Analytical Studies
G7/8 Summits • G7 Tokyo Summit
Tokyo Economic Declaration
Tokyo, May 6, 1986
- We, the Heads of State or Government of seven major industrialized
countries and the representatives of the European Community, meeting
in Tokyo for the twelfth Economic Summit, have reviewed developments
in the world economy since our meeting in Bonn a year ago, and
have reaffirmed our continuing determination to work together
to sustain and improve the prosperity and wellbeing of the peoples
of our own countries, to support the developing countries in their
efforts to promote their economic growth and prosperity, and to
improve the functioning of the world monetary and trading systems.
- Developments since our last meeting reflect the effectiveness
of the policies to which we have committed ourselves at successive
Economic Summits in recent years. The economies of the industrialized
countries are now in their fourth year of expansion. In all our
countries, the rate of inflation has been declining. With the
continuing pursuit of prudent fiscal and monetary policies, this
has permitted a substantial lowering of interest rates. There
has been a significant shift in the pattern of exchange rates
which better reflects fundamental economic conditions. For the
industrialized countries, and indeed for the world economy, the
recent decline in oil prices will help to sustain noninflationary
growth and to increase the volume of world trade, despite the
difficulties which it creates for certain oilproducing countries.
Overall, these developments offer brighter prospects for, and
enhance confidence in, the future of the world economy.
- However, the world economy still faces a number of difficult
challenges which could impair sustainability of growth. Among
these are high unemployment, large domestic and external imbalances,
uncertainty about the future behavior of exchanges rates, persistent
protectionist pressures, continuing difficulties of many developing
countries and severe debt problems for some, and uncertainty about
mediumterm prospects for the levels of energy prices. If large
imbalances and other distortions are allowed to persist for too
long, they will present an increasing threat to world economic
growth and to the open multilateral trading system. We cannot
afford to relax our efforts. In formulating our policies, we
need to look to the medium and longer term, and to have regard
to the interrelated and structural character of current problems.
- We stress the need to implement effective structural
adjustment policies in all countries across the whole range of
economic activities to promote growth, employment and the integration
of domestic economies into the world economy. Such policies include
technological innovation, adaptation of industrial structure and
expansion of trade and foreign direct investment.
- In each of our own countries, it remains essential to
maintain a firm control of public spending within an appropriate
mediumterm framework of fiscal and monetary policies. In some
of our countries there continue to be excessive fiscal deficits
which the governments concerned are resolved progressively to
reduce.
- Since our last meeting we have had some success in the
creation of new jobs to meet additions to the labor force, but
unemployment remains excessively high in many of our countries.
Noninflationary growth remains the biggest single contributor
to the limitation and reduction of unemployment, but it needs
to be reinforced by policies which encourage job creation, particularly
in new and hightechnology industries, and in small businesses.
- At the same time, it is important that there should be
close and continuous coordination of economic policy among the
seven Summit countries. We welcome the recent examples of improved
coordination among the Group of Five Finance Ministers and Central
Bankers, which have helped to change the pattern of exchange rates
and to lower interest rates on an orderly and noninflationary
basis. We agree, however, that additional measures should be
taken to ensure that procedures for effective coordination of
international economic policy are strengthened further. To this
end, the Heads of State or Government:
- Agree to form a new Group of Seven Finance Ministers, including
Italy and Canada, which will work together more closely and more
frequently in the periods between the annual Summit meetings;
- Request the seven Finance Ministers to review their individual
economic objectives and forecasts collectively at least once a
year, using the indicators specified below, with a particular
view to examining their mutual compatibility;
With the representatives of the European Community:
- State that the purposes of improved coordination should
explicitly include promoting noninflationary economic growth,
strengthening marketoriented incentives for employment and productive
investment, opening the international trading and investment system,
and fostering greater stability in exchange rates;
- Reaffirm the undertaking at the 1982 Versailles Summit
to cooperate with the IMF in strengthening multilateral surveillance,
particularly among the countries whose currencies constitute the
SDR [Special Drawing Rights], and request that, in conducting
such surveillance and in conjunction with the Managing Director
of the IMF, their individual economic forecasts should be reviewed,
taking into account indicators such as GNP growth rates, inflation
rates, interest rates, unemployment rates, fiscal deficit ratios,
current account and trade balances, monetary growth rates, reserves,
and exchange rates;
- Invite the Finance Ministers and Central Bankers in conducting
multilateral surveillance to make their best efforts to reach
an understanding on appropriate remedial measures whenever there
are significant deviations from an intended course; and recommend
that remedial efforts focus first and foremost on underlying policy
fundamentals, while reaffirming the 1983 Williamsburg commitment
to intervene in exchange markets when to do so would be helpful.
The Heads of State or Government:
- Request the Group of Five Finance Ministers to include
Canada and Italy in their meetings whenever the management or
the improvement of the international monetary system and related
economic policy measures are to be discussed and dealt with;
- Invite Finance Ministers to report progress at the next
Economic Summit meeting.
These improvements in coordination should be accompanied
by similar efforts within the Group of Ten.
