They're tuned up to sing in harmony at Tokyo summit
Like a barbershop quartet, the seven heads of government meeting for the economic summit in Tokyo this weekend will try to sing in harmony -- at least in public. ``There should be no confrontations,'' an Ottawa official predicts. ``There will be nuances of opinion, rather than deadlocks that need to be resolved.''
Harald Malmgren, a former high US trade official, postulates that Treasury Secretary James A. Baker III is bringing the United States back to a leadership mode that prevailed before 1971. John Connally, then Treasury secretary, shattered the existing international monetary system to deal with a persistent American international payments deficit.
The US dollar was devalued, with the system of fixed exchange rates falling apart soon thereafter. Western Europe and Japan were shocked by the roughness of Mr. Connally and President Nixon.
One Briton still recalls Connally's saying: ``We have a problem. It has to be fixed. We are fixing it with our friends, and after all, what are friends for but to share problems with?''
Since then, the US has often acted alone, according to its own economic interests, leaving its allies to like it or lump it. The Watergate tapes revealed President Nixon's disregard, with expletives deleted, for an Italian financial crisis.
Now Mr. Malmgren sees the US returning to a more ``collective leadership.'' As a sign of this, he cites Mr. Baker's efforts to coordinate national economic policies, including exchange rates and interest rates. He notes a renewed interest in strengthening such key multilateral institutions as the International Monetary Fund and the World Bank. And he points to Baker's plan for dealing with the debt problem of many developing countries.
The President seems to like this policy shift, Malmgren says.
Economists and government officials debate the merits and possibilities for coordination. For example, Dr. Martin Feldstein, Mr. Reagan's former top economic adviser, grants that Baker has set a ``more friendly tone'' in American dealings with its allies and that this has been well received by Europe and Japan. But he regards the change as ``all in atmospherics, rather than in anything precise.'' He doubts the ability of the major industrial powers to coordinate their economic policies consistently, or even the wisdom of doing so sometimes.
At the summit of top leaders of the US, West Germany, Japan, Britain, France, Italy, and Canada, Secretary Baker is expected to continue pushing the Germans and the Japanese in particular to take measures to step up economic growth. But the Germans continue to resist these pressures.
``They are the fly in the ointment,'' says Malmgren.
Considering the political hassle the shaky German government of Helmut Kohl would face at home, should it give in to American pressure, any further expansionary moves are unlikely.
This illustrates that although a friendlier atmosphere on economic issues may be desirable, it does not always bear fruit in coordinated economic decisions. Domestic issues tend to prevail.
If the US gets pushy on more growth, its allies may harp on the American budget deficit.
``The real task for the United States government is to get the budget deficit under control,'' West German Finance Minister Gerhard Stoltenberg noted in a recent interview. ``There are some first steps, but very modest ones. We do not believe that this problem will solve itself.'
At a meeting of the ``Group of Ten'' industrial countries (the Seven plus the Netherlands, Belgium, Sweden, and Switzerland) on April 8, the finance ministers and central bank governors spoke in their communiqu'e of the ``key role of surveillance in improving economic performance and international consistency of economic policies.'' They recommended that the International Monetary Fund (IMF) study ``various possible indicators'' to help this surveillance process.
What ``surveillance'' means is that these powerful industrial nations would have the IMF, as well as colleagues from the industrial nations, examine the foibles of their economic policies. The IMF frequently pokes its nose into the policies of developing countries seeking its loans. Surveillance would add some symmetry to the international monetary system in regard to creditor nations.
Here too, however, the limits of domestic political constraints impinge mightily on international economic cooperation.
Canada's finance minister, Michael Wilson, when asked about IMF surveillance, noted that economic indicators may provide ``early warning signals'' of one nation's policies touching other countries.
But ``it is up to the individual country,'' he continued, ``to decide how it wants to respond. If this country says, `Look, that may be, but we are not going to change policy for whatever reason,' the IMF, the World Bank, are not in a position where they can force a policy change by a creditor country. By drawing to that country's attention some problems they see developing, and in doing it in an international context, they hope to bring another perspective to encourage decisionmaking along a certain line.''
Similarly, at the summit the leaders will sing their policy tunes. But they are not likely to be in full harmony.