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

SUBJECT

  • Proposed Precipitate Action on the Balance of Payments

The President met last Friday with his new Cabinet Committee on Economic Policy.2 It comprises his domestic economic advisers: Secretary Kennedy, Secretary Stans, Budget Director Mayo, CEA Chairman McCracken, etc. They discussed the removal of present controls over the export of funds by American banks and businesses. The [Page 6]sentiment was very strong for immediate removal of these controls, with little consideration of the consequences of so doing or of the actions to be taken in response to those consequences. It now appears possible that Secretary Stans will announce a change in his part of the program as early as tomorrow (Wednesday).3

This question has a high foreign policy content. No action should be taken before a thorough review of both the effects on the balance of payments and foreign, especially European, reaction to removal of the controls. Removal of the controls might well result in a substantial increase in the payments deficit, or at least widespread expectations thereof, confronting the Administration with an international monetary crisis. It would evoke a strong negative reaction from high officials in Germany, France, the Netherlands, Switzerland, and possibly other countries-a reaction that would, among many other things, undercut our efforts to work out more satisfactory arrangements for sharing the financial burden of NATO.

The NSC is the natural place to consider the foreign policy implications of our balance of payments program and a meeting is scheduled for February 26 on international monetary arrangements.4 You should urge the President to avoid making any decision or public commitments on this question until after the NSC review and to instruct his Cabinet Members (especially Secretary Stans) not to do so either. Attached is a draft memorandum to him on the subject.5

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 309, Balance of Payments. Confidential; Urgent.
  2. The meeting on Friday, January 24, was held in the Cabinet Room 4:03-5:40 p.m. (Ibid., White House Central Files, President’s Daily Diary) The Diary lists the following attendees: Kennedy, Hardin, Stans, Shultz, Burns, McCracken, Mayo Stein, Houthakker, and Safire. See Document 9 regarding economic committees during the Nixon administration.
  3. Next to this sentence in the left margin someone wrote “not done.”
  4. The meeting was canceled. See Document 16 and footnote 4 thereto.
  5. Not found, but see footnote 1, Document 4.