HC Deb 18 July 1978 vol 954 cc266-83
The Prime Minister (Mr. James Callaghan)

A meeting was held in Bonn on 16th–17th July of the Heads of Government of Germany, Canada, France, Italy, Japan, the United Kingdom and the United States, together with the President of the European Commission.

The background is that the world economy is not growing fast enough, and world unemployment and inflation remain too high. Last March, in conversations with Chancellor Schmidt and President Carter, I proposed that all our countries should aim to agree on a concerted approach to five main issues, namely, world economic growth, better use of energy, increased trade, more currency stability and assistance for developing countries. I am glad to report that at our meeting at Bonn we agreed on a number of measures dealing with these points, recognising that our actions are interdependent, and that the measures required are different according to internal conditions that our countries face.

Contrary to much of the prior scepticism, we achieved a good measure of success, with undertakings being given for specific action by those attending. We recognised that the long-term problems of the world economy will yield only to sustained efforts over a substantial period. But, as a result of this meeting, the Summit countries are pointed in the right direction, and the measures that will follow from the individual commitments will help to create more jobs and more trade without rekindling inflation.

Our first concern was that the worldwide level of unemploymnt is too high. We agreed on the need to reduce the general level of inflation still further, and that higher growth and reduced inflation will contribute to greater currency stability and will also lessen the pressure for reducing world trade through protectionism.

Some of the specific proposals for action that Heads of Government intend to carry out in their own countries are summarised in the Declaration which I am placing in the Official Report.

Among them, Germany undertook by the end of August to propose to its legislative bodies substantial additional measures of up to 1 per cent. of gross national product to strengthen demand. One per cent. is approximately DM13 billion.

Japan undertook to determine in the months of August and September whether additional measures are needed to raise domestic demand to achieve a growth target 1½ per cent. higher than last year.

On behalf of the United Kingdom I undertook to continue our policies to contain inflation so as to improve still further the prospects for growth and employment.

The United States undertook to have in place by the end of 1978 a comprehensive framework for reducing American dependence on imported oil by as much as 2.5 million barrels per day by 1985, and stated that it is also determined that by 1980 the United States' oil price should be raised to the world level.

The European Community has agreed to reduce dependence on imported energy to 50 per cent. by 1985.

There was general agreement on the need for increased production, particularly of coal and nuclear energy. The United States and Canada both stated their firm intention to continue as reliable suppliers of nuclear fuel within the framework of effective safeguards.

We welcomed the progress made in the multilateral negotiations now taking place to improve and strengthen the international trading system. We called for them to be concluded by 15th December 1978. In this connection, Japan stated its intention to work for an increase of imports to Japan and to keep the total volume of Japanese exports for 1978 at or below the level of 1977.

Throughout these discussions we were very conscious of the needs and interests of the developing countries. Our efforts to strengthen our own economies will be of indirect benefit to a number of them, but they need to make more direct economic progress. They also need increasing flows of financial assistance and other resources, and we noted with regret that COMECON countries do not take their due share in this matter.

We agreed that the lending of the International Development Association should be enabled to rise annually and in real terms. We also agreed to work for a successful conclusion to the negotiations on a Common Fund, to continue with efforts for individual commodity agreements, and to ask the World Bank to examine the prospect of financing hydrocarbon exploration to meet some of the needs of the developing countries. I suggested that we should study the possibility of doubling the capital of the World Bank.

As regards international monetary policy, it is our view that implementing the comprehensive measures I have outlined will help to bring about a better pattern of world payment balances and thus lead to greater stability in exchange rates. Monetary authorities will continue to intervene to counter disorderly conditions in the markets. The meeting was informed of the proposals made at the last meeting of the European Council for a scheme for monetary cooperation, and the European Community representatives undertook to keep the other participants of the summit informed.

We reached an important agreement among ourselves to combat international terrorism through the hijacking of passenger aircraft. In particular, our countries will in future halt flights to and from countries which refuse extradition of or prosecution of those who have hijacked aircraft and/or do not return such aircraft. We urge other Governments to join us in this commitment. It is our joint intention that this important new policy shall operate immediately.

Finally, we instructed our representatives to convene by the end of 1978 to review the progress that will have been made as a result of this declaration. It represents a combined attack on the economic problems that our countries confront. The measures on which we agreed will mutually reinforce each other. Their total effect should thus be more than the sum of their parts. We undertook to commend them to our Parliaments and to seek public support for the policies and measures that will be required, and this with confidence I now do.

