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THE ECONOMIC SUMMIT MEETING IN TOKYO, 28/29 JUNE 1979
Delegations
Canada
The R t . Hon. J o e C l a r k , P.C., M.P.,
Prime M i n i s t e r .
The Hon. F l o r a M a c D o n a l d , P.C., M.P.,
Secretary of State for External A f f a i r s .
The Hon. J o h n C r o s b i e , P.C., M.P.,
M i n i s t e r o f Finance.
France
H.E. Mr. V a l e r y G i s c a r d President o f the French
d'Estaing,
Republic.
H.E. Mr. J e a n F r a n c o i s - P o n c e t , Minister of Foreign A f f a i r s .
H.E. Mr. Rene Monory,
M i n i s t e r o f Economy.
H.E. Mr. A n d r e G i r a u d ,
Minister of Industry.
Germany
H.E. H e r r Helmut S c h m i d t ,
Federal Chancellor.
H.E. H e r r H a n s - D i e t r i c h G e n s c h e r ,
Federal Minister for Foreign A f f a i r s .
H.E. H e r r Hans M a t t h o f e r ,
Federal M i n i s t e r o f Finance.
H.E. D r . O t t o G r a f L a m b s d o r f f ,
F e d e r a l M i n i s t e r o f Economics.
Italy
H.E. Hon. G i u l i o A n d r e o t t i ,
President of the Council of Ministers.
H.E. Hon. A r n a l d o Forlani,
Minister of Foreign A f f a i r s .
H.E. Hon. F i l i p p o M a r i a P a n d o l f i ,
M i n i s t e r o f the Treasury.
/Japan
J a p an
H.E. Mr. M a s a y o s h i Prime M i n i s t e r .
Ohira,
H.E. Mr. Sunao Sonoda,
M i n i s t e r f o r Foreign A f f a i r s . H.E. Mr. I p p e i Kaneko, M i n i s t e r of Finance.
H.E.
Mr. Masunii E s a k i ,
M i n i s t e r o f I n t e r n a t i o n a l T r a d e and U n i t e d Kingdom
The R t . Hon. M a r g a r e t T h a t c h e r , Prime M i n i s t e r .
Industry.
M.P.,
The R t . Hon. The L o r d C a r r i n g t o n , P.C., K.C.M.G., M.C.,
S e c r e t a r y o f S t a t e f o r F o r e i g n and Commonwealth A f f a i r s .
The R t . Hon. S i r G e o f f r e y Howe, Q.C., C h a n c e l l o r o f the Exchequer.
United
States
M.P.,
H.E. Mr. Jimmy C a r t e r ,
President.
The H o n o u r a b l e C y r u s V a n c e , Secretary of State.
The H o n o u r a b l e W. M i c h a e l Blumenthal, S e c r e t a r y of the Treasury.
The H o n o u r a b l e James R. S e c r e t a r y of Energy.
Schlesinger,
EC
Mr. Roy J e n k i n s , President.
(Note:
I n D e l e g a t i o n s c o m p r i s i n g more t h a n t h r e e M i n i s t e r s ,
two members o f t h e D e l e g a t i o n a l t e r n a t e d a c c o r d i n g t o
the s u b j e c t under d i s c u s s i o n . )
CONFIDENTIAL RECORD OF
THE ECONOMIC SUMMIT MEETING HELD IN TOKYO 28/29 JUNE 1979 IN THE AKASAKA PALACE
ON
FIRST SESSION : 0930-1230
Opening Statements
Mr.
O h i r a welcomed t h e Heads o f S t a t e and
E c o n o m i c Summit and Mrs.
T h a t c h e r and
their be
first
said
Mr.
t h a t he was
C l a r k who,
Summit m e e t i n g .
m e e t i n g i n Bonn C h a n c e l l o r as m o u n t a i n e e r s . by
those
and
had
a c t e d as h o s t
t o d a y we
had
use
f i r m and
long-term
Against discuss,
attending
described
taking part
those
the c o u n t r i e s
of d i f f i c u l t
w h i c h had
economic
p o s i t i v e and
j u s t caught s i g h t of
They had
were, i f a n y t h i n g ,
e v e n more
we
Giscard
and
predicament.
should
be
Our
adoption he
to
a t t i t u d e must
resolute in deciding
our
i n then c a r r y i n g i t out.
should
energy
(on
r e p r e s e n t a t i v e s o f t h e Heads o f S t a t e
and
the macro-economic s i t u a t i o n ;
t h e p o s i t i o n o f the d e v e l o p i n g
trade p o s i t i o n :
we
t o c o - o p e r a t e w i t h each o t h e r
Government were a l r e a d y m e e t i n g t o p r e p a r e a p a s s a g e f o r communique);
But
t h a t b a c k g r o u n d he s u g g e s t e d t h a t t h e m e e t i n g
which the p e r s o n a l
troughs
E c o n o m i c Summit m e e t i n g .
out of the p r e s e n t
i n order,
represented
p r e v a i l e d when P r e s i d e n t
at the f i r s t
and
Summit
At t h e l a s t
t h e wisdom w h i c h d e r i v e d f r o m e x p e r i e n c e ,
policy
see
encountered the l a n d s l i d e of another o i l
t h a t wisdom i n o r d e r
work our way be
had
Today's c i r c u m s t a n c e s
s e r i o u s than those
should
out
crossed broken t e r r a i n .
t h e peak when t h e y
had
frank approach.
S c h m i d t had
got
happy t o
hoped t h a t t h e d i s c u s s i o n s w o u l d
Since that occasion
t a k i n g p a r t had
crisis.
particularly
l i k e h i m s e l f , were
He
c h a r a c t e r i s e d by an open and
the
Government t o
the monetary s i t u a t i o n ;
o f t h e communique.
But
before
nations;
and,
finally,
beginning
on
the
the
the this
world
agenda
i n v i t e d each Head o f S t a t e o r Government t o make a s h o r t
opening statement which would serve
to provide
the o v e r a l l
g u i d e
lines for their discussion.
President focussed
on
C a r t e r s a i d t h a t the eyes of the w o r l d
t h e Summit m e e t i n g .
were
T h e r e were many m a t t e r s t o
be
/discussed,
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CONFIDENTIAL
d i s c u s s e d , and
the foremost
o f t h e s e was
t h e m e e t i n g w o u l d be b o l d , s p e c i f i c its and
u n i t e d i n what i t s a i d i n
and
c o u n t r i e s adopt i n d i v i d u a l t a r g e t s b a s e d on s p e c i f i c
commit t h e m s e l v e s
f i r m l y to meeting those
b e l i e v e d t h a t t h e r e s h o u l d be in
hoped t h a t
He
F o r t h e s h o r t - t e r m , he w o u l d p r e f e r
communique about e n e r g y .
t o see
energy.
the l o n g e r - t e r m ,
f u t u r e was import
an u n d e r t a k i n g Any
to achieve
should take account
i n t e r n a l problems of i n d i v i d u a l c o u n t r i e s .
