U.S. foreign policy and the international financial institutions - Joan E. Spero, Under Sec. for Economic, Business, and Agricultural Affairs - Transcript

US Department of State Dispatch, April 29, 1996

Mr. Chairman and members of the subcommittee. I appreciate the opportunity to speak to you today about a subject of great importance to the State Department and to American leadership in the world. The International Financial Institutions - the World Bank, the International Monetary Fund - IMF, and the regional development banks - are long-standing pillars of American influence. We had a strong hand in creating them. We have a major stake in them. And we rely on them to support our foreign policy objectives - to foster stability, growth, sound policies, and open markets essential to the success of American firms overseas, and to promote the values that Americans cherish - open societies, transparent and accountable government institutions, responsible stewardship of the environment, the eradication of poverty, and the opportunity for every person to reach his or her fullest potential.

Our contributions to the International Financial Institutions are not just about money. They are about effective American leadership and influence - in these institutions and elsewhere. Under Secretary Shafer has laid out the Administration's plan for honoring our commitments to the International Financial Institutions. In particular, I want to strongly endorse the Administration's request for the International Development Association - IDA, the IMF's Enhanced Structural Adjustment Facility - ESAF, the African Development Bank - AfDB, and the Middle East Development Bank - MEDB. Our plan for contributing to these institutions sets responsible priorities for using our scarce resources. But more importantly, it is the minimum required to maintain our leadership - leadership which has a profound impact on our ability to achieve our foreign policy goals and to maintain our influence in other forums.

In both industrialized and developing countries, people take for granted our preeminent position in the IMF and World Bank. The two premier global financial institutions, located just blocks away from America's leaders, are virtually synonymous throughout the world with U.S. power and influence. But we cannot take our position for granted: If we do not lead, there are others who will step in. And we must be clear: What is at stake is not the existence or even the influence of these institutions; they enjoy virtually universal support from donors and from the countries which benefit from their resources and expertise. What is in danger is our voice and influence in these institutions and, thus, our ability to use them to serve our foreign policy goals.

The international Financial

institutions Are a Critical Element

Of U.S. Foreign Policy

The International Financial Institutions provide critical support to our foreign policy objectives. From my position in the State Department, I am struck that, time and time again, we call on the World Bank, the IMF, and regional development banks to assist us with crucial elements of our objectives. Beginning with the reconstruction of Europe after World War II and up to the present, if you look at American foreign policy priorities, you will find the International Financial Institutions. Today in Bosnia, Mexico, Haiti, Africa, Russia, and the New Independent States, these institutions are key instruments and partners in executing our foreign policy.

I would like to give you my viewpoint on the contributions of the International Financial Institutions in several areas where I have seen their work up close. the Inter-American Development Bank's - IDB - importance to our Summit of the Americas initiative; the role of the Asian Development Bank - ADB - in promoting free markets and our ambitious agenda in APEC; European Bank for Reconstruction and Development - EBRD - and World Bank support for the transition from communism to free markets; and the role of the World Bank - and the soon-to-be-created Middle East Bank - in supporting the Middle East peace process.

But, first, I would like to point out that our ability to advance U.S. values and interests in these countries and regions depends critically on demonstrating that the U.S. is committed to supporting IDA. Support for IDA has become the "litmus test" for our allies in judging whether the U.S. is committed to multilateral cooperation. Why has IDA support become so critical? It is critical because IDA is universally recognized as the most effective tool we have for delivering assistance to the poorest countries and their poorest citizens. This support is consistent with fundamental American values of helping the poor help themselves. Our allies also recognize that cutting IDA is penny-wise and pound-foolish. If we don't support effective development now, we will face enormously higher costs to deal with future humanitarian needs.

With strong U.S. leadership, the International Financial Institutions have proved remarkably adaptable and effective in responding to evolving development needs. History would judge us particularly harshly if we began walking away from the International Financial Institutions just at the time when, under the effective leadership of Jim Wolfensohn, Michel Camdessus, Jacques de Larosiere, and the other presidents, they have become indispensable partners in development around the globe. While these are not perfect institutions, the current leadership has gone a long way toward improving management, making their operations more efficient, developing new lending techniques, and maximizing the use of their resources.