Mrs. Thatcher

May I put three points to the Prime Minister? First, he will be aware of my habit of comparing the phraseology of communiqués one with another across the years and noting a certain similarity of words, a certain similarity of optimism in the reports which followed the summit meetings, and a certain similarity in the lack of practical results during the ensuing year. Bearing in mind that the language of the Downing Street summit meeting, about which the Prime Minister was very optimistic indeed, used such phrases as our most urgent task is to create more jobs and We commit our Governments to stated growth targets —which were given in the briefing—may I ask what is the right hon. Gentleman's assessment of the practical benefits which have flowed from previous summit meetings?

Secondly, may I ask the Prime Minister about some of the briefing which was given alongside the Bonn communiqué? Clearly there was a great deal, and it is difficult to tell which was accurate and which was not. There is a report which appears in The Sun today under the name of the journalist whom the Prime Minister has chosen as his political adviser, which says that the Bonn summit meeting could mean an extra 2p off income tax in an autumn Budget. May I ask for the Prime Minister's comments upon that report?

Thirdly, may I say that we welcome the agreement to take action against States which harbour hijackers? Will the Prime Minister say what further action he and his colleagues propose to extend that agreement to other nations and other airlines, because clearly it will not be effective unless everyone joins in? Will he also say what action he proposes to take to seek to persuade other States to ratify the Hague, Montreal and Tokyo conventions on anti-terrorism and hijacking?

The Prime Minister

The right hon. Lady is wrong as regards hijacking. The measure can be effective, because the seven of us who were at the Summit meeting control over 50 per cent. of the air traffic of the world. That will be a significant deterrent to other countries concerned. As to other action that we shall take, we intend, through diplomatic channels, to approach other countries and to ask for their support in this matter. But the seven countries which assembled at the meeting intend to go ahead. I hope that the right hon. Lady will not indulge in her usual tactic of playing down any successful international co-operation in which this country is concerned.

The right hon. Lady asked about previous summit meetings. I should have thought that probably the biggest benefit secured—and it is a negative benefit so far—is that none of us has gone further down the road to protectionism, as might have happened if we had not met. I have always regarded that as very important.

I think that the practical benefits which will arise from this summit meeting will come from the specific commitments that individual countries, to some of which I have referred, have made. They have gone on record much more fully than they have at previous summit meetings as to what they are ready to do—certainly to a much greater extent than at the Downing Street summit, because I think that everyone—except, perhaps, the Opposition—realises that the situation is that much more serious, a further 12 months having elapsed. Throughout the world the situation has got worse.

Mr. Tebbit

So the right hon. Gentleman admits that it is worse now than 12 months ago.

The Prime Minister

Has the hon. Member not learned by now that the situation has got worse? Although I have no doubt that the Leader of the Opposition would like to hold me responsible for all the ills of all the world, I am responsible only for the United Kingdom.

I do not know to what the right hon. Lady was referring in her reference to the columns of The Sun, but I think that those personal references come amiss from her.

Mr. Noble

Will my right hon. Friend accept the congratulations of his hon. Friends on the role that he has played in the summit meeting? Will he tell us whether, during the discussions on trade, there were any discussions about introducing effective safeguards to replace the present article 19 of GATT? Will he give us an assurance that those agreements already in being, such as the Multi-Fibre Arrangement, will not be disturbed?

The Prime Minister

I am very grateful to my hon. Friend for his remarks. There was no discussion about the Multi-Fibre Arrangement. It is regarded as vital that we should all move to a general acceptance of the GATT provisions. This includes the United States, which has not so far, because of its own legal position, adopted all those provisions. There was certainly acceptance of that by the United States representatives, and I believe that there is a good chance of our so moving.

Several Hon. Members

rose—

Mr. Speaker

Order. Before I call anyone else, I remind the House that the main business is on a timetable motion and that the first guillotine will come at 5 p.m. Obviously, therefore, it will not be possible to call as many hon. Members as usual to ask supplementary questions. Mr. Crouch.

Mr. Crouch

While not wishing to detract from the Prime Minister's efforts to solve the economic problems of the free world, may I suggest to him that, at a time of international conferences, instead of visiting a small town in Germany his time might have been better spent in visiting a small castle in Kent, if only to pull up the drawbridge there and tell the people concerned to get on with the job of finding a settlement in the Middle East and not to leave until they have done so?

