28. Minutes of the London Economic Summit Meeting1

LONDON SUMMIT—May 8, Morning Session

North-South Issues

Callaghan: We welcome the President of the European Commission, Mr. Jenkins, and M. Boulin, the French Minister of Finance.2

Giscard: The French President and Prime Minister by custom, are not supposed to be absent from the country at the same time. I assume that this is because it is felt that were they to disappear it would be a catastrophe. I believe it is the same for the US President and Vice President.

Turning to North-South issues, these are one of the most important subjects we will discuss at this meeting. This is true, not only because the subjects themselves are significant but also because the meeting is being watched with anxiety by the developing countries who are not keen on this meeting of the wealthy nations. As we know, the EC has a Community mandate on this issue so it is suitable that the President of the Commission be here with us.

I would like to briefly discuss how the North-South dialogue came about and its economic and political character. The idea was broached first in 1974. Then there were two strategies vis-a-vis the oil producers. The first was a strategy of confrontation designed to break OPEC and cause a decline in the price of oil. The second was a strategy of consultation to help deal with the problems of the developing countries and thereby to elicit a more responsible attitude from OPEC. Since 1973 the countries of the Gulf, such as Saudia Arabia and the UAE, have taken a relatively reasonable attitude. This is in part because of our policy of consultations on energy and developing country problems. We should continue in this way to encourage the moderate oil producers. If there is a failure of the North-South dialogue, radical producers would gain the upper hand. A first element in encouraging moderation is a Middle East settlement. But the success or failure of the North-South dialogue will also have an impact. We should recognize that if there is an in[Page 102]crease in the oil price, the total sum involved will be far more than would be channeled for development assistance.

On April 26 the ten co-chairmen will meet to plan the Ministerial meeting to take place on May 30 to June 1.3 There is some reason for both optimism and for pessimism. I am optimistic because I believe we can reach an agreement. I am pessimistic because Perez-Guerrero recently said that the developing countries were disappointed and anxious about the possibility of ultimate agreement. The European Community has made progress and a number of points were agreed. But it is essential to make two main decisions now—on raw materials and aid to development. We need to establish a common fund to finance the organization of the commodity market. The EC has agreed (with German reservations, which I understand) to establish a common fund. Can we today say that we agree in principle to establish a common fund with the details of the fund to be settled later?

Related to this we need an expression of political intent, of political will, to conclude commodity agreements based on some criteria. Those criteria should be that we choose commodities of most direct interest to the poorest LDCs and accept periodic review of the reference prices of those commodities. It is correct that we should reject indexation, but it is only normal that the LDCs want a review of prices from time to time, and we should agree.

On aid, the developing countries want a lightening of debt—an automatic relief of the debt burden. We agreed to reject this and instead proposed special aid to these countries. There should be a better review of the problems of those countries in debt, but we should provide help on a case-by-case basis. We should respond, in this way, with better procedures and at the same time accept the idea of exceptional additional aid for the poorest with the greatest debt burden. We should explore at this meeting the possibility of a $1 billion special fund with contributions from the EC, the US and others, and should decide here whether to confirm this or not. The American position is that they prefer a bilateral channeling of this assistance and we should discuss this. We are open-minded. The figure I am talking about for this exceptional aid is very low—$1 billion—when the oil deficit is $45 billion. So $1 billion is not very generous.

But for what we do, we should ask what we should get in return. A system should be set up for periodic consultations on energy (i.e., oil prices) in a CIEC forum so that decisions are preceded by consultations. There should also be principles to protect our investment in the LDCs.

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We also need to decide whether we should do or say anything about the inadequacy of aid to development. Development aid is not commensurate with LDC needs. I do not believe that .7% is an acceptable level. I know that target is hard for some countries, but we all should be prepared to step up our aid.

In the present situation, the Socialist countries make virtually no contribution to development aid. They make only a small contribution to the UN. Bilateral aid, contributions to the World Bank and to the European Development Fund are done by Western industrialized states alone. We should take a public stand, a principled stand, in view of the scale of development problems and indicate that the Socialist countries should finance more development aid. We should make proposals along these lines. In Africa, for instance, we finance all development aid and get little political results. The Socialists provide virtually all the military aid with considerable political results. We should get the Socialist countries to contribute development aid. This will bring a reaction from the Soviet Union, but we should not be the only peoples to whom the finger of criticism is pointed.

