Statement by U.S. Treasury Secretary John Snow
following the Pre-Summit Finance Ministers’ Meeting

New York, May 23, 2004

I was pleased to host Finance Ministers in New York today to prepare for the Annual Summit of G8 Leaders.

Achieving sustained growth remains a key driver of our discussions. The world economy is strong. Global growth is expanding at more than 4 1/4% for 2003-2004, the best growth rate in fifteen years. This is excellent news for those represented at our meeting today as well as our neighbors in emerging market and developing countries.

President Bush’s economic leadership has put the United States at the forefront of the drive for growth. Nationally, we gained 288,000 new jobs in April, and the nation has added more than 1.1 million new jobs since last August. The unemployment rate has fallen steadily, and now stands at 5.6 percent, down from 6.3 percent last June — lower than the average unemployment rate of the 1970s, 1980s, and 1990s. Over the past year, the unemployment rate has fallen in 47 of the 50 states. After tax incomes are up by 10% since December 2000 and household wealth is at an all-time high. Economic growth over the last four quarters has been the strongest in two decades.

This pro-growth, pro-jobs agenda is founded in the President’s jobs and growth tax relief plan. When we let the American people keep more of what they earn and save, they put that money to good use. They demand more goods and services, which creates demand for new workers. Now that our economy is expanding and adding more jobs, we need to make sure Americans keep their tax relief.

The industrial sector is now clearly on the rise, thanks to strong gains in capital investment, a record level of exports, and a rebuilding of inventories. Industrial output has risen at nearly a 6 percent annual rate over the past ten months and manufacturers have added jobs in each of the past three months. Business sentiment at both large and small firms has rebounded, suggesting the outlook for real growth remains very good.

Policy changes in each of our countries are helping fuel strong global growth. Tax cuts, enhanced work incentives, pension reforms, and strengthened financial sectors — to name a few — are among the key steps taken to help bolster job creation and productivity growth. The strong world economy provides an important opportunity for Leaders to build on these successes through the Agenda for Growth Initiative. We discussed today our plans to implement further structural reforms, including ways to tackle rising healthcare costs, spur saving, reduce regulatory and legal burdens, and support entrepreneurship and innovation.

Tomorrow, Chancellor Gordon Brown and I look forward to hearing from entrepreneurs from both sides of the Atlantic about the critical role that enterprise and innovation plays in economic progress. We will explore the factors that help nurture entrepreneurship, existing impediments to enterprise, and how business and government can work together to address those impediments. These factors are critical to continued prosperity in the U.S. and world economies.

While positive news about the world economy and ambitious plans for solidifying growth dominated our meeting, the recent rise in oil prices was also discussed. Lower oil prices would contribute to our efforts to achieve strong and sustained growth. Higher prices act as a tax on both families and businesses. It is vital that oil producers provide adequate supplies to ensure that prices are at levels that foster strong global economic growth.

Our nation must also address the fundamental energy challenges that have built over time. Three years ago, President Bush submitted to Congress a national energy strategy that would address our long-term energy needs. It called for tax incentives for fuel-efficient hybrid vehicles, more exploration in places like Alaska, and greater use of ethanol, a reliable source of energy produced on our farms.

This national strategy would help make our country less dependent on foreign sources of energy. Yet, these measures have been repeatedly blocked by members of the Senate — and American consumers are paying the price. Three years is long enough. We urge the Congress to end the delays, and pass comprehensive energy legislation.

Helping generate strong growth in the world economy is critical for helping promote growth and reduce poverty in developing countries. But it is not enough. It is critical to do more to facilitate the role of the private sector in creating jobs and fueling growth in these economies. Other Ministers share this view.

Just as they have played a pivotal role in our own economies, entrepreneurs are a vital resource in developing countries. We know that only businesses — especially small enterprises — can create the jobs necessary to raise standards of living and lift people out of poverty. Ministers pressed for the multilateral development banks (MDBs) to do more to support the development of small business, for instance by enhancing their financial and technical assistance programs. We also urged them to work with bilateral donors and developing countries to develop action plans to address investment barriers and report on progress made. As we have increasingly stressed for all aspects of MDB operations, these plans should reflect clear, results-based objectives.

We emphasized the key role that remittance flows play in supporting households and their potential contribution to development. Together, we are committed to overcoming barriers to the transmission and receipt of these flows, to improving financial education and increasing the range of financial services available — so that remittance flows play as productive a role as possible in these economies.

Economic reform in the broader Middle East and North Africa was a key item on our agenda. In April, we met with regional Ministers and communicated our support for their reform efforts and their priorities for accelerating growth. We are committed to working with these countries to increase economic growth and job creation. Key steps will include improving the region’s investment climate, supporting private sector growth, and providing more effective technical assistance. We are supporting reform on economic and financial sector issues through an ongoing policy dialogue. We look forward to discussing these and other shared priorities when we meet with regional Ministers again this fall.

As you know, G7 Ministers have been conducting a Strategic Review of the IMF and World Bank. We agree that the goals of increasing economic stability and raising economic growth remain valid for these institutions. Nonetheless, as the world economy changes, the institutions themselves must reform if they are to be effective. Ministers expressed satisfaction with recent reforms, including clarifying the limits placed on exceptional lending, collective action clauses, increasing reliance on grants in the World Bank, and the introduction of measurable results management to the institutions.

The Ministers agreed that there is a need to build on these reforms, and the 60th anniversary of the institutions is an appropriate time to do so. These are just the preliminary outcomes of our Strategic Review, which has already received a very positive response beyond the G7 in emerging market and developing countries. The Review will continue after the Leaders meet, with full participation of the institutions and their shareholders. This is an important opportunity to identify new directions that will help ensure that the international financial institutions are equipped for modern markets and will be effective in promoting growth and stability well into the future.

Source: U.S. Treasury Department

See also Statement by G7 Finance Ministers, May 23, 2004