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Opening Remarks and Editor’s Talk on Foreign Economic Policy, 1973-1976

George Mason University School of Public Policy, Arlington, Virginia
March 7, 2011

  • MODERATOR

    • Edward Rhodes, Dean, School of Public Policy, George Mason University

  • PARTICIPANTS

    • Amb. Edward Brynn, The Historian (Acting), Office of the Historian, U.S. Department of State
    • Dr. Kathleen Rasmussen, Division Chief, Asia & General, Office of the Historian

Download Audio (22.7 MB MP3)

Note: This transcript and linked audio recording contain comments made during a roundtable discussion of the “Foreign Economic Policy, 1973-1976” volume of the Foreign Relations of the United States (FRUS) series. The comments of Robert Hormats and Kathleen Rasmussen reflect their individual points of view and do not necessarily reflect the views of the Department of State or the United States Government.

DEAN RHODES: Silence has descended on the room. I guess that means on academic time, it’s time for us to begin this conference. I’m Ed Rhodes, Dean of the George Mason School of Public Policy. And it’s my honor and pleasure to be the first today to welcome you to GeorgeMasonUniversity, to the School of Public Policy, and to this new facility.

We’re hoping that this facility for each and every one of you will come to be a second home, that it will come to be a place that you know well, that we are conveniently located to lots of things that are going on in Washington. And part of the joy of being a school of public policy is that we are a wonderful place to serve as an intersection between everything that’s going on in Washington and the various offices and outside folks, folks from the academic community, folks from consulting communities, a place where we can meet and have conferences just like this one, where we can exchange ideas.

As many of you have heard me say on previous occasions, deans are to successful conferences as dams are to rivers, so before I yield and let this river go to the places it’s supposed to go, I just did have a couple of quick points I wanted to make, just to share with you why I am so particularly pleased to be welcoming all of you here today. Frankly, this conference really is what a school of public policy is all about.

As I’ve indicated, what we have and what we’re able to do here is have a place where scholars from all the corners of academia, from history through civil engineering through whatever, all of the academics whose insights impact in some way on public policy can come together with practitioners. It’s in conferences like this one where I think we can identify critical issues from our past, from our present, and from our future and bring to bear some combined insights and to try to develop better explanations and better solutions, because, frankly, if there are any clues to the future, surely we’re going to have to find them in the past. And so a chance like today where we can take a look at the past and understand it better is a wonderful opportunity to think about the problems and challenges that we’re facing even now.

I’m also happy because our discussion today is possible, and it’s possible because of the FRUS series and because of a new FRUS volume, a new volume in the State Department’s Foreign Relations of the United States. What, this is about volume number 360, 350, 370? Anyway – keep bidding, okay – all the way back to President Lincoln.

This is – as those of you who use the FRUS series know, the volumes, like the volume today, contain the actual policymaking documents from the period, not some sanitized summary of them, not some expurgated or prettified history. What we’ve got is the – are the actual documents revealing what decisions were made, by whom, in consultation with whom, based on what arguments and on what information. And what this means is it’s possible for Americans and for the entire world to see what our government has done, what it has not done, and why it did it or did not do it.

Frankly, if this volume is like most of the ones that I’ve looked at, there are going to be some documents in this one that make us angry, some that make us blush, and some that make us shake our heads or pound our heads with disbelief that we could have done something so stupid. But every volume in this series is in an important way a celebration and a contribution to democracy, because what these volumes do is they allow us to know. They allow us to know exactly what it is we need to hold our government accountable for, what it was that was done.

The old axiom that the victors write the history books is defeated, disproved, whatever it is you do to an axiom to make it go wrong, with these volumes, because what these volumes mean is that the power to run the government, the power to run the state, is not the power to rewrite the past. And we are able, therefore, to hold our leaders accountable, after a lapse of 30 years, but nonetheless to hold them accountable for what’s been done.

One last reason why I’m particularly happy that we’re all here – and it’s an entirely personal one – I’m delighted to have a chance to welcome so many people I know over to the School of Public Policy, so many faces I recognize from the Historian’s Office and from the Advisory Committee on Historical Diplomatic Documentation. Working together, the Historian’s Office and the HAC [Advisory Committee on Historical Diplomatic Documentation or Historical Advisory Committee, for short] are responsible for producing a thorough, accurate, and reliable record. And that is a critically important thing and something that makes all of these discussions possible.

Okay, I’m holding up progress far too long. You’re already checking your watches to see if we’re late. My next pleasure is the opportunity to introduce Ambassador Edward Brynn, who has served as Acting Director of the Office of the Historian in the State Department since August 2009. Ambassador Brynn, who comes from Pittsburgh and was raised in Vermont, graduated from the Georgetown School of Foreign Service and got his master’s and PhD in British history from Stanford University and another round of degrees, a master’s in literature and PhD degree in Irish politics from Trinity College in Dublin. Ambassador Brynn has published two books and many scholarly articles on Ireland and the British Empire.

