Office of the Historian Press Release

The first Nixon administration’s policies to stabilize the U.S. economy and to reform the international monetary system are the main themes of Foreign Relations of the United States, 1969-1976, Volume III, Foreign Economic Policy, 1969-1972; International Monetary Policy, 1969-1972, released on March 7, 2002, by the Department of State. The volume, which is part of the ongoing official record of American foreign policy, is the first published in the subseries of the Foreign Relations series that will document the foreign policies of the administrations of Presidents Richard Nixon and Gerald Ford.

The first compilation of documents deals primarily with U.S. balance-of-payments policy and relations with the major industrial countries, particularly France, Germany, the United Kingdom, the European Community as a whole, and Japan. One of the first directives of the Nixon administration was the establishment of a permanent working group chaired by Under Secretary of the Treasury for Monetary Affairs Paul Volcker to make recommendations on international monetary policy. The Volcker Group became a major player in formulating balance-of-payments and international monetary policy.

The Nixon administration was predisposed toward macroeconomic monetary and fiscal measures to address balance-of-payments problems, in lieu of microeconomic measures favored by the Johnson administration. But as the new administration sought to phase out the latter some abroad saw a U.S. policy of “benign neglect” to the balance of payments. When it adopted a firm balance-of-payments target during the monetary crisis of August-September 1971, however, foreign observers were concerned and thought it excessive.

Military expenditures abroad were a factor in the balance of payments, and Senator Mansfield introduced legislation to reduce the American military presence abroad to help the balance of payments. The administration rejected this approach and instead negotiated “offset agreements” with Germany in 1969 and 1971 to mitigate the balance of payments impact of the U.S. forces stationed there. Burden sharing negotiations were also held in a multilateral, NATO-wide context.

The United States fully supported further expansion of the European Community but opposed the Community’s association agreements with a number of Mediterranean countries as inconsistent with its GATT obligations and detrimental to U.S. exports.

During several summits with Prime Ministers and many Ministerial consultations, U.S. and Japanese officials explored balance-of-payments and exchange rate issues, trade balances and trade policies toward specific commodities, defense costs, and the contributions Japan could make to economic assistance of developing countries, particularly in the Pacific region.

The second compilation of documents in this volume deals with the composition of international reserve assets, changing exchange rates, and proposals for international monetary reform. The United States sought activation of the new Special Drawing Rights in the International Monetary Fund, and saw the SDR taking pressure off the dollar as a reserve asset. The IMF Board approved a 3-year program to create $9.5 million of SDRs in September 1969. The United States also welcomed devaluation of the French franc in August 1969 and the appreciation of the German mark in October 1969, but its quest for greater, albeit “limited exchange rate flexibility” was thwarted until partially realized with the resolution of the monetary crisis in 1971.

On August 15, 1971, President Nixon announced his New Economic Policy, which suspended the convertibility of the dollar to gold, imposed a 10 percent tax on imports; and reduced foreign assistance expenditures by 10 percent. The compilation contains many documents explaining the development of this policy and identifying the major players. The cessation of dollar-gold convertibility and sudden floating of the dollar, i.e., devaluation, had special impact on U.S. foreign relations. Following announcement of the NEP there was a flurry of consultations: G-10 Deputies and Ministerial meetings, bilateral consultations, and the Nixon-Pompidou Azores Summit that produced the agreement at the G-10 Smithsonian Institution Ministerial.

The Smithsonian-agreed new exchange rates with wider margins of intervention did not hold long, and Britain allowed the pound to float in June 1972. President Nixon and Prime Minister Heath agreed that fundamental, long-term changes were required in the international monetary system. The IMF annual meeting in September 1972 established the C-20, an advisory committee to the IMF Board, to work on all aspects of reform of the system.

The Office of the Historian has prepared a summary of the volume. For further information, contact David S. Patterson, General Editor of the Foreign Relations series, at (202) 663-1127; fax: (202) 663-1289; e-mail: The texts of the volume, the summary, and this press release will soon be available on the Office’s Web site: <>. Copies of volume III can be purchased from the Government Printing Office. Please use the form below or go to