Western alliance squabbles quietly over trade disputes, export credits

Squabbling within the Atlantic alliance is more muted of late, but fundamental divisions remain just beneath the surface. Last June, trade and monetary disputes tore apart the Versailles summit. Since then there has been much progress in resolving these disputes. But a series of meetings here makes it clear that similar issues still nag the alliance one month before the leaders of the seven major Western countries - West Germany, France, Italy, Canada, Britain, Japan, and the United States - meet in Williams-burg, Va.

An Organization of Economic Cooperation and Development (OECD) meeting to set export credits broke up Tuesday in disagreement. The US has long wanted to limit subsidized export credits, especially to East bloc countries. Several West European countries - primarily France and Italy, which have high commercial interest rates - have resisted, arguing they need to subsidize their export credits to remain competitive.

Over the past year, the two positions have been narrowed. The OECD ''consensus'' export-credit rate has been dramatically increased. For so-called ''rich'' buyers of US and European Community (EC) goods, it now stands at 12.4 percent. In addition, the Soviet Union was moved into this rich-country category , forcing Moscow to pay the double-digit interest rate. And finally, the two sides have agreed that the consensus rate should be tied to commercial interest rates.

''The tone of the meeting this year was good,'' Marc Leland, assistant secretary of international affairs at the US Treasury Department, said. ''It's a very important development that the Common Market has accepted a type of automaticity'' - i.e., tying export credit rates to market interest rates.

Still, Mr. Leland acknowledged that serious differences continue to separate the US and West European positions. Essentially, the two sides could not agree on what the average commercial rate is. As a result, it was decided to keep the present 12.4 consensus rate until the end of June, when another OECD meeting is scheduled.

Another problem is that the US wants down payments on future export contracts with ''rich'' countries to be raised from the current 15 percent to 40 percent. The West Europeans reject this outright. They claim the US is using this argument as a guise to discriminate against the Soviet Union, while unwisely limiting exports to financially healthy countries.

''We have enough bad loans out to Brazil, Mexico, and others,'' said Donald Twyford, undersecretary at the Export Credits Guarantee Department at Britain's Ministry of Trade. ''We don't want to restrict trade to Switzerland, Austria, and other countries that can pay.'' He added the British did not want ''to clobber the Russians either.''

Similar themes are sure to be raised when officials gather for a Coordinating Committee meeting in central Paris Thursday and Friday. CoCom regulates sensitive high-technology exports to communist countries, and has come under fire from the White House for enacting rules that are not strict enough.

While the meeting is shrouded in secrecy, US and French diplomats hint that progress has been made on expanding the list of specific products to be banned for sale to the East bloc. But the diplomats add that the Americans are unlikely to make much headway in their effort to expand the CoCom agency, giving it a budget and a staff. As French Foreign Ministry officials have said, ''We will not accept an economic NATO.''

Finally, several US economic aides - including Martin Feldstein, chairman of the Council of Economic Advisers - are in Paris preparing for the finance ministers' meeting May 9-10. With economic activity picking up in the US and several West European countries, notably West Germany and Britain, most of the ministers are likely to be in a better mood this year than last.

Exchange rates will probably make for at least one nasty discussion. Many EC countries, especially France, argue that Washington must intervene in currency markets to push down the value of the dollar. US officials, including Treasury Secretary Donald Regan, have lately made conciliatory noises.

But this week Mr. Feldstein said central banks should move into the market only on a very limited, short-term basis when exchange rates swing widely.

''Beyond smoothing when markets are disorderly, I really see no need for exchange-rate intervention,'' he said.

This suggests that Washington does not expect any radical change in its laissez-faire approach to the currency markets. It also indicates that despite warmer economic signals passing back and forth over the Atlantic, the seven leaders will still have tough issues to thrash out in Williamsburg.

You've read  of  free articles. Subscribe to continue.
QR Code to Western alliance squabbles quietly over trade disputes, export credits
Read this article in
QR Code to Subscription page
Start your subscription today