Foreign Relations of the United States, 1964–1968, Volume VIII, International Monetary and Trade Policy

120. Memorandum From Secretary of the Treasury Fowler to President Johnson¹

Washington, April 22, 1967.

SUBJECT

• Meeting with Chancellor Kiesinger²

Since I did not want to interrupt your hectic schedule to talk about the matter covered in the attached papers, I thought at least I should let you know:

1. I have indicated to Secretary Rusk in Attachment A the negotiatory background which makes highly important some mention by you to Kiesinger of our disappointment in the German role at the Munich meeting of the EEC Finance Ministers last week.

In my judgment, if you do not so indicate to Kiesinger, the Germans will read your omission to mention it as a signal that you personally are not unhappy with their performance; and they will take any sign of unhappiness from other U.S. sources as a mere reflection of technical Treasury discomfiture which is not to be given any great weight.

2. I heartily subscribe to the Bator memorandum to you, a copy of which is Attachment B.

Henry H. Fowler

Attachment A

Washington, April 22, 1967.

Memorandum From Secretary of the Treasury Fowler to Secretary of State Rusk³

SUBJECT

• International Monetary Reform

You are familiar with the fact that the President’s letter to Chancellor Kiesinger stated his hope that the German Government would support agreement on a contingency plan for the creation of new reserves at the September meeting of the International Monetary Fund.⁴ The Chancellor’s reply stated that the German Government would “contribute to the best of its ability.”⁵

I wrote two letters to Economics Minister Schiller, outlining the American position and strongly expressing our opinion that a meaningful plan for reserve creation should be agreed upon by September.⁶ I said equally strongly that I hoped the Common Market Ministers would not agree on a weak plan for international monetary reform just in order to accommodate the French.

Walter Heller followed up my first letter to Schiller with a three-hour visit, in which he made these same points and told Schiller that a German position half-way between the United States and France was not a useful position. I also wrote a letter to Minister of the Treasury Colombo, of Italy,⁷ making the same points I made to Minister Schiller, and we had conversations with van Lennep of the Netherlands to this same end.⁸

At the Common Market Ministers meeting on April 17, Italy and the Netherlands stood up for a good plan, while Germany moved to a position closer to the French.⁹ Schiller and Debre had had a meeting prior to April 17 and apparently had agreed on a German-French position, which was supported by Belgium.

With the negotiations now moving into their critical phase, it is a matter of high importance that the President make known to the Chancellor that we regard the German position at Munich as counter-productive. It produced a Common Market attitude on reserve creation which is far short of what the world wants and needs. Failure on the President’s part to make this point strongly probably would convince the Germans that what they did had American approval and could result in an impasse in the negotiations.

The attached memorandum from Francis Bator to the President makes the points clearly and succinctly, and I cannot improve on it. I hope you will do your best to get the President to say to the Chancellor what Francis has outlined.

Henry H. Fowler ¹⁰

Attachment B

Washington, April 22, 1967, 11:30 p.m.

Memorandum From the President’s Deputy Special Assistant for National Security Affairs (Bator) to President Johnson ¹¹

SUBJECT

• Important points for Kiesinger, Wilson and Moro

I know that you don’t want to talk business on the trip. However, if you do not make a few key points on the hot issues,—particularly Kennedy Round and international money—we could suffer at the bargaining table right in the middle of the crunch.

I. Economic Negotiations: Kennedy Round and International Money.

Kiesinger and Moro are key figures on both fronts. Both are for success in the Kennedy Round, but don’t realize what a disaster failure would be in terms of US-European political relations. On international money, the Italians took our side in the recent caucus of EEC Finance Ministers, and should be thanked. The Germans ganged up with the French. If we can’t bring them back, the negotiations will fail and the balance of payments will become a much more serious political constraint on your domestic and foreign policies—we might even face a gold crisis.

Points to be made (Kiesinger and Moro):

• —Worried about two great economic negotiations coming to head soon. (Kennedy Round in next two weeks, international money in next 3–4 months.)
• —don’t wish to talk specifics on sad occasion; Bill Roth and Joe Fowler representing my position very precisely;
• —But, failure of either would be major political trauma in US-European relations.
• —don’t want to sound gloomy, but U.S. must have major movement from present positions on both fronts if President is to withstand domestic political pressures threatening to bring on new wave of protectionism and isolationism:
  • —Vital to have EEC movement on agriculture in Kennedy Round. Need further loosening on grains and tariff items. (U.S. pleased by EEC decision to put up 3 million tons for food aid, but needs much greater.)
  • —On international money, must have agreement on some kind new money that can be counted as part of reserves. New credit won’t do. (Germans sided with French for new credit rather than new money. Italians resisted and should be thanked.)
  • —Hope Kiesinger and Moro will keep personal track of both negotiations. can’t overstress danger of angry, divisive, isolationist political reaction in U.S. if either fails. Would damage political cohesion of Atlantic Community.¹²

1. Source: Johnson Library, White House Confidential Files, CF, TA 1 (1967–1969). Confidential.
2. On April 23, George E. Christian announced that President Johnson would go to Germany to attend the funeral of Konrad Adenauer and that he would call on Chancellor Kiesinger.
3. Confidential.
4. See footnote 4, Document 119.
5. Not further identified.
6. For the first of these letters, see Document 119. In the second letter, dated April 14, Fowler expressed, among other things, his “great concern” that at the forthcoming meeting of the EEC Finance Ministers in Munich “proposals might be endorsed, and possibly put forward publicly, by the EEC Ministers in very general terms (based upon unspecified and perhaps very limited common ground)—proposals which would not provide a basis for an adequate drawing rights scheme, but would appear to rule out, so far as the EEC is concerned, the alternative of reserve units.” (Johnson Library, Fowler Papers, International Countries: Schiller Meeting of June 19, 1967, Box 39) Copies of the April 14 letter from Fowler to Schiller were distributed to members of the Deming Group as DG/67/131. (Washington National Records Center, RG 56, OASIA Files: FRC 75 A 101, Deming Group)
7. Not found.
8. No record of these conversations has been found.
9. F. Lisle Widman, Director, Office of Industrial Nations, Department of the Treasury, sent memoranda to Under Secretary Deming reporting on the April 17 meeting, based on information he received by telephone from Treasury Attache McGrew in Paris. (Papers DG/67/102 and DG/67/104, dated April 18 and April 19; Washington National Records Center, RG 56, OASIA Files: FRC 75 A 101, Deming Group)
10. Printed from a copy that indicates Fowler signed the original.
11. No classification marking.
12. Following the meeting in Bonn between President Johnson and Kiesinger on April 26, the two made public remarks indicating that they had talked about a wide range of issues of mutual concern, including international monetary matters. See Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1967, Book I, pp. 462–463. No record of their private conversations has been found.