Callaghan: We cannot make decisions on CIEC at this meeting. But we can concert on national approaches to help in the development of the G–8 position. In 1975 there was a confrontation atmosphere in the UN. There could be another attempt at confrontation at the CIEC or an attempt to drive wedges between us. We should adhere to the major points. I would like to hear the attitudes of others on a common fund and on debt relief.

President Carter: We are willing and eager to participate in the endorsement of the principle of a common fund. We believe it is worthwhile. We feel that export earnings of nations should be stabilized.

With regard to the second point, our system makes it difficult for us to make a contribution through multilateral groups but we will go bilaterally. Also, we are willing to at least double aid between now and 1982. Last year we provided $8.5 billion in aid. Much of it was bilateral and included military aid. We are prepared to contribute more through lending institutions. On the inclusion of Socialist countries in the aid effort, this is a worthy idea. (I also personally think they should be in the World Bank and IMF. I don’t know why they are not.) We should make the proposal that they give more aid in a constructive, non-polemical fashion, perhaps before the CIEC. President Giscard will be meeting with Brezhnev in France. This is a worthy subject for discussion. We should also welcome participation by OPEC. They feel excluded. We have been too rigid in asking financial contributions without giving them a role in the institutions.

Callaghan: We all know your difficulties about your bilateral aid. We need something which looks like special action. If you diffuse it in a [Page 104] bilateral way, it does not look like something is happening of the nature of special action. Your doubling of aid by 1982 though is clearly tangible.

Vance: We can do this easily bilaterally. We can put our share into the fund. We can do it in a bilateral way so that it will be counted in the total.

Schmidt: I must ask the gentlemen around this table not to lose sight of one overriding principle. We should not have a bad conscience vis-a-vis the LDCs. It is not good that some Westerners go around extolling their bad consciences. We have done well, much better than the Communists. We will do more. We want it to be recognized that we have a moral obligation. And I think we can do better than we are. Although we must ensure that any additional commitments not jeopardize the world economy as a whole.

We have been talking about structural crisis. The oil countries’ price increase has had a major impact on the terms of trade, which is part of the structural crisis. What we do should not undermine the world economy. I hold this view as a social democrat, but my liberal friend Genscher also shares it. A smooth world economy is as important to them as it is to us. With respect to aid, $17 billion worth is provided; 80% comes from OECD countries, 15% from the OPEC countries, and 5% from the COMECON. They provide a lot of military aid. But their economic aid all together is only 50% of that of Germany. They sponsor wars in Africa and we let them get away with it. We should invite them today to participate in the aid effort—to take up their part of the responsibility. The Soviet Union and the East Germans are comparable to some industrialized countries.

In other fields I have the impression, as I said before, that we are going to meetings with bad consciences. We have been willing to give, but we are not asking all others to give as well. I am willing to go to my nation to ask them to give more—to make additional sacrifices. But we also want to get something. I want to get more stability and foreseeability in the system. I want guarantees for foreign investment in their countries. If we do not have this, private investment will diminish and aid requests will increase. This should be in the final act.

OPEC should also give certain pledges in the final act. They have contributed to the structural mess of the world economy. Saudi Arabia needs and deserves praise. It has been especially helpful. But there ought to be a pledge on the quantity of oil to ensure adequate supplies. We should not talk about a price mechanism. I don’t believe in a price mechanism very much, but we should at least ask this of them. It is outrageous that they embargo us.

Thus the Declaration should refer to the Soviet Union, LDC investment guarantees, and OPEC assurances on supply. Returning to my point about sacrifices, we should indicate that we will make some.

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In Puerto Rico, I gave some figures about what would happen if we concluded commodity agreements for 25 commodities. It would mean that we would not only misallocate resources, but would create other economic mistakes. We would be enlarging the revenues and receipts of countries who do not need it. We would give the US and the Soviet Union windfall price increases. The Soviets already charge Eastern Europeans a lot. Commodity agreements will only raise the price of the exports of Australia, Canada and the USSR. We want to help the developing countries, not the developed countries.

I have made a proposal to help the developing countries. We must, of course, have commodity agreements for a few tropical products. But we should use a Stabex scheme4 to avoid regulating all of the world’s market. This can help the developing countries without over-regulation of most commodity markets. I do this not out of German interests, but to maintain the continuity of the world economic system as a whole. A solution is no good if it is simply a cheap gesture which will hurt the world economy in 1978 and 1979.

