REMARKS BY DR. KISSINGER
FUNDAÇÃO GETULIO VARGAS, RIO DE JANEIRO

November 12, 1992

Mr. Langoni and friends:

The only complaint I have is that Mr. Langoni has already told every joke I usually use when I begin some of these remarks.

Brazil is the first Latin American country that I visited. When I made the trip in 1962, as Mr. Langoni has pointed out, a President [Janio Quadros] had just resigned. So, things do not change all that much from visit to visit.

I have been here seven times and it is the country where I established my first contact with South America (a country of continental size and world views, the country in the Western Hemisphere with the most similarities with the United States). So it is a great privilege for me to have this opportunity to talk to you about an international situation that is changing extremely rapidly and in quite unexpected directions.

When I was in Brazil the first time, Brazil had just won the World Cup Football Championship. I had an opportunity to watch a carnival out of season, and I remember the uniquely Brazilian joy and spontaneity that grew out of this.

Now we are in a situation that is new internationally, that is, one that was equally unexpected by all the countries in the world. If in 1987, when I was here last, I had predicted what would happen between 1989 and today, nobody would have believed it possible. Nobody could have believed that in five years the satellite orbits of Eastern Europe would throw off Soviet domination. The idea that Communism as a political movement would collapse worldwide in a brief period of time was never advanced by anybody. Nor was the disintegration of a Soviet Empire, started by Peter the Great (and which expanded inexorably for three hundred years) on anybody's agenda that I know about. These are colossal changes to have occurred in the Communist world. In Europe, Germany has been unified, changing the whole balance of power. In the Western Hemisphere, rich new groupings have emerged -- MERCOSUR in the South, NAFTA in the North, and prospects for an open market from Alaska to the tip of South America can now at last be seriously talked about.

In this same period, a somewhat stagnating world economy has developed. Nations are poised between the fear of inflation and the fear of excessive deflation, with a very narrow passage within which to tread.

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I will first talk about the international situation as I see it, and then make some comments about the Western Hemisphere. Then, I have no doubt that my good friends Roberto Campos and Mario Simonsen will correct me, the way they usually do when we have our valuable dialogues.

Since the American Consul-General is sitting on the podium, I must, for the sake of his emotional stability, point out to you that I am speaking here as a private citizen. I do not necessarily reflect the view of the American Administration, though I have been a friend and supporter of President Bush.

In that connection, I would like to make one observation. I am being asked everywhere what President Clinton is going to do. Now, since I was a supporter of President Bush, President-elect Clinton has not yet telephoned me to tell me what he is going to do. But I believe that the fundamental foreign policy of the United States should be determined by the national interest of the United States, and not by the personality of its leaders. Of course, there will be differences in tactic produced by personalities, and also in priorities, but I would be astonished -- nor do I believe it will happen -- if the main lines of American foreign policy can change because they have been continued now through several administrations, and because, in a bipartisan way, I believe in a non-partisan American foreign policy. For my part, I will support President Clinton in his pursuit of the main directions of American foreign policy, and I think you will find that those Republicans who have studied foreign policy will take the same attitude. So, don't look at this as a convulsion but rather as a continuation of important trends, all the more so as I think that the Enterprise Initiative for the Americas taken by President Bush will turn out to be the most historically important development of his administration. President-elect Clinton has an unique opportunity to build on it, to bring it to a completion, and to go down in history as the man who changed the structure of Western Hemisphere relationships.

Now, in the face of all the changes that have occurred in international events, the United States faces a rather unique challenge. George Bernard Shaw once wrote: "There are two tragedies in life. One is to fail to fulfill your heart's desire; the second is to fulfill your heart's desire." The United States is now in the position where it and its allies in East-West relations have achieved everything that they set out to do. I do not know of any corresponding period in history in which you can compare what leaders said, for example in 1950, with what actually happened in 1990. And yes, you can certainly say that task is accomplished. On the other hand, it also confronts the United States with a foreign policy challenge that is unique in its history.

American foreign policy has gone through several periods: for about thirty years after independence, American leaders skillfully, even ruthlessly, navigated between the contending European forces to establish the maximum margin for maneuver for the sovreignty of the United States. They behaved much like newly independent nations have

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behaved in our own day; the familiar pattern of taking a neutral position among the various forces, and trying to draw the maximum benefit from all of them. When that margin of independence was achieved and it became clear that, unlike other nations, the United States could buy more territory than other nations could conquer (after all, it bought half of North America in the Louisiana Purchase, something no European nation has ever been able to do), the United States in effect withdrew from world politics. Using the protection of the British Navy and a fortunate geographic accident -- the buffer of two large oceans -- to form a pattern of international politics that kept it aloof from all the major international developments until the outbreak of World War I (except for its role in the settlement of the Russo-Japanese War), the United States undertook many initiatives in the Western Hemisphere and in terms of westward expansion. Yet in American history books these are not described as acts of foreign policy but as something called either "manifest destiny" or a number of other names. Anyway, they were not conducted as foreign policy initiatives.

In 1917, the United States entered World War I. President Wilson appeared in Europe -- a continent that had conducted foreign policy for hundreds of years -- to announce that everything that had gone before was nonsense and that the United States had a special approach to foreign policy that relied on international law, the self-determination of the people, and a rejection of the balance of power based on equilibrium. Wilson sought to create a world organization. Then America withdrew again.

In 1945, America again entered the world scene relying more or less on the principles of President Wilson. But it was a rather unique world, dominated by rivalry with the Soviet Union and full of ideological conflict. It was a world that made it possible to view every event, anywhere, as part of a Cold War struggle. In such a two-power world, somebody always won and somebody always lost. Therefore, the tendency of the United States was to conduct the Cold War by analogy with two seminal American experiences: experience number one was its war against Nazi Germany, in which the aggressor was totally defeated; experience number two was the New Deal, in which the United States closed its domestic gap between expectation and reality by increased state action in the economy. Political stability and dynamism were restored. The New Deal experience led to the Marshall Plan, while the World War II experience produced NATO and the architecture of Atlantic relations. These remained dominant forces in American foreign policy for much of the Cold War period, together with an alliance with Japan, modeled on the same principles.