The
t h e s t o c k p i l i n g o f o i l a t a t i m e o f t i g h t s u p p l y , and and
s o l a r energy.
of energy such
I t w o u l d be
as c o a l ,
important
should
market,
development
the
shale,
t a r s a n d s and
t h a t immediate r e d u c t i o n s
i n o i l i m p o r t s s h o u l d be f o l l o w e d up w i t h s t r i c t measures, which s h o u l d ,
conservation
i n t u r n , be s u p p l e m e n t e d s u b s e q u e n t l y
the i n t r o d u c t i o n of a l t e r n a t i v e sources
and
the
of
meeting
s u c h p r o b l e m s as t h e o p e r a t i o n o f t h e s p o t
of a l t e r n a t i v e sources
targets
p l a n to reduce the consumption
o f o i l s h o u l d be e q u i t a b l e and
a l s o address
also
He
t h a t t h e more d i s t a n t
t h o u g h he a c c e p t e d
more u n c e r t a i n .
targets.
figures
of energy.
He
by
a l s o hoped
t h a t t h e m e e t i n g w o u l d a g r e e upon t h e means o f c o n s u l t a t i o n w i t h
members of OPEC.
The
present
l a c k o f c o n s u l t a t i o n had
g r i e v o u s consequences f o r the c o u n t r i e s r e p r e s e n t e d
He
b e l i e v e d t h a t t h e IMF
at the
d e v e l o p i n g c o u n t r i e s s h o u l d be e n c o u r a g e d , t h r o u g h o t h e r means, t o do more t o meet t h e i r own
materials,
including o i l ,
satisfactory necessary He
and
other supplies.
c o n c l u s i o n o f t h e MTNs and
t h e W o r l d Bank
needs f o r
raw
the
He welcomed
he hoped t h a t
the
a p p r o v a l w o u l d be o b t a i n e d f r o m C o n g r e s s i n A u g u s t .
be c o n s i d e r e d by F o r e i g n M i n i s t e r s and
o f t h e i r a d v i c e , t h e Heads o f S t a t e and d e c i d e what s h o u l d be s a i d on t h i s w o u l d be a m i s t a k e on
and
The
proposed t h a t the problem of South East A s i a n r e f u g e e s
first
meeting.
should r e t a i n i t s b a s i c purpose
he hoped t h a t t h e m o n e t a r y s y s t e m c o u l d be s t a b i l i s e d . and
had
d i d not make p l a i n
d i d not
issue a
light
then
It
statement i f they
f o r the d e v e l o p i n g c o u n t r i e s .
that although
p r i m a r i l y w i t h e n e r g y , i t was
Government s h o u l d
as i t w o u l d be u n f o r t u n a t e
t h e i r support
Signor Andreotti s a i d
t h a t , i n the
i s s u e i n t h e communique.
i f t h e Summit M e e t i n g
the refugee problem, j u s t
should
important
t h e i r m e e t i n g was
dealing
t h a t t h e p u b l i c image w h i c h
CONFIDENTIAL
/they
presented
CONFIDENTIAL - 3
they p r e s e n t e d
t h a t of a meeting of a p o l i t i c a l ,
was
technical, character. between now
internal but
and
then.
clearly
t h e changed
c i r c u m
at the
be
meeting,
t h e y s h o u l d r a t h e r assume a g e n e r a l g u i d i n g r o l e and s t r e s s
of a l l c o u n t r i e s i n f a c i n g today's
the inter-dependence
At t h e same t i m e i t was self-sufficient
problems.
t o b e a r i n mind t h e deep d i f f e r e n c e s
important
between t h e s i t u a t i o n s o f i n d i v i d u a l c o u n t r i e s : was
decided
T h e i r d i s c u s s i o n s h o u l d not
to the seven c o u n t r i e s r e p r e s e n t e d
not
They s h o u l d c o n f i r m what had been
at Bonn but s h o u l d a l s o b r i n g out stances
and
i n energy, w h i l e I t a l y
h e a v i l y d e p e n d e n t on e x t e r n a l s o u r c e s
and
Canada, f o r e x a m p l e ,
J a p a n were v e r y
of f u e l .
approach
In t h e i r
t o OPEC t h e s e v e n w o u l d be a l l t h e s t r o n g e r i f t h e y t o o k
account
not o n l y o f t h e i r own
developing
requirements
but
a l s o those of the
c o u n t r i e s , whose p r o s p e c t s were harmed most by c o n s t a n t l y r i s i n g
oil
prices.
All
sources
c o u n t r i e s were hampered i n t h e s e a r c h f o r a l t e r n a t i v e
o f e n e r g y and
e s p e c i a l l y t h e d e v e l o p m e n t o f n u c l e a r power
by s e r i o u s o b s t a c l e s o f a p s y c h o l o g i c a l c h a r a c t e r w h i c h were b e i n g
e x p l o i t e d by a demagogic o p p o s i t i o n . to carry forward
I t would help
Governments
t h e i r n a t i o n a l n u c l e a r power programmes i f t h e
m e e t i n g i s s u e d an a g r e e d n u c l e a r energy.
statement
of
a d v o c a t i n g t h e g r e a t e r use
I t m i g h t be p a r t i c u l a r l y
a p p r o p r i a t e i f word
nuclear
were t o come f r o m J a p a n on t h e need f o r t h e p e a c e f u l use o f energy.
Mr.
O h i r a s a i d t h a t he b e l i e v e d t h a t n u c l e a r e n e r g y was
most r e l i a b l e a l t e r n a t i v e t o o i l .
J a p a n was
p o l i c y o f d e v e l o p i n g n u c l e a r power and
was
now
pursuing
other countries.
E n s u r i n g s a f e t y was
i n t h e use o f n u c l e a r e n e r g y , and absolutely
thorough
programme was
about t h i s .
of c a r d i n a l
The
up.
France
importance
h i s Government i n t e n d e d t o
be
J a p a n e s e n u c l e a r power
not as f a r a d v a n c e d as he w o u l d w i s h , and
were t r y i n g t o c a t c h
a
engaged i n a r r a n g e m e n t s
f o r t e c h n i c a l c o - o p e r a t i o n w i t h t h e U n i t e d S t a t e s , Canada, and
the
they
P r e s i d e n t G i s c a r d s a i d t h a t t h e Summit m e e t i n g s h o u l d b e a r i n
mind i t s e c o n o m i c p u r p o s e .
They were m e e t i n g b e c a u s e t h e y had /role in
CONFIDENTIAL
a
CONFIDENTIAL
role
i n t h e s o l u t i o n of t h e w o r l d ' s economic
The p r e s s
and m o n e t a r y
problems.
had s p e c u l a t e d a b o u t t h e v a l u e o f s u c h m e e t i n g s and t h e r e
had been o c c a s i o n a l c r i t i c i s m o f them.
h i s v i e w , been u s e f u l , and t h e d e v e l o p m e n t s demonstrated i t s p o s i t i v e nature.
in
The Bonn Summit had, t h a t had f l o w e d
He hoped
f r o m i t
Summit
that t h i s
w o u l d be e q u a l l y v a l u a b l e .
The main e c o n o m i c crisis
p r o b l e m f a c i n g t h e m e e t i n g was t h e e n e r g y
T h i s was
and i n p a r t i c u l a r t h e p r o b l e m o f o i l s u p p l i e s .
an i s s u e w h i c h a f f e c t e d t h e s h o r t , medium and l o n g t e r m s , and t h e
m e e t i n g had t o be a b l e t o show t h a t t h e y relevant to a l lthe timescales. had p r e p a r e d
w h i c h were
had p r o p o s a l s
The E u r o p e a n E c o n o m i c
Community
f o r t h e Summit m e e t i n g a t t h e m e e t i n g o f t h e E u r o p e a n
C o u n c i l t h e p r e v i o u s week.
