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Press Conference of Henry A. Kissinger, Secretary of State, and William E. Simon, Secretary of the Treasury, aboard Air Force One
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Press Conference of Henry A. Kissinger, Secretary of State, and William E. Simon, Secretary of the Treasury, aboard Air Force One
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Digitized from Box 18 of the White House Press Releases at the Gerald R. Ford Presidential Library
FOR IMMEDIATE RELEASE
NOVEMBER 17, 1975'
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
PRESS CONFERENCE
OF
HENRY A. KISSINGER
SECRETARY OF STATE
AND
WILLIAM E. SIMON
SECRETARY OF THE TREASURY
ABOARD AIR FORCE ONE
SECRETARY KISSINGER: The overall purpose of the
meeting was to bring together the leaders of the industrial
democracies at a time when their economies were in various
states of recession.
When it was proposed, it was suggested that these
leaders ought to meet to give confidence to their peoples
and to convey to their peoples the sense that they were in
control of their future and were not simply waiting for
blind forces to play themselves out.
So we thought it was a matter of great importance,
one, because for two years we have been maintaining that
the political and economic cohesion of the industrial demo-
cracies was central to the structure of the non-Communist
world; secondly, because we believed that the interdependence
of these economies makes isolated solutions impossible;
and, thirdly, because we believed that there were a number
of concrete issues on which work had to begin and in which
common action was important.
We spent a great amount of effort within our
Government to prepare for this meeting and there are always
many stories when there are disagreements in the Government,
but this has been an unusual occasion, an unusual way in which
all the departments working together worked out common
positions, common philosophies, and achieved the basic proposals
that were put before the other leaders.
When this conference was called, I think it is
safe to say that some of our friends wanted to use it as an
occasion to blame us or at least to imply that their
economic difficulties could be solved primarily by American
efforts, and others may have had the idea that especially in
the monetary field it could be used to bring about rapid
solutions in which the heads of Government overruled the long
negotiations that had gone on.
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- 2 -
But as the preparation developed, I think a more
sober spirit grew also and one of our themes was that
economic recovery was meaningless if it started another
spurt of inflation and that what we had to aim for was
stable growth.
The second theme we had to get across is that the
American economy was doing well and that, therefore, the
concerns of other countries that our recovery was too slow
for their own was unjustified.
Thirdly, we had a number of areas, specific ideas,
on how the interdependence of these countries could be carried
out in the field of trade, in the field of economic relations
with the Socialist countries, in the field of monetary affairs,
in the field of energy and in the field of development.
The discussions took place in a really unusually
harmonious spirit. The fears which some of us had that the
others would bring pressure on us to accelerate what we
think is a well-conceived economic program proved unfounded,
and after the President made his extensive intervention of
the first day, explaining our economic program, the other
countries substantially accepted this and indeed seemed to
be appreciative of it.
I think this was a very important event because it
meant that they had more confidence that in looking ahead to
their own future they could count on steady growth in the
United States, and since everybody agreed that a substantial
percentage of the recession was psychological, I had the sense
that a consensus emerged that this confidence that developed
in our ability to handle the economic problems was a very
major factor.
In fact, the confidence of the leaders in this
process was shown by the fact that they would talk about
general principles and then turned over the drafting to
either Ministers or experts and that the leaders only spent
about an hour on the declaration.
At first we didn't want any declaration because we
were afraid that we would spend our whole time drafting it
and it didn't turn out that way, and that was important.
In the field of trade, there was an agreement first
that the negotiations on the multilateral trade negotiations
should be completed next year. Secondly, a commitment by
all of the countries there to bring about a substantial
reduction of trade barriers, including in the agricultural
field, and no attempt to hide behind community mandates or
other obstacles.
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- 3 -
There was also an agreement to accelerate or to
foster negotiations concerning export credits. Bill will
talk about the agreements in the monetary field which put
an end to a debate of years about the nature of the floating
system and the relation between floating and stability which
should end in January in an agreement that should at least
put the field of international finance on a more stable basis
than it has been in a long time.
In the field of energy, there has been an agreement
to cooperate closely or actively on the alternative sources
and on conservation, and I believe this will show up in the
program of the International Energy Agency which is in the
process of being negotiated, and which we hope to conclude
by December 15.
