Baker Urges Talks, Limits on Growth to Help Stabilize Monetary Systems

Treasury Secretary James A. Baker III on Thursday unveiled another set of proposals aimed at strengthening the ability of the major industrial nations to coordinate their broad economic policies, contending that it would help maintain stability in the global monetary system.

In the text of a speech prepared for delivery here early today, Baker suggested that the United States and its major economic allies develop upper and lower ranges for their growth rates and other economic indicators and agree to begin consultations--and “possible actions”--whenever their economies get out of line.

He also proposed that the allies--the United States, Japan, West Germany, Britain, France, Italy and Canada--broaden their current coordination efforts to include “structural reforms” designed to make their economies more efficient, such as tax revision, deregulation of financial markets, and a phase-out of restrictive work rules.

Baker asserted that the steps, while relatively modest, would continue the moves he began in 1985 toward stabilizing the world economy and global currency markets. In recent months he has also pushed through proposals under which the industrial nations set up a system for evaluating their own economic performance. Last month, the group approved a Baker plan to monitor commodity prices to help policy-makers stay alert to early signs of pending inflation.

Baker insists in his text that making continual improvements to the existing exchange-rate system is the only way to help stabilize global economic conditions. He said any attempt to move abruptly to, say, fixed exchange rates might be destined to fail because financial markets would regard it as “overly ambitious and unsustainable.” The secretary believes that the current exchange-rate system is succeeding in stabilizing currency rates.

Markets Criticized

Baker’s remarks follow a two-day meeting of finance and trade ministers from the United States and 23 other industrial countries under the aegis of the Paris-based Organization for Economic Cooperation and Development, a major forum for such debate.

It was not immediately clear how other countries in the so-called Group of Seven will react to the new Baker suggestions. In the past, other finance ministries have gone along grudgingly with the secretary’s proposals and later accepted them as part of the policy coordination process.

Baker criticized the financial markets Thursday for their slide following the publication of the latest U.S. trade figures. Asked why the stock and bond markets were in such a tailspin, he replied sarcastically, “I suppose because things are so good (they are afraid) that things are going to get worse.”

The Treasury secretary denied flatly that there is any valid ground for the latest fears in the markets that inflation may be on the rise again. “In our view,” he told reporters, “there is not going to be a resurgence of inflation.”

His remarks came as, separately, the 24-country OECD called on negotiators in the trade-liberalization talks going on in Geneva to prepare a detailed “framework” by early December on what they plan to include in the final two years of bargaining on agricultural trade and other key issues. The talks, known formally as the Uruguay Round, are scheduled to be completed in late 1990.

The OECD communique, hammered out after an all-night bargaining session that ended early Thursday, fell short of the Reagan Administration’s hopes that the industrial nations would spell out their mandate in more detail. European trade ministers in particular had strongly opposed going along with the full U.S. demands.

Lyng Cites Progress

U.S. and European policy-makers alike claimed victory in the continuing dispute over agricultural trade. Willy De Clercq, the Common Market’s top trade official, told reporters earlier that the Europeans attached relatively little significance to the OECD call because they believed they had succeeded in weakening its language.

However, U.S. officials insisted that the document would succeed in intensifying pressure on the Geneva negotiators to come up with a timetable and agenda by December. Agriculture Secretary Richard E. Lyng conceded after the meeting that “I guess we always would like to see something that was more specific.” But, he added, “We have made some progress.”

The OECD nations also agreed to begin informal consultations with newly industrializing countries such as Taiwan and South Korea in an effort to prod them into taking more responsibility for helping to correct the huge global trade imbalances. The industrial nations want the NICs, as they are known, to revalue their exchange rates and allow in more imports and foreign investment. There were no details on how such talks would be conducted.

The OECD countries also vowed to reduce so-called structural impediments in their economies, such as high and complex taxes and overly restrictive labor laws.

At a press conference Thursday, Baker also gave his strongest hint in public that he may soon leave the Treasury to help Vice President George Bush campaign for the presidency.

“For now, I’m staying at the Treasury,” he said, but added, “What I do in the future is a matter for the Vice President and the President to determine.”