Ambassador Brynn was an Air Force officer from 1968 to ’72 and served as assistant and associate professor of history at the Air Force Academy out in Colorado Springs, and joined the Foreign Service in 1972 with overseas appointments in Sri Lanka, Mali, Mauretania, the Gambia, Comoros Islands, Cameroon, Burkina Faso, and Ghana. Is there any place in West Africa you didn’t go to?

AMBASSADOR BRYNN: I’ve ruined them all. (Laughter.)

DEAN RHODES: Ambassador Brynn served as diplomat in residence at the Air Force Academy, a staff member of the Senate Select Committee on Intelligence in Foreign Policy. At the same time, he was an advisor to Senator Leahy, principal deputy assistant secretary in the Bureau of African Affairs, international affairs advisor and deputy commandant at the NationalWarCollege. He’s received the Walter J. Stoessel Award for distinguished diplomatic service. Ambassador Brynn also served as associate provost at University of North Carolina at Charlotte and as a teaching professor there as well. From 2002 to 2005 he was the chair of World Affairs Council of Charlotte and he’s a member of the board of trustees of the Vera Institute of Criminal Justice Reform in New York.

Ambassador Brynn, I could go on and on and on, but in the interest of moving us on, thank you so much for co-hosting. (Applause.) I should – the last thing I should say is this conference is courtesy of the U.S. Department of State in collaboration with GeorgeMasonUniversity. Thank you, Ambassador.

AMBASSADOR BRYNN: Thank you. Thank you, Ed. In the interest of full disclosure, I guess all of you are aware that Ed was a member of the HAC in a – six years ago, six or seven years ago? Yeah, so it’s great to have him as our host here. I want to thank George Mason for hosting us in this elegant accommodation this afternoon. I was astonished to find out from Ed the GMU School of Public Policy is a big-time operation. How many grad students do you have?

DEAN RHODES: We’ve got a thousand.

AMBASSADOR BRYNN: A thousand. Wow. And very, very impressive and, as you say, wonderfully located to take advantage of all the opportunities in the Washington area.

I’d like to welcome everybody who came today, not only a good contingent from the Office of the Historian, but others as well who’ve been vested in the FRUS adventures a long time. I know for some strange reason that Todd [Bennett] has come up all the way from North Carolina. He got a new passport, so he was able to get into Virginia. (Laughter.) I’m really pleased to see that. I want to thank some of the HO staff who really helped to put this together. Michael McCoyer, who is here today, and Lindsay – I think she’s here – Lindsay Krasnoff, Joe Wicentowski – I didn’t see Joe. Is Joe here?

PARTICIPANT: He’s out this week.

AMBASSADOR BRYNN: Hmm?

PARTICIPANT: He’s out this week.

AMBASSADOR BRYNN: He’s out. Okay. And of course, Kathy Rasmussen, who will be our speaker today, and Forest Barnum, who is our secret weapon. He came in from British Columbia on a rocket and has already demanded that we speak only Latin over in HO. So we’re back into the swing of things.

As you know, today’s conference is part of an array of events to commemorate the sesquicentennial of the Foreign Relations of the United States series, FRUS. FRUS is 150 years old this year. Ed has already said that on the 200th anniversary, we could have another thing here. I promise to be around. FRUS has become the world over the gold standard for documentary publications in the history of foreign policy. HO staff made two presentations at the American Historical Association Annual Meeting in Boston, and we are scheduled to make additional presentations at this year’s annual meetings of the Society for History in the Federal Government and the Society for Historians of American Foreign Relations. And we’re also planning talks and discussions for general audiences and non-academic specialist audiences, and you can consult our website, www.history.state.gov for the latest information.

As part of the FRUS sesqui and of HO’s ongoing commitment to raise awareness of the series, today’s conference is the inaugural event of the FRUS special conference series which is designed to highlight recently published FRUS volumes. We look forward with great anticipation to what today’s speakers will share with us, what they think this volume tells us, the one we’re going to feature today about the topic and the time period, and how it relates to issues today. I want to add here, of course, that Bill McAllister has been an architect in residence for shaping this series which is going to be a highlight of our outreach for the entire year, and it’s wonderful having the HAC members here. We did prove something today – how many HAC members could fit into the back of a Beemer – (laughter) – on our way over. If I told you, I’d probably be arrested for unsafe driving conditions.

But anyway, we made it all over here, and they each paid their hundred dollars, which is really great. I want to thank you again, Ed, for having us all here, and I think this is going to be a wonderful presentation this afternoon. Thank you much.

