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

SUBJECT

  • Summit Preparations (U)

I have just returned from the second Summit Preparatory Meeting; economic preparations are in good shape, although there are still some disagreements. (C)

1. The draft communique’s section on macro-economic policy stresses the need for (i) prolonged fiscal and monetary restraint, to dampen inflationary expectations; (ii) policies that will encourage investment by shifting resources from the public to the private sector, from consumption to investment, and from declining to growing industries. This is the most important part of the Summit as far as Mrs. Thatcher is concerned. She believes that this kind of hortatory language will help heads of government by showing that these painful policies are regarded by all major industrial countries as the right recipe. (C)

2. The energy section includes strong commitments regarding increased production of alternative energy sources, particularly coal and synthetics. This section also blesses the agreements we got at the IEA Ministerial Meeting (the Washington Post report notwithstanding) regarding (i) the establishment of national IEA annual oil import yardsticks, which can be converted into oil-import ceilings if the oil market tightens, and (ii) reducing the Summit countries’ aggregate 1985 import [Page 701]goal by 4 mbd.2 (If the oil conservation charge is still in dispute, I believe you can get the allies to support it vigorously at the Summit; I asked Lambsdorff to speak up on its behalf at the IEA meeting, with good results. See Tab A.)3 (C)

3. The North-South section focuses on helping LDCs produce more:

  • energy, and includes an interesting proposal for a new World Bank affiliate to this end;
  • food, via more emphasis on research, production (irrigation), and food storage. The UK and Japan are still trying to cut back on the food proposals. (C)

4. There are shorter sections on trade, international monetary affairs, and terrorism. The principal problem here is the trade section: Our language on barring bribery and avoiding wasteful competition in export credits won’t sell; we will have to compromise. (C)

5. The Italian delegate asked me to pass on his government’s strong request that a Four-Power Summit Meeting at Venice be avoided. The Italians believe that the press would find out about this meeting and that it would then overshadow the Summit’s constructive results in Italy, where it would be deeply resented—making it very difficult to get Italian parliamentary support for measures regarding Iran and the USSR. They were appalled that a four-power meeting on Italian soil should even be considered, given their role as host country and record of cooperation, to please a country which has shown as little concern for US interests as France.4 (C)

6. A few further comments:

—All allied economic discussion focuses on US proposals. If we don’t take the initiative, nothing happens. But the Europeans and Japanese expect us to consult about these proposals—to listen to their concerns. The IEA conference went well because Charles Duncan met most [Page 702]of the delegations separately before the conference started, and thus was able to take account of their concerns in the phrasing of our proposals.5 I’ve tried to do the same in Summit preparations, and will call my opposite numbers before going to the final preparatory meeting in Paris next week, to tell them that you hope they will be able at that meeting to report any Summit economic concerns their heads of government want you to be aware of before you leave for Venice. (C)

—Deep US-European political disagreements and criticism of US foreign policy, which was evident in side talks, did not unduly shadow our economic discussions. There is considerable allied respect for US domestic economic policies, which the allies hope we will maintain. Ditto for our trade policies; your recent decisions on shoes, leatherware, and Japanese automobile imports are admired. There is, however, deep concern over what is happening in the Congress to the US appropriations needed to fulfill our commitments to multilateral banks; these concerns were somewhat mitigated by what I was able to tell my colleagues about your efforts to back these requests. (C)

—To get allied agreement for US economic proposals we need German support. After the US, Germany is clearly the most influential country in this area: Schmidt is admired for his economic performance and respected for his recent election successes. We got what we wanted at the IEA because we cut a deal with the Germans beforehand. On the Summit, the Germans are o.k. on the macro-economic section, reluctantly committed to the energy section, and firm on North-South issues, except for worrying about our record. They are attracted by the Brandt idea of a North-South Summit in 1981. All this could change between now and Venice; I can’t be sure how much German colleague’s assent reflected Schmidt’s views. That is one reason I want to phone him and the others to make sure that they have checked with heads of government. (C)

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Trip File, Box 27, President, Europe, 6/19–26/80: Cables and Memos, 5/20–29/80. Confidential. Sent for information. Carter wrote at the top of the page: “good. J.” The memorandum was sent to Carter under cover of a May 28 memorandum from Brzezinski, in which he reported on the preparations for the discussion of political issues at the Venice G–7 Summit. (Ibid.)
  2. Telegram 137327 to all OECD capitals, Jidda, Abu Dhabi, Doha, Manama, Kuwait, Algiers, Baghdad, Dhahran, Caracas, Jakarta, Tunis, Lagos, Mexico City, Quito, and Libreville, May 24, reported on the May 21–22 IEA Ministerial meeting in Paris. (National Archives, RG 59, Central Foreign Policy File, D800255–0512) The May 23 edition of The Washington Post published a story, written by Ronald Koven, entitled “West Rejects U.S. Plan on Oil Imports.” (The Washington Post, May 23, 1980, p. A21)
  3. Tab A, attached but not printed, is an undated article published in an unknown newspaper entitled “19 Allies Back U.S. Oil Tax.” The article, written by Paul Lewis of The New York Times, is based on an article published in the May 23 edition of The New York Times entitled “Europeans Back Carter on Oil Tax.” (The New York Times, May 23, 1980, p. D5)
  4. In his May 28 cover memorandum to Carter (see footnote 1 above), Brzezinski noted Giscard’s belief “that only the Four and not the Seven should deal with political issues” at the Venice G–7 Summit. The Carter administration favored political discussions involving all seven Summit countries.
  5. Duncan reported to Carter on the IEA meeting and his subsequent bilateral discussions in a May 23 memorandum; see Foreign Relations, 1969–1976, vol. XXXVII, Energy Crisis, 1974–1980, Document 273.