The Next Summit Is in Tokyo

And the big issue there, for Western leaders, is energy

President Carter will barely have returned from Vienna before he wings off again, this time to Asia for twelve more days of summer summitry. Sandwiched between state visits to Japan and South Korea is a two-day economic summit in Tokyo that poses a major international policy test.

Carter's journey to the Far East will be his first as U.S. President; he has visited the area occasionally before, stopping briefly in Japan, while campaigning for the presidency in 1975 for instance. Solemn ceremonies and other red carpet activities--including an audience with Emperor Hirohito and an inspection of Western defenses in South Korea--should help reinforce relations with two of Washington's most valued Pacific allies. The Tokyo economic summit, however--the fifth such meeting of leaders of the largest industrial democracies*--is shaping up as a complex political obstacle course that is sure to magnify Carter's No. 1 current problem: energy.

The summit, to be sure, has a full agenda of other, leftover economic topics. But with the West German and Japanese domestic economies now pulling their weight, the old problem of economic growth and recovery has become less urgent. The dollar is riding higher these days, so monetary questions will also be secondary, even if, as one U.S. official warned, "there is almost certain to be turbulence in the money markets later this year." And with the industrial economies themselves newly threatened by the energy crunch, there is bound to be little enthusiasm for fresh initiatives toward the developing countries in the name of the North-South dialogue.

In the looming shadow of energy, in short, all the other problems are bound to be given short shrift. This time, as one Administration official put it, "all the delegates will be on one side of the table --and the problem of energy will be on the other side."

As the delegates get down to negotiations in Tokyo's Geihinkan, an elaborate Oriental replica of Versailles, the first question for the seven summit leaders is what to do about the world's most effective cartel, the Organization of Petroleum Exporting Countries. OPEC representatives will meet in Geneva two days before the Tokyo assembly begins, and they will almost certainly approve yet another hike in the posted price for crude, which now averages $17 per bbl. Some Administration officials have been arguing for a tough line against OPEC, and believe that the U.S. should even use economic clout to arm-twist other industrial countries into endorsing it. Carter himself, however, is inclined to what is described as a "firm but friendly" stand toward OPEC, and prefers what he calls an "all-around approach" based on "increased and sustained supply, a stable price and reduced consumption."

The President knows full well that the Western European countries and Japan, which are more vulnerable than the U.S. to an oil squeeze, have no stomach for challenging OPEC. Mindful of their "special relationship" with the Arab world, the French in particular want to steer clear of anything that smacks of "Arab bashing." Concludes a State Department official: "We are seeking ways to cooperate, not confront."

Thus the main attempt at Tokyo will be to devise a joint three-pronged strategy to 1) cut consumption in order to reduce imports, 2) spur greater effort in developing alternative energy sources, and 3) form a united purchasing front. If forceful joint action can be decided in all three areas, some slack could be reintroduced into the world oil market and some sanity returned to its pricing. In Paris last week, "Sherpas"--the foot-slogging diplomats and economists who have been preparing the climb to the summit for four months--were still poring over a number of possible actions. Among them:

>A detailed plan for equitably allocating OPEC supplies among the consuming countries, combined with some sort of joint conservation target. Proposals for an outright buyers' cartel to control consumption, much as OPEC controls production, are thought to be too ambitious. A more realistic expectation is a simple extension of the one-year 5% cutback in oil imports pledged by the 20-nation International Energy Agency last March.

>A system of coordinated purchasing policies for the consuming countries. It would be aimed at stopping the free-for-all bidding on the Rotterdam spot oil market. The French have even proposed a system for controlling Rotterdam prices, but some experts believe the market would simply float away to the Bahamas, Singapore or somewhere else. Another difficulty is that in France and some other countries the governments have considerable control over oil purchases, while in the U.S. the oil companies still act as independent agents.

>An energy trust fund of $10 billion to speed up development of advanced technologies for coal gasification and liquefaction. This proposal would have to surmount objections from Washington, where pressure to balance the budget still takes priority. In addition, some European countries are reluctant to subsidize the U.S. companies that are predominant in the field.

Shared solutions to the shared problem of energy will not come easily, however, because national and regional differences abound. First, relative dependence on imported oil varies widely, from Japan's virtually total reliance to Canada's relative self-sufficiency. So does consumption: Japan and Italy thriftily burn only about 16 bbl. per capita a year, while the U.S. devours a profligate 30 bbl.

Strategic perceptions vary accordingly. French President Valery Giscard d'Estaing, for instance, is expected to lobby strenuously for legislated energy saving and tight price controls in the name of "consumer solidarity." Many Japanese and West German experts, however, argue that governments should not interfere with market forces. Their theory is that ultimately only higher oil prices will force consumers to economize and encourage other forms of energy. Says Tokyo Economist Nobutane Kiuchi: "It may take another recession before the leaders learn this fact." Significantly enough, the three newest members of the summit club --Britain's Margaret Thatcher, Canada's Joe Clark and Japan's Masayoshi Ohira --are fiscal conservatives who tend to oppose government intervention.

The summit atmosphere will also be clouded by a certain amount of diplomatic recrimination. Carter will encounter criticism for the conspicuous failure of his Administration to curb the American appetite for energy. Most of the lecturing will come from the European Community countries, who can boast that they are successfully shaving their own reliance on OPEC oil by nearly one-tenth. Another irritant is the Administration's recent decision to subsidize the import of such middle-distillate petroleum products as diesel fuel and heating oil,* which the Europeans see as a hasty overreaction that sets a dangerous precedent. Said one U.S. official: "I haven't seen the Europeans so mad since we cut off their soybean supplies in 1973."

For its part, the Administration will charge the others with forcing higher prices by their rush to buy Rotterdam spot oil at staggering premiums. The U.S.has joined in the competition for supplies. But West Germany and Japan are believed to be especially guilty of this practice, which they are better able to afford with their ample trade surpluses and dollar reserves. Complains one U.S. official: "They think they can buy their way out." Warns another: "The way out of this situation is not for the Western nations to bid against each other. That just helps OPEC."

Past summits have taught the participants to be prudent about raising excessive expectations. One U.S. Sherpa last week was already lamenting that "right now it looks like it will be all mush and mirrors." West German Chancellor Helmut Schmidt has conceded that "we should not expect massive breakthroughs at Tokyo" but rather should aim for "a set of priorities about what should and should not be done." As Schmidt said last week, even if their accomplishments have sometimes seemed meager, the economic summits have helped the world avoid a repetition of the great Depression of the 1930s "which would have ruined us all."

* The U.S., Canada, Japan, West Germany, France, Britain and Italy * To replenish low U.S. stockpiles, in May the Carter Administration announced a "temporary" subsidy of $5 per bbl. for companies that import these products.

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