Briefing Paper : Houston Talks: Trade, Aid and Environment on Summit Agenda

The News:

As they have since 1975, leaders of the world’s seven largest industrial democracies will gather this month for their annual summit conference. This year’s session will be held July 9-11 in Houston.

Initially confined to economic issues, the summits more recently have turned into wide-ranging economic and political meetings at which the seven leaders thrash out important issues and lend political impetus to global initiatives.

The 1990 summit, the third to be held in the United States, will be first and foremost a political event, designed to impress the voters in the United States, Japan, West Germany, Britain, France, Italy and Canada.

Here are some of the issues they will discuss:

Soviet Aid

West Germany wants Soviet cooperation in smoothing the way for reunification with East Germany. The Soviet economy is faltering, and Soviet President Mikhail S. Gorbachev needs all the help he can get. The solution? West Germany and France say it’s massive Western aid to help bolster the Soviet economy, on the assurance that Moscow will not stand in the way of restoration of German sovereignty. They plan to seek summit pledges of up to $15 billion in economic help for Moscow.

But that will not sit well with President Bush, who argues that substantial Western aid will only be wasted until Moscow moves more decisively toward a market-oriented economic system.

The outlook: The summiteers will hold out the promise of some increased aid but peg it to concrete actions by Moscow--such as recognition of profits and private property--to put its economic house in order. Although Bush will be under pressure to make some gesture, he probably can forestall any massive aid. West Germany already has offered Moscow its own package. The other allies, a Bush aide says, “are all over the lot.”

The Environment:

Two issues are involved: what to do about global warming and whether to set up a special lending pool in the World Bank to help poor countries deal with their environmental problems. The Bush Administration had been adamantly resisting action on either front, leading some U.S. officials to believe that Bush would be isolated at Houston and dealt an embarrassing political setback. The six other allies all are on record as favoring strong action on both.

Late last month, Bush averted a clash by reluctantly agreeing to back the new World Bank effort. The only dispute left on that issue will be how much financing to provide. But Washington could still appear the spoiler on the question of how far to go in reducing emissions of carbon dioxide, the chief contributor to global warming. White House Chief of Staff John H. Sununu and Budget Director Richard G. Darman both contend that there is not enough evidence of global warming to justify massive outlays. But the allies disagree.

The outlook: A face-saving compromise.

World Trade:

Three-and-a-half years ago, at Punta del Este, Uruguay, the United States and 103 other countries launched a new round of talks designed to liberalize global trade. Besides reducing tariffs and lowering other barriers, the agenda calls for writing rules for the first time governing trade in agriculture, services, intellectual property and investment.

But the talks are faltering and could well bog down if the summit leaders do not succeed in jump-starting them. The most contentious dispute: a disagreement between the United States and the European Community over how rapidly and fully to reduce government agricultural subsidies.

The outlook is uncertain. Although the leaders undoubtedly will make an appeal for prompt action on the Uruguay Round, there is no indication that they will make progress on agriculture or any of the other outstanding issues. The battle lines are set: Washington will try to make the agriculture issue a major part of the summit’s final communique and the Europeans will seek to keep it off the agenda entirely.

Third World Debt:

In March, 1989, U.S. Treasury Secretary Nicholas F. Brady proposed the Brady Plan--a scheme to provide relief to Third World debtors by enabling them to reduce the debt they owe commercial banks. Now Eastern Europe wants the allies to forgive large portions of the debts that Poland and other newly emerging democracies owe to Western governments.

While all seven summit leaders want to provide some help for Poland, they will insist on proper safeguards to guarantee that relief is accompanied by good domestic economic policies. And they will undoubtedly require that other East European countries be firmly on the way to democracy before such aid is granted. The outlook: Relief is in sight, but with conditions.

Another question:

China, backed by Japan, is seeking a restoration of Western lending--both from the World Bank and from commercial banks--that the summit seven effectively cut off at their meeting in Paris last year following the massacre of pro-democracy protesters in Beijing last year. Japan has made the resumption of lending to China its number one priority at the summit. Despite the release of dissident Fang Lizhi, the United States and most other countries are cool to the idea.

The likely outcome is that the seven will authorize some renewal of lending to China, but withhold just enough to make their continued displeasure clear.

What they want...

President Bush hopes the summit will help bolster his image at home...Toshiki Kaifu want to project Japan’s status as an international player...Helmut Kohl will ask backing for still faster pace of German reunification...Margaret Thatcher will try to dispel impressions that she’s on the political ropes...France’s Francios Mitterrand may clash with Bush over economic aid to Moscow...Italy’s Giulio Andereotti usually plays a quiet role, but he soon takes over European Community presidency...Brian Mulroney will talk about the environment, but think about Quebec separatism...Jacques Delors, the head of the European Commission, wants the Europeans to think European.