229. Volcker Group Paper1

VGA/72-50 Rev.


(April 23, 1972)

I. Scope of future work on reforms

1. While the main task would no doubt be the reform of the international monetary system, there was a consensus that the future equilibrium of the world economy was also dependent on adequate trade rules, on rules for the responsibilities of surplus and deficit countries respectively (“burden-sharing” in the widest sense, as well as burden-sharing in the narrower sense of sharing aid and military burdens), rules on capital flows, etc. The U.S. representative mentioned also the relationship between the GATT and the IMF as a possible subject of review and reform. The close linkage of reform of the monetary system with other problems was generally acknowledged. However, there was a prevalent opinion to the effect that the preparatory work for solving the totality of these problems could not be entrusted to one single group but had to be delegated to several bodies.

II. Group of Twenty

2. There was general agreement that a new “Group of Twenty” (G 20) should be the main forum for discussing the reform of the monetary system. This Group should be set up by a decision of the Board of Governors of the Fund as a special committee of Governors of the IMF. Its composition should correspond to the regional composition (the “constituencies”) of the Executive Board of the Fund. The Managing Director of the IMF would be an ex-officio member. Switzerland could participate as an observer.

3. There would be one chief representative for each constituency (and possibly one or two alternates). The Group would elect its own Chairman. As the Governor’s Committee would hardly be able to assemble frequently and undertake the detailed work, a committee of deputies would have to be established which would prepare the work [Page 620] of the Governor’s Committee. The idea was mentioned that the Chairman of the deputies should perhaps work on a full-time or nearly full-time basis and he should be assisted by adequate staff.

4. The terms of reference would request the G 20 to prepare proposals for reform of the monetary system. This could also include rules for balance-of-payments adjustment, for capital movements, etc. Adequate reference should also be made in the mandate to the close linkage with some non-monetary problems. The G 20 should be authorized to draw not only on the work and staff of the IMF but also on other international organizations and on work done outside such organizations. The Group would submit its proposals to the Board of Governors of the Fund who would decide upon them.

III. Other international organizations

5. It was emphasized that trade negotiations would fall within the competence of GATT, and that any proposal for changes in trade rules would also have to be acted upon by GATT.

6. It was recognized that the so-called “non-monetary problems” could not be thoroughly dealt with by the Group of Twenty which would mainly be occupied with problems of the international monetary system. There were suggestions that these “non-monetary problems”—and also rules for the respective responsibilities of surplus and deficit countries and for capital movements—could be discussed, and proposals could be worked out, by appropriate committees of the OECD. To this end, existing OECD groups could be re-structured, or a new OECD group could be established. The OECD would enter the picture only as a forum for preparatory discussion and it would submit its proposals to the appropriate organizations.

7. The Group of Ten should have no specific mandate for participating in the preparation of monetary reform. It should continue within its narrower mandates in the framework of the GAB and in the consultation procedure for SDR allocations. It was left open whether it should be used also for other tasks of coordination among the major industrial countries.

8. Several participants in the discussion in London emphasized that the work to be done in G 20 or in other groups should in no way impinge on the competence and work of other international organizations.

IV. Further procedure

9. Draft minutes of the discussion in London should be sent to the participants and, if possible, agreed upon in the course of May. A draft of possible terms of reference for the Group of Twenty should be prepared [Page 621] by one of the participants. Mr. Van Lennep said that he will prepare a paper for the Council of OECD on how the OECD could contribute to the discussions on monetary and non-monetary issues and in particular their inter-relationship. As concerns the establishment of G 20 the aim was to have a decision by the Board of Governors of the Fund somewhen in June or July.

O. Emminger 2
  1. Source: Washington National Records Center, Department of the Treasury, Volcker Group Masters: FRC 56 86 30, VGA/72-1-VGA/72-50. Confidential. Willis’ May 31 cover note circulating the paper to the Volcker Group Alternates indicates the minutes are a revised version of the April 23 discussion in London. See footnote 2, Document 227.
  2. Printed from a copy that bears this typed signature.