A Primary Result Of The Smithsonian Agreement Was

The management of the Fund had been in informal contact with the US authorities during the first seven months of 1971, particularly after the first week of May, and knew that the position of the US authorities was very different from that of European officials. Moreover, as the speeches that were reported in the previous chapter show, the Us authorities had begun to present their views frankly. They felt that the responsibility for correcting chronic imbalances in international payments – the U.S. deficit on the one hand, and the surpluses of several other industrialized countries on the other – should be shared. Specifically, they believed that the U.S. payment deficit led, at least in part, to the United States` for many years to bear a very large share of the defence costs of Western Europe, Japan and other militarily allied countries, and because the EEC and Japan trade agreements did not allow liberal access to American goods. Therefore, countries with surplus surpluses should revalue their currencies and some concessions should be made with respect to military burden-sharing agreements and trade agreements. In particular, it was imperative that changes be made to ec`s common agricultural policy, which hampered US agricultural exports to European countries, and to import restrictions by Japan, which prevented the correction of the united States` large trade deficit with that country. In the absence of results from the Group of Ten ministerial meeting, Mr. Schweitzer presented the Executive Directors, on the weekend prior to the annual meeting, with a proposal for a decision for its presentation to the Governing Council. Executive Directors discussed the draft decision at unusual meetings of the office during the week of the general meeting on Monday and Tuesday afternoons, September 27 and 28.

Most supported the Director General`s attempt to find a resolution from the governors. But precise language proved elusive and controversial. Mr. Dale presented a draft that ended any implication that the difficult monetary situation was caused by complaints from the U.S. monetary authorities and in which there was no indication that monetary convertibility could be restored once the exchange rate adjustment took place.

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