High stakes in the cards at economic summit.

High stakes in the cards at economic summit

The economic summit of the seven industrial nations has been earning its name the last couple of years. This year should be no exception.

Billions and billions of dollars are at stake worldwide in areas like Middle East reconstruction

Heads of state from the United States, Germany, Great Britain, Japan, Canada, France, Italy and the European Community (EC), will get down to the brass tacks of world economics in London July 15-17 at the 17th annual economic summit.

The United States takes to the confab several messages. One is that Japan and Germany need to do more promoting world economic growth rather than fighting inflation: Both nations should lower interest rates, and Japan should remove barriers to investment and trade.

German Chancellor Helmut Kohl's defense will be that his country has largely done its share of economic cooperation for the sake of world economic growth and stability.

His nation has committed some $70 billion to the new world order over the last two years via pledges and payments of about $30 billion to the Soviet Union, about $12 billion to the United States and allies for the Persian Gulf War, almost $18 billion for Eastern Europe as well as the ongoing costs of unification.

Japanese Prime Minister Toshiki Kaifu will likely join Germany in some finger wagging at President George Bush for not doing more to lower the budget deficit, which has grown to a total exceeding $300 billion. U.S. interest rate policy may also come under attack as too easy and potentially inflationary.

But the United States won't stand alone on its pro-growth stance.

"We're pushing for growth over the inflation battle," an EC official tells Futures, echoing the call for greater monetary flexibility by Germany.

"Japan has done more in the way of aid," the EC official continues. "We all recognize that. But we'd like to see Japan fulfill a global role commensurate with its wealth."

Japan may have to answer for not fulfilling its pledges to the Persian Gulf efforts in a more timely fashion.

As of late May, Japan had disbursed only $803 million of its $2.6 billion pledge to front-line states most adversely affected by the crisis. But Japan has paid all but $1.2 billion of its $9 billion pledge to Desert Storm.

The Japanese and Americans are said to have agreed in principle to account for $500 million owed due to currency fluctuations. The remaining $700 million is being discussed.

On Western aid to the Soviet Union, Bush hopes the summiteers will agree to offer a level of support that will serve as a catalyst for the next phase of Soviet reforms.

The International Monetary Fund (IMF), in a study on the Soviet Union mandated at last year's summit, concluded humanitarian aid is needed, but structural government and distribution problems make widescale financing imprudent now.

Bush will push for Soviet assistance in the form of credits, grants, expanded technical cooperation, food distribution coordination, new energy assistance or special membership status in financial institutions like the IMF and the World Bank.

Perhaps a sexier issue surrounding the Soviet Union has been the debate of President Mikhail Gorbachev's request to address the London summit - a request he made of French President Francois Mitterrand in 1989.

As Kohl put it, long before a decision on the request was made, "President Gorbachev is going to play a role irrespective of whether he's actually bodily present or not."

World trade talks also will be on the agenda. It's time for the leaders to give marching orders to their ministers to get the Uruguay Round job done, summit planners say.

With the passage of the EC's 1991 crop price proposal, which stabilizes or cuts farm subsidies, and the U.S. Congress' OK of fast-track trade authority, the way should be cleared for concessions, observers suggest.

Quadrilateral trade talks between the United States, Canada, Japan and the EC in September may be the first test of summit leaders' resolve.

They are expected to continue assistance to Eastern Europe. They may agree to lift export restrictions or announce quota reductions on goods imported from these nations as reward for the stabilization achieved since democratization began in 1989.

European countries will push the United States and Japan on environmental issues such as air pollutants that erode the ozone and global warming, says one contact.

Still, for all this positioning and talking, a British contact involved in the summit warns that financial markets should not expect too much.

"The economic summit is more or less a brainstorming session," says the contact. "They are not negotiations."

But an official at 10 Downing St. in London warns not to undervalue the summit process. Leaders will give direction to many issues, he says, setting priorities in domestic agendas.