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Interview with Henry Nau,
George Washington University
Senior staff member of the National Security Council in the White House responsible for international economic affairs from 1981 to 1983
with Professor John Kirton,
Atlanta, May 7, 2004
John Kirton: When did you first become involved on behalf of the U.S. in the G7 summit process?
Henry Nau: I joined the National Security Council in January 1981, and we had our first sherpa meeting in February. I think it was in Ottawa. Immediately I was asked to be involved by the National Security Adviser. I had been asked to head the little economic shop on the NSC, and this fell into my area of responsibility. Ambassador Henry Owens had been the ambassador at large and the sherpa for the Clinton administration. So I spent a lot of time with him in December and January being debriefed. But at the first meeting in February, there were clearly big differences between the Reagan administration and what the Carter administration had done. The focus of the previous administration was on the studies that came out of the Venice Summit of 1980 dealing with foreign aid. That February 1981 meeting was a good meeting, but it was inconclusive. We had not yet developed an agenda, one month into the administration.
It was, in fact, the second or third sherpa meeting after the Venice Summit, but the first for which the new administration was responsible and the new Canadian presidency.
JK: What were the differences between Owens and the new administration?
HN: The biggest issue was that the previous summit at Venice had commissioned a report on foreign aid. The focus was on foreign assistance and development aid, on the numbers of aid as a percentage of GNP and which countries were or were not meeting expectations and standards. That was one of the issues at the end of the 1970s: a focus on development assistance and meeting those targets of 0.07 percent of GNP going to aid. Reagans people were going to approach it from a different end and this was one issue we discussed up front at the Ottawa meeting in February. We wanted domestic policies and domestic governance to be at the top of the agenda, followed by trade, then aid, then institutions the New International Economic Order was another element of the issues that came out of Venice. But our ordering of the issues was regarded as unacceptable. Canada said no; Pierre Trudeau would not sponsor a summit that would address the domestic policies of developing countries in any significant way. These policies were not our business. The attitude at that time was this was neocolonialism, it was intervention, and we should respect the independence of the developing countries as they were just coming out this colonial experience. It was not the big end of the problem as seen at the time. There was a lot of consensus among the other countries about that.
We were counter-conventional at those early meetings. So we had a lot of work to do over the next months. We put special emphasis on domestic policies of developing countries and especially domestic savings. As much as 95 percent of savings came from domestic sources, which was the big funding for development. It mattered how domestic policies affected savings and the allocation of those savings. This was clearly more important than the 5 or 10 percent of resources obtained from foreign aid under international standards. We were also interested in trade. This was a clear difference between Democrat and Republican strategies. The Republicans were more interested in opening trade markets, not having the same interests in labour, exchange rates, monetary issues and especially development assistance. We didnt get into disputes about fiscal policy and exchange rate policies at the Ottawa sherpa meeting. Eventually there were differences from the previous administration, but we didnt get into those until later in the preparatory process.
By the time the Summit came, it was clear we were going forward with a major tax cut package and large deficits. It was also apparent we would be reluctant to support intervention in exchange rate markets, which had been a policy of the previous administration and was an activity of the G7. By the time of the Summit, both of those issues had become matters of difference between the Canadians and us. There was some support from the British quite a bit from Thatcher, actually, who was sympathetic to this new emphasis. The Japanese were silent. They became more vocal in 1982 and 1983, and at 1983 there was a breakthrough. At Williamsburg in 1983, we agreed to discuss for the first time security issues, especially to talk about the NATO double-track decision to deploy missiles in Europe. The Japanese stepped up to the plate at that meeting; they were supportive but had the most difficulty talking about security at the Summit, because they were still a domestic civilian power. When Yasuhiro Nakasone came into power in 1982, however, he and Reagan hit it off. Gaston Sigur was a longtime Japan hand and ran the Asia operation on the NSC. He knew Nakasone personally. There was real co-operation to help move things forward so Japan could play a more significant role. About that time, Nakasone made his comment was it at Williamsburg? comparing Japan to an unsinkable aircraft carrier. It was the first symbolic identification of Japan with security interests and the G7 community of great powers that dealt with security and economic issues. The Japanese consented to a communiqué on the security issues, reflecting openly that Japan was cooperating with NATO countries. This was largely due to Nakasones influence. But the security communiqué was separate and not integrated into the final communiqué, which suggested that discussing security issues might still be a one-time affair.
