U.S. Department of State
95/06/08 UnderSec. Spero on Halifax/G-7
Office of the Coordinator for Business Affairs


                    MOUNT HALIFAX: IN SIGHT OF THE SUMMIT 

                      REMARKS BY UNDER SECRETARY SPERO 
              EUROPEAN COUNCIL OF AMERICAN CHAMBERS OF COMMERCE 
                                 JUNE 8, 1995 
 
THOSE OF YOU WHO ARE OLD SUMMIT HANDS MAY KNOW THAT THOSE OF US WHO 
ORGANIZE THE ANNUAL G-7 SUMMITS ARE GIVEN THE PECULIAR TITLE OF "SHERPA" 
-- OR, EVEN MORE PECULIAR IN MY CASE, "SOUS-SHERPA".  THE ANALOGY WITH 
HIMALAYAN MOUNTAIN GUIDES AND THEIR HEAVY BURDENS SEEMS APPROPRIATE.  AS 
THE HALIFAX SUMMIT LOOMS INTO VIEW, WE SHERPAS ARE TOILING UP THE FINAL 
SLOPE, PEERING INTO BUREAUCRATIC CREVASSES AND SUFFERING FROM OXYGEN 
STARVATION IN HIGH REALMS OF POLICY. WE HAVE MADE GOOD PROGRESS, BUT 
VISIBILITY IS STILL POOR AND WE HAVE SOME WAY TO CLIMB.  I AM PLEASED TO 
BE ABLE TO TAKE THIS BREATHER AND SHARE MY THOUGHTS ON WHAT MOUNT 
HALIFAX AND THE G-7 HAVE TO OFFER THIS YEAR. 
 
LAST YEAR AT NAPLES, WITH SHERPAS PUFFING TO CATCH UP, LEADERS SET 
THEMSELVES A DAUNTING TASK: TO REVIEW THE POSTWAR ECONOMIC ARCHITECTURE 
AND ITS CAPACITY TO MEET THE CHALLENGES OF THE 21ST CENTURY.  HALF A 
CENTURY AGO, THE U.S., THE UK  AND A HANDFUL OF OTHER POWERS CREATED THE 
UNITED NATIONS, THE IMF, THE WORLD BANK AND THE GATT TO ADDRESS THE 
PROBLEMS OF THE TIME: AN UNEASY PEACE, POSTWAR RECONSTRUCTION, A 
COLLAPSED TRADING SYSTEM, FRAGILE CURRENCIES.  ON THE WHOLE, THE SYSTEM 
SUCCEEDED REMARKABLY WELL. 

YET TODAY THERE ARE CLEARLY STRESSES. FROM OUR BASE CAMP LAST YEAR, WE 
SHERPAS FORESAW THAT LEADERS WOULD HAVE TO SURMOUNT A NUMBER OF GLOBAL 
CHALLENGES.  RIGHT IN THE FOREGROUND IS THE "MEXICO" ISSUE: HOW CAN 
EXISTING INSTITUTIONS SUCH AS THE IMF DEAL WITH -- OR PREVENT -- 
FINANCIAL CRISES IN A FAST-MOVING GLOBAL MARKET? 
 
IN THE MIDDLE DISTANCE IS AN EQUALLY TROUBLING QUESTION: HOW CAN 
INSTITUTIONS REACH OUT MORE EFFECTIVELY TO DEVELOPING COUNTRIES LEFT 
BEHIND BY THE GLOBAL SYSTEM? 

FINALLY, THERE ARE THE LOOMING GLOBAL PROBLEMS: ENVIRONMENTAL DAMAGE, 
CRIME, UNSUSTAINABLE POPULATION PRESSURES, POLITICAL INSTABILITY, AND 
THE COMPLEX AND TREACHEROUS HUMANITARIAN CRISES THAT RESULT. 

INTERESTINGLY, TRADE IS NOT A CENTRAL ISSUE THIS YEAR. AS A RESULT OF 
THE URUGUAY ROUND, WE HAVE A BRAND-NEW INSTITUTION IN THE WORLD TRADE 
ORGANIZATION.  OUR GOAL WILL BE TO GET IT UP AND RUNNING. 

BEFORE ADDRESSING THESE QUESTIONS, I'D LIKE TO  CAUTION THAT MOUNT 
HALIFAX IS NOT MOUNT EVEREST.  NO "NEW BRETTON WOODS" IS GOING TO EMERGE 
FROM THE NOVA SCOTIA WOODS.  THIS IS JUST ONE STEP ON A LONGER JOURNEY, 
AS THESE INSTITUTIONS SLOWLY AND PAINFULLY EVOLVE TO MEET NEW NEEDS.  
 
