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This Mandatory Declassification Review was for specific documents from Clinton Presidential Library Freedom of Information Act (FOIA) case 2006-0459-F. Case 2006-0459-F was for the files of National Security Council (NSC) speechwriter Antony Blinken. Documents being released include comprehensive talking points for the April 1997 foreign policy retreat, a briefing memo and talking points for a meeting with Korean President Kim Dae-Jung in November 1998, and notes and drafts of speeches concerning Iraq in February, November, and December 1998.
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Antony Blinken
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Korea
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Photographs of the White House Photograph Office
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<p>Official Photographers for the Clinton administration are as follows:<br /> Robert McNeely<br /> Sharon Farmer<br /> Barbara Kinney<br /> Ralph Alswang<br /> David Scull<br /> William Vasta</p>
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Little Rock, AR
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Little Rock Central High School Speech Preparation
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Bob McNeely
White House Photograph Office
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09/25/1997
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P56516_25A
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President Clinton works on his speech in the holding room at Little Rock Central High for the 40th Anniversary of the Desegregation of Central High with Bruce Lindsey, Sylvia Mathews, June Shih, Michael Waldman, Bob Nash, Sec. Rodney Slater
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<a href="https://clinton.presidentiallibraries.us/exhibits/show/central">Commemorating Courage: 40th Anniversary of Desegregation of Central High</a>
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P56516-25a_25Sep1997_H
594653
Bill Clinton
Civil Rights
Desegregation
Equality
Little Rock Central High School
Little Rock Nine
Speechwriting
-
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1993-2001
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<p>Official Photographers for the Clinton administration are as follows:<br /> Robert McNeely<br /> Sharon Farmer<br /> Barbara Kinney<br /> Ralph Alswang<br /> David Scull<br /> William Vasta</p>
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Little Rock, AR
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Little Rock Central High School Speech Preparation
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Bob McNeely
White House Photograph Office
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09/25/1997
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P56516_23A
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President Clinton works on his speech in the holding room at Little Rock Central High for the 40th Anniversary of the Desegregation of Central High with Bruce Lindsey, Sylvia Mathews, June Shih, Michael Waldman, Bob Nash, Sec. Rodney Slater
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P56516-23a_25Sep1997_H
594653
Bill Clinton
Civil Rights
Desegregation
Equality
Little Rock Central High School
Little Rock Nine
Speechwriting
-
https://clinton.presidentiallibraries.us/files/original/6f437a03325066269248c68fba1be7a0.jpg
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Photographs of the White House Photograph Office
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1993-2001
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<a href="https://catalog.archives.gov/id/594653" target="_blank">National Archives Catalog Description</a>
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<p>The White House Photograph Office was responsible for the official photography of the First Family and the Presidential administration. The primary duty of this office was to document the President, First Lady, and staff in their official capacities. The office handled media and personal requests for photographs of the President and administration.</p>
<p>Official Photographers for the Clinton administration are as follows:<br /> Robert McNeely<br /> Sharon Farmer<br /> Barbara Kinney<br /> Ralph Alswang<br /> David Scull<br /> William Vasta</p>
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Little Rock, AR
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35mm
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Little Rock Central High School Speech Preparation
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Bob McNeely
White House Photograph Office
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09/25/1997
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P56516_18A
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President Clinton works on his speech in the holding room at Little Rock Central High for the 40th Anniversary of the Desegregation of Central High with Hillary Rodham Clinton, Bruce Lindsey, Sylvia Mathews, June Shih, Michael Waldman, Bob Nash, Sec. Rodney Slater
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Photographs of the White House Photograph Office
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P56516-18a_25Sep1997_H
594653
Bill Clinton
Civil Rights
Desegregation
Equality
Hillary Rodham Clinton
Little Rock Central High School
Little Rock Nine
Speechwriting
-
https://clinton.presidentiallibraries.us/files/original/567d0d0b5fe7c4f89ec029e826523b79.pdf
711f19e3a21cd23b4a0a6062cf7542b5
PDF Text
Text
Clinton Presidential Records
Mandatory Declassification Review
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
Documentsfromthis Mandatory Declassification Review were
released in full.
�MEMORANDUM
TO:
FROM:
RE:
DATE:
Communications group
Bob Boorstin
1995 Communications Initiatives
February 17, 1995
Following up on our previous conversation, this memo roughly summarizes the rationale
and plans for Presidential national security initiatives over the course of 1995-96.
Initiatives and Rationale
Given the ongoing criticism of our foreign policy as reactive ~ the lack of a Clinton
doctrine ~ it is vital to the President's stature as Commander in Chief and our national
security agenda that we launch initiatives. Initiatives will provide us with positive
actions that we can claim as our own.
Due to limited news space and interest from the public and the media, however, we must
severely limit the number of initiatives that we put forth. Although the President will
obviously spend time on any number of key issues ~ as outlined in the "Action Agenda"
— his public time must be focused.
With that in mind, I believe that the President should launch initiatives on
nonproliferation and anti-terrorism. These initiatives should carry us through 1995 and
1996.
My rationale for choosing these areas:
(1) The time is right. This year is critical for nonproliferation efforts: NPT, North
Korea, Start I I , CTB, etc. Terrorism is always in the news, of course, but the World
Trade Center trial brings a special focus.
(2) People care. These are foreign policy issues which directly affect Americans
here at home. Polls demonstrate consistent public interest in both areas (especially focus
groups from this year's State of the Union.) We must continue to push our other best
choice of initiative - creating jobs through trade - but it has worn out its welcome with
the media.
(3) These are vital subjects in the post-Cold War era. The elites care. No
subjects better illustrate the challenges ~ and the potential for transnational cooperation.
Introducing new initiatives (even new packages) will stimulate elites and start academic
discussion.
(4) The risks of open partisan conflict are relatively small. With the exception of
North Korea, we have an even or upper hand on these issues. (Compare, for example,
with peacekeeping.) North Korea will continue to cause controversy. But arguments
CLINTON LIBRARY P O O O Y
HTCP
�against the NPT or START I I , for example, will not resonate with the public, and no one
opposes anti-terrorist activities.
(5) These subjects lend themselves to concrete demonstrations and television.
You can dismantle warheads and produce graphics showing the numbers of missiles
reduced. The arrest of terrorists and subsequent trials draw tremendous attention.
(6) The two initiatives intersect. Smuggling of nuclear materials, for example,
offers a prime opportunity for attack. Missions like "Operation Sapphire," presented
correctly, will draw intense media interest.
The Message
As with any message, the key is simplicity and repetition. We might want to attach
simple labels to each initiative. The message could be summarized as:
President Clinton is making Americans safer.
Americans sleep better at night because President Clinton has kept his promise to
reduce the threat of nuclear weapons. He is leading the world in efforts to stop
the spread of weapons of mass destruction.
Americans are more secure because President Clinton has kept his pledge to hunt
down and prosecute terrorists, at home and abroad. Now he has launched a new,
aggressive effort to stop terrorism.
The Plan
The initiatives would be introduced in major Presidential speeches and/or events. The
events would be preceded by small group and full White House corps backgrounders.
To maintain momentum, the initiatives would be the focus of the President's major
foreign policy addresses (i.e. UN Fiftieth Anniversary). Cabinet and sub-Cabinet
officials would include in their regular remarks reference to one or both initiatives. The
campaign would include regular op-ed pieces and articles in scholarly journals.
The campaign would begin immediately and build throughout the year, continuing
through 1996. A suggested calendar — including confirmed speeches and ideas for events
~ follows. It envisions starting the nonproliferation initiative almost immediately (the
calendar and our agenda are clear), while delaying the launch of the terrorism initiative
until late June (time to reach closure with domestic agencies and gain support of allies.)
•
March 1 ~ Possible POTUS address. Introduction of nonproliferation
initiative, with stress on NPT.
CLINTON LIBRARY P O O O Y
HTCP
�•
March 14 - Perry address to Council on Foreign Affairs. Relationship of
nonproliferation and conventional defense or focus on rogue states.
•
April — Christopher address. Nonproliferation and relationship with
Russia/former Soviet states.
•
April 18 ~ Perry address to Naval Academy. Nonproliferation subtopic.
•
May 12-13 - Perry commencement addresses.
•
May 31 - POTUS USAF Academy Commencement Address.
Nonproliferation, highlighting SALT II and further warhead reductions.
•
May/June - POTUS Russia visit. Event/speech at site where warheads are
dismantled.
•
June 26 - POTUS at UN 50th Anniversary. Launch of new worldwide antiterrorist campaign. (Alternate time might be G-7 meeting in Halifax, if
economic news is scarce.)
•
July - POTUS event. Announces new US task force on terrorism with
Reno, Freeh, Christopher, etc.
•
September ~ Congressional session. Introduction of new anti-terrorism
legislation.
•
September 2-3 ~ POTUS at VJ Day Commemoration. Prevention of conflict
through nonproliferation efforts. Update on initiative.
•
October 22 - POTUS at UN General Assembly. Fighting the terrorist threat,
particularly in regional conflicts. Initiative to fight nuclear smuggling.
•
November 18 - Japan state visit. Nonproliferation argument folded into
visit to A-bomb memorials.
As I indicated, these are obviously rough ideas. Congressional hearings, a potential trip
to Europe and other events offer further possibilities.
CLINTON LIBRARY P O O O Y
HTCP
�MEMORANDUM
TO:
FROM:
RE:
DATE:
Communications group
Bob Boorstin
Nonproliferation speech/calendar
February 19, 1995
As you know, the President is scheduled to deliver a major foreign policy address on March 1/2.
The speech will focus on nonproliferation and illustrate the benefits of engagement.
The message is simple:
President Clinton is making Americans safer.
We sleep better at night because President Clinton has kept his promise to reduce the
threat of nuclear weapons. He is leading the world in efforts to stop the spread of
weapons of mass destruction.
We will announce the initiative (i.e. Operation Secure Future) in the President's speech, putting
it in the context of our belief in engagement and our accomplishments to date. We would then
lay out an agenda for the year, hitting each major area without getting bogged down in the detail.
In the days, weeks and months to follow, the President, Vice President, Cabinet secretaries and
other officials would include agreed upon language on the nonproliferation initiative in their
public and private appearances. Subtopics ~ the NPT, START II, North Korea, Iran/Iraq, CTB,
chemical weapons, landmines ~ would be addressed and short reports would be delivered to the
President. The President would have at least one public event per month to advance the
initiative. Major speeches ~ Air Force Academy, UN Anniversary - would focus on this topic.
A proposed calendar and strategy for the first month might include:
February 20-25:
February 26:
February 27:
February 28:
March 1/2:
March 2/3:
March 6-10:
March M.March 13-17:
March 27-31:
Planning
Holum oped Times/Post
Select journalist/columnist briefings
White House press corps briefing
State Department press corps briefing
USIA foreign press corps briefing
POTUS speech
POTUS CNN interview
Christopher/Perry Reuter interview
START II press conference/event
Follow-up opeds
Perry speech on rogue states
POTUS event (meet with NPT delegation?)
Christopher address on Russia/former Soviet states
CLINTON LIBRARY P O O O Y
HTCP
�co!';riri::Ti:-L
Nonproliferation
Schedule
; )or' • •}> • • ro
;.
/
We'd l i • e t o k i c k o f f our n o n p r o l i f e r a t i o n e f f o r t Ji/; The' Presiident
:
i s sche d u l e d t o d e l i v e r a speech on March 1/2, on o n p r o l i f e r a t i o n
^ f^
.
and i l l u s t r a t e t h e b e n e f i t s o f engagement.
;
The message i s s i m p l e :
Pr e s i d e n t C l i n t o n i s making Americans s a f e r .
We s l e e p b e t t e r a t n i g h t because P r e s i d e n t C l i n t o n has k e p t
h i s p r o m i s e t o reduce t h e t h r e a t o f n u c l e a r weapons. He i s
l e a d i n g t h e w o r l d i n e f f o r t s t o s t o p t h e s p r e a d o f weapons
1
o f mass d e s t r u c t i o n .
We w i l l announce t h e i n i t i a t i v e ( i . e . O p e r a t i o n Secure F u t u r e ) i n
the P r e s i d e n t ' s speech, p u t t i n g i t i n t h e c o n t e x t o f our b e l i e f
i n engagement and our accomplishments t o d a t e . We w o u l d t h e n l a y
out an agenda f o r t h e year, h i t t i n g each.major area w i t h o u t
g e t t i n g bogged down i n t h e d e t a i l .
I n t h e days, weeks and months t o f o l l o w , t h e P r e s i d e n t , V i c e
P r e s i d e n t , C a b i n e t s e c r e t a r i e s and o t h e r o f f i c i a l s would i n c l u d e
agreed upon language on t h e n o n p r o l i f e r a t i o n i n i t i a t i v e i n t h e i r
p u b l i c and p r i v a t e appearances.
S u b t o p i c s -- t h e NPT, START I I ,
N o r t h Korea, I r a n / I r a q , CTE, c h e m i c a l weapons, landmines -- would
be addressed and s h o r t r e p o r t s would be d e l i v e r e d t o t h e
President.
