59. Memorandum for the President’s File1

SUBJECT

  • Meeting with Shultz, Ash and Stein on January 21, 1974

The President met with Troika at 3:15 p.m. in the Oval Office.

[Omitted here is discussion unrelated to foreign economic policy.]

Mr. Shultz reviewed the meeting of the Group of Twenty at Rome from which he had just returned.2 He said that the international financial system seemed to be on what he called the "reality track," meaning the general acceptance of flexibility in exchange rates. He thought that there would be agreement in the Group of Twenty in the treatment of SDR’s, the adjustment process and the structure of the IMF. This much agreement could probably be reached by July after which the Group of Twenty could go out of business.

Mr. Shultz had laid out the energy problem at the Rome meeting and had strongly asserted that the price of oil now existing was intolerably high from less-developed countries. He felt that his initiative there had started to build up resistance to further price increases. He raised the question of participation of some less-developed countries in the February 11 meeting on oil3 with the thought that they would help to indicate the seriousness of the situation created for oil importing countries. There was some discussion of possible countries to be invited and the President asked Mr. Shultz to consult with Henry Kissinger on that. He also asked him to consult with Kissinger on the desirability of inviting Finance Ministers to the February 11 meeting.

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Mr. Shultz expressed the view that the United States should not too readily bail out oil importing countries from the problem created by the high oil prices, lest that weaken the resolve to get the price down. At the same time we would have to be sure that international financial strategy and competitive devaluation did not go too far.

Mr. Shultz asked the President’s approval for getting rid of the remainder of capital export controls and the President agreed, leaving the timing to Secretary Shultz.

The President commented on the present position of the United States in the world political and economic scene and emphasized our unparalleled strength and leadership position. He said that no country feels that the United States has designs on it, which is a unique position for a superpower. He believed that the United States has a major opportunity to serve as peace maker and stabilizer in the world. He gave as example the willingness of Israel to agree to a troop pull-back in confidence that the United States would protect Israel if necessary. He said that confidence had been greatly strengthened by the willingness of the U.S. to order a worldwide military alert when confronted by the Russians.

The President reflected on the difficulty which everybody shares, including his advisers, in foretelling what is going to happen in the economy. He indicated his strong preference for a steady policy which would pay off best in the long run even though it might miss certain opportunities for political advantage in the short run.

Herbert Stein
  1. Source: National Archives, Nixon Presidential Materials, White House Special Files, Staff Member & Office Files, President’s Office Files, Box 93, President’s Meeting File, Memoranda for the President’s File, Beginning Jan 20 (1974). No classification marking.
  2. The C–20 met at the Ministerial level in Rome January 17–18. Shultz also reported on the meeting in a January 18 memorandum to the President in which he noted: "The two-day Ministerial meeting of the Committee of Twenty on Monetary Reform ended today reaffirming its intention of completing its work by mid-year. It reached agreement on strengthening the IMF by establishing a Council of Ministers which would meet three or four times a year as required. Agreement was also reached on some, but not all, of the technical changes needed to enhance the role of the SDR, and to permit its use during the expected continuation of floating in the period ahead." A notation on the memorandum indicates that Nixon saw it. (Ibid., President’s Handwriting, Box 25, Jan 16–31, 1974)
  3. Reference is to the Washington Energy Conference, which look place February 11–13.