POLICY: A Third Try at the Summit

As former Secretary of State Henry Kissinger now privately concedes, he and other top officials in the Nixon and Ford administrations had one major failing: an ignorance of international economics. No one was more aware of that shortcoming than the U.S.’s allies, who were often hurt and confused by American insensitivity to their economic problems.

Jimmy Carter is anxious to avoid that blind spot in his Administration. One of his first acts was to dispatch Vice President Walter Mondale to discuss economic issues with U.S. allies. He has also surrounded himself with economic advisers noted for international expertise (Treasury Secretary Michael Blumenthal, Under Secretary of State Richard Cooper, Assistant Treasury Secretary Fred Bergsten). As further evidence of his commitment to international economic cooperation, Carter last week announced that his first presidential trip abroad will be to attend a seven-nation* economic summit scheduled for May 7-8 in London.

The heads of government have much to talk about. The free world’s recovery has been faltering. Inflation is increasing in just about every country, and unemployment in the European Community rose to a record 5.6% of the work force in January. The Organization for Economic Cooperation and Development has even warned that a new recession could begin later this year.

Each country has its gripes. As Carter heard last week from visiting Prime Minister James Callaghan, Britain is upset by New York City’s reluctance to grant landing rights to the Anglo-French Concorde supersonic jetliner (see THE WORLD). French President Valéry Giscard d’Estaing is even more piqued. The West Germans fear that Carter’s pressure to get them to cancel a sale of nuclear reactors to Brazil will result in damage to their reputation abroad as dependable deliverers.

So far, no official agenda has been drawn up for the London summit. But when the leaders gather round the mahogany table in the State Dining Room at No. 10 Downing Street, the conversation seems certain to center on these topics:

> Speeding the Recovery. The weaker four (Britain, Canada, France and Italy) want the stronger three (the U.S., Germany and Japan) to stimulate their economies rapidly and thus create a market that will draw in imports. Carter took the lead by announcing a two-year, $31 billion program to speed up the U.S. economy, and Mondale pressed the Germans and Japanese to follow that example. But West German Chancellor Helmut Schmidt, who reflects his country’s historic fear of inflation, opposes heating up his economy too quickly. Carter is expected to renew the plea, but gingerly. Says one White House adviser: “We’ve made our point and we’ll make it again. But we’re not going to rub it in.”

> Encouraging Trade. As a result of the worldwide stagflation, protectionism is rising again. Prime example: the European Community, worried about the protectionist demands generated by its growing trade deficit with Japan, has asked the Japanese to restrain certain sensitive exports. Carter is expected to urge a revitalization of worldwide tariff-cutting talks that officially began in Tokyo in 1973 but have so far accomplished nothing.

The President faces his own pressures. U.S. shoe workers and factory owners are clamoring for a tariff that would reduce imports to their 1974 level. Makers of color TV sets are similarly demanding high tariffs that would keep out Japanese imports. The betting is that Carter will resist; he could hardly call for free trade at the summit right after caving in to protectionist pressure at home.

> Conserving Energy. On April 20, shortly before leaving for the summit, Carter is committed to announcing a “comprehensive” U.S. energy policy that will presumably call for tough conservation measures. He will probably ask his fellow heads of government to follow Washington’s lead. One proposal being considered by the White House: to ask the other six for a pledge to cut their 1978 energy consumption by a set figure, perhaps 10%. Carter will run into some flak. The French, in particular, complain that the U.S.’s rising oil imports encourage the OPEC price boosts that hurt countries like France.

> Trading with the Third World. Kissinger toyed with the idea of commodity price stabilization agreements that would insulate developing countries from wild swings in their earnings from export sales of raw materials, but Ford’s Treasury Secretary, William Simon, an ardent free-trader, knocked it down. No such conflicts have shown up in the Carter Administration. The President, while not committing the U.S. to stabilization plans, seems willing to discuss them. The Administration last week informed a United Nations meeting in Geneva that it is ready to talk about the financing of stabilization plans.

The two previous economic summits, at France’s Château de Rambouillet in November 1975 and in Puerto Rico last June, produced little but talk. London may be no different, but fortunately immediate results are not all-important. The meeting will give the other six heads of government their first opportunity to size up the new President in person. If they like what they see, they will be bolder in tackling the nagging economic problems that afflict the industrialized world.

* The seven: Britain, Canada, France, Italy, Japan, West Germany and the U.S.