THE PRESIDENT'S DAILY BRIEF 9 NOVEMBER 1974

• Document Type: FOIA
• Collection: President's Daily Brief 1969-1977
• Document Number (FOIA) /ESDN (CREST): 0006007864
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: August 14, 2016
• Document Release Date: August 24, 2016
• Publication Date: November 9, 1974

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The President's Daily Brief
November 9, 1974
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Exempt from general
declassification schedule of ED. I 1652
exemption category 5B(I
declassified only on approval of
the Director of Central Intelligence
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Egypt-Israel:
November 9, 1974
Table of Contents
(Page 1)
/(Page 2)
Panama: Prospects brighten for new canal treaty.
(Page 3)
Portugal: Lisbon looking for financial help_ and
trade concessions abroad. (Page 4)
Western Europe: Rising unemployment generates pres-
? sure to send iforeign workers home. -(Page 5)
? Italy: Political stalemate heads into its sixth
week. (Page 7) ?
USSR: Soviet purchases in the West at record high.
(Page 8) ?
Thailand-Laos: Thais trying to shore up bilateral
relations. (Page 9) ?
Notes:, Japan, Jordan, South Vietnam, Cyprus
(Pages 10 and 11)
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EGYPT-ISRAEL
The Egyptians held a large naval exercise on
Novehiber 6, apparently to test the navy's capability
to repel an amphibious invasion in the Port Said -
Damietta area. At least nine Egyptian ships, in-
cluding destroyers, submarines, and guided-missile
patrol boats, participated.
The locale and scenario of the exercise pre-
sumably reflect Egyptian concern that the Israelis
might attack in that area if fighting resumes.
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PANAMA
A major development in the canal
treaty talks increases the chances of
an accord by next March.
On Thursday, Panama accepted Ambassador Bunker's
package proposal covering the basic issues of canal
operation, canal defense, and jurisdiction, and the
two parties initialled three agreements on concepts
to guide subsequest treaty drafting. Still to be
tackled are compensation to Panama, return of some
Zone lands, duration of the treaty, and options for
expansion of the canal.
Much of the present progress undoubtedly results
from the recognition now given to Panama's sensitiv-
ity on matters pertaining to its sovereignty over the
Zone. The language of the agreements--carefully
chosen to be palatable to the Panamanians--made it
possible for them to accept effective US control of
canal operation and defense for the lifetime of a
treaty. Ambassador Bunker's collateral offer to
begin planning now for Panama's participation in
canal operation was, moreover-, viewed by the Panama-
nians as evidence of US good faith and caused 'them
to be even more receptive.
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PORTUGAL-EC
Lisbon, faced with a deteriorating
balance of payments and an economic slump,
continues to explore the possibility of
obtaining extensive financial assistance
and trade concessions abroad. Practically
all West European countries and the USSR
have been approached, as well as the US.
Although Portugal does not intend to ask
for negotiations looking toward an associa-
tion agreement with the EC any time soon,
it has now provided the EC Commission with
more detailed proposals for assistance.
Lisbon's search for financial help has signifi-
cant political implications. EC Commission Director
General Wellenstein told US officials recently that,
during a visit to Lisbon last month, Foreign Minister.
Soares took the line that the Lisbon government is
anxious to receive tangible economic support from
the West in order to counterbalance any Soviet of-
fers.
In this connection, Alvaro Cunhal, head of the
Portuguese Communist Party and minister without port-
folio, gave a rosy--if very generalized--account of
future trade prospects with the USSR following his
trip to Moscow earlier this month. Cunhal does not,
however, appear to have clinched any specific deals,
and Lisbon's NATO representative claims that, con-
trary to press reports, Soviet economic aid was not
discussed in any detail.
In recent conversations with representatives of
Western governments, Portuguese officials have argued
that they must receive aid commitments from the West
before their election next spring, in order to en-
able the government to demonstrate convincingly to
the electorate that Western Europe is prepared to
help. An announcement of EC concessions might also
increase the confidence of Portuguese investors, who
have been holding back because of the uncertain polit-
ical situation and labor disorders.
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The Importance of Foreign Workers to Labor Exporting Countries
Foreign workers as a percent -
of total labor force
Remittances as a percent
of total current account receipts
40%
ITALY YUGOSLAVIA TURKEY
556827 11-74
SPAIN PORTUGAL GREECE
? ?
