Foreign Relations of the United States, 1977–1980, Volume XXII, Southeast Asia and the Pacific

259. Memorandum of Conversation¹

Washington, January 2, 1979, 11 a.m.–noon

SUBJECT

• The President’s Meeting with Australian Prime Minister Fraser

PARTICIPANTS

• U.S.

  • President Carter
  • Secretary of State Cyrus Vance
  • Zbigniew Brzezinski, Assistant to the President for National Security Affairs
  • Henry Owen, Special Representative of the President for Economic Summits
  • Richard Holbrooke, Assistant Secretary of State for East Asia
  • Evelyn Colbert, Deputy Assistant Secretary of State for East Asia
  • Nicholas Platt, Staff Member, NSC
  • Guy Erb, Staff Member, NSC

• Australia

  • Prime Minister Malcolm Fraser
  • Foreign Minister Andrew Peacock
  • Alan Renouf, Ambassador to the U.S.
  • Geoffrey Yeend, Secretary of the Department of the Prime Minister and Cabinet
  • David Barnett, Press

President: Mr. Prime Minister, I very much appreciate your statement on our normalization of relations with Peking and I thank you for it.

Fraser: The move was inevitable. It was just a matter of time and finding leaders willing to grasp the nettle.

President: The Chinese were ready. During the last few weeks of the negotiations they were accommodating. They accepted our draft communique without change.² We are proud of this development. We think it will be beneficial to peace and stability. I would like to assure you that we will be careful. We know how concerned the Soviets are.

Did you have a good meeting with Manley and Schmidt?

Fraser: Yes. The Manley Summit grew out of a conversation between Manley and Schmidt in Germany.³ In fact, Schmidt had suggested the meeting and it had been rescheduled for him.

The most interesting aspect of the meeting was that all participants recognized that inflation damages the prospects for the growth of trade and markets. It limits the capacity of the developed countries to provide aid and access to their markets. The participants recognized that if there is to be a North-South breakthrough it won’t depend on taking something away from someone else but on enlarging the pie. I had not expected developing countries to agree on the importance of inflation and growth but they did.

President: You have had a remarkable success. This is a difficult point to make in the world community and even harder at home. Convincing the poor and the minorities that their interests are served by the fight against inflation is a tough task. I am impressed that the developing countries saw that point.

Fraser: The developing countries were vastly concerned with the Common Fund. They believe it will achieve more than it probably will. The Australian Government believes that it will be a useful adjunct to commodity stabilization policies. Even Schmidt recognized the importance of the Common Fund and indicated that he would agree with the majority view on this issue.

President: North-South issues are growing in importance. In Panama I had several North-South discussions with LDC leaders, including those of Costa Rica and Jamaica.⁴ Manley, is a thoughtful, forceful, and moderate person. However, in the United Nations, demands by the developing countries are often excessive and abusive. A rational debate is hard to achieve. Your bridge role in the North-South dialogue has been useful.

Fraser: I tried to stress the need for compromise at the Jamaica Summit. With regard to the second window of the Common Fund, I informed the developing country participants that there is no hope of financing that window unless its purposes are clearly defined.⁵ There is no pie in the sky.

President: There is a difference between the more advanced developing countries and those whose economies are very dependent on a single commodity.

Fraser: The particular situation of the oil producing countries puts them in a separate category.

President: There is a possibility of an expanded role for the IMF that might help address the problem of export instability. We have begun to distinguish between the political aspects of the North-South dialogue that are useful to attract attention, and those which are purely economic.

Fraser: The Australian position and strong views on the Common Fund are due to our own experience as commodity exporters. Fluctuations can upset plans and make the development process very difficult.

President: (Laughing) Are we demanding too much Australian beef?

Fraser: (Laughing) Not yet, Mr. President. We still have not made arrangements for the stabilization of commodity prices.

President: We have made some progress on individual commodities like sugar and coffee. The prices of these commodities have gone wild, with devastating effects to the economies of the producing countries.

Fraser: Such instability fuels inflation.

President: As a major sugar producer, we have to face domestic political problems when we examine international sugar questions.

What is your experience with Japanese import restraints?

Fraser: We have considerable trading experience with Japan, though import restraints are not a major problem. Last year we had trouble with sugar shipments.

Peacock: The Japanese trade balance is quite different with us.

Fraser: In fact, we had a group of ships in the harbor loaded with sugar which the Japanese refused to unload until we had settled some differences on coal contracts. The Japanese believe that contracts should be changed when considerations of price and quantity change.

President: Do you know Prime Minister Ohira?

Fraser: Yes. He is somewhat more reserved than Fukuda.

President: I met him briefly before he became Prime Minister. We don’t expect any major policy changes. We note that Foreign Minister Sonoda will be kept on.

Fraser: We are very happy that Sonoda will remain the Foreign Minister.

President: We are pleased with our new base agreement with the Philippines.⁶ It is the end to a long and drawn-out discussion. We have been forced to operate under very serious constraints. If we conclude a liberal agreement with one country, we will be under pressure to renegotiate from all the others with whom we have base agreements.