To come back to the Ottawa Summit, the other looming issue was the east-west trade question, articulated already in February. This followed from the tougher Soviet line that Reagan was going to take. We initially expressed opposition to a gas pipeline to be constructed by the Soviets and financed by the west, to create western dependence on the Soviet supply of gas. I was directly involved in this issue. There were lots of differences in the administration, but the resulting position was not a knee-jerk sanctions policy toward the Soviets. Reagans policy was to rebuild American defenses and invest in them, and to follow through on the two-track NATO policy. It was still a number of years before those missiles would be deployed, and during that time Reagan felt it was not appropriate for a major project to go forward, which could become a potential vehicle for undermining western solidarity. Some argued of course that sanctions themselves would undermine western solidarity, but Reagans notion was that it did not make sense to become dependent on Soviet gas while we were laying the gauntlet down for the Soviets, signaling a change of attitude in the west in reaction to the Soviet Unions Afghanistan intervention. We had to be consistent, Reagan argued, so its not the time to build a major pipeline. John Lewis Gaddis was at George Washington University last month (April 2004), working on new book on Reagan, and looking at all Reagans writings before he became president his speeches, radio addresses and so on. Out of those writings, Gaddis is developing an understanding that Reagan already knew where he wanted to go. By taking a hard line at the outset, Reagan was setting up the bargaining terms and would then go for compromises later. I remember Reagan kept emphasizing I dont want this pipeline at this time, and I remember thinking, Was there another time when it would be appropriate? It was not just an effort to bleed the Soviets but a policy that was consistent with a broader message that this is a new administration and the Soviet Union would have to live with it for a couple of years before we would start bargaining.
JK: Williamsburg in 1983 was the first time the G7 mentioned health. Do you have any idea how that got there?
HN: I would say it probably wasnt from us. It may well have been the French. Williamsburg was interesting because the French had just made a u-turn in their economic policies in March 1983. Now they were concerned about being isolated at the summit and perceived as a socialist state at a picnic of capitalist states. Helmut Kohl had come into office in Germany, so you had Kohl and Margaret Thatcher, and I think Italy was also conservative. You had Pierre Trudeau as a socialist but the focus had shifted to conservative parties. France was concerned about being perceived as abandoning socialist policies. Mitterrand had taken very market-oriented-looking decisions in March, to stick with the EU and not break out as France had threatened to do, and to rein in some of their fiscal expenditures and put the franc on a more stable course. There was an effort made to ease Frances discomfort. Reagan conducted a personal correspondence with Mitterrand to resolve differences over the east-west trade issue, which had blown up at Versailles a year earlier. At Versailles the leaders had clashed directly over the issue. So we worked hard to bring that issue back under control. There was no interest by April 1983 in unnecessarily or gratuitously isolating the French, so adjustments were made. I may be mistaken, but the health proposal may have come from the French, or possibly the Canadians supported by the French.
JK: Did it come out of Reagans health concerns?
HN: I dont think so. At Ottawa in 198, Reagan was still recovering from the assassination attempt in March 1981. But I dont remember any issues about his health at the time of Williamsburg.
JK: Did Reagan have specific views about the G7?
HN: l dont think Reagan had any view of the institution of the G7. He knew about the summit meetings, but whether he had a sense of what role this group played, and to what extent it had influenced previous policies was not apparent. The G7 was still young then and had only gone through one cycle. There was some question as to whether it would even continue. After the difficult summit at Versailles, this was a real issue within the G7 [not just the Reagan administration]. We had suggestions from other countries that unless we did a better job at these meetings, we should end them. The French made the point very clearly. Basically it was an issue between the two of us. Mitterrand was considering whether these sessions were worthwhile. He had been offended by the outcome at Versailles. I thought Versailles was a good summit, because it was very honest. It was contentious, and what we did agree on represented tougher decisions than at other summits, in the sense that we were dealing with divisions. It had been contentious and there was a flap about press conferences at Versailles, about everyone giving their own versions but versions that were hostile for the other side. Franois Mitterrand did it at a press conference right after Versailles, and Don Regan did the same on behalf of Reagan. The view was that thereafter the summits should be less extensive, less intensive, less public, and involve fewer people. Williamsburg was the first exercise in downsizing, and offered for the first time a heads-only meeting. Trudeau was skeptical. Prior to that it was only lunches for heads only without aides. The first heads only regular meeting was at Williamsburg, when they met in the Burgess House, with no one in the room except the leaders. Not even sherpas. The translators were behind glass enclosures outside the room. Reagan was insistent, adamant. Kohl thought it was a good idea. Mitterrand didnt strongly oppose it. Trudeau wasnt sure it would be terribly useful and could be counter-productive because Reagan might focus on differences. But it worked, and actually went really well. Everyone enjoyed it. It didnt discourage them from thinking about heads only meetings in the future.
