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International Monetary Discussions

Volume 828: debated on Tuesday 21 December 1971

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Text of communiqué of the Ministerial Meeting of the Group of Ten. Washington, 17–18 December, 1971.

The Ministers and Central Bank Governors of the Ten countries participating in the General Arrangements to Borrow met at the Smithsonian Institution in Washington on 17–18 December, 1971, in executive session under the chairmanship of Mr. J. B. Connally, Secretary of the Treasury of the United States. Mr. P. P. Schweitzer, the Managing Director of the International Monetary Fund, took part in the meeting, which was also attended by the President of the Swiss National Bank, Mr. E. Stopper, and in part by the Secretary General of the O.E.C.D., Jonkheer E. Van Lennep, the General Manager of the Bank for International Settlements, Mr. R. Larre, and the Vice-President of the Commission of the E.E.C., Mr. R. Barre. Ministers and Governors welcomed a report by the Managing Director of the Fund on a meeting held between the deputies of the Group of Ten and the Executive Board of the Fund.

The Ministers and Governors agreed on an interrelated set of measures designed to restore stability to international monetary arrangements and to provide for expanding international trade. These measures will be communicated promptly to other Governments. It is the hope of the Ministers and Governors that all Governments will cooperate through the International Monetary Fund to permit implementation of these measures in an orderly fashion.

The Ministers and Governors reached agreement on a pattern of exchange rate relationships among their currencies. These decisions will be announced by individual Governments, in the form of par values or central rates as they desire. Most of the countries plan to close their exchange markets on Monday. The Canadian Minister informed the Group that Canada intends temporarily to maintain a floating exchange rate and intends to permit fundamental market forces to establish the exchange rate without intervention except as required to maintain orderly conditions.

It was also agreed that, pending agreement on longer-term monetary reforms, provision will be made for 2¼per cent. margins of exchange rate fluctuation above and below the new exchange rates. The Ministers and Governors recognised that all members of the International Monetary Fund not attending the present discussions will need urgently to reach decisions, in consultation with the International Monetary Fund, with respect to their own exchange rates. It was the view of the Ministers and Governors that it is particularly important at this time that no country seek improper competitive advantage through its exchange rate policies. Changes in parities can only be justified by an objective appraisal which establishes a position of disequilibrium.

Questions of trade arrangements were recognised by the Ministers and Governors as a relevant factor in assuring a new and lasting equilibrium in the international economy. Urgent negotiations are now under way between the United States and the Commission of the European Community, Japan, and Canada to resolve pending short-term issues at the earliest possible date and with the European Community to establish an appropriate agenda for considering more basic issues in a framework of mutual co-operation in the course of 1972 and beyond. The United States agreed to propose to Congress a suitable means for devaluing the dollar in terms of gold to 38·00 dollars per ounce as soon as the related set of short-term measures is available for Congressional scrutiny. Upon passage of required legislative authority in this framework, the United States will propose the corresponding new par value of the dollar to the International Monetary Fund.

In consideration of the agreed immediate realignment of exchange rates, the United States agreed that it will immediately suppress the recently imposed 10 per cent. import surcharge and related provisions of the job development credit.

The Ministers and Governors agreed that discussion should be promptly undertaken, particularly in the framework of the International Monetary Fund, to consider reform of the international monetary system over the longer term. It was agreed that attention should be directed to the appropriate monetary means and division of responsibilities for defending stable exchange rates and for insuring a proper degree of convertibility of the system; to the proper rôle of gold, of reserve currencies, and of special drawing rights in the operation of the system; to the appropriate volume of liquidity; to reexamination of the permissible margins of fluctuation around established exchange rates and other means of establishing a suitable degree of flexibility; and to other measures dealing with movements of liquid capital. It is recognised that decisions in each of these areas are closely linked.