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Trend of the economy

Ronald Reagan may not know it, but he comes to Ottawa as a pupil, and a couple of stern teachers are descending on him from across the Atlantic. Francois Mitterrand of France and Helmut Schmidt of Germany want the President to know that his economic policies, as they see it, are throwing Europeans out of work, and they want some changes.

To old-timers on the summit scene, all this smacks of "deja vu." "Frankly," said a seasoned summit diplomat, "a prime reason for the first summit in 1975, as the French and Germans saw it, was to educate Gerald Ford."

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What is there about American presidents that impels European leaders to try to teach them lessons on economics?

The problem lies not so much in the men themselves as in the vast difference in scale between the huge US economy and the economies of the smaller summit partners.

Lump Canada, Britain, France, West Germany, and Italy together and their combined output of goods and services is less than that of the United States. Even the output of mighty Japan -- the seventh summit partner -- is not half as big as that of the US.

Every government head comes to these annual gettogethers weighed down with domestic political and economic concerns, casting wary glances back at parliaments and voters.

Every participant understands this and accepts the fact that his colleagues' policies sometimes will conflict with his own.

When those programs emanate from the United States, however, they tend to rock the boat for everyone else, simply because the US is so big.

So it was with Gerald Ford and American energy policies in 1975 when former President Giscard d'Estaing of France invited other Western leaders to meet with him at the secluded Chateau de Rambouillet, outside Paris. So it is today with Ronald Reagan and the way he wants to fight inflation, as Canadian prime Minister Pierre Trudeau hosts the seventh annual summit at the equally secluded Chateau Montebello, near Ottawa.

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In 1975, OPEC's 400 percent runup of oil prices had helped to propel the noncommunist world into the worst recession since the collapse of the 1930s. Vitally dependent on Middle Eastern oil, Japan and Western Europe saw little hope of spurring economic recovery, until -- among other things -- major industrial powers slashed their consumption of oil.

Americans, meanwhile -- shielded by domestic price controls from the full brunt of oil costs -- expanded their oil imports, in effect paving the way for later price hikes by the 13-nation Organization of Petroleum Exporting Countries (OPEC).

At Rambouillet in 1975 and again in Puerto Rico the following year, Giscard and Schmidt did their best to persuade President Ford that if Americans persisted in burning a quarter of all the oil produced by OPEC, other oil-importing nations would be badly hurt.

Part of the problem, of course, lay with Congress, which scuttled even modest conservation proposals advanced by President Ford.

"Baffling to Europeans," says Henry Owen, summit adviser to former President Carter "is the stalemating of US government by the division of power between Congress and the President. As experienced people, the Europeans understand our system, but find it hard to predict how the US will come down on any particular issue."

Eventually Americans did conserve oil -- so spectacularly that in some months the US imports only half as much petroleum as it did in 1978.

This time around, Schmidt and Mitterrand have a different bone to pick with the new President of the US, who makes his first major foray into intense, personal diplomacy at the Ottawa summit.

Unemployment, particularly among young people, runs so high in Western Europe that "we face the prospect of pauperization of large segments of our society," says Ivor Richard, employment and social policy commissioner of the 10-nation European Community.

"Unemployment," declares Mr. Richard, "is the coming problem of the 1980s."

Not to President Reagan and his key advisers, who point to a stable US jobless rate and insist that fighting inflation remains the primary task.

To the White House, this means tight curbs on growth of the money supply -- a policy that drives up US interest rates and forces European central banks to hike their own rates in response.

At a time of soaring unemployment, high interest rates -- which dry up investment and put more workers on the dole -- are the last thing European leaders want.

Is there some flexibility in President Reagan's approach? Will he ease up on monetary policy and interest rates, to help the colleagues he meets -- mostly for the first time -- at the Chateau Montebello?

The answer from a senior US official was short and to the point. "No," he said.

If not, no matter how smoothly the Ottawa communique tries to paper over differences, the whole exercise of summitry will face one of i ts sternest tests.

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