Hard U.S. Line for the Summit

A world monetary system based on floating exchange rates, so dear to the hearts of the Ford Administration's top economic and monetary officials, is giving them fits. Instead of smoothing adjustments in currency values, on occasion the market-based system is making them more erratic, and that is not the way it was supposed to work. Concerned by this unexpected twist, and by the fundamental international economic problems that lie behind it, U.S. officials decided it was time for a rerun of last fall's six-nation summit meeting at Château de Rambouillet.

Next weekend in Puerto Rico, the heads of state of six other major industrial nations−an insistent Canada was invited along with Germany, France, Britain, Italy and Japan−will gather at President Ford's request. The potential domestic political benefit of summitry in his struggle for the Republican presidential nomination has hardly escaped Ford. That, and the Italian elections, probably account for the timing. Whatever the motivation, there is no shortage of real-life problems crying for attention: the economic woes of Britain and Italy and their sagging currencies, the fragmented approach of the industrial nations to their economic negotiations with the developing world and, above all, how to manage the worldwide recovery in order to avoid a new surge of inflation.

Need For Cooperation. No ringing declarations, no grand schemes for promoting international economic stability will probably emerge from the meeting. As after Rambouillet, the communiqué will undoubtedly stress the need for cooperation among the nations and promise that it will be forthcoming. But the major American purpose at the economic summit will be to set some hard terms for that cooperation.

U.S. officials are worried that the industrial world may be about to divide itself essentially into two groups: the U.S., Germany, Switzerland and perhaps Japan, with strong, healthy economies characterized by relatively low inflation and currencies rising in value, and the Italys and Britains of the world, with their high inflation, weak economies, and depreciating currencies that worsen inflation by making imports more costly. In fact, the most recent forecasts by the staff of the Organization for Economic Cooperation and Development in Paris suggest that such a division may be coming. The Administration would like to head it off by encouraging the nations with more serious inflation problems to adopt the policies necessary to slow down soaring prices.

At Puerto Rico, Ford will be using a carrot and stick. The carrot will be the promise of the sort of support that led the U.S. to make available $2 billion of the $5.3 billion line of credit extended to Britain this month to help prop up the sagging pound, which has so far been successful. The stick will be the clear understanding that such financial support will be forthcoming for governments only on condition that they act swiftly to put their domestic economic houses in order.