In the field of development, we identified the balance
of payments deficits of the developing countries or their
current account deficits as one of the major problems on
which we would work jointly, but we also pointed out that
there is a close relationship between that and the action
that is taken with respect to oil prices. So we believe
that the consuming countries are in an excellent position for
the beginning of the talks on international economic
cooperation that are beginning in the middle of December.
And we agreed to work together in all existing institutions.
To sum up, this unusual meeting of the heads of
Government of the countries that between them produce 70
percent of the world trade represented a commitment to the
conception that our economic problems were long-term, that
there were no quick fixes to them, that they required a
steady cooperative effort, that their political relationship
affected their economic relationship and that their economic
relationship in turn assisted their political cooperation.
And so the free countries vindicated the concept
of their interdependence and laid out a program and a method
for cooperation which we hope will accelerate the recovery
of all of the peoples as well as their cooperation with the
less-developed countries for the benefit of everybody.
But I think Bill ought to explain the monetary
agreement because that is perhaps the single-most significant
thing that happened there.
SECRETARY SIMON: There is no doubt that it was a
significant agreement reached between the French and the
United States which,I believe and most everyone believes,
is going to pave the way for agreement at the Interim Committee
on Overall Monetary Reform in January. I think that the
agreements that we have reached are a fair and balanced
compromise. Neither side won nor neither side lost.
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Each has protected its very critical national
interests in a spirit of cooperation. We have sought to bring
a convergence of views and this is important. What we are
trying to do is build and expand on these areas of convergence,
and as we succeed in doing this, the whole world community
at large is going to benefit from this.
Now I think that the disparity of views of the
past few years between the French and the United States in
particular on various amendments to the articles of agreement
have obscured the deep mutuality of interest to return to
stable economic and financial conditions in the world and
more orderly and stable exchange rates and that is very
significant because this instability that we have had
contributed as well as resulted from tremendous institutional
financial strains.
Also, the instability created great problems for
many of the countries in the world in taking care of the
erratic price movements and setting economic policies and
restoring stable growth in their own economies.
Now having said this, because one must look at the
fundamental cause of the problem before we can begin to look
for any of the solutions, which is important, it has been
clear that the French and the United States share some
fundamental agreements on the monetary system, there is no
doubt about that. We both agree that the diversity of
financial arrangements, the floating system, if you will,
has served us well under the present circumstances. It is
actually necessary to take care of the stresses and the
strains that have been brought about by the severe inflation,
recession and, of course, the extraordinary oil : increase.
So having identified the causes, we then must set
about in curing the fundamental problems of this economic
instability and, therefore, the Communique, as it said, dealt
with two aspects of the monetary issue: one, the operational
and, two, the reform of the system.
On the operational side we have reached an under-
standing that to achieve durable and meaningful stability
in the underlying economic and financial conditions, we have
to provide for mutually cooperative and conciliatory policies
among ourselves, but that national domestic economic policies
must indeed be compatible. The world economy has suffered
from all of the ills that I have spoken about and the under-
lying problem remains with the severe inflation and, of
course, the recession which was caused by this inflation.
On exchange markets,we are going to deal with
erratic movements in exchange rates which, of course, create,
again, an instability. Erratic movements can be defined as
movements that have no underlying economic reason. Ours is
not an attempt to peg any of the currency rates at artificial
levels, but there are erratic movements in financial markets
on occasion that are notdirectly attributable to fundamental
economic events, and at this point intervention policies will
become mutually cooperative and compatible to smooth out
these unstable periods.
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I
How is that stability going to be brought about?
That is,how is this operation going to work?
SECRETARY SIMON: Well, in two ways. One, I think
a session that was heavily devoted, as Secretary Kissinger
said, to the economic aspects of the world's problems today,
the needed policies -- cooperative as well as individual --
that are required for a return to stable economic and
financial conditions are at the foundation of the answer to
your question.
As far as the consultations and the mechanisms
that are going to be established for smoothing out, there is
going to be greatly expanded consultative mechanisms throughout
the world done on a more orderly basis, on a more daily
basis, if you will, by both the central banks, of course,
who do this today, as well as the deputies to the Finance
Ministers and the Finance Ministers themselves.