The Prime Minister

We were very glad to provide the facilities for this conference on the Middle East, and we all hope that it will make progress. We shall do anything we can to assist those taking part in it.

I think that it shows a total lack of proportion, however, to refer to the capital of the Federal Republic of Germany as a small town. The Federal Republic has the largest economy in Europe. As we were assembled there, probably controlling more than 50 per cent. of the world's trade, I believe that it was worthwhile spending 48 hours in order to see what concerted action we could take to try to relieve the problems of world poverty and slow growth.

Mr. Urwin

While welcoming my right hon. Friend's assurances about the discussions on terrorism, may I nevertheless ask him whether in the discussions on that subject any reference was made to the Council of Europe's convention on terrorism, which was signed by the Committee of Ministers on 10th November 1976 and has so far been ratified by only three of the member States of the Council of Europe—Austria, Sweden and the Federal Republic of Germany? Can we assume that the British Government will now ratify that convention as one of the major contributions towards the suppression of terrorism?

The Prime Minister

We did not discuss the general convention on terrorism. The issue that was raised was the hijacking of aeroplanes, and it is to that measure that the seven countries attending the meeting have committed themselves. I am glad to say that I believe that there will be an extension of the number of countries prepared to take part. Certainly we shall do our best.

I shall look into the question of the ratification of the Council of Europe's convention on terrorism and write to my hon. Friend about it.

Mrs. Bain

In the light of the commitment by the EEC to reduce dependence on imported energy by 50 per cent over the next seven years, will the Prime Minister confirm, first, that this dependence is largely oil-based, and, secondly, that it will be no part of the deal to step up the rate of production in the North Sea, since this would be greatly against the interests of the United Kingdom as a whole and of the Scottish people, for whom the revenue should be used to create long-term secure employment?

The Prime Minister

The hon. Lady is right in saying that most of the dependence is oil-based. I could not help reflecting more than once yesterday and the day before, when I heard of the concern of countries such as France and Germany and other great industrial countries, which do not have the supplies of energy that we have, that we are indeed fortunate to have North Sea oil.

It is not, of course, the intention to alter the proposals which have already been put before Parliament, and which are well known, concerning the rate of extraction of oil from the North Sea, which we regard as being the right programme for the next four or five years. After that, no doubt, the matter will be looked at again.

Mr. Pardoe

Will the Prime Minister accept that we welcome any determination to increase world demand, more particularly if it actually comes about? Does he accept that the greatest barrier to increasing Britain's level of demand is our domestic rate of inflation? Will he say exactly how he proposes to carry out his undertaking to continue policies to bring inflation under control? Does he believe that the announcement which will be made in the White Paper on Friday will ensure that our rate of inflation in 1979 will be at or below the average level of inflation in OECD countries?

The Prime Minister

Perhaps the hon. Gentleman would await the publication of a White Paper on this matter. I will not go into details until I have had further discussions about it, if he will excuse me. Of course, inflation is a big handicap, but we have fortunately reduced that handicap very substantially. Certainly the Opposition have nothing to laugh about. Inflation is at only half the level at which it stood when they left office. Then it was going up, and now it is at the lowest level for some years. We shall continue with the policies which have brought about this degree of success so far.

The biggest problem that we have is one to the solution of which the Government can contribute only in a limited way. That is the relative failure of our industry to be more productive. Through the efforts of management and the work force, there are many industries which are extremely productive. There are others which are not. If we can raise the general level of productivity, we shall have a faster rate of growth and be able to do the other things that we want to do.

Several hon. Members

rose—

Mr. Speaker

Order. I propose to call three more hon. Members from each side. There is a Ten-Minute Bill to follow, before we get to the main business.

Mr. Wrigglesworth

I understand the scepticism of the Opposition, but will my right hon. Friend accept that firms in areas such as Teesside, which depend to a great extent for their business on exports—for example, ICI, Head Wrightson, British Petroleum and many other major firms—will be delighted with the efforts being made by the Government to get some growth in world trade? Does my right hon. Friend agree that it has been held up in recent times by the currency instability in the world? Will he tell the House why at the summit meeting there seems to have been less emphasis placed on means to overcome currency instability?

The Prime Minister

Some of the currencies have been more stable in recent months, but basically currency instability, apart from speculation, arises because the economies of the various countries are not sufficiently convergent. We believe that the measures that we have taken, if they are carried out—that is something that does not fall to me—will bring greater convergence and, therefore, less currency instability. That is the reason why this currency stability has become more of a residual than an actual target.