DEAN RHODES: Thank you very much. (Applause.) Let me just add my thanks to Ambassador Brynn’s thanks to all of the folks at the Historian’s Office who did the hard work on it, and also to some of the staff here at the School of Public Policy. Susan McLure, who many of you met on the way in, did a lot of the arrangements here, along with Barb Hill, and Andy Brown has helped us with some of the publicity for the event.

A quick note about our schedule for the afternoon. We’ve convinced Kathy Rasmussen, who is the compiler, to lead off, and she’s going to talk about the volume. Around about 3:10 or 3:15 – we’re flexible – we’ll break for coffee, which will be right outside. And then when we resume, we’ve got an academic panel and Q&A scheduled to look at the significance of the foreign economic policy of the period and of this volume. Will Gray from the department of history at Purdue University, Dan Hamilton from the School of Advanced International Studies at Johns Hopkins, Kent Hughes at the Woodrow Wilson International Center, and if she’s able, we’re hoping we’ll still be joined by Susan Aaronson from the Elliot School. Susan’s not feeling well. So whether she’ll be able to join us is still uncertain.

After that, there will be yet more coffee, something that’s never in short supply here at a university. And then Under Secretary Hormats will give the keynote address, and then we will celebrate with a bit of a reception next door. So we’re hoping that everyone will be able to stay for the entire time because I’ve been warned that I will have to drink whatever wine you don’t drink. (Laughter.) So in the interest of not getting me arrested, we’re counting on you all to stay and enjoy the full day.

As I indicated, we get to lead off with Dr. Kathleen Rasmussen, who is going to talk to us about the volume. Kathy graduated from the University of Toronto with a PhD in history. Before that, I guess, she spent some time here in Washington over across the river at Johns Hopkins SAIS. These are relationships with SAIS that we will change with time. (Laughter.) Apologies, but there’s room for both of us. There’s room for George Mason here as well, so. And of course, before that, Kathy started off her academic work at the University of Toronto, where she studied international relations before she went over to the dark side of history.

Kathy has worked as a historian at the Office of the Historian in the State Department since 2002. She’s completed three volumes in the Foreign Relations of the United States series. Two of her volumes examine U.S. foreign economic policy during the 1970s, and the third documents U.S. relations with Western Europe, also during the 1970s. Since July, 2009, Kathy has served as the chief of the Asia and General Division of the Office of the Historian. Obviously, the State Department isn’t keeping you busy enough, because you find time also to serve as a professorial lecturer in history at another unnamable university here in the Washington area, the George Washington University, where she teaches diplomatic history.

Kathy, thank you so very much for leading us off. (Applause.)

DR. RASMUSSEN: Well, I’m certainly not going to be the only one who doesn’t get to offer thanks around here. Before I start, I want to thank Ed Rhodes and his associates here at George Mason for cosponsoring and organizing this conference and hosting it at this lovely new facility. I also want to thank Bill McAllister and Lindsay Krasnoff, who got this thing going in the first place and saw it through to a successful ending. And I also want to extend my thanks to Michael McCoyer, who did all sorts of hard work on getting this thing up and running, especially in securing our speakers for today.

And speaking of speakers, let me also thank my – the people who’ve agreed to come here today and speak to us about my little FRUS volume: Susan Aaronson; Will Gray, who actually flew here all the way from Purdue to be with us today; Dan Hamilton and Kent Hughes. I also thank in advance Under Secretary Hormats, who, of course, will be joining us later this afternoon.

Finally, needless to say, I thank you all for coming because usually when one thinks about the best way to spend an afternoon, hours of discussion on foreign economic policy is usually not at the top of everybody’s list. So I really do thank you for putting your trust in us that we will be able to engage your attentions for a few hours today. I’ll do what I can to keep it interesting. In this, I think, I’m actually quite helped by my volume on foreign economic policy 1973 to 1976. Perhaps in spite of myself, it actually is a really, really cool and interesting volume because it’s a really cool and interesting time that the volume covers. It’s a volume that explores U.S. monetary, trade, and North-South relations at – in sort of an in-between time, a time of sort of great – a time of great crises, a time of great change, where it was clear that a sort of an old order was passing, but it wasn’t quite apparent yet what the new order was going to be that would take its place. So it’s really – it’s really, again, sort of an in-between time, which I think really sort of makes for a really interesting – at least for me, I found it a really, really fascinating period to study.

Just to sort of give you a sense of sort of what the – Richard Nixon and his advisors faced when they came into office for their second term in January of 1973, I just want to sort of sketch out just generally speaking what was going on in the international economy. By January 1973, it was pretty clear that American economic hegemony, which had been sort of rock-solid – rock-solid since – for decades, but certainly since the end of the Second World War, it was clear that hegemony was ebbing. It was clear that the United States was increasingly being challenged as the top dog in the international economy. The nations of Western Europe and Japan had not only recovered from the effects of World War Two, but in fact had experienced the sort of resurgence that actually led a number of them – West Germany and Japan in particular – to increasingly challenge the United States as an economic rival in markets not only around the world but also markets here at home, frighteningly enough for American policymakers.