B u t t h e d e c i s i o n s w h i c h had been
taken
t h e n w o u l d o n l y make s e n s e and have an i m p a c t on t h e p r o b l e m i f
i n hand w i t h s i m i l a r d e c i s i o n s by t h e Community's
t h e y went hand
partners represented
a t Tokyo.
They w o u l d be s u c c e s s f u l i n
t a c k l i n g t h e p r o b l e m o f o i l demand and s u p p l i e s o n l y i f t h e y
c o u l d a g r e e upon q u a n t i f i e d t a r g e t s f o r o i l i m p o r t s w h i c h were
as s p e c i f i c as p o s s i b l e . determination
I n t h i s way t h e y w o u l d show t h e i r
t o make a l a s t i n g r e d u c t i o n i n t h e i r
OPEC c o u n t r i e s .
I f , on t h e o t h e r hand,
imports
t h e r e were no t a r g e t s ,
The m e e t i n g
t h e m e e t i n g w o u l d be s e e n a s vague and d i s a p p o i n t i n g . should
a l s o a g r e e on c o n c r e t e
a c t i o n on p r i c e s and i n p a r t i c u l a r
on t h e e x c e s s i v e p r i c e s on t h e s p o t
market.
In t h e s h o r t t e r m t h e o n l y a l t e r n a t i v e s o u r c e s c o a l and n u c l e a r power, and on t h e s e i t s determination
o f e n e r g y were
the meeting should
to increase production.
express
E v e r y b o d y was c o n c e r n e d
about t h e s a f e t y o f n u c l e a r power, b u t t h i s s h o u l d a b s o l u t e p r e - c o n d i t i o n o f n u c l e a r development, t h e r e w o u l d be l o n g d e l a y s
from
n o t be an
f o r otherwise
i n m a k i n g g r e a t e r u s e o f n u c l e a r power.
The m e e t i n g ' s s t a t e m e n t on t h e d e v e l o p i n g be a s f a c t u a l and c r e d i b l e as p o s s i b l e . v e r y h a r d on t h e n o n - o i l p r o d u c i n g
countries
should
The e n e r g y p r o b l e m b o r e
developing
c o u n t r i e s , b u t t h e
s e v e n were n o t r e s p o n s i b l e f o r t h e i n c r e a s e s i n o i l p r i c e s :
/
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indeed,
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i n d e e d , b e c a u s e o f them, i t was up
their
a i d programmes.
f o r t h e Seven t o s t e p
more d i f f i c u l t
They s h o u l d not make s t a t e m e n t s
suggesting
t h a t t h e e f f e c t s o f i n c r e a s e s i n o i l p r i c e s on t h e e c o n o m i e s o f
d e v e l o p i n g c o u n t r i e s c o u l d be o f f s e t . c o u l d to h e l p the poorer
n a t i o n s , t h e r e was
s h o u l d do what
no way
i n w h i c h we
important
f o r the s t a b i l i t y
of the f i n a n c i a l markets t h a t
country
Each
w o u l d need t o d e f e n d
important
i t s n a t i o n a l i n t e r e s t s , but
i t was
t o t a k e an o v e r a l l v i e w o f t h e p r o b l e m i f t h e w o r s t
France
the
e f f e c t s of
c r i s i s on n a t i o n a l e c o n o m i e s were t o be a v o i d e d .
play a f u l l
could
the meeting a r r i v e d at s o l u t i o n s t o the energy problem.
oil
we
entirely.
s o l v e t h i s problem
I t was
W h i l e we
would
process.
part in t h i s
C h a n c e l l o r S c h m i d t s a i d t h a t he b e l i e v e d t h a t t h e s e q u e n c e o f
E c o n o m i c Summits had of the world's
had
a benevolent
e c o n o m i c s t r u c t u r e and p r o c e s s e s .
not a c c o m p l i s h e d
great reforms
and
development
i n f l u e n c e on t h e The
meetings
i m p r o v e m e n t s b u t had
to
helped
a v o i d m a j o r c a t a s t r o p h e s w h i c h o t h e r w i s e m i g h t have happened. had
prevented
1930s.
I t was
l a p s e s i n t o t h e b e g g a r my not n e c e s s a r y
schemes e v e r y y e a r , adopting misguided
and
neighbour
of
national Parliaments.
spending,
and
t o promote q u i c k e r
h i s Government had
taken
m e a s u r e s w i t h i n 8 weeks o f t h e Summit m e e t i n g .
he e x p e c t e d
new
to e x t e r n a l pressures,
At t h e Bonn Summit Germany had been a s k e d necessary
the
p o l i c i e s of
t h e m e e t i n g s s h o u l d a v o i d t h e temptations
i n c l u d i n g t h o s e e x e r t e d by
g r o w t h by d e f i c i t
They
f o r e a c h Summit t o p r o d u c e g r e a t
p o l i c i e s i n response
had
t h e German economy t o grow by
about 4% d u r i n g
the
As a
result
1979.
T h i s meant, however, t h a t t h e money s u p p l y had
i n c r e a s e d , and p u b l i c
borrowing
o f GNP,
i n t h e F e d e r a l R e p u b l i c was
t h a n t h a t f o r t h e U n i t e d S t a t e s and consequence of the i m p l e m e n t a t i o n had
entered
1979
not
France.
Another
of the u n d e r t a k i n g s
i n t o a t t h e Bonn Summit was
were h i g h e r t h a n
3.7%
t h o s e f o r 1978,
up by had
i n t h e c a p i t a l and 124%
now
i n the l a s t
and
stopped,
w h i c h Germany
the r e p e r c u s s i o n s of
c r e d i t markets: i n t e r e s t
12 months, and
inevitable
that price increases i n
w o u l d be s e e n i n t h e n e x t wage r o u n d i n Germany. arisen
level
a higher
P r o b l e m s had r a t e s had
CONFIDENTIAL
also
gone
t h o u g h he hoped t h a t t h i s
he c o u l d not be c e r t a i n t h a t i t had.
this
rise
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He u r g e d t h e m e e t i n g not w h i c h c o u l d not be these
fulfilled.
w o u l d soon be
leaders. i n the
On
to enter
implementation
of r e a l i s t i c
t h a t t h e OPEC m e e t i n g had
co-operate
ready t o
decisions.
He
energy
t h e OPEC
p u b l i c o p i n i o n o r by
hand, Germany w o u l d be
on
i n gimmicks,
I f the meeting i n d u l g e d
d e m o l i s h e d by
the o t h e r
into undertakings
thought i t l i k e l y
been a d j o u r n e d t h e p r e v i o u s
day
because
t h e y w a n t e d t o see w h e t h e r t h e Seven were s e r i o u s i n t h e i r
determination
t o t a c k l e the energy c r i s i s
no more t h a n p r o d u c e new
rhetoric.
f i n d i n g i t more d i f f i c u l t
On
the world
economy and
t h e y were r i g h t those
and
The
the s u b s t i t u t i o n of a l t e r n a t i v e f u e l s .
t h e need t o
however, o i l i m p o r t s
1973
Federal Republic
imported
d e s p i t e the growth of her
had
been a l i t t l e
higher
on
at a high
level,
of c o a l , w h i c h was
expensive
t o mine i n Germany, was
and
t h e use
result
i n d i c a t i o n of the success t h a t o n l y 9%
economy.
