Finn Gundelach:

Our recent economic experience has more than ever before shown us the necessity of close co-operation between the US and the EEC. We may have a number of differences between us, but the recent economic upheaval has clearly shown the interdependence between the US and the EEC. It has underlined the joint responsibility of the US and the EEC for the world economy. This responsibility involves co-ordination of major economic issues partly among the industrialized countries and partly between the industrialized and the third world.

Amongst the industrialized countries we have learnt that the really big issues in economicrelations between industrialized countriesare not the outstanding trade problems,

however important they may be, nor how to find a new technical solution for an internationalmonetary reform. The overwhelmingissue for immediate action is economic stabilization, i.e. how to reduce the enlarged swings in the business cycle, unemployment and inflation. With these issues under controlwe will have a solid basis on which to treat trade, development and financial and monetary questions.

The industrialized countries participate in the so-called North-South dialogue, the aim of which is to avoid confrontation between the rich and the poor by creating a mutual understanding of common problems and economic interdependence. However, this dialogue will not bring us very far unless the same mutual understanding of common problems is created between th industrialized countries themselves.

In order to establish this dialogue between the industrialized countries, it is not necessary to erect new institutions imposing new formal obligations upon the participants. We have in fact today a considerable number of international organisations taking care of specific problems as weii as more general questions (OECD). If the system does not work properly - and apparently it does not - it must be subscribed to lack of political will. Governments assume their responsibilities for the countries' internal development, but they are not inclined to assume any responsibility for international development.

Look at this in contrast to the fact that the US economy and the EEC economy are increasingly dependent on international trade. It then becomes clear that the governments' position is illogical and serves no purpose. On the contrary, governments' attitudes could well result in serious losses of confidence in the international economic system.

I do not emphasize this in order to put the blame on the US alone. The European countries should undertake their part of the responsibilities, but that they cannot do before they engage themselves internally in a true and efficient co-operation on economic problems. A commitment to this has proved much more difficult to obtain than to engage in a discussion of how to create a future political union, but it is much more important.

The importance of such co-operation is underlined by the present situation. Confidence in the future can only be restored if business circles feel convinced that the previously experienced "stop-go" policy will not be repeated. In order to achieve that, the underlying balance of payments problem needs to be solved by structural adjustments in our economies, which adjustments are equally necessary to diminish the problems of inflation.

It could well prove necessary to introduce specific measures destined to break the wages/prices spiral which often, during a recovery and even some time after, endangers the economic stability.

How the Americans would try to achieve this is not a matter for me to consider, but I think that for several European countries it could prove necessary to introduce income policies or other equivalent measures.

Both industry and labour must be involvedmore deeply than today in the decision-makingprocess. Not in order to take responsibilities away from the politicians, but in order to create an understanding by the social partners of basic economic realities.

To this end, it is important to integrate employeesin the decision-making process in industry. Workers' participation is probably the only feasible way in a modern complex society to bring into proportion conflicts of interest which are often artificial and more apparent than real. This is not least importantin order to bring about confidence in a fair burden-sharing in the present situation where economic growth to a large extent necessarily must be used for structural adjustments,that is increased exports, investmentsin new energy resources, in energy conservation, protection of the environment and transfers to the developing countries.

Co-ordination - or call it dialogue if you prefer - between the US and the EEC is more important now than in the sixties, because the almost total collapse of the Bretton Woods system has resulted in periods of wild fluctuations in key exchange rates. An evolution like this can very well disturb international trade and investments more than existing barriers to trade for industrial products. These erratic fluctuations not reflecting changes in terms of trade are caused partly by lack of confidence and partly by lack of co-ordination of national monetary policies. The Rambouillet and Jamaica talks have in this regard constituted not unimportant progress. But obviously not enough.

It is not possible to stipulate one final solution to this problem. However, I am firmly convinced that institutional reforms in the International Monetary Fund or elsewhere do not contribute much to a solution. The real problem will usually be left behind. The link between external monetary developments and internal economic policies is recognized in the work towards an IMF reform, form,but all depends on whether the political will to co-operate on these issues is present. This implies that neither the US nor the European countries should regard economic policies as falling exclusively within national competences.

Another important issue at stake is the
relationship between the industrialized world
and the less developed countries.

Many less developed countries have claimed the need for a new international economic order. Their main problem is fluctuations in prices of raw materials which, for many countries, play an important role in their export earnings. In our opinion two ways are open. One is commodity agreements where we, like the US administration, are willing to consider the problems on a case-by-case basis. Where it is possible and economically justified we are willing to make a financial contribution for, for example, the necessary buffer stocks. We do not, however, accept the idea of a general indexation scheme. A system of this kind would set out of play the market forces which are necessary if structural changes in demand are to be reflected in relative prices and terms of trade for individual countries as well as for groups of countries.

Less developed countries must adapt their economies to the hard facts of life, although it is painful to do so and more painful for less developed countries than for industrialized countries. We therefore support the alternative idea of a system for stabilization of export earnings. In fact the system has already been incorporated in the Lome Convention agreed between the EEC and fortysix less developed countries.

Incidentally, the Jamaica Conference also
contributed to alleviating the immediate balanceof

lanceofpayments problems of the developingcountries. A bigger contribution must, however, be demanded from the oil producingcountries.

When seeking solutions to international economic problems, the EEC and the US have a co-responsibility. Our interests and approaches are not always identical but nevertheless they are in the areas discussed sufficiently close to permit a convergence of positions rather than dangerous confrontation.

Still, I cannot hide the existence of a certain number of unsolved trade issues between the US and the European countries. While tariff reductions are becoming a less pronounced element in the GATT negotiations, a number of other issues are carrying a heavier weight. Such issues are non-tariff barriers to trade, safeguard clauses, agricultural problems and quantitative restrictions. While the EEC is willing to discuss the rules of GATT it is quite clear that we cannot accept rules conflicting with the GATT unilaterally adopted by the US. Any change of rules must of course be internationally negotiated, or we will be on the road to international

An issue in the discussions between the US and the EEC is the EEC's agricultural policy. It is obvious that agricultural policy both in the US and in the EEC is a special case. Large interventions in this sector have been undertaken. While recent developments on the World Market have for the time being allowed the US to pursue a more liberal policy in the agricultural field, it is questionable whether this policy will last. In Europe, the social and regional consequences of a breakdown of the Common Agricultural Policy would be politically intolerable. The security of supply is also an important aspect which has been underlined by temporary US supply restrictions.

Of course we are, in the EEC, willing to discuss with the Americans problems in connection with the CAP, but in order to assess the problem, you should know that the EEC imports more agricultural products from the US than we export to the US. The Americans pretend to be liberalists at heart, but in the field of agricultural policy the proclaimed American belief in the doctrines of Adam Smith is at variance with what is practised. A somewhat less hypocritical discussion - from both sides - of the agricultural problems would be desirable.

From our point of view the Trade Act is a main hurdle in European/American relations. Especially the absence of a real injury clause in cases of alleged export subsidies and dumping is in our opinion contravening the GATT rules. It is reassuring, however, that the US administration has not so far adopted a protectionistic line based on the Trade Act. Nevertheless, the road has been opened for protectionist pressures creating a dangerously uncertain atmosphere and much negative publicity. We recognize that the Trade Act also opened the way for the broad multinational trade negotiations, aiming at further liberalization of world trade. We support these negotiations wholeheartedly and look forward to a constructive dialogue with the US as a principal partner in these endeavours.

International economic and political relationsare based upon mutual understandingand acceptance. Confrontations are inevitable,but conflicts should be solved - and solved with respect to the international

rules of the game. These rules must be
brought in line with new economic and socialrealities.