221. Editorial Note

The G-10 Ministers met at the Smithsonian Institution in Washington on December 17 and 18, 1971, and agreed on a realignment of exchange rates similar to that agreed to by Presidents Nixon and Pompidou in the Azores. See Document 220. Addressing the Ministers at the conclusion of the meeting, President Nixon called their agreement “the most significant monetary agreement in the history of the world,” even in comparison with the 1944 Bretton Woods agreement that had established the postwar regime of fixed exchange rates and the International Monetary Fund. For text of the President’s address, see Public Papers of the Presidents of the United States: Richard M. Nixon, 1971, pages 1195-1196.

At his press conference with Federal Reserve Chairman Burns, Under Secretary Volcker, and Governor Daane following the G-10 meeting, Secretary Connally said the dollar would depreciate by an average 12 percent against other OECD currencies, but declined to disclose what the new exchange rates would be. Connally said the Ministers had agreed that each country would announce its parities at the time and in the manner it saw fit. Connally also said the administration would approach the Congress for authority to increase the gold price to $38 per ounce, and that the 10 percent import surcharge would be lifted, probably during the coming week. A transcript of the press conference and a copy of the G-10 Communique are in the Washington National Records Center, Department of the Treasury, Volcker Group Masters: FRC 56 86 30, 1971, VG/Uncl. INFO/71. The President’s statement and the G-10 Communique are also printed in Department of State Bulletin, January 10, 1972, pages 32-34. President Nixon announced the removal of the surcharge on December 20, during his meeting with British Prime Minister Heath in Bermuda. See Public Papers of the Presidents of the United States: Richard M. Nixon, 1971, page 1197. The G-10 Communique [Page 600] and the President’s statement lifting the surcharge are also in Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1972, pages 369-371.

Reports from the Embassy in France indicated that Finance Minister Giscard d’Estaing on December 21 announced the new franc parity for current account transactions, but said the financial franc would not be bound by the 2.25 percent margins agreed to in Rome and Washington. The Embassy reported that on December 21 the commercial franc was trading at 5.22-5.23 per dollar, within the new 5.23 ceiling, but that the financial franc was as high as 5.28. (Telegram 21746 from Paris, December 21; National Archives, RG 59, Central Files 1970-73, FN 10 FR)

In response to President Pompidou’s remarks during a TV interview on the international economic situation, during which Pompidou reportedly said there could be no damage to the Community’s Common Agricultural Policy in the trade negotiations (see also footnote 9, Document 220), the Department of State provided certain European Missions with Departmental press guidance for their use as appropriate. The guidance indicated that Ambassador Eberle had undertaken a series of trade negotiations with the Community’s Commission based on understandings reached in Rome and Washington and that the administration intended to submit the trade package “for Congressional scrutiny at the same time we submit our legislation on a change in the price of gold.” (Telegram 230632, December 23; ibid., E 1 US)

Reporting from Bonn [text not declassified]indicated that Chancellor Brandt thought that the fact that the G-10 reached agreement was evidence of “cohesion in the Western Alliance” despite the “fact that in reaching an economic agreement ‘some nations’ had ‘ganged up’ on the FRG and placed before the Germans some already-agreed-upon decisions” (understood to be the Azores Agreement). Brandt reportedly hoped it would be possible to reach agreement with France on agricultural policies, but Minister of Agriculture Josef Ertl highlighted difficult obstacles to an agreement with the United States as U.S. proposals would depress the prices received by German farmers. Minister of Economics and Finance Schiller was concerned with reaching agreement with France on the Mark-franc exchange rate and “complained that the French were insisting on fixed parities and were not agreeing to the general guidelines laid down by the Ten, particularly as far as parity bands were concerned.” (Telegram [document number not declassified] from Bonn, December 23; ibid., Nixon Presidential Materials, NSC Files, Country Files—Europe, Box 686, Germany, Volume X 9/71-12/71)

Background information provided to Congress in February 1972, when the administration sent forward the proposed legislation on modification [Page 601] of the par value of the dollar included the following tabulation on new parities:

“Country Percent appreciation against U.S. dollar vis-à-vis par values on April 30, 1971 Old exchange rate per dollar New exchangerate per dollar
Belgium 11.57 50.00BF 44.8BF
Canada float float float
France 8.57 5.55FF 5.12FF
Germany 13.57 3.66DM 3.22DM
Italy 7.48 625 lira 581.5 lira
Japan 16.88 360 yen 308 yen
Netherlands 11.57 3.62G 3.24G
Sweden 7.48 5.17K 4.81K
Switzerland 13.88 4.37SF 3.84SF
U.K. 8.57 .42 pounds .38 pounds”

(Ibid., Subject Files, Box 376, President’s Economic Program)