Throughout this period, to be quite honest, for most American policy-makers, Latin America was an adjunct to their other principal concerns. I have to confess that, in my period in government, in the whole first term of President Nixon, we were so very preoccupied with Vietnam, the opening to China, East-West relations, and the Middle East crisis that we really could not manage any more than a holding action in the Western

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Hemisphere. And it was not until the second Nixon term that we turned to Latin American problems. I have often commented about how one's view of the world is affected by one's priorities. Thirty years ago I, for one, thought in terms of West/East terms. That is to say, London, Paris and Bonn were close in my mind and I thought nothing of taking a trip there for one day and coming back. Mexico City seemed far, even though geographically it was closer, and going there was an expedition. Rio was a big enterprise. I, at least, to my shame, did not think naturally about going South. Now I think differently. As I will explain, I think Western Hemisphere relations are the area of greatest possibility for creativity, both for the nations of North America and the nations of South America. Also, my personal priorities have changed importantly.

Looking at the actual changes that have occurred, let me move first from West to East and begin with Europe. Until the collapse of the Berlin Wall and the disintegration, first of the satellites orbit and then of the Soviet Union as an empire, there were these following realities: a large Soviet Army in the center of Europe; a divided Germany; the necessity for American military support if Europe was to remain free; a European Community created for many reasons, including the need to find a home for a rearming Germany (of which some nations were understandably afraid in the light of the experiences of the two World Wars), but also to provide a sense of identity on the basis of which Europeans could deal on more equal terms with the United States. Within that European Community — which Britain joined after it was formed — Britain maintained a special relationship with the United States that was not written down on paper, but evolved through consultative arrangements that enabled Britain to participate as an organic element in the American decision-making process. France and Germany also had a very special arrangement based on a tacit acceptance of German economic power balanced by French political predominance within the European Community. Over it all was a NATO organization within which the United States had dominant influence because it was the most powerful country in the nuclear field and because the Europeans did not think they could defend themselves without American participation. And so the integrated NATO command and the various political institutions associated with it became the forum in which transatlantic relations were conducted, and the only forum that institutionally still exists.

All these conditions have changed. The Soviet armies are a thousand miles further East. In fact there are technically no Soviet armies any more. There are also fifteen more or less independent states. Eastern Europe has become genuinely independent. It is really trying to enter the European Community and would like to join NATO, if that could be arranged in a way that does not provoke a Russian reaction. Germany is unified, and a unified Germany not only changes the physical balance, it also changes the psychological balance.

I said that Germany accepted French political leadership during the duration of the Cold War for many reasons, one of the most important of which was that, as a divided

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country, it had an interest in achieving greater legitimacy than the East German Soviet satellite. Therefore it accepted American leadership in NATO and French leadership in the European Community. With unification, and with the movement of Soviet troops to the East, these conditions have changed. Inevitably (though not next year but over the next ten years), the internal balance within the European Community is also going to alter, especially after the disappearance of the generation represented by Chancellor Kohl, which still remembers World War II and has emotional feelings about the connection with America and Western Europe because of its postwar experiences. But when they are replaced by the generation that grew up after the war, whose roots and experiences are different, there will have to be a change in the balance. I am not saying this as a criticism; I am saying it is a reality. In that context too, the organization and nature of NATO must alter. It is not possible for it to continue unchanged. In such an alliance, when the threat has moved east, the fear diminishes and the possibility of describing a common strategy erodes. Under all these conditions, NATO too must change, as will the European Community. Many of the debates about Maastricht reflect not just technical issues about currency, but really profound, greater, issues, in which Europe is in a curious way returning psychologically to some of the patterns of pre-World War I, as penalties of acting on a national basis are diminishing.

Now I have described all these changes simply to indicate that, when one talks about a New World Order, one is not talking about something that President Bush dreamed up one night and put on television, but of something that is inevitable. The German philosopher Kant once said, "at some point a new structure of the world will appear. The only difference is: will it appear by human insight? Or will it appear through a series of crises of such magnitude that there is no choice?" If we look at our national histories, that is in fact true within nations: whether statesmanship can operate without crises, or whether statesmanship has to wait until there is such a catastrophe when it will be driven by events. We all know this to be true from examples within each of our own nations.

Now if we head East, the situation becomes more complex. Take Eastern Europe, now a no man's land between the Common Market and the Soviet Union. It faces the problem that I shall describe in a minute about the Soviet Union -- that the Communists are disastrous in terms of economic management. But they have one great ability, which is to so affect the incentives and priorities of the population that the task of going from a state system to a market system becomes more and more difficult. Once you have operated in a system in which every commodity moves by allocation, you create a whole class of individuals among the managers, among the planners, and among the politicians, who have absolutely no feel for the market and whose skill consists of maneuvering among the various bureaucratic forces. They understand feudal advantages, but have no instinct for the requirements of the market. This is a problem in Eastern Europe and it explains why even in countries with a long tradition of entrepreneurship like Czechoslovakia (especially the Czech part), and Hungary, have moved so slowly at first,

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though I am quite optimistic about those countries. Poland too is showing signs of progress. Their future question is: what will be their relations to Europe and to the North Atlantic? I believe they should be moved into the Common Market as rapidly as possible for political reasons; otherwise, in face of the realities emerging in Eastern Europe and in the (former) Soviet Union, a dangerous no man's land may emerge.

Now let me speak about the Soviet Union. On the territory of the former Soviet Union, two great revolutions have taken place. Revolution one was against Russian imperial rule; revolution two was against Communist economic management. Nobody predicted either of these revolutions. The revolution against Communism has led to the emergence of some democratic forms. But it has been primarily driven by economic conditions. And everything I said about Eastern Europe is infinitely more true of the Soviet Union. In an economy that had no long tradition of entrepreneurship to begin with and in which every article of commerce moved by allocation for seventy years, a totally different pattern of relationship is bound to emerge. A manager in such a system is a politician, not a man driven by economic laws. The consumer has no influence on production. Economic decisions reflect agreements among various bureaucratic entities that then develop a vested interest against innovation because that would throw off their carefully negotiated compromises. Stagnation is inevitable. The only free market that exists is buying the favors of corrupt officials, and the result is what we have seen: stagnation, low levels of production, and economic clashes. And it has been very difficult, if not impossible, to move towards market economics because the people most skilled in market economics are the semi-criminal element of the black market, while the experts are all used to operating a different system. And so you have the phenomenon of eminent economic planners who behave like graduate students in some university, coming forward with paper plans that never have the slightest possibility of being realized. I once spoke to one of the most famous planners there. He had an idea about how to move to market economics, and I said to him: *Do you think this can really work?* And he said: *Of course not.* I said: *If that is true, may I ask you why you put forward that plan?* And he said: *Do you have a better idea?* Now I do not have to have any idea, but in this sort of never-never land, we are clearly at the beginning, not at the end, of a process of political change. I noticed that President Yeltsin said the other day in London that, in order to protect democracy, he may have to assume emergency powers, which is more or less what is always said in Russia when more or less authoritarian rule is established.

