The financial crisis in Asia: we must protect our economic and national security interests. (speech by Secretary of the Treasury Robert E. Rubin)(Transcript)

WE MUST PROTECT OUR ECONOMIC AND NATIONAL SECURITY INTERESTS

Address by ROBERT E. RUBIN, Secretary of the Treasury of the United States

Delivered at Georgetown University, Washington, D.C., January 21, 1997

Today I would like to discuss the financial crisis in Asia; why the United States must protect its vital economic and national security interests by working to help restore financial stability and economic growth to that troubled region; and why acting promptly and effectively to do so protects the economic interests of every American.

To begin, I think it is important to place the recent events in Asia in the context of the emergence of the global financial system. Over the last several years, we have entered a new era for global financial markets and the global economy - an era of interdependence, complexity and opportunity. Expanding economic ties through greatly increased trade and vastly increased capital flows has brought tremendous benefits to the American people through greater exports, more high-paying jobs, and higher standards of living and through lower inflation than would have been expected with the strong growth we've had. And countries in the developing world and emerging markets have also benefited enormously from this environment, which has allowed them to attract previously unimaginable flows of private capital for investment. That investment has helped foster growth and lift millions out of poverty.

Yet just as this era brings great opportunities for the United States and the rest of the world, so does it present new risks. In recent months, these risks have been brought home as financial instability in Asia has shaken the region and affected markets around the world. Just a few years ago, it would have been unimaginable for the fluctuations of the Thai baht, or the fortunes of the Korean stock market to impact U.S. markets, to be printed on the front page of newspapers every day.

In the face of this challenge, our first job is clear: to help stabilize the immediate crisis. Yet, to make the most of the opportunities and limit the risks of the new global financial system and to have a viable situation for the years ahead, we must also modernize the architecture of the international financial markets that we helped create and that has served us so well for the last fifty years. This will be a long and complex process ~ which we actually began several years ago - involving both great intellectual effort and extensive international coordination, yet it is imperative for the strength of our economy and the prosperity of our citizens as we enter a new century.

The United States has enormously important economic and national security interests at stake in promoting restoration of financial stability in Asia. When we act to resolve the Asian crisis, we act to protect and benefit the American people.

The countries in Asia are our customers, our competitors and our security partners. Financial instability, economic distress, and depreciating currencies all have direct effects on the pace of our exports, the competitiveness of our companies, the growth of our economy and, ultimately, the well-being of American workers. Thirty percent of U.S. exports go to Asia, supporting millions of U.S. jobs, and we export more to Asia than Europe. In states like California, Oregon and Washington, exports to Asia account for more than half of each state's total exports.

Thus far, the effects on our economy, though real, are relatively moderate and the most likely scenario for the next year is continued solid growth and low inflation. However, the risks in this crisis are not just confined to the Asian countries now most directly involved. Roughly forty percent of our exports have been going to emerging markets around the globe. If the crisis were to spread more broadly to other emerging markets, then the impact on American workers and businesses could be much greater. Simply put, we cannot afford to stand back and gamble that the crisis will resolve itself.

The United States also has critical national security interests in seeing a restoration of financial stability in the region. We have …