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

143. Backchannel Message From the Under Secretary of the Treasury for Monetary Affairs (Yeo) to Secretary of State Kissinger and Secretary of the Treasury Simon¹

Munich, June 9, 1976, 1945Z.

• Subject: Deputies Meeting—Section III.

North/South issues: Summary—Our discussions were centered in four areas; the need for coordination and consultation of north policy, commodities, debt, and the IRB. In general, the discussion lacked originality and the views expressed were those that had been exposed at UNCTAD. There was a general frustration at the lack of consultation and coordination displayed at UNCTAD. On the part of the Europeans, the frustration focused on the general inability to coordinate with us and the Japanese and on the specific lack of EC coordination. While there seems to be a willingness to entertain ideas to effect greater coordination, there is a skepticism regarding their ability to get their EC colleagues to go along and this concern underlines their reluctance to take the heat if they don’t. There is also keen awareness of policy differences in the commodities area, particularly vis à vis the French. Finally, there is a sensitivity on the part of the Europeans that any visible effort at consultations by developed countries would be interpreted by the 77 as the beginning of a confrontation policy on the part of the developed countries.

In the commodities area, the thinking laid down was almost exclusively a function of UNCTAD with the French holding to the position that they had defined at UNCTAD IV and clearly enjoying the discomfort of their three friends and their positions which might be right but which the Germans and the English find very inconvenient. The French formulation of their position was tailored to the audience with a carefully circumscribed and qualified commitment to negotiate on the issue of a common fund. But de Larosiere’s elegant obscurities failed to conceal the policy differences although they did tend to convey the idea that in Puerto Rico France might opt to minimize the differences at least in the public sense.

On debt, there was general satisfaction at the UNCTAD IV outcome and little willingness to explore new ideas. The French were not pleased with our suggestion that we should consider sanitizing the Paris Club² operation including the development of principles that would apply to individual rescheduling exercises and procedures of a liberal type.

There is general support for the idea that the IRB ought to be considered carefully in the months immediately ahead. Indeed there seems to be general support for the idea.

What follows is a description of individuals’ comments:

Karl Otto Poehl: He described the Chancellor being embarrassed at the UNCTAD IV outcome and subject to criticism in the newspapers regarding the poor coordination with other developed countries and Germany’s isolated position. Poehl described Nairobi as being really disastrous and attempted to revive interest in the old STABEX scheme. The Germans are quite aware of the potential cost of the Common Fund and the fact that they, the U.S. and Japan, would provide the bulk of the financing. In the debt area he was satisfied with results and not terribly receptive to the idea of taking the initiative.

Sir Derek Mitchell: He agreed that the British were appalled at the outcome at Nairobi. He felt that politically the old STABEX scheme and variants were washed out. He described us as being hooked in a number of areas as a result of Nairobi and doubted that we could back down in Puerto Rico. He supported the notion of developing a common line for approach in our dealings with developing countries.

Jacques de Larosiere: He supported the idea of attempting to work out a common understanding with specific attention as to how we follow up Nairobi in the CIEC. He was willing to accept that the statement of principle regarding debt rescheduling would come out of the CIEC Financial Commission and felt that that was the appropriate forum (but that the subject ought not be discussed at the summit). He insisted that their notion of how buffer stocks would work had been misrepresented. He felt that the prices resulting from the operation of buffer stocks facilities should be a faithful reflection of the market and simply avoids “brutal falls and upswings in prices.”

Special Items of note: Schmidt and Giscard have been discussing the question of whether Thorn in his capacity as head of the EEC should be invited to Puerto Rico.³ Schmidt is under heavy pressure from the Dutch to make this concession and is inclined to do so. Giscard reportedly is not in favor of the idea.

De Larosiere is working on the specifics of a special African fund that Giscard plans to put on the table at Puerto Rico. Section IV of this message to follow June 10.⁴

1. Source: Ford Library, National Security Adviser, Kissinger–Scowcroft West Wing Office Files, Box 11, Economic Summit Conference, 6/76, Items AA–DD. Top Secret; Immediate. Also sent to Scowcroft, Seidman, Hormats, Greenspan, and Sonnenfeldt.
2. The Paris Club, an informal and voluntary consortium of creditor countries that develops coordinated policies towards countries having trouble repaying their debts, first came together in 1956.
3. The President of the EC Council, Luxembourg Prime Minister Gaston Thorn, was arguing strongly for EC inclusion in the Puerto Rico summit. Documentation on this request is in the Ford Library, National Security Adviser, NSC International Economic Affairs Staff Files, Box 3, Presidential Subject File, Economic Summits—Puerto Rico (3).
4. Not found.