Breakthrough in world crisis, says P.M.

Press, 1 May 1984, Page 8

Breakthrough in world crisis, says P.M.

By MICHAEL HANNAH, Parliamentary reporter The Prime Minister, Sir Robert Muldoon, has claimed a “major breakthrough” in talks aimed at reforming the world economic, trade and aid systems. Three days before the managing director of the World Bank, Mr A. W. Clausen, is due to visit New Zealand, Sir Robert said last evening that he believed there was finally movement "at the highest political level” on proposed reforms. “Political leaders are now being forced to admit that we have a crisis situation which demands some kind of action,” Sir Robert told Auckland Rotarians. “The recognition that we are dealing with a political,, rather than a technical problem, is a major breakthrough.” Sir Robert’s speech, which outlined a proposed agenda for an international conference to tackle the issues, comes as he is about to have talks with Mr Clausen. It is also a week before Sir Robert leaves for meetings in the United States and Europe, dealing with proposals to solve the world economic crisis, a visit he believed political opponents would dismiss as “another of his overseas junkets,

when he should be at home solving New Zealand’s economic problems.” Arguing that his speech would not be regarded as newsworthy, Sir Robert urged his audience, and Rotarians around the world, to pressure their politicians to address the crisis. He said the crisis “threatens the whole of the world’s interdependent economy” and “could within a very short time bring the affluent nations of the world to a depression of 1930 s style.” The crash of one or more of the major banks, which had provided loans to countries now unable to service those loans, “would see another day such as that in 1929, which heralded the onset of the Great Depression,” he said. Sir Robert said that he, and others working with him around the world, wanted to set up a committee of 22 countries, replacing the so-called “Interim Committee” of the World Bank and the International Monetary Fund, which now had a “minimal” constructive output. The new committee would bring together the I.M.F. and the General Agreement on Trade and Tariffs (G.A.T.T.), the major trade organisation, “out of their rules of the 1940 s and

into the 1980 s,” he said. Direct aid for countries in need would come through the international currency of S.D.R.s (special drawing rights), issued at present by the I.M.F. But they would go only to countries with a per capita income below a certain level, according to Sir Robert’s proposal.

He said that Mr Clausen had a different idea, channelling the aid money through the International Development Association, a branch of the World Bank. However, Sir Robert said he thought some poor countries would not be poor enough to borrow from the 1.D.A., yet give up their right to S.D.R. money. Saying that “some variation of this idea is certainly possible,” Sir Robert opened the possibility of some compromise in his talks with Mr .Clausen later this week.

The new international committee would also look at a "worth while move” against protectionism, giving the G.A.T.T. a new mandate; more discipline over volatile exchange rates; more reasonable terms from the 1.M.F., which at present applies stringent conditions to its loans; and an adjustment by surplus countries as well as deficit countries. Sir Robert said it was

clear deficit countries could not cany the whole burden of adjustment. Up to 50 countries were now unable to service, let alone pay off, their external debt. Yet every dollar of surplus in countries like Japan or Germany inevitably created a dollar of deficit elsewhere. Sir Robert said his talks with President Reagan in February and at the United Nations during the same visit told him that “finally we are getting movement at the highest political level.” His meetings from next week will include: 0 A meeting of senior Ministers of 12 countries, together with representatives of the 1.M.F., the G.A.T.T. and the European Community, called by the American Administration; over 2% days, the meeting will discuss trade protectionism and its relationship to the international financial system. ® A meeting of an eightmember Commonwealth Ministerial committee, set up in New Delhi last November, of which Sir Robert is the chairman. © The O.E.C.D. Ministerial Council meeting, which Sir Robert attends annually and at which he generally gains an updated picture of the major, affluent economies.