Debt and trade

Press, 7 May 1983, Page 18

Debt and trade

A country that has to pay its debts abroad must be able to trade to earn enough to pay the debts. This simple condition is at the heart of the crisis threatening the world financial system. The International Monetary Fund is being called on to bail out a number of countries in serious, even disastrous, financial disarray. How can these countries ever put their financial affairs in order if they are unable to trade because of restrictions imposed by importing countries? The world body appointed to deal with matters of trade practice is the General Agreement on Tariffs and Trade. It is not surprising therefore that ideas of establishing closer links between the I.M.F. and G.A.T.T. are being promoted. A committee of G.A.T.T. will consider the idea of closer links in meetings that are being held in Geneva. Although the committee has no decision-making powers, its deliberations are ' likely to be taken into account when the economic summit meeting of the seven major industrial Western countries is held in Paris later this month. The seven countries are the United States, Britain, Italy, West Germany, France, Japan and Canada. The European Commission is also represented. How recommendations from the consultative committee will fare is hard to predict. In spite of some rising hopes about the world economy, the plain fact that more than 30 million people are unemployed in the countries in the Organisation for Economic Co-

operation and Development is going to weigh heavily in the minds of the Government leaders who will be meeting in Paris. Liberalised trade unfortunately is not likely to be given priority in anything but rhetoric. The link between the I.M.F. and G.A.T.T. is not the only subject for discussion in the G.A.T.T. committee. The committee will also review world trade since the G.A.T.T. Ministerial meeting last November. Some undertakings were made at that meeting; the committee will be considering how performance has matched promises. The G.A.T.T. Ministerial meeting made few advances in the conduct of agricultural trade that would help New Zealand: the European Economic Community was determined to retain agricultural protectionism. This failure has caused the Prime Minister, Mr Muldoon, to abandon hope in G.AT.T.’s ability to resolve the problems of agricultural countries such as New Zealand. His proposal is now for a radical overhaul of the world financial system which will tackle both I.M.F. policies and trade policies. The proposal to be discussed in Geneva is far less radical than this. Yet it must be hoped that the ideas will gain acceptance because the future for some countries, heavily in debt and without a chance of trading their way out of the debt because of restrictive trade practices, is looking increasingly bleak. Protectionism can make the poor stay poor indefinitely.