Global Economic Growth and International Development Initiatives

10:30 A.M. EDT

MS. NISBET: Good morning, everyone. I'd like to welcome Dr. Taylor, the Under Secretary for International Affairs at the Treasury Department. It's always a pleasure having Dr. Taylor here with us. And a nice format for a roundtable today.

If everyone could, please, after his remarks, during Q&A, please state your name and affiliation before asking your question. Thank you.

UNDER SECRETARY TAYLOR: Well, thanks very much for coming. I wanted to make a few opening remarks about a couple things. One, in early December there is plans for a meeting of the broader Middle East/North Africa group, along with the G-8, which the Moroccans have agreed to host. There is no firm date just yet, but the Moroccans have agreed to host the meeting, which would involve both the finance ministers of the G-8 in the broader Middle East/North Africa countries and the foreign affairs ministers of those same countries.

It really is the continuation, but at a more substantial level, of two meetings that took place, one here in New York at the time of the United Nations General Assembly meeting that Secretary Powell chaired, along with visits from Secretary Snow, and then another meeting one week later in Washington which Secretary Snow chaired which involved these countries.

And so this next meeting will be with both groups of ministers together and it therefore is the significant step on the way towards the Forum for the Future engagement which President Bush and the other leaders agreed to get established back at Sea Island earlier this year.

The meetings, plans for the meetings, are underway. That's very substantial. In the areas of economics, the idea is to listen to the reforms underway from countries in the region. They have an important economic reform agenda. Some countries are making good progress. Others are looking for ways to make progress.

The general goal of increased economic freedom is recognized to be a way to improve the well-being of people in the region, and so the G-8 is looking for ways to help by working with the countries. And, of course, broader Middle East/North Africa extends all the way from Morocco through the Middle East and includes Afghanistan, Pakistan and Turkey.

The meetings that we've had so far have been -- that I've gone to, have been remarkably candid and good and open. The one which the finance ministers had in Washington, of course, involved the Finance Minister of Afghanistan, Iraq, Turkey, Saudi Arabia, all the North African countries, Jordan, the UAE, et cetera. And again, a very candid discussion about the great values of improving economic freedom in the region. And by bringing together the finance ministers with the foreign affairs ministers, there will be ways to look at the synergy between the moves on the political and the security side and the economic side.

So it's a very favorable development. I think it shows how President Bush's leadership in this area is culminating in a very important dialogue where countries are participating who could not have participated three or four years ago at all. So it's very promising and I wanted to mention that.

The second thing I wanted to touch on was the fact that just recently the IMF and the government -- Interim Government in Iraq have agreed to an IMF program. Even more recently, the letter of intent and the description of that program has been posted on the IMF website, so this is an indication of the transparency that Iraq is working on as they work with the international financial community.

In this posting on the website for all to see, there's a reference to some important things that are going on in the discussions with Iraq. In particular, the letter of intent makes note of the fact that, and I'll quote, "The IMF staff's debt sustainability analysis makes it clear that deep debt reduction, ranging from 90 percent to 95 percent, is necessary to help restore debt sustainability." And that analysis of the IMF, again, reflects the fact that Iraq's debt is very high, and for Iraq to be sustainable it needs to be reduced by those levels that the IMF has concluded.

And that's important because now that the IMF agreement is finished, now that we have objective economic analysis that shows the size of that reduction that's needed, we can proceed with the international community to have the debt reduction, and following the leaders in the G-8 goal to finish by the end of this year, it looks very much on track.

And the third thing I wanted to mention in the opening is the discussion of the increase in the interest rate in China, which came on the wires earlier today here. It is a move that is part of a series of moves to reduce the inflationary pressures in China. China has been growing very rapidly. They've been trying to reduce the inflationary pressures and this is part of that series of actions.

It is also consistent with the move to a flexible exchange rate, which China has indicated it wants to do. When you view that interest rate change in conjunction with the measures to allow for more capital transfers, to allow for the development of futures markets in currencies, to allow for the development of foreign exchange markets in the banking system, it is very consistent with the move to a flexible exchange rate.

