THE NEED FOR A MORE INTENSIVE DEVELOPMENT OF STRATEGY ON US-EUROPEAN RELATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83T00966R000100050010-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 35
• Document Creation Date: December 21, 2016
• Document Release Date: August 13, 2008
• Sequence Number: 10
• Publication Date: July 29, 1982
• Content Type: MEMO

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State Dept. review completed
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligen
DDI# 6257-82
29 July 1982
FROM . Henry S. Rowen
Chairman, National Intelligence Council
SUBJECT: The Need for a More Intensive Development of
Strategy on US-European Relations
1. The process underway so far in the IG-IEP and SIG-IEP reflects a
general problem on the way we are addressing our relations with Western Europe
-- and arguably also Eastern Europe and the Soviet Union. There is a good
deal of attention to tactics and too little on strategy. And there certainly
has been an inadequate articulation of our aims with the Europeans (perhaps
largely because of our unclarity on these aims especially regarding the
East). I believe that the problem extends beyond economic relations and
includes security relations with Europe.
2. For someone who has been intermittently involved with US-European
affairs for over two decades, a striking feature of the present period is the
negative character of much of the trans-Atlantic dialogue. There certainly
have been periods of considerable tension in the past, notably when President
DeGaulle was in power. However, during those periods visible efforts were
being made on both sides of the Atlantic to invent and carry out positive
steps to improve NATO's defenses, improve economic relations and the like.
Assuming,, as I do, that we have an enormously valuable relationship with the
Europeans -- one that does however have to adapt to changing conditions -- we
should be working on this relationship in a more positive and creative way
than is now evident in the Government.
US-European Economic Relations
3. The issues now before the SIG-IEP are very tough. Both sides are in
the trenches on the pipeline situation; the Administration has little
bargaining room on steel; the Europeans have a weak position on agriculture
but getting them to cut their export subsidies will be hard going; we are in a
weak position on DISC; and the GATT Ministerial meeting, although potentially
useful, does not promise important results. In addition there are issues
concerning macroeconomic policy consultation and exchange market
intervention. Fortunately on these intra-West matters there is agreement that
protectionism is bad and there are no fundamental disagreements between us.
Not referred to USDA. Waiver applies.
Not referred to DOC. Waiver applies.
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4. An urgent task is to incorporate these topics (and perhaps others as
well including sanctions, credits to Eastern Europe and the Soviet Union and
non-Soviet energy prospects) in an overall strategic framework. Marc Leland's
Agenda for last Wednesday's SIG (attached) lists and comments briefly on these
to till a long way from a strategy document. (See also the memos
by and Maurice Ernst on the last IG-IEP meeting). Tomorrow's SIG
will finally turn to the various issues outstanding with the Europeans but I
am unclear on how this discussion will produce a strategy. Clearly, this is a
task for a small staff group. So far, Leland, who is a very able but also a
very busy person, has been producing the papers. He tells me that on the
West-West issues he has been unable to develop any options (except on
agriculture) and finds no trade-off possibilities among them. The IG, so far,
has not come up with much, ent needs to be brought in to
help on these problems (e.g., Ambassador Katz from the OECD,
former Ambassador to Bonn Mar in Ni m en ran . The main point is to assemble a
broadly knowledgeable and talented group).
5. The group's task should not be limited to dealing with the issues now
cn our plate but to anticipate those that might arise in the next year or two
and might be headed off. More importantly, it should try to devise
initiatives that we might take in a positive spirit to improve our relations
with Europe. This, of course, is our aim in the GATT Ministerial and this
spirit motivates our search for non-Soviet energy alternatives, but there may
be other arenas in which initiatives might be made. For instance, Mitterand's
Versailles proposal on promoting new high technology development was too
diriaiste for our taste; nevertheless, perhaps there are some types of joint
research or other activities which could be mutually beneficial.
6. The staff group should also address East-West economic relations and
perhaps, security relations as well. Obviously, the inclusion of security
relations would take it well beyond the normal bounds of international
economic policy. Secretaries Shultz and Weinberger might set up a parallel
group to examine these or create an overarching group responsible for
developing ideas in both security and economic areas. (Such a group might
operate under NSC auspices). An argument for doing the latter is that we have
more chips in the security area than we have in the economic one and perhaps
could make some useful trades. In any case it is evident that the Soviets are
using the arms control negotiations to widen differences in the Alliance
further.
