with us to make 
the assistance and the institutions that provide it more efficient.  
Without American leadership, initiatives that use diplomatic or economic 
tools to forestall crises will fail. When they fail, the United States, 
as the world's only military superpower, will be left to pick up the 
pieces, at greater--much greater--cost. An ounce of prevention is worth 
a pound of cure. 
Engagement Is Key. After World War I, America retreated from 
international leadership and opted for protectionism. The Great 
Depression and World War II followed. After World War II, America opted 
for engagement. While we have made mistakes and experienced many 
problems, the last half-century has been one of peace and prosperity 
compared with the 30 years that came before.  
If this century has taught us anything, it is that the world is an 
unruly place. Without U.S. leadership, war and economic instability will 
intrude and make prosperity at home impossible. 
A better choice is to opt for leadership. We can shape the international 
environment by strengthening institutions that support open markets and 
economic development. We can strengthen cooperation with our partners. 
By accepting the obligations of leadership, we will be well-positioned 
to advance American interests and values, so that Iowa and the country 
as a whole will continue to share in an era of prosperity and global 


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