MANAGING THE GLOBAL ECONOMY 

CLEARLY, A MORE STABLE GLOBAL FINANCIAL SYSTEM IS ONE OF THESE NEEDS.  
IT WILL BE FRONT AND CENTER AT THE SUMMIT.  MEXICO HAS SHOWN US THAT WE 
NEED BOTH BETTER PREVENTION AND BETTER MANAGEMENT OF FINANCIAL CRISES. 
THERE IS A CLEAR NEED FOR MORE "EARLY WARNING" THROUGH TRANSPARENCY AND 
SURVEILLANCE. THE IMF HAS UNDERTAKEN TO STRENGTHEN ADVICE AND WARNINGS 
TO COUNTRIES PURSUING UNSUSTAINABLE POLICIES.  BUT WE MUST HAVE RELIABLE 
INFORMATION ON ISSUES SUCH AS CAPITAL FLOWS -- AND IMPROVE PRUDENTIAL 
REGULATION IN EMERGING MARKETS -- TO MAKE THE MARKETS FUNCTION BETTER. 

CRISIS MANAGEMENT IS THE OTHER SIDE OF THE COIN.  THE IMF NEEDS MORE 
RESOURCES TO COUNTER BALANCE OF PAYMENTS PROBLEMS.  WE HAVE BEEN 
EXPLORING A NUMBER OF WAYS TO PROVIDE THE IMF THE TOOLS IT NEEDS. 
 
FINALLY, WE NEED A WAY TO MANAGE NATIONAL DEBT CRISES IN AN ORDERLY 
FASHION. IN THE PAST, A HANDFUL OF CENTRAL AND COMMERCIAL BANKS COULD 
RESCHEDULE DEBT AND ARRANGE NEW LENDING FOR INDEBTED COUNTRIES. TODAY 
THESE COUNTRIES FACE COUNTLESS CREDITORS IN AN ANONYMOUS MARKET. IS IT 
POSSIBLE TO ARRANGE A WORKOUT IN SUCH A SITUATION? HOW WOULD WE DEAL 
WITH "MORAL HAZARD"? 

WE DO NOT WANT TO GIVE AN EASY WAY OUT TO COUNTRIES WHO HAVE MISMANAGED 
THEIR FINANCES.  HOWEVER, IGNORING THE PROBLEM COULD BE FAR MORE 
HAZARDOUS TO THE HEALTH OF OUR MARKETS. 

PROMOTING SUSTAINABLE DEVELOPMENT. 

THE SECOND KEY CHALLENGE AT HALIFAX IS TO REACH OUT TO COUNTRIES WHO ARE 
FALLING BEHIND IN THE DEVELOPMENT RACE.  IN MANY DEVELOPING COUNTRIES 
LIVING STANDARDS HAVE STAGNATED OR DECLINED. 
 
UNSUSTAINABLE POPULATION INCREASES, ENVIRONMENTAL DEGRADATION, CRUSHING 
DEBT BURDENS AND SPREADING POLITICAL INSTABILITY ARE POISONING THE 
FUTURES OF THEIR PEOPLE. 

WE CANNOT INSULATE OURSELVES FROM THESE PROBLEMS. ENVIRONMENTAL DAMAGE 
IS GLOBAL IN ITS EFFECTS; AND RISING VIOLENCE AND THE MISERIES OF FORCED 
MIGRATION REQUIRE MASSIVE HUMANITARIAN ASSISTANCE AND LEAD TO POLITICAL 
INSTABILITY THAT SPILLS ACROSS BOUNDARIES.  WE MUST BREAK THIS CYCLE. 

OVER THE PAST FIFTY YEARS WE HAVE LEARNED SOME LESSONS ABOUT SUSTAINABLE 
DEVELOPMENT.  ONE IS THAT MONEY AND BIG INFRASTRUCTURE PROJECTS ARE NOT 
ENOUGH. COUNTRIES NEED AN ACTIVE PRIVATE SECTOR, ECONOMICALLY AND 
ENVIRONMENTALLY SOUND POLICIES, AND DEMOCRATICALLY ACCOUNTABLE 
GOVERNMENTS -- IN OTHER WORDS, OPEN MARKETS AND OPEN SOCIETIES -- FOR 
AID TO BE EFFECTIVE IN THE LONG TERM.  
 
OUR DEVELOPMENT INSTITUTIONS -- THE WORLD BANK, REGIONAL DEVELOPMENT 
BANKS, AND THE UNITED NATIONS ECONOMIC AND SOCIAL BODIES --  MUST 
INCORPORATE THESE LESSONS INTO THEIR PROGRAMS; SOME HAVE ALREADY BEGUN. 