We haven’t even seen the peak of the world structural problem. We can’t stand more economic upheaval. This is true of all of our European partners. Italy, France, the UK, and Germany are all under serious political strains because our people do not believe that our difficulties are insurmountable. They feel we can surmount them. If not, they will vote us out.

Our objective should not be to please, but to help, the LDCs. We may want to please God, but we do not necessarily need to please the LDCs. We should think of the consequences of fixing world commodity prices. We should not repeat the situation of agriculture inside the EC. Too much commodity price-fixing leads to over-production, the cost of storage, buffer stocks, the breakdown of the system and too high costs for our economies. I can go along with anything you decide. I am not out to pursue German national interests. But I do not believe we should please the developing countries for a short while, if in the long run we suffer economically and politically.

Andreotti: We should have considerations that relate not only to humanitarian and welfare concerns, but also to our interests. Without participation of the developing countries, there can be no constant development of the world economy. We should not have regulation of commodities as in the EC. On this I agree with Chancellor Schmidt. I believe we should move from a general statement to a concrete study which Schmidt also referred to.

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Next, as to aid, we should try to work in multilateral fora. An example is what we are trying to do through the EC. We should create a realization of the solidarity which exists. Like Truman’s Point 4 acquired moral leadership in the developing world, if our coordination is to establish more development aid, we should give it a political character. It would be extremely valuable to make this step together with other steps, for instance the transfer of technologies. I also agree with the point of Presidents Giscard and Carter. Public opinion should recognize how little aid the Soviets give. We should say, not only is it scanty, but we do not consider it aid from the point of view of a constructive responsibility for the development effort. We should make sure that our aid is given in relation to effective programs. As in the IMF, we should use stabilization and growth as our criteria for giving aid.

Fukuda: We live in a day of structural change. There are many facets of this, and one is in recent North-South developments. Another is the finiteness of resources in energy. We should have a sweeping review of the situation. These matters are inter-related very closely. Countries of the South should be allowed to participate in the growth of the world economy. They should be given a role to play and be held accountable for their role. CIEC is vital and its success or failure is of vital concern to us all. We should think about how to ensure the success of CIEC. If it fails, we throw the world into a chaotic state.

What can we do to ensure the success of CIEC? If we say something about the orientation of the Common Fund, it will be useful. Debt is also an issue, and it will be useful for us to provide an orientation on this.

President Giscard gave an effective inventory of the issues and covered them very well in the Tokyo Round. We should give special consideration to the developing countries and the matter of primary commodities. When we discuss ways to aid the developing countries, the most effective way is for our own economies to recover their health. When we help increase LDC exports, we are doing something important. When we reflate our economies, we help the LDCs.

Jenkins: CIEC should not be seen as a charitable operation. We should go for better access to raw materials and stable investment. We should see it as a two-way process. The developing countries should be involved and their interests are wrapped up with ours. In many ways a safer way to stimulate our economies is to strengthen demand in the developing countries. We should make a success of CIEC, and I believe we can do this without unwise actions. The preliminary meeting gave us indications which were not too bad, but there still can be a confrontation. Our first need is for a united front vis-a-vis the G–8.

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On special action to help the poorest LDCs, we envisage a $1 billion fund. The EC will give 37.5%. We will need 37.5% from the US and contributions from others. We do attach great importance to its being multilateral. We recognize the US problem, but the money should be seen as additional. It should be money which can be used quickly and not be tied to projects.

There is also a longer-term question of official development aid over the next few years. We should discuss how we can improve our contribution to get more money.

On the Common Fund, we are in agreement that this issue has significant importance. We should accept the principle and approach this cautiously so that it does not cover a wide range of commodities.

And we should consider the stabilization of export earnings as well. There should be agreement to study Stabex at the Paris meeting. The EC Stabex has worked well. The Common Fund and Stabex will support each other. We hope for a study by the Development Committee of the IMF and the World Bank. This would be a good outcome of the CIEC.

Fukuda: I met with the Secretary General of UNCTAD who discussed the Common Fund concept. I had heard about it as a bad concept. I found his explanation made it seem like a more pragmatic proposal.

