220. Paper Agreed by President Nixon and President Pompidou 1


The following proposals providing a framework for an early settlement of monetary and trade issues should be considered as an integrated whole:

The U.S. will remove the ten percent surcharge and the related provisions of the Job Development credit.
The U.S. will propose to the Congress a suitable means for devaluing the dollar in terms of gold to $38.00 per ounce2 as soon as the entire set of related measures (including short-term trade measures) is available for Congressional scrutiny.
The French Government will reaffirm its intention, under these conditions, to maintain the present gold parity of the French franc. Consistent with this decision, it is anticipated the German mark will be revalued by 5-6% and the Japanese yen by 9-11%.3 It is anticipated also that sterling and the lire will remain in line with the French franc.
Pending resolution of longer-term means of monetary reform, provisions will be made for 2-1/4 % margins4 of exchange rate fluctuation above and below the new exchange rates.
The United States intends to assist in the stability of the system and the defense of the newly fixed5 structure of exchange rates in particular6 by vigorous implementation of its efforts to restore price stability and productivity.
Discussions will be promptly undertaken in appropriate forums to resolve longer term issues of international monetary reform. Attention should be directed to the appropriate monetary means and division of responsibilities for defending stable exchange rates and for insuring a proper degree of convertibility of the system;7 the proper role of gold, reserve currencies, and Special Drawing Rights in the operation of the system; the volume of liquidity; re-examination of the permissible margin of fluctuation around established exchange rates and other means of establishing a suitable degree of flexibility; and other measures dealing with movements of liquid capital. It is recognized that decisions in each of these areas are closely linked.8
Questions of trade arrangements are recognized as a relevant factor in assuring a new and lasting equilibrium in the international economy. The French Government therefore will support an appropriate mandate for the Commission of the European Community to enter into negotiations immediately with the U.S. to resolve pending short-term issues9 at the earliest possible date and to establish an appropriate agenda for considering more basic issues in a framework of mutual cooperation in the course of 1972 and beyond.
The United States believes commitments undertaken at the recent NATO meeting represent a constructive approach toward dealing more adequately with a proper sharing of defense burden.10
The United States and France will join with other nations to consider promptly means of appropriately facilitating the operation of the International Monetary Fund.

G. Pompidou

Richard Nixon
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 356, Monetary Matters, Envelope marked Bermuda. No classification marking. Initialed by Presidents Nixon and Pompidou at the bottom of the first page and signed by both at the end. An earlier version of the paper that Kissinger marked up, apparently during his breakfast meeting with Pompidou on December 14, is ibid. According to the memorandum of conversation of that meeting (see Document 219), Kissinger read Pompidou the proposed text of item 6 as formulated by Connally. Pompidou said he could not agree to the statement as read; he could not accept the absence of any mention of fixed parities. Kissinger wrote in the left margin of the draft: “Fixed Parity must be in.” In the expanded meeting at the conclusion of the Summit, Connally noted that the item 5 language had been modified. See also footnote 4, Document 223. The text of the earlier version of the paper is indicated in footnotes 2-9 below.
  2. Instead of “to $38.00 per ounce” the earlier paper read “by ten percent.” In the margin Kissinger calculated this to be an 8.6 percent change, but when Pompidou held out for $38, Kissinger said “we would not raise our voices on that.”
  3. The two percentages were “4-5%” and “8-10%,” respectively, in the earlier paper.
  4. The earlier paper read “three percent margins.” During breakfast Pompidou said France could accept 2 percent margins. Kissinger told Pompidou he would prefer to wait on this and would be prepared to discuss it if there were agreement on other matters. He said the President was prepared to split the difference between 2 and 2-1/2 percent. In the closed Summit meeting Kissinger noted the U.S. preference for 3 percent margins and the French willingness to accept 2 percent margins. Connally reportedly was prepared to accept 2-1/2 percent and left it to the principals to work out the difference. President Nixon said he would “bow” on 2-1/2 percent and would give 75 percent.
  5. The earlier paper had “established” instead of “fixed.”
  6. The words “in particular” were added to the final text.
  7. This phrase ended with “defending established exchange rates” in the earlier paper.
  8. The earlier paper read: “suitable flexibility in exchange rates. It is recognized that decisions in each of these areas will be interdependent.”
  9. The parenthetical phrase “(particularly affecting agricultural products)” was included at this point in the earlier version. The memoranda of conversation do not indicate when it was deleted. At the end of the earlier version of the paper, Kissinger wrote: “World organization of grains.” During the initial, limited Summit meeting on December 14 Pompidou said the EC had adopted a draft statement that once monetary measures had been taken France was ready for general trade discussions. He said citrus was not a problem for France but would be for others. Tobacco could be on the table, but for the time being cereals production, except for soft wheat could not. “If the leaders were to give the European farmers the impression that they were tampering with European agriculture, it would create an impossible political problem.” Pompidou later returned to the point and said “frankly (and this was very favorable to the U.S.)” that as French and Europeans they were ready to discuss world grain market organization with the United States and Canada, a point on which President Nixon expressed satisfaction.
  10. See footnote 3, Document 211.