Trade Ministers say Governments Need Credibility

Four trade ministers ended a weekend meeting with a frank confession that their governments are losing credibility in world financial markets and will not regain it until they back their promises over trade and currencies with action.

“Until today we have anounced policies, but when it came to action required it was done in a way that satisfied nobody,” Japanese Trade Minister Hajime Tamura told a news conference.

“From now on, if a government comes up with a certain policy, it must be followed by action,” he said following two days of informal talks with the trade ministers of the United States, the European Community and Canada in central Japan.

Last week, the dollar fell to a new record low below 140 yen, despite statements from the Group of Seven (G-7) leading industrial powers that currencies should be stabilised to underpin world trade.

“We need credibility to gain confidence. When we have confidence, then we can have an impact,” said Tamura.

His colleagues agreed that when major trade nations fought over trade issues while calling for each other to honour free trade rules in general, it was not a sight which inspired confidence in the markets.

“The time has come now to act in step with the talk. If you belong to a club, you have to act in concord with the rules, if you want to be credible,” said EC external trade chief Willy de Clercq.

Pat Carney of Canada said “We are meeting in a time of great trade tension. What the world needs to see is that we have the political will to deal with these problems we face.”

She said that next month’s meeting of the Organisation of Economic Cooperation and Development and the meeting of leaders of the G-7 nations in Venice in the summer would be a forum to show this will existed.

U.S. Trade Representative Clayton Yeutter reminded the news conference that the results of such high level meetings could lead to action which would only have an effect on smoothing out world trade imbalances perhaps years later.

“The media typically has a tendency to evaluate meetings like this in terms of tangible results. That is not the way it should be pursued,” he said.

“What is achieved in an intangible way almost always exceeds what is achieved in a tangible way,” he said.

Progress in personal contacts and understanding each others’ positions and policies was just as important toward reducing trade tensions, he said.

Tamura read out an agreed summary of the joint talks:

Currency stability was now essential, but currency movements alone would not correct a U.S. trade deficit with Japan which hit 58 billion dlrs last year, an 18 billion dlr EC deficit with Japan in 1986, and a Japanese global trade surplus of almost 90 billion, he said.

Trade retaliation, protectionism, and forcible export restraints which lead to a shrinkage in world trade flows were most dangerous, he said.

The imbalances can only be solved by coordinated policies over a whole range of fiscal, monetary, trade and industrial measures, and in line with a body of internationally agreed rules, he said.

In this regard, the policing role of the Geneva-based General Agreement on Tariffs and Trade world trade body must be strengthened, he said.

The ministers reconfirmed their individual promises to solve the problem. The United States will try to reduce its large budget deficit and restore competitiveness within its industries.

Japan will introduce early and effective measures to expand its domestic growth and rely less on exports.

The EC must continue efforts for balanced growth and reduced unemployment. All felt satisfied at the new progress in the Canadian economy.