MacDonald: I would like to discuss three points: politics, success and commodities. The failure of CIEC will have major consequences. OPEC will charge us economic rent one way or another. Saudi Arabia is emerging in a positive way. A conference in which they have played a positive role should be successful. On aid financing, progress has been made in the Witteveen facility. But we should not be overwhelmed by this success. There will be some shifting of resources from the developed to the developing countries.

On commodities, as a major primary producer and exporter, Canada is not seeking a new CAP. We are prepared to compete on commercial terms. We are prepared to participate in a Common Fund and don’t want a cartel. The place to continue the discussions is in UNCTAD.

Schmidt: Do you recognize the difference in international competence between the IMF and UNCTAD, and the difference between the developed and the developing countries management?

MacDonald: You have to deal with the LDCs somewhere.

Giscard: The communique should say that the Seven expect a positive outcome to CIEC, accept the principle of the Common Fund and exceptional aid. This will open up the road to a positive solution. And we should invite the Socialists to play a constructive role.

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Carter: I sense a concern about additional aid. There is a difficulty in the US about different pockets of aid. We have confidence in the IMF and the World Bank. But it will be hard to sell US participation of 37.5% on a multilateral basis.

There is a proliferation of too many different institutions. We need an analysis of the world development aid situation. We should get the World Bank and the IMF to say what the developing countries need most, and the objectives of aid which need to be assured. The developing countries would trust the World Bank and the IMF to do the analysis. We need a structured sort of analysis to help get increased support in the Congress and public opinion. There are a vast array of different organizations. I am not trying to delay action here. In fact, we are excited about it—but we must begin to develop a structured aid program to pinpoint the needs.

I would like to see the Socialists join the effort. It might be an appropriate time to get the Soviet Union to consider participating. If they join with us in these discussions, we might use these discussions as a mechanism to bring them into future aid programs. They might welcome some alleviation of tension.

I agree with Helmut on the requirement that LDCs agree not to confiscate property without compensation. We could help more if investment could be protected.

I am willing to go the second mile in the US to sell these ideas. But we need a comprehensive analysis and it would help to bring the Soviet Union into the structure.

Jamieson: Roy, are you suggesting that the G–8 should all agree on a CIEC package? How much will the package be affected by separate contributions? You depend one way or another on others to make up the $1 billion sum. The important thing is that it should be seen as something distinct. But this means the US will have to make up the other 37.5%.

Jenkins: A positive result is needed. We can put some things of a bilateral nature into this particular area. We have to erect a package. We will try to meet our target figure.

Giscard: We should be clear on the point that this must be an additional effort and we should not use existing aid programs. It is not useful today to address how this should be organized. We should pay; we will pay $1 billion by means suitable to each country. The US could do it bilaterally and others multilaterally. We should be flexible on ways and means. We should say we all agree on the principle, size, and objectives.

Vance: The fact that we do that bilaterally rather than in a common pot should not be a result inconsistent with the principle we are trying to achieve.

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Callaghan: Our contribution will be part of our aid, taking advantage of a marginal amount of funds we have left over for this purpose.

Jenkins: This is better than a debt moratorium.

Callaghan: This will help relieve the debt of the LDCs. It is not additional in terms of our budget.

Healey: It is additional to that aid which we have already committed.

Giscard: The idea is that we provide an additional effort. We all have difficult budget positions. We can’t look at the budget and simply say this is exceptional aid. The aid must be additional to what was anticipated in behalf of the poorest countries. We should not say this was an amount we were going to give anyway.

Callaghan: We should say we had some funds at the margin which will be allocated for this purpose. They could have gone to some other purpose.

Healey: We are reducing our public expenditures as a result of pressure from the IMF. We salt a little away in our program as contingency reserves. It appears as new money.

Fukuda: This is different from a routine case. It is an emergency situation. We need special measures with regard to the poorer countries—exceptional emergency measures.

Callaghan: I take it that the world development program sounds o.k. to everyone here and should find its way into the Declaration.

Trudeau: We should help the billion people who go to bed hungry. If we do not do it willingly, we will be made to do it unwillingly by OPEC. We agree with Giscard if we are not forthcoming at CIEC, we will be forced to do this through our self-interest. We will pay one way or another. We will help the LDCs or be hurt by OPEC.

Jenkins: We should ensure that funds flow quickly to countries who need it desperately.

Schmidt: We should not hide the fact that this is an additional sacrifice.

Callaghan: As far as our people are concerned, our contribution will be additional when it is published.


Callaghan: We should now take some time to discuss trade issues.