JK: Do you remember any elements of spontaneous combustion?
HN: Williamsburg was the smoothest of the three summits I participated in. In fact, Williamsburg was a love fest, basically because it was the first summit in the early 1980s when the world and the U.S. economies were beginning to revive. The 1981-82 recession was the deepest recession in the postwar period, deeper than later recessions in 1990-91 or 2001-2002. Trade issues had blown up at the GATT in 1982. I was at that GATT meeting, too. Bill Brock was the leader of our delegation. He was very upset at the meanness and ill-spirited nature of that meeting. It was a symbol of the temper of the times. By Williamsburg, however, things were improving. We were not by any means in the clear but we were moving in the right direction. France, on its own, had made some significant changes. There was a comity at Williamsburg. I remember Reagan was challenged on his economic program, because while we were recovering there was concern, as Helmut Schmidt had expressed it at Versailles, that interest rates in 1982 were higher than any time since Jesus Christ that was a direct quote. They had peaked at 18 percent. Interest rates were still high in 1983 and there was a lot of testing of Reagan at Williamsburg, both because he was the leader and because it was an opportunity to catch him without aides. There was always the criticism that he spoke only from note cards and had no depth to him. It was true of course that Reagan was not a long-time international politician the way most Europeans are by the time they get to the top position. But Reagan worked hard and always did his homework. He made a good impression. Trudeau confirmed that point when he was quoted in the New York Times to the effect that the president took a gamble, a big risk, and pulled it off. And Trudeau had been the most skeptical. We were able to repair some issues: the east-west issue gave way to deployment of missiles. Mitterrand was with us on the missile issue and very helpful. His support helped bring Kohl on board and ensured German solidarity on that issue. There was a lot of appreciation by Reagan of that support from Mitterrand. They eventually issued a good communiqué. At one point the leaders broke up the morning meeting to wrestle with this missile communiqué and went on for an hour in informal groups in the courtyard area outside the meeting area to work with the language. The leaders themselves were doing the drafting with Thatcher and Mitterrand standing face to face, then sitting down at one of the tables with Reagan scratching away to find the way around bracketed language. I could remember, with some review, what the critical words were. But they resolved the issues and decided even before they went into the room that the communiqué was going out. Then they went back into the room and continued the regular meeting. It was a very spontaneous process, just the sort of thing Reagan had hoped would happen, rather than everything being scripted.
JK: Was it paragraph five of the political declaration, the one that Trudeau took that as the G7s authorization for his peace initiative?
HN: I think that fits the scenario.
JK: Do you have any lingering memory of Montebello?
HN: Yes, especially the way the press was handled. The Americans stuck a little press operation in the hills outside of Montebello, which was typical of the aggressive kind of advance group we had that first year. I dont know if this is what happens when you havent been in power for a long time. There were rumours of things the security people did that I couldnt believe. You might know some of it involved the Canadians. The US advance people didnt like the way Reagans room was set up when they arrived, so they took a truck into Ottawa and somehow got into one of the Canadian offices and took the antique furniture and brought it to Reagans room at Montebello. I remember thinking, how can they do that? Montebello was designed to keep the press at some distance and let the leaders have some space so they wouldnt feel in competition with one another to get their story out. We blew that, with Haig going into the hills for repeated press conferences from day one, which made the French and Canadians furious. That may have been the moment when the next summit at Versailles was destined to become contentious because at Versailles the French wanted to make sure Montebello did not happen again. They severely constrained the media and especially us at Versailles, letting the story get out but controlled by the French. At one point, they warned the delegations that power would be cut if any unauthorized press conference was held. So Williamsburg was lets not do Montebello or Versailles but lets do Montebello right: keep the leaders away from the press, give them space so theyre not in competition to get their story out or to reach the press first or to see who is exercising the most influence and so on. Williamsburg was selected in part because it could be isolated. Dallas was an alternative and I dont remember the third. But Williamsburg was chosen because it could be isolated.