East-West Economic Relations
7. Although experience with the West Europeans since the invasion of
Afghanistan on credits, and sanctions has been discouraging, their behavior is
the net product of several distinct factors:
-- their economic interest in trade with the East in a period of
economic difficulty for them.
-- their political interest in tolerable relations with the East
(strongest for the Germans, weakest for the British).
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an underlying fear for some that Soviet strength has
outstripped NATO's, ability to match it.
-- a different reading from ours of the Soviet system and its
prospects.
-- perhaps a stronger sense of the weakening of the Soviet hold
on Eastern Europe than we believe.
-- a greater US sense of challenge from Soviet moves outside of
Europe and greater resulting stress on us to cope with this
challenge than on them.
8. On these East-West issues, the differences seem to be and no doubt
a-e more deeper seated than on West-West issues. One way of trying to
determine how deep they run and to try to narrow them would be to use an
existing forum (the NATO council?) or create an ad hoc one to explore in depth
our respective assessments of Soviet foreign strategy, its economic prospects
and those of Eastern Europe, and internal stability. This could be followed
up by a cabinet level meeting in the Winter.
9. We owe it to ourselves and to the Europeans to make an all-out effort
to understand and to communicate our different interests and perspectives and
to try to narrow the differences. There is more than a good chance that some
new Soviet misbehavior will help to remind them of the basic community of
Western values and interests. But there is a greater risk than ever before
that major sectors of European opinion will shift fundamentally and
irreversibly toward neutralism between the US and the Soviet Union. No effort
should be spared in combatting that trend.
Security Relations
10. In this domain, the dominant immediate issue is INF deployment and
the associated arms control negotiations. It is receiving a lot of attention
by State and Defense. Beyond this issue, however, there is the arguably even
more basic one derived from the demands that might be placed on US forces
outside of the NATO Guidelines area, for instance in the Middle East, which
could cause a temporary or permanent shift of US forces from Europe. This
possibility has been evident to the Europeans at least since the fall of the
Shah in early 1979 and their response has been inadequate. It is a potential
source of great diviseness within the alliance. Other factors that could
bring about pressures for a significant change one way or the other in our
European deployments include domestic budgetary pressures and further evidence
of instability in Eastern Europe on erosion of Soviet control over it.
11. Secretary Shultz might consider whether he wants fundamental topics
sich as these addressed on a business-as-usual basis or whether he wants to
set up a special group to examine them.
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12. If you find any of these ideas useful you might raise them with
judge Clark, and Secretaries Regan, Shultz or Weinberger.
~-s--/x2,
enry S. Rowen
Attachment: a/s
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DDI# 6257-82
29 July 1982
SUBJECT: The Need for a More Intensive Development of
Strategy on US-European Relations
Distribution:
Original - DCI
1 - DDCI
1 - EXDIR
1 - SA/IA
1 - Executive Registry
1 - C/NIC (chrono)
1 - VC/NIC
1 - NIO/E
1 - NIO/USSR-EE
1 - NIO/WE
1 - NIO/AL/LG
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THE DIRECTOR OP CENTRAL INTELLIGENCE
National Intellig.ncs Council
DDI 6183-82
27 July 1982
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
FROM: Maurice Ernst
National Intelligence Officer for Economics
SUBJECT: US-EC Relations
1. On 27 July of EURA and I attended an IG/IEP meeting on 25X1
US-EC relations, chaired y Marc Leland, Treasury. The IG was in
preparation for the SIG meeting scheduled for 28 July, which in turn is to
prepare for an NSC meeting on 30 July.
2. No recommendations were made to the SIG, and Leland indicated that
both the SIG and NSC meetings were for discussion, not decision. Indeed,
the staff work needed for decisions has not been done.
3. Except for a very general paper on how to approach the Europeans,
no attempt has been made to develop policy strategies which cut across
particular issues. The options on each issue have been developed
independently. Several of us at the IG pointed out that the papers
available did not appear responsive to the objective of examining
international economic issues and policy on an integrated basis.
4. With respect to specific issues, it is evident that what has
brought US-EC relations to the present difficult state are the differences
over East-West policy, especially the pipeline sanctions. On strictly
economic issues, the USG.has little leeway on steel and has little reason
to change the agenda of the GATT ministerial. The greatest leeway appears
to exist on agricultural issues: we have some choice as to which specific
problems to push and how hard and how quickly to push them. My view is
that our plate is full enough with East-West and steel problems, so that
other issues should be handled on a low-key for the time being without
giving up our prerogatives.