There will be more constructive meetings of the
Finance Ministers to deal specifically with this issue.
I
Will there be a standing committee of some
kind to advise intervention at a given point?
SECRETARY SIMON: No, the make-up of this committee
has not beenset yet but we have many standing committees.
We have the Interim Committee, which is the old group of
20 and the group of 10 which will meet and direct itself
right to this issue in December in Paris.
2
The mechanism has not been set up yet, I mean
the mechanism has not been designed as to how this consultative
process will go forward?
SECRETARY SIMON: The mechanism has been designed
in the Memorandum of Understanding that the French and the
United States initialed today and that the other Ministers
who attended this session and were briefed fully on this are
in general agreement, but until we bring all of the interested
and affected parties together, we cannot say that this is going
to be totally acceptable, although I believe it will be.
SECRETARY KISSINGER: It is safe to say that there
will be a much expanded discussion or consultation among the
Finance Ministers and their deputies as a result of this.
Q
Mr. Secretary, as long as we have still got
some video tape left, let me ask you in realistic terms
what you think this conference means to the average
American. Does it mean more jobs or lower prices, and if so,
how?
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- 6 -
SECRETARY KISSINGER: Well, if this conference
contributes to an acceleration of economic recovery world-
wide, which it is intended to do; if it contributes to a
lowering of trade barriers, as it is intended to do; and to
greater financial stability, then it will mean more jobs,
perhaps lower prices, better control over inflation and a
degree of cooperation among the industrialized nations, that
will benefit every American.
Q
When is this millennium going to come about?
How fast will this process take effect?
SECRETARY KISSINGER: We have made clear that it is
a long-term process and we are not ever going to be able to
say that on the next day a dramatic change occurred, but
I think that the hopeful processes that are already going
on car. be accelerated by the results that occurred here.
The major theme of this meeting was that we have got a
long-term problem, that we are not trying to make quick
fixes but that we can get a stable, steady growth on the
long-term basis.
Q This mechanism that you speak of and that you
can't tell us about, does it have to do with the Federal
Reserve Board and the central banks?
SECRETARY SIMON: Certainly the central banks are
the intervention mechanism and will continue to be, yes,
but it is also going to involve, as it always has, the
Finance Ministers of the various countries, but a formal
mechanism of where the deputies will also be used in this
formal consultative process and the consultative process is going
to be broader than it ever was before, bringing in more nations,
more affected, interested nations into the process.
Q Mr. Secretary, early this year the dollar had
quite a plunge. Had this system you envisage been in effect
then, would the dollar have plunged in relation to other
currencies the way it did?
SECRETARY SIMON: Well, our dollar declined, as
it often does, in response to several factors: one, an
outlook for lower interest rates which is a fundamental
factor in a country always, and, of course, the New York City
problem and the fears of some potential international problem
related to it as well. I would consider factors like this of
a temporary nature and not of a fundamental nature.
Q
Speaking of New York City, what did you tell
the European leaders about President Ford's --
SECRETARY SIMON: I was not asked by any of my
counterparts. I asked them questions as to what they thought
if indeed they had any reason to believe there would be a
problem that I had not thought of before and basically
briefed them on the whole situation because I felt that they
were interested, which indeed they were, but they didn't
cite any significant problem.
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2
Did they seem to be somewhat reassured by
the presentation that you and the President made on the
problem of New York City?
SECRETARY SIMON: Well, as I spoke to them, they
seemed to be reassured that the situation was indeed well
in hand at this point.
Q
You believe it is well in hand then?
SECRETARY SIMON: Well, I have been away for several
days, as you know, so I have to wait and get back. I still
have not seen the total agreement and been able to study it.
I have been too busy doing what I have been doing.
0 Do you think that the Federal Government
is going to have to do anything to guarantee the short-term
bond roll-over problem?
SECRETARY SINON: I don't think that anything that
comes under the heading of a bail out as far as the present
bondholders are concerned or the note holders is in the
cards, no. But then, again, the City-State program that has
been put up restructures and restructures all the notes that
are held so that would not be required.