Western Europe was also poised to become even more of a factor in the international scene because, of course, in 1973 the European Economic Community, the EEC, expanded from the original six members to nine members. It started off, of course, with France, Belgium – Belgium, France, Germany, Italy, Luxembourg, and the Netherlands. In 1973, they added three more members: the powerhouse of Denmark, Ireland, and of course most important of all, the United Kingdom, making for a potentially ever more powerful force in the international scene.

The system of fixed exchange rates that had been envisioned at the 1944 Bretton Woods Conference, this was a system of fixed exchange rates that was really centered on the U.S. dollar. This was a system that was clearly in crisis. One of the first major shocks that hit, actually during the first administration – in the first Nixon Administration, rather, in August of 1971, when Nixon unilaterally suspended the gold convertibility of the dollar, thus sort of taking away one of the fundamental props of this fixed exchange rate system. Efforts had been made since August ’71 to cobble the system back together. In December of 1971, there was an agreement at the Smithsonian Institution that Nixon called the greatest monetary agreement in the history of the world, and I’m not exaggerating when I say that, which tried to sort of put the system back together again, establishing a new set of fixed parities that would again allow for a system of fixed exchange rates, which policymakers at the time really believed was key – was key to prosperity as well as just general stability.

Within months of establishing this new system, by mid-1972 it was already breaking down again. And by the time that Nixon takes office for the second time in January of ’73, it’s not entirely clear just how stable that system is.

The most recent round of GATT negotiations – General Agreement on Tariffs and Trade – the most recent round of GATT negotiations, from 1964 to 1967, the Kennedy Round, had ended – on one hand, it ended in sort of a triumphant way because the Kennedy round negotiators had tried to go beyond just sort of reducing tariffs in order to – trying to do away with some of the non-tariff barriers that impeded trade in the international system. They went, however, quickly from hope to disillusion when the U.S. Congress picked apart the deal and refused to pass various parts of the deal that had been erected during the Kennedy Round, leading to a lot of political recrimination in the Western alliance.

The frictions that arose as a result of sort of the crumbling Bretton Woods monetary system and also the – again, the recriminations that were left over from the Kennedy Round of the GATT, these actually led to tensions among the main economic industrialized nations that carried over into the political realm. They’re important enough themselves for the global economy, but they’re also important for the political realm because, of course, America’s primary economic rivals were also America’s primary political allies. And if we learned nothing else in the 1930s, it’s that sometime – is that if you have economic rivalry among countries, this bleeds off into the political area. And so this also sort of threatened the underpinnings of the Western alliance in 1973.

During their time in office, first Nixon and then Gerald Ford faced even more global challenges. Interestingly enough, these actually came not from within the Western alliance but actually from the South. In 1973, the autumn of 1973, the Arab members of OPEC imposed an oil embargo. And also, OPEC as a whole agreed to cut production of – agreed to oil production cuts as well as price rises in oil. And also, in 1974 the less developed countries called for something called the New International Economic Order. This was an effort by the poorer countries of the world to try to get the richer countries to remake the international global economy in such a way as to redistribute, as to – to effect a better redistribution of the world’s resources and incomes. And if that weren’t challenging enough, Congress began to reassert itself in foreign policymaking, even before Watergate. Even before Watergate arises, Congress is increasingly sort of putting itself back into the policymaking process.

Now, my volume examines exactly how Nixon Administration and Ford Administration officials dealt with, again, this sort of time of change and crisis – dealt with this time of change and crisis. The structure of the volume – half of the volume is devoted to international monetary policy as well as the creation of the G-7 summit. This really reflects the fact that the sort of the biggest innovations, the biggest developments during this period, really sort of come out of this disarray in international exchange markets.

And just how – you know how, like, singer-songwriters actually kind of like getting into really bad relationships – (laughter) – because it means they’ve got really, really good material to work with? You know how sometimes crisis can be a great time of creativity? This is basically what happened in the 1973 to 1976 period. Because international financial markets were in such total disarray and no one knew what was going to happen next, it actually in the end turns out to be not just a time of crisis but also a time of creativity. You have institutional reform as well as institutional innovation that really sort of changes the way in which the international economy runs.

After two massive runs on the dollar within weeks of each other in February and March of 1973, the United States and Western Europe came to a more or less sort of silent agreement that it was time for fixed exchange rates to go. It was time for exchange rates to be the value of national currencies to be determined on the market, and the era of flexible exchange rates began. This was actually a really big intellectual jump, actually, for policymakers because before that, it was thought that fixed exchange rates – that you couldn’t trade unless you had fixed exchange rates because how would you know? How would you be able to make contracts that extended into the future unless you could always be certain what the value of your currency would be in terms of other countries’ currencies? So to go over – to switch to flexible was a huge intellectual leap for these policymakers.

