European leaders who had bitterly protested high American interest rates backed away today from any pressure for a change following President Reagan's strong defense of the U.S. position at the opening of the two-day summit conference of seven leading industrialized nations here.
But the Europeans did agree to try to enforce free trade measures throughout the world and planned a special session of an international committee next fall to discuss stronger measures governing export of strategic goods to the Soviet Union.
A formal statement released by the summit leaders summarizing today's discussions also warned that "we are seriously concerned about the buildup of Soviet military power." The statement said that Soviet actions "incompatible with the exercise of restraint and responsibility in international affairs" made a strong Western defense necessary.
Presidential counselor Edwin Meese said that the Europeans, while warning of the serious impact of interest rates on their economies -- French President Francois Mitterrand cited a danger of "social upheaval" -- offered no alternative to the Reagan program.
Canadian Prime Minister Pierre Elliott Trudeau, briefing reporters this evening following the talks at the Chateau Montebello, said, "We cannot pretend to tell other countries what they should do on macro-economic policy, we can only call attention to the impact of their policies."
He added that "not all was sweetness and light" in the discussions on interest rates and "there were some very frank discussions," especially on the high level and volatility of interest rates. "I think the Americans have been sensitized to the effects of their policies on their partners," Trudeau said.
Treasury Under Secretary Beryl Sprinkel told a press conference that the Europeans had become convinced that "we will hang tough" on this issue, even though the tight money policy may result in six months of economic downturn in the United States. Sprinkel declined to call this a recession.
Treasury Secretary Donald Regan added that the U.S. would "stick" with its tight policy for "another six months." By that time, Regan said, interest rates should be "several points" lower.
Thus, although Regan quoted West German Chancellor Helmut Schmidt as saying that interest rates "are now the highest since Jesus Christ," the issue has been laid aside for the moment and is expected to be dealt with in the final communique, in innocuous language.
The only sop to the European point of view, it appears, was a decision at today's meeting of the seven leaders to create some sort of "consultative process" to operate between summit meetings, an "early warning system of economic actions by one government that might affect others." w
By implication, this agreement foreshadows a decision likely to be made Tuesday to initiate a new series of summits next year, most likely in Paris.
Of the other agreements reached today, the first, on general trade matters, came at the suggestion of Mitterrand. On his initiative, the leaders agreed to compile "a complete catalog" of actions that impede free trade. Mitterrand and British Prime Minister Margaret Thatcher cited Japanese export concentration on a single industry as such a barrier to free trade. According to Meese, neither Japan nor the United States has commented directly on the reference to Japan.
The "catalog" idea of Mitterrand will tie in with a plan for a ministerial meeting of the General Agreement on Tariffs and Trade later this year. That session will take up the complaint that some countries are erecting barriers to free trade and services and in investments.
Another agreement, responsive to U.S. fears that commercial exports to the Soviet Union might be strengthening the military might of that communist superpower, will result in a high-level meeting this fall of the Coordinating Committee on export controls of the Organization for Economic Cooperation and Development.
This meeting will consider tighter rules on exports of such things as computers and products involving sophisticated metallurgy. Mitterrand suggested, Meese said, expanding this examination "to the whole picture of trade with the Soviet Union."
Schmidt said today that the European nations never really expected to turn U.S. high interest rate policy around and now feel they will have to suffer the consequences.
But according to key officials, the Europeans were just as interested in getting a change in Reagan administration policy that bars intervention in foreign exchange markets except in unusual circumstances. The Europeans feel that the Americans could and should step into the foreign exchange markets to prevent the dollar from rising too high, whatever the interest rates may be. There was no apparent U.S. concession on this question.
One area where the Europeans may be able to achieve some softening of U.S. views may come in the way the communique deals with North-South issues. Trudeau and Mitterand have been pressing for "global negotiations" with the Third World countries to get away from a piecemeal approach to aid problems.