The P r e s i d e n t would have a t l e a s t one p u b l i c event
per month t o advance t h e i n i t i a t i v e . M a j o r speeches -- A i r Force
Academy, UN A n n i v e r s a r y -- would focus on t h i s t o p i c .
NPT and a l l i e d i s s u e s should be f l a g g e d i n a l l v i s i t s h e r e by
heads o f state/govermment.
I n a d d i t i o n , a proposed c a l e n d a r and
s t r a t e g y f o r t h e f i r s t month m i g h t i n c l u d e :
•
•
•
February 26:
February 27
February 2 8
•
•
March 1/2
March 2/3
•
•
March 6/7
March 14:
•
March 18
TL oped Times/Post
Select j o u r n a l i s t / c o l u m n i s t b r i e f i n g s
White House p r e s s corps b r i e f i n g
S t a t e Department p r e s s c o r p s b r i e f i n g
USIA f o r e i g n press corps b r i e f i n g
C h r i s t o p h e r speech on Engagement/Resources
POTUS speech
POTUS CNN i n t e r v i e w
C h r i s t o p h e r / P e r r y Reuter i n t e r v i e w
C h r i s t o p h e r on N o n p r o l i f e r a t i o n
Perry speech on n o n p r o l i f e r a t i o n and s e c u r i t y
Lake meeting w i t h i n t e r e s t groups
Perry t o M i d d l e East
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�• March 18-24
Gore to Middle East
• March 20:
Christopher address on Russia/foririer Soviet
states
Joint meeting of N a t i o n a l Academy of Science
and Center f o r Foreign R e l a t i o n s
(Gore,Ferry,Holum)
START I I press conference/event f o l l o w i n g
Senate r a t i f i c a t i o n
Follow-up opeds
POTUS event (meet w i t h NPT delegation)
NPT extention Conference. Vice President t o
attend t o d e l i v e r speech
Marcn
•
l a t e March:
• A p r i l 16-17
• A.oril 17:
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�Blinken, Antony J .
From:
To:
Cc:
Subject:
Date:
Vershbow, Alexander R.
Blinken, Antony J.
/Ft, Record at A1
FW: State of Union Language - [GONriDEWTW?
Tuesday, January 24,1995 4:26PM
From: Fried, Daniel
To: @NSA - Nat'l Security Advisor
CC: /R, Record at A1; Burns, Nicholas R.; Vershbow, Alexander R.
Subject: State of Union Language - [CQNriDD'JTIAEr
Date: Tuesday, January 24, 1995 02:53 PM
For Tony Lake
From the Troika (Vershbow, Burns, Fried)
We recommending adding to the State of the Union text two sentences on NATO expansion, CEE and Russia.
The Administration" NATO/PFP initiatives show Presidential leadership and balance; they preempt Republican
criticism (the previous Administration did nothing on NATO expansion when it had the chance). Our sentences
are fonvard looking, rather than a catalogue of past activities.
Bob Boorstin would not take the language, stating that the speech was too long and the President had cut the
foreign policy sections by two pages already.
The sentences would go on page 18, the final paragraph (the paragraph beginning "The United States has proudly
supported free elections...")
"By launching the Partnership for Peace and initiating the process of NATO's expansion, we are building the
foundations for an expanded TransAtlantic community of secure, free market democracies. NATO will build close
and string ties with a democratic Russia, in parallel with expansion."
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�Cicio, Kristen K.
From:
To:
Cc:
Subject:
Date:
Poneman, Daniel B.
@NSA - Nat'l Security Advisor
IR, Record at A l ; Benjamin, Daniel; Blinken, Antony J.
NPT & State of the Union [CONriDENTIACT
Monday, January 23, 1995 10:50AM
PLEASE PASS TO TONY LAKE AND SANDY BERGER:
I have not seen the State of the Union, but would like to make a pitch -- just in case it's not there -- for a
phrase like "call this year for the INDEFINITE AND UNCONDITIONAL EXTENSION OF THE NUCLEAR
NON-PROLIFERATION TREATY, so that our children and their children may be protected from the specter of
nuclear war." The key words are in caps (the President was criticized for omitting "indefinite" at the
UNGA, giving rise to comment that the US was softening its support for that aim).
I know we don't want a laundry list in the speech, but omitting reference to NPT at this critical juncture in
the run-up to the Extension Conference will be noted in foreign capitals, and criticized in arms control
circles as showing a lack of Presidential vision and leadership on a critical challenge for the 1995 national
security agenda.
Dan
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�Hall, Wilma G.
From:
To:
Cc:
Subject:
Date:
Poneman, Daniel B.
@NSA - Nat'l Security Advisor
/R, Record at A l ; Andreasen, Steven P.; Bell, Robert G.; Benjamin, Daniel; Darby, M.
Brooke; Ross, Thomas B.; @NONPRO - Export Controls
Revised TL speech outliniHtGONriDLNTIAin'
Wednesday, January 25, 1995 10:13AM
< <File Attachment: LAKE.DOO >
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�NONPROLIFERATION AND ARMS CONTROL
1995 marks a p o i n t o f accomplishment and t r a n s f o r m a t i o n
of the
n o n p r o l i f e r a t i o n and arms c o n t r o l agenda.
-- Key elements o f the g l o b a l regime have r e c e n t l y been
completed
START I e n t r y i n t o
force
Ukraine/Kazakhstan/Belarus
—
NPT adherence
and we are moving e x p e d i t i o u s l y
t o put others i n place
NPT i n d e f i n i t e e x t e n s i o n
CTB
{Announce new p o l i c y on 10-year withdrawal
right}
START I I r a t i f i c a t i o n
CWC
ratification
Fissile material
convention
BWC i m p l e m e n t a t i o n
Increasingly,
increasing
a more c o o p e r a t i v e U.S.-Russia r e l a t i o n s h i p and t h e
importance o f p r o l i f e r a t i o n as a preeminent
national
s e c u r i t y concern mean t h a t the arms c o n t r o l and n o n p r o l i f e r a t i o n
agendas a r e c o n v e r g i n g .
—
For example, we are u n d e r t a k i n g a comprehensive
to control f i s s i l e materials
t h a t addresses b o t h arms
c o n t r o l and n o n p r o l i f e r a t i o n o b j e c t i v e s .
Thousands o f
Russian s c i e n t i s t s w o r k i n g i n I n t e r n a t i o n a l
Centers.
effort
Science
Five hundred tons o f Russian HEU t o be blended
CLINTON LIBRARY P O O O Y
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�down to harmless r e a c t o r f u e l .
Operation Saphire.
DOE
labs working with Russian counterparts. {Announce t h a t
U.S.
i s p u t t i n g s u b s t a n t i a l stock of f i s s i l e
from weapons under IAEA safeguards.
We
material
(Check with
DOE)}
c o n t i n u e t o need t o d e a l w i t h the imminent danger a r i s i n g from
b a c k l a s h s t a t e s who
Korea and
t h a n one
Iran.
seek weapons of mass d e s t r u c t i o n ,
Since many these c o u n t r i e s
r o u t e t o n o n c o n v e n t i o n a l arms, our
n o n p r o l i f e r a t i o n agenda must i n c r e a s i n g l y
be
e.g.
North
t y p i c a l l y pursue more
nuclear
interlinked with
CBW
and
missile
nonproliferation.
And
t h a t n o n p r o l i f e r a t i o n p o l i c y must be woven i n t o the broader
c o n t e x t o f our n a t i o n a l s e c u r i t y and
Expanding democracies —
nuclear arsenal.
foreign policy interests.
South A f r i c a ' s d e c i s i o n
t o g i v e up i t s
Expanding t r a d e as an engine of growth --
seek c l o s e r
economic c o o p e r a t i o n and
who
i n t e r n a t i o n a l n o n p r o l i f e r a t i o n norms.
fulfill
-- US
we
h i g h t e c h t r a d e w i t h those
S t r o n g defense
s e c u r i t y commitments t o Europe, South Korea and
Japan have
been c r i t i c a l t o p r e v e n t i n g p r o l i f e r a t i o n i n the p a s t 25
L o o k i n g t o the f u t u r e , we have the o p p o r t u n i t y
and
r e s p o n s i b i l i t y t o b u i l d on the accomplishments, b u t
years.
the
a l s o t o move
beyond the i s s u e s t h a t d e f i n e d n o n p r o l i f e r a t i o n d u r i n g
the
Cold
War.
S t a r t i n g from the January and
u n d e r t a k e n a new
September Summits, we've
agenda f o r t r a n s p a r e n c y and
irreversibility
weapons dismantlement.
We're t a k i n g s i g n i f i c a n t steps towards u n i l a t e r a l
openness on n u c l e a r
stockpiles.
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of
�D e t a r g e t t i n g and u n i l a t e r a l
and new
reductions i n a l e r t status
weapons development add t o mutual c o n f i d e n c e
and
s t a b i l i t y w i t h o u t complex n e g o t i a t i o n s
We're seeking t o use the momentum from g l o b a l
m a t e r i a l i n i t i a t i v e s t o s t i m u l a t e new
t h i n k i n g about t h e most
i n t r a c t a b l e r e g i o n a l p r o l i f e r a t i o n problems:
Middle
fissile
South A s i a and t h e
East.
Need t o move from 70s t o 90s approach t o arms c o n t r o l
and n o n p r o l i f e r a t i o n .
pursued
independently.
multilateral.
Each o f these i n i t i a t i v e s s h o u l d be
Some u n i l a t e r a l ,
others b i l a t e r a l , others
Need t o move beyond l i n k a g e ; each i n i t i a t i v e
i m p o r t a n t t o h o l d hostage
too
t o the o t h e r s .
This has been and w i l l remain an i s s u e of American
leadership.
Christopher
{Announce P r e s i d e n t i a l , V i c e P r e s i d e n t i a l ,
speeches; VP opening of NPT
Extension
Conference}
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�-SECRET
THE
WHITE HOUSE
WAS H I N GTO N
ACTION
MEMORANDUM FOR THE PRESIDENT
FROM:
ANTHONY LAKE
SUBJECT:
Your Trip to the 49th United Nations General Assembly (UNGA)
OVERVIEW
The dominant theme during your second trip to the UN General Assembly will be the
mission of the multinational coalition in Haiti - an issue that dovetails neatly with the other
themes you will stress in your speech to the General Assembly, in your bilateral meetings and in
the social events that you will host or attend. These themes include: continued U.S. leadership in
world affairs; the strong U.S. commitment to the United Nations; the need to strengthen and
reform the UN's peacekeeping capabilities and management practices; and, the importance of UN
initiatives in the realm of sustainable development and human rights.
Your visit comes at a relative high-point in U.S. leadership at the UN, where this
Administration is generally regarded favorably, especially in comparison to its predecessors. The
New York Times reported on Sunday, September 18, "As the General Assembly approaches, a
variety of diplomats say they like what they have seen of the Clinton Administration." U.S.
leadership in the Haiti crisis will likely enhance this perception. Moreover, having recently won
approval from Congress for $1.2 billion to pay past and anticipated peacekeeping expenses funds that will avert a once-imminent UN cash flow crisis - the Administration has proved its
willingness to fight to strengthen and sustain the UN.
Nevertheless, there remains an under-current of resentment towards the U.S. at the
United Nations, where some perceive us as bullying the membership into accepting U.S. dictates.
In part, this perception is unavoidable, given our status as the world's only superpower.
However, the strong pressure we applied to obtain Resolution 940, our resistance to impractical
and costly peace operations, and Congress's regular withholdings on payments to the UN are
cited by some as evidence of strong-arm tactics.
The centerpiece of your visit will be your speech to the General Assembly in which
you will.
SUMMARY OF EVENTS/OBJECTIVES
You will spend September 25 and 26 at the UN. On Sunday, September 25, you will
participate in four UN-related events:
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cc: Vice President
Chief of Staff
PHOTOCOPY
�-SEeRET-
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-- Bilateral meeting with UN Secretary General Boutros Boutros-Ghali, in which
you should strive for an open discussion on the UN's current challenges and its future as well as
developments in Haiti, Bosnia, and Somalia. You should urge appointment of a U.S. force
commander for UNMIH, stress our commitment to UN reform, and reiterate you personal
support for the candidacy of Dr. William Foege for UNICEF Executive Director.
-- Drop-by Trilateral Meeting with Crown Prince Hassan of Jordan and Foreign
Minister Shimon Peres of Israel, hosted by Secretary Christopher.
- Bilateral Meeting with President Izetbegovic of Bosnia, in which you should draw
him out on the notion of a six month delay in lifting the arms embargo, ask for his help during this
period in which we are intensifying pressure on the Bosnian Serbs, and stress the importance of
the Federation to any workable, long-term settlement.
- Reception for selected African Heads of State and Delegation whose countries
have made significant progress towards democracy and economic reform. At present, two
African heads of state/government have committed to attend: President Bedie of Cote d'lvoire
and Prime Minister Veiga of Cape Verde along with Foreign Ministers and senior representatives
from over twenty other African countries, Members of Congress, and representatives from the
U.S. business and non-profit communities. The reception affords an opportunity to reiterate the
U.S. commitment to Africa and highlight the constructive contributions made during your
Administration. You will give brief remarks, and President Bedie of Cote d'lvoire will reply.