So we have every expectation that as a result of this move the economic expansion in China will continue at a sustainable pace, and that is, of course, good for the world economy. The world economy as a whole is growing now at a sustainable pace. There's no recession of any magnitude. There is no financial market crisis of any major amount in any part of the world. Inflation is contained in much of the world.

And so this kind of move is just the kind of thing you would like to see when inflationary pressures are showing signs, and it's a good move for that reason, as well as the fact that it's consistent with the move to a flexible exchange rate, which the United States and other countries in the G-7 have urged that China move towards.

I'm happy to answer any questions on these or other topics.

QUESTION: Gertrudez Chavez, Reuters. You said it's consistent with the China (inaudible) flexible (inaudible). Apparently, in the market, it's not the interpretation. They are saying it's (inaudible) evaluation because, you know, it shows kind of they're satisfied with the reforms, and therefore, will take a lot more time to do the evaluation. What do you think?

UNDER SECRETARY TAYLOR: Well, we'll see how things sort out. There's lots of people digesting the information right now. What is consistent now with the interest rate increase is the fact that in order to have interest rate changes like this in an economy like China, you need to have a flexible exchange rate. China is becoming more open to trade and to capital movements, and as they do that they have to recognize, and they are recognizing, that changes in interest rates have implications for exchange rates.

And so we're very much in contact with the Chinese economic leadership. They met, of course, with the G-7 central bank governors and finance ministers in Washington for the first time ever just about a month ago, and these kinds of things are discussed. Of course, not the specifics but the general idea of moving towards the flexible exchange rates and how that would enable China to have a monetary policy that's able to adjust in the way that they've adjusted today. Twenty-seven basis points is a change that many central banks -- of a magnitude that many central banks do on one move or another, and it is in the right direction. But to continue these kinds of actions would entail a more flexible exchange rate.

Yeah.

QUESTION: Lawrence Newman from Dow Jones. What would you like to see as the next step in this process towards a flexible exchange rate? Is there any kind of specifics that you would hope for?

UNDER SECRETARY TAYLOR: The other things that are going on and we're welcoming, in fact, working with China on, are developing the futures market, the derivative markets, the inter-bank market, the regulatory issues that have to be addressed in conjunction with the developments of those markets. They have also been opening the banking sector to foreign investors and that brings in the skills and talents that China can benefit from, from expertise in other parts of the world. And, of course, we very much welcome the technical cooperation that the United States and other countries are engaged in with China to take these steps.

So there are a number of steps and you have to deal with this as a whole, and this is part of that.

Yes.

QUESTION: Gabriel Plesea with Romania Libera, Bucharest. Could I please -- given the condition of the weak dollar as to the Euro, what is the value and what is your weight in these discussions on world, you know, scene? Do you have the same say when, you know, these decisions talking about, you know, reducing the debt and, you know, what is the U.S. position? Is it on strength, still on strength position or a strong position, or is it a weaker one?

UNDER SECRETARY TAYLOR: I think the United States position is always one that's meant to be constructive, one in which people look to the United States for leadership that's constructive, and in so many of the areas I deal with, I think the leadership is important and working.

You mentioned one issue, and that is debt. The United States has endeavored to deal with the debt problem in the poorest countries in the world. President Bush, in 2001, his first year, proposed that the World Bank give more grants rather than loans to the poorest countries, his grants initiative, and we worked with the international community and now the World Bank is providing more grants than loans and it's welcomed by the countries receiving the grants and others.

We are now working on another proposal that goes even further to reduce debt further from the Heavily Indebted Poor Countries and to give more grants to really deal with this debt problem. As President Bush said in 2001, he wanted to find ways to drop the debt as well as stop the debt, and that's where the grants come in, but now we are looking for ways to expand that idea. And it's just an example, I think, where our engagement with the rest of the community is important and we do have a leadership role on issues. The United States is the largest shareholder in the World Bank and we want to be constructive with reform.

