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Coming of Age: The European Community and The Economic Summit

Susan Hainsworth

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1984: LONDON (7-9 June)

The 1984 London Summit gathering has been classified by Putnam and Bayne as a "self-content" summit, where harmony between the political leaders prevailed because controversial issues were avoided, and not necessarily resolved. After the Versailles fiasco, the summiteers were anxious to reestablish international goodwill. Indeed, "the bland declaration reflected the fact that, on virtually every issue, the summiteers settled for the least ambitious of the proposed alternatives...For each participant the overall objective was to avoid controversy or entangling commitments...". 61

On the economic front, the main concern for the European Community representatives at the summit revolved around macroeconomic policy attempts to get the Americans to commit to a decrease in their high interest rates and budget deficit. Third World debt, development issues, and structural adjustment issues, were attributed more attention at this meeting than ever before.

The Europeans failed to attain a commitment from the U.S. to reduce interest rates and slash their budget deficit, despite a fairly unified offensive led by Kohl and backed by Mitterrand and Thatcher. The final communiqué contained only a very vague admonition that "high interest rates could put the recovery at risk". This soft treatment of a highly controversial issue was a concession made by the Europeans in recognition of the fact that they could not coerce Reagan into accepting a more direct criticism, especially during an election campaign.

The summit leaders expressed their general satisfaction with the international economic recovery which was underway: the communiqué reendorsed the 'prudent monetary and budgetary policies' which were being followed; however, Thatcher stressed that the Europeans were in need of the flexibility and dynamism which had catalysed the American and Japanese economies and reduced unemployment.62

During the months leading up to the London summit, the international economic stage was dominated by the Third World debt crisis. Argentina and Mexico were having difficulty living up to their debt commitments; Bolivia and Ecuador suspended their payments in May 1984.63 The OECD, the IMF and the BIS pointed to rising U.S. interest rates as a major aggravating feature of the crisis. In preparation for the summit, the French government -- with the backing of Italy, Canada and the European Commission -- proposed a new $15 billion IMF SDR allocation, and the fulfillment of all Western pledges to the IDA. 64 The Commission assumed a conciliatory stance with regard to the debtor nations, realising that they were struggling under the imposition of severe austerity measures necessitated by their debt burden. It wished to give them an encouraging signal from the summit which would convince the debtors to "continue playing the game" 65 However, the U.S. opposed these ideas, arguing that the key to the debt problems of the Third World lay in increased trade with the western industrialised nations. Intense G5 preparatory negotiations on the eve of the summit -- in which the Commission was not involved -- reached a consensus upon an arrangement for rolling over large amounts of debt through 'multi-year rescheduling', which was duly endorsed at the summit table. This agreement on debt rescheduling is considered to be the most substantial and lasting result of the 1984 summit. 66

Positions of the summit countries in the trade sphere were also divergent, despite pledges made the previous year at the Williamsburg summit to 'roll back' the protectionist tide. Despite American advocacy of a new multilateral trade round in the GATT since 1981,the U.S. was in the throes of an election campaign at the time of the London summit. The campaign heightened protectionist pressures domestically and dulled interest in new GATT negotiations. It was from Japan that the main impetus for the pursuit of renewed multilateral trade talks originated. True to form, on the European side, it was the French and Italian governments who were most reluctant to pursue trade liberalisation, and they won support for their opposition from the EC Commission.67 The Europeans were concerned that the U.S. would attack the agricultural trade subsidy scheme which formed such a crucial foundation for the Community's Common Agricultural Policy, as well as the Community's public procurement programmes which discriminated against foreign producers.68

However, at the summit negotiating table EC solidarity did not prevail. Lambsdorff, the West German Minister of the Economy, broke with the agreed Community line -- a move which greatly annoyed the Commission -- and supported the Japanese and American push fora timetable for new GATT negotiations. In the end, because of the strong and resolute position maintained by the French, Italian and the European Commission, the summitteers reached a vague compromise,agreeing to consult 'at an early date' on the subject of future trade talks.69

Toronto, January 1990

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