140. Memorandum of Conversation1

SUBJECT

  • Economic Summit at Puerto Rico

PARTICIPANTS

  • State
    • Secretary Kissinger
    • Mr. Robinson (arrived late)
    • Mr. Rogers
    • Mr. Sonnenfeldt
    • Mr. Greenwald
    • Mr. Preeg (Notetaker)
  • Treasury
    • Secretary Simon (arrived late)
    • Mr. Yeo
    • Mr. Parsky (arrived late)
  • CEA
    • Mr. Greenspan
  • NSC
    • Mr. Scowcroft
    • Mr. Hormats
  • EPB
    • Mr. Porter

Secretary Kissinger: Where do we stand on the preparations for the Summit? Ed (Yeo), you are going over to meet some others.2 Have you arranged for the group meeting with Shultz?

Mr. Yeo: Messages have gone out.3 There will be a meeting with Poehl on Monday,4 de Larosiere and Brossolette on Sunday and the English tomorrow. The entire group will get together in Munich on [Page 498]Tuesday and Wednesday. The individual meetings will give us a sense of what they want. The French might have some kind of impossible monetary proposition. They are very concerned about sterling and the lira. By the end of Monday we should have a fairly good feel as to what they will want to put on the table. Then we can get to work on Tuesday and Wednesday.

Secretary Kissinger: I assume that the countries will split up the topics as we did last time. Are there any areas where something concrete will come out of the Summit?

Mr. Yeo: We should get a fairly firm commitment on policy goals. The problem is the Italians and the English. The Germans, Japan, U.S. and probably France, will come down on the side of a fairly firm economic statement.

Secretary Kissinger: Miki will agree to anything. He has been agreeing to our proposals before we even make them.

Mr. Yeo: In the monetary area, I estimate we have a four out of ten chance to get agreement on a super tranche.

Secretary Kissinger: When the Washington Post asked me if the whole effort wasn’t political, I said that even if that were right, the fact that we could get six other nations to help us is an indication of the cohesion of the Alliance and solidarity among the industrialized countries.5

Mr. Greenspan: All the press can think of is political motivations. Unless we fail.

Mr. Yeo: On the monetary front, there is a reasonable chance we can develop a super tranche for the industrialized countries, which can be dressed up in the right words, and contain up to $6 billion. The French will be difficult. The UK won’t like conditions, but we need this in order to avoid charges of a give-away.

Secretary Kissinger: If the British are smart, it could be in their interest to be pressured into agreement on conditions, so that they can say that the only reason they imposed stringent conditions on the British economy is because of those American SOBs. This is better for Callaghan than having to deal with the unions himself.

Mr. Greenspan: The UK is a more serious economic situation than Italy.

Mr. Yeo: This effort will be clearly in their real interests. The Germans will be SOBs, but with us one step ahead.

(Enter Secretary Simon, Mr. Parsky, and Mr. Robinson.)

[Page 499]

Secretary Kissinger: Sit up here Bill. We give a joint Press Conference and you get all the TV attention. Don’t think that this didn’t fill me with resentment.

Mr. Yeo: I have been describing possible achievements in the monetary and economic area. On North/South, a State–Treasury group is in the process of putting together a paper, which should be ready today. I understand the IRB will be one of the objectives.

Secretary Kissinger: I am for the IRB, but we don’t need to be obsessive. The issue isn’t whether we get the IRB, but when we go to a conference where our participation is absolutely necessary, we can’t have others refuse even to study a major proposal by us. This is a moral and political question. If we do not have the leverage to have a proposal studied when we are indispensable, we have a major problem.

Secretary Simon: I agree. There is no need for us to fall on our swords over the IRB.

Secretary Kissinger: I’m not a fanatic on this. It is a proposal to help others.

Mr. Robinson: It isn’t just the IRB proposal, but the lack of cohesion among the industrialized nations. We must seek ways to strengthen cohesion.

Secretary Kissinger: But we must be more clear what we mean by cohesion. There are three problems. First, each country conducts aid programs with its own criteria and purposes. This makes no sense in economic terms, when there are so many linkages, as in Africa where one must take into account regional relationships. It also makes no political sense when we want to encourage the moderates. The industrialized countries are in a monopoly position for development, and they have no common strategy.

