Office of the Historian

279. Memorandum of Conversation1

Washington, September 21, 1982, 10 a.m.

SUBJECT

  • International Monetary Issues

PARTICIPANTS

  • United States

    • The Secretary
    • W. Allen Wallis, Under Secretary-designate for Economic Affairs
    • Elinor G. Constable, Deputy Assistant Secretary for International Finance and Development

  • International Monetary Fund

    • Jacques de Larosiere, Managing Director

The meeting opened with a brief discussion of the Rambouillet Economic Summit.2 De Larosiere regretted the failure of participants to follow through on their commitment to adopt appropriate domestic economic policies. He hoped that, in contrast, we would take the steps agreed to at Versailles.3

The remainder of the discussion focused on trade policy as it relates to the IMF. De Larosiere said he had emphasized trade issues in his Bank/Fund Annual Meeting4 speech because he viewed effective measures to resist protectionist tendencies as essential if developing countries were to adjust successfully. Inaction by developed countries would threaten the entire process. He was, therefore, active in preparations for the GATT Ministerial.5

The Secretary asked whether, in applying its conditionality to developing countries, the Fund risked encouraging them to over-manage their efforts to get control of imports. De Larosiere thought this was unlikely, given the Fund’s commitment to an open international economic regime and its emphasis on liberalizing trade policy [Page 696] by discouraging export subsidies and import controls. De Larosiere cited Pakistan and India as examples of countries where the Fund has pressed hard for liberalization on the import side, using explicit performance criteria and quantifiable targets. He emphasized foreign exchange policy as an important instrument of liberalization and the Fund’s advice that countries eliminate dual or multiple exchange rate systems. He cautioned that, where governments have traditionally resorted to a high level of intervention, change must be gradual.

De Larosiere thought liberal policies in developing countries had to be balanced by export opportunities in developed countries if the Fund were to play a credible role in supporting effective adjustment. He wondered whether it would be possible to link the trade liberalization content of an IMF program to some sort of developed country quid pro quo in the GATT framework. The Secretary noted that developing countries are quick to criticize the U.S. but follow extremely protectionist policies themselves, and asked whether the Fund could make GATT affiliation a condition of a Fund program. De Larosiere said that the Fund could not insist on such a condition explicitly, but could certainly advise developing countries such as Brazil of the benefits of GATT membership. The Secretary thought a general statement by the IMF encouraging GATT affiliation might be helpful, and de Larosiere agreed.

  1. Source: Department of State, Executive Secretariat, S/S Files, Secretary Haig Memcons and Whitehead Briefing, Lot 87D327: Secretary Shultz—Memcons September 1982. Confidential. The meeting took place in the Secretary’s office. Drafted by Constable (EB) on September 24; cleared in S/S and S.↩
  2. The Rambouillet Economic Summit took place November 15-17, 1975, in Rambouillet, France. For documentation on this summit, see Foreign Relations, 1969–1976, vol. XXXI, Foreign Economic Policy, 1973–1976, Documents 91–129.↩
  3. The Versailles Economic Summit took place June 4–6 at the Palace of Versailles, France. See Document 93.↩
  4. See footnote 3, Document 278.↩
  5. See footnote 2, Document 99.↩