In
for
difficult
running
A good
of the measures which h i s c o u n t r y p r o d u c t i o n was
1973.
and
heavily subsidised.
o f Germany's e l e c t r i c i t y
1979,
i n c e n t i v e s t o c o n s e r v e o i l was very
had
l e s s o i l than
than those
H i s Government's e x p e n d i t u r e
conservation
t h e p r i c e mechanism t o work t o a l a r g e e x t e n t , w i t h t h e
t h a t d u r i n g t h e p e r i o d 1973-78 Germany had
was
that
confident
a t t e n d i n g t h e Summit m e e t i n g w o u l d a g r e e on
the years b e f o r e
wanted
of s e l f i s h n e s s ,
He was b o t h by
in
and
i n t h e i r view t h a t o n l y such i n c r e a s e s would
r e d u c e t h e a g g r e g a t e demand f o r o i l i m p o r t s allowed
in particular
who
a c t i n g e n t i r e l y out
make t h e i n d u s t r a l i s e d n a t i o n s c o n s e r v e o i l . all
their
in o i l prices
t h e o t h e r hand, t h o s e
q u i c k e r p r i c e i n c r e a s e s were not
do
a l s o c l e a r t h a t OPEC were
I t was
c o u n t r i e s of f u r t h e r e x p l o s i o n s
t h e y w a n t e d t o be m o d e r a t e . for
could
t o a g r e e amongst t h e m s e l v e s : some o f
members u n d e r s t o o d t h e e f f e c t s on on t h e d e v e l o p i n g
or whether they
had
now
taken
based
on
oil.
T h e r e was,
s w i t c h i n g from o i l t o o t h e r to
prevent
of
however, c o n s i d e r a b l e o p p o s i t i o n t o the p o l i c y
t h e g r e a t e r use
fuels.
The
environmentalists
of c o a l ,
and
t h e y were a l s o
sought
fighting,
w i t h t h e h e l p o f some c o u r t d e c i s i o n s , h i s G o v e r n m e n t ' s p l a n s
to
i n c r e a s e the p r o d u c t i o n
of n u c l e a r energy.
He
hoped t h a t
m e e t i n g ' s communique w o u l d c a r r y a c l e a r message a d v o c a t i n g use
o f b o t h c o a l and
the
greater
n u c l e a r power, f o r t h i s w o u l d h e l p h i s and
Governments i n t h e i r e f f o r t s i n t h i s f i e l d .
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I f the
other
industralised
- 7 -
CONFIDENTIAL
n a t i o n s were s e e n t o be t a k i n g c r e d i b l e m e a s u r e s t o r e d u c e o i l
demand n o t o n l y i n t h e i m m e d i a t e f u t u r e b u t a l s o i n t h e medium
t h i s w o u l d s t r e n g t h e n t h e hand o f t h e OPEC m o d e r a t e s .
l o n g terms,
Even s o , he had
no doubt t h a t f o r t h e r e s t o f t h e c e n t u r y o i l p r i c e s
Governments w o u l d have
w o u l d have t o go up a t r e g u l a r i n t e r v a l s . t o spend f a r more t h a n h i t h e r t o on p u r e and a l t e r n a t i v e energy thermal energy.
a p p l i e d r e s e a r c h on
s o u r c e s so t h a t by t h e t u r n o f t h e c e n t u r y we
u s i n g not o n l y n u c l e a r energy next
but s o l a r energy
He p e r s o n a l l y f o r e s a w
and,
possibly,
t o be e x p e c t e d
turned t o energy,
I t was
important
their
approach
w o u l d not
behind
t h a n b e f o r e , h i g h e r l e v e l s o f unemployment
c o u n t r i e s t h a n t h e y had
experienced
and
developing
hitherto.
P r i m e M i n i s t e r s a i d t h a t t h e p r o s p e c t s f o r t h e w o r l d economy
the energy
problem
were i n t e r - r e l a t e d and t h a t one
d i s c u s s e d without c o n s i d e r i n g the other. through
be
f i n e words.
a g r e a t e r l a c k o f f o o d and o t h e r b a s i c n e c e s s i t i e s i n t h e
The
express
w o u l d be p o i n t i n g t h e w o r l d t o w a r d s d e e p e r
the meeting
monetary i n s t a b i l i t y
i t was
t o a v o i d v e r b a l compromises
the p u r s u i t of n a t i o n a l i n t e r e s t s hidden
Otherwise,
more
atmosphere.
t h a t t h e Heads o f S t a t e and Government w o u l d
a n a t i o n a l i s t i c one.
the
any
he hoped t h a t a l t h o u g h
t h e i r n a t i o n a l i n t e r e s t s i n c l e a r terms,
and
geo
c e n t u r y t h e r e w o u l d be p r e s s u r e n o t t o use h y d r o - c a r b o n s
When t h e m e e t i n g
were
t h a t i n the e a r l y p a r t of
because of the dangers of o v e r - h e a t i n g the o u t e r
and
and
1979
b u t we
We
were now
be
way
c o u l d not only half
a l r e a d y s e e n p r o s p e c t s f o r t h e w o r l d economy
had
d e t e r i o r a t e month by month.
We
had s t a r t e d t h e y e a r w i t h a good
c h a n c e o f a b e t t e r b a l a n c e o f g r o w t h between t h e m a j o r c o u n t r i e s and
a l e s s exaggerated
b a l a n c e o f payments s u r p l u s e s and d e f i c i t s .
c u r r e n c y s i t u a t i o n was
a l s o more s t a b l e , b u t b e c a u s e o f what
especially
T h i s was
the second
t o r e a l i s e how
a problem
tackled
in relation we
time
inflation.
had
t h a t was
had
been made
oil.
t o d e v e l o p m e n t s on
not g o i n g t o go away, and
i t had
t o b o t h t h e s h o r t and medium t e r m s . f o r m e r l y taken
f o r g r a n t e d was
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had
i n f i v e y e a r s t h a t we
v u l n e r a b l e t h e w o r l d was
T h i s was
growth which
t r u e as r e g a r d s
much w o r s e :
happened on o i l t h e p r o s p e c t s i n a l l t h e s e a r e a s were now t h i s was
The
now
The
to
be
economic
a fragile
/We
had
thing.
CONFIDENTIAL
- 8 -
We
had
t o r e v i s e a l l our p r e v i o u s i d e a s about g r o w t h .
f o r the i n d u s t r i a l i s e d countries.
w o r l d economic a c t i v i t y
and
l e s s a b l e t o h e l p them. e c o n o m i c and
both
t h e Summit m e e t i n g was meeting f o r guidance
leadership.
w o r l d was
She
b e l i e v e d that the c o u n t r i e s
We
looking to
difficulties,
c o u l d and or took
c o u l d n o t be done.
refuge
Summit had meeting. The
and
T h i s was
had
o n l y was
t o be s u s t a i n e d y e a r
other sources t h e end
were needed. in f u l l ,
as t h e sun
of the c e n t u r y . I t was
f o r t h i s was
the
Our
and and
So b o t h
i n the
nowhere g r e a t e r t h a n
there a severe
immediate problem,
but
e f f o r t s t o r e d u c e o i l demand
a f t e r year.
to develop,
such
the
t h e w o r l d w o u l d say t h a t
c a n d o u r was
to face a long haul too.
took a long time
facts
responsibility.
a heavy
Not
about what
t h e p o s i t i o n w o u l d be w o r s e t h a n b e f o r e
need f o r r e a l i s m and
of energy.
were r e a l i s t i c
If the meeting f a i l e d t o face
i n pious p l a t i t u d e s ,
failed
either
s h o u l d n o t , however, h e l p
o u r s e l v e s o r o t h e r c o u n t r i e s u n l e s s we
had
the
The
t h e r e s i l i e n c e t o surmount t h e s e
p o l i c y had been r e d u c e d .
we
world,
i n the
s h o u l d r e c o g n i s e t h a t t h e room f o r manoeuvre i n e c o n o m i c
b u t we
field
be
the background a g a i n s t which
T h i s was
taking place.
reduced
n a t i o n s would
A l l t h i s meant more i n s t a b i l i t y
and
of t h e f r e e w o r l d had
increased o i l prices,
because the developed
political.
bad
developing
n a t i o n s but worse f o r the
They w o u l d s u f f e r t h r o u g h
I t was
The
supply of n u c l e a r energy
from
l a r g e - s c a l e s u p p l i e s of energy t i d e s c o u l d not be e x p e c t e d s h o r t term
e s s e n t i a l t h a t we
and
l o n g term
before
measures
l e t t h e p r i c e mechanism work
t h e most t e l l i n g way
o f r e d u c i n g demand.