So there's many examples. The Iraq debt is one which we are trying to be as supportive as we can of the Iraqis, get their economy moving again and help them a lot, and I think many other countries are as well.

If I could, just one more thing on this, please. I would like to also mention what I think to be a substantial improvement in our international economic policies over the last several years, and that's our policies with Japan. U.S.-Japan engagement has been constructive. It's been effective. In 2001, the President, in his engagements with Prime Minister Koizumi, said we would like to have a less antagonistic relationship in economics and other areas, and, in fact, that's happened, and as a result our engagement is candid.

We have a good dialogue and Japan's policy has changed in a beneficial way for Japan and the rest of the world. Japan, for the first time in over a decade, is growing in a sustained way. And I think, again, the United States has a role and I could give examples like that with Brazil and with Turkey and on and on. And we, I think, are looked at for advice when it's needed, when we can be helpful, and then to emphasize the ownership in countries, which is so important, and we're trying to do that, too.

Yeah.

QUESTION: Pedro DeCosta, Reuters. On the subject of Iraqi debt, how do you respond to critics who say it's somewhat hypocritical of the United States to ask for debt forgiveness in a country where, one, a lot of the debt isn't owed to the U.S. or the IMF, it's more owed to countries like Russia and Germany and France who weren't involved in the occupation; and also people from developing countries all over Latin America and Africa, which are still paying back the debts of old despots?

UNDER SECRETARY TAYLOR: There's no -- you know, we have a very substantial proposal for debt reduction in Heavily Indebted Poor Countries. I just referred to that. We would like to -- Secretary Snow mentioned in an important speech in Washington at the Bretton Woods Committee, we would like to find ways to reduce the debt up to 100 percent and increase grants up to 100 percent in the Heavily Indebted Poor Countries.

With respect to who holds the debt of Iraq, the United States has a share. It's not the major share. It's not -- certainly not larger than France, Germany and Russia put together. And there's other countries outside of the Paris Club who hold debt to Iraq in the Middle East, the Saudis and the Emirates and the Kuwaitis, for example. So there's debt all over the place.

And what we are stressing is that all that Iraq has gone through is important to take into account in considering this, and a thriving, prosperous Iraq people is their interest, of course, but in all of our interest, and we have a chance to do that right now. Their debt had gotten so high it was astronomical as a share of GDP, 600 percent of GDP. I mean, and so just to think if you reduce that by 90, 95 percent, as the IMF suggests is necessary, you still have debt that's higher as a fraction of GDP than the United States.

So it's in the world interest to do this, and I think ultimately people will realize that. And certainly it's not a -- who participated, how the alliance was put together with respect to the military side. It should have no bearing on this. Everybody, I believe, wants to have a prosperous, thriving, free Iraq.

QUESTION: Still on this subject --

QUESTION: Go ahead.

QUESTION: No, go ahead.

QUESTION: (Pedro DeCosta/Reuters) Yeah. On the subject of China, just what you said before, you're reading it as maybe a first step towards a reevaluation of the Chinese currency. Some of the analysts we spoke to this morning said there was actually a move away from that because it would actually, if they did just that and did nothing to the currency, would actually widen the trade gap, and, you know, the Chinese would be consuming less of -- fewer U.S. goods and we'd still be consuming just as many Chinese -- Chinese goods.

UNDER SECRETARY TAYLOR: What this move does is two things. One is it increases the chance that the expansion into China will continue. Okay? So that creates more exports from the United States to China, and that's beneficial to the United States. So it's -- rather than to have a boom and high inflation (inaudible), this is a better effort to continue the expansion for a long time.

What we have emphasized in the United States is the importance of a flexible exchange rate in China, so what I'm stressing here is that this kind of move, in terms of monetary policy, is the kind of thing that is consistent with a move to a flexible exchange rate.

So there will be lots of calculations and assessments of what this means, but again, what I would suggest is people remind themselves that the Chinese have indicated that they are intending to move to a flexible exchange rate, that they're doing a lot of other things as well as this. And with respect to market assessment of levels, I'll have to just leave that to the market.

