Foreign Relations of the United States, 1977–1980, Volume XXVII, Western Europe

111. Memorandum of Conversation¹

Washington, October 5, 1978, 12:05–12:15 p.m.

SUBJECT

• Summary of President’s Telephone Conversation with Chancellor Helmut Schmidt

PARTICIPANTS

• President Jimmy Carter
• PRG Chancellor Helmut Schmidt

The President thanked Chancellor Schmidt for his hospitality to Zbigniew Brzezinski, saying he thought Brzezinski had learned a great deal from their talks.² The Chancellor thanked the President for sending Brzezinski and said he found the talks very useful.

The Chancellor understood the positive prospects for concluding SALT II this autumn. He hoped that we can move on MBFR as agreed in July. The President reported that he had told Gromyko that the problem was the disparity in data, and (pursuing the idea they had discussed in Bonn), he had suggested to Gromyko that the problem lay in the definition of “troop”. The Chancellor asked if Gromyko had understood. The President said yes. He and Cy Vance had repeated the point several times. He thought that the Soviets want to move, but they cannot admit to false data, so the problem is how to enable them to save face.

The Chancellor noted that his discussion with Brzezinski on grey area problems had been fruitful, and he assumed that Brzezinski and Ambassador Stoessel would be reporting both orally and in writing to the President. It had occurred to both the Chancellor and Brzezinski that it might be necessary to have personal talks between the President, the Chancellor, President Giscard, and Prime Minister Callaghan sometime during the next four months on the present state of Alliance military strategy.³ The written texts on this point dated back eleven years nominally and seventeen years in substance.⁴ The question is whether or not they still mirror the thinking within the several national governments. He noted that Brzezinski would be presenting this idea to the President.

The President said that he and Brzezinski had gone over this idea this morning. (He interrupted himself to say that the Bonn Summit had been the best organized conference he had ever attended, and that the follow-up had been constructive. The Chancellor thanked him for this remark.) The President thought it might be useful to have a meeting of the four of them this winter, perhaps in Bermuda. The Chancellor noted that he would be in the Caribbean anyway immediately after Christmas at the end of December. The President said he would have Brzezinski follow up on this. He thought there need be no large entourage. The four could relax and have informal discussions.

The Chancellor repeated his congratulations to the President on the merits of the Camp David summit. He had written to Assad to emphasize the necessity of conclusive follow-up to Camp David. He would also be in touch with the Saudis and with Hussein, who will soon be visiting Bonn. He offered to do anything he could to help toward a conclusive follow-up, particularly if he got a hint from the US Administration about how he could be most useful. The President noted that the next move will be the meeting between Israel and Egypt in Washington, and he expected they would conclude a treaty on Sinai without delay. At that point, he suggested, he would give the Chancellor an update on the progress. Then it would be time to move the Saudis and Jordan into the process. The Chancellor offered to be of help with the Saudis, noting that he had good personal relations with Fahd. The President noted that the Lebanese situation is a threat both to the peace and to the Middle East treaty. He hopes to get Israel and Syria to help hold down the bloodshed.

The Chancellor referred to the President’s statement at the Bank-Fund meetings.⁵ He welcomed the President’s clearcut words on inflation, on reducing imports, on raising exports, and on the stability of the dollar. He noted, in particular, the President’s statement of trust that Europe would fashion the European monetary system in a way that will also strengthen the international monetary system and the IMF. The Chancellor is confident that Europe will in fact do so, but he had noted a degree of reserve among some American experts on this point. He wished to suggest the idea of the President’s sending a personal representative—an expert in international economics with a political bent—to see him, the head of the central bank, the minister of finance, perhaps even Giscard, so that they could provide him with a picture of the psychological and political side of the problem, and so that the President could be relieved about the consequences of the European monetary arrangements. The President thanked the Chancellor for the invitation, and said he would send someone. The Chancellor said that the person need not be someone in the Administration. It could be a private citizen, for example, an international banker with political experience. They were thinking of McCloy or someone in that class. The President said that he would speak with Cy Vance, and Charlie Schulze, and Mike Blumenthal and agree on whom to send.⁶ He wanted to make clear that he has no concern about the proposed European monetary arrangements, only interest. The Chancellor said he understood that, but he wished to use the visit of the personal representative to offer to the President 100 percent assurance that there is no hidden motivation to the European monetary proposal, and no hidden side-effects that would be disadvantageous.