Carter: I would like to introduce Bob Strauss, our Special Trade Representative.

Callaghan: I would like to ask Prime Minister Fukuda to open up the discussion of trade.

Fukuda: I think it is important to keep in mind that any shrinkage in trade will have an immediate impact on the employment situation [Page 110] and affect the business climate everywhere. In the final analysis economic recovery will be through trade expansion, not contraction. We should adhere to the OECD pledge. And we should secure the earliest possible conclusion of the Tokyo Round of trade negotiations. We need to deal with these problems to put the minds of our people at rest.

Jenkins: The MTN developed as a result of the Nixon measures of 1971.5 In 1973 we launched the Tokyo Round officially. In 1975 the actual negotiations began after passage of the US Trade Act. There are now six negotiating groups at work. The EC has made a number of proposals for tariff harmonization on cereals, meats and agricultural products. But the climate has worsened since the Tokyo meeting in 1973.

The EC feels that we should fight against the dangers of protectionism. One way to do this is to go for a successful outcome of the MTN. The Summit needs to give the political impetus. We are ready to enter into vigorous negotiations. A successful outcome is more important than the date of the conclusion. We should use the remainder of 1977 to make rapid progress and have the Ministerial after substantial progress has been made.

On specifics, the EC has a relatively low, harmonious external tariff. Most of our tariffs range between 3% to 17%—only one is above 25%. This is why we want harmonization to reduce the range of countries’ high and low tariffs. Also 90% of our tariffs are bound under the GATT. Some partners here have a much lower percentage of their tariffs bound, and we would like to see them bind them.

Agriculture is an important part of the negotiations, and special considerations apply to it. What we want is an expansion of agricultural trade around a background of stable markets. We have a $5 billion deficit with the US in agricultural trade alone so that our markets are quite open. We believe we can make progress in agriculture in the context of reaching an overall balance at the end of the day. We believe an impetus ford [forward?] is desirable. We are willing to participate vigorously.

Carter: What can we do to expedite the MTN? Why is it bogging down?

Jenkins: First there was the delay in getting the US Trade Act, and then the change in Administrations caused certain hesitations. Then there is the problem of the deteriorating world economic climate. But it [Page 111] is my belief that the way to combat protectionism is to make progress in the MTN.

Fukuda: There are three questions that must be addressed in the Tokyo Round—tariffs, non-tariff barriers and farm products. They are inseparably interlocked and we must proceed together on all three. On tariffs there have been proposals by various parties. We need an agreed formula for tariff reduction. We need not agree here, but we should move forward on this. Once agreed, this will simplify the technical work which will follow and give impetus to the Tokyo Round. We should set a target date of say August or September for us to agree on a formula for tariff reduction.

On non-tariff barriers we must also make progress. These are of a bilateral as well as a multilateral nature. We should quicken the pace of the progress. This is an important goal not only in itself but in the context of broader concerns to avoid protectionism. We must also give consideration to the developing countries in the MTN.

Stammati: There are two reasons to be favorable to the expansion of international trade. Italy has always been favorable to free trade and has gone to considerable efforts to remove protectionist measures. Even though we have deficits, we have made attempts to be integrated in the international trading system. We must fight tendencies in the government and among outside protectionists. There are also dangers in certain sectors or geographical areas who want restrictions. And we must look at the range of restrictions which hinder international trade, certain privileges that are part of legislation in a number of countries, and examine administrative measures that certain countries impose which are frequently less harmful than conventional protectionist measures. We should renew the OECD trade pledge at the end of June.

I agree with Prime Minister Fukuda on the need to intensify the MTN and we hope for substantial progress in the course of the year. We should have balanced results. We should also create liberalization and the safeguards for the nations concerned.

We stressed the importance of trade relations between East and West in the Puerto Rico Declaration.6 The preparatory group expressed the wish for the development of sound financial and trade relations on a mutually beneficial basis. President Carter wants the Eastern Europeans to be in the IMF and this would be desirable. President Carter’s view of this is important.

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Callaghan: To our trade unions what matters is their not being put out of jobs. In a slow economy, new jobs are not easily found. There is a relationship between trade and the ability to create jobs.