Mr. McCrindle

As the national airlines of all the seven participants at Bonn are members of the International Air Transport Association, was any consideration given to the possible use of commercial sanctions, such as cutting off the national airlines of those countries which may harbour terrorists from the very useful clearing house facilities operated by IATA?

The Prime Minister

We did not give consideration to that, but I am sure that there are a number of issues here which can, and will, be followed up by the Ministers concerned. We are anxious to put on record the simple, plain statement that I have announced this afternoon. As all of us have made it, and as all of us mean it, I believe that it ought to have some effect on anyone who is considering terrorism in this area.

Mr. McNamara

Not least of the important statements which my right hon. Friend has made has been the statement about the Common Fund and the progress and emphasis which is being made to help developing countries. However, my right hon. Friend omitted to mention the question of debt relief, which was also omitted from the statement made after the summit meeting. Can my right hon. Friend make a statement about the position with regard to debt relief for the least developed countries?

The Prime Minister

I am not able to make such an agreed statement, as there was not general agreement on this matter. But I believe that this is an issue on which we can be of great help to some of the developing countries, where the interest payable on their debt forms a substantial proportion of their export proceedings. I hope that we shall follow this matter up and try to get a satisfactory solution to it.

Mr. Whitney

The reports of the Bonn conference suggest that the Prime Minister had relatively little to offer in the way of stimulating the world economy in comparison with the other six Heads of Government and that he was forced to rely on the reduction of income tax which is to be carried out in this Budget. Did he make it clear to the other Heads of Government that the reduction in income tax was carried out in the face of the opposition of his own party and Government?

The Prime Minister

I was not required to make clear anything about our internal affairs. The proposals which were put forward by my right hon. Friend the Chancellor of the Exchequer represented 1 per cent. of the gross national product, and that in itself was regarded as a very useful addition. But as I have emphasised more than once, the major thing that we can do is to keep the rate of inflation under control. Although I know that Opposition Members are a little nervous about coming months, the plain truth is that what this country has done in recovering from the economic follies of the previous Administration is much admired overseas.

Mr. Norman Atkinson

Does not the Prime Minister agree that the results from Bonn are just as contradictory as those from Rambouillet and Puerto Rico? Is it not a fact that the other six Heads of State are leaders from free market economies, all of whom are determined to practise non-interventionist policies in their own countries? How is it possible, therefore, for them to deliver internationally what they refuse to deliver domestically?

The Prime Minister

My hon. Friend does not seem to be aware of the levels of control which other Governments have over their fiscal and monetary policies, as we have. Of course it is quite possible for the Federal Republic of Germany to take fiscal and other measures, through either reductions in taxation or increases in public expenditure—it is for it to choose—to add the equivalent of up to 1 per cent. to its GNP. In itself, that is equivalent to about DM 13 billion. The Japanese intend to do the same. The United States has said that it intends to try to adjust its balance of payments position by certain actions which President Carter can take in connection with oil prices.

All these are practical steps which have been missing from previous declarations, where we have confined ourselves to general statements. But here specific issues and specific figures have been inserted, and that is a great advance.

I do not know why Conservative Members should want to write this down. Do they not want to see unemployment reduced or efforts made to try to get world growth increased? If so, why do they sneer at efforts of this kind?

Mr. Forman

Will the Prime Minister take this opportunity to draw to the attention of his hon. Friends below the Gangway the very important commitment in the summit communiqué to the effect that all the nations at Bonn were prepared to agree not to put any impediments in the way of private investment, whether domestically or internationally? Does he accept that that is a very important contribution to the revival of world trade?

The Prime Minister

Private investment has a considerable part to play, both in this country and elsewhere. It is not private investment to which I find any objection. What I find objection to is the Opposition's Pavlovian reaction to anyone who suggests that public expenditure and public investment have a part to play.

Mr. Speaker

Northern Ireland motion.

Mr. David Price

On a point of order, Mr. Speaker. In view of the many hon. Members trying to catch your eye, and knowing your difficulty of getting on with the business of the House, may I simply ask whether the Government are prepared to give time to debate this matter before the House rises?

Mr. Speaker

I expected that was the question which the hon. Gentleman wished to ask.

