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

136. Minutes of a Summit Preparatory Meeting¹

Williamsburg, April 16, 1983

April 16	Afternoon Session
	Trade, Debt, Finance
Henry Nau	Presents outline; stress on relationship between domestic policy and international system, to link with previous item on economic policy and surveillance. LDCs figure prominently in the system. Want Summit to affirm central theme of growth as it is reflected in the components of the international system. Three major functional elements: macroeconomic policy, trade and finance rather than North-South etc.
	Recapitulates interrelationships from Overview talking points 1–6.
	Changes in revised outline:
	1) incorporates development as a principal objective.
	2) Time-phased approach (III, B, 3) short-term encompasses II, A, 1 & 2(b–d) & III, B, 1 and 2. Long-term focus on new trade negotiating process, and balance between trade and aid.
	Message coming out of Williamsburg for use at UNCTAD VI.2
Steeg	We are on track on linking recovery and rejection of protectionism. Use OECD Ministerial for strong language on using “room for maneuver” from recovery to halt and reverse the trend of protectionism. This will help prepare discussion at Williamsburg.
	Next, put GATT work program into force.
	Need give close attention to North-South relations. Have to say something because of UNCTAD. Agree it should be on debt and trade.
	Re debt, need deal immediately with debt crisis but not in ways that compromise long-term system viability.
	Re trade, services is in GATT work program. Technology should be examined in GATT.
	Re joint trade/finance meetings: sympathy for informal getting together. Commission has competence for trade. Questions have been raised about whether idea is to establish new institutions.
	Should concentrate on putting impetus behind existing work programs.
Durieux	Re identification of linkages: Clearly there is link between openness of market and solution of debt. Also link between interest rates and debt solution; level and stability of commodity prices also important. Need be cautious about these.
	Re III, A, 1: Need avoid overambitious statement on avoiding protectionism; risks raising expectations. Need reword.
	III, A, 2: Goes beyond agreed GATT program.
	(a) Is increased trade necessary to long-term solution? (Steeg—Yes). Putting excessive importance on this? Development of LDC food and energy production also important. Also increasing concessional aid. (Canada: trade essential but not sufficient).
	What does ref to trade in services mean?
	Re III, B, 3, b: Too much expected from increased access by LDCs to DC markets. Need face realities and recognize that increase of export receipts will not significantly affect debt service ratios. This will do nothing to help meet debt obligations. There is lack of balance in your presentation.
Beryl Sprinkel	True other forces involved, but essential they get foreign exchange both to service debt and tap additional lending. Adjustment in LDCs essential. IMF programs typically encourage restructuring of foreign trade, control of macroelements, etc. to service debt and improve creditworthiness. Net export position is essential if they are to earn their way. We have to help them by improving trade arrangements.
Camdessus	Agree with Sprinkel re IMF programs. 17 countries have been examined by Paris Club. Almost all suffered from protectionism, but even more from lack of growth in DCs.
Marchand	Sympathize with Durieux’s point re emphasis given to market openness. It is overdone. Need better balance between market access and other devices to improve LDC positions. Outline rejects master plan for debt restructuring “a bit lightly”. Is there really consensus on that?
	Re elements of debt policy (III, B, 2): Notes commercial banks very nervous. Need find ways to “alleviate” laws of market place to influence their behavior. Elements should bear more relationships to NAM recommendations by better reference to New Delhi language.3 Can’t have them be seen as two ships passing in night. Need relate our message to their expectations.
Paye	Re trade: Summit should renew commitment to resist protectionism, maintain and increase openness to reinforce recovery. Will be more credible if our own strategy for recovery is credible. Link between what we say on trade and what we do on economic policy.
	Williamsburg not place to reopen GATT Ministerial discussions and conclusions. Have decided to do some studies in GATT. Let them proceed.
	Re more meetings close to Steeg views. Need for these to be discreet, not publicized. Cannot permit that they threaten existing institutions.
	Re North-South: Attempt to treat problems in integrated way is interesting. However, approach in paper too limited. Doesn’t cover all facets of LDC problems. FM will want tackle these problems more comprehensively, referring to what has happened in Delhi. Have to say something about that, and to GNs (e.g. express regret at lack of success of what we tried at Versailles). South problems not just trade and debt. Should cite recession, oil shock, high interest rates which deprive LDCs of resources to deploy for their own development. This needs more cooperation between North and South.4 Thus need explicit item on North/South.
Fisher	Need take account of political dangers in South. Economic trouble breeds political instability. We see their willingness to talk with us in danger of being submerged by more radical elements. Moderates appealing to us (e.g. via Delhi declaration). Thus need more political answer than in outline. Kohl referred to need make contribution to North/South dialogue by promoting their independence and non-alignment. Need also reply to New Delhi, e.g. by reference to interdependence as in NAM communique. We should show we ready to find solutions and cooperate to that end at UNCTAD VI (e.g. by taking up North/South dialogue).
Paolini (and other Recommend Italians)	Three priorities:
	1) 7 refrain from measures inconsistent with GATT.
	2)5
	3) Discourage new protectionist measures.
	Re North/South dialogue: Agree entirely with French and Germans re importance of dialogue and need for response to Delhi declaration.
