Thank you Mr. Chairman. I'm pleased to be with you this morning, and before anyone asks, I still don 't know who will be our new President. One thing we can be certain of, however, is that the United States will continue to have an important role - and a vital interest - in European security in the next century. This is a strongly held belief across the U.S. political spectrum. To quote former President Bush, the United States seeks "a Europe whole and free." President Clinton's vision has been the creation of a "secure, democratic and undivided Europe" at peace for the first time in history. As the year 2000 comes to an end, we are within reach of this goal.

Over fifty years ago, the United States joined with European states to form NATO, an Alliance based on the principles of common values and shared security NATO not only kept the peace, but provided the foundation for the unprecedented process of European integration that has taken place in Western Europe over the past half-century. The same guiding principles led us to open the Alliance to membership by states formerly under communist domination. While the United States is a global power with global interests, we learned long ago that we need Allies who share our interests in continuing to export stability throughout Europe and to the world beyond. This is why NATO will remain a cornerstone of American policy.

NATO has transformed itself since 1989 - and is still changing. As we affirmed in the new Strategic Concept adopted at last year's Summit, the Alliance will focus more on crisis management and partnership, since the threat of a territorial invasion has diminished dramatically since the end of the Cold War.This new focus will require new forces and new links to all European democracies willing to join in meeting the new security challenges of the 21st century. In the United States, schoolchildren are taught the "three Rs" -reading, writing and rithmetic - as the building blocks of education. I Iike to think of the basics for building NATO's future as the "three Cs" - continued enlargement, capabilities, and cooperation. Just as children need to develop basic educational skills, NATO must make progress in these three interrelated areas in order to remain the foundation of Euro-Atlantic security in the new century.

In March 1999, the first three former Warsaw Pact countries joined NATO. Within days, they were confronted with perhaps the most difficult crisis faced by NATO in its fifty years of existence, the question of how to stop the bloodshed in Kosovo. At that time, the three new Allies gave consistent political support to the NATO air campaign, which ultimately succeeded in forcing Milosevic's forces to leave the province. At the same time, the example of the new Allies was important to the neighboring countries of Southeast Europe who joined NATO's efforts to oppose ethnic cleansing and to restore peace and stability to the region. Since the conflict, Hungary in particular has played a constructive role in NATO's Southeast European Initiative; through the Szeged process, Hungary has helped create the conditions for the establishment of a democratic Yugoslavia. All of this is to say that enlargement has been a success and that more of it will further benefit NATO as well as the security of the entire Euro-Atlantic community.

Adding more members to NATO who meet Alliance standards will not only expand the zone of stability and prosperity in Europe, it will also strengthen NATO's capacity to deal with future crises, in Europe and beyond. The question, therefore, is not whether the Alliance should be enlarged further, but when and how. I'm not going to give answers to these questions today. The United States has not yet decided its own position, nor have the other 18 Allies. But I can describe the main factors that will guide our thinking. In most basic terms, aspirants need to be prepared to be contributors to European security, not consumers. This means that aspirants must not only establish democratic governments and stable economies, but they must be able to demonstrate - through their polices and actions - the ways in which they will "add value" to the Alliance. By this, I do not mean only numbers of soldiers and fighter aircraft, but the ability to help the more troubled parts of the Euro-Atlantic area join the mainstream. Hungary is a small country with limited military capabilities, but it has been able to play a major role in helping to stabilize the Balkans. We would look for similarly constructive engagement from the next round of Allies.

A number of other factors will also come into play, but let me mention a few that will not: aspiring members will not be discriminated against on the basis of geography or history; no outside country will have a veto over the sovereign decision of a country to seek admission or for NATO to offer membership if it meets Alliance standards; and no European democracy will be excluded from consideration. That includes a democratic Russia, which we hope will be central player in building an integrated European security system together with NATO.

A moment ago I said that military capabilities were not the only qualification for NATO membership. NATO is, however, a military alliance, and capabilities are critically important. When commenting on NATO's future, Secretary General Robertson often says that his three top priorities are "capabilities, capabilities and capabilities." Aspiring members need to reform their defense establishments - establish effective civilian control, reduce top-heavy command structures, streamline their force structure, and bring training and equipment into line with NATO standards. Once in the Alliance, all members need to complete these critical reforms and to make a serious contribution to the full range of missions that the Alliance is likely to face in the coming years. Right now, the European members of the Alliance - old and new - are not doing as much as they should in this regard. During the Kosovo air campaign, U.S. aircraft had to deliver the great majority of the ordnance and provided almost all the command and control and precision-strike capabilities. Many European aircraft were not even equipped with secure communications, forcing U.S. and Allied forces to talk in the open, increasing their vulnerability to Serbian air defenses. After Milosevic's capitulation, the European Allies - despite having over two million soldiers in uniform - had a tough time moving less than two percent of that total rapidly to Kosovo to secure the peace. This capabilities gap between the U.S. and the rest of the Allies gave new impetus to a plan to develop better capabilities, the Defense Capabilities Initiative (DCI), launched at last year's Summit. It also injected a dose of reality into efforts by the European allies to build a stronger European security and defense identity (ESDI) within NATO and an effective European security and defense policy (ESDP) within the European Union.

