Foreign Relations of the United States, 1969–1976, Volume XXXI, Foreign Economic Policy, 1973–1976

114. Memorandum of Conversation¹

Washington, November 6, 1975.

SUBJECT

• International Economic Summit

PARTICIPANTS

• The Secretary
• Secretary Simon, Treas.
• Edwin Yeo III, Treas.
• L. William Seidman, CIEP
• Alan Greenspan, CEA
• Frederick Dent, STR
• Frank Zarb, FEA
• Gerald Parsky, Treas.
• Charles Cooper, Treas.
• John M. Dunn, CIEP
• Robert Hormats, NSC
• The Deputy Secretary
• Under Secretary Robinson
• Helmut Sonnenfeldt, C
• Thomas O. Enders, EB
• Winston Lord, S/P
• Arthur Hartman, EUR
• Paul H. Boeker, EB/IFD (Notetaker)

Simon: These meetings are getting bigger all the time.

Secretary: The first decision concerns the preparatory meeting.

Brosolette called; he is upset that the preparatory meeting is not taking place. You have talked to the British. Everyone seems to want one. I don’t see that it has any purpose, but it can’t do much damage.

Dent: What would the meeting do?

Secretary: It can’t work on a communiqué. But we need to have one ourselves.

Sonnenfeldt: We have a suggested one in the package. Secretary: My impression is that the French have a draft communiqué; George (Shultz) should stonewall it; he could also table ours.

Brosolette said he was not trying to dictate who should come to meals, etc. Maybe we could bring Canada too.

Sonnenfeldt: Is that settled?

Secretary: Yes. Apparently they are not going. It is an outrage. Please do a letter to Trudeau, for the President.

The British have organized the preparatory meeting, and if we don’t go the British and French will work out a communiqué without us.

(to Hartman) you get it on the letter?

Hartman: Yes, but I need some background first.

Secretary: Okay. We’ve agreed to have a preparatory meeting, and George will table our communiqué but not negotiate.

Enders: It needs some fine tuning, particularly on monetary issues. Parsky: Have we abandoned the defensive strategy on a communiqué?

Secretary: No. George will counter the French one with ours. The result may be none, but we are in a stronger position to resist. He could table ours and say we would be just as happy not to have one, but if there is one, we should work from ours.

Dent: It’s got a code word in there on agriculture which will put the French on guard.

Secretary: On paper work, Mike Dunn?

Dunn: Here.

Secretary: You are heading a group that will put together the papers over the weekend. We will meet again on Monday² and then go over it with the President.

Let’s take up the topics—money first.

Yeo: The French are now saying we are isolated. Schmidt will agree with Giscard. I had lunch with Fourcade. He cannot provide much compromise. I talked to DeLarosiere afterward; George thinks he is more significant than Fourcade.

Simon: Up to now Fourcade has prevailed.

Sonnenfeldt: On the other side, Barre came from Giscard and said he was not to talk to Fourcade.

Yeo: I am going back Monday to table a third paper on the theology of exchange rates.

Secretary: Why do we care about theology?

Yeo: It’s not theology, really. It’s a mask for the competitive position of the dollar.

Secretary: How does theology reduce the dollar’s competitiveness?

Yeo: By involving us in an intervention system to back the dollar vis-à-vis their currencies at an acceptable set of rates. Then you put bands around it, to get a fix on the dollar. It is thus as close as they can get to a fixed rate system.

Simon: In effect it is one.

Secretary: The Germans will support this?

Yeo: Yes. The Italians may not. The Japanese and U.K. will not. Secretary: Then we’re not isolated.

Yeo: We are not. It is true that in a recession a number of countries are feeling the competitiveness of the dollar. Our objective is not to get a system that over time overvalues the dollar.

Simon: Congress is virtually unanimously on record as opposing this. The French made a mistake going back into the snake and are going to be blown out.

Secretary: What is the compulsion on us to settle?

Yeo: None. I think this is the French last effort to get their way.

Simon: They are going to make one more full-court press. Our people are going to put the exchange rate issue on the basis of exports and jobs.

Secretary: Are we all agreed, Tom?

Enders: I agree with Bill.

Secretary: See, he’s given up on getting your job. We’re all agreed, okay.

Sonnenfeldt: I don’t believe Schmidt is going to side that clearly with Giscard if it is put boldly by Giscard.

Simon: Giscard is so eloquent that he can be quite convincing on instability, but he’s not right.

Yeo: Even the French admit it is not about instability but the level of rates.

Enders: There is an asymmetry here. In the continental economies there is less scope for devaluation under the present system. We have more manoeuvre. The system is asymmetrical, but favorable to us.

Yeo: We are willing to meet their nominal concern—random fluctuations.

Hartman: More convincing is the argument that even if bands were set, they can’t be maintained: no amount of intervention can achieve that.

Yeo: They accept that. We will give them cooperative—not coordinated—intervention.

Hormats: That means more than we are doing now.

Yeo: Not necessarily, but it gives them something to hang their hat on.

The Germans have an i.o.u. to the French on the snake: the French are doing all the intervening. Schmidt is attempting to honor that i.o.u.

Simon: If we hang on, we can split them off again.

Hartman: Is Giscard going to give you a domestic political case?

Simon: Giscard will open with the future of democracy hanging on monetary stability.