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WESTERN EUROPE: FOREIGN WORKERS
Rising unemployment is generating
pressure to reduce the number of foreign
workers in the northern countries of West-
ern Europe.
Several governments hope that the 8 million
to 10 million foreign workers will bear the brunt of
their anti-inflation measures, providing some insula-
tion from voter backlash. The countries that supply
the labor, on the other hand, fear that thousands of
their workers now abroad will be forced to come home.
The resultant rise in unemployment and balance-of-
payments difficulties would contribute to political
tensions, especially in Italy, Greece, Turkey, and
Portugal.
Declining industrial production in Western Europe
has led to widespread layoffs and expectations of
large-scale unemployment this winter. The slowdown
is particularly acute in several industries with a
high concentration of foreign workers--construction,
automobile manufacture, and tourism.
In West Germany--by far the largest employer of
foreign labor in Western Europe--the unemployment rate
for foreign workers was 2.6 percent in September, com-
pared with 0.6 percent a year ago. In contrast, un-
employment among the domestic work force was 2.3 per-
cent, compared with 0.9 percent in September 1973.
Recently publicized forecasts of a 4.3-percent unem-
ployment rate this winter has deepened West German
concern.
To protect domestic workers:
--West Germany and France have banned the
recruitment of foreign labor from outside
the EC and have stiffened penalties against
the smuggling of foreign workers. Bonn is
considering a special tax on companies em-
ploying foreigners.
--Switzerland has reduced the number of work
permits and has eliminated exemptions granted
for foreign workers in hospitals and schools
and on farms, despite its exceptionally low
unemployment rate.
(continued)
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--The Dutch have put a ceiling on the immigra-
tion of foreign workers and the number of for-
eigners a firm may hire. The government is
also considering offering "farewell bonuses"
to foreigners who go home voluntarily.
Workers' remittances constitute almost half of
Turkey's current account receipts and are a primary
source of foreign exchange earnings for Portugal,
Yugoslavia, and Greece. Yugoslavia and Greece al-
ready have current account deficits. A sharp drop
in remittances could push the current accounts of
both Turkey and Portugal into the red. As a member
of the EC, Italy is partially protected from north
European cutbacks in the use of foreign labor. None-
theless, even a moderate drop in remittances from this
source will rock its already shaky financial position.
Yugoslavia and Portugal would be badly hurt by
cutbacks because they have exported so large a pro-
portion of their labor force. Portugal has requested
that the EC guarantee to maintain the current level
of Portuguese workers in the Community. Given the
EC's own unemployment problems, however, such a com-
mitment is highly unlikely. Even without a return
of migrant workers, reduced demand and political un-
certainties are leading to higher unemployment in
Portugal, Spain, and Greece. Unemployment already
is severe in Turkey (11 percent) and Yugoslavia (9
percent).
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ITALY
Foreign Minister Aldo Moro is con-
tinuing his attempts to form a new govern-
ment, as the Italian political stalemate
heads into its sixth week.
Moro began his negotiations last week, but he
has been dogged by the same interparty differences
that prevented Christian Democratic Party chief
Fanfani from forming a government. Moro now appears
ready to settle for a "monocolore"--all Christian
Democratic--caretaker government. The "monocolore"
alternative is an established way of letting the
dust settle after a major political blowup in
Italy, but Moro is even having difficulty securing
an agreement on this formula.
The ardently anti-communist Social Democrats
are keeping alive a feud between themselves and the
Socialists over relations with the Communist opposi-
tion. If the Social Democrats stand pat, the Chris-
tian Democrats will have to choose between them and
the Socialists in order to set up even a "monocolore"
cabinet. The Christian Democrats are loath to make
such a decision, since it would require a clear
choice between left and right--something the Chris-
tian Democrats have tried to avoid.
Unemployment is rising rapidly, meanwhile, and
organized labor expressed its discontent by calling
another nationwide general strike yesterday--the
second since the government crisis began.
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USSR
The USSR is expanding purchases in
the West as a result of a sharp rise in
its hard currency earnings. Contracts for
Western plants and equipment placed so far
this year are already at a record 3 bil-
lions during recent negotiations, Soviet
buyers increased their original requests
for US equipment.
