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

64. Memorandum From C. Fred Bergsten of the National Security Council Staff to the President’s Special Assistant for National Security Affairs (Kissinger)¹

Washington, April 21, 1971.

SUBJECT

• Your Lunch With Pete Peterson—April 22

There are no specific issues on which decisions are pending which you need to raise with Pete. You might, however, wish to stress to him your interest in early submission of our generalized tariff preferences legislation in view of the implications for Latin American policy. You might also wish to get his reading on the outlook for success of our latest textile gambit.

There is, however, a deeper and more philosophical point which will continuously pervade your relationship with Peterson: the relationship between foreign economic policy and overall foreign policy. It is roughly accurate to say that foreign economic policy has been the handmaiden of overall U.S. foreign policy throughout the post-war period; all of our great “economic” initiatives (IMF-IBRD, Marshall Plan, Kennedy Round, SDRs, etc) have been undertaken for essentially foreign policy reasons, and foreign policy considerations have dictated the U.S. position on virtually all issues of foreign economic policy.

There is now great and increasing pressure to change this relationship. In fact, it probably must be changed to some extent—to increase the “economic” content of foreign economic policy—for the same reasons that we are now seeking to share our global role in political and security matters. The creation of Peterson’s job, of course, is an important indicator of this trend, and adds to the pressures for moving in such a direction.

However, some go so far as to say that foreign policy should now become the handmaiden of foreign economic policy;² that we should use our political and military muscle to pursue basically economic objectives. Pete himself believes that a trend in this direction is inevitable. There is certainly wide support for it in the Congress.

The obvious answer is that a new balance must be found between the economic and foreign policy components of foreign economic policy. This will often invade the heart of foreign policy, on such issues as German offset, general trade policy and therefore overall relations with key countries such as Japan and the Common Market; specific commodity problems such as meat, textiles, shoes, sugar, etc.; and East-West trade policy, on which the President has asked for a special CIEP meeting.

The important thing at this point is simply for Pete to know that you are aware of this problem, and the need to work it out with him on essentially a case-by-case basis. I see no general formula, or method for getting one, which can resolve the issue on a broader basis. You should make it clear, of course, that you are not prepared to see economic issues dominate foreign policy in areas where our political interests are sufficiently important.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Country Files-Far East, Box 530, Japan Volume IV 1/71-6/71. No classification marking. The memorandum is Tab B to the “Additional Information” memorandum cited in footnote 2 below.
2. On April 22 Bergsten sent Kissinger a memorandum with “Additional Information” for his luncheon with Peterson that day. After commenting on NSSM 122 on Japan (Tab A), Bergsten wrote:

   “Pete also wishes to raise with you major questions about the State Department. He already despairs at State’s ability to carry out negotiations with sufficient toughness to get acceptable results and present a respectable image. He clearly views this as an institutional problem rather than simply one of present personalities, though he is fully aware that present personalities exacerbate the difficulty. He hopefully speaks of getting an Under Secretary who understands economic issues and could hold to a tough line on them.

   “This line of Pete’s thinking raises two problems for you. The first is the substantive problem I mentioned in my memorandum of yesterday (Tab B): his growing desire to use overall foreign policy to pursue economic objectives, which will cause you increasing problems in the future.

   “The second is the problem of who does what in this field. I am more pessimistic than Pete about State. It is my view that their internal pressures will always cause them to soften in tough negotiations, whether on economic or other issues. I therefore suggested that Pete essentially forget about State and revitalize the Office of the Special Trade Representative by replacing Carl Gilbert with a tough negotiator who would be both effective and respected on the Hill. He could operate de facto as Pete’s deputy and operating arm. I recommend that you promote this line when you discuss the matter with Pete today.” (National Archives, Nixon Presidential Materials, NSC Files, Country Files—Far East, Box 530, Japan Volume IV 1/71-6/71)