WE NEED TO ENCOURAGE THE MULTILATERAL BANKS TO FOCUS ON AREAS WHERE 
PRIVATE CAPITAL IS NOT AVAILABLE, BUT DEVELOPMENT RETURNS ARE HIGH: 
HEALTH AND PRIMARY EDUCATION, FOR EXAMPLE. WE MUST ALSO ENSURE THAT 
COUNTRIES WHO ARE READY TO WORK TOWARD SUSTAINABLE DEVELOPMENT ARE NOT 
CRUSHED UNDER  OLD DEBT. 

THE INTERNATIONAL INSTITUTIONS MUST ALSO MANAGE THEIR RESOURCES MORE 
EFFECTIVELY. MANAGEMENT IS A DEVELOPMENT ISSUE; EVERY DOLLAR LOST TO 
OVERHEAD IS ONE LESS VACCINATION OR TEXTBOOK FOR PEOPLE WHO NEED THEM.	 

WHILE MOST OF THE INSTITUTIONS COULD USE BETTER MANAGEMENT, WE ARE 
FOCUSING HEAVILY ON THE UNITED NATIONS. 
 
THE UN'S ECONOMIC AND SOCIAL MACHINERY HAS GROWN ENORMOUSLY CUMBERSOME 
OVER THE LAST FIFTY YEARS.  THE US HAS PROPOSED SEVERAL STRATEGIES FOR 
MAKING THESE BODIES MORE EFFECTIVE: 
 
--  CONSOLIDATING AGENCIES WITH SIMILAR OR OVERLAPPING FUNCTIONS, SUCH 
AS HUMANITARIAN RELIEF OR DEVELOPMENT ASSISTANCE; 

--  A HARD LOOK AT THE MANDATES OF EXISTING BODIES TO SEE WHETHER THEY 
ARE STILL RELEVANT; AND 

--  REFORM OF THE UN SECRETARIAT TO BRING IT UP TO MODERN STANDARDS OF 
EFFICIENCY AND ACCOUNTABILITY. 

LEGITIMATE QUESTIONS HAVE BEEN RAISED ABOUT WHETHER THE G-7 SHOULD BE 
SEEN TO BE DICTATING TO THE REST OF THE WORLD -- AND IN AN ORGANIZATION 
WHERE WE HAVE ONLY SEVEN VOTES OUT OF 185. WE BELIEVE, HOWEVER, THAT 
MANY DEVELOPED AND DEVELOPING COUNTRIES ALSO QUESTION WHETHER THE UN CAN 
CONTINUE TO FUNCTION WITHOUT SERIOUS RESTRUCTURING. 
 
THIS IS AN ISSUE OF PARTICULAR RESONANCE FOR US.  THE PRESIDENT HAS MADE 
IT CLEAR THAT THE U.S. MUST AND WILL REMAIN ENGAGED IN THE MULTILATERAL 
SYSTEM.  HE HAS PUT IT ON THE LINE IN RESISTING EFFORTS TO GUT OUR 
FOREIGN AFFAIRS BUDGET.  AMERICANS HAVE NOT TURNED THEIR BACKS ON THE 
WORLD; INDIVIDUALLY, THEY STILL OPEN THEIR HEARTS AND PURSES TO 
ALLEVIATE GLOBAL POVERTY AND MISERY.  INCREASINGLY, HOWEVER, THEY 
QUESTION THE VALUE OF THE EXISTING MULTILATERAL INSTITUTIONS. 

IN TODAY'S BUDGETARY CLIMATE, WE NEED TO SHOW THAT THE UN AND THE 
DEVELOPMENT BANKS CAN USE OUR RESOURCES EFFECTIVELY IN RESPONDING TO 
CURRENT GLOBAL NEEDS. AT HOME, WE HAVE VOWED TO REINVENT GOVERNMENT TO 
MAKE IT SMALLER, MORE EFFECTIVE AND MORE RESPONSIVE.  REINVENTING 
MULTILATERALLY IS EVEN MORE COMPLICATED, BUT WE MUST MAKE A START. 
 
IN MY VIEW OF THE PEAKS ON THE HORIZON, THERE IS ONE I HAVE NOT 
DISCUSSED SO FAR -- THE G-7 ITSELF. THE LEAST DEFINABLE OF THE WORLD'S 
ECONOMIC BODIES. IS IT A CABAL OF WORLD FINANCIAL POWERS, A CURRENCY 
CARTEL TO PUSH THE DOLLAR UP OR DOWN, OR MERELY THE SUPER BOWL OF THE 
SUMMIT SEASON? PERHAPS THE MYSTIQUE IS A MAJOR PART OF ITS ATTRACTION. 