Now, there are many in the West who believe that this is the occasion for another Marshall Plan. I do not believe this is true. I believe it is an occasion for humanitarian aid, for emergency assistance to address specific shortages, and for cooperation on projects that can be clearly defined, such as energy. But until the internal structure changes and until a market is clearly established, outside help along the Marshall Plan type will not work. Also, it will run up against the second most important reality of the former Soviet Union, and that reality is the following: the Soviet Union has broken

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up into fifteen independent nations -- at least they are independent on paper. They all belong to the United Nations. They all have ambassadors to the United Nations. And they all conduct normal diplomatic relations. But anybody dealing with the leaders in Moscow recognizes that the process of giving up an empire is very painful, and that these leaders, or at least the educated classes in Moscow, have not really, inwardly, accepted that the empire has broken up. They look at this period as being similar to the time between 1917 and 1922, when independent states emerged in the Ukraine and elsewhere, but were brought back into Moscow's orbit within five years. Even now, the former Soviet (now Russian) army is deployed all over the former Soviet teritory. Every day we read about Russian troops intervening in Georgia, in Tadzhikistan, in Moldavia. Nobody ever looks at a map -- at least not in the United States -- to ask this question: since the troops intervening in Moldavia are separated from Russia by Ukraine, how do they get there? Well, they must be crossing Ukrainian territory. So you have armies marching around in independent countries and nobody officially notices it. Sooner or later this will produce a crisis of recentralization, and the international community will have to take a position on how independent these independent nations really are. I have mentioned this not because I have a brilliant solution, but only to indicate the complexity of the international environment, and why it is that when people talk about a New World Order, they are talking about something that really needs to be created, not something that already exists.

If we go further West, we find in China exactly the opposite of what we had in the former Soviet Union. The former Soviet Union started with political reform and now finds it very hard to move to economic reform; China started with economic reform and has been very slow on political reform. On the other hand, the Chinese growth rate is probably the fastest and most sustained in the world. Along the coast and especially in the South, China is developing rapidly and compares with the kind of economies we have already seen in Korea, in Taiwan, and in Southeast Asia. Now the question is: will that lead to political change? Of course, on this, opinions are always divided. I personally believe that you cannot run a modern market economy without some constitutionalism. There has to be a legal system that produces definable expectations and there needs to be a minimum scope of personal initiative which in the past, in other societies, has always been translated into some form of democratic system. Now, of course, China has governed itself for 3000 years without conspicuous advice from the United States and elsewhere, and it is possible that she can govern herself for another few decades by developing her own methods. But I believe, at a minimum, constitutionalism is inevitable, and some form of democracy very possible.

Japan, of course, has already become an economic superpower. It had the great advantage of being occupied by the United States, so that its bureaucracy could blame difficult decisions on the occupying power. In fact, I have had leading Japanese tell me that when they had a controversial decision to make, they liked to take it to American Headquarters to see whether we would order it, that way they did not have to fight with

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their own people to get it carried out. Now in the early stages of economic growth that is a great convenience to have. Today Japan is clearly an economic superpower. It will become politically more and more active. By the turn of the century, it will also be a significant military power. It is already doing more in the military field than is acknowledged. A country that devotes 1% of its constantly growing GNP to defense is increasing its military capability, especially if you keep in mind that the 1% for Japan is larger than the 4% Britain is spending on her defense. Secondly, many of its expenses are outside the military budget. Now, when this reality emerges, we will have in Asia a Japan, a China, and a Russia as major powers, and then countries like Korea, Indonesia, and India as very significant powers, all of them quite nationalistic. Therefore, in my view, two things will happen. One, an attempt by Japan to create some kind of Asian regional system. Secondly, a kind of diplomacy will emerge with many similarities to Nineteenth Century European diplomacy, when European countries of more or less equal strength tried to prevent any one of them from dominating the whole system. This is the reason that I, as an individual, am so opposed to a cooling of relations between the United States and China. China is an absolutely inevitable component of such a system. It is also symptomatic that I am strongly criticized in the United States for having such a view, because Americans do not like to think in terms of balance of power, which they regard as a peculiarly European, and especially British, aberration.

Then we have other areas like the Middle East with conflicts between fundamentalism and moderate regimes. But I do not want to go around the whole world, because I want to make two major points. Point one: this world is quite novel for the United States. The United States has never had to operate in an international system which it could neither dominate nor withdraw from. Until 1945, we could withdraw. After 1945 the United States was, in effect, dominant. Before 1945, Britain, and to a lesser extent France, took off our shoulders the burden of difficult choices. After 1945 a two-power world make it possible to make American-type choices. Now, in the world that I have described, there will be five, six, seven powers of more or less equal strength. It is often said that the United States is the only remaining superpower, but that is true only in a limited, military, sense, and it is mitigated by two factors. One is that we are reducing our military strength for economic and other reasons. The other is that very few of the problems I have described can be solved by purely military means. Therefore, the United States' relations to Europe, Japan, China and other regions will be more like those of an equal, and will require of America qualities she has never had to possess before. And what you can expect, and would have been able to expect no matter who had won the election, is an intense debate about what all this means. I do not agree that foreign policy has ended. The real foreign policy debate is only beginning.