Fraser: It is a very positive development, and like normalization, one which we regarded as predictable over the long run.

President: There was some doubt, however, that we would be able to agree, but we now hope to conclude the agreement shortly.

In South Korea we have a potential avenue to the PRC. We are concerned about North Korea. When Vice Premier Deng comes to Washington we will be talking about this.

Fraser: I was given a briefing this morning by the Director of your CIA on the increases in the North Korean order of battle, and I am concerned about the build-up.

President: The trend is ominous. However, the North Koreans have in recent months moved closer to the Chinese. Deng Xiaoping should realize that were he unable to restrain the North Koreans, he would be destroying everything that he had achieved.

Fraser: Could you not argue that your normalization of relations with Peking will move the North Koreans toward the Soviet Union?

President: It could. We don’t know yet what the impact of the Soviet-Vietnamese Treaty⁷ will be. For the time being, we plan to hold off normalization with Hanoi. What is your assessment of the situation in Indochina?

Fraser: It is disturbing. The Vietnamese have shown great capacity for persistence in the past.

President: What is your relationship with Hanoi?

Peacock: We have an Embassy in Hanoi, a modest aid program, and a good working relationship. We are concerned over the extent to which either the Soviet Union or the Chinese become embroiled in the Cambodian conflict.⁸ We wonder whether China could accept Cambodia coming under Hanoi’s control.

Holbrooke: If Vietnam had intended to be genuinely nonaligned, the treaty with the Soviet Union was a giant step in the wrong direction. The establishment of the Cambodian Front Organization and the attack on Kratie are further such steps.

President: Perhaps Secretary General Waldheim will have some success. When does he travel to the area?

Vance: At the end of the month.

Fraser: None of us believe we can deter Vietnam from causes they want to pursue.

President: We have learned that.

Holbrooke: China is very unlikely to take direct military action but can squeeze the Vietnamese in other ways.

Fraser: You cannot rule out the possibility of a Chinese military intervention.

Vance: No, you cannot rule that out. We have seen them do it before.

Peacock: Is it not possible that the tendency by the United States to drag out the normalization process with Vietnam might force Hanoi closer to the Soviet Union? Could you not delay too long?

President: The refugee problem is very unpopular in the United States. Our efforts to normalize relations with Hanoi have been complicated by the invasion of Cambodia, the signing of the treaty with the Soviet Union, and the outflow of refugees. Speaking of refugees, we appreciate the role that you are playing, and the numbers you are taking. Unfortunately, I think the problem is going to get worse.

Fraser: I agree. The matter of Soviet intentions in Indochina places a very serious question mark in our minds.

President: We hope to have a SALT Agreement soon and then sit down and talk with Brezhnev about this problem. The Soviets have been negotiating in good faith. At Cy’s last meeting, the Soviets interjected some new elements, apparently wanting to delay conclusion of the agreement until after Deng Xiaoping’s visit.⁹ We had discussed all the other issues ad nauseam.

President: I would like to hear your thoughts about the Iranian situation and what we might do.

Fraser: Keep your naval vessels in the area. None of us saw the nature or the intensity of the problem. We are concerned that the balance of power will be altered if the Shah does not survive, and are very unhappy with a difficult situation.

President: We have maintained in private and public our loyalty to the Shah. To get ourselves further into the dispute would be counterproductive. We have been interested to see Khomeini make anti-Soviet as well as anti-government statements. If Bakhtiar can put together a government, there is a chance of maintaining equilibrium after a period of adjustment.

Peacock: It is really a question of adopting the policy best suited to limit damage to our interests.

President: The Shah has been indecisive and at times lost control of himself. We are as helpless as you or anyone else to intrude.

Brzezinski: You have, however, taken the lead in discouraging others from meddling in the situation. The best we can hope for is the emergence of a government like that of Soares in Portugal, but you could also envisage a less positive development, something more closely resembling the Allende government.

President: How would you describe your relationship with Pakistan?

Fraser: Friendly but not deep.

President: We are concerned about Pakistan. We have tried to prevent an infusion of advanced weapons into the area, which has hurt our relationship. We have a better relationship with India now. I find that I get along very well with Desai.

Fraser: He is a determined individual. We found it difficult to develop practical relationships with India. Our trade is very limited.

President: India has seemed averse to developing major business and economic relationships with other countries. This may be diminishing.

Peacock: The Prime Minister has used the Commonwealth, in which India participates, as a bridge between developed and developing countries. They see a bridging role within the Commonwealth for Australia. The Commonwealth, although it lacks the super powers, is a microcosm of world relationships. Sometimes, during informal discussions within the Commonwealth it was possible to cut through areas which meet obstacles in other organizations or discussions.

Fraser: The Commonwealth plays a role comparable to the Manley meeting. Whatever one thinks of that meeting and who attended, we do have a better understanding of each other as a result of it, which will help when we try to negotiate agreements.

President: What are your thoughts on the Middle East? We are so deeply involved that we sometimes lose perspective.

Fraser: We admire very much your efforts at Camp David and subsequently to further peace.¹⁰

President: It is a thankless task which we would be glad to turn over to you. (Laughter)

Fraser: You achieved a significant accord. Israeli transigence has been the principal problem as we have seen it.