5. The absence of any crosscutting analysis of issues and options in
this exercise suggests the need for special staff support for the
2 8 JUL 1982
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SIG/IEP. I do not believe that the Treasury staff by itself, although
competent, is able to take a broad, integrated view of policy cutting
across departmental interests. A separate full time two or three person
staff should be created either,as an adjunct to the NSC staff or under the
Secretary of Treasury.
Maurice Ernst
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27 July 1982
MEMORANDUM FOR THE RECORD
SUBJECT: 27 July IEP IG, Chaired by Marc Leland, Treasury;
Principal Agency rep: Maurice Ernst
1. The meeting was neither particularly incisive or decisive.
2. It opened with a philosophical and somewhat meandering discussion of
what the IG (and to some extent, the USG) should be doing. Commerce Under
Secretary Olmer led off with an impassioned indictment of the current
system. According to Olmer, possibly because of too much staff -- or possibly
because of too little staff -- the system was being choked with too much
paper, too much obfuscation, too little action. On a specific point, Olmer
stated that he was strongly against formulating some new type of bilateral
consultative mechanism to deal with US-EC there were more than
enough such mechanisms currently extant.
3. After several minutes of rather aimless discussion, Maurice Ernst
interjected that the issues facing the IG for the SIG (28 July) and a probable
NSC meeting on 30 July were to (1) suggest an outline or methodology for
formulating a coherent, unified government strategy; i.e., taking the
individual and narrowly focused issues papers and considering the problem of
US-EC relations as a whole; and (2) defining with some clarity how much
flexibility there is on each issue and how such flexibility, if demonstrated,
could affect other issues -- on acriculture, for example, how driven are we by
4. These comments were supported by several others (particularly the
opening shot at USDA), and Leland started going down the list of issues. The
sense of the discussion was as follows:
the calendar or by US laws?
o Steel -- little the USG can do; indeed, the USG is being as flexible
as it can and is doing everything it can to get the West Europeans
and US industry to compromise.
o Poland -- discussed at the 26 July SIG.
o US grain sales -- discussed at the 26 July SIG.
o DISC -- something will have to be said for the SIG and NSC meeting
because of the potential for explosion this fall, but there is little
the USG can do. It is part of US legislation, and attempting to
change the DISC rules (which by themselves have little impact -- DISC
came into being as simple retaliation against the EC) could open a
Pandora's box in Congress.
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o GATT Ministerial -- the US has an ambitious list of agenda
items/objectives, developed painstakingly over the past six months.
The biggest issue is subsidies which, in turn, generally fall in the
agricultural field.
o Agriculture -- USDA had submitted an issues/options paper that listed
only two options: either (a) surrender to the EC or (b) declare all-
out war. Several agencies responded with the obvious third option
5. The meeting quickly came to the conclusion that agriculture is about
the only area where we can demonstrate any give at all, even if largely in
terms of tone -- i.e., not at this late date actually changing our goals or
agenda at the November sterial but perhaps lowering the rhetoric and
expectations somewhat. AIL-M~_n~
6. The theme of the meeting was, of course, the atmosphere of crisis in
US-EC relations. This atmosphere arises primarily because of the US pipeline
sanctions; moreover, eliminating other points of disagreement will probably
not have much impact on the crisis atmosphere as long as the pipeline
sanctions remain and the US attempts to punish those West European firms and
governments defying the sanctions. Leland and others recognized this problem,
but the issue of pipeline sanctions was not discussed as a subject on which
there are any options -- the President has already decided.