Now, what does all of this mean in terms of our relationships? It is all occurring at a moment when the world economy is becoming truly global and while nationalism is increasing, which is quite contradictory. Market economics are avowed, but protectionism has a political base. One can speak about free trade in the abstract, but

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the reality is that, under free trade -- as in any economic competition -- somebody wins and somebody loses, which is what makes for competition. If the loser has access to a political process, he will try to ease his defeat, that is, he will try to protect himself. And so free trade cannot happen automatically. It must be organized. And right now, it has proved easier and certainly most convenient, to organize it on a regional basis.

In the world that I have described, the United States has had a tendency to present itself as disinterested, that is, as defending abstract principles and as different from all other nations engaged in "selfish" pursuits. And while foreigners can say that this is rather hypocritical, it is, unfortunately, not at all meant hypocritically but very seriously. I say "unfortunately" because there is a need for us now -- and for all other nations -- to define an enlightened self-interest in terms of both global and regional arrangements. As one looks around the world, the evolution of Europe can no longer be determined by the United States. And in all the debates about Maastricht one of the most interesting phenomena is that the United States is, to all practical purposes, not consulted. I do not say this as a criticism. I describe it as a reality. NATO should be preserved because it represents a common destiny, but NATO must also be redefined. This is an area of the Atlantic relationship with the possibility for some real creativity. The Common Market and the European Community will develop their own momenta and, in relation to other regional groupings, their tendency will be somewhat discriminatory because that is what makes it a common market. Now, this can be eased by success of the GATT negotiations; if trade negotiations succeed on a global basis, criteria will be established by which trade will have a forum and objective criteria to which to appeal.

In all the areas that I have described there are possibilites for creative roles for America. But the area in which it is possible to be most creative, to make the most difference, is in the Western Hemisphere. Both North and South America for the first time have a common interest in working together to make their contributions to developing their populations on a joint basis, and to create structures that will be effective if the world moves towards free trade, and that will be defensive if the world does not move towards free trade, as it should.

MERCOSUR in the South, and NAFTA in the North, are two such organizations. I happen to know NAFTA better than MERCOSUR. Two years ago I spoke to President Salinas after he was elected, but before he was inaugurated. And he said, "some Americans talk about free trade between Mexico and the United States. Please do not ever mention it publicly in Mexico. It creates absolutely the wrong impression. We can make individual agreements, but if we try to make a comprehensive agreement we start a huge political debate." Two years later he proposed a free trade amendment. I mention this to point out the scope of the revolution that is taking place. The attitudes of the United States, Mexico, and Canada to each other have been radically altered. That is one of the great events of our period. And if it succeeds, as I believe it will, it will create a market of three hundred and sixty million, with a gross national product of six trillion and a possibility of improving competitiveness, spreading technology, and

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becoming a major player in international economic discussions. But it is not something
at which one should stop. Very soon, negotiations will start with Chile to join NAFTA.
Venezuela and Colombia already have free trade agreements with Mexico, and a creative,
imaginative, dynamic North American foreign policy could bring about a rapid expansion
of these structures. Leaving aside the issue of MERCOSUR, Argentina and Uruguay ought
to be able to participate. Now I am leaving out Brazil not in order to be discriminatory,
but because Brazil is a very special country. Brazil is the only country in Latin America
that did not have to go through a struggle for independence, but could declare itself
independent. It is the Latin American country that has been most open to the outside
world for a great part of its history. It is of continental proportions and has had fewer
complexes than some of the others. It has been ingenious in developing domestic crises,
but has also been skillful in resolving them. Of course, all of my Brazilian acquaintances
are very conscious of their immediate difficulties. But I am conscious of the difference
in the Brazil that I first visited in 1962, when the capital was in Rio, and the Brazil of
today.

So, Brazil and the United States have a need for a very special dialogue on how
to shape this evolution in which, of course, there are some competitive elements. But
if I am right about this special role that can be developed in the Western Hemisphere,
Brazil and the United States can and should cooperate closely.

How MERCOSUR develops is a question for the countries of that region to resolve.
Is it possible to belong to both MERCOSUR and NAFTA? Is it possible in time to merge
MERCOSUR and NAFTA? Is it possible for individual nations to belong to both
organizations? All of these are important issues which we must address. And what we
must keep in mind above all is that it defines areas of tremendous opportunities. For
many nations, the economic problems of the present cannot be dealt with on a purely
national basis. There has to be the largest possible market and the possibility of close
cooperation. The institutions that are being built can be an important step in that
direction.

I would like to conclude by stressing that when people talk about a New World
Order, they create the impression that it is already here. It is not here. At any given
moment in history, there is always a world order. It is either chaos or true order, and
in looking at the sweep of human history, you can describe many world orders. But
there has never been a world order encompassing the whole globe. There has never been
a world economy in which events in one part of the world automatically affect events in
another part. There has never been a diplomacy that could be viewed instantaneously
on television. There have never been such problems as the environment, which can only
be dealt with on a global basis. In this Hemisphere there has never been a situation in
which one could ever really talk of North and South America coming together as genuine
equals. In 1974, as Secretary of State at a foreign ministers' conference in Tlatelolco,
I proposed a Western Hemisphere Economic Community. The very foreign ministers who

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had been complaining about neglect were now terrified of domination. This may have
been a natural reaction to the conditions of the time. But now the perspectives are
different. The opportunity is enormous.

I have a Chinese acquaintance who claims there is the following Chinese proverb
(and I say "claims" because I suspect the Chinese like to invent proverbs to intimidate
Westerners!) The proverb goes like this: "When there is turmoil under the heavens, little
problems are dealt with as if they were big problems, and big problems are not dealt
with at all. When there is order under the heavens, big problems are reduced to little
problems, and little problems should not obsess us." I believe that in the Western
Hemisphere we now have an opportunity to reduce our big problems to littler problems,
to create regional systems that will encompass in time the whole Western Hemisphere,
all of which would bring enormous changes. Every statesman at the end of the day has
to justify himself by answering this question: "Did my actions really make a difference,
or was I just administering day-to-day events?" When we talk about a New World Order
and a Western Hemisphere Community now, we see that our statesmen can really make
a difference, can really create something new, something to the benefit of this
Hemisphere and of all of mankind. And that will be, as my Chinese friend says, a great
contribution to order under the heavens. Thank you very much.

