THE PRESS FRIDAY, JUNE 12, 1987. Easy options at Venice

Press, 12 June 1987, Page 16

THE PRESS FRIDAY, JUNE 12, 1987. Easy options at Venice

The, Venice economic, summit meeting of the world's seven leading Western industrial countries and the European Economic Community, appeared to take mostly the easy options. Although many of the right things were said, it would be difficult to claim that the world was changed by the meeting. The Americans wanted, and got, Western backing for a stem line in the Gulf. The Americans wanted, but did not get — because the Europeans opposed them — a firm commitment to reform of world agriculture. Mrs Thatcher wanted, and got, splendid exposure to the world’s cameras to help with her re-election. The Canadians wanted, and got,, a condemnation of apartheid, but it stopped short of any promise of action against South Africa. Much of the rest was ritualistic: traditional gestures towards economic growth, lower inflation, lower interest rates, and more stable exchange rates. A few doctrinal matters were touched upon. “The correction of external imbalances will be a long and difficult process. Exchange rate changes alone will not solve the problem of correcting these imbalances while sustaining growth,” said the text of the economic declaration. This was the summit meeting’s way of acknowledging the United States view that the fall in the value of the American dollar would not in itself cure the United States trade deficit; that it would require Japan and West Germany to help cure the problem. In the words of the declaration: “Surplus countries will design their policies to strengthen domestic demand and reduce external surpluses while maintaining price stability. Deficit countries, while following policies designed to encourage steady lowinflation growth, will reduce their fiscal and external imbalances.”

Some minor encouragement may be taken from the attitude towards agriculture, which was the issue on which New Zealand was placing most of its hopes. At least the Venice summit meeting did not oppose the view of the Organisation for Economic Cooperation and Development that the longterm objective should be to allow market signals to influence the orientation of

agricultural production. However, this amounts to little more than saying that it would be a good idea if, one day, farmers were not paid, to produce what the market doesnot want.. The sensitivity of agricultural issues was, revealed in the qualifications attached to agricultural reform —. that consideration would have to be given to “social and other concerns, such as food security, environmental protection, and over-all employment” On the basis of these considerations the Europeans have insisted on keeping people down on the farm because of worries about farmers coming into the cities. Both the Europeans and the Japanese have insisted on continuing subsidies of food production for reasons of food security. Such encouragement as is offered is to be taken from the sentence: “We have agreed, and call upon other countries to agree, to refrain from actions which by further stimulating production of agricultural commodities in surplus, increasing protection or destabilising world markets, would worsen the negotiating climate and, more generally, damage trade relations.” Japan is often the country most criticised when world economic issues are discussed. Japan neatly avoided that at Venice by announcing, at the end of May, some substantial measures to boost its economy and to extend aid to developing countries. Japan even earned some praise at Venice. The declaration welcomed the “recent initiative of the Japanese Government in bringing forward a new scheme which will increase the provision of resources from Japan to developing countries.” Venice has just played host to the thirteenth economic summit. As in other years, the meeting gave at least an aura of

co-ordination to Western economic policies and the opportunity to express horror about trade protection. The value of these summit meetings might lie in these imprecise sentiments on economic management. The precise accomplishments of the summit meeting were political — in finding common ground on the Gulf, on terrorism, and on the arms control dialogue with Moscow.