President Reagan will stand firm against European pressures for a change in U.S. economic policy at the heads-of-state summit in Ottawa July 19-21, arguing that it is in Europe's best interest for the United States to stick to its present tight-money, anti-inflation stance.
And White House aides have set a political objective for the conference as well. Reagan at one point had been considering a trip to Europe this fall; that idea was set aside after he was shot in March. The conference in Canada thus presents an immediate opportunity for the present to mingle with other world leaders and convince them and the voters at home that he is comfortable dealing with foreign issues as well as domestic.
According to White House aides, Reagan has become sensitive to news stories intimating that he lacks a foreign policy or is weak on foreign issues. sAs a result, he has spent a good part of each day this week boning up on the economic problems likely to arise in Ottawa.
The conference will bring together the leaders of the United States, Japan, West Germany, France, Great Britain and Italy in the seventh in a series that began in Rambouillet, France, in 1975. It will also be the first face-to-face meeting between Reagan and France's newly elected president, Francois Mitterrand, a socialist with whom Reagan differs sharply on economics.
White House aides feel that the best possible political result in Ottawa would be establishment of a smooth working relationship with Mitterrand. There is less anxiety now at the White House over inclusion of communists in the French Cabinet than there was at the time of Vice President Bush's recent visit to France. Reagan is understood to be avoiding any other statements that would irritate the French, and hopes that he and Mitterrand can come away from Ottawa with a "mutual understanding."
Whether this can be accomplished remains to be seen. "Mitterrand is a wild-card for this summit," says one of the U.S. team. "No one knows precisely what he will bring to Ottawa, but we know that Europe, and especially the French, are upset with high interest rates." In all probability, the French president will emphasize a need to control rising unemployment in Europe by heavier government spending, a "Keynesian" approach rejected by the Reagan administration.
The president has been bracing himself for an undercurrent of protest in Ottawa, stemming from the depressed state of the European economy that many continental politicians blame on high U.S. interest rates. Aides say he is gearing up for a vigorous counterattack, in which he plans to assert that this country too would like lower interest rates, but has been "getting its fiscal house in order," just as the Europeans urged in years past.
"People in glass houses shouldn't throw stones," snapped a high administration official noting that almost all of the European governments urging the United States to forgo a tax cut so as to reduce the federal deficit are themselves running bigger deficits when measured alongside their gross national products.
There is a sense that the carefully laid plans for a quite discussion of wholly economic issues may be shattered by events along the Soviet-Polish border. The Polish Communist Party's central committee is scheduled to meet on July 18, the day before the summit. "As much as leaders want to focus on the big traditional issues of summits, like the economy and energy," says a presidential aide, "they also like to talk about timely things."
Officials say that "contingency plans" have been made if the Soviet Union moves across the Polish border. Sources said the administration will sound out its partners at Ottawa on "a concerted approach," involving economic responses, if the Soviets move.
The first two days' sessions will take place in the relative isolation of Le Chateau Montebello, a resort about 40 miles east of Ottawa, where access to the assembled presidents and prime ministers will be limited. On the final day, the leaders will return to Ottawa for one more session, issuance of a communique and a joint press conference.
Despite the potential for conflict and controversy, what can be expected at the end of the Ottawa summit is deliberately vague communique -- and one much shorter than in the previous six years -- using compromise language. Says Undersecretary of State Myer Rashish, the president's personal representative for summit preparation: "There will be no concrete conclusion, no numbers in the communique, no specific policy agreements."
Many participating governments believe that in several past summits the communique-drafting process overwhelmed what should have been the main product, greater personal contact among the heads of state. Thus, Rashish and his fellow advance men for the Ottawa summit have consciously tried to provide instead a milieu for personal relationships among the seven leaders. This was the original design of economic summitry, as envisioned in 1975 by then-president Valery Giscard d'Estaing of France.
Rashish says that creating the opportunity for a "tour d'horizon" by all the participants, rather than getting into nitty-gritty details, is all the more important this year because it will be the first summit for four of them, including Reagan. The other neophytes are Mitterrand, Japanese Prime Minister Zenko Suzuki, and Italian Prime Minister Giovanni Spadolini. The veterans are West German Chancellor Helmut Schmidt, British Prime Minister Margaret Thatcher, and the host, Canadian Prime Minister Pierre Trudeau. Also present will be Gaston Thorn, foreign minister of Luxembourg, in his capacity as president of the European Common Market.
Among the strong differences between Reagan and the others is how to aid Third World countries. More generous government-to-government aid is advocated by most of the other participants, notably Mitterrand and Trudeau. In keeping with its general philosophy, the Reagan administration wants to pursue more of its foreign and economic aid through the private sector.
Another area of tension relates to East-West policy. Reagan wants his partners to adopt stronger controls on exports of strategic materials to the Soviet Union, especially oil and gas equipment. "We don't want to suppress trade with the Eastern bloc," Rashish said in an interview, "but we do want the summit partners to control the transfer of strategic materials and technology."
The United States also worries that Soviet economic leverage is increasing because some West European countries, notably West Germany, are becoming too dependent on Soviet supplies such as natural gas from Siberia. These are issues that the Europeans would rather not face head-on; their economies depend heavily on maintaining peaceful two-way trade with the Eastern bloc.
The Reagan team would like the summit to focus more on these issues than on so-called "North-South" problems dealing with the transfer of economic aid to the loss developed world. Although last year's summit, at Venice, assigned to this one the task of evolving better North-South solutions, the Reagan preference is to leave those matters to the North-South summit set for Cancun, Mexico, in October.
Trudeau is making a last-ditch effort to keep the spotlight on North-South issues. He is expected to make one more try in a two-hour session with Reagan at the White House tomorrow.
But Reagan aides are sticking to their plan. "We are not in a position to come up with new initiatives to help the poor countries," says a State Department official. "We have a problem hanging on to what we've got." This is a reference to the likelihood that once a $3.2 billion authorization for World Bank subsidized loans runs out in 1983, there may be trouble over any further "replenishment."
The way things shape up, much of the time at Montebello will be spent on the broad economic issues, with Europe seeking relief from high interest rates and Reagan selling the virtues of supply-side economics, worldwide. Treasury Undersecretary Beryl Sprinkle says that the United States doesn't really expect to make converts, but hopes to convince the others that it won't change its course.
Although the United States would like to de-emphasize North-South issues. Reagan won't be able to avoid a discussion of his administration's disavowal fo the Venice summit's proposed energy "affiliate" for the World Bank, to help develop indigenous energy sources in the Third World. Reaganites don't like the energy affiliate, claiming the job could be better done by the private sector.
But in its final summit preparations, The Washington Post learned, the administration reached a compromise between Treasury officials most adamant against the energy affiliate and its supporters. The new "positive approach" policy, to be explained at Ottawa, rules out additional U.S. money contributions to the World Bank for this purpose, but invites the bank to expand energy development by finding ways of getting a "higher multiplier" out of existing funds.
More broadly on energy issues, the communique is likely to stress the need for further reduction in oil imports, coupled with an endorsement of the International Energy Agency's recent warning that conservation efforts should not be relaxed because of the present oil glut.
On trade issues, the administration will try to support free trade principles, defusing, if possible, better sentiment in Europe toward Japan for its penetration of consumer and industrial markets.The United States supports the view that Japan must open up its own markets to Western goods. But it wants to keep the communique language very general, espousing anti-protectionist principles, and avoiding any language hostile to its key Pacific partner.