The G-7 – the G-7 is also created, and it’s actually created as a result of a French initiative. It’s created as a result of a French initiative in 1975 and 1976, with a membership that really reflects this new global distribution of economic power, essentially. The United States’, again, hegemony is ebbing. And it’s not just the United States that is really sort of dominating the international economy. The fact there are – it has six partners, six partners now with which it feels the need to sort of discuss global economic developments, is not only an important sort of institutional reform but, again, reflects this new reality. Note, incidentally, that of course, just to sort of contrast it with the 1940s, note that three of the seven members of the G-7 – the United States, the United Kingdom, Canada, Germany, France, Italy, Japan – notice that three of those – Germany, Italy, and Japan – actually were our enemies in World War Two and so actually had not been a part of the effort to remake the economy after World War Two.

The volume’s second half is divided equally between trade policy and North-South relations. The trade compilation covers the passage of a landmark piece of legislation, the Trade Act of 1974, which introduces a number of innovations into American commercial policy. It renewed the President’s authority to negotiate reductions in tariffs. This authority was necessary to engage in a new round of GATT negotiations. It implements what we know today as fast-track authority, whereby Congress can vote yea or nay on trade deals that include reductions in non-tariff barriers. It reworked the fair trade laws of the United States, such that U.S. producers who felt they were being damaged by foreign trade could have easier recourse to the government to help protect their interests. It instituted a series of tariff preferences for LDCs in order to encourage development through trade.

It did all of these things, and yet no one remembers the Trade Act of 1974 for doing all of these things because the Trade Act of 1974 also has the Jackson-Vanik amendment, and everybody remembers the Trade Act of 1974 because it has the Jackson-Vanik amendment, which is that amendment to a title of the act which conditions the granting of normal trade status, Most Favored Nation status, to the emigration policies of non-market economies. “I’m looking at you, Soviet Union,” is really what the Trade Act of ’74 is saying, although it never actually says it outright.

The trade compilation also looks at the beginning of the Tokyo Round of GATT negotiations. These began in 1973. The United States really believed that it was important to have this round in order to make – not only to build on the Kennedy Round but also, in a way, to actually to sort of make amends for what had happened during the Kennedy Round, and this time to start attacking non-tariff barriers in a way that – where they – where the United States would do it right. Unfortunately, the progress of that round was stymied by the fact that the United States had no negotiating authority for the first 15, 16, 17 months of that round, simply because the trade act wouldn’t pass because of Jackson-Vanik.

The final quarter of the volume is on North-South policy, which tackles sort of the traditional issues that are dealt with in FRUS volumes, the development of U.S. tradepolicy but also, in my opinion, the more interesting documents explore how Henry Kissinger, who really took the lead in this – Henry Kissinger responded to the challenge that was posed to the North by – the industrialized North by the less-developed South, that said we want a new international economic order; what are you guys going to do about it?

When you’re putting together a FRUS volume, you’re encouraged to think of the series as a whole. You’re encouraged to think of it, as Henry Kissinger would have said, as an organic whole. Each volume tells a different aspect of the story. And whereas I believe that Foreign Economic Policy ’73-’76 really does stand on its own as an independent volume, it is also really profitably read with a number of other volumes in the series. We have some volumes on energy policy for the 1970s that provide a very important complement to it, volumes on the Soviet Union, particularly when it comes to the Jackson-Vanik amendment, global issues, Western Europe – these – the volume on Japan – these volumes also sort of provide different aspects of the story that’s told in Foreign Relations.

The volume contains documents from all the usual agencies that you’d expect to find in FRUS. We’ve got the National Security Council; we’ve got the Department of State; we’ve got the White House. But of course, we also have some voices that one doesn’t usually hear from in Foreign Relations, including, of course, the Treasury, the ever robust voice of the Federal Reserve Board and Arthur Burns’s extreme wonkiness as chairman of the Fed. We have the Special Trade Representative, we have the Council on Economic Advisors, Council on International Economic Policy, and the Economic Policy Board.

And interestingly enough, of course, because this is a volume that deals with the ’73 to ’76 period, we actually really have honest-to-God voices because we have the Nixon tapes. And I think some of the most interesting documents actually in the volume are the transcripts of the Nixon tapes, when you see Nixon and Kissinger and Paul Volcker and George Shultz really sort of hammering out what approach we should take to, in this case, the exchange crisis of the spring of 1973.