	Integrated approach carries implicit message, but need explicit as well. Unclear to what extent our recovery will be transmitted to Third World. Need constructive approach re UNCTAD. We encouraged by moderation and realism of Delhi and Buenos Aires.6 Should be reflected by Summit statement. Our leaders objectives will be political.
	Agree with Durieux views about need for more balance. Protectionist pressure strong, but crusade is not credible response. Question is how to proceed with negotiations; old style not sufficient. DCs must be open to LDC exports in order to permit LDCs to service their debt.
	Concern about commercial bank role. Problem of risk and loan portfolios. Thus need focus on need for financial flows from whatever service.
	Finally need avoid rigidity and dogmatism in IMF conditionality.
Armstrong	Agree with Steeg’s position. Understand view that not enough to focus on LDC export earnings, but it should be significant part of Summit conclusions. On occasion of this Summit, that is appropriate place for emphasis.
Evans	Approve functional as opposed to topical approach to structuring discussion. Agree that theme for message to UNCTAD should be interdependence. Right that DCs and LDCs look for measures which are positive sum.
Tietmeyer	Need clear message to LDCs which also takes account of political dimension. Not enough to underline this and do nothing on economic relations. Need give them confidence that world economy is recovering. Must also demonstrate that it will be sustainable and non-inflationary. Otherwise benefit will be low.
	Trade questions need focus on recovery on both intra DC as well as between DCs and LDCs. Trade openness necessary for DC recovery too. Need anti-protection pledge, including both barriers and “subsidies for negative adjustment.”
	Re financial resources, agree Delhi and Buenos Aires language more moderate and we can refer to that in statement. However, clear we cannot undermine monetary system by accepting some of their special demands re IMF conditionality, SDR allocations. Thus, should welcome moderate language but avoid endorsement of measures that can undermine monetary system. Agree with Sprinkel re need for F/X, and with Camdessus about growth. But growth depends on openness of markets. Should also note importance of LDC domestic policies in attracting capital.
Marchand	Are we prepared to say that our recovery depends on growth in Third World as well? Not a rhetorical question.
Beryl Sprinkel	If banks have to write off LDC debt, will be devastating to banks’ net worth, thus posing threat to our own investment and recovery.
Marchand	Ref to Kissinger thesis about removing LDC threat of debt moratoria.
Henry Nau	Trying develop comprehensive view looking over longer term. Need combine steady approach to management in short term with how to proceed in longer run. Might begin a process of discussions among trade and finance ministers to look collectively at ways to improve trade and financial systems. Should distinguish between necessary short term actions to improve liquidity and maintain market access, and longer term possibilities such as reciprocal negotiations to enhance market access in both DCs and LDCs, as Italians intimated.
	Re politics, need not avoid substance. Can’t handle all aspects of interdependence in short term, but think of a process to address longer term aspects.
Evans	Real dialogue has been separate from formal dialogue, and latter interpreted as zero-sum game.
	Real dialogue (e.g. in Banks, Lome, Paris Club, etc.) has prospered and been fruitful. Formal one (UN, UNCTAD) has been different, in which presentations made in one bear no relation to those in the other.
	South thinks power flows from institutions. North has been too acquiescent in this view. Believe interdependence is good point of departure. Good if it stresses all areas where dialogue occurring. Must be ready to listen, to propose and not zero-sum. Attach importance to integrity of international financial institutions, both in our own interests and those of LDCs.
Motono	Noted Steeg’s point that we should encourage South with message of our recovery. Needs to be credible. Continuation of open trade depends on open investment climate in LDCs. If South wants recovery, they need focus on their own means and will, as well as ours.
Drabble	Re 5 elements of debt strategy, any statement should be fairly short. Case-by-case approach requires we remain vigilant about future prospects. Questions about where resources will come from. Cannot afford to be complacent about any of these.
	Problem also re poorest LDCs. So far, we are focusing mainly on big debtors, and trade with them, especially NICs. Re poorest, debt not problem but rather poor management and insufficient aid flows. Need make our awareness of difference clear, and need to channel concessional aid especially to poor and key role of IDA.
Tietmeyer	Agree with that point.
	Also problem of short-term liquidity problem in IMF. All of us should find a way to bridge liquidity problem until quota increase and GAB come into effect. We said we’re willing to help if others will do same. No reaction yet. Not a Summit question.
Beryl Sprinkel	Important we move process to success by year-end on IMF replenishment and GAB. Think there are devices that can help IMF get to that point if replenishment in place by year end.
Allen Wallis	Summit should make general reference to importance of IMF replenishment and give it a boost.

[Omitted here is discussion of environmental issues, energy, and East-West relations.]

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. Confidential. The meeting took place in the afternoon in preparation for the Williamsburg Economic Summit. No drafting information appears on the minutes.
2. For documentation covering UNCTAD VI, see the Global Negotiations compilation of this volume.
3. See footnote 3, Document 104.
4. For documentation covering North-South issues, see the Global Negotiations compilation of this volume.
5. This line was blank in the original.
6. The G–77 Ministerial meeting to define its negotiating strategy and position for UNCTAD VI took place April 5–9 in Buenos Aires.