The biggest problem at Williamsburg was with the communiqué. Up to then the summits had been so much of a political event that the communiqué s were negotiated beforehand with great intensity and detail. It usually meant contentious issues were left in bracketed language to be resolved at the summit, with the possibility that differences would be aired externally to the press. This was very destructive for the process, so the big issue was whether we needed a communiqué. The US team started off with the idea that we didnt need one. We would simply report that the leaders had met, exchanged views on x, y and z, and were looking forward to meeting next year. That was controversial to say the least. We realized we would not able to have a meeting without something more substantive taking place, but the idea was to have the substance develop very late and not prenegotiate it in the second or third sherpa meetings. So we went into the last meeting in San Diego in April 1983 with a lot of nervousness. If there would be no communiqué, the leaders would be coming to a meeting without knowing what was going to come out of it. So we said wed keep minutes and develop a paper trail and summaries of what we talked about in these preparatory meetings. But these minutes would not involve the formal language or disagreements of a prenegotiated communiqué.
We met already in France at Celle Saint-Cloud in December 1982. The first meeting under US chairmanship was in San Diego in March. Then we met in Williamsburg in April and again at Celle Saint Cloud in May.
We started, as I mentioned, with what we called minutes as a paper trail of the sherpa meetings. There was a really strong view on the part of most sherpas that we had to prenegotiate a communiqué. But Allen Wallis, the Undersecretary of State for Economic Affairs and the chief US sherpa, was adamant. He had to be because President Reagan told us before the first meeting in San Diego no prenegotiated communiqué . He wanted a more flexible summit, and as Trudeau commented later, he got it and it worked.
By the way, I might mention that the chief US sherpa changed three times from 1981-83. Mike Rashish was the sherpa at Ottawa, Bob Hormats at Versailles and Allen Wallis at Williamsburg. Rashish was also at Cancun in the fall of 1981. Beryl Sprinkel and I were the other two sherpas at all of those summits. In a sense Reagan was much less dependent on his staff than people thought at the time. John Lewis Gaddis in his new work on Reagan notes that Reagan also had many different national security advisers and chiefs of staff. He had his own sense of strategic direction. And that was never more evident than on this communiqué issue at Williamsburg.
At the sherpa meeting in Williamsburg in April, we decided we would develop a thematic paper that would be very short not more initially than 600 or 800 words identifying the themes and broad conclusions reached in the minutes of the preparatory work. In the end, this thematic paper evolved into the Williamsburg communiqué. One contentious issue was a monetary conference that the French were eager to call. To some extent we had called for such a conference too. Don Regan, the Treasury Secretary, had given a talk in March or April calling for a new Bretton Woods. But this proposal was not staffed out within the US administration. And the administration didnt want do anything that would divert attention from or overshadow the recovery in progress. The focus should be on the basic market-oriented policies that were generating the recovery and were being applied now in France as well. Another issue that threatened to divert attention was calls for exchange rate coordination. This was a favorite activity of the previous US administration and previous summits. The Reagan administration was determined to avoid it throughout the early 1980s, seeing exchange rate coordination (bringing the dollar down) as just another way to derail the disinflation process that was under way and was so necessary to achieve full recovery.
In the end the Williamsburg communiqué was a short one. I know youve got some numbers at the G8 Research Centre that say it was as long as the communiqué of other summits. But youre may be counting all the annexes. Wed tried to keep the communiqué as short as possible, under 1,000 words. It contained the Williamsburg consensus, which later became known as the Washington consensus, an emphasis on market-oriented reforms aimed at low inflation, deregulation, flexible labor and capital markets, and fiscal responsibility. But the details were in an annex. Together with annexes the word count probably came up to 2500 words or something like that.
JK: Can you go back to the Ottawa Summit for a minute?