Monday, September 26, will be devoted entirely to UN-related activities:
- Jog with President Menem of Argentina (Tentative). The Argentinians have
provided crucial support for U.S. policies at the United Nations, most recently and importantly on
Haiti. Our goals are to thank the Argentinians for their support at the UN and with the Summit of
the Americas and smooth over any remaining ruffled feathers they may have about being surprised
by the Carter mission.
- Photo-Opportunity with the Incoming UNGA President, Foreign Minister
Amara Essy of Cote d'lvoire, purely for protocol purposes.
- Speech to the 49th UN General Assembly, highlighting
.
- Bilateral Meeting with President Franjo Tudjman of Croatia, in which you
should reinforce Tudjman's commitment to responsible international behavior, especially
cooperation with UNPROFOR. You should also encourage full implementation of the
Washington Agreement and warn him against any attack on the UN Protected Areas.
- Visit to the UN Situation Center, the UN's fledgling 24-hour crisis management
cell. Until last year, the UN had no capability to monitor its field operations continuously. For
instance, in 1989, UN Special Representative Marti Ahtisaari placed a weekend call to UNHQ
from Namibia to report his UN forces were caught in a deadly firefight on the first day of the
ceasefire. His call went unanswered. Today, the Situation Center, established with significant
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�U.S. assistance, represents a substantial step forward. Your visit underscores the U.S.
commitment to improving UN capabilities pursuant to our peacekeeping policy.
-- Visit to U.S. Mission to the United Nations (Tentative). A brief visit and remarks
by you would be greatly appreciated by USUN staff who are among the most hard-working and
poorly compensated of U.S. embassy staff anywhere.
- Luncheon Hosted by Boutros-Ghali. The Secretary General customarily hosts a
luncheon for visiting heads of state on the opening day of the UNGA. This is an opportunity to
talk with heads of state with whom you will not have bilateral meetings. The Secretary General
will offer a toast, and you will respond with brief remarks.
~ Bilateral Meeting with President Aliyev of Azerbaijan, in which you should
congratulate him on this week's agreement to develop the large Caspian petroleum reserves with
a Western consortium, encourage Azerbaijan's cooperation in a CSCE-sponsored peace process
for Nagorno-Karabakh, and urge progress on political/economic reforms and human rights.
- Bilateral Meeting with President Iliescu of Romania, in which you should
encourage his country's economic reforms, acknowledge Bucharest's strengthening democracy,
thank him for his steadfast support of UN sanctions against Serbia/Montenegro, and praise
Romania's enthusiastic embrace of the Partnership for Peace.
~ Bilateral Meeting with President Salinas of Mexico, the object of which is to
compliment him on completion of his enormously successful presidency, thank him for hard work
in improving bilateral ties ~ especially NAFTA - and acknowledge Mexico's political and
economic progress. Salinas will likely tout his candidacy for director of the World Trade
Organization (WTO), established under GATT, and has requested a brief, one-on-one session
with you during the meeting.
- Press Availability (one half hour)
- Reception for Heads of State and Delegation at the Metropolitan Museum of Art.
You will offer brief remarks to Heads of State, Foreign Ministers, UN officials, and Permanent
Representatives from almost every country in the world. This event has become something of an
American tradition and a symbol of our leadership. Most invitees will have no other opportunity
to meet you.
CONTEXT
The Year in Review. The UN's record over the past year has been mixed at best.
The 48th General Assembly ended with some significant successes, including the establishment of
UN High Commissioner for Human Rights and an independent office of inspector general top U.S. priorities. The UNGA also adopted favorable modifications to the customary Middle
East resolutions. In addition, the UN Population Conference, just concluded in Cairo,
succeeded in reaching broad consensus on a strategy to bolster educational opportunities for
women and ensure access to family planning, maternal and child health services. Most nations
should pursue implementation aggressively.
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Nearly 2,000 UN electoral observers were the backbone of the international
monitoring effort during the South African elections. After much wrangling, the UN deployed
observers to Georgia to assist in refugee repatriation and monitor the Russian peacekeeping
force. Most notably, the passage of UNSC Resolution 940, authorizing the use of "all necessary
means" in Haiti, constituted a triumph of U.S. leadership and diplomacy.
Against the backdrop of these notable successes, however, several serious setbacks
have occurred. Bosnia, where fighting is intensifying, remains an open wound for the UN. The
UN has proved reticent to enforce the exclusion zones and has turned the other cheek to repeated
violations of other UN resolutions. In Somalia, the factions have made no measurable progress
toward political reconciliation, and the UN is increasingly a target for attack.
Arguably, the worst stain on the UN's record this year is Rwanda. The UN, and
particularly the U.S., have been blamed for abandoning Rwanda when the killings began and
responding slowly to the resultant genocide. In fact, the UN's response reveals more about the
gap between international expectations and the UN's capabilities than about the will of member
states. It is improbable that a large peacekeeping force, even if well-trained and equipped, could
have prevented the genocide in Rwanda. In any event, a large UN force could not have been
assembled in time. Troop contributors are over-extended and hard to recruit. Many poor
countries have not been reimbursed for months - sometimes years - due to the large debt owed
the UN. Moreover, the bulk of UN troops come from developing countries, and many are poorly
trained or equipped.
Lacking a rapid reaction force or an emergency humanitarian response capability, the
UN is hamstrung in such situations. While the Administration's peacekeeping policy rules out any
standing UN army "at this time", it does call for further consideration of a UN rapid reaction
force, once the UN implements fundamental peacekeeping reforms. In the meantime, the NSC
plans to initiate a policy review on means of strengthening international humanitarian response
capabilities so that the world is not entirely dependent on the U.S. military in extremis. President
Menem's "White Helmets" proposal will serve as a spring-board for the review. (For details, see
background paper).
Another milestone this year was the release of the Administration's long-awaited
Policy on Reforming Multilateral Peace Operations, PDD-25, which you signed May 3. This
was the first comprehensive review of its sort. Among its most prominent features are the tough
questions the U.S. will ask before voting for new peace operations or committing U.S. forces.
Some analysts on the left cite these questions as proof we seek to curtail UN peacekeeping.
Others on the right argue the PDD reveals our readiness to subcontract our foreign policy to
Boutros-Ghali.
Both interpretations are groundless. The purpose of the PDD is to offer a concrete
proposals to strengthen UN peacekeeping as an effective tool of U.S. interests and an efficient
method of burden-sharing. The PDD acknowledges peacekeeping is not a panacea but an
instrument applicable in certain contexts, particularly when conditions are ripe for a political
settlement. In short, our aim is to ensure we use peacekeeping selectively and more effectively.
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While PDD-25 was misconstrued in some quarters, most in Congress, in the UN and
foreign capitals view it as pragmatic. The release of the PDD, preceded by extensive
consultations, served to dampen Congressional criticism of our policy on such emotional issues as
command and control of U.S. forces. Since then, our political opponents have had little success
in using the UN against us. Moreover, the UN has begun to implement several reforms we
proposed, and the Security Council adopted a Presidential statement in May embracing many of
our tough questions as those it will weigh before authorizing new missions.
The Year to Come: 1995 marks the fiftieth anniversary of the United Nations (UN
50). There are many UN commemorative events and conferences scheduled throughout next
year. You have or will be invited to several. While no scheduling decisions have been made, you
should be aware of the following events planned for 1995:
•
UN Security Council Summit, New York, January 31. Argentina's President Menem will
chair this summit attended by Prime Minister Major, President Mitterand and President
Yeltsin, among others. No formal agenda has been set, but the meeting, which will review the
work of the Council since the last summit in 1992 and deliberate tasks for the future, fulfills a
goal set by you and President Yeltsin at the Moscow Summit.
•
World Summit on Social Development, Copenhagen, March 6-12. The "Social Summit"
will address issues of poverty, employment and social integration, building on the Population
Conference and 1992 Earth Summit. Boutros-Ghali may again urge you to attend.
•
50th Anniversary of the UN Charter, San Francisco, June 26. A non-profit UN50
committee will host 184 Permanent Representatives to the UN for two days of
commemorative activities in San Francisco, including re-enactment of the Charter signing and
a reading by Maya Angelou of a poem written for the occasion. This event is of particular
interest to several in the California congressional delegation.
•
Fourth World Conference on Women, Beijing, September 4-15, which will adopt a
platform of action for accelerating women's economic and social progress. The USG and
women's groups throughout the U.S. are actively planning for this event, which it is hoped the
First Lady will attend.
UN General Assembly Summit, New York, October 22-24, will supplant the opening of
the UNGA in September as the event for which Heads of State will travel to New York.
KEY ISSUES
Haiti (Placeholder): There will be wide interest at the UN in your views on Haiti,
especially U.S. plans for standing up the police force and the risks inherent in the interim period
before the de facto leaders resign. You should emphasize that the UN gave the U.S. authority to
use "all necessary means", and we did not abuse it, choosing to seek at peaceful settlement up
until the last minute.
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�SCCRffH
6
Initial UN Security Council and Secretariat reaction to the Carter Mission and U.S.
deployment was cautious, though relatively optimistic. A subsequent briefing by a senior
interagency team has done much to assuage pique among UN officials and Security Council
representatives that they were not consulted on the Carter Mission. Nevertheless, most capitals
have warmly praised the U.S. success in avoiding an invasion. A few UNSC members ~ notably
Brazil and China -- remain cool even to the permissive U.S. presence in Haiti.
There is wide consensus in the Security Council that most multilateral sanctions should
not be lifted until after Aristide is restored, in accordance with UNSC Res. 917. At present,
countries are poised to participate in the coalition, and the UN expects to deploy the first
contingent of 16 UN military observers to Haiti by September 25. The U.S. continues to press
the UN to accelerate dispatch of the UN-OAS human rights observers (ICM).
The U.S. confronts several challenges at the UN with respect to Haiti. The first is to
ensure continuous, close coordination on the ground and in New York. Dante Caputo's
resignation is a reminder that we cannot coordinate enough with the UN. The second is to
persuade skeptics that our objectives in Haiti are not altered by permissive entry. In the shortterm, we may face more ambiguity and complexity that had we entered forcefully. These short
term costs are easily outweighed by the improved long-term prospects for a peaceful transition to
stability and democracy in Haiti.
Third, we must continue to insist on a U.S. force commander for UNMIH to maximize
continuity with the coalition and security during Phase II and to minimize difficulties with
command and control of U.S. forces. Boutros-Ghali has resisted a U.S. commander, arguing that
this mission - as with any other UN undertaking - will lose its international credibility if
perceived as U.S-dominated.
Finally, we are likely to have difficulty gaining UN agreement to a timely transition to
UNMIH. This is a sensitive issue at the UN, where there is still a broad perception that the U.S.
left the UN holding the bag in Somalia. We must continue reassuring the UN of our long-term
commitment to Haiti. The best way around Boutros-Ghali's delaying tactics will be to establish
quickly a secure and stable environment and provide every assistance to the UN in recruiting,
equipping and deploying non-U.S. troops to Haiti - a top priority of the Haiti ExComm.
Bosnia: The increased fighting in Bosnia, repeated violations of the Sarajevo
exclusion zone, and the UN's continued reluctance to resort to NATO air power have taken a
considerable toll on the UN's credibility there. At NATO's urging, UNPROFOR has begun
planning for an orderly withdrawal. It is in this context that the Security Council will consider
UNPROFOR's mandate when it comes up for renewal on September 30. The Croatian
Government, still frustrated by the UN's failure to roll-back the Serbs from UN Protected Areas,
may be reluctant to extend UNPROFOR's tenure in Croatia beyond three months. Other UNSC
members are skeptical about UNPROFOR's future but will likely accede to a six month mandate
without modifications to avoid signaling any uncertainty about continued UN involvement. You
should stress to Boutros-Ghali our commitment to a regular, six-month mandate extension.
The UN and some key troop contributors remain apprehensive about strict enforcement of
the exclusion zones. However, the British who have been among the most apprehensive, have
-™
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spoken more positively in recent days about strict enforcement. Progress on resolutions lifting
sanctions on the Belgrade Serbs and tightening sanctions on the Bosnian Serbs has been slow, but
Contact Group unity has held up reasonably well. The recently agreed border monitoring regime
has begun successfully. Passage of the sanctions resolutions, coupled with continuing
confirmation that the border remains closed and strict enforcement of the exclusion zones, may
help alleviate pressure on the Administration to lift the arms embargo.
Somalia: UNOSOM's mandate comes up for renewal on September 30, and the
Council will decide whether to extend the mission until 1995, as originally planned, or end it early
(e.g. December 31) and begin immediate troop withdrawal. The Secretary General has
recommended a one-month extension and a delay in any decision about UNOSOM's future.
