Foreign Relations of the United States, 1969–1976, Volume III, Foreign Economic Policy; International Monetary Policy, 1969–1972

32. Memorandum From the President’s Assistant (Flanigan) to the Staff Secretary of the National Security Council¹

Washington, December 3, 1969.

RE

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Our balance of payments has been in deficit for a decade. During the recent election campaign the President strongly criticized the Democratic administration for not having taken steps to cure this serious problem. Since we have been in office we have already had a modest relaxation of foreign investment control. In the first year of this Administration the balance of payments deficit has risen dramatically to a $10 billion deficit on a liquidity basis, two and one-half times the previous peak figure. The outlook for 1970 is not encouraging.

Our apparent unwillingness to take strong action in this area as opposed to the strong action taken in other areas, such as monetary and fiscal policy, raises questions in the US and abroad as to the seriousness with which we regard this problem.

Based on the above, I strongly recommend liberalization for investment in LDCs only (set forth as No. 3 on page 2 of Dr. Kissinger’s memo).²

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 309, Balance of Payments. Confidential. Document 31 and its tabs are attached.
2. An attached December 12 handwritten note from John Brown to Haig notes that this memorandum was received after the President had taken an action on the recommendations in Kissinger’s memorandum (Document 31), but that since the President had approved two different courses of action, “this issue may still be alive. Flanigan wants you to know that he feels strongly on his recommendations.”