And it’s those conversations that, I think, in addition to sort of the theme of crisis and chaos but also creativity that I think sort of runs through the volume – those tapes really highlight another theme, which I think is really integral to the volume, which is the intersection of political – of politics and economics, essentially. It’s not just econ policy wonks who are making policy by any means. Politics, domestic politics, foreign politics, very much factor into the policy choices that are made during this period. So for example, in March of 1973, there’s a run on the U.S. dollar. That’s again – that’s the second exchange crisis to hit the United States in a matter of weeks. And Nixon’s concern is less with what this means for the future of the monetary system and more on how this will reflect on the United States as a leader in the international community. If we devalue the dollar again, does that make us look weak? If we don’t take the lead in trying to find a solution to this problem, will that make the Europeans doubt our leadership? What if we want – what if we use our actions – Nixon thought, what if we use our actions in the monetary realm in order to get the Europeans to play ball with us on other issues, such as MBFR or NATO reductions?

Kissinger, also, of course, is obsessed with politics when it comes to this exchange crisis. And unlike Nixon, who really wants to use the crisis to solidify relations with the Europeans, Kissinger wants to use the crisis to beat them over the head and teach them a lesson and, if possible, split them apart entirely so that we can dominate them. In very, very open – (laughter) – very open and very assertive terms, Henry believes that this is really the crisis when we should tell – show the Europeans that they can’t push America around, that we may want them to be integrated, blah, blah, blah, but we don’t want them to be integrated into a force that opposes us.

The Jackson-Vanik amendment is obviously – the Jackson-Vanik amendment is clearly a product of politics. Congressional members sought to actually turn – of course, Nixon’s and Kissinger’s policy of linkage on its head, using Nixon’s promise of Most Favored Nation for the – status for the Soviet Union in order to affect human rights policies within the Soviet Union. And also, the way in which Nixon and Kissinger address the challenge posed by Congress in the form of the Jackson-Vanik amendment also, of course, is highly political.

Because the Jackson-Vanik amendment is embedded in this big, huge piece of trade legislation, what it comes down to in the end is Nixon and Kissinger have to make a choice: Do you want to get this piece of trade legislation passed? And if you want to, the best thing to do is just like take MFN for the Soviet Union out of it altogether. Or do you want to leave it in and have – sort of hold the entire American commercial policy program hostage to this one title of Most Favored Nation for the Soviet Union? Nixon and Kissinger choose to leave MFN in, which means that the trade bill takes a long, long time to pass. And Charles Cooper, who’s a member of the NSC staff – I thought he put – I thought he had a really perceptive observation in October of 1973, in which he said that the way in which Nixon and Kissinger were approaching the issue of MFN and the trade bill was that they were – quote –“putting the relationship with Moscow ahead of the relationship with our allies and friends,” which is really actually one of the subtexts I think of the way in which they deal with Jackson-Vanik.

Let me just briefly also say when it comes to North-South policy, the rhetorical response to LDC demands for a new international economic order was a source of controversy in the Ford Administration, not the policy that we would pursue but how we talked about that policy on the world stage. That was a source of big controversy. And in this wonderful series of meetings in May of 1975, the Secretary of the Treasury, William Simon, dukes it out with Henry Kissinger in front of Gerald Ford, in which Kissinger wants to make a series of speeches in the international arena in which he pays at least some rhetorical mind to the fact that the South believes that the system is arrayed against them. But William Simon says no, that’s socialism, and we’re Americans, and we believe in free market principles; we can’t even bend on terms of rhetoric. And Henry wants to bend in terms of rhetoric, because he says if we bend in terms of rhetoric, then we can split the less developed countries and we can nail them on individual issues, and I don’t want to do international economic order either, but I want to at least make it seem like I want international order because it’s going to look better for our image to do so.

I think the issues covered in this volume continue to be relevant to the present day. Clearly, politics has not left us, nor has image left us when it comes to international economic policy. And I will just sort tell you an – I’ll just tell you briefly an anecdote which really reflects sadly on me as a human being more than on anything else. I remember I awoke one morning in September of 2009 to the fact that the G-8, which had replaced the G-7 in 1997 with the addition of Russia, had officially declared itself obsolete, that it was replacing itself with the G-20 and that henceforth the G-8 wasn’t enough, that once again sort of the global balance of power had shifted so that it wasn’t just enough to have the eight in the room; you actually need to have 20 countries in the room. And I remember feeling some nostalgia for the passing of the creation of the G-7 that I documented in my volume.

I’m serious; I’m, like, waking up to NPR, listening to this, and thinking “that’s just too bad, that time has come and gone.” And on an even more personal level, what strikes me as particularly noting as – of the coming of the G-20, which, of course, has replaced the G-8, is that, man, this is going to make my life difficult in 30 years when I do the FRUS volume on foreign economic policy – (laughter) – because now I’ve got to deal with, like, 20 countries as opposed to 7.

