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

21. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter¹

Washington, April 15, 1977

SUBJECT

• Summit Preparations—A Progress Report

I gather from what you said to me after the Fukuda dinner² that you wanted informal progress reports from time to time. I am sending you this report while preparations are still in mid-stream, so that if you do not feel I am on the right track, you can let me know.

To make a success of the Seven Nation and NATO Summits, we need (1) a clear view of their purpose; (2) allied agreement on specific actions to achieve this purpose; (3) means of sharing both these actions and the purposes to which they are directed with public opinion; (4) effective follow-through. This memorandum discusses means of meeting all four needs.

I. Purpose

The economic and political progress achieved by the industrial world since World War II is threatened by two inter-related problems:

—Economic. The world economy has the potential for healthy growth; present trends in Germany, Japan, and the U.S. are favorable. But in the UK, France, and Italy, steps to curb inflation and the eroding effects of inflation itself have slowed economic growth or brought it to a halt. International indebtedness is mounting, partly as a result of high energy costs. In France and Italy, these economic and political problems have weakened moderate forces and threaten a shift to the Left, which could endanger confidence and stability in neighboring Germany. Parochial and protectionist pressures in the industrial world, triggered by these economic problems, also hinder joint action by rich nations to help developing countries.

—Security. U.S. and German forces are in good shape, and there is no prospect of early East-West conflict. But NATO is not keeping pace with modernization of Soviet forces. It is difficult for NATO to do so, within realistic fiscal ceilings, without rationalization of NATO programs to reduce waste and overlapping. Continuation of present trends could eventually threaten the balance of military power that keeps peace in Central Europe.

These two problems interact: Political and economic trends hinder defense efforts in some European countries, and an evident weakening of European defense could hinder European recovery.

Meeting these problems will require cooperative effort by the main industrial countries. In the economic field they will need to confirm each other in sensible domestic policies, and to join in enlarging international financing, reducing artificial obstacles to trade, improving the balance between global energy demand and supply, and providing more effective help to developing countries. In the security field, they will need to modernize NATO forces and rationalize NATO defense programs.

Action to these ends will confront major obstacles. These cannot be overcome without a powerful political impulse. The purpose of the Seven Nation and NATO Summits should be to generate that impulse. Implementing action can then be taken in other forums.

II. Specific Actions

Seven Nation Summit. To serve this purpose, we are negotiating in the international preparatory group to include the following in the draft Seven Nation Declaration:

1. Domestic. Germany, Japan, and the United States would commit themselves to achieve present expansionist targets; Britain, France, and Italy would pledge to maintain their stabilization policies until inflation had been brought under control; and both groups of countries would agree to concert about these actions in the OECD.

2. Financing. The seven nations would agree to support Witteveen’s proposal to expand the IMF’s resources in order to help debtor countries finance their deficits on current account.³

3. Trade. The seven participating governments would agree to seek specified substantive results, including progress toward an international system of national grain reserves, in 1977 in the multilateral GATT trade negotiations.

4. Energy and Non-Proliferation. Governments would pledge to reduce energy consumption, increase energy supply, share research and development to these ends, and concert about these measures in the International Energy Agency. They would also agree that legitimate nuclear needs should be met, that this should be done without enhancing prospects for nuclear proliferation, and that studies of national and international means of reconciling these two objectives should be pursued.

5. North-South. The Summit nations would agree that the level and quality of aid to LDC’s should be raised, and that resources of the World Bank should be increased—thus permitting more of its resources to be devoted to expanding energy and raw materials production. Governments would agree to negotiate flexibly about individual commodity stabilization agreements, and to finance these agreements through a common fund. I hope that the Summit nations can also agree to ask the World Bank to explore the concept of a world development budget or program; I’ll have a better feel for other countries’ reactions after the next meeting of the International Preparatory Group.

The agreements outlined above would launch or reinforce action to address the main problems that the industrial countries face, and they would strengthen the international agencies in which that action must be taken. Taken together, they should convey a persuasive impression of governments that are in control of their destiny, and whose policies promise a better future for their peoples.

When I have asked journalists what it would take to convince them that the Summit was a success, their answers have called for a less ambitious outcome. What emerges from the Summit will probably also be less ambitious; we are unlikely to achieve international agreement on all the above points. But I hope that our main goals can be fulfilled. The main obstacle at the moment is that the British draft Declaration is inadequate; our own is better,⁴ but the British (as hosts) have the main drafting responsibility. I am encouraging the Canadians to prepare an alternative draft which will borrow the best from the British and American drafts, and which I hope can provide a basis for discussion at the April 25–26 meeting of the International Preparatory Group.

Arms transfers will be taken up in the Four Power Berlin Summit meeting.⁵ Human rights will be covered in your NATO speech; it would not be in our interest to make this a major issue in the Seven Nation Summit, since intensive discussion there would probably generate allied disagreements on which the media would focus, overshadowing constructive economic agreements.

NATO Summit. We are consulting with NATO embassies in Washington about the following initiatives for your speech to the North Atlantic Council:⁶

1. NATO Forces. Defense Ministers would be asked to develop a program of needed modernization and improvement of NATO forces, and to examine possible changes in NATO machinery to ensure effective follow-through. The Defense Ministers’ recommendations would be reviewed (after an interim report to the December NATO meeting) at the NATO meeting of May 1978, which might be held at the Summit.