Meanwhile, violence is increasing in Somalia: ten UN peacekeepers have been killed in the past
month. The parties have made no progress towards national reconciliation. Apart from providing
limited security to relief efforts, UNOSOM is mainly engaged in force protection, while
consuming approximately $80 millVmonth (U.S. share is $25 milL/month). Increasingly, the UN
and troop contributors concede that the mission is not succeeding, as evidenced by the recent
UNSC decision to reduce UNOSOM by 3,000 troops to 15,000.
The U.S. position is that withdrawal should begin immediately with the aim of terminating
UNOSOM by year's end. Withdrawal will be risky, as Somalis try to seize UN assets (many of
which are USG property) and possibly test the UN on its way out. Keenly aware of their
vulnerability, the UN and numerous troop contributors - including Pakistan, India, Egypt and
Australia - have asked for U.S. assistance in withdrawal. They are quick to remind us the U.S.
persuaded many of them to go to Somalia. If abandoned in a pinch, allies are unlikely to forgive
us. The implications for UN and other coalition missions, including Haiti, could be grave.
We have given no formal response to the UN and will soon ask you to decide whether we
are prepared, in principle, to provide support for a UNOSOM exit. The Joint Staff, which favors
U.S. assistance to UNOSOM, has begun evaluating potential U.S. force requirements. Its
preliminary judgment is we would need to place an Amphibious Task Force offshore to deter
attacks on UN forces and possibly to go ashore to cover the withdrawal's last stages. We would
need to consult closely with Congress about any such effort. Anxious for a U.S. response,
Boutros-Ghali may ask you about U.S. support. We recommend you respond in general bui
favorable terms.
Rwanda: U.S. forces will complete withdrawal from the Rwanda Crisis Area by
September 28, having fulfilled the four agreed UNHCR service packages. U.S. military
responsibilities are being transferred to civilian organizations (i.e. UNHCR and NGOs) with equal
or better capabilities. Our forces accelerated the flow of critical humanitarian assistance to the
region and were instrumental in producing and distributing adequate water supplies in Goma.
While the immediate crisis appears to have subsided, there remain tremendous long-term
challenges such as the welfare and security of 800,000 refugees in Goma, the presence in the
camps of armed Rwandan Army personnel poised to resume the civil war, and delays in
prosecuting war criminals. The situation in Burundi also remains highly unstable. The U.S. will
continue to provide substantial humanitarian, political and other assistance to the region.
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The UN is taking several steps to assist in Rwanda. UNAMIR, the 5,500-person
peacekeeping force, is finally nearing full strength, following many months in which troops were
short and resources limited. The U.S. has provided considerable logistics support and equipment
to UNAMIR. The UN is gradually deploying human rights monitors to Rwanda to investigate
and deter additional acts of genocide. In the meantime, we are receiving credible reports that the
RPF, and possibly the Government itself, is responsible for killing up to 10,000 Rwandan civilians
per month. Though the agony in Rwanda is far from over, it is unclear what more, if anything, the
international community can do to help.
U.S. Debt to the UN: As of early August, member states owed the UN over $2.1
billion for the peacekeeping and regular budgets. The U.S. was by far the biggest debtor, with
arrears amounting to $883 million in the peacekeeping budget and $531 million in the regular
budget. The large U.S. debt resulted from the establishment in 1993 of huge missions in Somalia
and Bosnia, each costing over $1 billion per year and Congress's refusal to appropriate adequate
FY 94 funds for peacekeeping or the regular budget.
This year, the Administration had remarkable success in gaining Congressional
approval for payments to the UN. With strong Democratic support (but virtually none from the
GOP), we obtained $1.2 billion for peacekeeping expenses, including a $670 million FY 94
supplemental for past arrears. The Administration managed to preserve its entire FY 95 request
in the State Department budget, except $30 million, which was to be our FY 95 down payment
for Reagan-era regular budget arrears.
Congress also failed to appropriate $300 million in FY 95 peacekeeping funds
requested in the DOD budget as part of the Administration's new "shared responsibility" policy.
Conferees agreed to revisit this issue next year. The resultant shortfall, combined with the
establishment of a large UNMIH - unanticipated at the time of our budget submission ~ ensures
additional arrears in FY 95. Their size, however, could vary substantially depending on whether
missions in Somalia and Yugoslavia continue long into next fiscal year.
U.S. Debt to the United Nations
$U.S. Millions
Peacekeeping
BudRet
Regular Budget
Total
U.S. Debt as of
August 1
883
U.S. Payments to be
Made by September 30
670
U.S. Payments
in FY 1995
533'
Remaining
U.S. Debt
?
531
0
335
58'
1.414
670
868
?
1
The U.S. will make an immediate payment of at least $213 mill, at the start of the fiscal year, clearing all
outstanding current peacekeeping arrears.
The UN carries on its books $138 mill, in U.S. anears that we do not acknowledge and will never pay due to
congressionally-mandated "policy holds" for such things as previous UN activities in support of the PLO and
SWAPO.
2
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UN Inspector General and Other UN Reforms: The U.S. recently won a hard-fought
battle to establish, by consensus resolution, an independent UN office of inspector general, known
as the Office of Internal Oversight Services (OIOS). Its establishment, in accordance with
Congressionally-mandated requirements, is a major victory for the Administration. It also averted
the loss of half the $670 mill. FY 94 peacekeeping supplemental and 20% of our FY 95 regular
budget dues. On Friday, September 23, the Secretary of State will certify to Congress that the
UN has in place an independent office of inspector general, and we will release the bulk of the
sequestered funds.
The U.S. continues to press for various UN reforms, including cost containment,
procurement and personnel reform, reduction of waste and fraud, and openness in UN budget
processes. However, our top reform priority is reduction of our peacekeeping assessment from
the current 30.4% to 25% by FY 96. While the reduction is consonant with Administration
policy, it is also now law: Congress has prohibited payments exceeding 25% after October 1,
1995. We have tried to work constructively within the UN system to get other OECD countries
to assume a greater share of the burden. Our success has been minimal thus far, despite some
help from Boutros-Ghali, who recognizes the dangers of over-dependence on a single large
donor. We will continue to urge a UN-managed reduction but expect, ultimately, it will be
imposed unilaterally by Congress. This will leave us technically in perpetual arrears to the UN.
U.S. Priorities Purine the 49th UNGA: During this UNGA session, the U.S. will
continue pursuing concrete peacekeeping and management reforms. We will also seek broad
support for the indefinite extension of the Non-Proliferation Treaty in 1995 and swift conclusion
of the Comprehensive Test Ban Treaty. The U.S. will aim to cut-offfissilematerial production
and establish a regime limiting exports of anti-personnel land mines.
Limits on UNGA resolutions addressing the Middle East, and further improvements
in the texts of those that remain, is a major U.S. goal. Resolutions should reflect progress in the
Peace Process and should be rid of unbalanced language. The U.S. will again press for Israel's
inclusion in one of the five UN regional groupings and encourage support for economic
development in the region.
The U.S. will lobby for priority attention to women'srightsas well as increased
funding for the UN's Human Rights Center and newly established High Commissioner for
Human Rights. We will also pursue adequate resources for the Yugoslavian and Rwandan War
Crimes Tribunals and swift prosecution of suspected war criminals.
In addition, the U.S. will continue its support for an array of initiatives aimed at
promoting sustainable development, while seeking substantive follow-up to the UN Conference
on Environment and Development.
Finally, the U.S. will support Security Council reform efforts. There has been little
progress in the open-ended UNGA working group established for this purpose last year. Its work
will continue through the upcoming UNGA session, with the aim of placing a resolution before
the GA in late 1995. However, the near-term prospects for reform are dim, and the U.S. must
soon decide how hard it wants to push for change. Other permanent members have made
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conciliatory sounds but privately prefer no reform in order to preserve their own privileged
positions. The U.S. joins many other nations in supporting a modest expansion to 20-21 seats (up
from 15) to create a more representative Council but opposes any expansion that would render
the Council unwieldy and ineffective. We continue to support permanent seats for Germany and
Japan but have taken no formal position on extending to them the veto.
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�COHriDDHTIAC
THE
WHITE
HOUSE
WASHINGTON
J u l y 2, 1994
INFORMATION
MEMORANDUM FOR THE PRESIDENT
FROM:
ANTHONY LAK^\^/
SUBJECT:
Your T r i p t o Germany, J u l y 10-12
OVERVIEW
Your v i s i t t o Germany f o r b i l a t e r a l meetings and a U.S.-EU Summit
i s t h e f i r s t t r i p by a U.S. P r e s i d e n t s i n c e t h e f a l l o f t h e
B e r l i n W a l l and t h e l a s t b e f o r e t h e B e r l i n Brigade d e p a r t s i n
September. I t a l s o comes i n t h e run-up t o October 16 n a t i o n a l
e l e c t i o n s , and you w i l l have t o t a k e some care n o t t o be
showcased by Helmut Kohl f o r h i s p a r t i s a n p o l i t i c a l b e n e f i t .
Germany's r o l e as our most i m p o r t a n t European p a r t n e r i s c l e a r ,
r e i n f o r c e d by your r e l a t i o n s h i p w i t h Kohl. Bonn and p a r t i c u l a r l y
B e r l i n are f i t t i n g s i t e s t o r e p e a t your message about t h e
u n f i n i s h e d business o f Europe's l i b e r a t i o n -- and t o reassure
Germans about t h e i r c r i t i c a l r o l e and U.S.-German t i e s . O v e r a l l ,
t h e t r i p w i l l help p u t i n p e r s p e c t i v e Germany's e x c l u s i o n from DDay e v e n t s .
U n i f i e d Germany i s once again becoming t h e European c o n t i n e n t a l
power, g i v i n g some pause t o France, t h e UK and e a s t e r n neighbors
as they eye Germany's r e t u r n t o pre-eminence. T h i s e v o l u t i o n has
i n c r e a s e d t h e importance o f Kohl's and M i t t e r r a n d ' s commitment t o
c l o s e Franco-German t i e s -- b i l a t e r a l l y and w i t h i n t h e EU - - and
r a i s e d t h e c o s t t o t h e UK o f i t s ambivalence toward Europe.
Germany's s t r e n g t h and s e l f - c o n f i d e n c e a r e e s s e n t i a l t o many o f
our most i m p o r t a n t g o a l s , such as g l o b a l economic growth, r e f o r m
i n Russia, t h e NIS and CEE, and a d j u s t i n g Western i n s t i t u t i o n s
( e s p e c i a l l y NATO and t h e EU) t o welcome Europe's new democracies.
Germans know what t h e y s t a n d t o b e n e f i t - - o r l o s e -- most from
success o r f a i l u r e o f democratic t r a n s i t i o n s i n Europe's e a s t and
have been w i l l i n g t o i n v e s t more t h e r e b o t h p o l i t i c a l l y and
e c o n o m i c a l l y than o t h e r West Europeans.
Our c o n t i n u e d r o l e as Germany's s t r o n g e s t f r i e n d i s an e s s e n t i a l
element o f European s t a b i l i t y .
Germany cannot c a s t o f f t h e
burdens o f i t s h i s t o r y , b u t can - - i f encouraged by t h e U.S. and
f i r m l y embedded i n t h e EU and NATO t o r e a s s u r e a l l i t s neighbors
-- t a k e on g r e a t e r r e s p o n s i b i l i t i e s .
T h i s i s t h e d i r e c t i o n Kohl
has been c a u t i o u s l y b u t d e f i n i t i v e l y moving.
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The U.S.-EU Summit i s t h e f i r s t major event o f t h e 6-month German
p r e s i d e n c y t h a t began J u l y 1. Greece's embarrassing t e n u r e , t h e
EU's Bosnian f a i l u r e and p u b l i c s k e p t i c i s m t o w a r d t h e Union
demonstrated i n June's European P a r l i a m e n t a r y e l e c t i o n a l l have
depressed hopes r a i s e d by t h e 1993 M a a s t r i c h t T r e a t y . I n t h e
p l u s column, Germany's l e a d e r s h i p w i l l i n c r e a s e t h e EU's focus on
CEE and, we hope, s e t t h e CEE c o u n t r i e s on a course toward
e v e n t u a l EU membership. A t t h e same t i m e , A u s t r i a ' s June v o t e
f o r j o i n i n g t h e EU may h e l p t h e p u b l i c s i n F i n l a n d , Sweden and
(more p r o b l e m a t i c ) Norway decide s i m i l a r l y .
YOUR OBJECTIVES
o
Affirm unequivocally the German-American p a r t n e r s h i p and
friendship.
o
Present from the h e a r t l a n d of Europe -- where E a s t and West
once met i n confrontation -- your v i s i o n of an expanding,
peaceful and prosperous t r a n s - A t l a n t i c order.
o
H i g h l i g h t Germany's v i t a l r o l e and c o n t r i b u t i o n s t o date i n
helping adapt Europe's i n s t i t u t i o n s and reach out t o the new
democracies i n the E a s t .
o
Further the b i l a t e r a l dialogue on Russia and the NIS, CEE
and NATO and s t r e s s the need for follow up.
o
Launch a t the U.S.-EU Summit working groups t o coordinate
aid t o CEE and t o strengthen U.S.-EU c o n s u l t a t i o n s .