But
t h e r e were a l s o o t h e r s t e p s t h a t s h o u l d be t a k e n : we must r e d u c e
c o n s u m p t i o n i n t h e p u b l i c s e c t o r and c o n s e r v a t i o n measures such
improve t a x i n c e n t i v e s f o r
as i m p r o v e d i n s u l a t i o n .
We
should
r e d u c e o i l demand by s w i t c h i n g t o o t h e r s o u r c e s o f e n e r g y . cent of Great 15 p e r c e n t
B r i t a i n ' s e l e c t r i c i t y was
from o i l .
also
70
per
only
p r o d u c e d f r o m c o a l and
In t h e l o n g e r term we must make much more
use
of n u c l e a r energy.
The
meeting should
inflation.
The
a l s o be r e a l i s t i c
about how
l e s s o n o f t h e y e a r s s i n c e 197^
was
to
tackle
t h a t we
should
not s e e k t o accommodate t h e i n f l a t i o n p r o d u c e d by o i l p r i c e
i n c r e a s e s by d e f i c i t fight
i t . We
f i n a n c i n g a n d p r i n t i n g money b u t we
should instead
s h o u l d make i t p l a i n t h a t t h i s c o u r s e meant a l o s s
CONFIDENTIAL
/real
of
income
CONFIDENTIAL
real not
income t h a t was mean g i v i n g up
t h a t the But
we
f o r g r o w t h had
we
commerce and
and
i n s p i r e confidence I f we
i t s c o n s e q u e n c e s we t h a t our
We
had
t o show OPEC t h a t
serious
i d e n t i f i e d with problem i n the adapting
we
saw
need t o r e b u i l d t h e What she
purpose of the
should
much g r e a t e r Roy
not
cloak
confidence Jenkins
W h i l e we
and
for
applied
had
o f our
throughout the
full
in A p r i l ,
should
not
a particular
i n d u s t r i e s and
to
the
to give a lead.
To
the world
realistic,
t h i s would i n s p i r e
though i t remained c r u c i a l
e x a g g e r a t e what had
The
a
that
agreement on
largely
been
there
growth
fulfilled.
happened i n t h e m o n e t a r y
CONFIDENTIAL
our
If
been b r o u g h t t o
been v e r y
that
economy
amount o f p r o g r e s s had
i m p l e m e n t a t i o n of them.
do
world.
MTNs had
been r e a c h e d a t Bonn had
making
e n e r g y and
c l e a r and
The
were
s a i d about f i g h t i n g i n f l a t i o n
countries.
a fair
We
were t h e r e f o r e
our meaning w i t h s o f t p h r a s e s .
said that
successful conclusion be
strength
a p p r o a c h on
made s i n c e t h e Bonn Summit. now
We
M o r e o v e r , we
Summit m e e t i n g was
a p p r o a c h t o t h e s e p r o b l e m s was
w h i c h had
the
countries.
t o change a p p l i e d even more s t r o n g l y t o
must adopt a r e a l i s t i c
should
too q u i c k l y ,
countries.
i n t e r e s t s as c l o s e l y
our
had
Kingdom t h a n t o some o t h e r
Mr.
demand i n o i l ,
o i l producing
t h o s e o f consumer c o u n t r i e s .
make them c o m p e t i t i v e .
we
and
to
lines.
f o r the Western n a t i o n s
determined e f f o r t s t o save energy.
and
the r i g h t
Kingdom t h a n t o some o t h e r
a m a j o r e n e r g y p r o d u c e r but
we
If
fight against o i l
Prime M i n i s t e r s a i d that perhaps these precepts
more t o t h e U n i t e d
The
the
i f p r i c e s went up
w o u l d be v e r y
their
economy as a w h o l e .
the w o r l d
United
increases.
w o u l d be b e t t e r a b l e
p o l i c i e s were on
must r e a c h some u n d e r s t a n d i n g w i t h
and
true
o i l price
approach to the
we
The
I t was
of renewed g r o w t h .
were t o a c h i e v e a b a l a n c e of s u p p l y
repercussions
did
this
t o improvements i n
t o a d a p t t o change - f o r p r o s p e c t s
inflation
But
future.
been damaged by
a d o p t e d t h i s k i n d of r e a l i s t i c
price
term.
e l s e w h e r e - f o r example, t o g r e a t e r e f f i c i e n c y
look
i n i n d u s t r y , a g r i c u l t u r e and ability
short
a l l hope of g r o w t h i n t h e
prospects
should
unavoidable i n the
field,
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we h a d s e e n t h e A m e r i c a n s t a b i l i s a t i o n measures
but
into
I t was p e r h a p s i n t h e
p o s i t i o n o f t h e E u r o p e a n M o n e t a r y System. field
and t h e p u t t i n g
o f N o r t h / S o u t h r e l a t i o n s t h a t t h e r e had been
least
progress,
even h e r e n e g o t i a t i o n s on t h e r e n e w a l o f t h e Lome C o n v e n t i o n h a d
j u s t been c o n c l u d e d . overshadowed
B u t a l l t h e s e modest a c h i e v e m e n t s were
by what had happened
T h i s was t h e
i n t h e energy f i e l d .
p r o b l e m w h i c h d o m i n a t e d t h e Summit.
could
T h e r e was n o t h i n g w h i c h
p r e v e n t s u b s t a n t i a l e c o n o m i c damage b e i n g s u f f e r e d as a r e s u l t o f
the
events of t h e l a s t
s i x months.
g r o w t h w o u l d be r e d u c e d .
I n f l a t i o n was bound
The b a l a n c e o f payments c o s t f o r t h e OECD
c o u n t r i e s as a w h o l e w o u l d be $20 b i l l i o n
a year.
t h e i n e s c a p a b l e i n j u r i e s which r e s u l t e d from t h e o i l
The o i l m a r k e t w o u l d p r e s u m a b l y b a l a n c e i t s e l f so.
The c e n t r a l
and a v o i d a b l e wounds
q u e s t i o n was how f a r we added s e l f - i n f l i c t e d to
t o go up, and
situation.
i n t h e next year o r
He a g r e e d t h a t o i l p r i c e s w o u l d go up, b u t we must n o t
e n c o u r a g e u n n e c e s s a r y p r i c e i n c r e a s e s and we must do a l l we c o u l d
to
s e e t h a t p r i c e r i s e s were g r a d u a l and n o t sudden.
no v o l u n t a r y agreement
I f t h e r e was
t o r e s t r a i n o i l i m p o r t s a n d no d r i v e
towards
s u b s t i t u t i o n , we s h o u l d f i n d t h a t we were s a v i n g e n e r g y i n t h e most
e x p e n s i v e way - by r e c e s s i o n .