Schmidt: I agree on the short-term economic problems that you mention, but protectionism will adversely affect jobs. All who have spoken here have supported free trade. All of us have agreed, however, to measures which discriminate against others. Some have applied import deposits, although we all knew that it was inevitable for Italy to do this at the time.7 I, like the Prime Ministers of Italy and Japan, fully favor free trade and we should be articulate about this in this part of the communique. We ought to state the importance of avoiding any fallbacks to protectionism. Why not say we recommend a renewed commitment to the OECD trade pledge? We are all sinners from time to time. It is good to put in a reference to the OECD trade pledge.

In the draft communique, which I have in front of me, it calls for progress in agriculture, expansion and stabilization, increased cooperation on grains and an agreed approach to grain stocks. It looks like heaven on earth. Is there anything behind it, or is it merely a bureaucratic compromise?

Giscard: The kind of discussion we are having is getting away from the purpose of this meeting. The communique is getting away from the purpose of the meeting. It is getting longer than the meeting. We should not repeat discussions. We need a synthesis on guidelines. It is nonsense to publish a ten-page communique. A four-to-five page communique is enough for our publics.

As regards the aims of the meeting, we should fight protectionism which is linked to the crisis in which we find ourselves. To avoid protectionism, we must draw the consequences of it. In the MTN, we should aim for a symmetrical solution. In trade, we must have a symmetrical solution. Access to markets should be comparable. We should attempt to ensure a better balance in the system of freedom of trade.

On the matter of trade unions, if we merely recite 19th century language of free trade, the unemployed will not understand. We should say we are against protectionism but are aware of the new problems of organizing our economies. We cannot change the market immediately, but in order to fight inflation we need better organization of the free-dom of exchange.

We all have moral views and are all aware of the idea of sin. It may be noble to create a deficit but the result on trade is the same. Neither a [Page 113] structural surplus nor a structural deficit is good. We need a maximum of symmetry in rights and obligations.

Carter: I agree that we should have a briefer paper. We should ensure that people know that an increase in trade is a prerequisite for internal prosperity. We want to discourage protectionism and to expedite the Tokyo Round by establishing its priorities. I am aware of the complications which unemployment poses for trade negotiations. In the US, the unions used to openly advocate free trade and now they advocate protectionism. I have withstood their pressures and not without a certain degree of pressure. Labor deplores my actions. We need to avoid any evasion on this subject. I prefer the strongest possible language. I have no objection to mention of the OECD pledge but it is important that it be seen as only one mechanism.

Blumenthal: I also want to stress the need to give impetus to the trade negotiations. It is important to go beyond the mere affirmations of the past. There are three key areas—a tariff-cutting plan, agriculture and non-tariff barriers. In the first two the deadlock is on the rules of the negotiation rather than on the negotiation itself. On agriculture there is a need to break the deadlock and agree on how to negotiate—to break the deadlock on the rules of the game. We can have a compromise between expansion and stabilization. There should also be an effort to develop stocking arrangements.

MacDonald: We have to be concerned about balanced results, which Mr. Stammati raised. We should convince people to expect benefits through additional trade rather than just costs in terms of jobs. I disagree with President Giscard that we should have a symmetrical pattern of trade. We in Canada have a limited number of exports in primary problems [products?]. We must take account of the job issue and the asymmetry of our economies.

We also agree on the need to stress non-tariff barriers, such as government procurement. Our problems are caused as much by non-tariff barriers as by tariffs.

Giscard: The communique should express the content of our discussions.

Callaghan: We should confront the realities of the problem. Free trade and the removal of trade barriers are best for the Free World. Our levels of unemployment are around 5%, but the men out of work are 100% unemployed. If we want to keep to a system which is in the best interests for all of us, we will have to pay attention to adjusting workers to new jobs.

Strauss: I understand that what goes on at the MTN is not likely to reduce unemployment. But a failure to do something positive will add to our unemployment problems. We need a positive and firm thrust in behalf of movement in the MTN without prejudicing the positions of [Page 114] any of the parties here. We must, for instance, come to grips with issues such as subsidies and other problems which affect our trade relations.

Callaghan: We want to see an expansion of world trade and believe that the present round of negotiations will contribute to this. We also believe that protectionism will hurt jobs and the economic growth.

MacDonald: But we should also remember your point that workers who are unemployed are 100% out of work.

Healey: While at the moment we are all fighting unemployment, we should recognize that we cannot solve unemployment by allowing inflation to revive. Also, a precondition of expansion is free trade and unless you can diminish trade barriers, you cannot get expansion. Likewise, prosperity is a condition to moving toward free trade. We should say we recognize this interdependence. This framework is valuable when we get home.