HN: Sure. For 1981, the Canadians had a game plan. There was a lot of interest in a good and thorough follow-up to the Venice Summit, which had developed development assistance themes. I think Trudeau had just made a trip to some developing countries, including Africa. Maybe that was in preparation for the Summit. The theme was going to be north-south, and other countries were on board. We were the skunk at the party. It was not very pleasant. We were all new Rashish, Sprinkle and I were up there as the U.S. sherpas and we realized it was going to be contentious if we were going to hold the policies that Reagan supported. We had a lot of work cut out for us. There was a clear program or set of themes coming out of Venice and it seemed well organized. We felt as though we had to be maybe even more assertive because we saw the follow-up work from Venice as being quite far along and we had only three or four months before the Montebello summit. That would be Reagans first summit, and like any leader he didnt want to go to a summit where he would be isolated. North-South issues were not at the top of Reagans agenda, given the way the world economy and the U.S. economy were going, and the assertiveness of the Soviets in Afghanistan.
JK: For the Canadians, Montebello was meet-and-greet with the President and a chance to bond with the institution, and lets agree to go to Cancun for global negotiations some thought Reagan wouldnt have gone to Cancun without the G7.
HN: It think thats reasonable. I know that global negotiations issue well, because I negotiated it at Versailles in June 1982 and was closely involved in the run-up to the Cancun meeting in October 1981. What you say is plausible. Trudeau wanted to communicate to Reagan his hopes for Cancun, just as Reagan wanted to inform his colleagues about his concerns over global economic and east-west strategic issues. The summits serve that purpose, and its a good function of the summits. Reagan was not unwilling to deal with developing country issues. He just wanted to pursue a more pragmatic agenda focusing on domestic policies not just global talk shows. He saw Cancun as a more practical format than global negotiations. For one thing there were only 22 countries involved and not the whole UN. Reagan had a sense that nothing had come out of all the North-South meetings in the 1970s. Cancun would be a more manageable process. He may well have thought that after Montebello weve got a strong group of industrial countries, with some differences but lots of common views, and this is a good base on which to go forward and reach out to the developing countries and make sure were not sucked into some endless dialogue of words and rhetoric.
For Reagan, Cuba was the big obstacle to Cancun. Rashish and I were sent to Mexico. Reagan didnt want Cuba at the meeting. It was up to Lopez Portillo, the Mexican President, to finesse that issue. Reagan would not come to Cancun if Castro came. Rashish and I went down, and Portillo, who had met with Reagan shortly after Reagans inauguration, agreed to take care of it so Castro wouldnt be there. Once that was resolved, Reagan was quite happy with Cancun. He didnt want something to come out of Cancun that would approve global negotiations. That was the interest of some G7 countries. Some inconclusive things came out of Cancun, which brought the issue of global negotiations to Versailles. There the Reagan administration strategy was to work out a deal with the G7 that would either not be acceptable to the G77 or would dramatically change the character of global negotiations if it was accepted by the G77. That was the objective and the subject of several intense meetings at Versailles. I was authorized to work on this issue at Versailles. We negotiated a detailed side agreement on global negotiations, which became the basis on which the French and Canadians approached the G77 in the summer of 1982. Ultimately, there was no success. The G77 decided not to accept the proposal because the agreement we reached among the G7 recast global negotiations in such a way that the G77 could not portray it in the same light in which they had conceived it. For one thing, Global Negotiations would not be able to create new institutions that might rival the international financial agencies, such as the IMF and World Bank. There were other aspects. I cover the details of this issue in my book, The Myth of Americas Decline. The US and probably others were relieved when the G77 rejected this final attempt. The US Treasury Department was particularly opposed to anything like Global Negotiations. In the end, the Versailles Summit negotiations were probably most responsible for scuttling the idea of Global Negotiations, which was totally antithetical to the new direction of market-oriented policies in which the US and some other G7 countries wanted to move.
JK: Were there other examples of the dominant portrait of a president listening, learning, adjusting?
HN: At Ottawa in 1981 Reagan himself was a novice, without the international exposure others had. But he was an extremely confident person and seemed to me already then (and Gaddis is now finding this to be true in retrospect) to know exactly where he wanted to go on big issues. I had never been active politically in either party and had not campaigned for anyone before 1979, but I was very impressed with Reagan the first time I met him in a small group. In terms of a big picture, he made it clear there were links between the security policies, economic issues, north-south issues and pipeline issues. There was a framework. He had a vision of where he wanted to go. At the operational level he was very flexible: if you can get half the loaf now, you take that half and tomorrow you go back for the other half. So he was both flexible and tenacious. He had a good sense of timing for bargaining. He knew he needed time to build a different basis or platform for what he wanted. He genuinely enjoyed the summit meetings. Most thought he would not, that he would feel put off by the sophistication and even the snobbery of the Europeans, maybe even of his Canadian colleague. But he enjoyed his counterparts. They would tell jokes and stories about their lives and their campaigns. He could disagree but in a very friendly manner. He didnt have any personal enemies, not even inside the U.S., not to mention outside the US. Some people didnt like what he stood for but they did not dislike his style and charm. He was a very charming man.
