178. Telegram From the Department of State to the Embassy in Germany1

109873. Paris for Trezise. Please deliver following message from President Johnson to Chancellor Kiesinger at earliest appropriate time on Monday:2

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“Dear Mr. Chancellor:

I thank you for the friendly reception accorded Under Secretary of State Katzenbach during his visit to Bonn early this year to explain our program for dealing with the U.S. balance of payments problem. The ready response of your Government to Mr. Katzenbach’s presentation was most gratifying. Now we must move on to the phase of cooperative action.

I fully recognize, as I am sure you do, the serious political issues which face us all as the result of the U.S. balance of payments problem. Every aspect of our relationship—political, economic, commercial and especially security—could be affected by this situation. All our efforts to achieve a stable and prosperous world community will be in jeopardy if we have not the will to act together now—as we have done over the past twenty years.

You and I are old enough to remember how a lack of economic cooperation among the nations plunged us into the depression after 1929—with all its tragic consequences.

Therefore, these are matters of great concern.

I think we are in agreement that both deficit and surplus countries must take measures to restore international payments to equilibrium. These measures will be painful and politically difficult for all of us, but my government is determined to carry through with our program. The effectiveness of what we do—the course of action we follow—will be determined in large measure by the way in which our Atlantic colleagues—and especially Germany—react. With careful cooperation we can move forward to resolve this issue. We must preserve the political and economic gains we have achieved in the last two decades—and go on from there. This is our objective and we seek your cooperation.

It has become apparent to me as I have examined our balance of payments position that the United States—despite the efforts we are making to avoid excessive demand at home and to take action on capital account, tourism, the neutralization of military expenditures overseas and in other ways—cannot reach equilibrium without improving its trade account. I believe the consequences of continuing large-scale deficits are so dangerous that we must take action in this sector as in others.

To this end we are seriously considering a number of possible steps, including the introduction of border tax measures of our own or the use of measures available under GATT to countries with balance of payments problems.

It will, of course, be most desirable to find solutions which will result in trade expansion, rather than trade restrictions. I am sure you know that I—like others who believe in liberal trade principles—must deal with strong protectionist pressures.

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We propose to consult closely with our European trading partners, of which Germany is of first importance. I have therefore asked Ambassador Philip Trezise to visit Bonn as my representative. I hope it would be possible for your Ministers and senior officials to receive him during the week of February 5.

Ambassador Trezise will convey our views on the need for trade adjustment and the possible alternative means of bringing it about. He will explain our urgent concern with the tax adjustments at the border of your country and other countries. He will present our views on the kinds of actions Germany and other European countries could take to contribute to a general expansion of world trade and income as we move toward balance of payments equilibrium and a stronger international monetary system.

I know that you agree with me on the importance of resolving our balance of payments problem in an environment of expansion.

I hope that the visit of Ambassador Trezise will help achieve that objective.

Lyndon B. Johnson

  1. Source: Department of State, Central Files, ORG 7 U. Confidential; Exdis; Immediate. Drafted at the White House; cleared by Solomon, Leddy, Heymann, Deming, Roth, and Fried; and approved by Enders. Repeated to Paris for the Embassy and OECD.
  2. February 5.