QUESTION: My name is Konstantin Elovskiy. I work with Russian TASS News Agency. Mr. Taylor, what is the U.S. Government position of Russia's membership in the WTO, and if there's any predictions approximately when it's going to happen?

UNDER SECRETARY TAYLOR: Well, we're supportive of Russia joining the WTO, and the actions that Russia needs to take to do that we're also supportive of. We have in the area of financial markets been working with Russia to do the steps necessary on financial services opening to become members of the WTO. So the Treasury, for example, has been active in this area, as the United States Trade Representative has.

So it would be welcome and -- but there are steps that have to be taken. And therefore, to answer your question about timing, I can't state that. In some sense, it depends on how rapidly the Russians want to make the changes that are needed to get to the entry to the WTO.

And I think it's not just the United States that's supportive, but the Europeans, of course, have expressed support as well.

Yes.

QUESTION: When is the government going to start worrying about the fall of the dollar?

UNDER SECRETARY TAYLOR: What did you say?

QUESTION: When is the government going to start to worry about what's happening with the dollar? It's going down and it's (inaudible).

UNDER SECRETARY TAYLOR: Well, the dollar and the exchange rate are things that Secretary Snow has made comments on. I would refer you to his comments.

What I would say is that the exchange markets have been orderly. Volatility has actually been low. The G-7 has issued important statements on exchange rates, the most recent being the one on October 1st from Washington, and that was a renewal of a statement from earlier this year when they met in Florida and it states that flexible exchange rates are important for international adjustment, and in large countries in particular. So that strategy is a good strategy, and that's what Secretary Snow has articulated, along with the G-7.

QUESTION: Yeah, but in this context (inaudible) the dollar, do you see that at meaning that (inaudible) there will be no justification for the Japanese to come in and intervene in the market, given that it's (inaudible) essentially the (inaudible) the same way the banks (inaudible) using. So is there any justification there for the Japanese to intervene?

UNDER SECRETARY TAYLOR: I think I'm going to leave my comments on the currency to my answer to the previous question.

Yes.

QUESTION: Tuvia Tenenbaum of Neusehland TV, Germany. I wondered, in case Kerry wins the election --

UNDER SECRETARY TAYLOR: I'm sorry? Again?

QUESTION: In case Kerry wins the election --

UNDER SECRETARY TAYLOR: Say that again?

(Laughter.)

QUESTION: I'm just saying, just in case, what would be the major differences of the Treasury policies domestically and internationally?

UNDER SECRETARY TAYLOR: Oh, I think you'll have to ask --

QUESTION: (Inaudible.)

UNDER SECRETARY TAYLOR: You have to ask the Kerry campaign about their policies on international and domestic financial issues. I know that the policies that President Bush has led in the international area are working and, for example, right now, the world economy is doing very well and it's partly due to the United States' leadership economically.

Our economy is doing well. The tax cuts in '01, the tax cuts in '03, remarkably well timed, the first one making sure that the recession and slowdown that began before President Bush came in was short and mild. It turned out to be one of the shortest and mildest downturns in U.S. history. There weren't even two quarters in a row where growth was negative. Economists have said in the past that the rule of thumb for a recession is two quarters of negative growth. It didn't even get two quarters. And then you had the tax cut in '03 which bolstered the expansion, and in the last 13 months we've got 1.9 million new jobs. So that's all working and, of course, that's benefiting the world economy.

I can't tell you how often I go to meet with foreign economic leaders and they want to know the U.S. economy: Is it going strong? I say yes, and they say hallelujah. And if they hear it's not going so well, they worry about it. So that's leadership. And -- but in addition, there is the bilateral relationship with Japan that I mentioned and engaging with Brazil, engagement with Mexico, engagement with other countries, and those are good economic policies.

And then the economic reforms in the development area, the Millennium Challenge Account that President Bush proposed and which is up and running to provide assistance to countries that are following good, pro-growth policies.

