Frank Discussion of Common Concern

THE best way to solve problems is to foresee them before they become problems." Those words from Dr. Joachim Zahn, chairman of the executive board of West Germany's Daimler-Benz, expressed as well as any the sense of an unusual meeting in Brussels this month. Nearly 40 chief executives of leading European and American business and banking firms assembled in the Common Market's headquarters city, under the auspices of TIME, for a colloquy on their common concerns.

For most of the Europeans, the meeting was a reunion. At TIME'S invitation, they had journeyed to the U.S. 17 months ago to hear the views of Cabinet officers, Government officials and legislators in Washington. Since then drastic changes had swept the transatlantic business community: the dollar had been devalued twice, the world's major currencies had begun floating, a shortage of energy suddenly seemed imminent. For two days, participants analyzed their increasingly interdependent futures. A sampling of the discussions:

THE DOLLAR PROBLEM

Most participants agreed that reform of the international monetary system had to start with a reduction of the "dollar overhang" -the $80 billion or so held by central and commercial banks, by companies and by individuals outside the U.S. Fernand Collin, chairman of Belgium's Kredietbank, proposed that the U.S. Government sell dollar bonds abroad. By so doing, said Collin, the U.S. would reduce the pool of volatile money and could use the proceeds within the U.S.

Dr. Wilhelm Christians, a managing director of the Deutsche Bank, said that the world would have to be patient while the U.S. tried to turn its payments deficit into a surplus. "Most people expect too much too quickly from currency realignments," he explained. "The experience of American industry is different from the European. We have had to export to survive. American companies generally have not. Many have preferred to export dollars, to build plants overseas rather than to export goods."

Robert Triffin, a member of TIME'S Board of Economists, warned: "Experience can only make you -and me -skeptical about the willingness and ability of responsible officials to reach sensible agreements." Yet such agreements are urgently needed, he said, "to end the present drift towards unilateral, nationalistic and mutually defeating policies, bound to bring disaster to all concerned."

His proposals for reform: 1) central banks should phase out national currencies as a reserve asset and substitute an international form of asset, preferably one issued by the International Monetary Fund; 2) all major currencies, particularly the dollar, should be convertible into this new asset; 3) governments should continue to "demonetize" gold by not buying it in the private market, but they should be free to sell gold in the market, to each other, or to the IMF at any agreed price; 4) domestic policies or exchange rates, or both, should be adjusted whenever a country's foreign exchange reserves rise or fall substantially; 5) countries should harmonize interest rates in order to avert flows of short-term money seeking maximum earnings. Triffin also urged U.S. officials to "stop triggering bearish speculation in the dollar. They have done so repeatedly in the past by arguing for exchange-rate flexibility and hailing as a victory every upward valuation % of foreign currencies and every devaluation of the dollar."

FREE TRADE

Many of the executives felt that free trade is still in danger, though the Europeans were less apprehensive than when they met in Washington in 1971. Some suggested that the world was moving toward a different definition of free trade. Pierre Waltz, general director of Societe Suisse pour ITndustrie Horlogere, even stated: "Free trade, as visualized in the last century, is dead. We are in a situation of haphazardly controlled free trade. If Texas cattle imports seriously disrupted the outdated European agricultural system, no Texas cattle would be allowed into Europe. If Japanese shipyards threaten American shipyards, ways will be found to protect the American yards." Sweden's Pehr Gyllenhammar, president of Volvo, agreed that it is uncomfortable to be invaded by the products of a country that has a keener competitive edge. "But," he asked, "will the U.S. recognize that because of its loss of competitive ability, it will continue to be invaded by the Japanese and others?"

Hendrik Van Riemsdijk, president of Philips' Glo-eilampenfabrieken, asserted: "We in The Netherlands are free traders. As far as the Japanese penetration of Europe is concerned, I would like to point out that it is the excessive scale on which Japanese imports are increasing that constitutes a threat to employment. The Benelux governments are advocates of greater freedom for imports of European products into Japan itself." Folke Lindskog, chairman of Svenska Kullagerfabriken (S.K.F.), emphasized that "the Japanese protect their home market. They are reluctant to allow us to establish ourselves as manufacturers in Japan, although they are free to establish 100% ownership of factories in the U.S. and in important European countries." Many speakers, including Lindskog, thought that Japan was starting to soften its attitudes because of fears of retaliation.

ENERGY AND ENVIRONMENT

Both Gerrit A. Wagner, president of Royal Dutch Petroleum, and Sir Eric Drake, chairman of British Petroleum, denied that there is an energy "crisis." What there is, said Drake, is a man-made shortage of energy in certain places. In the U.S., he contended, government regulation of natural gas prices has discouraged investment in new sources of supply, and environmentalists have virtually stopped the building of new electrical generating plants and urgently needed oil refineries. There is no physical world shortage of oil, he said.

British estimates place current world production of oil at about 19 billion bbl. a year, and project that it must rise to 35 billion by 1980 and to between 45 and 55 billion by 1990 to satisfy global consumption needs. However, said Drake, "Our estimate is that the remaining proven conventional reserves of oil amount to 570 billion bbl." Sir Eric stated: "We believe there are potential reserves of another 1,080 billion bbl. In addition, we think we could get about 700 billion bbl. of oil from tar sands and another 3,140 billion bbl. from oil-bearing shale." Not all those actual and potential reserves are recoverable at current prices, he pointed out. Moreover, as several speakers said, some two-thirds of conventional oil reserves lie beneath Middle Eastern and North African countries, and all of them are constantly raising the price.

Charles Tillinghast, chairman of Trans World Airlines, argued that the energy crisis is political -and thus not easily soluble. "The technology may be there," said Tillinghast, "but the political will is not. Environment may be the concern of only a minority of people in the U.S., but we have reached the stage where almost any determined group can block the doing of anything. I don't think we shall see solutions coming until things have got considerably worse. I think it is going to take cold houses and unemployment through lack of energy to persuade the public and the politicians that something drastic must be done."

AGRICULTURE

Food prices are even higher in Europe than in the U.S., which is a source of American complaints that the Common Market's agricultural program distorts world trade. "We have established in recent years the most planified market that ever existed," said Louis Camu, chairman of the Banque de Bruxelles. "Every day the price for eggs, for example, is fixed by a computer in Brussels and then transmitted to the people who buy, sell and transport them. What is astonishing is that the system works. Of course, there is a need for change, but the agricultural voters are influential and their trade unions are strong. Before we can start bringing prices down by importing food from the U.S., there will be a very long struggle."

Belton K. Johnson, a director of the King Ranch in Texas, had visited the Brussels meat market and reported: "Those women down there were knocking each other around paying twice as much for beef as we pay in the U.S., but we could airlift beef out of Amarillo, Texas, into Brussels tomorrow morning. But they won't let us do it. Agricultural expertise is one of the best things the U.S. has to sell. Yet here in Europe we are fighting with one hand tied to our back."

The Brussels meeting ranged across many issues. Perhaps one theme linked them all: this is an age of uncertainty and of complex links between seemingly disparate subjects. Middle Eastern politics is closely related to the supply and price of oil, and the price and availability of energy helps to determine both an industrial nation's standard of living and its competitiveness in world markets. Similarly, labor's insistent demand for a bigger share in prosperity is a cause of inflation and of governmental attempts to restrain it by raising interest rates. That, in turn, tends to reduce consumption and new investments. The level of interest rates in different countries partly determines the direction and force of capital flows, which are a source both of balance of payments problems for individual nations and of world monetary turbulence. One conclusion: top managers today need to be better informed about more subjects than ever before -and, as those in Brussels pointed out time and again, so do their partners in government.

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