Following is the Declaration:

The Heads of State and Government of Canada, the Federal Republic of Germany. France, Italy, Japan, the United Kingdom of Great Britain and Northern Ireland and the United States of America met in Bonn on 16th and 17th July 1978. The European Community was represented by the President of the European Council and by the President of the European Commission for discussion of matters within the Community's competence.

1. We agreed on a comprehensive strategy covering growth, employment and inflation, international monetary policy, energy, trade and other issues of particular interest to developing countries. We must create more jobs and fight inflation, strengthen international trading, reduce payments imbalances, and achieve greater stability in exchange markets. We are dealing with long-term problems, which will only yield to sustained efforts. This strategy is a coherent whole, whose parts are interdependent. To this strategy, each of our countries can contribute; from it, each can benefit.

GROWTH, EMPLOYMENT AND INFLATION

2. We are concerned, above all, about world-wide unemployment because it has been at too high a level for many years, because it hits hardest at the most vulnerable sections of the population, because its economic cost is high and its human cost higher still. We will act, through measures to assure growth and develop needed skills, to increase employment. In doing this, we will build on the progress that has already been made in the fight against inflation and will seek new successes in that fight. But we need an improvement in growth where that can be achieved without rekindling inflation in order to reduce extremes of balance of payments surpluses and deficits. This will reduce destabilising exchange rate movements. Improved growth will help to reduce protectionist pressures. We need it also to encourage the flow of private investment, on which economic progress depends; we will seek to reduce impediments to private investment, both domestically and internationally. Better growth is needed to ensure that the free world is able to develop to meet the expectations of its citizens and the aspirations of the developing countries.

3. A programme of different actions by countries that face different conditions is needed to assure steady non-inflationary growth. In countries whose balance of payments situation and inflation rate does not impose special restrictions, this requires a faster rise in domestic demand. In countries where rising prices and costs are creating strong pressures, this means taking new measures against inflation.

Canada reaffirmed its intention, within the limits permitted by the need to contain and reduce inflation, to achieve higher growth of employment and an increase in output of up to 5 per cent.

As a contribution to avert the world-wide disturbances of economic equilibrium the German Delegation has indicated that by the end of August it will propose to the legislative bodies additional and quantitively substantial measures up to 1 per cent. of GNP, designed to achieve a significant strengthening of demand and a higher rate of growth. The order of magnitude will take account of the absorptive capacity of the capital market and the need to avoid inflationary pressures.

The President of the French Republic has indicated that, while pursuing its policy of reduction of the rate of inflation, the French Government agrees, as a contribution to the common effort, to increase by an amount of about 0.5 per cent. of GNP the deficit of the budget of the State for the year 1978.

The Italian Prime Minister has indicated that the Government undertakes to raise the rate of economic growth in 1979 by 1.5 per centage points with respect to 1978. It plans to achieve this goal by cutting public current expenditure while stimulating investments with the aim of increasing employment in a non-inflationary context.

The Prime Minister of Japan has referred to the fact that his Government is striving for the attainment of the real growth target for fiscal year 1978, which is about 1.5 per centage points higher than the performance of the previous year, mainly through the expansion of domestic demand. He has further expressed his determination to achieve the said target by taking appropriate measures as necessary. In August or September he will determine whether additional measures are needed.

The United Kingdom, having achieved a major reduction in the rate of inflation and improvement in the balance of payments has recently given a fiscal stimulus equivalent to rather over 1 per cent. of GNP. The Government intends to continue the fight against inflation so as to improve still further the prospects for growth and employment.

The President of the United States stated that reducing inflation is essential to maintaining a healthy U.S. economy and has therefore become the top priority of U.S. economic policy. He identified the major actions that have been taken and are being taken to counter inflation in the United States: Tax cuts originally proposed for fiscal year 1979 have now been reduced by $10 billion; government expenditure protections for 1978 and 1979 have been reduced; a very tight budget is being prepared for 1980; steps are being taken to reduce the direct contribution by government regulations or restrictions to rising costs and prices, and a voluntary programme has been undertaken to achieve deceleration of wages and prices.

The meeting took note with satisfaction that the common approach of the European Community already agreed at Bremen would reinforce the effectiveness of this programme.

ENERGY

4. In spite of some improvement, the present energy situation remains unsatisfactory. Much more needs to be done.

5. We are committed to reduce our dependence on imported oil.

6. We note that the European Community has already agreed at Bremen the following objectives for 1985: to reduce the Community's dependence on imported energy to 50 per cent., to limit net oil imports, and to reduce to 0.8 the ratio between the rate of increase in energy consumption and the rate of increase in gross domestic product.