BACKGROUND
German P o l i t i c s .
I n power s i n c e 1982, Kohl i s i n a t o u g h
r e - e l e c t i o n f i g h t w i t h v i g o r o u s b u t i n e x p e r i e n c e d Rudolf
Scharping, t h e f o u r t h S o c i a l Democratic P a r t y (SPD) l e a d e r t o
c h a l l e n g e him. Scharping has done much t o u n i f y h i s f r a c t i o u s
p a r t y on t h e issues o f unemployment and t h e economy and, w h i l e
m o s t l y a v o i d i n g Kohl's f o r e i g n p o l i c y s t r e n g t h , has t r a v e l l e d
abroad (Washington i n c l u d e d ) t o show competence and c o n t i n u i t y i f
he wins. Recession, new budget d e f i c i t s r e s u l t i n g from r o u g h l y
$90 b i l l i o n a year i n t r a n s f e r s t o e a s t e r n Germany, and
p o s t - u n i f i c a t i o n d i s l o c a t i o n s h e l p e d Scharping u n t i l r e c e n t l y .
But Kohl has bounced back w i t h t h e e l e c t i o n o f h i s p r e s i d e n t i a l
c a n d i d a t e and a b i g C h r i s t i a n Democratic U n i o n / C h r i s t i a n S o c i a l
Union (CDU/CSU) win i n June's E u r o - e l e c t i o n s . F o r e i g n M i n i s t e r
K i n k e l ' s Free Democratic P a r t y (FDP) i s t h e c o a l i t i o n ' s weak l i n k
and must work t o c l e a r t h e 5% h u r d l e f o r Bundestag
r e p r e s e n t a t i o n . Any new government formed i n October w i l l be a
coalition.
P o s s i b i l i t i e s i n c l u d e r e e l e c t i o n o f t h e c u r r e n t KohlK i n k e l (CDU-FDP) c o a l i t i o n ; a "grand" CDU/SPD c o a l i t i o n , w i t h
e i t h e r CDU o r SPD on t o p ; and an SPD/Greens a l l i a n c e .
The grand
c o a l i t i o n c o u l d be a r e c i p e f o r deadlock. A g o v e r n i n g
arrangement Scharping might work o u t w i t h t h e Greens (who have
c a l l e d f o r a b o l i s h i n g NATO and t h e German Army) would keep
f o r e i g n and s e c u r i t y p o l i c y i n h i s hands b u t s t i l l c o m p l i c a t e
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German Economy. Germany was i n sharp r e c e s s i o n from t h e second
h a l f o f 1992 t h r o u g h 1993. Unemployment, a t over 9% n a t i o n a l l y
and 15% i n t h e e a s t (where massive i n d u s t r i a l r e - s t r u c t u r i n g has
been underway) reached t h e h i g h e s t l e v e l s i n c e WWII. Growth o f
1.5% i n 1994 i s f o r e c a s t . U n i f i c a t i o n c o s t s have r e s t r i c t e d
Bonn's a b i l i t y t o d e a l w i t h t h e r e c e s s i o n . The Bundesbank kept
c r e d i t t i g h t d u r i n g t h e r e c e s s i o n t o combat i n f l a t i o n , w h i c h
dropped below 3% i n A p r i l f o r t h e f i r s t t i m e s i n c e mid-1992.
Labor c o s t s a r e among t h e w o r l d ' s h i g h e s t . The r e c e s s i o n
i n c r e a s e d concerns about Germany's l o n g - t e r m i n d u s t r i a l
competitiveness.
The SPD has based much o f i t s campaign on
a l t e r n a t i v e economic s t r a t e g i e s f o c u s i n g on t r a i n i n g and
h i g h - t e c h r e s e a r c h t o promote employment. SPD t a x p r o p o s a l s
aimed a t a more e q u i t a b l e d i s t r i b u t i o n o f t h e c o s t s o f
u n i f i c a t i o n (now l a r g e l y f i n a n c e d t h r o u g h p a y r o l l t a x e s ) appear
t o have b a c k f i r e d , however, and Kohl i s p r o f i t i n g from r e t u r n i n g
c o n f i d e n c e i n t h e growing b u t s t i l l s l u g g i s h economy.
German Foreign/Defense P o l i c y . Germany has been t h e b i g g e s t
European t r o o p c o n t r i b u t o r t o NATO and t h e most a c t i v e o f t h e
A l l i e s i n advancing NATO's opening t o t h e East.
Bonn does n o t ,
however, see Russia, Ukraine and t h e NIS as p o t e n t i a l members.
Germany shares our view t h a t Russia s h o u l d have no v e t o over NATO
decision-making and s u p p o r t s r a p i d PFP i m p l e m e n t a t i o n , i n c l u d i n g
a n o t - y e t - f i n a l i z e d "command e s t i m a t e " on German s o i l t h i s year.
Major b i l a t e r a l and m u l t i l a t e r a l economic and t e c h n i c a l
a s s i s t a n c e t o Russia, NIS and CEE i s p a r t o f Germany's p o l i c y o f
promoting s t a b i l i t y and p r o s p e r i t y t o t h e East.
The German
m i l i t a r y ' s h e l p f u l p a r t i c i p a t i o n i n "out-of-NATO-area" m i s s i o n s
mandated by t h e UN and/or NATO ( i n Cambodia, Somalia, Bosnia and
t h e A d r i a t i c ) i s t h e s u b j e c t o f p o l i t i c a l debate and l e g a l
c h a l l e n g e , as t h e c o u n t r y weighs i t s p o s t - u n i f i c a t i o n
i n t e r n a t i o n a l r o l e . On Bosnia, f o r i n s t a n c e , German a s s e t s h e l p
e n f o r c e s a n c t i o n s i n t h e A d r i a t i c and t h e No-Fly Zone. The
German C o n s t i t u t i o n a l Court p l a n s t o i s s u e a r u l i n g on such
a c t i v i t i e s d u r i n g your v i s i t on J u l y 12. Germany seeks a
permanent seat w i t h a v e t o on t h e UN S e c u r i t y C o u n c i l and has
proposed Bonn as t h e s i t e o f t h e new World Trade O r g a n i z a t i o n .
Kohl has u s e f u l l y t o l d Germans t h a t t h e y cannot expect a
permanent S e c u r i t y C o u n c i l s e a t u n t i l t h e y p a r t i c i p a t e i n UN
peacekeeping.
The European Union. On J u l y 1 Germany assumed t h e 6-month
r o t a t i n g EU Presidency.
Kohl wants t o g i v e t h e slumping Union -s u f f e r i n g from members' s l u g g i s h economies, weak governments and
d i s g r u n t l e d p u b l i c s -- new impetus by d e m o n s t r a t i n g i t s r e l e v a n c e
on issues t h a t t o u c h c i t i z e n s l i k e j o b c r e a t i o n and crime and by
g i v i n g i t a new sense o f m i s s i o n t o i t s e a s t . He f a v o r s b o t h
deepening i n t e g r a t i o n among c u r r e n t members and b r i n g i n g a t l e a s t
Poland, Hungary and t h e Czech Republic i n t o t h e EU by 2000. He
wants s u c c e s s f u l c o o r d i n a t i o n o f t h e German and subsequent French
p r e s i d e n c i e s t o s o l i d i f y t h e Franco-German p a r t n e r s h i p a t t h e
h e a r t o f t h e EU and g a i n French s u p p o r t f o r a more a c t i v e EU r o l e
i n e a s t . But e l e c t i o n s w i l l d i s t r a c t Bonn from i t s European
p o l i c i e s , and P a r i s sees expansion eastward as a t h r e a t t o .
"deepening" European i n t e g r a t i o n , w h i l e w o r r y i n g more about
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i n s t a b i l i t y i n Algeria than i n CEE.
Meanwhile, EU enlargement i s
proceeding apace. B r i t a i n slowed EU agreement on a successor t o
Commission President Delors a t the June 22-24 Corfu Summit.
EVENTS
O f f i c i a l Meetings. I n Bonn you w i l l meet w i t h President Herzog,
Chancellor Kohl, and party leaders Kinkel and Scharping. The
U.S.-EU Summit w i l l take place i n B e r l i n the next day and you
w i l l also have a photo op w i t h Finance M i n i s t e r Waigel.
Media. You w i l l give speeches t o the c i t i z e n s of B e r l i n a t the
Brandenburg Gate and t o the departing U.S. B e r l i n Brigade. Press
a v a i l a b i l i t i e s w i l l f o l l o w both your b i l a t e r a l meeting w i t h Kohl
and your summit w i t h him and EU Commission President Delors.
Other.
Capping the f i r s t f u l l day i s a t r i p t o Ludwigshafen,
where Kohl w i l l host you f o r dinner at h i s p r i v a t e home i n the
suburb of Oggersheim. I n B e r l i n you w i l l also v i s i t the
Oranienburg Synagogue.
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MEETING WITH PRESIDENT HERZOG
CONTEXT OF MEETING
Roman Herzog took o f f i c e f o r a f i v e - y e a r term J u l y 1, succeeding
the r e s p e c t e d Richard von Weizsacker -- who used t h e l a r g e l y
ceremonial post as a b u l l y p u l p i t f o r t o l e r a n c e , s o c i a l
r e s p o n s i b i l i t y and n a t i o n a l u n i t y . U n t i l w i n n i n g e l e c t o r a l
c o l l e g e b a l l o t i n g as Kohl's c a n d i d a t e May 23, Herzog was head o f
Germany's C o n s t i t u t i o n a l (Supreme) Court. A l e g a l s c h o l a r , he
has shown i n t e r e s t i n t h e p r e s i d e n c y ' s l i t t l e - u s e d power t o
r e v i e w t h e c o n s t i t u t i o n a l i t y o f b i l l s a f t e r passage.
Not w e l l known t o t h e p u b l i c , Herzog i s a t t h i s p o i n t p e r c e i v e d
as s t o l i d l y c o n s e r v a t i v e , l a c k i n g i n charisma and i g n o r a n t o f
e a s t e r n Germany. He reached o u t t o E a s t e r n e r s i n h i s acceptance
speech, c a l l i n g them a n a t i o n a l a s s e t , b u t was c r i t i c i z e d f o r n o t
making a s i m i l a r g e s t u r e t o f o r e i g n e r s i n Germany. P r i o r t o
e l e c t i o n , he c r i t i c i z e d t h e e x t e n s i o n o f d u a l c i t i z e n s h i p t o
f o r e i g n permanent r e s i d e n t s . He has s i n c e condemned e x t r e m i s t
v i o l e n c e and warned a g a i n s t a new German n a t i o n a l i s m .
The C o n s t i t u t i o n a l Court w i l l r u l e on Germany's p a r t i c i p a t i o n i n
"out-of-(NATO)-area" m i l i t a r y m i s s i o n s (Somalia, t h e A d r i a t i c ,
Bosnia) J u l y 12. Most expect a d e c i s i o n i n f a v o r o f t h e
government ( a p p r o v i n g such m i s s i o n s ) b u t perhaps i n t r o d u c i n g a
r e q u i r e m e n t f o r Bundestag a p p r o v a l o f each m i s s i o n . Germany's
e v o l v i n g i n t e r n a t i o n a l r o l e b r i n g s new r e s p o n s i b i l i t i e s . A
r e l a t e d t r e n d i s t h e s h i f t o f our b i l a t e r a l r e l a t i o n s from t h e
Cold War's s e c u r i t y focus t o deepening economic and c u l t u r a l
ties.
Herzog noted America's c o n t r i b u t i o n t o postwar Germany i n
h i s acceptance speech May 23.
YOUR OBJECTIVES
o
E s t a b l i s h a r e l a t i o n s h i p with Germany's new head of s t a t e .
o
Discuss h i s domestic r o l e , Germany's i n t e r n a t i o n a l r o l e , and
bilateral relations.
CORE POINTS
Herzog's Presidency
o
G r a t e f u l f o r your acceptance speech r e f e r e n c e t o America's
c o n t r i b u t i o n s i n b u i l d i n g postwar Germany.
o
Domestic issues o f intra-German s o l i d a r i t y , r i g h t - w i n g
extremism and i n t o l e r a n c e concern many Germans, i n c l u d i n g
your predecessor.
What w i l l be your approach as P r e s i d e n t ?
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Germany's Role
o
U n i f i e d Germany's new s t a t u s b r i n g s new r e s p o n s i b i l i t i e s .
Pleased t o be w o r k i n g t o g e t h e r d u r i n g Germany's EU
Presidency t o g i v e new boost t o r e f o r m i n CEE.
o
Support o f / p a r t i c i p a t i o n i n NATO and UN peacekeeping
a l s o be v e r y i m p o r t a n t .
o
What a r e l i k e l y i m p l i c a t i o n s o f tomorrow's c o u r t r u l i n g on
o u t - o f - a r e a m i l i t a r y missions? How do you assess domestic
p o l i t i c a l debate on Germany's r o l e i n w o r l d ?
will
U.S.-German R e l a t i o n s
o
B i l a t e r a l r e l a t i o n s h i p c r u c i a l now and i n f u t u r e t o European
and American s e c u r i t y and p r o s p e r i t y .
o
U.S. s e c u r i t y presence b e i n g balanced by enhanced economic
and c u l t u r a l t i e s .