2. Defense Production. The U.S. would indicate its willingness to work with a collective group of European countries in improving present procedures for development, production, and procurement of NATO defense equipment—in order to avoid waste, promote joint European effort, and increase U.S.-European defense trade. This seems like a dull technical issue, but it is tearing NATO apart politically and wastes large resources (perhaps as much as $10 billion annually) that are badly needed for more effective defense.

3. Political. We have in mind that you would speak in some depth about East-West relations. You might suggest launching a major joint reappraisal of the alliance’s role in changing East-West relations—also for review in May 1978. This would provide a more effective basis for inter-allied consultation on this subject, and could help to create a political framework in which the need for effective NATO defense effort would be more evident.

These actions would not be dramatic. But they would respond to the main threats that NATO faces and should reassure the Europeans. If followed through, they would eventually reverse the adverse military trends in Central Europe noted under I, above.

III. Sharing Perceptions

It will be important not only that the Summits achieve the purpose defined above but that they be seen to have done it.

This requires explaining to the media and to our own people what we are trying to achieve—creating an environment in which the industrial world can register steady economic growth, helping developing countries achieve more rapid progress, and making NATO a more effective means of defense and consultation. It also means explaining how the actions taken at the Summit can help to fulfill these goals—pointing out that this requires an on-going process in diverse forums that Summits reinforce.

I will send you an action memorandum later, raising the question of whether you wish to meet with the Congressional leadership in late April or early May to discuss both Summits, and then meet with the leadership again after you return from London to acquaint them with the results. I will send you another memorandum asking if you would like to meet with business and labor leaders to the same end.

After the Summits, and depending on their results, you may wish to make a TV report to the nation about these results; in such a speech you could present a broad view of these meetings’ role in your foreign policy. I will begin drafting an outline, for use in case you decide to make such a speech.

IV. Follow-Through

The business-like approach to Summitry outlined above hinges on effective follow-through. After the Rambouillet and Puerto Rico Summits⁷ this was lacking. At both Summits, for example, it was agreed that Multilateral Trade Negotiations should be concluded by the end of 1977, but this had little effect on the conduct of negotiations.

At the first meeting of the Seven Nation international preparatory group, we discussed whether finance ministers of the seven participating nations should meet regularly to consider whether their countries’ policies were fulfilling Summit directives. The general reaction was that this would antagonize non-attending nations and over-burden finance ministers. It was suggested that follow-through should be “flexible” and “informal”, which—to judge from past experience—means that it would be slight to non-existent.

Of course, much of the economic follow-through will take place in other forums; the OECD for domestic and balance of payments economic policy, the IMF for international financing, the GATT for trade, the IEA for energy, and the World Bank for aid. The same is true on the security front: The NATO Defense Ministers’ Committee is the place for defense improvements, and the North Atlantic Council is the place for consultation. But we need to be sure that ministers and civil servants in these forums are following Summit guidance, instead of allowing that guidance to be eroded by time and new events.

To meet this need within our own government, you may wish, after the Summit, to arrange for periodic NSC meetings, at which the actions taken to fulfill Summit actions are reported and reviewed. Preparations for these meetings will keep the government’s attention focused on carrying out Summit agreements.

On the international level, civil servants of other governments will only concern themselves with follow-through if instructed to do so by their political masters. At the final session of the Seven Nation Summit you might propose that there should be a follow-up meeting, say, five months after the Summit, attended by whatever official each head of government designates. It need not be finance ministers; it could be the same group that has been preparing for the Summit. This meeting would survey progress made in executing Summit decisions and submit a report to the heads of government. If the meeting were conducted quietly and without publicity (meetings of the preparatory group have attracted no media attention), there should be little basis for resentment by countries not attending the Summit. While this would place some additional burden on the officials involved, it would be small compared to the advantages of ensuring that Summit decisions had some effect on what happened in the real world.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Trip File, Box 1, President, Europe, 5/5–10/77: Memos and Cables, 4/15–28/77. Confidential. Sent for information. Carter initialed “C” at the top of the page and wrote “good.” The memorandum was sent to Carter under cover of an undated note from Brzezinski that reads: “The enclosed is only for scanning. It will be in your briefing book.” (Ibid.)
2. Apparently a reference to a March 21 working dinner held at the White House during Fukuda’s March 20–23 official visit to the United States. A memorandum of conversation is in the Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 34, Memcons: President: 3/77.
3. In February 1977, concerned that delays in the expansion of IMF member quotas would combine with large-scale demands on IMF resources to produce a situation in which the IMF could not meet its members’ financial needs, Witteveen proposed the creation of a “supplementary financing facility.” Also known as the Witteveen Facility, this initiative would allow the IMF to borrow funds from member countries that it could then lend to other member countries. (De Vries, The International Monetary Fund, 1972–1978: Cooperation on Trial, vol. I: Narrative and Analysis, pp. 545–546)
4. Neither the British nor the U.S. draft declaration was found.
5. The three Western powers occupying Berlin at that time—France, the United Kingdom, and the United States—along with the Federal Republic of Germany, held a Four-Power Berlin Summit on May 9 in London. A joint declaration on Berlin issued on that day is printed in Public Papers of the Presidents of the United States: Jimmy Carter, 1977, Book I, pp. 840–841.
6. For Carter’s speech on May 10 at the London NATO Summit, see ibid., pp. 848–852.
7. The Rambouillet Summit took place November 15–17, 1975; the Puerto Rico Summit June 27–28, 1976. Both are documented in Foreign Relations, 1969–1976, vol. XXXI, Foreign Economic Policy, 1973–1976.