121. Memorandum From Secretary of State Kissinger, Secretary of the Treasury Simon, the President’s Assistant for National Security Affairs (Scowcroft), and the President’s Assistant for Economic Affairs (Seidman) to President Ford 1


  • International Economic Summit Overview

The summit is intended to permit an intimate and serious discussion by the leaders of industrialized democracies of common problems; it should convey to the peoples of the industrialized democracies that their leaders are working together with good will and common purpose.

The summit provides you with an opportunity to demonstrate sensitivity to the problems of others and to exercise constructive American leadership, both to resolve current difficulties and to set positive directions for the future evolution of the international economy. Your leadership can help:

  • —to focus the meeting on priority problems, ensure that the discussions are oriented toward a long term view of major issues, and identify areas in which increased momentum in ongoing negotiations and more intensive joint efforts can contribute to the benefit of the industrialized countries.
  • —to put the meeting in an appropriate political context by stressing that the destinies of the industrial democracies are intertwined on economic issues in much the same way as they are in the sphere of defense and mutual security, and that differences must be subordinated to their paramount interest in their common well being.

Your description of the U.S. recovery and the philosophy underlying your economic program will set an optimistic note at the outset of the conference. In followup remarks you can move the conference toward consensus on objectives in the various subject areas.

How Foreign Leaders View the Summit

The summit will provide the other leaders an opportunity to more fully explain to you, and to each other, their problems and proposals, and to be seen participating in a serious effort to improve the international economy. It will thus help them to build prestige at home, to underline [Page 379]the fact that their domestic economic problems are shared by others and result in part from problems in the international economy, and to strengthen their electoral prospects.

Your foreign counterparts will use the summit to strengthen confidence in their leadership and in the ability of the democracies to master their problems. These leaders will also likely seek an indication that the U.S. is contributing to the solution of their problems. As a consequence, they may tend to focus less on the problems of the international economic system than we would desire and more on the U.S. contribution to their recovery.

The two concerns which, to a large extent, originally motivated Giscard and Schmidt to seek the summit—a weak dollar and inadequate U.S. recovery—are no longer compelling. However, the Europeans remain skeptical about the continued strength of the dollar (fearing a decline would again strengthen the competitiveness of U.S. exports vis-à-vis those of Europe) and about the durability of the U.S. recovery (fearing in particular that our restrictive monetary growth may cause it to abort).2

The other leaders will approach the summit from a number of perspectives: Giscard is extremely concerned that continued economic problems in France could lead to a Socialist/Communist victory in National Assembly elections likely to be held early in 1977 ultimately weakening the power of the French Presidency to levels of the Fourth Republic. Giscard will articulate his concerns about the impact of present economic problems on the future of France and the democratic world, and focus on developing international remedies to France’s economic ills (underlining the fact that these ills are international in origin; i.e., not completely his fault), and to affirm France’s political and intellectual leadership of Europe’s effort to assure adequate American support for its recovery. His desire to reduce exchange rate volatility, avoid a dollar depreciation weakening European competitiveness, and ensure a strong and sustained U.S. recovery which will continue through the 1978 French elections, will reflect these views.

Schmidt shares Giscard’s concern about the corrosive effect of current economic problems on the industrial democracies as well as his eagerness to demonstrate that his nation’s slow recovery is not his fault. He too is seriously concerned about the political impact of the current recession, fearing a strong CDU threat in next year’s national elections. He is already under strong attack for unprecedented German unemployment and budget deficits. Schmidt can be counted on to point out to the U.S. its responsibilities to help Europe recover, to describe vividly [Page 380]the adverse effect on NATO of weak European recovery, and to underline the need to build confidence in the industrial democracies.

Miki, compromise leader of the LDP and politically weak within his party, will use this meeting to demonstrate his credentials as a world leader. Moreover, as the only Asian country at the meeting, the Japanese will likely consider themselves spokesmen for Asia. Miki hopes to strengthen his position for the likely general elections next year.

Attendance at this meeting symbolically confirms international acceptance of Japan as a major economic power. Miki is unlikely to put forward any major new initiatives, but will seek a reconciliation of differences on trade and monetary issues and a conciliatory approach toward the developing world, which Japan depends heavily upon for energy and other raw materials.

Wilson will use the summit to help build domestic confidence in Britain’s future economic recovery, to strengthen his ability to resist union pressures which threaten his recent "voluntary" restraints on wage increases, and to enable him better to fight off strong protectionist pressures from the Labor left. A clear indication that the other major economies are beginning to enjoy solid recovery may buy Wilson more time at home to allow his policies to work. A demonstration that the assembled leaders are determined to fight off protectionism in their countries will strengthen Wilson’s ability to hold off such pressures in the U.K. Outside of these issues, Wilson’s main concern will be the plight of the LDC’s—which Britain feels a moral obligation to help and which are important suppliers and markets for U.K. exports.

Moro ’s attendance is, in itself, a victory for Italy, which was not originally on the list of invitees. The Christian Democrats are strengthened by international attention and acceptance. They may, as the result, gain support for domestic policies to hold down inflation and resist protectionism. Moro is unlikely to play a major role at the conference.