I was intrigued by his relationship with Mitterrand. Mitterrand spoke no English, so they communicated through translators and there wasnt the same chance for being spontaneous. But they had good meetings, prior to the Versailles and at Versailles. I remember one meeting, one on one, just before the summit began, and Reagan had been writing on a piece of paper as though he was taking notes, which was unusual. At the end he got up and handed me this piece of paper, and it said, This fellow is a friendly guy if he just werent a damn socialist. That summed up Reagans attitude. He liked the guy genuinely. I dont think he knew at the time that Mitterrand, I think it was before Versailles once said that Reagan was a man without culture. I suspect Mitterrand might have felt the same way about Americans in general. That was a devastating line. I dont know if Reagan knew about it at the time. But it probably would not have mattered. Reagan had a wonderful way of letting such slights roll right off the back of his collar.
Tip ONeill would say the most horrible things about Reagan, and yet they adored each other. They had lots of private evening meetings and theyd tell Irish jokes and have a snort of scotch and a great old time together. Reagan always understood were all politicians and have to say certain things.
He listened, at the operational level, but not at the strategic level. He had a firm view where he wanted to go and was not open to variations, for example, about deploying missiles. By Williamsburg, I believe, he had already proposed the zero option, which no one gave any credence. But his view was: why should the Soviets pull out their missiles when they still had hopes that we would not deploy. So lets show them, if theyre not going to back off without our deploying, then we will deploy. And then well negotiate a mutual withdrawal. It was a perfectly sensible, in fact ingenious, strategy.
JK: This is after your time, but in September 1985 before Reagan flew off to his big summit, he called the G7 to meet in New York. The French didnt go so they denied it was a G7 meeting.
HN: That doesnt surprise me. It didnt surprise me at the time. I think there was a good sense that we couldnt get anything done without the allies. George Bush Jr. is dealing with a different threat now the terrorist threat is piecemeal and ad hoc but the Soviet threat was so comprehensive and so central in the middle of Europe. Reagan had to regroup and redirect the effort of the allies but he always had a sense that the allies were essential. That was the same attitude I saw from the beginning in the context of the G7 process. Reagan knew what he wanted to do. Some aides in the administration were very nervous about the summit process and about the Presidents personal involvement, because they feared what the President might do when he wasnt scripted and would be out of the hands of the handlers. But Mike Deaver knew Reagan best and understood that Reagan wouldnt say dumb things. But Deaver feared hed be caricatured and the press image would be bad. Deaver was very involved in the Ottawa Summit. It was nominally run by the Vice-President in the six months leading up to Ottawa. More nominal than substantive, because the work was done by the NSC staff. Dick Allen and I went in for several meetings with Bush Senior to brief him. Bush Sr. had enough sense to know that the Vice-President wasnt going to take direct control. We briefed the Vice-President, and then he would have luncheon meetings with the President and make whatever counsel he wanted. We briefed him frequently and thoroughly, but never asked him to make decisions, and we certainly didnt sharpen options for him so that he could weigh in. The Vice President was brought in because there was never complete confidence in the NSC Adviser. There was some desire to make sure Allen was under wraps. That was my guess. Allen very soon left the administration. Judge William Clark, who succeeded Allen, was close to the President, but in 1981 he was still at the State Department to manage Alexander Haig, who was perceived as a loose cannon who needed to be managed.
JK: Are there alternative approaches to summits?
