291. Memorandum From the Economic Policy Board to President Ford 1

During the past several weeks, we have participated in discussions on important international economic issues. Recent public presentations by the Secretary of State have been sufficiently ambiguous to preserve the opportunity for you to decide policy issues. This is also true of a speech he will deliver at the OECD this week.2 However, as a result of this process it has become obvious that in the international field, we are in danger of compromising our basic commitment to the free enterprise system. At this point, we believe it is important for you to focus on the principles on which our strategy in the international area is founded.3

1.
Much of the Third World is pushing for a new international economic order based on socialist principles. While we would like to avoid a confrontation, we clearly cannot acquiesce in, or compromise with, this new economic order. A socialist economic order outside the United States would require us to either (a) become socialist or quasi-socialist or (b) become economically isolationist.
2.
The issue that is posed is fundamental:
  • —Do we respond by reaffirming our own commitment to the basic principles of free enterprise and free markets, but offering to discuss and negotiate on problem areas in a spirit of practical cooperation?
  • —Or do we respond by being forthcoming and indicating that we are prepared to accept the inevitability of a fundamental change in international economic arrangements, but still bargaining hard on a case by case basis on particular issues?
3.
We do not want to pursue a policy based on promising the rest of the world a great deal now, knowing that we do not intend to deliver on these promises, implied or stated, at a later time. Instead, we should be maintaining our leadership role which seeks to preserve the economic system based primarily on private ownership and free competitive markets.
4.
We believe that our interests can only be served by speaking out frankly and forthrightly concerning our basic disagreement in principle with those who are demanding a new world economic order. The principles of free markets and free enterprise are, after all, what we stand for and what we believe in. If we fail to speak out in their defense, no one else will be able to do so.
5.
Clearly, an area where this fundamental choice is confronting us is in the third world’s pressure for international arrangements with respect to commodities. It was central to the breakdown of the preparatory conference on energy in Paris4 and it will be presented to you throughout your upcoming European trip.5 If we posture ourselves as willing to discuss this area with an eye toward "new solutions" or "new arrangements," the world will perceive this as a willingness on our part to compromise our basic system. In any statements referring to discussions on this issue, we should not be afraid to strongly assert that the United States, as well as the less fortunate countries, can best be served not by a system of government agreements on various aspects of international trade and finance, but rather by continued reliance on the effective private institutions which have evolved in these areas.
6.
This policy does not mean that we need posture ourselves as seeing no avenues of improvement in the existing system. However, if we agree, or give the appearance of agreement, to changes in the international economic system abroad, we will be in danger of jeopardizing the principles you have been building at home and our economic and military strengths will increasingly count for less in the world.
The Economic Policy Board
  • W.E. Simon
  • L.W. Seidman 6
  1. Source: Ford Library, U.S. Council of Economic Advisers Records, Alan Greenspan Files, Box 58, Economic Policy Board Meetings, EPB—May 1975. No classification marking.
  2. Kissinger addressed the OECD Ministerial Council in Paris on May 28. See Document 293.
  3. On May 23, Scowcroft wrote Kissinger, who was in Ankara, that, according to Seidman, Simon, Greenspan, Lynn, and Dunlop, all had "a major philosophical objection to the whole approach, in whole or in part," of Kissinger’s proposed OECD speech and "that Simon wants to take the issue straight to the President as one of basic philosophic approach." (Ford Library, National Security Adviser, Scowcroft Daily Work Files, Box 10, 5/22–31/75) Later that day, Scowcroft cabled Kissinger to report another conversation with Seidman, who had reaffirmed the existence of "a very basic disagreement about the approach to the ’new economic order.’" Seidman said "that Simon, Greenspan and Lynn felt that the speech prejudged issues which had not yet been resolved and in a manner to which they were fundamentally opposed" and supported taking the issue to the President the next morning. Scowcroft and Seidman decided to continue to work toward achieving interagency agreement without the President’s involvement. If these efforts failed, however, unresolved issues would be put before President Ford on May 26. (Ibid.)
  4. Preparatory talks for the international energy conference proposed by French President Giscard began in Paris on April 7. The negotiations broke down on April 15 over disagreements about the agenda.
  5. Between May 28 and June 3, President Ford visited Belgium, Spain, Austria, Italy, and the Vatican.
  6. Printed from a copy bearing Simon’s and Seidman’s typed signatures.