Message to the Congress Transmitting Annual International Economic Report of the President.

To the Congress of the United States:

Last year, when I submitted my first International Economic Report, the Nation had just concluded its involvement in a lengthy and tragic war. We were thus able to turn greater energies to building a more lasting and secure world peace.

A major part of our peace-building effort lies in resolving international economic problems, and today we can look back upon a year of progress on that front. We have strengthened our competitive position in the world. We have moved ahead toward vitally needed reforms of the world economic structure and we have improved our trade balance beyond our expectations, reflecting our ability to compete more effectively at home and abroad with foreign producers. Our strengthened trade position has in turn contributed significantly to the expansion of jobs and income for our people, and has led to renewed confidence in the dollar in the world's money markets.

One of the greatest challenges facing the international community is to overhaul our world monetary and trading systems. During this past year, I have been heartened by the progress that the Committee of Twenty, under the auspices of the International Monetary Fund, has made toward reforming the international monetary system and by the way that transitional monetary arrangements have proven effective under conditions of stress. Meanwhile, over 100 nations, meeting in Tokyo this past September, opened a new round of international trade negotiations. And the trade legislation we submitted last April has moved through the House for further consideration in the Senate.

Despite this significant progress, 1973 was also a year in which new problems vividly brought home to us the degree to which our own economy is affected by developments elsewhere. This past year the major industrial nations experienced simultaneous boom conditions for the first time since 1951. This complicated economic policy-making, demonstrating that the same interdependence which can contribute so much to world prosperity through trade can also contribute to national problems. One such problem is inflation. While we continue to attack the causes of excessive price increases within the United States, we must also realize that inflation has been a world-wide problem driving up the cost of world-traded goods.

Two new problems also arose in 1973, reminding us of the impact that other economies have upon our own: last summer's food shortages and the current oil crisis. There was an unprecedented and unforeseen surge in international demand for American agricultural products last year. The causes ranged from poor harvests abroad to food policy shifts by foreign governments, affecting their demand for agricultural imports. These significant shifts could not help but have a strong impact upon our domestic economy: on the one hand, expanded sales helped the recovery of our trade balance and helped ensure our position as a reliable world supplier of agricultural goods; but on the other hand, world-wide shortages caused our food prices to rise significantly. A number of measures have now been taken at home and abroad to help prevent a recurrence of such problems. We have brought land back into production, we have taken every step we can to expand our harvests, and we have established an agricultural export monitoring system. In addition, we have called for a World Food Conference to meet in Rome this year, where the newly developing problems of agricultural supply and demand can be addressed by both producer and consumer nations.

The second major problem--the oil embargo and its accompanying price increases--has given us further evidence of our interdependence with other nations. While our country is relatively less dependent upon foreign supplies for our energy than are most industrial nations, these developments are adversely affecting many sectors of our economy. Again, as we have done with regard to food shortages, we have taken vigorous actions to meet energy shortages. The actions taken by the Executive, the Congress, and especially by the American people have enabled us to make significant progress. The consumption of almost every form of energy has been dramatically reduced. But much more needs to be done in order not only to alleviate the current emergency but also to assure that the United States can develop greater energy resources of its own. This January, I submitted to the Congress my third special message on energy, outlining further needed legislation. I have also invited the foreign ministers of the major oil-consuming nations to Washington this month, initiating cooperative discussions on these problems. Those who will attend this conference recognize that the large price increases announced late last year can only create hardships for the major industrialized economies and could have a disastrous impact upon the world's poorest nations.

The new problems we face are of such enormity that there may be a temptation to delay further progress toward trade and monetary reform. Nothing could be more foolish. It is particularly important that we move forward in a multinational attempt to reduce trade barriers so that individual nations are not tempted to "go it alone" in seeking solutions. I consider it essential that we continue to construct a consultative framework in which new as well as old issues can be addressed. The current trade and monetary discussions provide such a framework and also allow us to continue our long-term effort to build a more effective world economic order. To make this possible, the Trade Reform Act should be promptly passed without restrictions upon our ability to end trade discrimination against other nations.

The Annual Report of the Council on International Economic Policy provides background and analysis which should be highly useful to the Congress as it considers 'these complex and important issues.

RICHARD NIXON

The White House,

February 7, 1974.