International summits are dismissed by some as frivolous media events. I don't see it that way. The May 28-30 gathering of leaders of seven major industrial nations in Williamsburg offers an excellent opportunity to tackle major problems facing the Western economic system. Foremost among them is reestablishing the link between trade and monetary policies that was recognized at Bretton Woods by the founders of our economic system.

Dark storm clouds, however, already are gathering over the summit. This threatens to have a negative effect not only on companies doing business internationally, but also on those concerned with jobs here at home. The same is true for all countries around the world.

Let's face it: the embryonic economic recovery for which we all have waited so long is still in an extremely delicate stage of gestation. It could be choked off entirely if the leaders of North America, Western Europe and Japan fail to create the proper environment.

We are all familiar with the major issues:

* The world trading system faces its most serious challenge since the grim days of the Depression. Protectionist steps have been taken against everything from motorcycles to videotape recorders. Governments that officially support a liberal international trading system have been forced by unemployment and other domestic pressures to close markets. International trade is actually shrinking for the first time since World War II.

* Imbalance and volatility in exchange rates are exacerbating our problems. The high value of the U.S. dollar, for example, makes foreign imports cheaper and helps spark cries for protection. A strong U.S. dollar also drives up the real cost of oil imported by our trading partners, encouraging them to impose protectionist measures against "nonessential" imports. In addition, sharp fluctuations in exchange rates and their sheer unpredictability serve as disincentives for international trade and investment projects by the private sector.

* Third World countries such as Brazil, Mexico, Argentina and Nigeria owe billions of dollars to Western banks and have been forced to adopt severe austerity moves, sharply limiting their purchase of foreign goods. That dries up markets for American, Japanese and European goods and services, hamstringing the Western economy's recovery. It also provokes retaliatory steps that make it more difficult for developing countries to find markets for their goods. The end result is that they have even greater difficulty servicing their debts.

So it is obvious the issues of trade and finance are inextricably linked. Logic, therefore, would dictate that these problems be treated in an integrated fashion. If you have a critically ill patient, it makes no sense to have one doctor taking the pulse and another checking the reflexes, particularly if they are not willing to share their findings.

There are institutional barriers to the kind of consultations that are necessary. Governments have separate trade and finance ministers, who tend to meet in separate places and at separate times. Another barrier is the structure of the summits themselves. It is absurd to expect seven leaders to sit down for three days under the full glare of the television cameras and find the needed solutions. Consultation among governments must be integrated, and it must be a continuing process.

Several top U.S. officials, to their credit, have recognized the vital need to revive the spirit of Bretton Woods and foster such a consultation process. This could lead to major progress at Williamsburg.

But resistance to this approach is mounting from some quarters within the administration and from some of our trading partners. The Bretton Woods conception of an economic system, which resulted in unprecedented prosperity, is endangered.

Opponents of an integrated approach often do not recognize that actions taken--or not taken--on the domestic U.S. economy such as the budget deficit have an impact on the strength of the dollar abroad. They also believe the forces already at work in the world economy must be allowed to play themselves out and that the United States must not intervene in currency markets. Fundamental market trends, of course, cannot be reversed by governmental intervention. But we can try to soften their impact. One major step toward doing that would be a full discussion of coordinated but limited currency intervention to calm the gyrations in foreign exchange markets and of appropriate coordination of interest rates.

So at a time when our multilateral institutions face unprecedented strains, we must begin identifying the middle ground. The failure to recognize the link between trade and finance issues could have an effect tantamount to enacting a Smoot-Hawley bill, the legislation that sparked the trade war of the 1930s. It prevents the central problems from being effectively addressed, and it could propel us into a sharply downward economic spiral.

We are confronted with a basic choice: whether to follow through on the vision of Bretton Woods and create a truly international economy, a world economy, or retreat into inflexible positions and hunker down for the storm. It is time for the United States to display vision, leadership and courage. We have a "moon-shot" opportunity--now. The Western economic system looks to Williamsburg for effective and critically needed leadership.