OUR FRENCH COLLEAGUES CONTINUALLY REMIND US THAT WE ARE NOT A 
DIRECTORATE; THE REMINDER IS HARDLY NECESSARY. MACROECONOMIC 
COORDINATION HAS PROVED DIFFICULT IN THE FACE OF POWERFUL DOMESTIC 
PRESSURES.  OUR ABILITY TO PREVAIL IS LIMITED EVEN WHERE THE G-7 IS MOST 
POWERFUL, AS IN THE IMF. THE MEMBERSHIP ITSELF SEEMS TO REPRESENT A 
WANING OLD ORDER. ONE JOURNALIST RECENTLY DUBBED IT THE "GERIATRIC 
SEVEN". 

IS THE G-7 AN ANACHRONISM? SHOULD THE SHERPAS RETREAT TO A RETIREMENT 
HOME FOR ELDERLY WORLD POWERS? NOT YET. 
 
THE G-7 HAS CHANGED WITH THE TIMES, EXPANDING ITS SCOPE TO TRADE, 
EMPLOYMENT, AND OTHER TIMELY ISSUES. IN TRADE, THE G-7 SUMMIT WAS AN 
IMPORTANT CATALYST IN CONCLUDING TWO MAJOR GATT ROUNDS.  IT HAS PROVED 
EFFECTIVE AT MOBILIZING SUPPORT TO MEET SPECIFIC NEEDS, SUCH AS HELPING 
RUSSIA WITH ITS TRANSITION AND UKRAINE TO STABILIZE ITS ECONOMY AND COPE 
WITH THE LINGERING AFTERMATH OF CHERNOBYL. IT HAS KICKED OFF USEFUL 
INITIATIVES IN AREAS SUCH AS COMBATING MONEY-LAUNDERING AND TERRORISM. 
IT HAS BECOME A CRITICAL, YEAR-ROUND PLAYER IN THE MANAGEMENT OF WORLD 
FINANCIAL ISSUES. 

THE G-7 HAS ALSO BECOME A VALUABLE POST-COLD-WAR INSTITUTION.  THROUGH 
THE 'G-7 PLUS ONE' DIALOGUE, IT HAS PROVIDED RUSSIA ONE MORE WAY TO 
ARTICULATE ITS POLITICAL INTERESTS AND AN OPPORTUNITY TO WORK WITH US ON 
POLITICAL ISSUES. 
 
FINALLY, THE G-7'S REAL VALUE IS NOT AS A DIRECTORATE BUT AS A VOICE OF 
EXPERIENCE.  THE "SEVEN" INCLUDE THE WORLD'S LARGEST ECONOMIES. WE SHARE 
A POSTWAR HISTORY OF DEMOCRACY AND COMMITMENT TO THE MULTILATERAL 
SYSTEM.  MOREOVER, IT IS A FORUM CONDUCIVE TO CREATIVE INITIATIVES BY 
LEADERS. THE G-7 SUMMIT ALLOWS OUR HEADS -- AS THEY ARE KNOWN -- TO TALK 
WITHOUT SCRIPT OR AUDIENCE; IN THAT RAREFIED ATMOSPHERE, SOMETIMES THEY 
FIND THE POLITICAL WILL TO GO BEYOND THEIR CAUTIOUS SHERPAS. THIS YEAR'S 
INSTITUTIONAL REVIEW, WHICH HAS TURNED OUT TO BE TIMELY AS WELL AS 
CHALLENGING, WAS AN INSPIRATION OF THE "HEADS". 

SO WHEN YOU READ THE COMMUNIQUE OVER WHICH WE HAVE LABORED SO HARD, 
THINK OF IT NOT AS A DIKTAT FROM THE REIGNING POWERS BUT AS PART OF A 
DIALOGUE.  NO EASY FIXES ARE IN SIGHT FOR THE PROBLEM WE HAVE SET 
OURSELVES. 
 
WHAT WE ACHIEVE AT THE SUMMIT WILL BE ONLY ONE STEP IN THE PROCESS; 
IDEAS FOR REFORM OF THE UN, THE IMF AND OTHER INSTITUTIONS MUST BE 
PURSUED FROM WITHIN, AND WE WILL NEED TO MOBILIZE SUPPORT FROM A MUCH 
BROADER COALITION OF MEMBERS. 

THE HALIFAX SUMMIT CAN ADD MOMENTUM TO THE REFORM PROCESS WITHIN THE 
WORLD'S ECONOMIC INSTITUTIONS.  BUT THE G-7 WILL NOT BE FINISHED WITH 
THESE ISSUES ON JUNE 17; WE NEED TO KEEP PUSHING IF MOUNT HALIFAX IS TO 
HAVE MEANING.  TUNE IN NEXT YEAR FOR THE EXPEDITION UP MONT FRANCE.