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Financial Post, July 25, 1981


This report on the opening of the summit discussions was prepared by Patricia Anderson, Barry Critchley and Fred Harrison.

OTTAWA--Emerging out of the diplomatic mists and nuances of another Western Economic Summit is a newly dominant United States, its goals and sensitivities once again pivotal in whatever happens next.

Almost effortlessly, U.S. President Ronald Reagan and grim-faced Secretary of State Alexander Haig are reestablishing a half-forgotten global hierarchy--with Washington, not the Western Alliance, not Moscow and certainly not the OPEC nations, at the top.

The tilt was clear at this week's Ottawa summit, and poses difficulties for the next one in France. The chief premise for summitry's 1975 start--what to do about the post-Vietnam erosion of U.S. influence coupled with the growing vigor of Europe and Japan-- seems much eroded.

The desire for concerted policy, the goal set when France's former President Valéry Giscard d'Estaing called the first meeting, is becoming a search for far humbler things--information on U.S. intentions and explanations of unilateral American actions.

In part, the change parallels the trend to political, rather than economic, discussions. The U.S. preoccupation with Soviet expansion colored much of the opening discussion, and a renewed crisis in the Middle East helped to underline Washington's strategic role in world affairs and prompted harsh words in a statement from the seven summiteers.

Reflecting this political flavor was the four-part statement on terrorism issued after the first day. One highlight--and a back-handed slap at the Soviets--was the suspension of air services into Afghanistan as a result of that country's harboring hijackers early this year.

But even on economic questions, balanced multilateralism seemed threatened by a kind of serial bilateralism--with President Reagan on one side of a series of troubled relationships with the others.

The final communiqué--released after The Post went to press--may paper over the differences. And, in truth, even in the summit's early hours, there were some signs of compromise. Speedy, almost peremptory settlement of the agenda, achieved by the summiteers at their dinner on Sunday, July 19, suggested a successful outcome to Prime Minister Pierre Trudeau's months of advance spadework.

Trudeau's pet issue, the North-South dialogue, was not the dominant matter, but even sandwiched with energy into a two-hour session, it was moderately prominent. Partially disguised as "another economic issue," in the words of a Canadian official, the issue was dressed up a bit for U S. consumption--but it was, at least, discussed.

Indeed, if the final communiqué lives up to promises sprinkled at Trudeau's press conference after the first day, there will be concrete commitments not only to increase aid budgets but to boost the share going to the poorest countries. Energy problems of the poorest also received the attention of the seven--despite U.S. reluctance to give the World Bank the backing it needs for an energy affiliate.

There was, moreover, evidence of consensus on East-West relations. As Canadian External Affairs Minister Mark McGuigan put it, similarities in political approaches were evident, at least at Sunday evening's dinner.

Nonetheless, the proliferation of bilateral chats between Reagan and the others, the long list of issues directly involving U.S. policy, even the establishment, at Washington's request, of press and briefing facilities well apart from those of the other participants--it all gave a ring of bitter validity to Trudeau's recent joke about the U.S. president's aspirations for the chairmanship.

Reagan's bilateral meetings also underscored the tensions surrounding the main sessions.

French President François Mitterrand, for example, virtually delivered an ultimatum on U.S. interest rates--bring them down by yearend or else. The European argument embraces political as well as economic justifications. With rates at current levels, they argued, higher defense spending as committed under NATO is proving difficult. In response, as U.S. Treasury Secretary Donald Regan told a U.S. television reporter, Washington is offering "reasonable assurance" that rates will come down this year by several points.

But Europe's concerns were raised again in Monday's opening multilateral session--a session dominated by set-piece statements at the expense of freewheeling deals. In fact, U.S. officials said that about the only truly ad-libbed contribution was a crack from West German Chancellor Helmut Schmidt to the effect that his nation's real interest rates had never been higher since the birth of Christ.

While high interest rates are hurting the Europeans' economic recovery and adding to unemployment, much of their criticism is clearly public posturing. Even France, with a new administration at the helm, has given reassurances through Economics & Finance Minister Jacques Delors, that his country's new preoccupation with unemployment shouldn't lead anybody to the conclusion that inflation isn't an equal priority.

The Canadians, who have long complained about the lack of independent monetary action possible with a giant breathing next door, were relatively quiet while the cacophony of complaints came from the Europeans. Said Trudeau: "I felt like telling them, `Well, join the club.'" We know more than anyone about the interdependence of economic policies--exactly what summits are supposed to be all about.

On economic matters, apart from the inevitable talk about high inflation and slow growth, several concrete results are expected:

A new arrangement for consultations between summits. The thinking, according to Canadian officials, is that existing economic forums--IMF Interim Committee meetings, OECD ministerial meetings and the monthly talks among central bank chiefs--are too formal and too visible, causing the financial markets to twitch nervously when talk gets too frank. However, Trudeau stressed that all summiteers wanted to avoid over-bureaucratization of the summit process.

A French-requested GATT ministerial meeting to catalogue all that ails the campaign for freer world trade.

A high-level meeting of the West's Co-ordinating Committee for East-West Trade.

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