SPEECH DELIVERED BY MR. HENRY KISSINGER AT THE SHERATON HOTEL

RIO DE JANEIRO

FUNDAÇÃO GETÚLIO VARGAS

11/12/92

Mr. Langoni and friends,

The only complaint I have is that Mr. Langoni has already told every joke that I usually do, when I begin some of these remarks. Brazil is the first country of Latin America that I visited. But in 1962, as Mr. Langoni pointed out, a President had just resigned. So, things do not change all that much from visit to visit.

I have been here seven times and it is the country where I established my first contact with South America, country of continental size, world views, the country in the Western Hemisphere with most similarities with the United States, and so it is a great privilege for me to have this opportunity to talk to you about an international situation that is changing extremely rapidly and in quite unexpected directions.

When I was in Brazil the first time, Brazil had just won - in fact while I was here it won the Football Championship, had won the World Cup. So I had an opportunity to watch a carnival out of season, and I remember the joy uniquely Brazilian and a spontaneous.. the spontaneity that grew out of this.

Now we are in a new situation, internationally. And it is one that is unexpected for all the countries in the world. If in 1987, when I was here last, I had predicted what would happen between 1989 and today, nobody would have believed it possible. Nobody believed, could have believed that in five years the satellite orbits of Eastern Europe would throw off Soviet domination. The idea that communism as a political movement would collapse worldwide in a brief period of time was never advanced by anybody. And finally the disintegration of the Soviet Empire, started by Peter the Great, expanding for three hundred years inexorably, was on nobody's agenda that I know anything about. Those are colossal changes that have occurred in the communist world. In Europe, Germany has been unified, changing the whole balance of power. In the Western Hemisphere, rich new groupings have emerged, MERCOSUR in the

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South, NAFTA in the North, and the prospects of an open market from Alaska to the tip of South America can at least be seriously talked about.

In this period too, there has grown up, there has developed a somewhat stagnating world economy with nations poised between the fear of inflation and the fear of excessive deflation and with a very narrow passage within which to walk.

I will first talk about the international situation as I see it, and then I will make some comments about the Western Hemisphere and then I have no doubt that my good friends Roberto Campos and Mr. Simonsen will correct me the way they usually do when we have our valuable dialogue.

Since the American Consul-General is sitting on the podium, I must, for the sake of his emotional stability, point out to you that I speak here as a private citizen. I do not necessarily reflect the point of view of the American Administration, though I was a friend and supporter of President Bush, but of course we don't have Administration right now, So.. he doesn't have to..
Well we have one but it is going out and a new one is coming in. In that connection, I would like to make one observation. I have been asked everywhere what President Clinton is going to do.
Now, since I was a supporter of President Bush, President Clinton has not yet telephoned me to tell me what he is going to do. But I believe that the fundamental foreign policy of the United States is determined by the national interest of the United States and not by the personality of the leaders. Of course there will be differences produced by personalities in tactics, in some priorities, but I would be astonished - and I do not believe it will happen - I cannot believe that the mainlines of American foreign policy can change because they have been continued now for several administrations, and because in a bipartisan way, I believe in a non-partisan American foreign policy. For my part I will support President Clinton in his pursuit of the main directions of American foreign policy, and I think you will find that those republicans who have studied foreign policy will take the same attitude. So, don't look at this as a convulsion but rather as a continuation of important trends, all the more so as I think that the Initiative for the Americas taken by President Bush will turn out to be in history the most important development of his administration, and President Clinton has an unique opportunity to build on it, to bring it to a completion and to go down in history as the man who changed the structure of Western Hemisphere relationship.

Now, in the face of the changes that have occurred in international events, the United States faces a unique challenge. George Bernard Shaw once wrote: "There are two tragedies in life. One is to fail to fulfill your heart's desire and the second one is to fulfill your heart's desire". The

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United States is now in the position where it and its allies in East-West relations have achieved, I would say, everything that they set out to do. I do not know any corresponding period in history, in which you can compare what leaders said, for example in 1950, with what happened in 1990. And you can say that task is accomplished. On the other hand, it also confronts the United States with a foreign policy challenge that is unique in our history. American foreign policy has been dominated by the following periods. After independence, for about thirty years, the United States leaders skillfully, I would say ruthlessly, maneuvered between the contending European forces, to establish the maximum margin for maneuver and for sovereignty for the United States. They behaved like newly independent nations have behaved in our days, in a familiar pattern, taking a position of neutrality between the various forces, and trying to achieve the maximum benefit from all of them. When that margin of independence was achieved, when it became clear that unlike other nations, the United States could buy more territory than others could conquer, because we bought half of North America in the Louisiana purchase, something no European Nation had ever been able to do. When that became clear, the United States in effect withdrew from world politics. Using the protection of the British Navy, it declared a fortunate geographic accident the existence of two large oceans as its pattern of international politics and stood aloof from all the major international developments, until the outbreak of World War I, except for the settlement of the Russo-Japanese War. It undertook many initiatives in the Western Hemisphere and in the westward expansion. But in American history books these are not described as foreign policy. These are described as manifest destiny or a number of other names, but they were not conducted as foreign policy initiatives. In 1917, the United States entered World War I. And President Wilson appeared in Europe - a continent that had conducted foreign policy for hundreds of years - and announced that everything that had gone before was nonsense. That the United States had a special approach to foreign policy, relying on international law, self-determination of people, rejecting the balance of power not based on equilibrium and creating a world organization. Then America withdrew again. And in 1945 it again entered the world scene with more or less the principles of President Wilson, in a very particular world. It was a world dominated by rivalry with the Soviet Union. It was a world of ideological conflict. It made it possible to view every event, anywhere, as part of a cold world struggle. In a two power world, somebody wins and somebody loses. And therefore, the tendency of the United States was to conduct the cold war by analogy to two great American experiences. Experience one was the war against Nazi Germany, in which an aggressor was totally defeated. Experience two was the new deal, in which within the United States a gap between expectation and reality was closed by state, increased state action in the economy, and political stability and dynamism was restored. The new deal experience produced the Marshall Plan. The World War II experience produced NATO and the architecture of Atlantic relations.