Both initiatives - DCI and ESDI/ESDP - will require cutting back on the numbers of static combat forces configured for yesterday's Cold War tasks while making more of the remaining forces deployable and sustainable for out-of-area missions. Since not all crises will present a benign environrnent, European forces also need to acquire some of the sophisticated combat capabilities that only the U.S. and a few other Allies possessed during the Kosovo air campaign - such as precision-guided munitions, electronic warfare, and unmanned surveillance vehicles. It would be unwise for our European allies - and politically unhealthy for NATO - if a division of labor emerged in which the Europeans were only equipped for light peacekeeping missions, with the U.S. left to do the heavy lifting. Achieving effective capabilities will require resources. While some of these can be found through reprioritization (spending existing funds more wisely), for many European nations, increased defense spending will be necessary. I know this will be a difficult decision for many governments. Political leaders, however, have a responsibility to make the case if they are serious about creating an effective European defense capability and a more balanced transatlantic partnership.

The same can be said of countries seeking NATO membership. NATO candidates will make a stronger case as to why they should be accepted if they can bring additional military and supporting capabilities to the Alliance. Nobody would expect the armed forces of Slovenia or Lithuania, for example, to take over the U.S. sector in Kosovo; but even small countries should be able to add value to future NATO operations. Increased multinational collaboration and role specialization are ways for smaller allies to make a more substantial contribution to our collective capabilities for future military operations without breaking the budget.

That brings me to the third "C," cooperation. It is fundamental to any Alliance that its members should be able to work together, but I use the term "cooperation" in a larger sense. As foreseen in the 1999 Strategic Concept, in the future, NATO will have to look beyond its own borders to preserve and spread stability in the Euro-Atlantic area. The kinds of crises we can expect the Alliance to face in the post-Cold War period will require more than a NATO military response to resolve. We will need support from nations outside the Alliance and other international organizations to manage most such crises.

In the past decade we have sought to erase the historic dividing lines in Europe which give rise to tension, unrest and, ultimately, conflict. NATO enlargement has been only one aspect of this strategy. No less important is the inclusive Euro-Atlantic Partnership Council and the practically oriented Partnership for Peace (PfP). PfP is a true success story. A 1994 U.S. initiative, PfP is based on the principle of self-differentiation, whereby each of the 27 Partners can shape its relationship with NATO in a way that best suits its needs and ambitions. By providing a platform for discussion of political issues with the Alliance, as well as a catalogue of practical, security-related activities, the Partnership for Peace contributes to conflict prevention, helps create and reinforce political consensus, and supports political and defense reforms. Partner support was critical to the Alliance during the Kosovo air campaign. The Operational Capabilities Concept is helping them develop their forces so that they can work better with NATO and help carry part of the peacekeeping load. PFP provides a springboard for nations seeking NATO membership. In fact, the activities provided by the Partnership have been described by the three newest Allies as indispensable to their preparations for NATO membership.

NATO also maintains an active program of cooperation with Ukraine and Russia, both of which have established special relationships with the Alliance in addition to their involvement in PfP. Ukraine is making important contributions to the KFOR mission in Kosovo, including through the presence of the Polish-Ukrainian battalion in the sector of operations commanded by the United States. NATO has advised the Ukrainians on defense reform and is working with Kiev on how to modernize its reduced, but still Soviet-style military.

Relations with Russia remain one of NATO ' s biggest challenges. Russian leaders remain reluctant to engage with the Alliance, since they continue to portray NATO as an adversary and remain critical of enlargement and Allied actions in Kosovo. But these problems have not derailed NATO-Russia cooperation. Our military cooperation on the ground in Bosnia and Kosovo has been excellent, and relations have steadily "normalized" since the Moscow visit by Secretary General Robertson in January. NATO-Russia programs now focus on such areas of mutual interest as halting the spread of weapons of mass destruction, transparency on military infrastructure and maritime search and rescue. The last point gained in importance after the Kursk tragedy. Looking to the future, I believe there is considerable potential for NATO-Russia collaboration in meeting the new dangers of the 21st century, including a cooperative system of ballistic missile defense.