I f t h a t happened
o i l prices
would
s t a b i l i s e a t a v e r y h i g h l e v e l and w o u l d t h e n r e m a i n t h e r e . w o u l d be l i k e l y
c o n s e r v a t i o n measures. it the
t o produce a g l u t of o i l , and i t would then i n t u r n
become more d i f f i c u l t the
This
t o b r i n g home t o p e o p l e t h e need f o r
I n t h i s way an even worse e n e r g y c r i s i s
p r e s e n t one w o u l d b u i l d up i n t h e 1980s. n e c e s s a r y t o a g r e e upon m e a s u r e s
than
T h i s p r o s p e c t made
t o deal with the problem i n both
s h o r t and l o n g e r t e r m s .
Mr. C l a r k s a i d t h a t he a g r e e d t h a t t h e Summit's u n d e r t a k i n g s on
e n e r g y must be s e e n t o be s e r i o u s ones and t h e m e e t i n g s h o u l d itself
t o a d o p t i n g g o a l s w h i c h were a c h i e v a b l e .
u n a t t a i n a b l e o b j e c t i v e s , t h i s would r e s u l t
restrict
I f t h e y went f o r
i n s c e p t i c i s m and f a i l u r e .
The e f f e c t o f t h e Summit's c o n c l u s i o n s on p u b l i c o p i n i o n w o u l d be
very important.
An e x p r e s s i o n o f s e r i o u s c o n c e r n about t h e e n e r g y
s i t u a t i o n w o u l d h e l p Governments u n p o p u l a r c o n s e r v a t i o n measures. r a i s e d environmental problems.
like
h i s own who h a d t o i n t r o d u c e
A l t e r n a t i v e sources of energy T h e r e was, f o r e x a m p l e ,
e v i d e n c e i n
/ Canada
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often
- 11 -
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oT^acidic rain resulting
f r o m t h e use o f c o a l .
I t would
be
i m p o r t a n t f o r t h e Summit t o t a k e a c c o u n t i n s e t t i n g g o a l s o f t h e
different
circumstances of i n d i v i d u a l c o u n t r i e s .
r e g i o n a l d i f f e r e n c e s o f w e a l t h i n Canada. o f t e n t h o s e where t h e r e was
T h e r e were m a j o r
Some a r e a s , w h i c h were
e n e r g y , were v e r y w e a l t h y , b u t
abundant
t h e r e were a l s o r e g i o n s w i t h l i t t l e o r no l o c a l e n e r g y s o u r c e s
w h i c h were much p o o r e r .
These
be
were l i m i t s on t h e s p e e d w i t h w h i c h t h e p r i c e mechanism c o u l d applied
in full
i n Canada.
The C a n a d i a n Government was
d e v e l o p i n g an e n e r g y p o l i c y
there
i n t e r n a l d i f f e r e n c e s meant t h a t
actively
f o r t h e 1990s e m b r a c i n g s u b s t i t u t i o n
and
conservat ion.
Mr. O h i r a s a i d t h a t e v e n t s had shown t h a t t h e v i e w t a k e n o f t h e
Middle East s i t u a t i o n
a t t h e Bonn Summit had been n a i v e and
that
t h a t m e e t i n g s ' s a p p r o a c h t o f u n d a m e n t a l and l o n g t e r m m e a s u r e s t o
d e a l w i t h t h e o i l p r o b l e m had n o t been a d e q u a t e . in
We must now
c o p i n g w i t h f u t u r e o i l p r i c e i n c r e a s e s and we must show t h a t
were s e r i o u s about l o n g t e r m c o n s e r v a t i o n m e a s u r e s . oil in
crisis
t h e r e had been some improvement
inflation
Since the
we
first
i n g r o w t h , some r e d u c t i o n
i n some c o u n t r i e s and a b e t t e r b a l a n c e o f payments
s u r p l u s and d e f i c i t s .
But i n o t h e r a r e a s , p a r t i c u l a r l y
employment, s e r i o u s p r o b l e m s r e m a i n e d s o t h e r e was scope f o r improved economic
performance.
c o n s i d e r a b l e demand f o r an improvement his
firm
be
still
t h a t of
substantial
In J a p a n t h e r e was
a
i n the q u a l i t y of l i f e ,
Government were t r y i n g t o g i v e r u r a l c o m m u n i t i e s the c i t i e s .
J a p a n was
of
the o i l c r i s i s
and
g i v i n g s e r i o u s thought t o the
life
implications
f o r t h e c o m i n g w i n t e r as w e l l as t o t h e means o f
s o l v i n g the longer term problems a r i s i n g
/
from the s h o r t a g e o f o i l .
Macro-Economic
CONFIDENTIAL
urban
a m e n i t i e s and a t t h e same t i m e t o r e d u c e t h e w o r s t f e a t u r e s o f in
Situation
CONFIDENTIAL
Macro-Economic S i t u a t i o n
Prime M i n i s t e r O h i r a , resuming a f t e r the
adjournment,
t o u c h e d on t h e r e l a t i o n s h i p
r e c a l l e d t h a t Heads o f Government had
Session.
o f energy p o l i c y t o macro-economic p o l i c i e s i n the Opening He
invited The
f u r t h e r c o n t r i b u t i o n s on t h e w o r l d
should
P r i m e M i n i s t e r s u g g e s t e d t h a t Heads o f Government
g i v e more a t t e n t i o n t o t h e need t o f i g h t
inflation.
t h e o i l p r i c e i n c r e a s e t h e r a t e o f i n f l a t i o n had many c o u n t r i e s . urgent.
The
o i l p r i c e i n c r e a s e had
P e o p l e had
purchasing
power.
been r i s i n g i n
come t o e x p e c t l i v i n g s t a n d a r d s Difficulties
not
enough.
Inflation
of t h e i r s a v i n g s .
to r i s e ,
on
stemmed f r o m t h e e m p h a s i s
financing.
c o n t r o l o f t h e money s u p p l y ;
c h e a t e d e l d e r l y p e o p l e out
It represented
Inflation
unattended simply because the world
had
Control that
value
but
of the
a t r a n s f e r of resources
r e t i r e d to the working p o p u l a t i o n .
without
increases in real
K e y n e s i a n p o l i c i e s w i t h t h e i r e m p h a s i s on d e f i c i t of i n f l a t i o n r e q u i r e d s t r i c t
before
Even
made t h e p r o b l e m more
d i f f e r e n t i a t i n g between r i s i n g money i n c o m e s and
was
situation.
economic
the
from
c o u l d n o t be
left
become so p r e o c c u p i e d
with
the problem of energy.
Mr.
O h i r a a g r e e d w i t h t h e P r i m e M i n i s t e r on
s u s t a i n i n g t h e a t t a c k on t h e Summit had and
growth.
t o be
inflation.
importance of
countries represented
s i d e s o f t h e same c o i n .
t h a t t h e p r o b l e m o f i n f l a t i o n was
S c h m i d t s a i d he
M i n i s t e r ' s point of view. t h e same p h i l o s o p h y .
He
He
more a c c u t e
a l s o concurred
m i g h t use
than
He
Prime
i n the
d i f f e r e n t words t o
f e a r e d most t h e t e m p t a t i o n s
shown t h e f u t i l i t y
of t h i s .
sentence under item 3 ) .
the thought c o n t a i n e d
there.
