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Financial Post, Weekly edition, Mon 20 Jun 88, page 42. Editorial.


Summit may move on debt, subsidies

External Affiars Minister Joe Clark says to expect ''momentum but no miracles'' from the Toronto Economic Summit. That's a good way to describe what is likely to be the outcome of this gathering of leaders of the seven major industrial countries and the president of the European Community.

If the momentum is of sufficient force to lead toward long-term solutions to some of the tough problems confronting the leaders, the Toronto meeting will record a solid achievement.

Brian Mulroney:

Canada's example

There are hopeful signs. Prime Minister Brian Mulroney will press the leaders to send a strong message to the General Agreement on Tariffs & Trade mid-term meeting in December in Montreal that the political will does indeed exist to begin to tear down agricultural subsidies.

Mulroney told The Financial Post's Ottawa bureau chief, Hyman Solomon (p. 1), that he wants ''a direct signal to negotiators that the political will exists for change.'' Agricultural subsidies are a politically sensitive issue in all summit countries. And Canada, as international comparisons have shown, is a big-league subsidizer.

An attack on subsidies has strong support from the Business Council on National Issues. This week, the council called for a program that includes a common basis for measuring trade-distorting agricultural subsidies; a freeze on agricultural production and export subsidy levels followed by real reductions in 1989-90; reductions in barriers to market access; and agreement on management of agricultural surpluses to avoid disruption of world markets.''

Mulroney seems ready to take the ''political heat'' that comes with cutting back on subsidies. But he is not willing to take the heat all by himself. ''Don't ask me to sacrifice a single Canadian farmer in Saskatchewan or Manitoba unless we see both the clarity and the commonality of the signal which will be sent from the summit to Montreal,'' he said. U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher are on side on the subsidy issue, but Mulroney will have his work cut out to get the other summiteers to agree to move against subsidies.

There is also the likelihood of some ''momentum'' on the Third World debt issue. Canada is in the forefront of a move to ease the debt burden on the poorest countries, mainly those in sub-Saharan Africa. Mulroney has credibility on this issue because of Canada's forgiveness last fall of development assistance debt for 13 sub-Saharan countries.

What may emerge from the summit is agreement on a ''menu'' of options in which debtor and creditor nations can work out debt rescheduling and concessional deals on an individual basis. In addition to some forgiveness, this could include rescheduling paybacks at lower than market interest rates.

Last week, President Mitterrand of France sent letters to the other summit leaders proposing that there be agreement at the summit to cancel one third of the debt of the poorest nations. With Canada's example before them, there could well be action on this front in Toronto.

DNOTE (Ed. note) Refers to ''Mulroney presses for ''political will'', by Hyman Soloman, p. 1

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Revised: June 3, 1995

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