THE INTERNATIONAL ECONOMY

A growing defense effort and a vigorous foreign policy rest upon a strong economy here in the United States.  And the strength of our own economy depends upon our ability to lead and compete in the international marketplace.

ENERGY

Last year, the war between Iraq and Iran led to the loss of nearly 4 million barrels of oil to world markets, the third major oil market disruption in the past seven years.  This crisis has vividly demonstrated once again both the value of lessened dependence on oil imports and the continuing instability of the Persian Gulf area.

Under the leadership of the United States, the 21 members of the International Energy Agency took collective action to ensure that the oil shortfall stemming from the Iran-Iraq war would not be aggravated by competition for scarce spot market supplies.  We are also working together to see that those nations most seriously affected by the oil disruption—­ including our key NATO allies Turkey and Portugal—­can get the oil they need.  At the most recent IEA Ministerial meeting we joined the other members in pledging to take those policy measures necessary to slice our joint oil imports in the first quarter of 1981 by 2.2 million barrels.

Our international cooperation efforts in the energy field are not limited to crisis management.  At the Economic Summit meetings in Tokyo and Venice, the heads of government of the seven major industrial democracies agreed to a series of tough energy conservation and production goals.  We are working together with all our allies and friends in this effort.

Construction has begun on a commercial scale coal liquefaction plant in West Virginia co-financed by the United States, Japan and West Germany.  An interagency task force has just reported to me on a series of measures we need to take to increase coal production and exports.  This report builds on the work of the International Energy Agency’s Coal Industry Advisory Board.  With the assurances of a reliable United States steam coal supply at reasonable prices, many of the electric power plants to be built in the 1980’s and 1990’s can be coal-fired rather than oil-burning.

We are working cooperatively with other nations to increase energy security in other areas as well.  Joint research and development with our allies is underway in solar energy, nuclear power, industrial conservation and other areas.  In addition, we are assisting rapidly industrializing nations to carefully assess their basic energy policy choices, and our development assistance program helps the developing countries to increase indigenous energy production to meet the energy needs of their poorest citizens.  We support the proposal for a new World Bank energy affiliate to these same ends, whose fulfillment will contribute to a better global balance between energy supply and demand.