Your Participation

You will have the opportunity to comment at least once on each topic. The agenda will be decided upon at the first session. We assume that the topics will be those recommended by the "Informal Group" which included George Shultz—economic recovery and coordination, trade, monetary issues, developing countries, energy, and East-West relations.3 It would be preferable from our viewpoint that the agenda follow the above order. Specifically, we want trade (in which we have proposals) [Page 381]to precede monetary issues (where we may face French pressure).

Following Schmidt’s initial presentation on economic recovery and coordination, you will have the opportunity to place the summit in a political framework stressing:

  • —the central economic, political, and security importance of the industrial democracies to one another;
  • —the enormous interdependence among our societies and that the summit should convey to our peoples that we are politically committed to their common well-being;
  • —that individual efforts to solve our problems can only have lasting success if supported by the contributions of all;
  • —that our problems must be resolved through political will and a spirit of compromise, and that differences should be considered in light of our broader common interests.

Recovery from the recession is stronger and more advanced in the United States than the other nations participating in the conference. This may occasion efforts by the other countries to seek further stimulus to the U.S. economy on the assumption that this will provide the basis for export-led recoveries of their own economies. Rather than defensively arguing that their overall economic prosperity is less dependent on additional U.S. stimulus than they believe, the summit provides an opportunity to explain the philosophy underlying your policies for a sustained recovery and economic growth without inflation. The central elements of your economic program focus attention on a dynamic growth in the private sector as the basis for a sound economy. Specifically, your discussion of our economic policy should stress:4

  • • Increased job formation through incentives for capital investment, e.g. your tax proposals for reductions in corporate taxation are designed to stimulate capital formation. (Significantly, the U.K. has recently announced a series of measures, philosophically at variance with its traditional reliance on the public sector, which are similar to our emphasis on tax incentives for private investment.)
  • • Fiscal restraint by government to control excessive deficits and the growth of government expenditures. (Your $28 billion tax reduction and spending restraint program recognizes the need to reverse the pattern of the explosive growth of government expenditures and the need for greater reliance on the private sector.
  • • Emphasis on steady policies, long-term objectives, and avoiding short-term "stop-go" economic policies which have occurred in [Page 382]virtually all of the Western democracies. (Moderating expectations and reducing policy fluctuations provides greater certainty for individuals and businesses in their planning and can contribute significantly to a restoration of confidence.)
  • • Reforming government regulation to remove obsolete and unnecessary restrictions on private enterprise and to enhance productivity, essential to sustained economic growth.

You will also have the opportunity to discuss the strength of the U.S. recovery and an optimistic projection for future growth. Taking such an initiative at the outset would prevent our being placed on the defensive by repeated questions about our prospects and the adequacy of your policies.

Beyond this, you can briefly describe the necessity of progress in areas of longer-term significance—energy, trade, monetary policy and improved relations with the developing world. In effect, this presentation can lay out an entire framework for the meeting, elevating the focus to broad issues of cooperation aimed at recovery, sustained growth and improvement of the international economic system.

Individual Issues


Miki will lead off probably by (a) emphasizing the need for strong support for the multilateral trade negotiations (MTN) and (b) expressing concern over growing protectionism in the U.S. and Europe, and seeking reaffirmation of the OECD trade pledge to avoid new protectionist measures.

The Europeans are likely to be even stronger in expressing concerns about a possible resurgence of U.S. protectionism. Although somewhat mollified by Treasury’s recent rejection of a countervailing duty complaint on steel and our planned use of the waiver on canned hams, the Europeans may cite as evidence a barrage of petitions on dumping and countervailing duties. They may question whether serious progress in the multilateral trade negotiations will be possible before our Presidential elections. Most will also cite high levels of unemployment in their countries as a reason for avoiding new commitments to trade barrier reductions in the near future.

Trade is an area in which U.S. leadership can be extremely effective in giving direction and impetus. Your suggestions for ambitious tariff cuts, priority objectives and a tight completion deadline for the MTN (contained in your draft statement) could stimulate agreements among the participants to reinvigorate the negotiations and give them better focus. (The Europeans might, however, be reluctant to make specific commitments on the grounds that trade policy in Europe is made in an EC rather than a national context. France may also cite lack of [Page 383]progress toward a more stable monetary system as a reason why trade matters should not be seriously discussed at this time.)

A strong U.S. reaffirmation of the OECD trade pledge to avoid new protectionism, along with an equally strong reaffirmation of our continued commitment to a more open trading order and to flexible use of our discretionary authority under the Trade Act (also in your statement), could lead to agreement by participants to continue to adhere to the trade pledge and avoid new protectionist measures. This would strengthen the hand of the other leaders (particularly Wilson) in resisting protectionist forces, and would make it easier for you to justify flexible use of discretionary authority on the grounds of a common effort by all the industrialized countries to resist protectionism. It would also strengthen our position in protesting unfair trade practices of others.