And those were the dominant forces in American foreign policy for much of the cold war period. There was also an alliance with Japan, modelled on the same principles. Throughout this period, to be quite honest, for most of American policy makers, Latin America was an adjunct to the other principle concerns. I have to confess, in my period in government, in the whole first term of President Nixon, we were so preoccupied with Vietnam, opening to China, East West relations, Middle East crisis, that we really could do not much more than a holding action in the Western Hemisphere. And it was not until the second term that we turned to Latin American problems. I have often commented about how one's view of the world is affected by one's priorities. Thirty years ago, I for one, thought in East/West terms. That is to say, London and Paris and Bonn were close in my mind and I thought nothing of taking a trip there for one day and coming back. Mexico City was far, even though geographically closer, and going there was an expedition. Rio was a big enterprise. I at least, to my shame, did not think naturally about going South. Now I think differently. As I will explain, I think Western Hemisphere relations are the area for the greatest possibilities of creativity, both for the nations of North America, and the nations of South America. And so, also my personal priorities have changed importantly.

When one looks at the actual changes that have occurred, let me move first from West to East and begin with Europe. Until the collapse of the Berlin Wall and the disintegration first of the satellites orbit and then of the Soviet Union as an Empire, there were the following realities. A large Soviet Army in the center of Europe; a divided Germany; a necessity for American military support if Europe was to remain free; an European Community created for many reasons, including to find a home for a rearming Germany, of which some nations were understandably afraid in the light of the experiences of the two world wars. And also to provide a sense of identity in which Europeans could deal on more equal terms with the United States. Within that European Community - which Britain joined after it was formed - within that European Community, Britain had a special relationship with the United States. Not written down on paper, but evolving through consultative arrangements that enabled Britain to participate in the American decision-making process for practical purposes as an organic element. France and Germany had a very special arrangement. It was based on a tacit acceptance of German economic power balanced by French political predominance within the European Community. That was and over it all, was a NATO organization within which the United States had a dominant influence because we were the most powerful country in the nuclear field, because the Europeans did not think they could defend themselves without American participation. And so the integrated command of NATO and the various political institutions associated with it, became the forum in which transatlantic relations were conducted, and the only forum that

institutionally still exists. All these conditions have changed. The Soviet armies are a thousand
miles further East. In fact there are no Soviet armies technically any more. There are fifteen
more or less independent states. Eastern Europe has become genuinely independent and is really
trying to enter the European Community and would like to join NATO, if that could be arranged
in a way that does not provoke a Russian reaction. And Germany is unified. And a unified
Germany not only changes the physical balance, it also changes the psychological balance.

I said that Germany accepted French political leadership during all of the Cold War period for
many reasons, one of the most important of which was that as a divided country it had an
interest in being considered more legitimate than the East German satellite. And therefore it
accepted American leadership in NATO and French leadership in the European Community.
With unification, and with the movement of Soviet troops to the East, these conditions have
changed. And inevitably, not next year but over the next ten years, the internal balance within
the European Community is also going to alter, especially after the disappearance of the
generation represented by Chancellor Kohl who still remembers World War II, who has an
emotional feeling about the connection with America and Western Europe because of their
postwar experiences. But when they are replaced by the generation that grew up after the war,
whose roots and experiences are different, there must be a change in the balance. I am not
saying this is criticism. I am saying this is a reality. In that context too, the organization and
nature of NATO must alter. It is not possible to remain, to continue unchanged. An alliance,
when the threat has moved east, the fear has diminished, the possibility of describing a common
strategy erodes. Under all of these conditions, NATO must change, and the European
Community will alter and many of the debates about Maastricht reflect not just technical issues
about currency, but profound issues, in which Europe in a strange way is returning
psychologically to some of the patterns of prior World War I, because the penalties of acting on
a national basis are diminishing.

Now I have described these changes simply to indicate that when one talks about a new world
order, one is not talking about something that President Bush dreamed up one night and put on
television. It is inevitable. The German philosopher Kant once said "some point a new structure
of the world will appear. The only difference is: will it appear by human insight? Or will it appear
through a series of crisis of such magnitude that there is no choice". If we look at our national
histories, that is in fact true within nations, where the statesmanship can act before there is a
crisis or whether statesmanship has to wait until there is such a catastrophe that it will be driven
by events. And we all know examples within all of our nations that that is true.

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Now if we go East, the situation becomes more complex. We take Eastern Europe, it is now a no man's land between the Common Market and the Soviet Union. It faces the problem that shall describe in a second about the Soviet Union, that the Communists are a disaster in economic management. But they have one great ability which is so to affect the incentives and priorities of the population, that the task of going from a statist system to a market system becomes more and more difficult. Once you have operated in a system in which every commodity moves by allocation, you create a whole class of individuals among the managers, among the planners and among the politicians, who have absolutely no feel for the market, whose skill consists of maneuvering between various bureaucratic forces, but who understand feudalistic advantages, but who have no instinct for the requirements of the market. This is a problem in Eastern Europe and it explains why even in countries with a long tradition of entrepreneurship like Czechoslovakia, specially the Czech part, and Hungary, man has moved slowly at first, though I am quite optimistic about those countries, and Poland too is showing signs of progress. The future question is: what is its relation to Europe and the North Atlantic? I believe they are to be moved into the common market as rapidly as possible for political reasons because otherwise, in the face of the realities emerging in Eastern Europe, in the Soviet Union, a dangerous no man's land may emerge.