Welcome your s u p p o r t f o r t h i s e v o l u t i o n .
COHFIDENTIMJ'
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MEETING WITH CHANCELLOR KOHL
CONTEXT OF MEETING
May's win by Roman Herzog (Kohl's c a n d i d a t e f o r P r e s i d e n t ) and
the CDU/CSU's v i c t o r y i n June's European P a r l i a m e n t e l e c t i o n
suggest Kohl c o u l d win a f o u r t h term i n October's n a t i o n a l
e l e c t i o n s . Germans bucked a Europe-wide, a n t i - i n c u m b e n t t r e n d t o
support t h e CDU/CSU over Rudolf Scharping's SPD 38.8% t o 32.2%.
Kohl drew some d i s c o n t e n t e d v o t e r s from r i g h t - w i n g p a r t i e s , w h i l e
i n c r e a s i n g confidence i n t h e s t i l l - s l u g g i s h economy (expected t o
grow 1.5% i n 1994) n e u t r a l i z e d t h e SPD's c e n t r a l campaign theme.
Foreign M i n i s t e r K i n k e l ' s Free Democrats (FDP) f e l l below t h e 5%
h u r d l e f o r r e p r e s e n t a t i o n i n EU P a r l i a m e n t a r y and Saxony-Anhalt
s t a t e e l e c t i o n s t o take f o u r t h p l a c e behind t h e Greens. While
the FDP w i l l l i k e l y c l e a r t h e Bundestag's 5% h u r d l e i n October,
i t s margin may not p u t Kohl's c u r r e n t c o a l i t i o n over t h e t o p .
Our m i l i t a r y drawdown i n Germany and t h e September d e p a r t u r e of
U.S. t r o o p s from B e r l i n s i g n a l a new r e l a t i o n s h i p . Economic and
c u l t u r a l t i e s are deepening, i n c l u d i n g our c r e a t i o n of U.S.
Business I n f o r m a t i o n Centers t h r o u g h o u t Germany, t h e opening of a
c o m m e r c i a l l y - o r i e n t e d Consulate General i n D u s s e l f o r f , expanding
academic and a r t i s t i c exchanges, and a conference o f t o p German
and American CEOs whom Kohl w i l l address i n B e r l i n i n September.
These steps come as Germany's importance i n p r o m o t i n g g l o b a l
economic growth and r e f o r m i n t h e East grows.
Germany has s i n c e t h e mid-80s p r o v i d e d t h e most a s s i s t a n c e -over $75 b i l l i o n - - t o Russia, t h e NIS and CEE, and sees t h e need
t o c o n s o l i d a t e post-1989 g a i n s . But Germany b a l k s a t g i v i n g
major new b i l a t e r a l a i d t o Russia and Ukraine and i s alarmed by
developments i n b o t h c o u n t r i e s . As t h e l a s t Russian f o r c e s
prepare t o leave e a s t e r n Germany i n August, Russian "mafias" t h a t
have sprung up t h e r e are a growing concern.
Germany sees Poland as key t o c r e a t i n g a zone o f s t a b i l i t y and
p r o s p e r i t y t o t h e East, f a v o r s i t s NATO membership and was
i n s t r u m e n t a l i n s e c u r i n g WEU a s s o c i a t e s t a t u s f o r CEE s t a t e s .
Germany's EU Presidency w i l l focus on ways t o encourage r e f o r m i n
CEE and e v e n t u a l EU membership. I n s p i t e o f s u p p o r t f o r PFP and
b i l a t e r a l m i l i t a r y c o o p e r a t i o n w i t h e a s t e r n n e i g h b o r s , Bonn has
not y e t f i n a l i z e d a promised 1994 PFP event on German s o i l .
On
Bosnia, Germany p a r t i c i p a t e s i n i n t e r n a t i o n a l r e l i e f d e l i v e r i e s ,
s a n c t i o n s m o n i t o r i n g , and NATO AWACS p a t r o l s and encouraged
C r o a t i a t o s u p p o r t t h e Muslim-Croat F e d e r a t i o n i n Bosnia.
Your c o n v e r s a t i o n w i t h Kohl w i l l c o n t i n u e over an o f f i c i a l l u n c h
and p r i v a t e d i n n e r , where you can d i s c u s s f u r t h e r Germany's EU
presidency, "out-of-area" m i l i t a r y missions, b i l a t e r a l
compensation c l a i m s and I r a n .
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YOUR OBJECTIVES
o
Affirm the U.S.-German p a r t n e r s h i p
and i t s new dimensions.
o
Continue engaging Kohl i n p u r s u i t of c r i t i c a l shared
o b j e c t i v e s on Russia, Ukraine, CEE and Bosnia.
o
Encourage preparations
t h i s year.
f o r a PFP a c t i v i t y on German s o i l
CORE POINTS
B i l a t e r a l Relations
o
Want t o s t r e s s importance o f m u l t i - d i m e n s i o n a l p a r t n e r s h i p
w i t h Germany, even as U.S. m i l i t a r y presence d e c l i n e s .
o
Pleased t o see s e c u r i t y focus o f postwar r e l a t i o n s
t o deeper economic and c u l t u r a l t i e s .
shifting
Russia
o
F i r s t - e v e r v i s i t by U.S. P r e s i d e n t t o B a l t i c s sends c l e a r
message we support t h e i r s o v e r e i g n t y , r e j e c t Russian "sphere
of i n f l u e n c e . "
o
Hope y o u ' l l j o i n me i n p r e s s i n g Russia and E s t o n i a t o s e t t l e
f i n a l d i f f e r e n c e s and conclude t r o o p w i t h d r a w a l d e a l .
Together w i t h p u l l o u t from Germany, w i l l be f i r s t t i m e s i n c e
1945 Russian f o r c e s f u l l y w i t h i n pre-war b o r d e r s .
o
R e l a t i o n s w i t h Russia on t r a c k . Reforms c o n t i n u e d e s p i t e
pessimism a f t e r December e l e c t i o n s .
Pleased Y e l t s i n
responded t o u r g i n g t o s i g n up t o PFP b e f o r e Naples.
Will
host him f o r Summit i n September.
o
Concerned about s p r e a d i n g c r i m e ; undermines s u p p o r t f o r
r e f o r m , scares away i n v e s t o r s . FBI D i r e c t o r Freeh v i s i t e d
Moscow a f t e r h i s v i s i t t o B e r l i n t o h e l p expand c o o p e r a t i o n
i n combatting organized crime.
Ukraine
o
Need t o c o n t i n u e pushing Kiev t o adopt an economic r e f o r m
s t r a t e g y ; no a l t e r n a t i v e .
U.S. and Germany w i l l a p p o i n t
p r i v a t e economists as a d v i s e r s ; t h e y ' l l v i s i t Kiev l a t e r
t h i s month.
o
Naples s i g n a l o f s u b s t a n t i a l s u p p o r t f o r r e f o r m i m p o r t a n t .
o
Ukraine a major p r i o r i t y f o r us.
b o l s t e r i t s independence.
Want t o work w i t h you t o
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C e n t r a l and Eastern Europe
o
West must focus e f f o r t s t o c o n s o l i d a t e CEE g a i n s o f 1989.
Need t o show t h a t p a t h t o i n t e g r a t i o n w i t h West i s open.
o
Economy i s key. D e s p i t e s i g n s o f r e c o v e r y , s o c i a l s t r e s s e s
pushing v o t e r s i n a n t i - r e f o r m d i r e c t i o n .
o
Two-track response:
c o n t i n u e d s u p p o r t f o r f r e e market
t r a n s f o r m a t i o n and e f f o r t s t o h e l p s o c i e t i e s cope w i t h
d i s l o c a t i o n s , l i k e unemployment.
o
Want t o work much more c l o s e l y t o c o o r d i n a t e a s s i s t a n c e .
See Germany, U.S., EU as c o r e , w o r k i n g w i t h IBRD, EBRD.
o
Beyond a s s i s t a n c e -- which must be temporary -- t r a d e and
investment e s s e n t i a l . Must a v o i d p r o t e c t i o n i s m , keep EU
enlargement on t r a c k .
o
Transforming s o c i e t i e s need t o be secure and f e e l secure.
CEE need t o know t h a t t h e y won't be l e f t i n a "grey zone" o f
i n s t a b i l i t y , t h a t Russia w i l l n o t have v e t o over NATO
membership o r s p e c i a l r i g h t s i n CEE.
NATO
Need t o make PFP work, t h i n k about way f o r w a r d on NATO's
expansion.
Welcome German o f f e r t o host a PFP event t h i s year; hope
p l a n n i n g can go f o r w a r d .
Bosnia
o
Must m a i n t a i n r e s o l v e i n s u p p o r t i n g Bosnian t e r r i t o r i a l
compromise and i n f o l l o w i n g t h r o u g h on t h e
i n c e n t i v e s / d i s i n c e n t i v e s package i f map r e j e c t e d .
BACKGROUND
The F e d e r a l C h a n c e l l e r y (Bundeskanzleramt) where you w i l l meet i s
an u l t r a - m o d e r n b u i l d i n g housing about 420 o f t h e C h a n c e l l o r ' s
s t a f f , l o c a t e d between h i s o f f i c i a l r e s i d e n c e ( P a l a i s Schaumburg)
and t h e p a r l i a m e n t . Kohl's predecessor, Helmut Schmidt, had a
Henry Moore s c u l p t u r e p l a c e d i n t h e garden.
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LUNCHEON HOSTED BY CHANCELLOR KOHL
CONTEXT OF EVENT
This event occurs one day b e f o r e t h e U.S.-EU Summit i n B e r l i n
a c o u r t r u l i n g on German " o u t - o f - a r e a " m i l i t a r y a c t i v i t i e s .
and
Germany, a f t e r a weak Greek p r e s i d e n c y , hopes t o r e - e n e r g i z e t h e
EU i n c l o s e c o o r d i n a t i o n w i t h France, w h i c h f o l l o w s Germany i n
what some have dubbed a y e a r - l o n g "megapresidency" o f t h e EU's
" h e a r t and s o u l . " Germany p l a n s t o focus on: j o b c r e a t i o n and
growth; e x t e r n a l r e l a t i o n s , i n c l u d i n g as a f i r s t p r i o r i t y t h e
c o u n t r i e s o f C e n t r a l and Eastern Europe; j u s t i c e and home
a f f a i r s ; and d e c i s i o n - m a k i n g procedures. Kohl i n s i s t s Germany
n o t be t h e e a s t e r n edge o f t h e EU.
Even b e f o r e CEE s t a t e s g a i n
f u l l membership, Bonn seeks t o enhance t h e i r market access and
sense of p a r t i c i p a t i o n -- f o r i n s t a n c e , w i t h an annual summit o f
EU heads o f government w i t h CEE c o u n t e r p a r t s .
Domestic
unemployment and t h e f i n a n c i a l s u p p o r t new ( p o o r e r ) members would
r e q u i r e c o n s t r a i n Germany's agenda.
Kohl has g r a d u a l l y sent Bundeswehr u n i t s on o u t - o f - a r e a m i s s i o n s
i n Cambodia ( m e d i c a l u n i t ) , Somalia ( l o g i s t i c s t r o o p s ) , Bosnia
(crews f o r AWACS No-Fly Zone enforcement) and t h e A d r i a t i c (a
s h i p t o a s s i s t s a n c t i o n s e n f o r c e m e n t ) . Opponents have c h a l l e n g e d
t h e c o n s t i t u t i o n a l i t y o f these deployments, which f o r some are
p a i n f u l reminders o f t h e Nazi p a s t . The C o n s t i t u t i o n a l Court
w i l l announce i t s r u l i n g J u l y 12, j u s t b e f o r e your speech a t t h e
Brandenburg Gate. F u t u r e deployment d e c i s i o n s w i l l depend on t h e
s p e c i f i c s o f t h e case. The SPD, f o r i n s t a n c e , accepts m i l i t a r y
p a r t i c i p a t i o n i n h u m a n i t a r i a n and peacekeeping m i s s i o n s , b u t n o t
i n combat -- i . e . , no G u l f Wars o r "peace enforcement."
YOUR OBJECTIVES
o
Get Kohl's view of Germany's goals w i t h i n and f o r the
EU.
o
Encourage p a r t i c i p a t i o n i n "out-of-NATO-area" m i s s i o n s .
CORE POINTS
o
U.S. i n c r e a s i n g i t s s u p p o r t f o r CEE r e f o r m ; welcome
Germany's d e c i s i o n t o focus on t h i s d u r i n g EU Presidency.
o
Want t o see CEE j o i n EU.
What's a reasonable timeframe?