The grants initiative at the World Bank, the reforms at the IMF to be clear about what the large-scale financial support would be, the collective action clause. I could go on and on. There are a lot of good things that have been done, and I think that's one of the reasons the world economy is humming as well as it is right now.

QUESTION: (Inaudible.)

(Laughter.)

QUESTION: (Pedro DeCosta, Reuters) You did mention Japan earlier and said that Japan is (inaudible). Are you worried that Japan is making suggestions that it's going to intervene in the market?

UNDER SECRETARY TAYLOR: What I know is that Japan has not intervened in the market since March 16th of this year, and that in the period before that, from January of '03 until March 16th, there was $316 billion of purchases of U.S.-denominated securities, and I know that all through this period, since the intervention has stopped, that the markets have been performing well, orderly, and there's been a good recovery in the United States and a beautiful recovery in Japan.

So in terms of what, you know, forecasting and about other countries' exchange rate policies, it's not my position to do that. You should ask them.

QUESTION: (Inaudible) Japan has made, you know, comments from the Minister of Finance, that, you know, (inaudible) if the pace of the fall continues, is that consistent with your policy?

UNDER SECRETARY TAYLOR: Well, I don't -- they haven't done anything that I know about, so I think you just have to ask them what they're going to do and when they're going to do it.

Yeah.

QUESTION: Do you discuss it with (inaudible)?

UNDER SECRETARY TAYLOR: We exchange -- we discuss with all of our partners in the international community issues of this type all the time. The global financial system is doing very well, but we can't be complacent. We have discussed the risks of high oil and we're, you know, very -- welcome the reduction in oil prices recently. We discuss the fact that emerging market spreads are way down, interest rates are way down, and what can we do to prevent them from rising again, and we discuss that.

So I would say we discuss these issues all the time, and but the specifics I can't comment on, specific discussions.

QUESTION: What about with China? Have you had any contact with them since this decision, and (inaudible)?

UNDER SECRETARY TAYLOR: I don't want to comment on specific discussions at all, yeah.

QUESTION: (Inaudible) government intervene to stop the decline of the dollar (inaudible)?

UNDER SECRETARY TAYLOR: I don't want to comment on that at all.

QUESTION: Can we move to the economy then?

UNDER SECRETARY TAYLOR: Pardon?

QUESTION: Can we move the economy (inaudible) tax system. A lot of economists, we talk to economists all day long, and a lot of them are really worried that the recovery is, in fact not as solid as some might say, and that -- and there, actually, because a lot of people who even supported the tax cuts are surprised that given the amount of stimulus that was in the system, how little there has been, how little -- how unable, firms have been able to step in and make up for, perhaps, a little decline in consumer spending with increased capital spending. To what do you attribute that?

UNDER SECRETARY TAYLOR: I don't know who the (inaudible) economists are you're referring to. I'm, in addition to being a public official and economists and talk to economists all the time, I can't find many economists who are concerned about the sustainability of this expansion. All the forecasts, the IMF forecasts, the consensus forecast -- I can't find forecasts that don't have this expansion continuing. I mean, you can maybe tell me whose forecast it is not continuing.

QUESTION: It's interesting because --

UNDER SECRETARY TAYLOR: Just let me finish. In terms of investment, in the second quarter, which was 3.3 percent growth, investment increased by 12.5 percent in the second quarter. So, you know, what number is -- you could refer to that's -- that are bleak in this regard? It's -- people can agree and disagree, but here it's -- this expansion is approaching its third year, and just the last 13 months alone, 1.9 million jobs were created in the expansion. Other numbers suggest it's even larger than that. Those are the numbers that are on the low side of the spectrum of estimates. You have interest rates that are still low. You have lowered marginal tax rates, which will be good for the expansion. And productivity growth is so strong and has all the elements of continuing, it surprises people every time the numbers come out that the American economy is generating such high productivity, which means higher wages, it means expanded growth for a long time with low inflation.

