Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

183. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter ¹

Washington, December 1, 1978

SUBJECT

• MTN (U)

You asked why failure of the MTN would hurt the US more than France or others.² (C)

1. In the long run, I don’t believe it would: A failure of the MTN would hurt all nations by triggering a spiral of protectionism that would lower living standards, reduce employment, and weaken the international cooperation on which everyone’s security depends. (U)

2. In the short run, the US national interest might be more adversely affected than that of the European Community. The US, as a strong economy, would lose opportunities for expanding its exports. And the influence that it exerts through a worldwide trading system, of which it is the leading member, would be reduced. By contrast, the weaker members of the European Community (France, Britain, and Italy) would lose fewer opportunities for increasing exports, since they are less competitive. And the protected market open only to EC members and associated states that the Community has built would help shield these weaker members from the effects of an MTN failure. (C)

3. I doubt, however, that France wants a failure of the MTN. Giscard is trying, rather, to get the best deal he can—one that will protect French agriculture and industry from the effects of trade liberalization. MTN delay is one way of trying to achieve this objective; the more MTN is delayed, the more watered down the final agreement is likely to be. Bob Strauss is resisting both the delay and the watering down—because they would reduce the usefulness of MTN and because they would make it harder to secure Congressional approval. (C)

4. Our main ally in all this is Germany. With a strong and open economy, Germany’s interest in concluding an early and far-reaching MTN is similar to ours. Giscard will not push his MTN views too hard if he believes that this would cause a Franco-German rupture. He is bluffing and under-estimates the risks that his tactics entail for the MTN; Schmidt is well positioned to call his bluff. (C)

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Subject Chron File, Box 92, Finance/International: 7/78–1980. Confidential. Sent for information. Carter initialed “C” at the top of the page.
2. In a November 29 handwritten note to Owen, Carter asked: “Why does a failure of MTN hurt the U.S. more than France or other countries involved?” (Ibid.)