173. Telegram From the President’s Special Assistant (Rostow) to President Johnson, in Texas1

CAP 80157. Herewith Nick has a civilized talk with the French.2

Fred Deming, Bill Roth, and I met with Debre and some of his senior officials and then later I made courtesy call on Couve. I would describe atmosphere as one of friendly, if studied, understanding. I think this best typified by Couve’s remark that having argued for us to take action, it would be difficult for French now to complain. Except for rather brief references to doctrinal differences, all the remarks and comments made by the French seemed positive and uncontentious.
Debre stressed one point several times—although he said he did not want to moralize. He said that measures will be accepted or rejected outside the United States in direct relation to the understanding of both govts and public opinion that the U.S. is also dealing effectively with its domestic economy. Both Couve and Debre emphasized the necessity of President getting his tax measures exactly as introduced, as well as the U.S. taking steps to control internal credit and stabilize prices and wages. They seemed to accept my point that outsiders should not wish U.S. deflation and Couve replied that, on contrary, French wish see stability in U.S. economy. The Embassy will report our conversations in detail but I think that the following points are worth noting here.
Debre stated position of French Govt that they accepted measures in principles and recognized the strong and determined efforts of the President in both the domestic and international areas. They put usual stress on responsibility of deficit countries to take action, but rather [Page 494] surprisingly indicated that surplus countries too had at least a secondary responsibility. They emphasized that overwhelming position of U.S. economy in world economy presents special problems and calls for U.S. to exercise special care.
Debre said on investment measures he was perplexed by discriminatory treatment. Particularly, he could not understand why oil countries had been included in Group B. He was careful to say that this discrimination could not be whole-heartedly, or for long accepted by the French Govt, but did not appear to reject measure for the time being. He questioned how U.S. could regulate foreign affiliates of American companies if the U.S. continued to wish them treated equally in countries such as France. I responded to these remarks by pointing out that any regulation is inherently discriminatory since situation differs from one country to another and one company to another. I stressed that we had acted responsibly in not wishing to put burden of our adjustment on less developed countries or those in weaker B/P position.
Debre expressed some concern that we might be about to start a credit war. He warned that this would lead to organized disorder. Both Fred and I attempted to reassure him on this and said we had no intention of beginning competition on export credit.
Debre’s general conclusion was that he admired U.S. action. “France had hoped too long for this action to criticize it now.” He recalled that the United States had led the world in eliminating exchange controls, liberalizing trade and freeing both capital and movements of people. He said the French recovery had taken its cue from this leadership as they reduced protection, supported the Kennedy Round, eliminated exchange control, and opened their doors to investment. The present French Govt had done more in the last few years than in the past 50 to eliminate French protectionism. He then went on to say that they could accept temporarily these measures but, aside from their doctrinal differences with the U.S., they would find it difficult to convince their public opinion unless the U.S. internal measures were perhaps stronger than those proposed. (I am not sure that he fully understood U.S. internal measures.) He also thought we should examine our investment measures to see whether they could be less discriminatory and possibly re-examine all our measures to make sure that they would have their desired effect and not be quite so inequitable. Couve also expressed approval for continuing exchange of views, particularly on effects of measures, in OECD economic policy discussions.
I think it was right for us to go to Paris and I think we now have a record from the French on which we can build. I have no doubt that they will use different arguments with their European colleagues and others. But it seems to me the correct position for us to take with France is one which emphasizes our determination to act responsibly and to take [Page 495] account of our own strength and not jeopardize others who are in a weaker position.
Debre made a very strong statement at the beginning that he and the French Govt were “scandalized” by some of the things appearing in the foreign press. He said that these had completely misrepresented the actions and intentions of the French Govt. Fred observed that we too had been shocked by some of the things said in the press and that we could only assume that the French Govt had not inspired these things as we had not inspired the stories in our own press. Fred pointed to last night’s “Le Monde” story which talked of a tax on gold. He said that he had denied that there was any consideration of a move of this nature but pointed to this story to indicate that it is very difficult, if not impossible, to control what the press says. Bruce.
  1. Source: Johnson Library, National Security File, Subject File, 1968 Balance of Payments Program, Memos and Miscellaneous [2 of 2], Box 4. Secret. The telegram was received at the LBJ Ranch Communications Center on January 6 at 4:25 p.m. (CST). A handwritten note at the top of the source text reads: “Jones told B. Smith.”
  2. Numbered paragraphs 1–8 below are taken verbatim from telegram 5277 from London, January 6. (Department of State, Central Files, ORG 7 U) A much longer account of this meeting is in telegram 8738 from Paris, January 6. (Ibid.)