Treasury Secretary James A. Baker III yesterday rejected French President Francois Mitterrand's demand that a decision on starting a new round of global trade negotiations be coupled with American agreement on a conference to revamp the international monetary system.
In a television interview Sunday night, Mitterrand said that negotiations on trade and currency matters "should be done in the same process." If currency negotiations are refused, then "I say it is not possible to accept this negotiation on trade matters," he said.
But Baker reiterated that President Reagan will argue at this week's economic summit in Bonn that a new trade round, starting no later than 1986, is essential to deflate "protectionist sentiment that is growing around the world."
Baker hinted, however, that Reagan's goal of getting the Bonn summit to agree on a date for a new round of trade bargaining may not be realized in the face of opposition from Mitterrand, and to a lesser extent from other Europeans, and that the United States may have to settle for generalized language in the communique' on the need for trade liberalization.
At the same time, Baker admitted that the pace of the U.S. economic expansion "shows every indication of moderating" -- although he insisted at another point in a press conference that the administration is sticking to its forecast of 4 percent real growth this year. In the first quarter, the growth rate slipped to 1.3 percent.
"It is very important for the other industrialized nations that are in a position to do so to pick up the slack," Baker said. He mentioned Japan and West Germany in particular, adding: "We don't want them to do something that would run the risk of reigniting inflation. But we feel there may be some room for additional growth in the economies of both Germany and Japan."
The push for an early start on a new round of trade negotiations promises to be a major and contentious agenda item in Bonn. But some members of Congress, worried by the huge U.S. trade deficit and high dollar exchange rates that inhibit American exports, are pressuring the administration to give equal time and attention to exchange rates.
Speaking for the Common Market, external relations commissioner Willy de Clerq has argued that trade and monetary talks should be staged "in parallel" because many trade problems have their origin in "monetary disorders."
Baker said yesterday that the administration is willing to study international monetary system improvements, but "we simply do not accept the concept of formal linkage."
Baker had proposed two weeks ago the possibility of a U.S.-hosted monetary conference to build on monetary reform proposals that have been under study for the past two years by an international committee created at the Williamsburg summit in 1983.
He added yesterday that the United States is interested in building political support for such changes, which would be considered by the policy board of the International Monetary Fund at an annual meeting in Seoul this fall. But he again rejected a massive reconstruction of the monetary system, as envisioned by Mitterrand, through a new Bretton Woods conference.
Baker suggested that when Europeans such as Mitterrand "criticize the strong dollar, they ought to also keep in mind what it means to them from a beneficial standpoint." Baker was referring to the fact that France and other countries whose currencies have depreciated against the dollar have been able to increase their exports here, helping to sustain their economies.
Nonetheless, Baker seemed to be paving the way for a disagreement in Bonn on a starting date for a new trade round, even though major industrial nations have agreed to a preparatory session beginning in July.
"We would certainly hope" to fix a date in Bonn, he said. "We think that we'd be a long way toward improving the world economy if we could get started on a new trade round, because one takes quite a long period of time [to conclude].
"If the European Community is not ready to actually fix the date in '86, fine. Let's see if we can't get some communique' language that talks about the need for trade liberalization and a new trade round," Baker said.
Baker said that the administration is still opposed to direct intervention in foreign exchange markets except under "disorderly" conditions. Through the intervention process, a nation buys its own currency when trying to prop it up, or sells it when trying to push it down.
But he then added some comments that may leave confusion in financial markets. He was reminded that at the end of a meeting held by former Treasury secretary Donald T. Regan with four other leading finance ministers in February, a statement said that the major powers would intervene as needed; and that this had been interpreted as a liberalization of U.S. intervention policy.
"I don't think the policy changed in January, and if it did, we changed it back. But I think the point in January was simply that we wanted to send the markets, we wanted to send the speculators a signal that they would continue to speculate at their own risk. And we have since intervened to a greater degree, quite frankly, than we had theretofore. But our basic policy remains the same: We intervene only to cure disorderly markets."