Foreign Relations of the United States, 1969–1976, Volume III, Foreign Economic Policy; International Monetary Policy, 1969–1972

16. Action Memorandum From C. Fred Bergsten of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)¹

Washington, April 1, 1969.

SUBJECT

• Relaxation of Balance of Payments Controls

The attached memorandum from Secretary Kennedy recommends that the President announce shortly the modest relaxation of all three aspects of our controls over private capital outflows already decided.² The recommendation is agreed to by Secretaries Rogers and Stans, Chairman Martin, Paul McCracken, and Bob Mayo.

I recommend that you support the recommendation, although it carries significant foreign policy (and domestic economic) risks as outlined in the memo itself and conveyed to you in my earlier memos. There are, however, two specific problems of concern to us, one relating specifically to our new emphasis on consultations and one relating to the decision-making process.

This recommendation was delayed for two weeks to permit Treasury Under Secretary Volcker to consult with the Europeans on it.³ None of the Europeans oppose the move outright, but virtually all of them were highly cautionary. They indicated that any resultant increase in the U.S. payments deficit would weaken our over-all bargaining position, particularly with regard to early and sizeable activation of Special Drawing Rights. The major implication of this conclusion is that our preferred multilateral approach to monetary reform is now less likely to succeed, and we may be forced to take unilateral steps which could be seriously disruptive to the entire Atlantic Alliance.

Since we do not plan to reduce the pressure on the Europeans to move ahead on SDRs—and on much more “radical” reforms—the question of our sincerity in undertaking consultations will arise at some point in the near future. We gave them a chance to record their views and they did so. Our future action may well imply that we have ignored those views. I flag this as an early case of the obvious problem that the new emphasis on consultation will create. On decision making, this is a prototype case of unsatisfactory ad hoccery. The President is being asked to enunciate his over-all international monetary policy without ever considering that policy. He has been given no choices, nor even a paper on the over-all subject. In retrospect, the decision to lift the subject from the NSC agenda was a mistake⁴—since the Secretary of Treasury has not exercised the responsibility which he sought and received.

This factor does not lead me to recommend your opposing the proposed action, since the President has made known his strong desire to begin relaxing the controls as soon as possible. But I suggest that you remind the President that he is being asked to do something without consideration of its context and without systematic exploration of its full implications, and recommend that he instruct the Secretary of Treasury to present an options paper for his consideration in the near future.

Recommendation:

That you sign the attached memorandum to the President, recommending that he:

(1) Approve the proposed relaxation of controls.

(2) Do so between 2 P.M. Thursday and 11 A.M. Saturday for market reasons.⁵

(3) Instruct Secretary Kennedy to prepare an options paper on our international monetary policy with a meeting to take place on it at an early date.⁶

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 309, BOP. Confidential.
2. See Document 15.
3. See Document 14.
4. The meeting had been scheduled for February 26. See footnote 4, Document 3.
5. April 3-5. The President released a balance-of-payments statement at Key Biscayne, Florida on April 4. See Public Papers of the Presidents of the United States: Richard Nixon, 1969, pp. 265-267.
6. Possibly a reference to the Treasury Department’s Basic Options paper prepared for the meeting with the President on June 26; see Document 130. On April 11 Kissinger sent the President a memorandum entitled “Relaxation of Balance of Payments Controls,” repeating his support for the President’s limited action despite certain foreign policy risks. Kissinger noted, however, that because of Secretary Kennedy’s reluctance to have the matter referred to the NSC the President had, in effect, been asked to make his balance-of-payments strategy statement without an opportunity to address the subject systematically and in context. Kissinger recommended the President ask Secretary Kennedy to prepare a memorandum outlining options in the balance-of-payments and international financial area and attached a memorandum for the President’s signature so instructing Secretary Kennedy. The President initialed the memorandum for Secretary Kennedy on April 15 requesting a paper on “what my choices are” with respect to international monetary policy, “a paper which will permit me systematically to look at the available options.” (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 309, BOP)