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

SUBJECT

  • Tokyo Summit (U)

This memorandum reviews the US position on Summit issues, in light of recent events—including discussions with the Summit Preparatory Group,2 German Economics Minister Lambsdorff, and French leaders (Giscard, Barre, and Francois-Poncet) in Paris last week,3 as well as the EC heads of government meeting, which ended today.4 (U)

[Omitted here is discussion of energy.]

II. Macro-Economic Policy

1. Short-Term. Giscard wants the communique to register the Summit governments’ intent to offset the contractionary effects of higher oil prices through their domestic macroeconomic policies. There are differences of view as to how work can be done to this end. All agree that the effects of oil price increases cannot be passed through in the form of wage increases without disastrous effects, and that this should be made clear in the communique. The unresolved question is whether Germany and Japan will continue to maintain high growth rates, or cut back to fight inflation. Both are clearly leaning in the latter direction. We should join the other Summit countries in urging these two countries to continue to maintain the rates of growth in domestic demand to which they committed themselves at Bonn. This is in our in[Page 635]terest from the standpoint of increasing US exports and strengthening the dollar. If the opportunity arises, you may want to make this point in bilateral talks with Schmidt and Ohira. German and Japanese policies will be reviewed bilaterally in the OECD assessment of member countries’ macro-economic responses to higher oil prices this fall. (C)

2. Medium-Term. All agree this Summit should place more emphasis on medium-term policies to increase investment and productivity. This means such steps as deregulation, tax incentives for new investment, less protection and subsidy, and reducing the size of the public sector. The only question is how clearly this view should be stated, and how specifically these policies should be described. It would be helpful to the US—since we will want to move in this direction anyway—to have the Summit speak forcefully to this issue. Thatcher and Clark will likely take the same view. As on most issues, the Japanese will favor generalities.

III. North-South

All agree that the Summit should emphasize aid to developing countries for production of energy and food, and should stress technical assistance. Again, the need is for specificity: otherwise, the whole thing will be dismissed by the developing countries as a farce. Furthermore, only a clear call for specific action will produce that action. We do not want the Summit, in its preoccupation with energy, to become—or to be seen to have become—an ingrown rich man’s club. The other countries agree but would, for the most part, be content with bland generalities. (C)

1. Energy. The key points to make here are:5

a. The Summit should call on the World Bank and other multilateral banks to expand their programs to aid hydrocarbon exploration in LDCs, and on the Summit countries to improve their national programs to the same end. The French have proposed a joint mechanism (presumably managed by the World Bank) to guarantee developing countries and oil companies against the risks of fruitless exploration; the Summit could ask the World Bank to study this idea, which is too vague to be acted on. (C)

b. The Summit countries should agree to give high priority, in their aid budgets, to renewable energy development in LDCs and should call on the World Bank to coordinate increased bilateral aid for this purpose. (C)

[Page 636]

c. The French want the Summit to call on the OPEC countries to participate vigorously in these programs of energy aid to LDCs. This makes sense. (C)

2. Food. In line with Sol Linowitz’ Hunger Commission report to you:6

a. Reserves. The Summit should call on LDCs to strengthen their food storage capacity, so that they can maintain larger food reserves, and should urge increased bilateral and multilateral aid to them for this purpose. You might urge governments expeditiously to establish the basis for a successful resumption of the negotiations for an international wheat reserve. (This means European willingness to agree to larger stocks.) (C)

b. Production. The Summit should call on LDCs to develop national food production strategies, and pledge increased bilateral and multilateral aid to help LDCs carry out these strategies. (C)

c. Research. The Summit should call for increased bilateral and multilateral aid for agricultural research in LDCs. This is one of the main prerequisites to increased food output; it is underfunded. The most effective instrument for supporting this research is the World Bank’s Consultative Group for International Agricultural Research; its resources should be doubled. (C)

d. Food Aid. The Summit should call for more food aid to LDCs. To this end, it should suggest negotiating a new Food Aid Convention, and fulfilling the aid targets in the present one.7 (C)

3. Technical Assistance. The Summit should call for increased effort in this field and for coordination between national programs—such as our proposed new Institute for Scientific and Technological Cooperation and the comparable Canadian institution. (C)

The heads of government don’t need to spend a great deal of time on these North-South issues. If they will agree that the communique should be specific, the Summit Preparatory Group can do the rest. The Bonn communique called for a new World Bank program of lending for oil exploration in LDCs, which has proved exceedingly useful. This is [Page 637]the sort of thing Summits can accomplish in the North-South field if they resist the temptation to settle for soothing generalities. The steps proposed above cost little. (C)

IV. Other

1. Trade. Nothing new here. All agree on the need to say something forceful about implementing MTN. (C)

2. Monetary. No need to spend much time on this issue unless the fall in the dollar continues, in which case Mike Blumenthal will have specific recommendations as to what you might say about this at Tokyo. (C)

[Omitted here is discussion of Central America, Indochina, aid to Egypt, aid to Turkey, hijacking, Iran, Cuba, Pakistan, and China.]

