Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

127. Memorandum of Conversation¹

Washington, April 17, 1978, 2:27–2:47 p.m.

SUBJECT

• Summary of Telephone Conversation between the President and Prime Minister Callaghan

The following is a paraphrase of the conversation:

The President: Jim, how are you?

Callaghan: Fine.

The President: It’s a great pleasure to talk with you.

Callaghan: I called just to exchange thoughts after the Neutron bomb decision.² How was Camp David?³

The President: Very good. It was the first time we’d done it. We reassessed the first fifteen months of the Administration, and the problems in an administrative sense. We also discussed several themal issues, we talked about the mood of the country, and went over opinion polls. I think it cleared the air and helped to eliminate the kind of sniping and backbiting that is liable to occur. I think we came away with a renewed spirit, and a new sense of team. It was very, very good.

Callaghan: I think that’s necessary now and again.

The President: I agree. It was the first time we’d done it. But I think we’ll do it every three months or so. Camp David has all sorts of facilities.

Callaghan: It makes people feel they’re part of a team.

The President: It breaks down tensions and alleviates all sorts of problems. There was some question about one junior staff member.

Callaghan: Jimmy, at this end the main issue on the cards is whether Europe goes it alone more than it cooperates with you in the United States. I detect more inclination in that direction here in Europe. Not in defense, of course; there you must remind those who would go it alone that European defense cannot be separated from the United States. But in the economic and monetary field I do detect a tendency. There is talk here, for instance, of enlarging the European “snake”. If that were done, the only reason would be to insulate us a bit from what happens to the dollar.

When I talked with you before Easter I told you I was not in favor of enlarging the “snake”.⁴ That is still my view. I did go along with a technical examination of the question. But, frankly, an enlargement of the “snake” is not attractive to the United Kingdom or, I think, to the world economy as a whole. That is a political judgment. I will make sure that the question is not looked at from a political standpoint until after the Bonn Summit. But there is this feeling in Europe, and I thought you should know about it.

The President: I appreciate that. We had some reports from the periphery of the Copenhagen meeting.⁵ We have been concerned, but not too seriously yet. Here there has been some reversal of previous concerns—such as inflation, the failure to pass the energy bill and the Panama Canal vote tomorrow. That concern has been alleviated here recently, to some degree. But I understand the concern in Europe and Japan over the appreciation of the yen and the Deutschmark.

Callaghan: That is wrapped up with other problems, especially unemployment.

The President: Here we have had considerable success in reducing unemployment over the last fifteen months.

Callaghan: (interference on line) When that is linked to the fall of the dollar, people begin to say: “The United States can stand on its own, we must do what we can by ourselves.” That would be extremely unfortunate.

The President: We must consult, at least at the level of Henry Owen. We should have an open and frank discussion—we have nothing to hide—of the advantages and disadvantages of our basic interdependence.

Callaghan: Helmut Schmidt is the key to the European view. I’m not sure you get his point of view clearly.

The President: I doubt it.

Callaghan: Germany is the strongest economy in Europe, and what it does makes a great deal of difference. Helmut feels strongly that Europe must organize itself to do better. You—not you personally, but your people—need to know his point of view better. It’s hard to understand. There is the coalition government, and Helmut and Genscher are not always on the same wavelength. Then there is the Bundesbank that has certain kinds of independence. But I’m not sure you get the depth of his view.

The President: I’m not sure I do. When we talk, either personally or on the phone, or when we exchange messages telegraphically, we have a good meeting of the minds. I will make a comment and he will respond that it is a good answer, that he agrees. But then I hear that he has expressed concerns about our actions and policies. That is something I have not been able to solve.

Callaghan: It’s very difficult if he won’t tell you what he thinks. My understanding of his view is that the United States cannot continue to expand, the dollar is in trouble and therefore the Europeans should do what they can to insulate themselves. I don’t know if you have heard it that way. But it is a stronger and stronger view in Europe. I don’t know how to obviate it.

I think it very likely that Giscard will re-enter the European “snake” before the Bonn Summit. I’m 99 per cent certain that I won’t. But the alternatives are complex. Helmut is the key.