He
The
F o r t h a t r e a s o n he
to
t h a t i t was
unjust
last
wished s t r o n g l y to
5
liked
incomes
the
underline
P r e s i d e n t G i s c a r d mounted a s p i r i t e d d e f e n c e o f L o r d arguing
express
increase
to
s e n t e n c e i n the d r a f t communique w h i c h d e a l t w i t h r e a l (the f i r s t
agreed
ever,
n o m i n a l incomes t o compensate f o r h i g h e r o i l p r i c e s . y e a r s had
at
inflation
c o n c e r n e d a b o u t t h e c h o i c e between
These were two
Chancellor
The
the
Keynes,
to c r i t i c i s e p r e s c r i p t i o n s which r e l a t e d
t h e e a r l y 1930s t o w h i c h Keynes had
rightly
CONFIDENTIAL
addressed /
himself.
if
- 13 -
CONFIDENTIAL I f Keynes had his
been a l i v e now
s u r e he w o u l d have u p d a t e d
he was
p r e s c r i p t i o n s t o meet c o n t e m p o r a r y p r o b l e m s .
Picking
he
C h a n c e l l o r S c h m i d t ' s r e m a r k s a b o u t t h e d r a f t communique, thought agreed
t h a t p a r a g r a p h s 3 and
5 c o u l d u s e f u l l y be c o m b i n e d .
But
t h a t d i d not n e c e s s a r i l y i m p l y
deflationary policies.
In F r a n c e
investment
had
making f o r economic growth i n the l a s t 5 y e a r s . depended more on
c o n s u m p t i o n and on o v e r s e a s
t h a t w i s e l y chosen investment g r o w t h and
real
adopting not been a
factor
Growth
had
He b e l i e v e d
trade.
c o u l d b o t h be h e l p f u l i n
to develop
new
He
had
sources
5 of
i n mind measures t o c o n s e r v e
o f power.
b e n e f i c i a l t o many c o u n t r i e s .
He
He was
r i g h t simply to s e t t l e f o r running
thought
felt
be
t h a t i t was
lower
t h e w o r l d economy a t a He
energy
these could
not s a t i s f i e d
l e v e l s i m p l y because of the o i l c r i s i s .
promoting
i n c o n s e r v i n g energy - i n the terms of paragraph
t h e d r a f t communique.
He
t h e need f o r a l l c o u n t r i e s t o a d j u s t t o t h e h i g h e r
on
p r i c e of o i l .
and
up
communique
t h a t the
s h o u l d i n d i c a t e t h a t g r o w t h r a t e s s h o u l d n o t be t i e d t o t h e r a t e
o f c o n s u m p t i o n o f o i l and o i l p r o d u c t s . broken.
He
agreed
That l i n k needed t o
t h a t g r o w t h n e e d e d t o be
sources of energy supply.
In t h i s way,
c o u l d r e i n f o r c e commitments t o d o m e s t i c
those
s e n s i b l e energy measures
growth.
r e s u l t e d i n a message o f hope and
economic
because
solidarity,
c o u n t r i e s b e s t a b l e t o i n c r e a s e t h e i r economic growth
committed themselves well placed. Italy
alternative
f u e l l e d by
S i g n o r A n d r e o t t i r e c a l l e d t h a t t h e two p r e v i o u s Summits had
i t s g r o w t h t a r g e t a t a r o u n d 4%.
r e a c t i o n s t o the twin problems of i n f l a t i o n
He
less
strictly
difficult acceptable
feared that
and e n e r g y
f o r c o u n t r i e s l i k e h i s own He d i d n o t w i s h
i n f l a t i o n but agreed not j u s t s e t t l e
t o m a i n t a i n growth at
to minimise
than
The
should
Summit l e a d e r s s h o u l d aim
t o r e d u c e unemployment and
other j o i n t objectives.
an
the problem of
w i t h P r e s i d e n t G i s c a r d t h a t the w o r l d
for deflation.
a coordinated policy
shortage
I f t h a t h a p p e n e d , i t w o u l d make i t e x t r e m e l y
necessary.
level.
helped
w o u l d l e a d some c o u n t r i e s t o o v e r r e a c t i n r e d u c i n g g r o w t h more was
had
t o f a s t e r growth i n o r d e r t o h e l p those
As a c o n s e q u e n c e t h e a c t i o n s o f o t h e r s had
to maintain
be
achieve
Without i n f l a t i n g popular
at
their
expectations
t h e y s h o u l d aim a g a i n a t a message o f hope i n t h e communique.
/ Mr.
CONFIDENTIAL
Jenkins
CONFIDENTIAL - 14 Mr.
Jenkins
of the o i l p r i c e
noted that the d i f f i c u l t y
i n c r e a s e l a y i n the
contradictory effects:
f a c t t h a t i t p r o d u c e d two
a c o s t - p u l l e f f e c t on deficiency
-
inflation
i n demand.
In an
together
i d e a l world
similtaneous
with a
Governments w o u l d be
able
t o p r o d u c e a demand c o m p e n s a t i o n p o l i c y w h i c h c o u l d be p r o g r e s s i v e l y
r e d u c e d as t h e h i g h e r p u r c h a s i n g
power o f t h e o i l p r o d u c i n g
t o o k up
extremely
the s l a c k .
conditions.
But
t h i s was
difficult
countries
present
in
a case
He wondered, however, w h e t h e r t h e r e m i g h t not be
for developing
separate
p r i c e i n d i c e s which would d i s t i n g u i s h p r i c e
rest.
i n c r e a s e s a s s o c i a t e d w i t h r i s i n g energy p r i c e s from the T h i s would e n a b l e Governments t o emphasise the n e c e s s a r y of energy s h o r t a g e s .
consequences in dealing
Separate i n d i c e s could also help
w i t h f o r m a l i s e d systems o f wage i n d e x a t i o n .
President Carter reviewed
t h e measures taken
by
A d m i n i s t r a t i o n t o respond t o the energy shortage. Bonn Summit, he had
put
i n hand d e - c o n t r o l o f US
the
US
Following
the
domestic o i l p r i c e s .
C o n s e q u e n t l y o v e r t h e n e x t 18 months o i l p r i c e s w o u l d r i s e f a s t e r i n the U n i t e d
States than i n the other
Summit c o u n t r i e s s i n c e
v/ould r e f l e c t
the r e s u l t s of d e - c o n t r o l
i n a d d i t i o n t o t h e OPEC
price increases. separate he was
d i d not
had
energy p r i c e r i s e s p a s s i n g
Throughout h i s P r e s i d e n c y l a s t 2\
T h a t l i n k had
years.
Before
effectively
c o n s u m p t i o n f a c t o r had i n c r e a s e i n GNP.
1973
now
cent
f a l l e n t o 0.37
States.
combine c o - o p e r a t i o n He
had
successful.