HN: I think so. The dominant perception of summits is that it is a negotiating forum to arrive at detailed and package (cross issue areas) agreements. The media likes this view and concludes that if there is no mass of detail and negotiations, the summit is a failure or just a photo-op. Conservative Republicans generally dont share this view. In The Myth of Americas Decline I tried to outline an alternative way to think about summitry. Rob Paarlberg, at Wellesley College and Harvard, found something valuable in the more informal domestic (or domesticist, as I called it) approach to summits I developed in The Myth. Rob developed the approach further in a book for the Brookings Institution and called it inward-oriented, as opposed to the dominant outward-oriented view. The inward-oriented view had to do with leading with domestic policy rather than with international agreements. The popular view of summits is to lead with international agreements and then come home to change domestic policies under the constraints of the international agreements reached at summits. The 1978 Bon Summit is said to be the prototypical model of this approach. The other approach is that you reach a consensus domestically on what you think are your best interests, and that includes your role in the world, and then you compete, through a more informal and open market system, and come to a broad consensus at the international level. Some issues, I believe, can only be approached in this way. For example, disinflation was not a policy that you could have negotiated at an international summit. It had to be done more indirectly through domestic policies, such as tight money and high interest rates in the US squeezing credit in global markets and pushing interest rates up in other countries. Youre coming at agreement in different ways. Its worthwhile keeping this in mind, for a balanced sense of how we think of these meetings. One reason that domestic conservatives dont like the international agreement approach and this is true of Reagan, Bush Sr. and Bush Jr. is that it leads to too much institutionalization, regulation and bureaucracy. Theres one great fear, which is overdrawn but comes out of the late 1970s, of summits being more bureaucratized, of more meetings, of more sub-official meetings at this and that level. The alternative is: Lets downsize and not let this monster grow and spread, because its more effective as an informal process. A certain level of institutionalization is needed, but theres always the fear of the EU-style top-heavy institutional agreement with a law-oriented approach rather than a more competitive market-oriented approach. It seems to me you need both options, not just the one that is favored by market intervention advocates.
JK: Reagan said how can I agree to this before Ive said it.
HN: Yes, that was a major point he made. If youve already negotiated the meeting, then whats the point of me going to it?
JK: Who was perceived as the dominant practitioner of this alternative approach?
HN: I think no one thought about this in the context of the summit. Maybe George Shultz was the most experienced individual, since he was involved in organizing the very first one in 1975 when he was Treasury Secretary. He was always in the wings of the early Reagan administration. He led a group that I briefed, before he became Secretary of State, on law of the sea and IMF issues. There was an effort to bring in private people like Shultz to offer advice. Rashish and I sought counsel from him about the summit process. If anyone was an expert in this area, it was Schultz.
Reagan had his views about the leaders, but not specifically from the summits. Thatcher was at the top of his list. Hed met her briefly in the 1970s. I was not at the meetings prior to Montebello, but at Versailles there was an enormous rapport between them and he had a special bond with her. Schmidt was a little exotic, if not erratic. He was a little bit strange in 1981. I often wondered about him. He came for a couple of bilateral meetings, and he didnt look well. He snorted snuff. There was a white powder he kept sniffing and it was all over his suit he was a mess. Reagan was a little puzzled by Schmidt. They had long conversations, but he wanted to get that guy a clean suit or something. Mitterrand he liked in a strange way, as I said. I dont think he liked his policies in any way shape or form, but he liked him in a human way. Mitterrand had an aloofness that Reagan also had to some extent. You got what you saw which was different in both cases but you couldnt get too close to either. Mitterrand had very few close associates, and the same was true for Reagan. Even Reagans wife makes that point. Trudeau and Reagan didnt get on famously. My impression was he thought Trudeau was a little pretentious, but they didnt have any quarrels. He had quarrels with no one. He was friendly with Kohl; they saw things similarly but werent chummy. Kohl was a bit too bon ami for Reagan, who had a distance about him. He liked jokes and laughter, but you couldnt put your arm around him and take him off to the corner to tell him an off-colour joke not that Kohl did that.
Reagan had a lot of respect for Nakasone. Some people close to Reagan were close to Nakasone, like Gaston Sigur, my colleague on the NSC staff. The Williamsburg Summit brought them together under the right circumstances. Nakasone was taking some chances in his country because of his sense of where Japan needed to go after World War II. Reagan could understand that. Nakasone was charming and good looking, and brought the same kind of Hollywood to Japanese politics that Reagan was accused of bringing to American politics. I recall Nakasone came in for a bilateral and they met initially in one of the reception rooms on the first floor of the White House. They were going on and on. Malcolm Baldridge, the Commerce Secretary, was there, Nakasone was there, Yoshio Okawara (he was the Japanese ambassador, and very relaxed compared to most) and they were going on and on, telling jokes. Reagan was late for some other meeting. Fisher, his scheduler, was trying to get me to get Reagan to end the session, but I said you do it. Reagan was clearly having a good old time and they were not going to be disturbed. That was very unusual for a Japanese prime minister; theyre usually stiff and formal. Reagan was informal up to a point he loved story telling but always with that kind of good, proper everyone-standing-at-attention style and then enjoying a good guffaw afterwards.