Now let me speak about the Soviet Union. On the territory of the former Soviet Union, two great revolutions have taken place. Revolution one against communist economic management. Revolution two against Russian imperial rule. Nobody predicted either of these revolutions. Revolution one, against communism, has led to the emergence of some democratic forms. But it has been primarily driven by economic conditions. And everything I said about Eastern Europe is infinitely more true for the Soviet Union. In an economy that had no long tradition of entrepreneurship to begin with. In an economy in which every article of commerce moved by allocation. For seventy years, a totally different pattern of relationship is bound to emerge. A manager in such a system is a politician, not a man driven by economic laws. The consumer has no influence on production. Economic decisions reflect agreements among various bureaucratic entities that then developed a vested interest against innovation because that will throw off their carefully negotiated compromises. Stagnation is inevitable. The only free market that exists is buying the favors of corrupt officials, and the result is what we have seen: stagnation, low levels of production and economic clashes. And it has been very difficult, if not impossible, to move towards market economics because the people most skilled in market economics are the semicriminal element of the black market, while the experts are all used to operate a different system. And so you have the phenomena of eminent economic planners who behave like graduate students in some university, coming forward with paper plans that never have the

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slightest possibility of being realized. I once spoke to one of the most famous planners there, who had an idea of how to move to market economics and I said to him: Do you think this can really work? And he said: of course not. I said: if that is true may I ask you why you put forward that plan? And he said: Do you have a better idea? I don't have to have any idea, but in this never never land therefore we are at the beginning, not at the end of a process of political changed. And I noticed that President Yeltsin said yesterday.. said the other day in London, that in order to protect democracy, he may have to assume emergency powers, which is more or less what is always said in Russia, when more or less authoritarian rule is established, which has always been the case in Russia.

Now, there are many in the West who believe that this is an occasion for another Marshall Plan. I do not believe this is true. I believe it is an occasion for humanitarian aid, for emergency assistance in specific shortages and cooperation on projects like energy that can be clearly defined. But until the internal structure of persistent changes and until a market is clearly established, outside help on the Marshall Plan type will not work. And secondly, will run up against the second most important reality of the former Soviet Union. And that reality is the following: The Soviet Union has broken up into fifteen independent nations. At least they are independent on paper. They are all in the United Nations. They all have ambassadors at the United Nations. And they all conduct normal diplomatic relations. But anybody dealing with the leaders in Moscow will recognize that the process of giving up an Empire is very painful. And that the leaders in Moscow, or the educated classes in Moscow have not really, inwardly, accepted that the empire has broken up. They look at this as similar to the period between 1917 and 1922, when independent states emerged in Ukraine and elsewhere, and within five years were brought back into Moscow's orbit. Even now, the former Soviet, now Russian army is deployed all over the former Soviet territory. And everyday we read about Russian troops intervening in Georgia, in the Tadzhikistan, in Moldavia, and nobody ever looks at a map - at least not in the United States - to ask this question: the troops that are intervening in Moldavia are separated from Russia by Ukraine. So, how do they get there? Well they have to be crossing Ukrainian territory. You have armies marching around in independent countries and nobody notices it officially. Sooner or later this will produce a crisis of recentralization. Sooner or later the international community will have to take a position on how independent these independent nations are. And I have mentioned this not because I have a brilliant solution. I mentioned it only to indicate the complexity of the international environment. And why and when people talk about a new world order, they are talking about something that really need to be created. Not that something that already exists.

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If we go further West we have in China exactly the opposite as in the former Soviet Union. The former Soviet Union started with political reform and now finds it very hard to move to its economic reform. China started with economic reform and has been very slow on political reform. On the other hand the Chinese growth rate is probably the fastest and most sustained now in the world. China, along the coast, and especially in the South is developing rapidly out of, into some comparison with the kind of economies we have already seen in Korea, in Taiwan and Southeast Asia. Now the question is: will that lead to political changes? And of course on this, opinions are always divided. I personally believe that you cannot run a modern market economy without some constitutionalism. There has to be a legal system that produces definable expectations and there needs to be a minimum scope of personal initiative which in the past, in other societies has always been translated into some form of democratic system. Now, of course, China has governed itself for 3.000 years without conspicuous advice from the United States and elsewhere, and it is possible that they can govern themselves for another few decades by developing their own methods. But I believe, at a minimum, constitutionalism is inevitable, and some form of democracy very possible.

Now Japan has already become an economic superpower. It had the great advantage of being occupied by the United States, so that its bureaucracy could blame difficult decisions on the occupying power. And in fact I have had leading Japanese tell me that when they had a controversial decision to make, they liked to take it to American Headquarters to see whether we would order, so that they had not to fight with their own people and getting it carried out. And in the early stages of economic growth that is a very conveniency to have. Now Japan is clearly an economic superpower. It will become politically more and more active. And I believe that by the turn of the century it will also be a significant military power. It is already doing more in the military field than is acknowledged. A country that devotes 1% of its constantly growing GNP to defense, is increasing its military capability, especially if you keep in mind that the one percent for Japan is larger than the four percent Britain is spending on its defense. And secondly, many of its expenses are outside the military budget. Now, when this reality emerges, there will be in Asia, Japan, China and Russia as major powers, and countries like Korea, Indonesia, India as very significant countries. All of them quite nationalistic. And therefore, in my view, two things will happen. One, an attempt by Japan to create some kind of Asian regional system. And secondly a kind of diplomacy with many similarities to Nineteen Century European diplomacy, in which European countries, of more or less equal strength, tried to prevent any one of them from dominating the whole system. This is the reason why I, as an individual, am so opposed to a cooling of relations between the United States and China. Because China is an absolutely inevitable component of such a system and it is also symptomatic that I am strongly criticized in

the United States for such a view, because Americans do not like to think in terms of balance of power, which they think is a peculiarly European and especially British aberration. And then we have other areas like the Middle East which conflicts between fundamentalism and moderate regimes.

But I do not want to go around the whole world, because I want to make two major points. Point one. This world is quite novel for the United States. The United States has never had to operate in an international system from which it could neither withdraw, nor could it dominate it. Until 1945 we could withdraw. After 1945 the United States was, in effect, dominant. Before 1945, Britain, and to a less extent France, took off of our shoulders the burden of difficult choices. After 1945 a two power world made it possible to make American choices. Now, in the world that I have described, there will be five, six, seven powers of more or less equal strength. It is always said that the United States is the only remaining superpower. That is true only in the limited military sense. And it is mitigated by two factors. One that we are reducing our military strength for economic and other reasons. And secondly very few of the problems that I have described can be solved by military means. And therefore the United States relation to Europe, Japan, China and other parts will be more of an equal, and will therefore require of us qualities which America has never had to possess before. And what you can expect and would have been able to expect, no matter who had won the elections, is an intense debate of what all of this means. I do not agree that foreign policy has ended. The real foreign policy debate is only beginning.