You know, you asked Henry a question about the
process we went through here at the economic summit and it
reminded me of the perhaps overused word these days of
interdependence, and it was brought up and very forcefully
brought up in this meeting that the world communities
indivisible, recognizing that national economic policies are
certainly important, yes, but today this inter-relationship
in the world communities and in the economic and financial
area in particular must be better understood by each of
us. Our policies must be mutually supportive where indeed
they are compatible and meetings like this bring about better
understanding of what our policies are in the United States
and indeed what the policies are in the European community
and in Japan and these are major, these are significant steps
to agreeing about the permanent durable prosperity that we
wish to provide for all of our peoples.
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- 8 -
SECRETARY KISSINGER: A good example is that at all
of our previous meetings this year with European leaders, as
I said earlier, there was an undertone that we were not doing
enough. I think that after our presentation on Saturday that
topic never emerged again and everyone was more discussing
how we could support each other's efforts.
Q What is the compromise since I understand that
the central bank has been intervening on the floating dollar?
I mean what compromise did we actually make? Is it on the
basis of his consultation?
SECRETARY SIMON: Yes, indeed. You know there is a
danger and there are those -- of course one never knows how
people view agreements but there are those who believe that
designed intervention policies mean a zone or a ban or
fixed rates of some kind and that is not the case, but it is
going to be a formal mechanism that is aimed not at setting
any currency at an artificial rate that would contravene the
market forces but one that moves in erratic fashion not
related to underlying economic activity.
Q Mr. Secretary, Mr. Cormier has asked you before
about what would have happened back in the spring of this year
when the dollar first declined and then recovered under this
new mechanism. Would those swings have been reduced?
SECRETARY SIMON: I think it is difficult at this
point for me to recall any way, Paul, all of the conditions
that were extant at that time and suggest what would have
occured as far as this consultation method because this is
not only the United States that is going to be reporting and
giving their judgments on the market conditions but all of
the countries involved in this process.
Q
So this would be a process much like the open
market committee of the Federal Reserve when it determines
how to intervene in U.S. monetary markets; that is, they
take an ad hoc view of the economy and make some judgments
in private?
SECRETARY SIMON: No, I would not say there is
anything ad hoc about this operation at all. As a matter of
fact, it is designed so it will not be ad hoc in nature,
that it is going to be daily monitoring of all of these
markets with an exchange of information that is going to give
the officials in the United States a greater fundamental
knowledge about what is going on in all of the currencies of
the world.
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Q
There will be no automatic criteria for
decision?
SECRETARY SIMON: No, absolutely not. That will be
done on the judgments of the Finance Ministers and the
central bankers, the ultimate judges of this issue, of the
fundamental aspects of the issue at that time.
Q Okay. Will they take a vote and the vote will
be binding or will each country retain sovereignty?
SECRETARY SIMON: No, no, no. There is no vote or
binding in these areas whatsoever. That would really be
impossible and indeed unfair and unworkable. This will be
done just the way that the central bank and ourselves and
the Treasury decide there should be intervention now. We
work together and we usually can agree when indeed it is needed,
0 But if the U.S. Government, for example, does
not believe it is appropriate to intervene, it believes that
fundamental forces are at work and let us say the French
Government or some combination of other Governments believes
that these are erratic fluctuations, then there is a
stand-off and the United States would not intervene?
SECRETARY SIMON: If that occasion arose, you are
correct, we would not intervene.
Ω What response did you find to your offer --
the U.S. offer -- for other countries to invest in our
energy projects, including OPEC?
SECRETARY SIMON: Well, I think it is too early to
tell.
Henry.
SECRETARY KISSINGER: Well, I think the other leaders
considered that one of the most interesting parts of the
President's presentation and they asked a number of questions
about how it would work and what we had in mind, and I
would say that they all agreed that that was one of the
most significant proposals, but it has to be worked out by
experts.
Q
You met with Mr. Callahan during the sessions
and did you discuss the problem of seating at the energy
meeting in December?
SECRETARY KISSINGER: I also met with Sauvagnargues.
You mean membership or seating?
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- 10 -
Q
Membership.
SECRETARY KISSINGER: Only in the most general way.
Mr. Callahan explained his point of view to me. As for that
matter Sauvagnargues did explain his opposite point of
view to me. Our position is that this is primarily a
matter between the United Kingdom and the European community
in which the United States will not play a principal role.