The President noted that he had just vetoed a public works bill as inflationary, the first time a President had had the nerve to do so. There would be a vote on his veto within the hour.⁷ We had succeeded in cutting the budget deficit to $40 billion. The Chancellor interjected that that was even lower than his own deficit. The President reported he had had Congressional cooperation, and that there was a mood of increased interest in this country in fiscal responsibility, in holding down the deficit, in increasing exports, and so on. He thanked the Chancellor for his support from afar on these matters. The Chancellor reported that they were in the middle of Parliamentary implementation of the FRG’s Bonn pledges; they were going to the maximum possible limit of deficit spending.

The President encouraged the Chancellor to work with Prime Minister Callaghan and President Giscard to ensure a constructive outcome of the MTN. He noted that he faces strong protectionist pressures, and that he may even have to veto the EXIM Bank bill because of a textile protectionist rider.⁸ If the MTN should break down, it would be very difficult for him to resist these pressures. The Chancellor noted that he had asked Brzezinski to use a private channel to send him a paper on the real facts of this matter and how he (the Chancellor) could be of help. The President noted that Giscard and Callaghan would listen to the Chancellor.

The President concluded that we would move on the possibility of a winter meeting of the four leaders. The Chancellor believed that Giscard may be thinking along the same lines, and the President believed that Callaghan is, too. (The Chancellor suggested jocularly that the President had the Prime Minister in his pocket.) The President and the Chancellor exchanged mutual thanks.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 36, Memcons: President: 10/78. Secret; Sensitive. Carter spoke to Schmidt from his study off the Oval Office. In an October 4 memorandum to Carter on the economic issues that might come up in the conversation, Owen wrote: “You may want to point out to Schmidt that these problems—waiver authority, textiles, etc.—underline the central point you want him to make to Giscard: the alternative to a successful MTN is not a continuation of the status quo, but a revival of protectionism that would do great damage. Hence the need for French negotiating positions that will enable us to conclude a successful agreement by December 15, as pledged at the summit.” (Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 36, Memcons: President: 10/78)
2. See Document 110.
3. See footnote 5, Document 110.
4. Apparent reference to MC–14/3, a NATO Military Committee report on the “Overall Strategic Concept for the Defense of the North Atlantic Treaty Organization Area,” which was approved on December 12, 1967. (Gregory W. Pedlow, ed., NATO Strategy Documents: 1949–1969, Brussels: NATO, 1997, pp. 345–370)
5. See Document 110, footnote 7.
6. In an October 19 memorandum to Carter, Owen and Brzezinski suggested that Carter send George Ball to deliver a letter of congratulations to Jean Monnet on the occasion of his 90th birthday and that Ball could meet with Schmidt, who also intended to call on Monnet. Carter approved both suggestions. (Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Box 12, Europe 1978) McCloy met with Schmidt on November 30. Their talk covered FRG expenditures of DM to support the dollar, the statute of limitations on murder and Nazi war crimes, and the Soviet military buildup as well as EMS. (Telegram 22097 from Bonn, December 1; National Archives, RG 59, Central Foreign Policy File, P850104–2473)
7. Carter vetoed the public works appropriations bill (H.R. 12928) on October 5; later that day the House voted to sustain Carter’s veto. (“Remarks on Vetoing H.R. 12928,” and “Message to the House of Representatives Returning H.R. 12928 Without Approval,” Public Papers: Carter, 1978, p. 1706–1710; Mary Russell, “House Sustains Carter’s Veto,” Washington Post, October 6, 1978, pp. A1, A6)
8. Reference is to the Senate’s September 29 vote to amend the authorizations bill for the Export-Import Bank to prohibit any concessions on textile tariffs in the MTN talks. On November 11, Carter vetoed a different bill to which the textile amendment had been attached. (Herbert Rowan, “Textile Tariff Move Alarms White House,” Washington Post, October 2, 1978, p. A20; “Memorandum of Disapproval of H.R. 9937,” Public Papers: Carter, 1978, 2008–2009)