Can Germany persuade c u r r e n t EU p a r t n e r s concerned about
d i l u t i n g e f f e c t and budgetary d r a i n ?
o
On tomorrow's c o u r t r u l i n g on o u t - o f - a r e a : know o f domestic
and r e g i o n a l s e n s i t i v i t i e s t o German m i l i t a r y ; b u t u n i f i e d
Germany's s u p p o r t o f / p a r t i c i p a t i o n i n NATO and UN
peacekeeping v e r y i m p o r t a n t , as shown i n Cambodia, Somalia,
A d r i a t i c and over Bosnia.
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�GOHriDDtffiHtL
PRIVATE DINNER WITH CHANCELLOR KOHL
CONTEXT OF EVENT
Kohl s e t s g r e a t s t o r e on p e r s o n a l r e l a t i o n s . A g r a c i o u s h o s t , he
i s n o t above c a l c u l a t i n g t h e domestic p o l i t i c a l b e n e f i t o f
e n t e r t a i n i n g you a t home i n an e l e c t i o n year i n t h e s t a t e SPD
Leader Scharping governs. The i n t i m a t e s e t t i n g may a f f o r d a good
o p p o r t u n i t y t o r a i s e two s e n s i t i v e b i l a t e r a l i s s u e s :
U.S.
c i t i z e n c l a i m s cases from t h e Nazi and GDR eras and I r a n .
I n t e r e s t i n t h e Holocaust compensation c l a i m o f Hugo P r i n c z -which you mentioned t o Kohl i n January -- p e r s i s t s i n Congress
and among Jewish groups. A f e d e r a l appeals c o u r t i s c o n s i d e r i n g
a d i s t r i c t c o u r t r u l i n g t h a t P r i n c z ' s s u i t a g a i n s t Germany may
proceed. T h i s d e c i s i o n c o u l d ease Germany's f e a r o f t h e
precedent an ex g r a t i a payment t o P r i n c z would s e t . Members o f
Congress have j u s t w r i t t e n you a g a i n t o t a k e up t h e m a t t e r w i t h
Kohl. S e p a r a t e l y , a number o f U.S. c i t i z e n s who seek r e s t i t u t i o n
of p r o p e r t y i n t h e former GDR r i s k b e i n g t r e a t e d u n f a i r l y under a
1992 p r o p e r t y c l a i m s s e t t l e m e n t agreement -- due b o t h t o
Treasury's l a t e n o t i f i c a t i o n t o c l a i m a n t s t o choose compensation
now o r p u r s u i t of r e s t i t u t i o n i n German channels and Germany's
i n s i s t e n c e on t h e missed d e a d l i n e .
Germany's p o l i c y o f engagement w i t h I r a n i s a concern, though
Bonn shares our o b j e c t i v e o f changing I r a n ' s b e h a v i o r . I n June
Kohl r e c e i v e d I r a n i a n F o r e i g n M i n i s t e r V e l a y a t i , who announced
Tehran's pardon o f a German businessman under death sentence f o r
espionage. Such s o l i c i t o u s b e h a v i o r a t t h e h i g h e s t l e v e l and
Germany's r e s c h e d u l i n g o f I r a n ' s o f f i c i a l debt make i t d i f f i c u l t
f o r us t o convince I r a n t h a t i t s unacceptable b e h a v i o r has a
price.
YOUR OBJECTIVES
o
Follow up e a r l i e r d i s c u s s i o n during the
day.
o
A l e r t Kohl to continuing need for help on Holocaust
property claims and I r a n .
and
CORE POINTS
o
A s i g n i f i c a n t ex g r a t i a payment would r e s o l v e t h e d e s e r v i n g
c l a i m o f Holocaust s u r v i v o r Hugo P r i n c z , e s p e c i a l l y now t h a t
the U.S. appeals c o u r t has r u l e d i n Germany's f a v o r .
o
A problem under our 19 92 p r o p e r t y c l a i m agreement:
a number
of U.S. c i t i z e n s r i s k h a v i n g v a l u a b l e c l a i m s i n German
channels c u t o f f .
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I r a n c o n t i n u e s t o a c t unacceptably, e s p e c i a l l y i n s u p p o r t i n g
v i o l e n c e a g a i n s t Middle East peace process.
Need Germany t o
r e f r a i n from e x t e n d i n g new o f f i c i a l c r e d i t s o r guarantees.
BACKGROUND
Oggersheim i s a q u i e t r e s i d e n t i a l v i l l a g e o u t s i d e Ludwigshafen, a
medium-sized i n d u s t r i a l c i t y on t h e Rhine where Kohl grew up and
saw the d e s t r u c t i o n of World War I I . The c o u n t r y s i d e i s f l a t ,
known f o r asparagus and sugar beet p r o d u c t i o n . Ludwigshafen i s
home of t h e l a r g e BASF chemical company; Kohl began h i s career i n
environmental a f f a i r s .
Oggersheim/Ludwigshafen are w i t h i n
s t r i k i n g d i s t a n c e of some o f Germany's b e s t wine c o u n t r y . Nearby
Worms has one of the most famous Rhineland c a t h e d r a l s and was t h e
s i t e of d i e t s of the Holy Roman Empire, i n c l u d i n g t h e famous
c o n f r o n t a t i o n between M a r t i n L u t h e r and Emperor Charles V.
The
n e i g h b o r i n g c i t y of Speyer a l s o hosts an i m p o r t a n t c a t h e d r a l .
Kohl's house i n Oggersheim i s medium t o l a r g e by American
standards, s i t u a t e d on a s m a l l s t r e e t w i t h two-way t r a f f i c .
His
f a v o r i t e d i s h , o f t e n served t o guests, i s saumagen, a hash of
meat, potatoes and v e g e t a b l e s baked i n t h e s k i n of a p i g ' s
stomach.
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EU SUMMIT MEETING
CONTEXT OF MEETING
The EU i s i n a slump.
S l u g g i s h economies c o n t r i b u t e t o weak
governments and low p o p u l a r enthusiasm f o r p o l i t i c a l engagement,
i n c l u d i n g i n Europe's new democracies. The EU's Bosnia p o l i c y i s
w i d e l y regarded as a f a i l u r e and Greece's January-June 1994
Presidency u n s a t i s f a c t o r y . ' June e l e c t i o n s t o t h e EU P a r l i a m e n t
showed d i s s a t i s f a c t i o n w i t h n a t i o n a l l e a d e r s (German and I t a l i a n
n o t a b l y excepted) and apathy toward t h e Union i t s e l f .
On J u l y 1 Germany assumed t h e six-month r o t a t i n g p r e s i d e n c y o f
the European Union. Kohl wants Germany's C o u n c i l Presidency t o
g i v e the EU new impetus by d e m o n s t r a t i n g i t s r e l e v a n c e on i s s u e s
t h a t t o u c h c i t i z e n s l i k e j o b c r e a t i o n and c r i m e , and by g i v i n g i t
a new sense o f m i s s i o n t o i t s e a s t . He f a v o r s b o t h deepening
i n t e g r a t i o n among c u r r e n t members and b r i n g i n g a t l e a s t Poland,
Hungary and t h e Czech Republic i n t o t h e Union, i d e a l l y by 2000.
He understands t h a t Germany would s u f f e r most from i n s t a b i l i t y t o
i t s e a s t , b u t a l s o t h a t "widening" w i t h o u t "deepening" c o u l d
wreck t h e f l e d g l i n g Union. He hopes c l o s e c o o r d i n a t i o n o f t h e
German and subsequent French P r e s i d e n c i e s w i l l b o t h s o l i d i f y t h e
Franco-German p a r t n e r s h i p a t t h e h e a r t o f t h e Union and g a i n
French s u p p o r t f o r a more a c t i v e EU r o l e i n Europe's e a s t .
But domestic pressures i n t h i s German " s u p e r - e l e c t i o n " year w i l l
d i s t r a c t Bonn from i t s European p o l i c i e s . Moreover, P a r i s views
expansion eastward as t h r e a t e n i n g t h e "deepening" o f European
i n t e g r a t i o n and i s i n c r e a s i n g l y p r e o c c u p i e d w i t h s e c u r i t y i s s u e s
i n t h e Mediterranean/Maghreb, s p e c i f i c a l l y A l g e r i a , which c o u l d
have d e v a s t a t i n g e f f e c t s on m i g r a t i o n t o and e t h n i c r e l a t i o n s
w i t h i n France.
On June 12, an A u s t r i a n referendum approved EU membership.
S i m i l a r r e f e r e n d a are scheduled l a t e r t h i s year f o r Sweden,
F i n l a n d and Norway ( o n l y Norway appears s t i l l s k e p t i c a l on
joining).
E x i s t i n g EU i n s t i t u t i o n s are s e t f o r r e v i e w d u r i n g t h e
scheduled 1996 I n t e r - G o v e r n m e n t a l Conference, w h i c h w i l l be
forced t o deal w i t h the issue o f strengthening the i n s t i t u t i o n s
w h i l e b a l a n c i n g member s t a t e concerns-. The 1996 c o n f e r e n c e w i l l
come under t h e t e n u r e o f D e l o r s ' successor -- perhaps t h e reason
B r i t a i n ' s John Major b l o c k e d consensus on Belgium's Dehaene, a
"deepening" proponent, a t t h e EU Summit i n C o r f u June 22-24.
Kohl has c a l l e d a n o t h e r summit f o r J u l y 15 t o t r y a g a i n .
You w i l l meet w i t h C h a n c e l l o r Kohl and P r e s i d e n t D e l o r s i n a
photo-op b e f o r e t h e t e n - o n - t e n meeting. A p r e s s a v a i l a b i l i t y
concludes t h e Summit. The major i n i t i a t i v e you w i l l undertake i s
t o e s t a b l i s h two ad hoc s t u d y groups. One group w i l l recommend
steps t o c o o r d i n a t e and r a t i o n a l i z e U.S. and EU p o l i c i e s on
C e n t r a l and Eastern Europe.
The second group w i l l o u t l i n e
o p t i o n s t o improve U.S.-EU c o o p e r a t i o n , i n c l u d i n g on home and
coHriDDHTiMCLINTON LIBRARY PHOTOCOPY PER E.O. 1 5 6
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D e c l a s s i f y on:
�COiiriDDHTIKE
(
'
2
j u s t i c e a f f a i r s ( t h e " T h i r d P i l l a r " o f M a a s t r i c h t ) which t h e EU
has o n l y r e c e n t l y undertaken. Both groups would o f f e r
recommendations a t t h e n e x t U.S.-EU Summit (under French
P r e s i d e n c y ) , then disband. A l s o on t h e agenda are Uruguay Round
r a t i f i c a t i o n and growth and employment, t h e M i d d l e East and
Bosnia.
YOUR OBJECTIVES
o
Reaffirm our commitment to c l o s e t i e s and cooperation with
the European Union.
o
Encourage p r a c t i c a l steps on U.S.-EU cooperation i n CEE.
o
Move U.S.-EU c o n s u l t a t i o n s beyond information exchanges to
r e a l p o l i c y cooperation.
o
E s t a b l i s h two l i m i t e d - d u r a t i o n , ad hoc study groups on
coordinating U.S./EU support for CEE reform and improving
U.S.-EU c o n s u l t a t i o n s .
o
Exchange views on the Uruguay Round r a t i f i c a t i o n ,
growth and employment, the Middle E a s t and Bosnia.
CORE POINTS
,
<
Commitment t o t h e European
o
Union
Eager t o expand p r a c t i c a l U.S.-EU c o o p e r a t i o n as t h e Union
takes on new r e s p o n s i b i l i t i e s .
Cooperation on
CEE
o
o
Major p o t e n t i a l now t o extend s t a b i l i t y / p r o s p e r i t y
eastward, c o n t r i b u t e t o i n t e g r a t i n g Europe w i t h
s e c u r i t y based on c o o p e r a t i o n n o t c o n f r o n t a t i o n .
o
D e s p i t e tremendous s t r i d e s , CEE's r e f o r m s remain a t r i s k , as
t h e e l e c t i o n t r e n d s i n Poland and Hungary show. Cannot t a k e
success f o r g r a n t e d .
o
(
The EU was never j u s t a r i c h man's club/common market.
P u t t i n g key war-making s e c t o r s under s u p r a n a t i o n a l
c o n t r o l , making b o r d e r s over w h i c h n a t i o n s had f o u g h t
l e s s i m p o r t a n t i n d a i l y l i v e s , always made i t i m p o r t a n t
t o members' own s e c u r i t y .
Admire EU and i t s members' r o l e as c h i e f t r a d e
p a r t n e r s / i n v e s t o r s / a i d donors i n t h e new democracies
w i t h over $20 b i l l i o n i n a i d and 50% o f CEE t r a d e .
Want t o h e l p S t a b i l i t y Pact p r o j e c t use CEE d e s i r e f o r
membership t o i n f l u e n c e how t h e y d e a l w i t h m i n o r i t y ,
o t h e r problems.