Since
per cent
O t h e r s u p p o r t i n g m e a s u r e s had
c o n t i n u i n g concern at the
fall
had
(e.g.
priority
increase in 1973
GNP
consumption.
the
energy
f o r each 1 per
cent
been p u r s u e d ,
i n a v i a t i o n ) and
improved
P r e s i d e n t C a r t e r a l s o mentioned h i s i n the r a t e of p r o d u c t i v i t y i n c r e a s e
In a m i x t u r e
o f p o l i c i e s he
had
tried
to
i n t h e MTNs w i t h r e d u c e d p r o t e c t i o n at
p e r s i s t e d w i t h t h i s mix
although
i t had
not
P r e s i d e n t C a r t e r a l s o r e f e r r e d to the high
D expenditure
which
been made
i n c r e a s e i n energy
been b r o k e n .
tax i n c e n t i v e s for investment. i n the U n i t e d
d e a l of progress
But
wage
been o f f i r s t
each 1 per cent
including progressive de-regulation
and
accept
labour
s t r a i g h t i n t o US
e n e r g y had
A great
been a s s o c i a t e d w i t h a 1$ p e r
home.
p u b l i c o p i n i o n would
hoping to e s t a b l i s h a contract with organised
i n h i s d o m e s t i c programme. in the
t h i n k US
they
p r i c e i n d i c e s d i s t i n g u i s h i n g energy p r i c e i n c r e a s e s .
would prevent rates.
He
i n the Federal
a l w a y s been
l e v e l of R
Budget.
CONFIDENTIAL
/The
Administration
CONFIDENTIAL
The
A d m i n i s t r a t i o n was a l s o e n c o u r a g i n g
private
industry.
competition.
s i m i l a r e x p e n d i t u r e by
t o continue t o encourage
I t was i m p o r t a n t
But t h e c e n t r a l q u e s t i o n f o r t h e i n t e r n a t i o n a l
how t o d e a l w i t h t h e p r o b l e m o f e n e r g y .
community was u n d o u b t e d l y
He f e a r e d t h a t p r e s s r e p o r t s o f s p e c i f i c a t t i t u d e s w o u l d
reduce
o f Heads o f S t a t e and Government t o r e s p o n d t o
the f l e x i b i l i t y
e a c h o t h e r ' s p r o b l e m s i n a way t h a t w o u l d p r o d u c e a c o n s t r u c t i v e
response.
t h e y w o u l d c o n c e n t r a t e on
Above a l l , he hoped t h a t
r e a c h i n g agreement on p o s i t i v e commitments t o s p e c i f i c m e a s u r e s t o
meet t h e e n e r g y p r o b l e m . should t r y t o support
I t was i m p o r t a n t
that c o l l e c t i v e l y
they
and a p p r o v e t h e p r o p o s a l s o f e a c h o t h e r .
Whatever e l s e m i g h t a p p e a r i n t h e communique c o u l d n o t s u b s t i t u t e
P r e s i d e n t C a r t e r went on t o
for
constructive action of this kind.
say
t h a t t h e U n i t e d S t a t e s and Canada were l e s s w e l l p l a c e d
some o t h e r c o u n t r i e s t o r e d u c e t h e i r demands on t h e w o r l d market.
Partly
t h i s was b e c a u s e , f o r t h e l a s t
15 y e a r s ,
than
energy
domestic
p r o d u c t i o n h a d been f a l l i n g b e c a u s e o f r e l i a n c e on o l d e r o i l w e l l s .
Partly
i t was b e c a u s e , a s an o i l p r o d u c e r
as w e l l as an o i l
the i n t e r e s t s of
consumer, t h e U n i t e d S t a t e s h a d t o b a l a n c e d i f f e r e n t groups i n a d a p t i n g t o a s i t u a t i o n had
i n which p u b l i c o p i n i o n
L i k e t h e Canadian
got used t o a cheap source o f energy s u p p l y .
P r i m e M i n i s t e r he had t o have r e g a r d t o t h e f a c t t h a t
important
i n t e r e s t s i n h i s c o u n t r y were d e p e n d e n t on o i l p r o d u c t i o n and
exports.
He f e l t
domestic
i t was e a s i e r f o r t h o s e
source o f supply.
accommodate h i s own p o l i c y
countries without a
He was p r e p a r e d
t o go a l o n g way t o
t o t h e needs o f o t h e r c o u n t r i e s , b u t i f
he was t o c a r r y US o p i n i o n w i t h h i m he h a d t o be a s s u r e d t h a t would j o i n
i n a common commitment t o s o l v e t h e e n e r g y p r o b l e m .
Above a l l , he d i d n o t w i s h
t o s e e t h e Summit f a i l .
happen u n l e s s t h e r e was s u f f i c i e n t divergent
Mr.
views.
t o accommodate
He a g r e e d
w i t h o t h e r s on t h e
o f energy t o w o r l d economic development.
T h e r e was
s l o w g r o w t h and h i g h e r unemployment.
p r o b l e m was t o know how b e s t been l e a r n e d .
T h i s would
a n x i e t y about i n f l a t i o n , had
flexibility
O h i r a then spoke f o r Japan.
importance
others
to tackle this anxiety.
OECD had a g r e e d
upon d i f f e r e n t i a l
Many l e s s o n s demand management /
CONFIDENTIAL
The
policies.
- 16 -
CONFIDENTIAL
policies.
The J a p a n e s e Government had c o n t r i b u t e d t o t h i s
He r e c o g n i s e d but
P r e s i d e n t C a r t e r ' s need t o c u r e U n i t e d
t h e p r o b l e m o f i n f l a t i o n was common t o o t h e r
I t was n e c e s s a r y
d u r i n g t h e 1978 f i s c a l y e a r .
a c c o u n t h a d been r u n n i n g
at a d e f i c i t
o f $700 m.
J a p a n now e x p e c t e d
Whilst
l e v e l o f 20 p e r c e n t
domestic economic p o l i c y
I t was i m p o r t a n t
T h e r e was a need now t o renew
had
should
t h e C h a i r a t t h e Bonn Summit.
discussion
Schmidt suggested
r e p o r t on t h e i r p r o c e e d i n g s
T h i s had p r o v e d a s a t i s f a c t o r y
taken
technology.
f o r lunch, there followed a b r i e f
on c o n t a c t s w i t h t h e p r e s s ^ w R i c h C h a n c e l l o r press.
t o improve t h e
J a p a n was c o m i n g t o t h e end o f t h e p e r i o d
i n v e s t m e n t and t o s t i m u l a t e a programme o f i m p r o v e d
Prime M i n i s t e r O h i r a alone
prices
I n f l a t i o n remained t h e c e n t r a l i s s u e i n
of post-war t e c h n o l o g i c a l development.
adjourning
h a d been made
i n A p r i l and May, t h o u g h r e t a i l
i n Japan.
s i d e o f t h e economy.
Before
therefore,
W h o l e s a l e p r i c e s h a d moved up s h a r p l y t o an
towards i t .
moved up l e s s s h a r p l y .
supply
account
S i n c e March t h e c u r r e n t
had n o t a t t a i n e d t h e t a r g e t s e t a Bonn, p r o g r e s s
annualised had
c o u n t r i e s as w e l l .
But t h e c u r r e n t
a very s m a l l c u r r e n t account s u r p l u s t h i s year. in reaching
inflation,
J a p a n e s e d o m e s t i c damand had grown by
s u r p l u s h a d been r e d u c e d f r o m $14 b. t o $12 b.
they
States
f o r them a l l t o m i n i m i s e t h e e f f e c t o f i n f l a t i o n i n
r e s t r a i n i n g economic growth. 8 per cent
agreement.
that
to the
a r r a n g e m e n t when he h i m s e l f
Mr.
C l a r k seconded
a p p r o a c h a n d o t h e r Heads o f Government a g r e e d . f o r l u n c h a t 1215.
28 J u n e 1979
CONFIDENTIAL
this
The m e e t i n g a d j o u r n e d