7. Recognising its particular responsibility in the energy field, the United States will reduce its dependence on imported oil. The U.S. will have in place by the end of the year a comprehensive policy framework within which this effort can be urgently carried forward. By year end, measures will be in effect that will result in oil import savings of approximately 2.5 million barrels per day by 1985. In order to achieve these goals, the U.S. will establish a strategic oil reserve of I billion barrels; it will increase coal production by two-thirds; it will maintain the ratio between growth in gross national product and growth in energy demand at or below 0.8; and its oil consumption will grow more slowly than energy consumption. The volume of oil imported in 1978 and 1979 should be less than that imported in 1977. In order to discourage excessive consumption of oil and to encourage the movement toward coal, the U.S. remains determined that the prices paid for oil in the U.S. shall be raised to the world level by the end of 1980.

8. We hope that the oil exporting countries will continue to contribute to a stable world energy situation.

9. Looking to the longer term, our countries will review their national energy programmes with a view to speeding them up. General energy targets can serve as useful measures of the progress achieved.

10. Private and public investment to produce energy and to use it more efficiently within the industrial world should be increased. This can contribute significantly to economic growth.

11. The further development of nuclear energy is indispensable, and the slippage in the execution of nuclear power programmes must he reversed. To promote the peaceful use of nuclear energy and reduce the risk of nuclear proliferation, the nuclear fuel cycle studies initiated at the London Summit should be pursued. The President of the United States and the Prime Minister of Canada have expressed their firm intention to continue as reliable suppliers of nuclear fuel within the framework of effective safeguards. The President intends to use the full powers of his office to prevent any interruption of enriched uranium supply and to ensure that existing agreements will be respected. The Prime Minister intends that there shall be no interruption of Canadian uranium supply on the basis of effective safeguards.

12. Coal should play an increasingly important role in the long term.

13. Joint or co-ordinated energy research and development should be carried out to hasten the development of new, including renewable, energy sources and the more efficient use of existing sources.

14. In energy development, the environment and human safety of the population must be safeguarded with greatest care.

15. To help developing countries, we will intensify our national development assistance programmes in the energy field and we will develop a co-ordinated effort to bring into use renewable energy technologies and to elaborate the details within one year. We suggest that the OECD will provide the medium for cooperation with other countries.

16. We stress the need for improvement and co-ordination of assistance for developing countries in the energy field. We suggest that the World Bank explore ways in which its activities in this field can be made increasingly responsive to the needs of the developing countries, and to examine whether new approaches, particularly to financing hydrocarbon exploration, would be useful.

TRADE

17. We reaffirm our determination to expand international trade, one of the driving forces for more sustained and balanced economic growth. Through our joint efforts we will maintain and strengthen the open international trading system. We appreciate and support the progress as set forth in the Framework of Understanding on the Tokyo Round of Multilateral Trade Negotiations made public in Geneva, 13th July 1978, even though within this Framework of Understanding some difficult and important issues remain unresolved.

The successful conclusion of these negotiations, the biggest yet held, would mean not just a major trade liberalisation programme extending over the 1980s but the most important progress yet made in the GATT in relation to non-tariff measures. Thus the GATT rules would be brought more closely into line with the requirements of the next decade—particularly in relation to safeguards—in ways which would avoid any weakening of the world trading system and be of benefit to all trading countries developed and developing alike. A substantially higher degree of equity and discipline in the international trading system would be achieved by the creation of new mechanisms in many fields for consultation and dispute settlement. Uniform application of the GATT rules is vital and we shall move in that direction as soon as possible.

In all areas of the negotiations the Summit countries look forward to working even more closely with the developing countries. We seek to ensure for all participants a sound and balanced result, which adequately takes into account the needs of developing countries, for example, through special and differential treatment, and which brings about their greater participation in the benefits and obligations of the world trading system.

At last year's Downing Street Summit we rejected a protectionist course for world trade. We agreed to give a new impetus to the Tokyo Round. Our negotiators have fulfilled that commitment. Today we charge them, in cooperation with the other participants, to resolve the outstanding issues and to conclude successfully the detailed negotiations by December 15, 1978.

18. We note with satisfaction the renewal of the pledge to maintain an open market oriented economic system made by the OECD Council of Ministers last month. Today's world economic problems cannot be solved by relapsing into open or concealed protectionism.

