186. Editorial Note

The 36-page draft paper attached to the October 26, 1971, memorandum from Peterson to Secretary Connally ( Document 185) is dated October 25 and entitled “Negotiating the New Economic Policy Abroad.” Classified Secret, it is divided into nine sections: Introduction—Some Backdrop, Objectives and Their Priority, Negotiating Levers and Issues, Overall Negotiating Scenario, Decision Points and Coordination, The Official Price of Gold, U.S. Convertibility in the Interim Period, Fundamental Monetary Reform, and Negotiating Strategies—Surcharge and Capital Controls. The scope of the paper is broad and deals with monetary issues, trade issues, defense burden-sharing issues, and the free flow of investment. There are sections specifically directed at objectives with Japan, Canada, and the European Community. The paper contains a number of specific negotiating strategies and objectives, including the following:

“The surcharge provides little leverage against France, and France does not abhor the trade wars and bloc formation which could develop. We can therefore achieve an effective French revaluation only by devaluing the dollar…. The United States should agree to devalue the dollar against gold by 5% to 8% if the following monetary conditions are met: 1. Simultaneous revaluations of at least 10% by Japan and 5% by Germany, leading to effective exchange rate changes of at least 15%-18% for Japan; 10%-13% for Germany; and 5%-8% for France, Italy, Britain (hopefully).” (pages 21-22)

These are, in effect, the measures agreed to by Presidents Nixon and Pompidou in the Azores (see Document 220) and by the G-10 in the Smithsonian Agreement on December 18 (see Document 221).

The draft paper received only limited distribution; another copy is marked “#2 of 5.” On the cover sheet of that copy Kissinger wrote: “For meeting with Peterson,” and Haig wrote: “HAK wants staffed (Bob—this came ‘eyes only’ from Peterson)” when he routed the paper to [Page 521] Hormats. (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 376, President’s Economic Program)

In his October 26 covering memorandum, Peterson noted that the attached draft paper had been given only to Quadriad members, but an October 29 memorandum from Deputy Under Secretary of State Samuels to Peterson entitled “Your Memorandum on the New Economic Policy,” is presumably a State Department response to the paper. Generally, the State Department agreed with the basic conclusions and priorities set out in the draft paper. (National Archives, RG 59, Central Files 1970-73, E 1 US)