So, you know, trying to be quite objective and look at the numbers, there is -- this is the beginning of an expansion which seems to be continuing and has all the elements of being another record-breaking expansion for the U.S. The '80s for a while with the longest peacetime expansion in American history, the 90s then became the longest expansion in the American history, and this expansion could very well be another record-breaking expansion. It has all the elements of it.

QUESTION: (Pedo DeCosta, Reuters) The sense I get from economists is they might be -- they might have optimistic GDP forecasts, but they have a lot more caveats to these forecasts than they would in a normal recovery. One big caveat is the lack of jobs. I mean, you might admit that 96,000 jobs a month isn't exactly spectacular job creation, you know, on a monthly average. Oil prices are a huge concern. People talk about their forecasts and they always say "as long as oil prices come down below $50 a barrel."

It seems like -- and it also seems like we're still suffering from the (inaudible) double overhang where investors themselves aren't 100 percent sure where the economy is going and they're not 100 percent confident in equity markets, so there's a sense of uncertainty.

UNDER SECRETARY TAYLOR: I see less uncertainty now than many times in the past, certainly much less uncertainty now than in late 2000 when the markets were falling and the economy was beginning to sink, certainly much less uncertainty now than in 2001 after 9/11, certainly much less uncertainty after the scandals, corporate scandals. And again, now the IMF has an estimate for this year, this year's growth -- this is not a forecast for next year, this is this year's -- the growth is the highest it's been in 30 years.

So it's just hard for me to see why there should be more uncertainty, and I think the high oil prices are certainly a reason to not be complacent. But in all the estimates that are there, even at these levels you're talking about a reduction in growth rate that are fractions of a percentage point. And, you know, we meet, as I was answering the previous question, a lot with our counterparts in other countries and we go through the econometrics, if you like, the statistics and the models, and find, yes, the economies of the world are doing well and they're resilient to things like the oil price at this point. So we would like lower oil prices, but it's not the kind of thing that would thwart this expansion right now.

So again, you can go through the IMF report that just happened, you look through it. Do I have that table with me? Let me hand something out for you, just to sort of elaborate on this a little bit. But I hope that's helpful.

Yes.

QUESTION: Yes, this is (inaudible) Watanabi (ph) from Asahi Shimbun. This is just a general question. In what case do you think the government intervention to the currency market can be justified?

UNDER SECRETARY TAYLOR: I'm sorry, I don't want to talk about intervention in the markets at this point.

Yes.

QUESTION: I'm (inaudible) Argentina (inaudible) but another -- another favorite subject.

UNDER SECRETARY TAYLOR: Okay.

QUESTION: A couple of things. The (inaudible) ruling the other day (inaudible) court, there was, I know, the issue of whether the banks will get further compensation has been one that seems rattling around for ages and that the (inaudible) government said it won't give in. Do you see -- first question -- do you see the (inaudible) ruling as being a trigger or should -- as a necessary trigger for the government saying, all right, let's give the banks more compensation for the (inaudible)?

And the second question is, apparently there's some talk of a bit of a delay in Argentina as to them making a -- moving forward with this process, partly because the SEC has still not approved the presentation. How important is it that they get this wrapped up by the end of the year so that this doesn't then have to wait for the Argentine (inaudible) to be over and to drag on to March or April?

UNDER SECRETARY TAYLOR: On the second part of your question, I think it is important to wrap this up as soon as possible. There's a lot of steps that Argentina has had to go through. There's the SEC registration, there's the similar things in other countries. But it is taking a long time and we would like to see it wrapped up. The sooner it's wrapped up, the better for Argentina so they can grow on a more sustained basis; and the sooner it's wrapped up, the better for the international financial community because it's a -- it's still an issue that is unresolved and people in the financial community don't like those unresolved things.

With respect to the amparos and the bank compensation, I really couldn't say how this impacts on that. It's very complicated, as you know. The court has made this decision which is different from earlier decisions. The banks have been pleading for compensation for a long time and I read the analyses that suggest that this would make the compensation more justifiable, but I don't really -- it's really more of a question about the internal politics in Argentina, which I can't really give you a view about at this point.