19. We welcome the statement on positive adjustment policy made by the OECD Ministers. There must be a readiness over time, to accept and facilitate structural change. Measures to prevent such change perpetuate economic inefficiency, place the burden of structural change on trading partners and inhibit the integration of developing countries into the world economy. We are determined in our industrial, social, structural and regional policy initiatives to help sectors in difficulties, without interfering with international competition and trade flows.

20. We note the need for countries with large current account deficits to increase exports and for countries with large current accounts surpluses to facilitate increases in imports. In this context, the United States is firmly committed to improve its export performance and is examining measures to this end. The Prime Minister of Japan has stated that he wishes to work for the increase of imports through the expansion of domestic demand and various efforts to facilitate imports. Furthermore, he has stated that in order to cope with the immediate situation of unusual surplus, the Government of Japan is taking a temporary and extraordinary step of calling for moderation in exports with the aim of keeping the total volume of Japan's exports for the fiscal year of 1978 at or below the level of fiscal year 1977.

21. We underline our willingness to increase our co-operation in the field of foreign private investment flows among industrialised countries and between them and developing countries. We will intensify work for further agreements in the OECD and elsewhere.

22. In the context of expanding world economic activity, we recognise the requirement for better access to our countries' markets for the products of the developing countries. At the same time we look to increasing readiness on the part of some of the more advanced developing countries to open their markets to imports.

RELATIONS WITH DEVELOPING COUNTRIES

23. Success in our efforts to strengthen our countries' economies will benefit the developing countries, and their economic progress will benefit us. This calls for joint action on the basis of shared responsibility.

24. In the years ahead the developing countries, particularly those most in need, can count on us for an increased flow of financial assistance and other resources for their development. The Prime Minister of Japan has stated that he will strive to double Japan's official development assistance in three years.

We deeply regret the failure of the COMECON countries to take their due share in the financial assistance to developing countries and invite them once more to do so.

25. The poorer developing countries require increased concessional aid. We support the soft loan funds of the World Bank and the three regional development banks. We pledge our governments to support replenishment of the International Development Association on a scale that would permit its lending to rise annually in real terms.

26. As regards the more advanced developing countries, we renew our pledge to support replenishment of the multilateral development banks' resources, on the scale needed to meet the growing needs for loans on commercial terms. We will encourage governmental and private co-financing of development projects with these banks.

The co-operation of the developing countries in creating a good investment climate and adequate protection for foreign investment is required if foreign private investment is to play its effective role in generating economic growth and in stimulating the transfer of technology.

We also refer to our efforts with respect to developing countries in the field of energy as outlined in paragraph 15 and 16.

27. We agreed to pursue actively the negotiations on a Common Fund to a successful conclusion and to continue our efforts to conclude individual commodity agreements and to complete studies of various ways of stabilising export earnings.

INTERNATIONAL MONETARY POLICY

28. The erratic fluctuations of the exchange markets in recent months have had a damaging effect on confidence, investment and growth throughout the world. Essentially, exchange rate stability can only be achieved by attacking the fundamental problems which have contributed to the present large balance of payments deficits and surpluses. Implementation of the policies described above in the framework of a concerted programme will help to bring about a better pattern of world payments balances and lead to greater stability in international exchange markets. This stability will in turn improve confidence and the environment for sustained economic growth.

29. Although exchange rates need to respond to changes in underlying economic and financial conditions among nations, our monetary authorities will continue to intervene to the extent necessary to counter disorderly conditions in the exchange markets. They will maintain extensive consultations to enhance these efforts' effectiveness. We will support surveillance by the International Monetary Fund, to promote effective functioning of the international monetary system.

30. The representatives of the European Community informed the meeting of the decision of the European Council at Bremen on 6/7 July to consider a scheme for a closer monetary co-operation. The meeting welcomed the report and noted that the Community would keep the other participants informed.

CONCLUSION

31. It has been our combined purpose to attack the fundamental economic problems that our countries confront.

The measures on which we have agreed are mutually reinforcing. Their total effect should thus be more than the sum of their parts. We will now seek parliamentary and public support for these measures.

We cannot hope to achieve our purposes alone. We shall work closely together with other countries and within the appropriate international institutions; those among us whose countries are members of the European Community intend to make their efforts within this framework.

We have instructed our representatives to convene by the end of 1978 in order to review this Declaration.

We also intend to have a similar meeting among ourselves at an appropriate time next year.

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