Q
Do you see this causing any problem with the
starting of that meeting or do you see a solution?
SECRETARY KISSINGER: A number of compromise solutions
have been proposed. I don't want to put any one of them
forward. There is going to be a European summit on December 2
and we hope that it will be worked out on that occasion.
Q Has there been any discussion on nuclear non-
proliferation of the peaceful plans?
SECRETARY KISSINGER: Not as such, no.
Q
Mr. Secretary, on the basis of your Pittsburgh
speech and some other indications, I think some of us have
the idea that the American delegation went to Rambouillet
hoping that out of this would evolve some continuing machinery
for consultation and the Communique speaks only of using the
existing machinery. Did we abandon some idea here?
SECRETARY KISSINGER: You have the machinery that
was set up under the monetary arrangements in which the
Finance Ministers will be in almost daily contact and there
are many other organizations. There was an agreement that
the Governments concerned would work cooperatively on all of
these problems and so there was no formal machinery set up
except the one that grows out of the monetary group and
since the monetary arrangement is exactly the group we
envisage to begin with, there wasn't any sense of setting up
another one with a different hat.
2 Was there any talk about another meeting of this
sort a year from now?
SECRETARY KISSINGER: Yes, there was talk of another
meeting and the leaders will stay in touch with each other
depending on conditions. If the conditions get critical,
they will meet earlier. If conditions take the form that .
are now predicted, then they will meet some time during the
course of the next year -- within a year, roughly.
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Q
Could you gentlemen tell us what role Mr. Shultz
and Dr. Burns played in the monetary agreement? We were told
there were two months of negotiations behind the scenes on this
point and they made a promise.
SECRETARY SIMON: Arthur Burns plays a very active role.
Arthur attends all of the interim committee meetings with me,
the G-10 meetings and the G-5 meetings that we hold so he is
obviously actively involved in the mechanism, both in setting our
policy back in the United States as well as in negotiations that
I conduct. But Arthur is always, as I say, with me as far as --
Q He is?
SECRETARY SIMON: Of course he is. Yes, indeed.
Q
What about Shultz?
SECRETARY SIMON: Well, as you remember George Shultz,
I took over from George so this is a continuation really of the
negotiations that George carried on when he was Secretary of
State but other than the preparations of the meeting with the
private citizen group that George Shultz worked on, he had no
active area of involvement in the negotiations on the monetary --
SECRETARY KISSINGER: But he was never Secretary of
State. (Laughter)
SECRETARY SIMON: That is a freudian slip.
Q
He had no contacts with his former Finance
Minister colleagues who are now heads of state?
SECRETARY SIMON: Sure, George is very close on a personal
basis to both Chancellor Schmidt and President d-Estaing and
he sees them and talks to them frequently.
Q
Did he talk to them as part of this meeting?
SECRETARY SIMON: I doubt --
SECRETARY KISSINGER: I think the correct explanation --
there was a group of private experts connected with their
Governments that meet actually less on the monetary question
than on the other issues. The reason we did it on that basis
was because one didn't want to bring the heads of Government
together if there was not some sense that something significant
would be achieved. So we designated George Shultz to attend
these informal meetings that gave us a sense where the other
Governments were going. I repeat, the monetary matters were
really negotiated primarily by the Treasury Department and
by Ed Yeo, but the other issues were in a preliminary way
explored by a group which George Shultz attended in a private
capacity but still in close touch with Bill and myself and
the President.
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- 12 -
Q
But did he meet or talk with Mr. Giscard and --
SECRETARY KISSINGER: The process went like this.
The idea of this summit came up first in a vague way at a
meeting that I had with Giscard in May. It was then put
forward in a more formal way at Helsinki by Giscard to the
President. At that point we decided that we would send
somebody around, not quite an official, to give us his judg-
ment of whether it would be worthwhile and George Shultz
went around to see Giscard, Schmidt, Wilson, and reported to us
afterwards that he thought there was a good basis for a summit
and only after we had that report did we make the decision to
go ahead.
We wanted to avoid a situation in which the summit
would deal with only one problem, say, exchange rates, and only
a set of demands made on the United States by the others and
when George Shultz was reassured by that, then the President
decided to go ahead and removed it into formal governmental
channels.
THE PRESS: Thank you.
END