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Coming of Age: The European Community and The Economic Summit

Susan Hainsworth

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Inaugurating the second round of summit conferences, Versailles is widely considered to be the first 'failed summit'. 54 The deepening worldwide recession was reaching its nadir, putting the heads of state and government under immense domestic pressure. The final communiqué at Versailles was very short, reflecting the French desire to return to a more streamlined summit format. The only new face at the summit table represented a symbolic step for the European Community: for the first time, the President of the Commission Thorn was accompanied by a European Council President who was from a non summit country, Belgian Premier Wilfried Martens. Thus, there were nine summiteers at Versailles, with the summit accommodating the dictates of EC necessity, and indicating that the structures and processes of the European Community system were regarded as legitimate by other summit participants.

At the top of the agenda was the European American dispute over East West trade and monetary policy. In the months preceding the Versailles summit, the summit finance ministers of the five leading economic powers had attempted to formulate a plan for western monetary cooperation. These presummit negotiations marked the beginning of the "convergence vs. intervention" debate which would permeate many summits to come. The French were strong proponents of coordination and intervention, while the U.S. stalwartly believed in cooperation or convergence. Rumours of the construction of a "package deal" circulated on the eve of the summit, and the President of the Commission, Thorn, outlined one possibility:

However, no such package deal of convergent measures occurred. The divergent American and European positions in the field of monetary affairs persisted, although the gulf between them was narrowed to some extent by prior negotiation. The four European countries present at the summit and the two representatives of the Community had met prior to the summit to formulate a common position, and were able to present a common front to the U.S.on this issue.

At Versailles, the leaders agreed to establish a group of finance ministers (later labelled the G5) to meet regularly to conduct multilateral surveillance of macroeconomic processes. Italy and Canada were initially excluded from the G5 process, which was to become an integral part of the summit process. They were to be admitted to a renewed and expanded G7 in 1986. The EC was never included, as it did not possess the competences of a sovereign state in the monetary sphere.

In the area of East West trade and credit, however, the Versailles negotiations were a failure. The Reagan Administration had displayed its hostility to European participation in the Siberian pipeline undertaking in December by decreeing an embargo on materials produced by U.S.companies destined for use in the pipeline's construction, in the aftermath of the imposition of martial law in Poland. This manoeuvre had undermined the position of many European companies with contracts in the project, as they relied on a large amount of indispensable parts which were manufactured in the U.S. Simultaneously, the U.S. urged that the Europeans should reduce credits to the Soviet Union. The conflict between the Americans and Europeans (i.e. the EC member states and the Commission) persisted. Despite attempts at conciliation in meetings of high level officials leading up to the summit, no agreement was attained before or at Versailles.

On North-South issues, the summit focussed upon 'global negotiations' in the UN. The Americans had thus far rejected any such proposition,in the fear that it would interfere with the work of the IMF and the World Bank. On the other hand, the Europeans had long demonstrated their desire to commence global negotiations. However, intensive negotiations just prior to Versailles between the U.S. President and the Presidency and Commission of the European Community, gave a boost to the more "internationalist forces" within the Reagan Administration and led to an

agreed position favouring the launching of global negotiations at the summit. EC influence on this issue was thus decisive in reaching a consensus at Versailles. However, the Versailles offer was rejected in the end, and negotiations in the UN remained stalled.56

In the political sphere, the Versailles summit occurred at a time of high international tension. The discussions were dominated by the Falkland crisis, which monopolised the attention of U.K.Prime Minister Margaret Thatcher, who was eager to evoke support from her summit colleagues. The Israeli invasion of Lebanon occurred while the summit was in progress. A very general political declaration was issued on the Lebanese conflict, without making any specific judgements or stipulations. Although the Falkland crisis was not the subject of a special political declaration, all leaders confirmed their solidarity with the U.K. stance.

The failure of the Versailles summit to construct strong and lasting compromises became apparent immediately, especially in the contentious issues of East West trade and monetary relations. Even at the concluding press conferences at the summit itself, divergences in the leaders' interpretations of the arrangements was evident. The U.S. denied that the Versailles agreements necessitated any change of strategy in monetary policy; the Europeans stated that their willingness to adopt a 'prudent attitude' did not include cutting back their credits to the USSR.57 Relations between the EC and the Americans dipped to their lowest level in decades in the period after the summit, as a series of summit related occurrences heightened transAtlantic tensions. On June 18, the U.S. announced an embargo on exports of high technology material for the Siberian pipeline, extended to foreign affiliates of U.S. companies . West Germany, France, Italy and the U.K., which had the largest West European roles in pipeline construction, instructed their companies to honour their contracts with the Soviet Union.58

The aggressive American position on East West trade was strongly criticised at the Brussels European Council meeting, which occurred on 28-29 June. The series of downward spiralling events which occurred after Versailles bore witness to the 'failure' of the summit and cast doubts upon the utility of the summit process.

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