7. nmm fitments made: None. However, one subject came up twice, with
(from State/EUR) prior to the meeting and with Maurice (from a
i e House staffer) during the meeting. Both mentioned that the Agency
should do a study looking into what the current crisis atmosphere, if
continued, or if worsened, might mean for US-West European relations two-three
years hence. That is, how much damage could be done to economic relations, as
well as political/military relations, if a retaliatory trade war arose and/or
if public opinion truly soured? We did not volunteer, and there was no
indication of follow up. We suggest that if asked again or if formally
tasked, the subject is most fitting for an Estimate. Indeed, one is already
scheduled to appear soon (this fall?) 25X1
Deputy Chief,
Western Europe Division
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UNCLASSIFIED
(With Secret Attachments)
MEMORANDUM FOR THE SECRETARY OF STATE
THE SECRETARY OF DEFENSE
THE SECRETARY OF AGRICULTURE
THE SECRETARY OF COMMERCE
THE DIRECTOR, OFFICE OF MANAGEMENT
AND BUDGET
CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS
ASSISTANT TO THE PRESIDENT FOR
NATIONAL SECURITY AFFAIRS
ASSISTANT TO THE PRESIDENT FOR
POLICY DEVELOPMENT
UNITED STATES TRADE REPRESENTATIVE
DIRECTOR OF CENTRAL INTELLIGENCE
SUBJECT: Senior Interagency Group on International
Economic Policy (SIG-IEP)
Attached is the reporting memo on Tuesday's Interagency
Group meeting on U.S.-EC relations. It will serve as the
basis for the SIG meeting scheduled for 10:00 A.M., Wednesday,
July 28, in the Roosevelt Room.
UNCLASSIFIED
(With Secret Attachments)
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July 27, 1982
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Date: July 27, 1982
MEMORANDUM FOR:
From :
Subject:
SECRETARY REGAN
Report on IG on U.S.-EC Relations; Suggested Agenda
for Wednesday's SIG
The IG recommends that the SIG discuss the following issues
to prepare for discussion of U.S.-EC relations on Friday, July
30 with the President at the NSC:
1. State of U.S.-EC Relations. What type of response does
the overall state of our relation s with Europe require? Our
relations are described in attachment 2. Possible views are:
a. Relations are such that changes on both sides are needed
to improve the relationship.
b. The Europeans are angry, but that is to be expected;
we should continue business as usual.
c. Despite the state of relations, we should press harder
to assert U.S. interests (agriculture, East-West 'ssues).
The discussion might cover how to respond to European defiance
of the President's sanction decision on the pipeline, the differ-
ences among the EC members on most issues (other than the pipeline),
the economic malaise in Europe that invites using the United
States as a scapegoat, and the European perception that the United
States is aggressively pursuing its interests irrespective of
European views or GATT rules.
2. Current Issues. What are they, which are most pressing, and
how much freedom of maneuver is there? The immediate issue is
our policy response to the Europeans going ahead with the pipeline.
Steel is next. Option papers on steel, agriculture, and GATT
Ministerial are at attachment 5.
The IG discussion revealed very little room for maneuver on
most issues. These issues continue to be handled ndePendentl
by the interested_agencies, which oppose basic changes in current
SEC R FT C' lassGifieecid by Marc E. Leland
assffy IR Reviev, for
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-- On steel, Secretary Baldrige will continue to seek an
agreement acceptable to U.S. industry.
-- On agriculture, there was disagreement on whether to
reduce U.S. rhetoric, withdraw weak GATT cases, and
seek a negotiated solution to EC export subsidies
(accepting the EC's right to subsidize but trying to
discipline it) or whether to start subsidizing
our exports to strengthen our negotiating position.
-- On DISC, the IG believed the Europeans had made DISC a
symbolic issue of U.S. obstinacy, but the U.S. would be
in an untenable position should the GATT rule against
us, as is likely.
-- On the GATT Ministerial, the IG felt the real options
were whether to press on agriculture, and how hard to press
for U.S. objectives in investment and high technology trade.
However, U.S. concessions would have little effect on over-
all U.S.-EC relations.
3. U.S. Strategy. How should we structure our economic '
policy with Europe? The IG felt more work needed to be done on
both substance and style.
-- On the first, we should develop, by the end of August,
a decision package on key issues in U.S.-European economic
relations for the President. .19
-- Based on those substantive decisions, we should decide on
the most appropriate, effective followup -- ranging from our
existing approach, to a more visible emphasis on high-level
contacts, such as a senior mission to Europe, the convening of a
U.S.-EC Ministerial this autumn, or an expanded mandate for a
Cabinet officer to deal with U.S.-EC economic issues.
The attached papers provide background as follows:
1. Objectives of U.S. economic policy toward Europe.
2. Assessment of present economic relations between the United
States and Europe and their implications.
3. Future decision points affecting U.S.-EC relations.
4. General approach in responding to the EC.
5. Option papers on steel, agriculture, and the GATT Ministerial.
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Marc E. Leland
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C. Pursue dialogue with the Europeans to contain economic
problems and reduce tensions, after we have set our own
priorities and identified areas for possible shifts in
policy by the U.S. and Europe.