Giscard: We need an organized and orderly expansion of trade and organization of liberal trade.

Trudeau: We spent yesterday and today shooting down interdependence and free trade. We talked about the need to deal with OPEC and how to tamper with the market to help the LDCs. Now we ask how to tamper with the market to increase employment.

Callaghan: Obviously nations must safeguard themselves when their jugular is attacked on such matters as oil. But unless we can keep barriers as low as possible, we cannot get the best distribution to contribute constructively to the well-being of our peoples.

Healey: Clearly there are structural problems within countries and between countries, and the problem of finite resources. We want the market to regulate relations among us.

MacDonald: Free trade, yes, but free trade in manufactured products? There should be a broad discussion of this and we should discuss the social problems which emerge.

Carter: The text that we come up with should be specific. If it is bland, it will say nothing. We should ask our drafters to be as specific as possible. We want the Tokyo Round to be productive; it must equal the results of the Kennedy Round. That will be an important achievement, although perhaps the results could take different forms from the results of the Kennedy Round.

Callaghan: We give one another strength by our collective commitments. We have protectionist pressures from our industries; and we resist these pressures by pointing to what is happening elsewhere.

Jenkins: I agree that we need a short communique. We should not get into complicated GATT negotiations. At the same time, it would be a pity if the communique contained nothing of substance. We should put ourselves in a position where it is easier for governments to resist [Page 115] pressure from protectionists. We should say we are not standing still but are going ahead with the MTN.

Schmidt: The Declaration should be short and impressive. It should stress our commitment toward open world trade in order to supply ourselves with a weapon against protectionism.

Jenkins: If we try to stand still, we will go back.

Giscard: Mike Blumenthal and I have discussed these things before 1973, but today the situation is different. In Europe there are seven million people unemployed. If we keep talking about open borders, we will be accused of ignoring the situation. The firm stand against protectionism is impressive. If we stand firm and open our frontiers, we must take into account these problems. We must take into account the need for social symmetry. We know there already have been agreements between Italy and Japan, and the UK and Japan. We must take social problems into account. We should move ahead on an EC mandate to achieve progress, but we should take care not to dis-stabilize the social situation. This should be in the communique.

Carter: I disagree with the notion that our unemployment results from the fact that we have, as President Giscard said, thrown our borders open. Factories are not closing because of greater world trade, although I sense that President Giscard feels this way. Factories close because of constraints on world trade. I am trying to boost our economy and I want growth. I want the opportunity to sell abroad and to buy from you. But we can also survive on our own resources if there were a move toward global protectionism. I am not for dropping all barriers and totally throwing our frontiers open, but at the same time I do not believe that our factories are closing because of trade.8

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Trip File, Box 1, President, Europe, 5/5–10/77: Memos and Cables, 5/5–20/77. Secret. The minutes of the Summit’s final session on the afternoon of May 8, which covered Summit follow-up and the Summit declaration, is in the Carter Library, National Security Affairs, Staff Material, Special Projects, Henry Owen File, Box 27, Summit: London: 5/77.
  2. Robert Boulin was not the French Minister of Finance but the Minister Delegate to the Prime Minister in Charge of Economy and Finance.
  3. Reference is to the CIEC Ministerial meeting held in Paris May 30–June 3.
  4. See footnote 6, Document 24.
  5. On August 15, 1971, Richard Nixon announced his administration’s New Economic Policy, whose measures included the suspension of the dollar’s gold convertibility and the imposition of a 10 percent surcharge on dutiable imports. For the text of Nixon’s announcement of the New Economic Policy, see Public Papers of the Presidents of the United States: Richard Nixon, 1971, pp. 886–891.
  6. For the text of the Joint Declaration issued on June 28, 1976, at the end of the Puerto Rico Summit, see Public Papers of the Presidents of the United States: Gerald R. Ford, 1976–77, Book II, pp. 1922–1926.
  7. On May 5, 1976, the Italian Government announced an import deposit scheme in order to dampen the demand for imports, a measure intended to combat the declining value of the lira.
  8. The Joint Declaration issued in London on May 8 at the conclusion of the Summit and the accompanying appendix is printed in Public Papers of the Presidents of the United States: Jimmy Carter, 1977, Book I, pp. 819–824.