Foreign Relations of the United States, 1969–1976, Volume XXXI, Foreign Economic Policy, 1973–1976

201. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon¹

Washington, undated.

Meeting with Secretaries Kissinger and Shultz

Monday, December 3, 1973²

10:00 A.M. (30 Minutes)

I. Purpose

To discuss some of the major aspects of international economic policy.

II. Background, Participants & Press Plan

A. Background: The following are some of the major outstanding economic issues which you may wish to discuss:

1. Trade Bill: The issue is whether to let the trade bill go to the House floor now. The problem is that if it goes to the floor, we do not have the votes to prevent Title IV from being included nor the Vanik amendment from being added. Together, these provisions would make MFN and further EXIM credits for the USSR dependent on drastic changes in Soviet emigration and domestic policies. In addition, the debate on these provisions could easily turn into a major critique of our détente policies.

On the other hand, there is widespread agreement, that if the trade bill does not go to the House floor in the near future, the coalition that has backed the Administration, on issues other than those related to trade with Communists, will fall apart and your basic program to improve the trading system will die. In addition, the economic staffs argue that to delay and thus risk losing the trade bill would mean going back on commitments made to the Europeans, Japanese and other trading partners and would prevent multilateral negotiations to reform the trading system.

Earlier last month, Secretary Shultz took the position that if it was felt that House action on Title IV and the Vanik amendment would endanger the Middle East cease-fire and follow-on peace talks by inflaming US-Soviet relations, he would support delay on the trade bill. He in fact did. But along with Peter Flanigan and Bill Eberle (your Special Trade Representative) he remains strongly in favor of the Bill and would support floor action now despite the risks vis-à-vis the Soviets.³

Supporters of floor action now argue that you could assure the Soviets that you would veto an unsatisfactory bill next year. (Senator Jackson has rejected any compromise on the House bill and, while he might be more flexible next year in the Senate debate, he could prevent enactment of a bill that does not contain at least some provisions linking MFN and credits to Soviet emigration policy.) This, of course, however has the disadvantages that you would be killing an otherwise satisfactory trade bill for “Soviet reasons,” with all that implies about choosing between the Soviets and our major trading partners, in a much more dramatic way than if you were to request another postponement now. (While Messrs. Harlow, Laird and Timmons are convinced postponement now would in effect kill the bill, there is of course no way of being wholly certain of this.) Moreover, it is possible that an eventual Senate/House bill might contain MFN-credit provisions that you could accept, whereas the Soviets might still find them offensive and they would regard your failure to veto as a breach of faith. This might occur near the time of your next scheduled summit with Brezhnev. It could do more damage to our relations than the absence of MFN.

Your trade advisors also make the point that even if you postpone the trade bill, Jackson et al will find other bills to which to attach the prohibition of Government credits to the USSR and thereby force you to veto those bills.

The choices open to you at this time are thus distasteful. On the whole, in view of the delicacy of the Middle East situation, it is probably wisest to seek a further postponement and make a major effort to keep the coalition behind the trade bill together. Such postponement should not be cast in terms of a decision “for” détente and “against” our major trading partners in Europe and Japan; rather, it should be explained as required by your efforts to achieve a settlement in the Middle East.⁴

2. Monetary Reform: Secretary Shultz recently met with the finance ministers of France, the UK, the FRG and Japan to plan the next formal meeting, in January, on international monetary reform.⁵ As a result of our problems with the Europeans on other matters, however, he was under guidance to go slow. Because of our improved monetary position, there is little reason for us to change our basic position in favor of flexible exchange rates and against early restoration of convertibility. Our interest in some rules of the game remains but timing of progress in the negotiations should be subordinated to our overall relations with the Europeans and Japanese.

3. Offset: We are in the midst of periodic negotiations with the FRG for arrangements to offset our balance of payment losses due to our troop deployments in Europe. The Germans will not agree to “hard” offset for the entirety of our losses and we will require certain loan arrangements with them to make up the total. Treasury has not favored such loans but now appears willing to accept them if they are sufficiently long term and the interest rates are concessionary.

The basic thread running through these and other foreign economic issues is the problem of making our international economic policies responsive to your overall foreign policy requirements. There is both a problem of strategy and of tactics. Thus, the issues described above concerning trade and monetary reform at the moment turn heavily on timing in relation to important foreign policy developments. Organizationally, it is more important than ever that the mechanisms you maintain for dealing with international economic policies are kept in close harmony with the NSC system.

B. Participants: Secretaries Kissinger and Shultz.

C. Press Plan: None.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 290, Agency Files, U.S. Treasury, Vol. IV, Sept. 19, 1973–Dec. 1973. Administratively Confidential. Kissinger did not initial the memorandum. A notation on the memorandum indicates the President saw it.
2. President Nixon met with Kissinger and Shultz in the Oval Office on December 3 from 10:20 until 11:17 a.m. (Ibid., White House Central Files, President’s Daily Diary) No other record of the meeting has been found.
3. President Nixon met with Shultz on November 30 from 10:05 to 11:34 a.m. “to discuss national and international economic issues.” (Ibid.) No full record of the meeting has been found; however, the President made some notes during the meeting: “Shultz. 1) Let it go through House with veto signal—2) Would veto if Senate acts the same.” (National Archives, Nixon Presidential Materials, White House Special Files, Staff Member & Office Files, President’s Personal Files, Box 15, Name/Subject File, Shultz, George)
4. According to The New York Times, December 4, 1973, p. 1, President Nixon wrote Albert asking him to schedule a vote on the bill. Drafts of the letter to Albert are in the National Archives, Nixon Presidential Materials, NSC Files, Box 403, Subject Files, Trade, Vol. VI, April 8–December 1973. In a December 3 memorandum to Flanigan, Scowcroft stated: “The only problem which the Secretary has with the attached letter is in the last paragraph, where he does not consider a veto signal to be sufficiently strong. I would suggest perhaps modifying the first sentence of the last paragraph to read something like the following: ‘However, should this matter still not reach a satisfactory resolution, I want you to know that I would find the legislation unacceptable.’ You may wish to play with those words, but the veto signal should be unmistakably clear.” (Ford Library, National Security Adviser, Scowcroft Daily Work Files, Box 5, 12/1–11/73) Scowcroft, Sonnenfeldt, and Kissinger discussed the letter by telephone on December 3 at 5:20 p.m., and Kissinger noted that in the meeting that morning, President Nixon had decided that the letter should contain “a strong veto signal.” (http://foia.state.gov/documents/kissinger/0000C5B5.pdf)
5. See Document 57.