QUESTION: A quick one to follow up?

UNDER SECRETARY TAYLOR: Yeah.

QUESTION: I know that in the September 2003 accord this was something that Argentina had actually planned to do at this time. So, now, beyond that (inaudible), but are you saying that the U.S. doesn't -- really doesn't have a view as to whether there should be further compensation for the banks?

UNDER SECRETARY TAYLOR: No, we've always been supportive of the IMF and their program completely. There's no space between the United States and the IMF on these issues. I just was trying to address the question of how this influences the decisions and how this court decision influences the political decisions in Argentina, and I can't comment on that. I just don't have a way to do that.

Yeah.

QUESTION: On China, have you sort of given China a real timetable or deadline to (inaudible) the currency?

UNDER SECRETARY TAYLOR: We have never worked with China on timelines and deadlines. Rather, we've worked on the steps that are needed to get to the end of the road, get to the result. And that's how China would like to work and we can understand that's the way to do it. You can't predict all the time when things are going to be able to be done.

Economic reform, which this is, is one that requires adjusting timetables and making changes when they have to be made, so we're comfortable with this approach because it is yielding concrete actions -- we've given a number of that already in the examples today -- and it's on the way, they are clearly all the things that are on the way to a flexible exchange rate, and China has indicated publicly and privately they want to move to a flexible exchange rate. So that seems like a good approach to us.

QUESTION: (Inaudible) first part of your opening remarks concerning these meetings between the G-8 and (inaudible). Just two quick questions. Do you have any just date or schedule for these meetings? And is the Iraqi delegation going to participate in this forum?

UNDER SECRETARY TAYLOR: The Iraqi delegation will certainly participate because they participated in the ones that have taken place thus far. The dates, you'll have to ask the Moroccans, who are hosting, about what their plans are for the dates, but they have a -- they are hosting it and they're working with them. I have been engaged with them, as my other colleagues have, in the United States. But the exact timing, you'll have to check with them.

Yes.

QUESTION: (Inaudible.) On China, are they moving fast enough toward a flexible foreign exchange regime? Timetables aside, are they moving fast enough?

UNDER SECRETARY TAYLOR: Well, we would like them to move as fast as possible, and fast enough is something we'll have to address after a period of time. I am very pleased that they've taken the steps they've taken, and in certain cases they could take the steps more quickly, and we've indicated when those are and what those are. But I think in general the sooner, the better, with respect to the flexible exchange rate, in the context of the reforms that China needs to put in place to make it happen.

So I hope that's helpful, but it's a difficult question.

Yes.

QUESTION: Are there considerations to let Libya join the Forum for the Future (inaudible)?

UNDER SECRETARY TAYLOR: To let them join what?

QUESTION: The Forum for the Future.

UNDER SECRETARY TAYLOR: Certainly, it's something that makes sense as Libya has made these important changes. I can't really address, you know, which specific meeting they'll come to. The Moroccans, of course, are chairing this particular meeting, so you probably want to ask the Moroccans. But we're very positive about the changes that Libya has been making and look forward to more economic engagement with Libya. But I think it's really a question for the Moroccans. You'll have to (inaudible), yeah. They're hosting the meeting.

QUESTION: Would you say that the Moroccans, beside who participate in these --

UNDER SECRETARY TAYLOR: Well, the broader Middle East countries are defined broadly, and with respect to who comes, there's a discussion, of course. The host government has a particular important role here, but it is very much a collaborative exercise. And what I've found thus far is the countries in the Middle East are emphasizing, rightly, that their views about economic reform and political reform here are the driving factors and we're working with them on those, and participation is one of those things, one of the many things that we're discussing.

But, you know, right now there is -- there has been agreement to have a wide participation, and ultimately I hope it's wider and wider over time.

QUESTION: (Inaudible) participating?

UNDER SECRETARY TAYLOR: Pakistan?

QUESTION: Israel.