The President: He is coming to Washington before the NATO Summit.⁶ In view of what you’ve said, I’ll prepare myself very carefully—of course I’ll use words that don’t reveal where I heard of his view. When he comes, I’ll be more briefed than usual. He can speak frankly, bluntly. Why he is reticent with me, I can’t understand. I’ll try to break that down.

Callaghan: If I might suggest, perhaps you could have Miller with you, and he might bring Emminger or someone else from the Bundesbank.

The President: That’s a good idea. We might perhaps have a luncheon, with a tiny group.

Callaghan: I think I would do that. If it’s a tiny group, he’ll talk frankly. He knows economic issues very well . . .

The President: Much better than I do.

Callaghan: . . . he was Finance Minister, he has had considerable experience, and he cares a great deal. He thinks the United States position is all wrong.

The President: I appreciate your advice, Jim, your admonition. It is very valuable to me.

Callaghan: Let me leave it there. Whatever you hear, you can be sure that I won’t allow action on the “snake” before Bonn. Perhaps by then you’ll have the measure of it.

The President: I do have one source of confidence—the strength of the U.S. economy. We did meet our goals for inflation and growth set at the London Summit, while some other countries did not. Barring unforeseen circumstances, we will meet them again this year. The goal for unemployment by the end of the year we’ve met already. There is no potential problem with our economy.

Callaghan: That’s right. What is a matter of concern in Europe is the external value of the dollar. That is a difficult technical problem. If you could reduce your balance-of-payments deficit by some action on energy, that would be very healthy.

The President: Jim, thank you. I appreciate you being a good enough friend to speak frankly.

Callaghan: I would hope that in May at the NATO Summit we could have a declaration that means something, that talks about the interdependence of Europe and the United States.

The President: Right.

Callaghan: You know, as do I, that the Soviet Union believes it is the largest power in Europe but without comparable, matching influence in Western Europe. It will try to strengthen its position. Unless Europe responds and the United States recognizes that it is inextricably bound up with what happens in Europe, we’ll all go under at some point. I saw Harold Brown for an hour today, and I have asked him and Fred Mulley to begin working on such a statement. I knew you wouldn’t mind. Then I could raise the idea with Helmut Schmidt, who I’ll be seeing on Sunday.⁷ The declaration would show the Soviet Union that there is no difference between us, and it would also demonstrate to the people of Europe and the United States that they must remain together.

The President: That is exactly our commitment and our purpose. That is the reason I suggested escalating the level of the NATO meeting. I think there is a new commitment to NATO in Europe, and a renewed commitment here. There was doubt in the past, but now the Alliance is strong. Our renewed, deepened commitment is reflected in our budget decisions and in many others. I think a strong statement in May would be very important.

Callaghan: That kind of statement could have repercussions on economics as well.

The President: Yes.

Callaghan: I remind those in Europe who could go a separate way about defense. We couldn’t have close defense relations while economically we were pursuing different directions.

The President: Yes, Jim, you’re a great man.

[Omitted here is discussion of the Comprehensive Test Ban Treaty and Carter’s trip to Latin America and Africa.]

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 36, Memcons: President: 4/78. Secret; Sensitive. While the memorandum indicates that Carter spoke to Callaghan from the Oval Office, the President’s Daily Diary states that the call took place in the Cabinet Room. (Carter Library, Presidential Materials)
2. On April 7, Carter announced his decision to defer production of the neutron bomb; for the text of the statement, see Public Papers of the Presidents of the United States: Jimmy Carter, 1978, Book I, p. 702.
3. Carter met with select Cabinet members and senior advisers at Camp David on April 16 and 17. (Carter Library, Presidential Materials, President’s Daily Diary)
4. See Document 121.
5. The EC Heads of Government met in Copenhagen April 7–8.
6. Giscard was in the United States May 26–31 to attend the UN Special Session on Disarmament. He had a working dinner with Carter on May 26. (Carter Library, Presidential Materials, President’s Daily Diary) The NATO Summit took place in Washington May 30–31.
7. April 23.