369. Memorandum From the Director of the Office of Management and Budget (Shultz) to President Nixon 1

SUBJECT

  • Meeting with George Shultz and Henry Kissinger August 11, 1970, 11:00 a.m.
    (10 minutes)2

I. Purpose

Kissinger and Shultz will present a proposed organizational arrangement for handling foreign economic policy.

II. Background

On June 30, 1970 you approved a “Troika-plus” arrangement for economic policy generally. In the proposed system for foreign economic policy we plan to build on this arrangement. The Treasury Department, especially Paul Volcker, will play a coordinating role. The National Security Council will be fully represented.

The group itself will be assigned by several subgroups with interlocking membership. While some flexibility should be retained, we visualize the need for five at this time.

1.
Committee on Monetary Policy and Balance of Payments
2.
Committee on Commercial Policy
3.
Committee on Export Promotion
4.
Two parallel Committees dealing with Multilateral and Bilateral Economic Assistance

If you approve, Shultz will work it through the various affected Departments and prepare a formal memorandum for you and an implementing letter from you to the Secretary of the Treasury. Drafts of these are attached. See Tabs A and B.3

George Shultz4
[Page 800]

Attachment5

Draft Memorandum to the President

SUBJECT

  • Organization for Foreign Economic Policy

Consistent with the memorandum to you of June 30 from George Shultz dealing with organization for economic policy in general, this memorandum proposes more specific organizational arrangements for foreign economic policy.

The proposed arrangements are designed to:

(1)
Provide a clear top-level focus for the full range of foreign economic policy issues to assure these problems receive consistent, timely attention;
(2)
Deal with foreign economic policies—trade, investment, balance of payments, aid, and financial—as a coherent whole;
(3)
Achieve consistency between domestic and foreign economic policy;
(4)
Maintain close coordination with basic foreign policy objectives.

These goals would be achieved by building on the basic Troika framework, adding particularly State and National Security Council representation. The proposed arrangements would retain (but modify) some existing coordinating arrangements, supersede others, and fill gaps as necessary.

We would suggest that, if you agree, these arrangements could be set in motion by a letter from you to the Secretary of the Treasury and to other affected officials. The letter would establish the broad mandate for the proposed Foreign Economic Policy Group, set the membership, [Page 801]and ask Secretary Kennedy to assume Chairmanship and provide the principal staffing. A draft of such a letter is attached.6

Proposed Organizational Structure

Consistent with your decision to organize foreign economic policy around the basic Troika framework, supplemented by relevant additional agencies, the following arrangements are proposed for foreign economic policy:

(1)

A top-level policy body would be established by you to be known as the “Foreign Economic Policy Group.” The members of this Group would be the Troika agencies, to which would be added State, NSC, STR, Commerce, Labor and Agriculture. This membership would be supplemented by others as needed. A high-level member of your White House staff concerned with economic policy would be included.

This Group would be close in membership to the present National Advisory Council on International Finance, which has specific responsibilities in certain areas of international finance. Maintenance of the formal identity and continuity of the NAC would have some advantages in terms of legislative history and relationships. We would, therefore, contemplate that the Group could meet from time to time in that name, when dealing with matters that the Congress has specifically directed to the NAC (mainly issues concerning the multilateral financial institutions).

We would propose that the Secretary of the Treasury be Chairman of the new “Foreign Economic Policy Group,” as he now is of the NAC. He is the official with the primary operating responsibilities in much of the area and has adequate staff. Accordingly, Treasury would be looked to to provide primary staff support and, working closely with the White House representative, would organize and coordinate needed staff support in other agencies.

Regular meetings would be contemplated with at least partly regular agenda to assure timely reports from subgroups.

(2)
We contemplate that the top group would be assisted by several subgroups with interlocking membership, each dealing with an important phase of foreign economic policy. The Troika agencies, State, and the NSC would be represented on each of these groups, and your White House staff would be informed about and free to participate in their deliberations (and should participate in the more critical meetings).

[Page 802]

While some flexibility should be retained for fixing the number, composition, and mandate of these subgroups, we visualize the need for five at this time, along the following lines:

(a)
A Committee on Monetary Policy and the Balance of Payments, chaired by Treasury. This group would include the Federal Reserve. It would essentially carry forward the present working group on international monetary matters known as the Volcker Group.
(b)
A Committee on Commercial Policy, chaired at least initially by CEA and including STR, Commerce, Agriculture, and Labor as regular members. This Group would deal with critical trade matters, where the need for better coordination is particularly critical.
(c)
A Committee on Export Promotion, chaired by Commerce, with STR, Agriculture, and Labor represented. This effort needs persistent high-level attention.
(d)
Two parallel Committees dealing with Multilateral and Bilateral Economic Assistance. In the multilateral area, use can be made of the existing NAC “Alternates” group, chaired by Treasury; a decision on the bilateral assistance group will need to be integrated with your recommendations on the Peterson Report.

Conclusion

In shaping these recommendations, we have been particularly conscious of the need to assure a comprehensive view of foreign economic policy as a whole, while recognizing the links both to domestic economic policy and to foreign policy. We believe these objectives can be achieved by establishing close links between the Troika pattern and the State–NSC complex. Against the background of the Troika model, we visualize close and informal working relationships on the basis of a letter from you to the interested agencies as proposed above.

  1. Source: National Archives, Nixon Presidential Materials, White House Special Files, President’s Office Files, Box 82, Memoranda for the President. No classification marking.
  2. The President’s Daily Diary indicates that Nixon met with Shultz and Kissinger from 11:30 to 11:40 a.m. on August 11. Just prior to that meeting Nixon had met with Shultz for almost 50 minutes, with Ehrlichman, Haldeman, Finch, and Harlow present for most of the meeting. The latter four departed by 11:30. (Ibid., White House Central Files) No record of discussion at either meeting has been found.
  3. Tab B is attached but not printed.
  4. Printed from a copy that bears this typed signature.
  5. Confidential. The draft memorandum appears on blank paper, but another copy (from which the copy at Tab A was made) is on the letterhead of the Secretary of the Treasury and is attached to an August 10 memorandum from Flanigan to Shultz in which Flanigan commented that the “Treasury proposed organization” differed “in only one major respect” from his own proposal—”that difference puts management of the program in Treasury rather than in the White House.” The benefit of Treasury’s proposals, in Flanigan’s view, was that staff already existed in Treasury, while outside of NSC and CEA staff did not exist in the White House. The major objection was in making Treasury “primus inter pares,” which was a “difficult concept,” especially for areas other than monetary, and one State in particular would find hard to accept. (National Archives, Nixon Presidential Materials, White House Special Files, Confidential Files, Subject Files, FO)
  6. Attached but not printed.