Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

130. Memorandum Prepared in the Department of State¹

Washington, undated

WILLIAMSBURG SUMMIT

Summary

This memorandum provides background and recommendations from the Sherpa team for the President’s use in formulating instructions to guide the substantive preparation for the Williamsburg Summit. The approach taken by the Sherpa team is based on the success of the President’s domestic program, and relies heavily on the President’s leadership at the Summit.

The memorandum suggests the following as U.S. objectives at the Summit:

1) Economic Policy: Agreement that world economic recovery depends on each country establishing the domestic conditions for sustainable, non-inflationary growth and job creation, not on an international “blueprint” of expansionary action. The leaders would build on and strengthen the multilateral “surveillance” mechanism agreed at Versailles.

2) Trade: Positive steps to fight protectionism, avoid predatory trade practices, resolve outstanding trade problems, and pursue greater trade liberalization. Specific action is recommended on trade with developing countries, high technology, and new institutional initiatives to assure a more integrated approach to the problems of trade and finance.

3) Debt and Finance: Agreement to a set of principles to guide our collective approach to problems of international debt and finance. In particular, the Summit leaders should reaffirm their support for the increase in IMF resources by the end of this year and otherwise signal their determination to safeguard the international financial system.

4) Security and East-West Economic Relations: Endorsement of the principles governing our future approach to East-West economic relations, welcoming agreements which will have been reached in this area before the Summit and resolving to continue work toward greater coordination of our policies as a permanent feature of our cooperation to insure Western security.

[Omitted here is information not focused on debt issues.]

U.S. Strategy

We propose the following as elements of a U.S. Summit strategy:

[Omitted here is information on general economic policy and trade.]

Debt and Finance

The world financial system is faced with a potential crisis which need not develop into an actual crisis, provided all participants cooperate. To this end, our objective is to get agreement at Williamsburg to the following key principles:

— Any long-lasting remedy to the debt problems of less-developed countries requires effective policies of economic adjustment that must be adopted and followed by the countries themselves.

— Official financing on a transitional basis must be available where needed, in order to permit orderly domestic adjustment to take place. (The International Monetary Fund is the institution best able to provide this support, and to assure that the adjustment programs of borrowing countries are appropriate. Other forms of official financing, through Multilateral Development Banks and bilateral programs, can also provide longer term assistance.) The Summit should reaffirm support for increases in the International Monetary Fund quotas and the General Arrangement to Borrow, and stress the need for completing the increases before the end of 1983.

— The role of commercial banks overshadows that of all other lenders combined. Commercial banking institutions must be aware of the dangers to them and to the world financial system should they attempt to withdraw funds during the adjustment period. As the adjustment process succeeds, commercial banks will have an incentive to increase their lending.

— Treasuries and Central Banks must demonstrate the will to provide immediate and sufficient ad hoc liquidity in emergency situations while the countries involved conclude an agreement to draw on the International Monetary Fund.

— The major industrialized countries must counter the pressures for inward-looking protectionism and provide markets for developing countries’ exports. Economic recovery among the Summit countries provides the best hope of meeting this requirement.

We will propose that these points be worked into the “economic policy protocol” to be discussed by Finance Ministers at Williamsburg.²

[Omitted here is information unrelated to debt issues.]

1. Source: Department of State, Bureau of Economic Affairs, Office of Economical and Agricultural Affairs Files, Official Economic Summit Files, 1975–1991, Lot 93D490: 1983 Williamsburg Summit, Williamsburg Sherpa Meeting April 15–17, 1983. Secret. Sent under a March 15 covering memorandum from Wallis to multiple recipients in which Wallis explained that the memorandum had been approved by Reagan “in general terms as instructions for the preparation of the U.S. participation in the Williamsburg Economic Summit.”
2. An unknown hand wrote “No” in the left-hand margin.