53. Memorandum From Secretary of the Treasury Shultz to President Nixon 1


  • Report of IMF/IBRD Meeting, Nairobi, Kenya, September 24–28

The principal issues at the IMF/IBRD meeting this week concerned monetary reform; the fourth replenishment of International Development Association (IDA IV); aid to Vietnam; and Chinese representation in IMF and IBRD. I believe we made progress on each of the first three; the last question of Chinese representation was deferred, but will need to be dealt with shortly.

1. Monetary Reform—Meeting of Committee of Twenty Ministers

The 20 Ministers’ meeting was amicable, but—as anticipated—made no substantive progress. We have set in motion a more intensive formal work program for the reform negotiations. To help dramatize this, we set a deadline of July 31, 1974, for the completion of a basic agreement in the committee. This agreement would subsequently be transformed into revised IMF Articles of Agreement, for submission to governments for formal ratification.

Potentially more important, there seems to be wide acceptance of the notion that the “Big Five” (U.S., Japan, France, U.K., and Germany) should formally meet and try to settle the main issues. We will get together in good time.

On substance, we agreed to publish a “Chairman’s report,” outlining areas of agreement and issues yet to be resolved.2 The report does not represent a commitment by governments, and explicitly notes that agreement on any particular issue is subject to final agreement on the reform package as a whole.

While we are not entirely happy with this report, I believe it does represent some considerable convergence and consensus as compared [Page 195] to a year ago. The major disappointment has been that Europeans have in recent weeks backed off from the more positive attitudes expressed in the July meeting,3 and have been trying to place the blame on supposed “U.S. intransigence.” Parts of the press have been taken in by this, and have mistaken the European negotiating ploy for reality. Unquestionably, the European harder line on some aspects reflects their impatience to obtain from the U.S. more sweeping convertibility commitments than we have been willing to give.

In recent weeks, I have made considerable efforts to discuss monetary reform with our Monetary Advisory Committee,4 various other groups of bankers and businessmen, and with the academic community. There is almost universal support among these groups for the U.S. substantive proposals and for our negotiating approach—in particular, our desire for some flexibility in exchange rates; our emphasis on a reserve indicator system which will keep countries like Germany and Japan from continuing to pile up huge surpluses; and avoiding a premature move to dollar convertibility. They have urged us to stick to our guns on this matter—they say present exchange arrangements are reasonably satisfactory for this transitional period and they do not share the French criticism of interim floating.

I have also had an opportunity on this trip to brief a number of members of Congress as well as both the U.S. and foreign press on what we are trying to achieve. I hope this will improve public understanding and support for our proposals, and offset the reports being put out by some of the Europeans.

[Omitted here is discussion unrelated to international monetary policy.]

  1. Source: National Archives, RG 56, Office of the Under Secretary of the Treasury, Files of Under Secretary Volcker, 1969–1974, Accession 56–79–15, Box 3, International Financial Institutions. Secret; Exdis. The memorandum was transmitted in a telegraphed message received in the White House Situation Room on October 18. A stamped notation on the memorandum reads: “Noted by Mr. Volcker.”
  2. The text of the September 24 “Report to the Board of Governors of the International Monetary Fund by the Chairman of the Committee on Reform of the International Monetary System and Related Issues” is in de Vries, The International Monetary Fund, 1972–1978, Volume III, pp. 155–163.
  3. The C–20 met at the Ministerial level in Washington July 30–31, 1973.
  4. Apparently a reference to the Advisory Committee on the International Monetary System. Reports on the Committee’s members and its inaugural meeting, held on August 29, are in the August 23 and August 30, 1973, New York Times, respectively.