LONDON — U.S. Treasury Secretary James A. Baker III said Sunday that imbalances in the world economy could not be resolved solely through stabilized exchange rates but required urgent action to reduce international trade barriers.
In an interview with Britain's Channel 4 television, Baker said a comprehensive solution was needed in the wake of last month's Paris accord among major Western industrialized nations to cooperate in maintaining exchange rates at current levels.
"The problem cannot be solved on the exchange rate side alone . . . . The solution requires a comprehensive approach. We've got to look at trade barriers," Baker said in the interview, conducted in the United States.
"We've got to look at aggressively enforcing our own fair trade laws in the United States," he said, adding that protectionist pressures in America were increasingly strong.
"We see ourselves as engaged here in a real struggle to preserve the world's free trading system, because if the largest market in the world goes protectionist, we run the risk of moving down the same path that the world did in the late 1930s," he declared.
On the problem of Third World debt, Baker said a recent proposal by the Philippine government to pay some of the interest on its loans in investment notes was an interesting innovation that should be considered by creditor nations.
He said Brazil, which last month declared a moratorium on interest payments on its short- and medium-term debt, should seek to work out a stand-by agreement with the International Monetary Fund as a basis for refinancing by private creditors.
"If there were a closer relationship (with the IMF) there would be a quicker solution to some of their problems down there and clearly there would be a quicker development of a comprehensive economic plan and program which is something they badly need," Baker said.