Now, what does all of this mean for our relationships. All of this is occurring at a moment when the world economy is global, nationalism is increasing, which is quite contradictory. Market economics are avowed but protectionism has a political base. One can speak about free trade in the abstract, but reality is that under free trade, under any economic competition, somebody wins and somebody loses which is what makes competition. And if the loser has access to a political process, he will try to ease his defeat, that is he will try to protect himself. And so all of these so free trade cannot happen automatically. It must be organized. And right now, it has proved easier, but anyway most convenient to organize it on a regional basis. In the world that I have described - and I am speaking now, of the United States - first, the United States has a tendency to its public, to present itself as disinterested, as defending abstract principles, as being different from all other nations, that are selfish, only the United States is not. And while foreigners can say that it is hypocritical, it is unfortunately not hypocritical. It is meant seriously. And yet there is a need for us and for all other nations to define an enlightened self interest in global arrangements or in regional arrangements. As one looks around the world, the evolution

of Europe can no longer be determined by the United States. And in all the debates about Maastricht one of the most interesting phenomenon is that the United States is, to all practical purposes, not consulted. I don't say this is a criticism. I describe it as a reality. NATO should be preserved, because there is a common destiny. But NATO must be redefined. And this is an area of the Atlantic relationship for the possibility of some creativity. But the Common Market and the European Community will develop its own momentum and in relation to other regional groupings its tendency will be somewhat discriminatory. Because that is what makes it a common market. Now, this can be eased by the success of the GATT's negotiations. And if the trade negotiations on a global basis succeed, taking an established criteria by which trade will have a forum and criteria to which to appeal.

In all the areas that I have described there are possibilities of emergency roles for America. But the area that is possible, in which it is possible to be most creative, to make most difference, is the Western Hemisphere. Both North and South America for the first time have a common interest in working together on making their contributions to developing of their populations on a joint basis, and to create structures that will be effective if the world moves towards free trade, and that will be defensive if the world does not move towards free trade as it should.

MERCOSUR in the South, and NAFTA in the North, are two such organizations. Now I know NAFTA better than MERCOSUR. Two years ago I spoke to President Salinas after he was elected but before he was inaugurated. And he said: some Americans talk about free trade between Mexico and the United States. Please do not ever mention it publicly in Mexico. It creates absolutely the wrong impression. We can make individual agreements, but if we try to make a comprehensive agreement we start a huge political debate. Two years later he proposed a free trade agreement. And I mention this to point out the scope of the revolution that is taking place. The attitudes of the United States and Mexico to each other, and of Canada have radically, historically altered. That is one of the great events of our period. And if it succeeds, as I believe it will, it will create a market of three hundred and sixty million, with a gross national product of six trillion and a possibility of improving competitiveness, spreading technology and being a major player in international economic discussions. But it is not something at which one should start. Very soon, negotiations will start with Chile to join NAFTA. Venezuela and Colombia already have free trade agreements with Mexico, and a creative, imaginative, dynamic North American foreign policy could bring about a rapid expansion of these structures. And leaving aside the issue of MERCOSUR, Argentina and Uruguay ought to be able to participate.

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[c]

Now I'm leaving out Brazil, not in order to be discriminatory, but because Brazil is a very special
country. Brazil is the only country in Latin America that did not have to go through a struggle of
independence but could declare itself independent. It is the country of Latin America most
opened to the outside world for a great part of its history. It has continental size, it has had fewer
complexes than some of the others. It has been ingenious in developing domestic crisis, but it
has also been skillful in resolving them and of course, all of my Brazilian acquaintances are very
conscious of their immediate difficulties. But I'm conscious of the difference in the Brazil that I
visited first in 1962, when the capital was in Rio, and the Brazil of today.

So Brazil and the United States have a need for a very special dialog in how to shape this
evolution, in which, of course, there are some competitive elements. But if I am right about this
special role that can be developed in the Western Hemisphere, Brazil and the United States can
and should cooperate closely.

How MERCOSUR develops is a question for the countries of that region to solve. Is it possible
to belong to both MERCOSUR and NAFTA? Is it possible in time to merge MERCOSUR and
NAFTA? Is it possible for individual nations to belong to both organizations? All of these are
important issues which we must address. And what we must above all keep in mind, is that it
sets areas of tremendous opportunities. From many nations the economic problems of the
present cannot be dealt with on a purely national basis. There has to be the largest possible
market. There has to be a possibility of close cooperation. And the institutions that are being
built can be an important step in that direction.

So, I would like to conclude by stressing that when people talk about a new world order, they
create the impression that it is already here. It is not here. At any one moment in history there is
a world order. It is either chaos or order and in the sweep of human history you can describe
many world orders. But there has never been a world order encompassing the whole globe.
There has never been a world economy in which events, in one part of the world, automatically
affected events in another part. There has never been a diplomacy that could be viewed
instantaneously on television. There have never been problems like environmental problems
that can only be dealt with on a global basis. In this hemisphere there has never been a situation
in which one could really talk of a North and South America coming together as genuine equals.
In 1974, as Secretary of State at a foreign ministers conference in oco, I have proposed a
Western Hemisphere Economic Community. The very foreign ministers who had been
complaining about neglect were now terrified of domination. So, it was a natural reaction in the
conditions of the time. But now the perspectives should alter, and the opportunity is enormous.

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[c]

I have a Chinese acquaintance who claims there is the following Chinese proverb. And he claims it because I suspect the Chinese invent proverbs to intimidate Westerners as they go along. And the proverb goes like this: "when there is turmoil under the heavens, little problems are dealt with as if they were big problems. And big problems are not dealt with at all. When there is order under the heavens, big problems are reduced to little problems, and little problems should not obsess us. I believe that in the Western Hemisphere we have an opportunity now to reduce our big problems to little problems, to create regional systems encompassing in time the whole Western Hemisphere, which would make an enormous change. All statesmen at the end of the day have to justify but themselves by the question of "did their actions really make a difference or were they just administering day to day events". When we talk about a new world order and a Western Hemisphere Community now, we see that our statesmen can really make a difference, can really create something new, and can create something to the benefit of this Hemisphere and of all of mankind. And then that will be, as my Chinese friend says, a great contribution to order under the heavens. Thank you very much. □

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