UNDER SECRETARY TAYLOR: Israel has not been to the meetings that we've had thus far. Pakistan, of course -- I thought you said Pakistan, but you didn't.

Okay?

MODERATOR: I think we've got an additional question over there.

UNDER SECRETARY TAYLOR: Okay, sorry.

QUESTION: (Inaudible.) Is there efforts to increase interest rates (inaudible) for aid to China as China is considered a borderline country (inaudible)? Are there any of those efforts?

UNDER SECRETARY TAYLOR: No, the interest rate decision in China today is a macroeconomic decision that has really no bearing on U.S. aid policy, U.S. foreign assistance policy. It is really more related to global stability and growth in the world economy. So it's a good question, and the Millennium Challenge Account is a major thing for us right now, but it's just a separate issue.

Yes.

QUESTION: (Lawrence Neuman, Dow Jones) A couple of questions, one on Argentina. Any further views on what (inaudible) high participation in the debt restructuring means? I know (inaudible) from Argentina is on the point of concluding 64 percent (inaudible) there's been some parallels (inaudible). Do you consider a 64 percent number to be high participation or would that be way too low?

UNDER SECRETARY TAYLOR: You know, I think it's not a good idea for me to get in the numbers game on this, but you have had international restructurings before and you can look at what participation rates have been there. You need to think about Argentina's engagement with the international community going forward, and that, of course, requires a high participation. But in terms of the numbers, I really can't say at this point, and it very much depends on how the deal is restructured. And we've always emphasized the good faith in the negotiations, if you like, the transparency and the engagement, and that's what we're focusing on right now. But just to try to be as helpful as I can, we'd like the participation rate to be high but I can't give you specific numbers, by any means.

QUESTION: (Inaudible.)

UNDER SECRETARY TAYLOR: Well, that is -- a lot of people say one thing and a lot of people say other things about this. We are listening as much as we can to the investment community, to the creditors, but also to Argentina, and I think we hear different things from different people, which is probably understandable in these circumstances. But it's not finished yet, but in the end we're very much hopeful that there will be as much give and take as there possibly could be, and it's not finished yet.

QUESTION: Would you like to sit down again and actually -- (inaudible) has been kind of locked out of this for the last few months. Would you like to see more meetings going on at this stage, and how can that work given that we (inaudible)?

UNDER SECRETARY TAYLOR: I can't really say about particular meetings.

Yeah.

QUESTION: Can you tell us if the Department of the Treasury is like an independent? I know that the post is -- you know, is part of the cabinet, but is this an independent, like, you know, like --

UNDER SECRETARY TAYLOR: Like the Fed?

QUESTION: Is it independent? The decisions are, you know, from top to bottom, or is it an institution that would show to the President or to the (inaudible) --

UNDER SECRETARY TAYLOR: The President is the Chief Executive, the Chief Executive. The cabinet members, whether it's Treasury or State or Homeland Security or Defense, report to the President, and the President makes the decisions. He works in a way to set the broad policy parameters and then delegates, as a good executive does, the things that should be done at the cabinet agencies.

But, for example, now, as you know, President Bush has gone for substantial tax reform and has laid out a way to do that by bringing in experts, but ultimately, at some point, the details of that will be worked out by the cabinet agencies responsible.

And I can give you maybe one example of how this delegation works that goes back to the 2000 Presidential campaign, when President Bush wanted to put together the tax package and he laid out the broad parameters. He wanted marginal tax rates reduced across the board and have a substantial reduction for low-income people, and so he laid out the vision and then the experts provided different proposals and he chose the one that would work best. And so, for example, that one called for reducing the lowest bracket from 15 percent to 10 percent, and so that's what he chose. It called for raising the Child Tax Credit from $500 to $1,000 so families with two kids could get an extra $1,000 a year, so that's what he chose. So that's really how the Executive Branch works and I think it's working quite well.

MS. NISBET: Thank you.

UNDER SECRETARY TAYLOR: Okay, thank you. Okay, appreciate it.