Secretary: Okay, economic recovery.

Simon: I think we should definitely plan on it.

Secretary: I understand there are two issues: goals and a follow-on mechanism.

Simon: Let’s work out destinations that do not imply we get there by planning.

Enders: Ed, you and I can get together afterward and do that. Secretary: The follow-on mechanism should definitely be finance ministers.

Simon: I don’t object to finance ministers meeting every two months or so. But the OECD mechanism is burdensome.

Secretary: Should we insist on Canada being in the follow-on mechanism? I think yes.

Several: Yes.

Secretary: What does the OECD link mean in practice?

Enders: There is an Economic Policy Committee which meets about four times per year and has a Bureau of seven which meets beforehand. We don’t want this OECD mechanism to atrophy. Is there some way the operations can be related to one another? It’s a question of warehousing.

Hormats: Can we use both?

Yeo: There is no question of atrophy. On a link, WP–3³ is a link of sorts. We are one government; we can coordinate with CEA.

Simon: The Finance Ministers of Europe don’t want Van Lennep in a meeting. He is kept out of the Interim Committee by the Europeans.

Secretary: Can heads of government decide to have the seven ministers meet? They can then decide where to warehouse themselves.

Dent: You might perpetuate EC wounds of having some in and some out.

Yeo: They could use the G–10 for that purpose. The relationship would go G–7, G–10, then Interim Committee.

Secretary: Do we really care? Art?

Hartman: In all we are trying to do, we are attempting to bring the industrial countries together. That is the OECD. I would like to link in the OECD.

Simon: I don’t disagree, but I don’t think the Europeans will buy it. If you use the OECD, Van Lennep will take charge.

Robinson: I feel strongly in favor of an OECD link.

Simon: I don’t object to an OECD link.

Parsky: Leave it to the Finance Ministers.

Enders: Bill is right: Giscard and Schmidt will resist an OECD link; others may want it.

Secretary: Is it acceptable to leave it to Finance Ministers to house themselves?

Sonnenfeldt: I want to warn you that neither Schmidt nor Wilson will be enthusiastic since they have their own problems with their Finance Ministers. We should not nail our flag to the finance minister mast.

Secretary: I’m for nailing the Finance Ministers to the mast. I think it should be the Secretary of Commerce since I have a strong incentive to keep him occupied.

(On security assistance, a decision has to be made by the President. Congress is looking for a $1 billion cut in security assistance or something else. Lee Hamilton⁴ sees it this way and he normally does not shoot from the hip.)

On energy, we have two issues: access and MSP. On access we are down to “considering” or “giving” access. With the economic agencies, consider means consider negatively, as happened in commodities. By the way I see that you two (Enders and Parsky) are co-chairmen on commodities. When you two go at each other the angels weep.

I’m in favor of dropping “consider.”

Zarb: I’m a “consider” man. I would go stronger elsewhere. If we tell them: whenever we build a plant here, we will help them build one there, that’s better.

Secretary: From a foreign policy point of view, I don’t favor autonomy for them, I’d prefer to link more closely.

Zarb: It’s economically more meaningful my way. What examples are there of exotic energy plants the Japanese want to participate in?

Enders: It’s not necessarily exotic energy that matters. The Japanese want to have a coal mine participation and a guarantee to export coal. If we say “consider”, the Japanese will soon be in with a request and we will have to respond.

Zarb: But we just can’t do it for shale in Colorado. Then we’d have to say no.

Secretary: I don’t care that much. I prefer to be more affirmative, but it depends on what the President says.

Enders: “Incremental” would have to mean a new source of trade and energy, not that it can’t be financed here—because virtually everything can.

Zarb: I have no problem with considering projects for additional exports.

Ingersoll: They want more coal for steam power.

Parsky: A firm commitment opens up investment policy questions too.

Secretary: The key issue is what are we ourselves agreed to do.

Zarb: Coal is what we can do.

Secretary: I understand Frank’s point that we can’t give them everything. Maybe we could use words like “wherever feasible,” or outline our constraints.

Zarb: That’s perfect.

Secretary: MSP.

Parsky: You don’t need it for the long-term program.

Sonnenfeldt: The EC is in a shambles on this; 5–3 against an MSP for the EC. They are probably not going to have a mandate on this for the December meeting.⁵

Enders: That’s not a bad result.

Secretary: Let’s see Monday where this stands and whether it’s worth taking to the President.

1. Source: Ford Library, National Security Adviser, NSC International Economic Affairs Staff Files, Box 4, Presidential Subject File, Economic Summits—Rambouillet (4). Confidential; Nodis. Drafted on November 18 by Deputy Assistant Secretary of State for International Finance and Development Paul Boeker and approved in S on December 11. The meeting took place in the Secretary of State’s conference room. This planning meeting for the economic summit, as well as a subsequent one that took place on November 11 (see Document 116), were initiated by Kissinger and Simon at an October 13 meeting; see Document 235.
2. November 10. The meeting was held the next day; see Document 116.
3. “WP–3” refers to Working Party Number 3 of the OECD Economic Policy Committee.
4. Representative Lee H. Hamilton (D–Indiana).
5. Telegram 11248 from USEC, December 16, reports on the December 15 meeting of EC Finance Ministers and central bank governors in Brussels. (National Archives, RG 59, Central Foreign Policy Files)