Reagan's free-market pitch to allies:President will prod summit countries toward faster growth
President Reagan leaves today for a summit meeting where the economic issues on the agenda are almost sure to be overshadowed. The unintentional summit centerpiece is the controversy surrounding the President's planned visit Sunday to a German cemetery containing the graves of Waffen SS soldiers.
The overriding theme Mr. Reagan brings to the 11th annual economic summit, being held in Bonn, is the need for other nations to adopt the kind of free-market economic policies the administration champions. The Reagan team wants to have Europe and Japan provide more fuel for the worldwide economic recovery, now that US economic growth is slowing.
``The economic expansion in the United States shows every intention of moderating,'' Treasury Secretary James A. Baker III said Monday. ``It's important in terms of world recovery that the world economic expansion continue. It is very important for the other industrialized nations that are in a position to do so to pick up the slack.''
The US does not want other nations to take steps that might trigger inflation, Mr. Baker said. But he added that ``we feel that there may be some room for additional growth in the economies of both Germany and Japan.'' Last year the West German economy grew 2.5 percent, while the Japanese economy grew 5.75 percent.
The President travels to Germany with a variety of economic policy objectives. In talks with leaders from Canada, Japan, France, West Germany, Britain, and Italy, the US has several goals, including:
Reaching agreement on a starting date in 1986 for a new round of talks aimed at reducing trade barriers. One goal of the talks would be to ease protectionist pressures, aimed at Japan, that are building in the US. Some key members of Congress from both parties have recently voiced opposition to such talks. They have urged Reagan to focus on finding ways to cure what they see as the dollar's overvalued condition relative to foreign currencies.
Encouraging other summit nations to eliminate what the US calls structural rigidities. These are various economic policies that the US feels have retarded European economic growth. Examples include unemployment benefits lasting up to two years, restrictions on firing workers, and high social-welfare costs. Baker, however, says, ``We are not trying to give them micromanagement suggestions about their economy.''
Fending off French efforts to link approval of trade talks with the scheduling of a conference to revamp the world monetary system. The French favor having central banks intervene in currency markets to maintain closer links between the values of individual nation's currencies. French President Franois Mitterrand announced Sunday France would refuse to discuss trade agreements without parallel talks on a new monetary system.
In mid-April Secretary Baker told an Organization For Economic Cooperation and Development meeting in Paris that the US was ``prepared to consider the possible value'' of a high-level meeting of industrial countries on monetary reform. But the talks would be limited to refining the current floating-rate system.
``We are not talking about another Bretton Woods,'' Baker said Monday, referring to the 1944 conference that established a system of fixed exchange rates.
In addition to the economic topics that will be discussed at formal meetings, a variety of political topics will be addressed at working luncheons and dinners. Topics likely to be discussed include the state of arms control negotiations with the Soviet Union, the problem of acid rain, the food crisis in sub-Saharan Africa, and European and Japanese participation in the President's Strategic Defense Initiative (SDI), or ``star wars'' proposal.
The US goals at the coming summit are modest enough that some success can be anticipated, experts say, especially in securing agreement on a new round of trade talks.
``I think the principal thing that will come out of the summit is an endorsement of the commitment to a new round of trade negotiations,'' says William Cline of the Institute for International Economics.
Baker added a note of caution, however, saying the US ``may not get'' the date it seeks for a new global round of trade talks because of opposition from the French and from the European Economic Community, whose president will attend the meeting.
Opposition to the new talks has also come from the President's own party in Congress. Sen. John C. Danforth (R) of Missouri, chairman of the Senate trade subcommittee, said last Thursday that Congress should insist on ``clear plans for rectifying the exchange-rate problem'' as a condition to granting the President authority to bring about a new round of trade talks.
Baker said he did not think the sentiment Senator Danforth expressed would damage the President's chances of getting agreement on a new trade round at the summit.