And on that note, I will say thank you very much for your attention. (Applause.)

DEAN RHODES: Would you be willing to take a few questions if there are –

DR. RASMUSSEN: Oh, if there are questions.

DEAN RHODES: Are there – before we break for coffee, are some questions – there’ll be more time for questions later as well. But if you want a chance to grill Kathy right now –

DR. RASMUSSEN: Or you can grill me over coffee.

DEAN RHODES: Silence. Well –

QUESTION: Kathy, can you tell us a little more about the NIEO? Was there like an emerging debate within the government about it, or was it just we think this is a dumb idea from the beginning and just a matter of how to spin it? Was there any – how did the policy for the U.S. emerge when it came to the New International Economic Order?

DR. RASMUSSEN: I think there is, even beyond rhetoric. I mean, it’s really this discussion that I examined, that I mentioned, from May of 1975 really focuses on the rhetoric. But I do think that there is – I think the administration is split. William Simon is known – the Treasury Secretary who followed George Shultz – he really is known as being a very hard line sort of free market principles sort of guy. I think that in other realms of the department, and particularly the Department of State, there was more of a willingness to go some way to meet the demands of the less developed nations, but not in any – I mean, we are talking about degrees as opposed to sort of a fundamental shift of U.S. foreign economic policy because, of course, quite frankly, we’re quite happy with how the system is ordered. It’s worked well for us for quite some time, and we don’t really want to see fundamentally any changes to it.

So there are debates, but it’s really a matter of just – it’s not a – it’s not, hey, this is a great idea; let’s do it. It’s far more sort of a matter of degrees about how far are we willing to stray towards a slightly more managed global economy. So, from outright opposition to okay, we can consider it. So there is some debate.

QUESTION: Since Henry Kissinger used to like to say that he wasn’t really interested in economic policies, who from your volume do you think has Henry’s ear? Was it Bob Hormats or somebody else on his staff, or was he actually interested in it and didn’t (inaudible)?

DR. RASMUSSEN: I think that he certainly – I mean, Bob Hormats has his ear. Charles Cooper, who’s an NSC staff member, has his ear. Tom Enders, when he moves over to State, has his ear. So he does – he is careful – Hal Sonnenfeldt, actually, interestingly enough, also has his ear. He is careful to have advisors who can explain to him what’s going on, because – I mean, in many documents in the volume, Kissinger freely admits that he absolutely no idea what’s going on terms of the economics. I think he’s bluffing, to a certain extent. There’s this wonderful staff meeting in which Kissinger throws up his hands and says, “I have no idea what’s going on,” and he knows full well what’s going on, actually. He’s able to tell Tom Enders exactly what’s happening.

Whether or not Henry Kissinger likes economics, after he becomes Secretary of State in September of 1973, economics is thrust upon him and he is forced to deal with the issues not only in terms of sort of, again, their importance to the global economy, but he continues to do what he had done for – throughout his time as National Security Advisor, which is to look at them within sort of the geopolitics of the economic issues, which is why he gets into trouble with people like Bill Simon, who just really believe that he’s being too political and not economic focused enough. But he’s not quite the naïf that he claims to be.

QUESTION: Kathy, this is the time when you have Bob McNamara at the World Bank.

DR. RASMUSSEN: Mm-hmm.

QUESTION: And exactly the period where he’s making a big speech in ’73 on poverty in Nairobi. He obviously is a Democrat, obviously appointed by Johnson. What do you find the policymakers in the government saying about the bank and about McNamara?

DR. RASMUSSEN: It’s not – McNamara actually figures in a number of the documents, particularly in the early period, when we are trying to get some appropriations through Congress in order to fund some of the bank programs. And he fades from view as time goes on, as I think that sort of energies on the development issues are shifted away from traditional sort of – the 28th annual replenishment of the IDA. I mean, as we sort of shift away from those sort of questions into sort of – not just sort of thinking about how do we keep what we’ve got going, but shift it over to how can we sort of make something new, because clearly what we’ve got going isn’t really working all that well.

So McNamara actually – although he does figure – he does actually figure prominently in a few telephone conversations, actually in the beginning, I feel like he fades away. I feel like, also, he fades away is because, as Nixon and – as the Nixon and Ford Administration goes on, Congress is increasingly stingier when it comes to appropriations for the international development – international lending – financial institutions, I beg your pardon, the IFIs. And so, again, sort of the shift of the focus – the White House’s focus also shifts as well, away from, again, these more traditional things on to new ideas like: Do we want to have a common fund? Do we want to have buffer stocks? I mean, do we want to, instead of giving less developed countries money, or engaging in sort of discrete development products, do we want to completely rework how primary commodities are bought and sold? Because that’s what they’re talking about. They’re really talking about sort of restructuring the international economy to give certain advantages to the LDCs. And again, there really is – I do see a sort of shift of focus.

