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Timely summit

May 1, 1985



THE Bonn economic summit -- which officially gets under way tomorrow -- comes at an opportune moment for the Western industrial nations and Japan: against the backdrop of a moderating economy in the United States, an economy which has, to date, been the engine driving the global recovery. In that regard, the Reagan administration has considerable justification for seeking to nudge Europe (particularly West Germany) and Japan into pursuing somewhat more expansionary monetary and fiscal policies designed to spur growth -- yet expansionary actions modest enough to avoid a resurgence of global inflation. The administration can also point to the more subdued US economic pace to justify its call for a new round of global trade talks in 1986, since Europe and Japan's current levels of growth are in considerable part linked to their strong export performance abroad.

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All that said, the Bonn summit -- the 11th regularly institutionalized gathering of Western heads of state and finance ministers since the Rambouillet summit outside Paris back in 1975 -- will most likely be remembered as much for non-economic issues as the triumvirate of economic issues expected to dominate the conference: trade, global expansionary policies, and reform of the world's monetary system. The non-economic issues include President Reagan's decision to visit the Bitburg military cemetery in West Germany and European concern over the American ``star wars'' antimissile system. While supporting research, many European heads of state are wary of an eventual testing or deployment of the defense system.

Economic summits, it must be kept in perspective, are as much media events and occasions for the heads of states of the major industrial nations to get together socially as they are gatherings geared toward substantive economic actions. The difficulty of reaching a consensus on economic issues -- other than the broad generalities usually issued in end-of-conference position papers -- need not be surprising, since each nation follows its own distinct economic policy.

But what makes some mutually agreed upon action at Bonn possible this year, particularly regarding trade talks, is that all of the leaders attending, with the exception of Canadian Prime Minister Brian Mulroney, are old hands at such summits and already acquainted with one another. That familiarity, of course, does not preclude controversy, such as French objections to the holding of global trade talks without coupling such talks with reform of the world monetary system. Still, it is expected that the heads of state will once again paper over disagreements as much as possible.

Just how much the global economy -- especially the giant US economy -- may be slowing is the subject of much uncertainty.

The International Monetary Fund, in its just-released annual economic report, holds that the US economy will grow 3.4 percent during 1985 and avoid a recession.

But such growth would still be below the administration's earlier projection of 4 percent growth. Presumably, growth in the 3 percent range would not be rapid enough to provide the substantial numbers of additional jobs necessary to accommodate new entrants into the US labor market in the months ahead. That could well mean upward pressure on the unemployment rate. Some economists are also noting that purchases of imports are slackening in the US -- which should be of concern in export-oriented Europe.

A new forecast just released by the West German government's council of private economists contends that economic growth in West Germany will be down a notch this year, to 2.5 percent, from 2.6 percent last year. Unemployment, meanwhile, is expected to rise, from 9.1 percent in 1984 to around 10 percent in '85.

President Reagan could be expected to point to such evidence in his private meetings with European heads of state to shore up his call for a firm date next year for a new round of global trade talks. There is considerable support for such talks among many of the developing nations of the Asia-Pacific region, which are increasingly geared toward world trade. Asian and Pacific Rim nations, it should also be noted, have extensive trade with the United States, in part at the expense of trade between the US and Europe.

In short, then, Bonn represents a moment of genuine opportunity for the industrial leaders to agree, at the very least, to broad steps and policies designed to ensure continuing global recovery. ----30--{et