President: We will be persistent. Sadat has gone about as far as he can, given Arab pressures. Begin must operate in a democracy. His own party won’t even support his actions at Camp David, presenting him with serious political problems. Cy’s recent meetings with Dayan and Kahlil were constructive. Dayan took back to Israel a clear sense of the constraints on the Egyptians.

Vance: We have recently received word from Egypt that they are willing to resume negotiations. If so, we would recommend that they resume at the drafting level. Later we can move to a higher level if progress warrants.

President: We look at our relationship with you as being good and sound. Is there anything that we can help with at this point?

Fraser: I agree that our relationship is sound. We need some help, however, on one aspect. The Japanese have contacted us through a number of channels expressing the view that we should combine with them and you to develop a consultative mechanism on Pacific affairs. The idea of greater cooperation in the Pacific by the major powers involved is a good one.

President: We should explore this further. There was a revulsion in the United States regarding involvement in Southeast Asia following the fall of Saigon. We have worked hard to repair that wound. The Korean Peninsula is still a problem. PRC relations with both the United State and Japan have improved. As a matter of fact we encouraged both the Japanese and the Chinese to conclude the Peace and Friendship Treaty. ASEAN is greatly strengthened, thanks to your beneficial influence. We have encouraged Fukuda to play a bigger role in the region, and he has responded. Has Mike Mansfield been to Australia?

Fraser: No.

President: That might be a good next move. Mike is in many respects our senior man in Asia. Perhaps he might visit to discuss with you and Philip Alston our policies in the region.

Fraser: Japan is indeed reticent to play a role, and sensitive about its past. We should encourage them to be more active.

President: The same is true of Germany, which is similarly constrained by its World War II image.

Peacock: Fukuda and Sonoda have said that if we want them to play a larger role in the region this can only be done in conjunction with the United States.

Vance: That is good. We encouraged them to move on the Peace and Friendship Treaty when Fukuda was here. They still feel that people distrust them.

Fraser: They do.

President: Let’s see when it’s convenient for Mike to go to Australia. He is a fine gentleman.

What is the state of uranium production in Australia?

Fraser: All projects are completed. Bilateral safeguard treaties are now being negotiated with our trading partners. We have had problems as a result of differences in bilateral requirements and Euratom standards. We maintain our commitment to non-proliferation and share your views on the restraint of reprocessing.

President: We would like you to supply India with nuclear fuel and help us get out of that business. (Laughter) Your attitude on proliferation and reprocessing has been very helpful to us.

Fraser: The Europeans have been very unforthcoming in the MTN. The only result of the MTN will be perhaps to stop some protectionism, which would be some advantage. But the outcome of the MTN could also heighten North-South tensions. If there is no progress on commodity issues and no MTN benefits for developing countries the attitude of the developing countries will be critical of the developing countries.

Owen: The MTN does have something in it for the developing countries. The EC has been fairly forthcoming but France is holding out. Substantial results have been achieved in the industrial and agricultural areas. In addition, there are benefits for the developing countries in the MTN package. When negotiations resume we will make further efforts with the developing countries.

Fraser: We are skeptical of the benefits of the subsidies code.

President: We would have liked to have achieved more, but the language was the most that could be obtained from the European community. The MTN is on the “non-agenda” for Guadeloupe.¹¹ Schmidt agrees with the importance of the MTN for the world economy.

Fraser: The European Community is subsidizing exports even to the Australian market, a situation that we find unacceptable but difficult to remedy.

President: I’m delighted that you were able to visit. Please don’t hesitate to keep in touch on any problems you might have. I feel that way toward you.

Fraser: If there is any possibility of your coming to our part of the world you would receive a very warm welcome in Australia.

President: I would love to do this.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 37, Memcons: President, 12/78–1/79. Confidential. The meeting took place in the Cabinet Room at the White House. Fraser was in the United States for a private visit January 1–3.
2. For the text of the communiqué, see Foreign Relations, 1977–1980, vol. XIII, China, Document 171.
3. Regarding the summit on North-South issues organized by Jamaican Prime Minister Manley, see Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy, Documents 319, 323, and 324.
4. Carter traveled to Panama July 16–17, 1978. See ibid., Document 306.
5. Negotiations on the Common Fund took place in Geneva November 14–30, 1978.
6. See Document 326.
7. Reference is to the USSR-Vietnamese Treaty of Friendship and Cooperation, November 3, 1978.
8. Vietnam’s invasion and occupation of Kampuchea began on December 25, 1978. See Documents 36–39.
9. Vance and Gromyko met in Geneva November 22–23, 1978; see Foreign Relations, 1969–1976, vol. XXXIII, SALT II, 1972–1980, Documents 230 and 231. Deng visited Washington January 28–February 5. See Foreign Relations, 1977–1980, vol. XIII, China, Documents 201–210.
10. The Camp David Accords were signed on September 17, 1978.
11. Carter met with Giscard, Schmidt, and Callaghan at Guadeloupe January 4–9.