II. Specific Issues
A. Macroeconomic Policy
1. Convince Europeans that we are following a coherent
strategy for controlling inflation and lowering
budget deficits and interest rates.
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1. OBJECTIVES OF U.S. ECONOMIC POLICY TOWARD EUROPE
4UL 26 1982
I. General U.S. Goals
A. Protect most important U.S. economic interests.
B. Prevent economic arfd trade disputes from undermining
transatlantic cooperation on fundamental political and
security issues.
2. Demonstrate that we are prepared Lo follow up on
VVsailles commitments on macroeconomic policy con-
sultation and study of exchange market intervention.
3. Use action on 1 & 2 above to reduce Europeans' tendency
to use the U.S. as a scapegoat for their failure to
deal more effectively with their own economic problems.
B. East-West
1: Sanctions
a. Maintain pressure on Soviet Union and Poland.
b. In view of European decision to challenge pipe-
line sanctions, examine our legal options so
as to preserve our credibility, while minimizing
damage to our future commercial prospects.
c. Seek coordination on responses to July 22-
announcements in Poland to prevent precipitous
European action.
2. Cred its
a. Implement recent agreement to. the OECD Arrangement
on Export Credits to raise the cost of official
credits to the USSR.
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b. Concentrate now on improving data collection and
policy-oriented discussion in the OECD and NATO,
including U.S. reporting.
c. Move later, using that information, toward
setting up a Summit Monitoring Group.
3. Polish Debt
a. Prevent the Poles from making credible political 7
arguments rather than economic arguments for
their inability to repay their debts.
b. Coordinate decision with Allies on the July 22
announcement to block rescheduling at this time.
c. Avoid isolation from Europeans so that we do
not lose le%&erage.
4. Long-Term Grain Agreement with the USSR
a. Preserve markets for our farmers and ensure
decision on the Agreement that is consistent
with other aspects of U.S. policy.
b. Resist European efforts to use U.S. grain sales
,.-as justification for go-ahead on pipeline and/or
other actions.
a. Protect U.S. industry from injurious unfair trade
practices, without unduly jeopardizing U.S.-EC
relations.
b. Demonstrate that GATT Subsidy Code can work to
increase market discipline.
c. Seek EC-wide settlement before October 8.
2. Agriculture
a. Encourage improved discipline on EC export
subsidies.
c. Deflect 'EC efforts to force renegotiation of
tariff bindings (corn gluten-soybeans).
b. Negotiate stronger GATT rules on agricultural
trade.
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d. Negotiate with the EC on problems of agri-
cultural trade. This would involve a lowering
of rhetoric and reexamination of policies on
both sides (EC on subsidies -- U.S. on weaker
GATT cases which have not yet gone to panel).
3. GATT Ministerial
a. Obtain EC cooperation in pushing a broad agenda
for strengthening the international trading
system. Our priorities include initiatives on
agriculture, services and trade-related invest-
ment, high technology and a North/South round
of trade negotiations. (Many Europeans are
lukewarm, at best, about the scope of our
proposals and, on agriculture,-actively opposed.)
b. Consider whether sharpened emphasis on areas to
which EC is now receptive (services, North/South
round) can improve cooperation.
D. Energy
1. Accelerate efforts to develop credible energy
security program, through U.S. domestic measures and
efforts in Europe. (Under Secretary Buckley chairs
an?Bnergy Alternatives Group which plans to present
a package to the President soon.)
2. Continue to discourage undue European vulnerability
to cutoffs of Soviet natural gas.
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B. Differences in European Views
In addition to keeping in mind the economic backdrop in
considering U.S.-EC relations, we need to recognize the diversity
of views in the European Community. The European Commission
tries to lead, but often ends up bridging differences among
states with a 'least-common-denominator" position. While they
may agree on some issues, there are huge differences on many
issues of interest to us among leaders such as Thatcher, Schmidt,
Mitterand, and Papandreou. Some of these differences, which
often exist within governments as well, are described in the
following discussion of current issues.
C. East-West Issues
There are fundamental differences between U.S. and Euro-
pean views of the proper res nse to the Soviet threat. Even
if thhe_o 4s are 90 to 10 that,the Soviets can be brought to the
barg&inin-g tab through economic sanctions -- and the Europeans