Top-level summit talks a ‘dogfight’

Press, 3 February 1986, Page 6

Top-level summit talks a ‘dogfight’

NZPA-Reuter Honolulu Top-ranking officials preparing for the summit meeting of seven leading democracies have clashed over how to respond to the collapse in world oil prices, delegates say. "It was a real dogfight,” said one delegate. Producing countries such as Britain and Canada stood to lose from the recent collapse In oil prices. Consuming nations such as West Germany and Japan would gain, delegates from both sides said. Britain and Canada have already been forced to increase interest rates to protect their currencies against speculation by in-

vestors and are concerned about the effects of lower oil prices on their economies. Three senior officials from each of the summit conference countries — Britain, Canada, France, Japan, Italy, the United States, and West Germany — are attending the top secret talks on mapping out strategy for the economic summit meeting in May. , ' A representative from the European Commission, and from the Netherlands, which is in the chair of the European Economic Community’s Council of Ministers, are also in Honolulu. Several participants said that the one-third drop in oil prices

swell Japan’s huge trade surplus even more, fanning protectionist pressures in the United States and destabilising the world economy. "It could prove pretty embarrassing for them,” one official from an oilproducing country said. Japan will be particularly anxious to avoid such criticism because it will be host of the sevennation conference in Tokyo. It argues that it has already acted forcibly by pushing up the value of the yen on foreign exchange markets, thus making Japanese exports more expensive and imports cheaper. Despite the strength of the yen — it has risen 20

per cent against the United States dollar in the last year — Japan came under pressure at Honolulu to do more to reduce its SUSSO billion ($95 billion) a year trade surplus, delegates said. The United States has long urged both Japan and West Germany to increase imports by boosting domestic demand. An official from an oilproducing country said that Tokyo’s efforts to stimulate domestic growth so far had been largely cosmetic and pointed to weakening Japanese investment Some American officials believe Japan’s economy could grow 5 per cent this year without re-

igniting Inflation. Japan has forecast 4 per cent growth for 1986-87, but most independent economists say that that is overoptimistic. “They can do more,” an American official in Tokyo said recently. Before last month's sudden fall in oil prices, Japan had been forecasting a trade surplus of SUSSB billion (sllo.2billion) for the year ending March 31. The lower oil prices will boost that even more because of the country’s overwhelming dependence on imported fuel. . Delegates at Honolulu said Japanese officials had told them the stronger yen would »ot if

have much of an impact on the trade surplus for some months. European officials, for instance, have complained that most of the yen’s strength has been against the United States dollar, and not against European currencies. Japan had a trade surplus of about SUSI2 billion ($22.8 billion) with Europe last year. Japan responded to this international pressure to boost domestic growth by cutting its key interest rate percentage last week. But that was unlikely to appease critics of its huge trade surplus attending the week-end’s meeting at Honolulu, North American officials said.