Cooperation also needs to be strengthened within the transatlantic family.This brings me back to the question of the European Union's security and defense policy (ESDP) and NATO-EU relations. This subject has occupied a great deal of our time in Brussels lately and will not be completely settled for some time. We want to see a European security structure that can complement and enhance the transatlantic link while providing Europe the ability to assume a greater share of the burden for its own security. European leaders have come to realize that a common foreign policy, to be credible, often requires a credible military capability to back it up. This was one of the key reasons why U.S.-led diplomacy in the Balkans over the past decade succeeded where European efforts had failed.

Development of the ESDP will strengthen NATO - and also be advantageous to the United States - it is done the right way. First, ESDP must respect the indivisibility of transatlantic security: it should not call into question NATO's primacy for the collective defense of its members or its role as the "option of first resort" in managing future crises. Second, ESDP must be inclusive, ensuring that all the European Allies who are not members of the EU (and Canada as well) can participate fully in the shaping of decisions and in the conduct of EU-led operations in situations where NATO as a whole is not engaged. Third, and most fundamentally, the development of ESDP should result in new and improved military capabilities so that the European Allies can effectively exercise the greater responsibility they seek - whether acting through NATO or the European Union.

If the European Union neglects these factors and focuses more on building autonomy for its own sake, then the effects could be serious: new frictions within the transatlantic community; a reduced capacity to manage crises; and, in the worst case, an increasing tendency on the part of many people in my country to reduce American engagement in European security. With crucial ESDP decisions looming next month at the EU Summit in Nice and the NATO Defense and Foreign Ministers' meetings in Brussels, it is imperative that we get it right.

NATO should remain the primary guarantor of European security , as it has been for over fifty years. NATO does, however, welcome a stronger European Union as a teammate. Crisis management operations, such as those in Bosnia and Kosovo, require more than military force. They need inputs for the process of nation-building that go beyond NATO's scope, but where the EU has played a critical role. There should be no false choice between being a good European and a good Atlanticist; the two institutions should work together to build a more stable and peaceful Europe. We at NATO have had success working in tandem with the EU in the Balkans without any formal institutional links. Just imagine how much better we will do ifwe can coordinate our joint efforts.

If one's only source of information was the popular media of the past few weeks, one might conclude that the transatlantic relationship was in trouble. Newspapers and television are filled with stories about supposed transatlantic differences over ESDP, not to mention global warming, banana wars, and beef hormones. European commentators often voice frustration with American arrogance, and Americans often express frustration with European passivity. Certainly no European politician ever lost votes by standing up to the United States.

These stories always make for entertaining news, yet the facts tell a different tale. A year and a half ago, nineteen nations were able to decide together to take military action to halt the humanitarian crisis in Kosovo. As one who was at the center of the decision-making process, I can assure you that it wasn't easy , as each nation had special concerns to take into account. But when decisions were necessary, we were all able to stand together to take action. The basic values that we have in common - democracy, human rights, economic liberty and the rule of law - have proven far more important than whatever minor disputes arise from time to time. This commonality of values has given rise to unprecedented stability in much of Europe. Today, for the first time in history, a war in the heart of Europe is unthinkable.

It is our task for the next century to export that stability and enlarge the area in which wars just do not happen. In doing this, we must continue to enlarge NATO to include other European democracies that wish to join and can meet its membership standards. We must strengthen and deepen the Partnership for Peace and NATO's strategically important relationships with Russia and Ukraine. We must develop the capabilities necessary for effective action to deal with future crises, and with new risks like weapons of mass destruction. And we must develop a more balanced sharing of responsibility between the United States and Europe, including a true strategic partnership between NATO and the European Union.

In all of this, Hungary has a role. Even though it is a small country, in NATO all Allies have an equal voice. Hungary has thus far made the most of its NATO membership by playing an important role in Balkan operations, by contributing actively to Alliance debates, and by lending critical support to the forces that have brought about democratic change in Yugoslavia. Hungary can and should continue its contributions. It can reach out to its neighbors and share Hungary's experiences in order to help them prepare for NATO membership. It can continue its own reforms to add defense capabilities to the Alliance. Finally, as a NATO Ally that will soon become an EU member as well, Hungary can work to ensure that the NATO-EU relationship is developed in such a way as to provide mutually reinforcing cooperation, not duplication or competition.

We cannot be certain what challenges we will face in the new century. But it is certain that any challenges can be better dealt with by a strong NATO that remains the central pillar of a wider - and inclusive - Euro-Atlantic security system. There is no false choice between strengthening NATO and supporting the larger process of European integration. Getting both of these processes right will provide the basis for a more balanced transatlantic security partnership that should be our common goal for the 21st century.