QUESTION: [Somewhat related to that, in Margaret de Vries’ history of the IMF] there’s this latent vitriol between Pierre-Paul Schweitzer and Nixon, but there’s nothing at all about him at this point [but there’s nothing at all about him in this volume].

DR. RASMUSSEN: Yeah, I think there may be – if memory serves, there might be, like, a footnote on it. (Laughter.) It’s true, because I think the French are really cross, of course, that we don’t support their candidate to – the renewal of his tenure as head of the IMF. It’s – when you do one of these volumes, ultimately, of course, you have to make choices. And in terms of sort of the internal workings of the IMF and the structure of the organization, I tended to sort of focus more on sort of actually the reform of the organization as opposed to the sort of stuff that Margaret Garritsen de Vries would cover in her official history of the IMF.

QUESTION: Kathy, talk about the tapes. How useful were they to you? How awful were they to use, or –

DR. RASMUSSEN: The terrifying thing about the tapes is that when you listen – so these Nixon tapes, these are wonderful in a crisis. That’s – they – I found them most particularly helpful in the exchange crises of February and March of 1973. The one thing, though, where you have to be really careful when you work with the Nixon tapes is that we had a number of folks in our office who did the first transcripts of the tapes. But then, of course, the compiler will listen to the tapes and look at the transcripts over and over again. The danger of working with the Nixon tapes is that when you listen to them enough times, they worm their way into your head. (Laughter.) So now when I read those transcripts, I can hear the economists speaking slowly and in a monotone. And it’s just horrible. (Laughter.)

So in a way, they’re horrible. But in another way, what I love about them is that they’re unguarded. They show – as actually, as David’s question sort of alluded to – they show the strengths and the flaws of policymakers. Nixon clearly – sometimes he gets what’s going on and other times he’s making random analogies about poker games that have nothing to do with what’s going on, and he’s just trying to seem – like, he’s just trying to hold on for dear life. So they really are – I mean, they – it’s – they really are a priceless – priceless documents. And again, though, I think for me, I think that they’re best used in a crisis, when the tensions are focused and Nixon’s not just rambling about who he likes and who he doesn’t like.

Kent?

DR. HUGHES: Kathy, thanks for a wonderful overview. How do we sign up for your diplomatic class? (Inaudible.) (Laughter.)

DR. RASMUSSEN: Yeah, I feel sorry for them. They get entirely too much of this, actually. (Laughter.) They get – they know way more about the Reciprocal Trade Agreements Act than any person should know. (Laughter.) It’s really quite terrifying.

DR. HUGHES: Well, in your – you cover the shift between Nixon and Ford.

DR. RASMUSSEN: Yeah.

DR. HUGHES: Are there three policy areas that really were decided differently, do you think, because of that shift?

DR. RASMUSSEN: Oh, I think so. I think the fact that Jackson-Vanik – I think the fact that the trade bill passed is entirely due to Gerald Ford, because Nixon clearly has other things on his mind from April in ’73 until August of – well, January ’73 until August 1974. And, I mean, clearly, getting an acceptable amendment that somehow bridged the gap between what Congress wanted and what the Soviet Union would accept in terms of our fulfilling the promises that we made to them at the Moscow summit, clearly that was going to take a decision at the political level. And Nixon just either was unwilling or, more to the point, probably incapable of sort of focusing his attentions on it.

But Gerald Ford comes in, and with his legislative experience, he just gets right on that thing. So actually, I believe that Ford really deserves the credit for actually getting the trade act finally passed through Congress.

I wonder, too, with the creation of the G-7 summit – again, this is – the G-7 is very much a French initiative to which we respond. And there’s actually some resistance in the Treasury Department to a positive response to the initiative. We’re afraid that the French are going to back us into a corner and force us to accept gold as the center of the monetary – international monetary system, and also France’s general awesomeness. And so the Treasury Department’s like, “Mr. President, you can’t get into a room with those French; they’ll just pin you down, and this is just not going to – it’s not going to work.” But Ford doesn’t listen to them.

And I wonder – I do wonder if Nixon would have been – I wonder if Nixon would have been able to allow some – another country to take the lead. But Ford doesn’t have a problem with it, for better and for worse. So I think that Ford also is – even though his performance at the G-7 summit is not what one would want – it’s clear he’s reading the text of the prepared remarks and he’s not engaging like the other leaders – I do believe that Ford also deserves a lot of credit for being open to an act of leadership on behalf of another country.

DEAN RHODES: Let me cut off the discussion for right now so that we can get a cup of coffee, and then we can come back and grill the panel, let the panel have some comments, and then grill them. Thank you, Kathy. (Applause.)