Second, all the industrialized countries use the slogan that they can’t be in the last row in an isolated position. How can we be in an isolated position with 80% of the resources? We get caught up in competitive yielding which brings us back to the initial problem of coordination. I will make these points at the OECD.6 It’s better for me to do it than to have the President do it. The competitive bidding and maneuvering is undignified. Nobody benefits. This is a theme I can state as a proposal at the OECD, and then look to some results at Puerto Rico. I will chastise and they will produce the solution.

[Page 500]

We will have some leverage over the French, since they will want to promote their African fund. I think this is a good idea as a way to reward the moderates, while having someone else out front.

Similarly, we need a coordinated approach on East-West relations. Whether détente is a one-way street we can argue forever. Now they claim it for the wheat deal, although at first everyone thought it was great, and there was a great struggle over who would make the announcement. We thought the Soviets did us a great favor.

Now if the Soviets go into debt to us of $30 billion, we do not have to be apologetic. This is only a liability if there is competitive bidding among the industrialized countries. We should try to establish a common approach to credits.

Mr. Sonnenfeldt: We have little leverage, since most U.S. credit is commercial credits.

Secretary Kissinger: The basic fact is that a country that can’t feed itself, and needs so much credit from abroad, cannot be a big threat in all parts of the world.

Secretary Simon: Playing devil’s advocate, I could say your argument is okay for five to ten years, but then what? Remember what happened to the Tsarist bonds, which are still being traded, but will never be repaid.

Secretary Kissinger: Their Tsar didn’t default, it was the Communists. If the Communists go, the credit bonds might go down the drain. But if this means the collapse of the system, it might be a cheap price to pay. We could decide at Puerto Rico not to lend to the Soviet Union.

Secretary Simon: Inconceivable.

Secretary Kissinger: At least we could develop some criteria, explicit economic criteria and tacit political criteria.

Secretary Simon: Not with the big group, but perhaps only the smaller group of five heads of government and foreign ministers.

Secretary Kissinger: Certainly not a formal discussion. I took East-West off the agenda. The five finance and foreign ministers should have this subject in mind, however, to discuss privately. Should we include Japan since they leak like sieves?

Mr. Yeo: The financial power is there.

Secretary Kissinger: The Soviets have increased their power position beyond their economic ability.

Secretary Simon: We have already cracked the price of gold and this has hurt the Soviets. If you want to pressure them further we can crack the price of oil. I can go to Teheran.

Mr. Greenspan: They might not let you come back, and we will have to pay a high ransom fee. Henry’s point could be done relatively easy.

[Page 501]

Secretary Simon: It would not be easy.

Secretary Kissinger: For both sides, military intervention is increasingly risky, and we seek other areas of competition. The Communists use infiltration and subversion. We have massive structural advantages if we know how to organize it.

Mr. Greenspan: It would be technically very difficult to implement. Unless the private institutions are involved, they could undercut it. But this is an interesting issue to look at. One problem is the Swiss.

Mr. Yeo: We have the leverage, but the banks are subtle in their operations. Not caps, but other kinds of restraints. The balance of lending in the East is getting bent and we can force them all to the gold market.

Secretary Kissinger: We would want to do it subtly to avoid government by government confrontation. We should have them come to us to unblock the lending.

Secretary Simon: This is most interesting but what if the gold price should collapse. What would France do?

Mr. Parsky: Look at the great difficulty we have had with the first understanding on export credits.

Secretary Kissinger: But we are in the middle. Congress prevents us from getting involved in credits, leaving it all to others who do not have our strength.

Mr. Yeo: But they have to come to us eventually. There is already a problem with Eastern Europe and Soviet borrowing in Western Europe. The bull is coming our way and we need to think how we are going to handle it.

Secretary Kissinger: I don’t have a scheme.

Mr. Greenspan: But potentially there is something here.

Secretary Kissinger: I agree we should not discuss it among the 7, and maybe not even the 5. How about a little group of 3 or 4 in this Government to develop our thinking? Hal can pull together a group with Alan, Joe and Hormats.

I talked to Schmidt, and he is convinced we need to do something. We should not talk to Healey, but only Callaghan among the British.

Mr. Yeo: We may want to limit our discussion to Poehl. Secretary Kissinger: The UK has their own problems and may not want to get into this.

Mr. Scowcroft: We need to develop our own thinking first. Secretary Kissinger: Okay. Hal can get a paper ready by our next meeting. Maybe when Schmidt comes in July we can do it more precisely. Schmidt will be here on July 15.

