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G-7 Burden-Sharing Needs Formal System

WHEN the Bush administration rounded up $54.5 billion in pledges and cash from its allies toward the cost of the Gulf war, it was an ad hoc affair. United States officials had no specific formula for sharing the burden. Nonetheless, their ``back of the envelope'' calculations and actions, as C. Fred Bergsten puts it, ``came out well.''

Dr. Bergsten, director of the Institute for International Economics in Washington, would like to see a more formal, organized system for working out burden-sharing issues among nations in the future. He suggests that when the finance ministers of the seven major industrial democracies gather in Washington April 28 at the time of the spring policy meetings of the International Monetary Fund (IMF) and the World Bank, they consider the possibility of establishing a commission to study the matter. This comm ission would involve the United Nations, perhaps NATO, as well as various international economic agencies.

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If the idea appeals, the finance ministers of the US, Canada, France, Britain, Germany, Japan, and Italy should take it up with their ministers of defense and foreign affairs. Finally, it should be brought before the annual Economic Summit of the seven top leaders of these nations when they meet in London this summer.

Last year, when the G-7 summit was held in Houston, Texas, the seven leaders agreed on a joint analysis by the IMF, World Bank, the Organization for Economic Cooperation and Development, and the new European Bank for Reconstruction and Development on the question of possible economic assistance to the Soviet Union. That study was completed in December and has helped guide policy decisions.

The need for coordination in such economic issues arises from the growing ties between nations. Writes Wendy Dobson, a former ``sherpa'' (organizer) for Canada, who helped prepare Economic Summits in the late 1980s: ``The industrial economies are becoming ever more interdependent - more like one economy. Tighter economic links among countries have reduced the ability of policymakers to manage what is happening in their own country, as the effects of economic policies in one country are transmitted ever more readily to its trading and investment partners. Policy changes quickly spill over, through the impact of exchange- and interest-rate changes, to affect international asset flows, trade flows, current accounts, and inflation.''

But the political structures in these countries have not changed to accommodate fully this dramatic integration of markets. So Bergsten, in the area of burden-sharing, and Ms. Dobson in matters of economic policy coordination in general, are tossing out ideas for bringing better management to the world economy.

Dobson, now a visiting fellow at Bergsten's think tank, in a report released this week, suggests that central bankers be involved more closely in the policy coordination activities of the Group of Seven in such areas as foreign exchange rates and national fiscal and monetary policies.

``That could evolve in the reasonably near future,'' says Bergsten.

Dobson also proposes an independent secretariat for the G-7 to create an ``institutional memory'' for this powerful group. This secretariat should work in confidence, but be linked to the managing director of the IMF, who already participates in ministerial G-7 meetings. As it is, she writes, ``the informality of G-7 coordination so highly valued by its participants is also a source of weakness. There is no formal chairman who decides what is to be done, by whom, and when.''

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Bergsten sees a somewhat similar need for more organization in considering burden sharing. ``Can a common denominator be derived for comparing the disparate elements that make up these contributions?'' asks Bergsten. For example, how much burden-sharing credit should the Germans get for their financial help to the Soviet Union and the cost of reconstruction in eastern Germany? Do Germany and Japan get credit for keeping their own economies expanding, providing a positive impetus to the global economy? H ow do you count foreign aid contributions, an area where the US is weak? How do you measure the varying national burdens for defense, including the spilling of blood in actions to counter aggression?

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