- The pursuit of these policies by the industrialized countries
will help the developing countries in so far as it strengthens
the world economy, creates conditions for lower interest rates,
generates the possibility of increased financial flows to the
developing countries, promotes transfer of technology and improves
access to the markets of the industrialized countries. At the
same time, developing countries, particularly debtor countries,
can fit themselves to play a fuller part in the world economy
by adopting effective structural adjustment policies, coupled
with measures to mobilize domestic savings, to encourage the repatriation
of capital, to improve the environment for foreign investment,
and to promote more open trading policies. In this connection,
noting in particular the difficult situation facing those countries
highly dependent on exports of primary commodities, we agree to
continue to support their efforts for further processing of their
products and for diversifying their economies, and to take account
of their export needs in formulating our own trade and domestic
policies.
- Private financial flows will continue to play a major
part in providing for their development needs. We reaffirm our
willingness to maintain and, where appropriate, expand official
financial flows, both bilateral and multilateral, to developing
countries. In this connection, we attach great importance to
an early and substantial eighth replenishment of the International
Development Association (IDA) and to a general capital increase
of the World Bank when appropriate. We look for progress in activating
the Multilateral Investment Guarantee Agency.
- We reaffirm the continued importance of the casebycase
approach to international debt problems. We welcome the progress
made in developing the cooperative debt strategy, in particular
building on the United States initiative. The role of the international
financial institutions, including the multilateral development
banks, will continue to be central, and we welcome moves for closer
cooperation among these institutions, and particularly between
the IMF and the World Bank. Sound adjustment programs will also
need resumed commercial bank lending, flexibility in rescheduling
debt and appropriate access to export credits.
- We welcome the improvement which has occurred in the
food situation in Africa. Nonetheless a number of African countries
continue to need emergency aid, and we stand ready to assist.
More generally, we continue to recognize the high priority to
be given to meeting the needs of Africa. Measures identified
in the Report on Aid to Africa adopted and forwarded to us by
our Foreign Ministers should be steadily implemented. Assistance
should focus in particular on the medium- and longterm economic
development of these countries. In this connection we attach
great importance to continued cooperation through the Special
Facility for SubSaharan African countries, early implementation
of the newly established Structural Adjustment Facility of the
IMF and the use of the IDA. We intend to participate actively
in the forthcoming United Nations Special Session on Africa to
lay the foundation for the region's longterm development.
- The open multilateral trading system is one of the keys
to the efficiency and expansion of the world economy. We reaffirm
our commitment to halting and reversing protectionism, and to
reducing and dismantling trade restrictions. We support the strengthening
of the system and functioning of the GATT, its adaptation to new
developments in world trade and to the international economic
environment, and the bringing of new issues under international
discipline. The new round should, inter alia, address
the issues of trade in services and traderelated aspects of intellectual
property rights and foreign direct investment. Further liberalization
of trade is, we believe, of no less importance for the developing
countries than for ourselves, and we are fully committed to the
preparatory process in the GATT with a view to the early launching
of the new round of multilateral trade negotiations. We shall
work at the September Ministerial meeting to make decisive progress
in this direction.
- We note with concern that a situation of global structural
surplus now exists for some important agricultural products,
arising partly from technological improvements, partly from changes
in the world market situation, and partly from longstanding policies
of domestic subsidy and protection of agriculture in all our countries.
This harms the economies of certain developing countries and
is likely to aggravate the risk of wider protectionist pressures.
This is a problem which we all share and can be dealt with only
in cooperation with each other. We all recognize the importance
of agriculture to the wellbeing of rural communities, but we are
agreed that, when there are surpluses, action is needed to redirect
policies and adjust structure of agricultural production in the
light of world demand. We recognize the importance of understanding
these issues and express our determination to give full support
to the work of the OECD in this field.
- Bearing in mind that the recent oil price decline owes
much to the cooperative energy policies which we have pursued
during the past decade, we recognize the need for continuity of
policies for achieving longterm energy market stability and security
of supply. We note that the current oil market situation enables
countries which wish to do so to increase stock levels.
- We reaffirm the importance of science and technology
for the dynamic growth of the world economy and take note, with
appreciation, of the final report of the Working Group on Technology,
Growth and Employment. We welcome the progress made by the United
States Manned Space Program and the progress made by the autonomous
work of the European Space Agency (ESA). We stress the importance
for genuine partnership of appropriate exchange of information,
experience and technologies among the participating States. We
also note with satisfaction the results of the Symposium on Neuroscience
and Ethics, hosted by the Federal Republic of Germany, and we
appreciate the decision of the Canadian Government to host the
next meeting.
- We reaffirm our responsibility, shared with other governments,
to preserve the natural environment, and continue to attach importance
to international cooperation in the effective prevention and control
of pollution and natural resources management. In this regard,
we take note of the work of the environmental experts on the improvement
and harmonization of the techniques and practices of environmental
measurement, and ask them to report as soon as possible. We also
recognize the need to strengthen cooperation with developing countries
in the area of the environment.
- We have agreed to meet again in 1987 and have accepted
the invitation of the President of the Council of the Italian
Government to meet in Italy.
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Source: U.S., Department of State, Bulletin,
No. 2112 (July 1986): 8-10; Economic Summits, 1975-1986:
Declarations (Rome: Istituto Affari Internazionali, 1987):
137-143; Great Britain, Foreign and Commonwealth Office, Declarations
of Annual Economic Summits, 1975-1986 (London, 198-):
A12 Tokyo, 1-6 [unpublished].
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