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

SUBJECT

  • Report on post-Summit and MTN meetings in Europe

This memorandum summarizes two meetings I attended on your behalf recently in Europe, about which other heads of government at Guadeloupe will have received reports from their representatives, and which revealed Allied attitudes on problems that may surface at Guadeloupe: (U)

I. December 11 Summit Follow-Up Meeting in Bonn2

1. Macro-Economic Policy

(a) Japan: Most members of the seven-nation Summit review group voiced deep concern over Japan’s failure to achieve its growth target or increase access to its import market. Most agreed that these changes in [Page 562]Japanese policy are necessary to achieve the dramatic reduction in Japan’s external surplus which is the key to a successful Summit in 1979, as change in German policy was to a successful Summit in 1978. Japanese responses made clear that they believe their existing policies are adequate to reduce their external surplus. My Japanese colleague and I arranged further US-Japanese talks to try to resolve these differences. (C)

(b) US Inflation: There was strong approval of your November 1 decisions.3 The only concern was whether the US will stick to tough fiscal and monetary policies during the several years that other countries, notably Germany and Japan, believe on the basis of their own experience will be required for success.

2. Energy: Passage of the energy bill was welcomed. The Germans would like us to meet our Summit commitment to raise US oil prices to world levels by December 1980, but will understand if we let the target date slip to October 1, 1981, when control legislation expires. They say that letting decontrol slip beyond that date would raise doubts as to whether the US commitment would ever be fulfilled. (C)

3. North-South: There was general support for the proposal that the World Bank has developed, in response to the Bonn Summit’s directive, for large-scale IBRD lending to help LDCs explore for oil—and also for the World Bank proposal to convene a spring meeting of donor nations to coordinate their bilateral aid to LDC energy programs. It was agreed that these World Bank proposals had been among the more useful Bonn results. (U)

4. Tokyo Summit: We agreed that no commitment to a specific date (June 28 and 29 were preferred) should be sought until the next meeting of our Preparatory Group in March, when it could be determined how much progress was being made. (C)

II. December 18 Meeting with French Trade Minister Deniau (who had wanted to come to Washington to meet with you)4

1. Agriculture: The French say that the language that the US and the EC have agreed on to prohibit agricultural export subsidies that displace other countries’ exports in third markets will be seen by French farmers as a threat to the EC’s Common Agricultural Policy. Al McDonald, our Geneva trade negotiator, and I pointed out that this was a problem of perception, rather than substance, since this language did not pose such a threat; we suggested that the perception should be cor[Page 563]rected by clarifying statements. (We could not go further in conceding to the French on this point without forfeiting the support of US farm groups, which want to be protected against subsidized export competition.) (C)

2. Tariffs. The French say that they would find it difficult to secure public acceptance of eight-year tariff cuts of about 30 percent, as now planned, against the background of present high French unemployment. They propose that the MTN commit its signatories to cuts of only half this size, with further cuts to be decided after four years. We said that it would be difficult to secure enough US Congressional and public support to overcome protectionist opposition to MTN, unless it opens up new markets for US exporters, which requires substantial (i.e., around 30 percent) tariff cuts. We thought that it might be possible to organize these cuts into two four-year phases with timing of the second phase being somewhat flexible, but we could not agree that a new decision would be needed to proceed to the second phase. (C)

3. Conclusion: The discussion was more friendly than I had expected. Deniau said that the countervailing duty issue was no longer a problem, since it was understood that the EC would only formally approve an MTN agreement when the CVD issue was resolved by the Congress. (In the meantime, Treasury will require affected importers to post bonds, rather than pay the duties.) He stressed political difficulties in France: The Gaullists and Communists were both attacking the government for yielding to external pressure. I described our political problems and the need to conclude Geneva negotiations by the end of January; McDonald did a superb job of outlining the concessions the US had made to date in MTN, which would benefit France. (C)

We won’t know till negotiations resume in Geneva whether the compromises that Al and I described will be acceptable to Giscard. At the EC meeting later that day Deniau outlined the French position on agriculture and tariffs but did not object when the chairman said that there seemed to be a good basis for proceeding to a conclusion of the negotiations, so our meeting with him may have done some good. (C)

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Trip File, Box 15, President, Guadeloupe, 1 /4–6/79: Briefing Book for the President [II]. Confidential. Sent for information. Carter initialed “C” at the top of the page.
  2. Owen reported on the December 11 follow-up meeting in greater detail in a December 13 memorandum to Carter. (Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 64, Summits: 1/78–8/79)
  3. See footnote 2, Document 175.
  4. A memorandum of conversation of the meeting on December 18 among Owen, Deniau, and other U.S. and French officials is in the Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 23, France: 1–12/79.