In the past several weeks, Moscow has also placed
orders for $900 million worth of corn and wheat, and
- $200 million worth of raw sugar.
The Soviets will pay cash for most of their agri-
cultural purchases and for roughly $150 million in
Western equipment. The Soviets are expected to have
substantial hard currency trade surpluses in 1974 and
in 1975 as a result of the rapid rise in world market
prices for major Soviet raw material exports,
Gold sales are another major source of hard cur-
rency. While only $300 million in Soviet gold is
known to have been sold this year, large additional
sales are rumored to have occurred in late October.
Moscow probably would not have bought such sizable
amounts of agricultural products if--as in the past--the
purchases required heavy borrowing. Soviet agricultural
output promises to be good in 1974, and recent purchases
seem geared to improving, rather than just maintaining,
domestic conditions. A $100-million cash purchase of
tractors from the US International Harvester for use
in constructing the second Trans-Siberian railroad, on
the other hand, resulted from a Soviet desire and
ability to avoid high interest rates prevailing in the
West.
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THAILAND-LAOS
A high-level Thai delegation has
arrived in Vientiane in an effort to en-
sure that Thailand maintains some lever-
age and influence in Laos, The Thais
are well aware that the struggling Lao
coalition government has been looking
increasingly to North Vietnam, China,
and other communist countries for eco-
nomic assistance, and they attach con-
siderable importance to shoring up re-
lations with their Lao neighbors.
Negotiations on the ministerial-level meetings
began some months ago, and the Lao are apparently
aware of and in general agreement with a Thai cabinet
proposal for Laos that includes:
--a $250,000 contribution to the Lao Foreign
Exchange Operations Fund;
--$500,000 in short-term aid in basic commodities
such as food, textiles, and medicine;
--long-term recovery assistance, especially for
war refugees;
--more equitable treatment and charges for Lao
goods transiting Thailand;
--expanded cooperation in social, cultural, and
educational fields,
?Lao communist Deputy Prime Minister Phoumi Vong-,
vichit, who invited the Thai delegation to Vientiane,
and his communist colleagues have not said they have
difficulty with the Thai offer. Non-communist members
of the coalition, however, fear that Thailand's par-
ticipation in Lao foreign exchange operations would
enable the Thai government to exploit Vientiane's
financial problems.
US Ambassador Whitehouse believes that Lao Prime
Minister Souvanna Phouma's mid-summer heart attack
has greatly reduced his ability to resume full polit-
ical activity. Souvanna has admitted to feeling very
tired and told the ambassador yesterday, in their
first meeting since Souvanna's return from France,
that he would be leaving for the royal capital of
Luang Prabang in about a week for an extended conva-
lescence.
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NOTES
Japan: The US embassy in Tokyo reports that
those in Japan who oppose your visit have not been
able to rally widespread support for their efforts
to disrupt it. Protesters are already trimming the
list of activities they were planning. One opposi-
tion party recently decided against participating
in demonstrations against the visit, and others have
been unable to agree on a united effort. The major
groups now opposing the visit--the Communist and
Socialist parties and Japan's largest labor federa-
tion--are still committed to holding demonstrations,
but they are already stressing that these will be
nonviolent. The major rallies in Tokyo are scheduled
for days when you will not be there.
Jordan:
South Vietnam: The South Vietnamese Foreign
Ministry has called for resumption of political and
military negotiations with the Viet Cong without con-
ditions, according to an announcement released Friday.
There has as yet been no communist response. Although
South Vietnam is trying to place the onus on Hanoi
for the lack of movement in negotiations, the an-
nouncement, in effect, is Saigon's response to a
Viet Cong statement of October 8 that called for the
removal of President Thieu as a precondition for
negotiations and implementation of the Paris Agree-
ment. The announcement also appears to be part of
Thieu's current efforts to take the wind out of the
sails of his political opponents in South Vietnam.
(continued)
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Cyprus: Archbishop Makarios reportedly has ad-
vised Greek Cypriots, including Acting President
Clerides, that he will fly to Athens on November 21
and on to Cyprus on the 25th.
whether Makarios will return as president or only as
religious leader will be decided in Athens.
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