Secretary Simon: You will miss the opening of the World Cup, that I will be going to.

[Page 502]

Secretary Kissinger: I will not go to the opening day, but I will go to the closing day. But, seriously, you should be here on July 15 for Schmidt.

Mr. Sonnenfeldt: In fact the World Cup does not begin until the 16th or 17th.

Secretary Kissinger: Is State doing a North/South paper?

Mr. Greenwald: We are doing it jointly with Treasury, and it should be ready at noon today. The trade paper is being done by STR.

Mr. Parsky: On trade we should push to get a statement on intent to liberalize trade.

Secretary Simon: We should push for a long-term commitment for free trade. Fred Dent is against it but we should still push it.

Secretary Kissinger: The French will be against it.

Mr. Greenwald: It will be opposed as an attack on the EC.

Mr. Hormats: We could set a date well into the future—1990 or 2000.

Mr. Parsky: In any event, it should be a post-MTN commitment.

Secretary Kissinger: Of course this would not affect things like countervailing duties and orderly marketing arrangements. We would have no tariffs, but other means to continue to restrain trade.

Secretary Simon: As for OMAs, the steel decision comes up next week.

Mr. Greenwald: Our position is to try for a substantial increase in the quota level.

Secretary Simon: I think we should have one more run to reverse the Presidential decision.7

Secretary Kissinger: I agree. Let’s do a joint memorandum.

Secretary Simon: We should have a full court press. The least we can end up with is larger quotas. Alan will join us, and perhaps we can reverse the decision. As for augmentation we can cite the response on autos and shoes. Woodcock and Congressman Dent 8 have both sent me positive letters, since they have been getting heat for their earlier stand. We should also cite Allegheny–Ludlow. They announced record earnings right after the President’s decision.

Secretary Kissinger: I’m leaving soon and I will sign the memo before I leave.9

[Page 503]

Mr. Robinson: This is a very important move. There should be no fallback position.

Secretary Simon: Right.

Mr. Hormats: We need the memo today.

Mr. Porter: The President must finalize his decision on the 14th. We will hold it open until we receive your memo.

Mr. Parsky: Somebody should inform Fred Dent. How does NSC comes out?

Mr. Hormats: I will be for it if the arguments are compelling.

Secretary Kissinger: Back to the Summit, how should we proceed? Should the next step be to develop talking points for the President?

Mr. Greenwald: We are doing that and we should have a first very rough draft today.

Secretary Kissinger: I want to look at the first drafts during the trip. Can we meet again a week from Monday.10

Mr. Sonnenfeldt: That will be the first day of the preparatory meeting here.

Mr. Parsky: I would like to raise the investment issue. We plan to seek a commitment for a freer system, but there are two other issues. First, bribery.11 Should we push this for the Summit?

Mr. Greenwald: We have a proposal in our paper.

Secretary Kissinger: Two governments are in political difficulty on this issue. It could help, but we shouldn’t browbeat. I’m not sure about the Summit. Those of us who know the Japanese know there is a difference between their formal position and their real position. This could be very dangerous for them.

Secretary Simon: But it is an issue we almost can’t avoid.

Mr. Parsky: The President is on the line with the special task force, with a June 1 deadline.12

Secretary Simon: It was a big mistake for Commerce to give the June 1 deadline.

Secretary Kissinger: Over the last year our approach has been to lay it on the line and expose ourselves, and in the process we have destroyed our security system and have undermined confidence in our intelligence network. Now we are on a similar kick on bribery. It is a [Page 504]much more complicated issue than we are led to believe. For example, if the Jordanians go ahead and buy Soviet arms defense, it could be [1½ lines not declassified]. This is not an issue for us to go balls out for headlines.

Mr. Parsky: But we need to do something to head off legislation, and one way is to say we are looking at it together internationally.

Secretary Kissinger: I don’t know about Miki. He will not say anything with 21 people in the room. He will tell me with two people in the room.

Mr. Parsky: But can we say we didn’t talk about it?

Secretary Kissinger: We should not discuss this at the preparatory meeting. Perhaps it will come up over breakfast at the Summit. It is the preparations that bother me.

Secretary Simon: We ought to discuss it, but we could just make a statement for the record.

Mr. Greenwald: There are two possibilities. The OECD package has a couple of paragraphs on bribery. The other is to avoid legislation.