VII. Next Year

The question of the next Summit may come up. Italy, which will have the EC Presidency in the first half of next year, proposes to hold it in Venice (on an island for security’s sake). I told my Italian colleague that May might be better than June, given the approach of our Presidential election. He intimated that they will invite you to a state visit to Italy just before or after the Summit. Dick Gardner says that the security problem is manageable, and cites two papal funerals and one papal coronation to prove his point.

There are rumors that Giscard may ask: Why have an annual Summit? I doubt he will, unless the Tokyo Summit is a bust. But in case he does: the Japanese would be mortified by the implication of failure inherent in the Tokyo Summit’s being the last such meeting for a while; and the Italians would be even more mortified—particularly after Guadeloupe8—if there were no 1980 Summit.

You might mention that peaceful uses of nuclear energy should be discussed at the Summit next year, in the wake of INFCE (which ends in February). You might stress the need for an international approach to this issue, and say that Gerard Smith will be visiting their governments to talk about this approach shortly. (You may recall that you wrote “OK” on a memo I sent you a while back, proposing that this be a main theme of the 1980 Summit.9 Gerry and I are working on specific proposals for early submission to you.)

[Page 638]

VIII. Bilateral Talks Regarding the Summit

A. Ohira

Your Monday10 meeting with Ohira is an opportunity to impress strongly on him the need for the Tokyo Summit to agree on bold and specific steps regarding energy. (C)

Japanese officials below Ohira are reluctant to accept specific oil-import targets—and count on the known reluctance of Schmidt and the UK to accept such targets to ensure that their views prevail. The Trade Ministry, which is responsible for energy, wants Summit energy agreements that will look good, but that will not limit Japan’s freedom of action. (C)

You need to make clear to Ohira that your definition of a successful Summit is one that involves specific commitments on both the supply and demand side. These will be painful, but essential. You count on him to exert his influence, as he did so successfully in helping to resolve US-Japan economic issues earlier this year, to ensure a successful outcome. (C)

You might also stress your desire to see the Summit come up with specific commitments in the North-South field—particularly re-garding aid to LDCs to help them increase their food and energy production. (C)

B. Thatcher

Mrs. Thatcher said to the media, after the recent EC heads of government meeting, that “the current supply crisis is not as bad as it is sometimes made out to be . . . It is a marginal problem, which is reflected in the spot market.” (C)

You may want to share with her our view that the imbalance between oil supply and demand, even though it is only 1.5 million barrels a day, has extremely serious implications for the US and other OECD economies. If the Tokyo Summit does not agree on effective joint action, the pressures for competitive national responses will mount. We should not let the fact that small amounts of oil are involved blind us to the very high political and economic stakes, or to the fact that this Summit presents an opportunity for a common response which, if missed, may be hard to recapture. Half-measures will not meet the need. (C)

[Page 639]

IX. Communique

I attach a draft communique circulated by the Japanese after the last meeting of the Preparatory Group. It is not agreed, and I want to make it more specific. But since other heads of government may have seen it, you may wish to glance at it. (Tab A)11 (C)

X. Other Briefing Materials

Summit issues are described more fully in Book I; luncheon discussion issues are treated in Book II. This memo covers the ground sufficiently so that I believe you need only review these other briefing materials for background reading, as time permits. (U)

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Trip File, Box 24, President, Far East, 6/23/79–7/1/79: Cables and Memos, 6/22/79–7/3/79. Confidential. Sent for information.
  2. The Summit Preparatory Group met in Paris June 15–16.
  3. The discussions with Lambsdorff, Giscard, Barre, and François-Poncet were not further identified and no other record of them was found.
  4. The EC Heads of Government met in Strasbourg June 21–22.
  5. Documentation on the Tokyo G–7 Summit preparations on the issue of energy and oil pricing is printed in Foreign Relations, 1969–1976, vol. XXXVII, Energy Crisis, 1974–1980.
  6. Sol Linowitz, Chairman of the Presidential Commission on World Hunger, sent Carter a report entitled “Recommendations Concerning Hunger for the President’s Use at the Tokyo Summit” under cover of a June 8 letter. (Letter from Linowitz to Mondale, June 15; Carter Library, Donated Material, Papers of Walter F. Mondale, National Security Issues, Box 87, National Security Issues—World Food (6/30/1977–12/17/1979)) Documentation on the report is in Foreign Relations, 1977–1980, vol. II, Human Rights and Humanitarian Affairs.
  7. Under the Food Aid Convention, first negotiated in 1967, donor nations promised to provide LDCs with specified amounts of food assistance.
  8. See footnote 5, Document 179.
  9. Apparently a reference to Document 202, in which Owen sought Carter’s approval for themes for the Tokyo G–7 Summit.
  10. June 25. Carter arrived in Japan on June 24, before the start of the Summit on June 28.
  11. Attached but not printed is the June 18 “Draft Communiqué for Tokyo Summit.”