JK: Do you know anything about a North American accord?
HN: Reagan first broached it in the fall of 1979. It was an early topic after he declared his candidacy for president, in November or December of that year. Maybe he went to Mexico, on an informal trip. I dont remember offhand, but it was on the record already. I recall in the run-up to Cancun in 1981 Reagan would bring it up over and over again. In his mind, it had been a campaign theme in 1980, but not more than that. He would bring it up in the sense that we could get something done with Mexico. We could sit down andé youre always telling me we got to go to the UN or do global negotiations. Why not just sit down with our neighbours? Then we could get something done! He thought about this idea, but it was just a theme in his mind, maybe partly from his California background. California has a closer sense of association with Mexico than the Eastern Seaboard does. I dont remember the details. But both Presidents liked ranching country, Reagan with his interest in horses and outdoor life. He enjoyed his relationship with Portillo; they exchanged horses.
He had very little sympathy with north-south discussions in the 1970s, and made it clear to us not to involve him. Give me something practical I can see problems there, give me something I can do this was true at Montebello, but he had the sense that you have to start at these issues in a practical way, and maybe you start at home. I remember at the time not thinking about the North American Accord much; I thought it was a Californian thing. It was an idea he had, not his staff. I dont remember anyone on the staff being keen on this or urging him to develop it. Mexico was still associated with G77, still had a trade ministry vehemently opposed to GATT and open trade and the postwar trading system, so I thought you wont get much done there, Mr. President, with these officials running Mexican policy. It started with these themes of economic renewal, in the U.S., as the primary focus: economic renewal, maybe next a regional or growing economy. Throw the gauntlet down with the Soviet Union, and deal with them through a different policy or approach. I do remember vividly that first year we were told not to let foreign policy intervene with domestic issues. Increasing the defence budget and tax cuts were the first priorities. The flap with the Saudis over the sale of some aircraft became a headline issue but not until October. That was the first time after the tax plan passed and had been signed in the summer that a foreign policy issue was allowed to surface. The only other foreign policy issue in that early period was this vague theme of Mexican-U.S. relations.
That was the next step. Domestic recovery, as Reagan saw it, was based on a strong program of creating new incentives to revive the American economy, deregulating and bringing down inflation. We can build on that, and then possibly we can look at the revival of the western economy and then, down the list, relate to developing countries. His vision was so different from the top-down view dealing with issues at the level of international organizations or even the New International Economic Order. Were in such a mess that we had better start this from the bottom up, he said. Get this economy on track. The two years of 1981-82 produced the deepest recession since Hoover and, as it turned out, until the present day. I remember thinking in 1982, Are we going to have to keep stonewalling international meetings while our economy goes nowhere? Some of us began to wonder, but not Reagan. Six months later in spring 1983, things began to break. Once we could get that domestic order back in place, we could try to get the GATT process revived, but then in the meantime, Reagan insisted, dont do anything with international negotiations that would set us back.
JK: The North American Accord was a good idea but it was not fleshed and maybe deliberately so out because then people ask what it means.
HN: That sounds right. Mike Rashish knew the Mexican scene quite well. He was generally familiar with Canada, had worked with a Kissinger commission that had done a Mexican study in 1978-79. He gave me a copy of that, and I was impressed by how well informed he was about U.S. Mexico relations. He led the group on the preparations for Ottawa and Cancun. He spoke passable French.
I only got to know Mike around then. He had a private economic consulting practice. I knew of his work with Kissinger, and he was a well-respected member of the Council for Foreign Relations for some time. I didnt know him from his writings, but he had a good pedigree. Degree from Harvard, taught at a number of schools, independently wealthy. Very nice guy, but he ran afoul of the handlers in the White House. He came across as being a bit too offhandish, too lighthearted. He would make cracks about things, and people would wonder if he was reliable for negotiations. In the summit process, economic issues had more of Reagans attention than the other issues. So we got his attention easily in the summit process, and maybe his colleagues did too, even though here was this guy with a degree from Eureka. Reagan did well and enjoyed it and focused on those issues.
JK: Thank you.
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