Secretary Kissinger: We have been feeding the alligators for a year on the intelligence issue. Why must heads of government now listen to us on this matter? Because of Church and Proxmire?13

Secretary Simon: I can see this in a more positive light. We have problems. We have directed finance ministers to look into it.

Secretary Kissinger: But we should not discuss this in the preparatory meetings. We must first decide how we will handle it.

Mr. Greenwald: It is only in the paper at this stage.

Secretary Kissinger: It’s okay for a U.S. Government paper. We can discuss it again at Monday’s meeting.

Mr. Parsky: We also want a positive statement on MNCs.

Secretary Kissinger: I favor that.

At Rambouillet we had two good things: a monetary accord, and an eloquent communiqué, announced at a joint press conference. We should begin work on a communiqué.

Mr. Hormats: We will start this weekend.

Secretary Simon: No more talk about millions of jobs. I opposed this and it was still put in the President’s statement. It was the first question asked of me, and I almost said flatly it was wrong.

[Page 505]

Mr. Scowcroft: Mike Duval14 said he cleared it with you personally. Mr. Porter: No, at the breakfast meeting Bill said to take it out. Secretary Kissinger: We need a rhetorical beginning. Then a portion on the recovery, stressing coordination and consultation. For North/South, we can develop some mechanisms or principles for cooperation.

Mr. Robinson: There are many meetings coming up, and we must get the more radical industrialized countries into line.

Secretary Kissinger: It is not just the small countries but the Germans. Look at Bahr. We will have to draw the line at some point. Are the State people all working with Parsky? I need to leave now to see the Foreign Minister of Guyana.

Mr. Robinson: Guyana is the one Latin American country who voted against the IRB.

Secretary Kissinger: Somebody removed your memo on the IRB from my desk. I would like to see it again.

Are you happy, Bill.

Secretary Simon: I am happy as a clam.

Secretary Kissinger: But no one knows how happy clams really are. (To Ed Yeo) Good luck on your trip.

  1. Source: Ford Library, National Security Adviser, NSC International Economic Affairs Staff Files, Box 3, Presidential Subject File, Economic Summits—Puerto Rico (3). Secret; Nodis. Drafted by Preeg and approved on July 2 by Collums. The meeting took place in the Secretary of State’s conference room.
  2. According to June 5 messages from President Ford to Prime Minister Callaghan, President Giscard, and Chancellor Schmidt, Yeo was scheduled to meet with his British, French, and West German colleagues on June 8 in Europe. (Ibid., KissingerScowcroft West Wing Office Files, Box 11, Economic Summit Conference, 6/76 Items S–Z)
  3. The June 5 messages from President Ford to Prime Minister Trudeau, Ambassador Volpe, President Giscard, Chancellor Schmidt, Prime Minister Miki, and Prime Minister Callaghan proposing a series of mid-June meetings in Washington of Shultz, U.S. officials, and representatives from the other six participating nations are ibid.
  4. June 7.
  5. On June 4, The Washington Post carried a report on the KissingerSimon briefing on the upcoming Puerto Rico summit.
  6. On June 21, Kissinger gave an address at the OECD Council in Paris entitled "The Cohesion of the Industrial Democracies: The Precondition of Global Progress." For the text of his speech, see Department of State Bulletin, July 19, 1976, pp. 73–83.
  7. See footnote 2, Document 130.
  8. Leonard Woodcock was the President of the United Auto Workers; Representative John H. Dent (D–Pennsylvania).
  9. From June 6 to 13 Kissinger visited the Dominican Republic, Bolivia, Chile, and Mexico.
  10. June 14.
  11. A number of U.S. corporations were under investigation for paying bribes in order to encourage the export of their products. In particular, the Lockheed Aircraft Corporation confessed to bribing Italian and Japanese Government officials.
  12. On March 31, President Ford announced the formation of a cabinet-level task force to investigate "questionable corporate payments abroad." See Public Papers: Ford, 1976–1977, Book I, pp. 868–871.
  13. Senator Frank Church (D–Idaho), as the Chairman of the Senate Subcommittee on Multinational Corporations, and Senator William Proxmire (D–Wisconsin), as the Chairman of the Senate Banking, Housing, and Urban Affairs Committee, were involved with the Senate investigation of the Lockheed bribery scandal.
  14. Michael Raoul-Duval was President Ford’s Special Counsel.