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

175. Telegram From the Embassy in the United Kingdom to the Department of State ¹

London, September 17, 1971, 1124Z.

8639. From Under Secretary Volcker to Treasury for Petty. Subject: Meeting of Ministers and Governors of the Group of Ten.

1. Other G-10 Ministers generally followed lines foreshadowed by Deputies meeting and EC Finance Ministers meeting.² With varying emphasis, they suggested that (A) United States adjustment goal too ambitious particularly in short time, (B) realignment should include U.S. action to change dollar parity in terms of gold, (C) U.S. import surcharge should be eliminated as part of multilateral realignment, (D) effort should be made to return to fixed parities as soon as possible, to avoid tendencies to build in restrictions on trade and investments if present situation continues long time. Some countries, notably Italy (speaking as Chairman of Six Finance Ministers) and Japan, sought improvements in monetary system by greater reliance on Special Drawing Rights.

2. Secretary Connally, speaking from notes, stated U.S. position in statement covered in full in separate message.³

3. On procedural problems, Schweitzer listed number of main issues and proposed division of issues into three groups-immediate, intermediate, and longer run. First group concerned realignment, price of currencies in gold, wider margins and abolition of U.S. surcharge. Intermediate group included B/P adjustment measures other than exchange rates (presumably including defense burden-sharing), the future type of convertibility, and methods of handling flows of capital. Long-range group was future role of reserve currencies and other basic reform of international monetary system. Barber (U.K.) and Schiller (Germany) pushed for prompt action on first group of issues, and France and others gave milder support.

4. Secretary Connally felt division of issues into separate groupings was premature, prejudiced substantive judgments and priorities, and concentrated too much attention on further U.S. contributions to equilibrium through change in dollar price of gold and abolition of surcharge. Such proposed work programs did not give adequate effective and prompt attention to issues of special interest to U.S., such as sharing of defense burden and elimination of unfair trade practices on part of other countries. Secretary Connally also stated President’s position in opposition to change in dollar price of gold was absolutely clear. He suggested that Working Party Three examine statistics on size of correction needed and Deputies meet to prepare a work program that might meet with general acceptance. This was agreed and stated in communique (see separate text).

5. Deputies meeting scheduled for 3:30 p.m. September 25, Ministerial September 26.

Annenberg

1. Source: National Archives, RG 59, Central Files 1970-73, FN 10. Confidential; Limdis; Greenback. Repeated to Bern, Bonn, The Hague, Ottawa, Paris, Rome, Stockholm, Tokyo, USEC, and USOECD.
2. The G-10 Ministers met in London September 15-16. The G-10 Deputies met in Paris on September 3; see footnote 3, Document 173, and Document 174. According to a September 11 memorandum from Hormats to Kissinger, on September 10 the Executive Commission of the European Community proposed a U.S. devaluation of the dollar as part of an international currency realignment in the context of a system of fixed parities, albeit with wider margins. The Commission also recommended prompt lifting of the U.S. 10 percent import surcharge, an expanded role for SDRs, and the phasing out of national currencies as sources of international liquidity. Hormats noted that the EC Finance Ministers would consider the Commission’s recommendations on September 13 prior to the G-10 Ministerial meeting. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 218, Council on International Economic Policy)
3. Not found. The full text of Secretary Connally’s statement, along with those of other Ministers, Chairman of the G-10 Deputies Ossola, and IMF Managing Director Schweitzer were circulated to the Volcker Group as VG/LIM/71-35 on September 20. (Washington National Records Center, Department of the Treasury, Volcker Group Masters: FRC 56 86 30, VG/LIM/71-1-) See Document 78 for a summary of Connally’s remarks on the balance of payments.