Monetary Issues

Giscard will likely press for more stable exchange rates on the grounds that instability adversely affects trade and investment, and disrupts domestic economies. He will argue that volatility undermines confidence and disrupts European economies, for whom trade accounts for a higher percentage of GNP than for the U.S. (Behind this desire for "stability" is a desire for an overvalued dollar, and an undervalued franc, to strengthen the international competitiveness of French (and European) goods vis-à-vis American goods.) Schmidt (whose country would also benefit from improved export competitiveness) may support Giscard’s proposals: the U.S. [U.K.?], Italy and Japan desire flexibility and will not support Giscard, although their leaders are unlikely to express strong feelings.

We should try to avoid a prolonged discussion of monetary issues, staying away from both technicalities and theology. The other participants except for France and, perhaps, Germany probably share this interest. The discussion will give you an opportunity to clarify our opposition to returning to a par value system, to maintenance of "zones" or "bands" around exchange rates, or to agreed restraints on exchange rate movements. We should assert our desire to ensure that resolution of exchange rate issues is consistent with successful management of domestic economies and permits each country to choose the exchange rate regime which permits it best to achieve its domestic economic goals while meeting its international responsibilities. The best we can hope for is a narrowing of differences and agreement to cooperate on exchange rate intervention to maintain orderly currency markets and to explore whether there are actions which can be taken to achieve greater exchange stability under current conditions. If the discussion becomes either ideological or technical, you can seek agreement to remand the problem to the Finance Ministers and their Deputies.

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In leading off the discussion on energy, you might portray higher oil prices as a key domestic and international problem and the essential difference between the present recession and those of the past 30 years. To avoid disruption resulting from future arbitrary price increases or supply cutoffs, consumers must reduce their dependence on OPEC oil. The other participants will be especially interested in the status of our domestic energy legislation, and the strength of your commitment with respect to decontrol of oil prices. There is some skepticism abroad regarding whether the U.S. will implement the tough energy measures that you have been advocating. You will want to assure the others that you are committed to, and that the U.S. is developing an effective energy program that will significantly reduce our oil imports.

You will want to state the degree of your commitment to the minimum safeguard price (MSP) and other elements in the IEA long-term program; you will want to state what type of access to U.S. energy supplies we will provide. The Japanese, especially, resist the MSP (for which they do not believe they can get Diet approval) but would like more secure access to U.S. energy. The French are not members of the IEA and resist any action therein because they believe that it relegates the EC to a secondary role in the energy area. Britain will be particularly sensitive about access to its energy resources.5 You may want to stress our conviction that cooperation among the consuming countries will reinforce our individual energy programs and ensure that our combined effort will achieve our objective of reduced vulnerability to foreign supply disruptions and arbitrary price increases.

You might also stress that all summit participants, including France, have an interest in cooperating to develop a common strategy and set of objectives for energy in the forthcoming dialogue.

Developing Countries

Wilson will likely focus on commodities (perhaps proposing a new international organization to deal with them) and the LDC payments problems (perhaps suggesting a new creation of special drawing rights in the IMF or a large debt moratorium). Our approach should underline the secure maximum support for our key proposals at the UN, stressing especially the Development Security Facility in the IMF (to provide LDC’s loans to offset declines in exports) and our case-by-case approach to commodities. You could indicate our continued commitment [Page 385]to development cooperation, underline our major efforts to improve the dialogue with LDC’s, and stress the importance of close cooperation among the developed countries in formulating positions for the dialogue.

In this context, you might also stress the need for a firm stand by the industrialized nations against expropriations not compensated or prescribed by international law, pointing out that interference with investment harms the climate for the private investment so vital to future development in the poorer nations.

In response to the above initiatives from others, you might indicate that a new SDR issue for developing countries and a major debt rescheduling would spread the assistance too thinly when the need is really for better capital market access for a few large or middle-income countries and more grant aid for the poorest. A new commodity institution is unnecessary and would merely duplicate UNCTAD.


Moro’s presentation is unlikely to be dramatic. While it is likely that little time will be devoted to this subject, you might stress our continued commitment to consult with our allies in formulating East-West economic policies, that economic relations are part of our efforts to strengthen political relations with the East, and emphasize our desire for agreement on guidelines for government financing of exports to communist countries.

Follow-on to the Summit

Establishing a follow-on consultative mechanism would emphasize the seriousness of the Summit’s conclusions and its contribution to economic cooperation among the industrial countries.6 We should support periodic consultations among our representatives over the next year to review progress toward agreed objectives, and assess the economic performance and policies of individual nations in this light. Liaison among ministers representing the Summit participants (plus Canada), utilizing existing mechanisms to the maximum extent possible, would maintain the highest flexibility while ensuring proper follow up.

  1. Source: Ford Library, President’s Handwriting File, Subject File, Box 49, Trips—Foreign—Economic Summit—1975 (1). No classification marking. A stamped notation on the memorandum indicates the President saw it.
  2. President Ford highlighted this paragraph.
  3. President Ford highlighted the remainder of this paragraph from this point. Reference is to the Carlton Group.
  4. President Ford highlighted this paragraph.
  5. President Ford highlighted the remainder of this paragraph from this point.
  6. President Ford highlighted the remainder of this paragraph from this point.