BUSINESS/ECONOMY

Vagueness in Venice

D’ARCY JENISH June 22 1987
BUSINESS/ECONOMY

Vagueness in Venice

D’ARCY JENISH June 22 1987

Vagueness in Venice

BUSINESS/ECONOMY

Over an elegant dinner of coquille St. Jacques, gnocchi and lamb ribs in Venice’s opulent 18th-century Palazzo Grassi, Prime Minister Brian Mulroney made his case. Before the annual summit meeting of leaders from the United States, Japan, West Germany, Britain, France, Canada and Italy, Mulroney knew that West Germany was most strongly opposed to Canadian initiatives on South Africa and agricultural subsidies. As chance would have it, Mulroney sat next to West German Chancellor Helmut Kohl during the 90minute dinner on Tuesday, June 9, and quietly but persuasively argued Canada’s positions. The results were evident when the summit concluded Wednesday afternoon. Italian Prime Minister Amintore Fanfani, who as host spoke for the group, called for an end to apartheid in South Africa and a truce in agricultural-subsidy wars.

Although Mulroney claimed a personal triumph, the three-day summit

involving the seven big industrial democracies, known as the G7, left the world economy unchanged. The nine-page economic communiqué, containing 35 different points, consisted of bland generalities about promoting growth, employment and economic co-ordination. But the leaders failed to produce any dramatic new solutions to the problems that threaten to cause another debilitating world recession. Japan and West Germany, the two countries with large trade surpluses, repeated earlier pledges to stimulate their economies in order to increase imports and reduce their surpluses. The countries with major trade deficits, led by the United States, promised to try again to correct their trade and fiscal shortfalls. The leaders denounced protectionism and acknowledged the Third World debt crisis— without proposing any specific remedies.

The summits originated in 1975 as a mechanism for discussing economic issues only, but over the years they have expanded to cover a wide range of politi-

cal problems as well. Indeed, this year’s six-page political communiqué touched on subjects as diverse as the AIDS epidemic, illegal drugs and, in a separate statement, even the dangers to shipping in the Persian Gulf war zone. U.S. President Ronald Reagan convinced his fellow leaders to renew their denunciation of terrorism and won from them a declaration of support for freedom of navigation in the Gulf. As for AIDS, the summiteers called for co-ordination of medical research, and they recommended that the World Health Organization oversee efforts to combat the disease.

But with the motherhood issues out of the way, Mulroney found that he was unable to win the necessary unanimous support of the other leaders to include a statement in the political communiqué against apartheid. External Affairs Minister Joe Clark said that the United States, Japan and France supported Mulroney, but West Germany’s Kohl was opposed. The Prime Minister worked on Kohl throughout the leaders’

dinner Tuesday evening, then Clark followed up by phoning West German Foreign Minister Hans-Dietrich Genscher later that night. Mulroney raised the South Africa issue again on Wednesday morning, at which point the leaders decided that Fanfani could mention South Africa in his closing remarks. As a result, the Italian prime minister’s oral summary included the sentence, “We agreed that a peaceful and lasting solution can only be found to the present crisis if the apartheid regime is dismantled and replaced by a new form of democratic nonracial government.” Later Mulroney told Canadian reporters, “We persisted, and

I’m pleased the persistence paid off.”

On the agricultural subsidies issue, the Prime Minister achieved everything on his agenda but, again, not without a fight. In mid-May trade ministers from the 24 member nations of the Organization for Economic Co-operation and Development (OECD) adopted a set of guidelines aimed at ending the massive subsidies that have led to vast overproduction and driven commodity prices to disastrous lows. Mulroney persuaded his fellow leaders to endorse the agreement and to include a declaration of support in the summit’s economic communiqué. Highly placed officials in the Canadian delegation said that West Germany’s Kohl was initially opposed because his coalition government is heavily dependent on the farm vote.

Still, summit support for a truce in the subsidy wars will not mean overnight salvation for grain farmers in Western Canada and elsewhere who have been devastated by falling com-

modity prices. Instead, Mulroney described the leaders’ action as “a vital ingredient to a long-term solution.” From a practical point of view, said officials travelling with the Prime Minister, such political support will put pressure on the General Agreement on Tariffs and Trade negotiators to produce agricultural trade regulations. As well, the leaders committed themselves to reviewing the progress of the GATT talks when they meet next year in Toronto.

On other economic issues of pressing importance, the leaders had little or no chance of coming up with new solutions, largely because of political circumstances. Italy’s Fanfani was named

prime minister in mid-April pending a June 14 general election. As a result, he was in no position last week to commit his country to any new long-term economic policies. Britain’s Margaret Thatcher was in a similar position, with the summit scheduled on the eve of Britain’s general election on June 11.

But to some extent the seven leaders’ role in co-ordinating economic policy— along with the potential for dramatic action at the summits—has been reduced by the creation of a finance ministers’ committee last year at the 1986 Tokyo summit. Since then, the ministers have met three times to establish a set of objective indicators on such things as growth rates, trade and budget balances, inflation, interest rates and currency exchange rates, which can be used to keep their economies moving in the right directions. Canada’s Michael Wilson told Maclean ’s that the regular meetings have been designed to anticipate problems. Said Wilson: “We are

trying to encourage the Americans, the Japanese, the Germans and smaller countries like ourselves to adopt policies to get these major deficits or surpluses down to a more normal size.”

After choosing their economic indicators, the ministers had to ensure that they were using common methods of measurement because their statistics are collected differently and their budget cycles vary. Wilson said that consideration of the economic indicators contributed to Japan’s announcement just before the summit of a $56.8-billion program of public spending and tax cuts aimed at stimulating the economy and boosting imports of foreign goods.

The leaders’ renewed commitment to the use of economic indicators received a mixed reception from government officials in the participating countries. In France it was widely viewed as a positive step, with one foreign office aide describing the summit as “the most satisfactory and balanced” in years. The French official said that the “mere promise to abide by norms and open the books to common scrutiny augurs well for much greater stability.” On the other hand, West German and British officials were less enthusiastic about the monitoring system because it could limit their independence. As a result, said West German Finance Minister Gerhard Stoltenberg, the indicators should lead to action only if world economic growth is inadequate—“a situation we hope won’t take place.”

While the United States has been pressuring both Japan and Germany to stimulate their economies, the Canadian economy is performing fine, according to Wilson. The minister admitted that some G7 members and such multilateral organizations as the International Monetary Fund have complained that Canada is not reducing the budget deficit quickly enough. But on the whole, he said, they are satisfied with the Conservative government’s policies on foreign investment, energy, deregulation and privatization. “People are saying this is really a textbook example of what countries should be doing,” he told Maclean’s. But the Venice summit ended with no new initiatives for such global problems as the debt crisis in the developing world and fluctuations in interest and currency rates. And the potential remains for international upheavals that could derail even a textbook national economy.

—D’ARCY JENISH with ADELAINE DROHAN in Venice

MADELAINE DROHAN