Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

138. Minutes of a Senior Interdepartmental Group–International Economic Policy Meeting¹

Washington, April 22, 1983, 4 p.m.

ATTENDEES:

• Treasury

  • Secretary Regan
  • Beryl Sprinkel
  • Marc Leland

• Office of Vice President

  • G. Philip Hughes

• State

  • Kenneth Dam
  • Richard McCormack

• Defense

  • Fred C. Ikle
  • Donald Goldstein

• Agriculture

  • Alan Tracy

• Commerce

  • Secretary Baldrige
  • Michael Liikala

• CIA

  • Henry Rowen
  • Maurice Ernst

• OMB

  • Alton Keel

• CEA

  • Martin Feldstein

• USTR

  • Michael B. Smith
  • Harvey Bale

• OPD

  • Roger Porter

• NSC

  • Paula Dobriansky
  • William Martin
  • Norman Bailey, Executive Secretary

NSSD-3: Approach to International Debt

The Chairman opened the meeting by noting that while everyone was probably not entirely happy with every part of the debt report, a consensus had been reached on most of it.² The discussion would focus on the two or three outstanding issues where there were still major differences of view. Before proceeding, the Chairman noted his unhappiness over the fact that a summary of this report had been leaked to the New York Times.³

Marc Leland introduced the paper, noting that the document would be transmitted to the NSC and the President, who would then issue an NSDD.⁴ Under Secretary Ikle noted that it is important that our debt strategy help support our overall security interests and that our adversaries should not benefit from the help we are giving our friends.

The Chairman then asked Henry Rowen to clarify the Agency’s objections to the four percent real growth rate assumption. Mr. Rowen noted that four percent was overly optimistic and that even if such a rate was achieved, there would still be some countries who faced difficulties over the long term. Mr. Feldstein shared this view and noted that unless European recovery is more vigorous than presently predicted, the four percent will not be achieved. However, OMB pointed out that the economic fundamentals argue for a higher rate of growth: four percent seemed about right—it might even be low by historical recovery standards. The Chairman closed the discussion by suggesting that we agree to a range between three and four percent.

The Chairman then turned to the second major problem area—that of the institutional arrangements for managing the debt problem. The paper suggests the Group of Ten framework be considered as the focus for creditor consultations and decision on key debt issues. However, Chairman Volcker argued that such an approach would be rigid, slow and cumbersome. The Federal Reserve has no objection to the use of the existing G–10 framework as a means for review, but it would not be prudent to expect it to be operationally oriented. Mr. Volcker noted that he would prefer using the IMF as the coordinating body. Dr. Sprinkel noted that he too would be more comfortable with an IMF framework, but said that this approach may be rejected by other nations. The Chairman concluded the discussion by saying that the use of the IMF should be explored with the G–5 at next week’s meeting, after which our position can be modified as appropriate.

Secretary Baldrige, Norman Bailey and Fred Ikle all noted that the study might be too optimistic on the ability of the overall system to handle debt problems and that further steps should be explored in the follow-up work. Secretary Baldrige also noted that it is vitally important to monitor debtor country export progress. Secretary Regan noted the contribution of the Department of Commerce to further studies and said that these would help form the basis of future work.⁵ In addition, he agreed that further analytical work should be performed to test the sensitivity of the system to much higher (six percent) or lower (two percent) rates of real economic growth.

The Chairman instructed Marc Leland to make the appropriate changes in the paper and forward it as soon as possible to the President and the NSC for their review.

[Omitted here is discussion of the Long-Term Grain Agreement, the International Sugar Agreement, and the Polish debt situation.]

1. Source: Reagan Library, Roger Robinson Files, Subject File, SIG–IEP Meetings 04/28/1983–05/12/1983; NLR–487–6–44–15–1. Confidential. The meeting took place in the Indian Treaty Room in the White House. No drafting information appears on the minutes. Another portion of the minutes is printed as Document 295.
2. Reference is to the draft interagency report, “Approach to the International Debt Situation: A Policy Overview,” prepared in response to NSSD–3 for SIG–IEP consideration. A copy of the draft report was sent to members of the SIG–IEP under an April 20 memorandum from Leland and is in the Reagan Library, Douglas McMinn Files, Subject Files, Sugar Quotas.
3. Bailey forwarded the April 19 New York Times article on the leaked NSSD–3 to Clark under an April 19 covering memorandum. (National Security Council, NSC Institutional Files, Box SR–073, NSSD 3–83) See H. Erich Heinemann, “Hope Stirs for World Debt Relief,” New York Times, April 19, 1983, p. D1.
4. See Document 143.
5. Under an April 22 memorandum to Regan, Baldrige forwarded an attachment which outlined a number of areas that he believed should be analyzed in order to be able to clarify the options and constraints faced in implementing the debt strategy. In the April 22 memorandum, Baldrige argued that the U.S. “should be prepared to adapt the current strategy to changing circumstances.” (Washington National Records Center, RG 56, Executive Secretariat, Congressional Files, 1987, 56–90–29, Box 46, National Security Study Directives (NSSD) ’83)