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o
American e f f o r t s a l r e a d y complement EU's. I n January
i n Prague, I announced a s e r i e s o f measures t o deepen
our p o l i t i c a l / e c o n o m i c engagement. I n c l u d e d more
s u p p o r t f o r g r a s s r o o t s democracy and a s o c i a l s a f e t y
n e t ; s u p p o r t f o r i n t r a r e g i o n a l c o o p e r a t i o n ; and v a r i o u s
ways o f encouraging t r a d e and i n v e s t m e n t .
o
B u i l d i n g on these, e.g., Housing Investment Guarantee
Program we launched i n Poland t o s u p p o r t market-based
mortgages and c o n s t r u c t i o n , a l s o w i l l h e l p w i t h t h e
human dimension o f r e f o r m .
o
Must c o n t i n u e opening markets t o new democracies.
P o l i t i c a l l y hard for a l l of us. Any more you can do on
expand access for a g r i c u l t u r e would help immensely.
[ I have developed a proposal for t r e a t i n g economies i n
t r a n s i t i o n d i f f e r e n t l y under our anti-dumping laws. I
hope to secure Congress's support.]
o
I n t e r e s t e d i n your plans f o r i n v o l v i n g CEEs i n f o r e i g n
and o t h e r p o l i c y c o o r d i n a t i o n even b e f o r e f u l l
membership i s p o s s i b l e . With PFP, can g i v e them sense
of i n c l u s i o n and promote h a b i t s o f c o o p e r a t i o n .
Ad Hoc Study Groups
o
The CEE Study Group we c r e a t e today can move us beyond
j o i n t d e c l a r a t i o n s t o concrete cooperation.
Doing
p r a c t i c a l work t o g e t h e r a l s o w i l l s t r e n g t h e n U.S.-EU
ties .
o
The second group can p r o v i d e o t h e r recommendations,
p a r t i c u l a r l y f o r c o o p e r a t i o n on T h i r d P i l l a r i s s u e s .
Consultations
o
Need to move beyond j u s t c o n s u l t a t i o n s to cooperation,
as we seek to do on CEE.
( F Y I : The EU p r e f e r s
"cooperation" t o "coordination.")
o
C a b i n e t - l e v e l c o n s u l t a t i o n s c a l l e d f o r i n t h e 1990
D e c l a r a t i o n a r e n o t u s e f u l ; s u b - c a b i n e t and e x p e r t l e v e l meetings which have grown up are e f f e c t i v e .
Need
more i n p u t from o u r EU p a r t n e r s i n meetings between o u r
diplomats i n t h i r d c o u n t r i e s .
o
Perhaps we can p a r t i c i p a t e as EUROPOL e s t a b l i s h e s i t s
data l i n k s and i n f o r m a t i o n - s h a r i n g p o l i c i e s .
o
Our study group s h o u l d a l s o e x p l o r e U.S.-EU c o o p e r a t i o n
on a n t i - c r i m e a s s i s t a n c e t o CEE.
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Middle
East
o
A p p r e c i a t e EU p a r t i c i p a t i o n and s u p p o r t f o r t h e Middle
peace process and t h e over $600 m i l l i o n t h e Union has
p r o v i d e d f o r P a l e s t i n i a n economic development, s o c i a l
programs and p o l i c e f o r c e ; EU c o o p e r a t i o n i s key.
o
Also must focus our d i a l o g u e on p o t e n t i a l i n s t a b i l i t y
i n t h e Maghreb, which might spread t o d e s t a b i l i z e the
whole r e g i o n .
o
Committed t o the U.S.-EU-Canada Working Group on I r a n .
Concerned t h a t Germany, France, Belgium and Spain have
proceeded w i t h debt r e s c h e d u l i n g agreements w i t h I r a n .
o
East
T r u s t t h e EU w i l l uphold i t s i n t e r n a t i o n a l commitments,
d e s p i t e e x i g e n c i e s o f member-state domestic p o l i t i c s .
Bosnia
o
Contact Group agreement on t e r r i t o r i a l p r o p o s a l , package o f
incentives/consequences, holds b e s t hope y e t f o r a
negotiated settlement.
o
Must a l s o g i v e h i g h e r p r i o r i t y t o p l a n n i n g f o r
r e c o n s t r u c t i o n . U.S. w i l l do i t s p a r t , b u t EU c o n t r i b u t i o n
is c r i t i c a l .
o
Prospect o f Western h e l p t o r e s t o r e normal economic l i f e can
encourage Bosnians, even Bosnian Serbs, t o accept peace and
h e l p make any agreement s t i c k .
Uruguay Round R a t i f i c a t i o n
o
Tough, b u t w i l l do. Have asked Congress t o pass
implementing l e g i s l a t i o n b e f o r e August r e c e s s .
o
Almost every major business group s u p p o r t s passage.
Means $100-200 b i l l i o n per year f o r t h e economy.
Passage key t o growth and employment.
o
A l l s i g n i f i c a n t s i g n a t o r i e s should s t r i v e f o r
r a t i f i c a t i o n i n 1994 so Agreement can t a k e e f f e c t
January 1995.
o
I f EU d e l a y s Uruguay Round a g r i c u l t u r a l t a r i f f
r e d u c t i o n s u n t i l J u l y 1, 1995, as planned, I w i l l have
problems w i t h our a g r i c u l t u r a l i n t e r e s t s , s i n c e our
t a r i f f r e d u c t i o n s b e g i n i n January.
Changing your
plans c o u l d a i d passage i n Congress.
o
Must move immediately t h e r e a f t e r t o t a c k l e o t h e r
i s s u e s , e.g., agreements on f i n a n c i a l s e r v i c e s ,
telecommunications. Also t o continue p r o d u c t i v e
d i a l o g u e on r e l a t i o n s h i p o f t r a d e w i t h t h e environment
and i n t e r n a t i o n a l l a b o r s t a n d a r d s .
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Growth and Employment
o
Jobs Conference helped focus a t t e n t i o n o f governments
and businesses on ways t o make our economies more
a d a p t a b l e and p r o d u c t i v e . Labor m o b i l i t y as w e l l as
growth key t o j o b c r e a t i o n .
o
R a t i f y i n g NAFTA and t h e Uruguay Round, and p a s s i n g
w e l f a r e and h e a l t h c a r e r e f o r m are a l l key components t o
secure U.S. growth.
o
We expect t o grow a t 4% t h i s year; s h o u l d p r o v i d e
s t i m u l u s f o r your e x p o r t s . U.S. unemployment down t o
6%, b u t s t i l l t o o h i g h . Must n o t l e t concerns f o r
i n f l a t i o n strangle the recovery.
o
How have you f a r e d w i t h implementing t h e White Paper
recommendations? W i l l t h e p r o j e c t e d 1.9% EU growth
make i t e a s i e r t o b u i l d trans-European i n f r a s t r u c t u r e ?
W i l l t h e member s t a t e s agree t o f i n a n c i n g ?
Russia/NIS ( i f r a i s e d )
o
C o n g r a t u l a t i o n s on P a r t n e r s h i p / C o o p e r a t i o n Agreements
w i t h Russia and Ukraine. R e a f f i r m s West's s u p p o r t f o r
NIS r e f o r m and shared commitment t o independent,
non-nuclear Ukraine.
o
Understand you are c l o s e t o s i g n i n g P a r t n e r s h i p and
Cooperation Agreements w i t h o t h e r NIS.
BACKGROUND
Since i t s c o m p l e t i o n i n 1894 as t h e p a r l i a m e n t b u i l d i n g f o r t h e
new German empire, t h i s neo-renaissance palace has been a t t h e
c e n t e r o f German h i s t o r y . The Nazis used a f i r e i n 1933 as a
p r e t e x t t o suspend b a s i c r i g h t s and h e l p c o n s o l i d a t e power.
The
R e i c h s t a g s u f f e r e d damage s t i l l v i s i b l e today from bombing
m i s s i o n s i n World War I I . The S o v i e t s r a i s e d t h e r e d f l a g over
the b u i l d i n g on A p r i l 30, 1945.
A f t e r t h e war, t h e R e i c h s t a g
s t o o d j u s t i n s i d e West B e r l i n . R e c o n s t r u c t i o n , minus dome and
most o r n a m e n t a t i o n , was completed i n 1970.
The c e l e b r a t i o n o f
u n i f i c a t i o n t o o k p l a c e on i t s steps on October 3, 1990 and t h e
all-German p a r l i a m e n t (Bundestag) h e l d i t s f i r s t meeting i n t h e
p l e n a r y chamber on October 4, 1990.
The b u i l d i n g i s now used f o r
b o t h n a t i o n a l and i n t e r n a t i o n a l conferences and o c c a s i o n a l
meetings o f Bundestag p a r t y caucuses. I t w i l l become t h e
permanent venue o f t h e Bundestag when t h e f e d e r a l government
moves t o B e r l i n . P r e s i d e n t s Harry Truman and Ronald Reagan have
v i s i t e d t h e b u i l d i n g ; t h e l a t t e r peered i n t o t h e former East
B e r l i n from a balcony.
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GERMANY, NATO AND THE EAST
Germany has been t h e most a c t i v e o f t h e A l l i e s i n advancing
NATO's opening t o t h e East, b u t German o f f i c i a l s make a c l e a r
d i s t i n c t i o n between t h e C e n t r a l and E a s t e r n European (CEE) s t a t e s
on t h e one hand and Russia, Ukraine and t h e o t h e r New Independent
S t a t e s (NIS) on t h e o t h e r . Bonn sees t h e former as p o t e n t i a l
NATO members and t h e PFP as a s t e p t o w a r d membership f o r them.
I t does n o t see Russia, Ukraine and t h e o t h e r NIS as p o t e n t i a l
members. I n s t e a d , German l e a d e r s c a l l f o r a c l o s e r e l a t i o n s h i p
between NATO, Russia and U k r a i n e , i n p a r t t o r e c o n c i l e them t o
t h e i r permanent e x c l u s i o n from NATO.
While we have emphasized t h e equal s t a t u s o f PFP P a r t n e r s , German
l e a d e r s , p a r t i c u l a r l y Defense M i n i s t e r Ruehe, p r e f e r t o s t a t e
openly t h a t some p a r t n e r s w i l l become NATO members and o t h e r s ,
l i k e Russia, w i l l n o t . D e s p i t e these d i f f e r e n c e s , Bonn f i r m l y
shares our view t h a t Russia s h o u l d have no v e t o r i g h t over NATO
d e c i s i o n - m a k i n g . Germany s t r o n g l y s u p p o r t s r a p i d PFP
i m p l e m e n t a t i o n and has agreed t o h o s t a "command e s t i m a t e " as a
PFP a c t i v i t y d u r i n g 1994. We a r e w o r k i n g t o g e t t h i s event and a
f i e l d e x e r c i s e scheduled as soon as p o s s i b l e .
Bonn always has been s y m p a t h e t i c t o o u r concerns t h a t t h e
development o f European defense c a p a b i l i t i e s n o t undermine NATO
and was an e a r l y s u p p o r t e r o f t h e Combined J o i n t Task Force
initiative.
Since t h e NATO Summit, t h e FRG has been h e l p f u l i n
w o r k i n g o u t arrangements t o implement t h i s e f f o r t .
Nonetheless,
t h e German Defense M i n i s t r y i s concerned about d i l u t i o n o f NATO's
t r a d i t i o n a l r o l e ( i n which i t i s a key p l a y e r ) t h r o u g h g r e a t e r
emphasis on peacekeeping ( i n which i t i s r e l a t i v e l y a minor
player).
We work c l o s e l y w i t h Germany on n o n p r o l i f e r a t i o n m a t t e r s , and
German s u p p o r t was i m p o r t a n t i n e s t a b l i s h i n g t h e NATO
n o n p r o l i f e r a t i o n i n i t i a t i v e a t t h e Summit. The Germans have
expressed concern t h a t t h i s i n i t i a t i v e n o t u n d e r c u t o t h e r
p o l i t i c a l - d i p l o m a t i c e f f o r t s and t h a t i t n o t be seen as an e f f o r t
t o " m i l i t a r i z e " t h e West's n o n p r o l i f e r a t i o n e f f o r t s .
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T M T HN
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�•eOMKHBDHTIAL
GERMAN ASSISTANCE TO RUSSIA AND
THE
EAST
Germany has a g r e a t s t a k e i n p r o m o t i n g economic r e f o r m i n t h e
East, and C h a n c e l l o r Kohl has e l e c t o r a l p o i n t s r i d i n g on r e g i o n a l
stability.
Germany i s t h e East's most i m p o r t a n t t r a d i n g p a r t n e r ,
the second l e a d i n g i n v e s t o r and t h e most v o c a l European Union
member s u p p o r t i n g a f u r t h e r r e d u c t i o n o f i m p o r t b a r r i e r s and
V i s e g r a d accession.
N e v e r t h e l e s s , Kohl b e l i e v e s t h a t Germany,
the l a r g e s t a i d donor w i t h over $75 b i l l i o n t o Russia, t h e New
Independent S t a t e s (NIS) and C e n t r a l and Eastern Europe, has
reached t h e bottom o f i t s purse. Germany b a l k s a t p r o v i d i n g
major new b i l a t e r a l a i d t o Russia o r U k r a i n e , p r e f e r r i n g
i n t e r n a t i o n a l f i n a n c i a l i n s t i t u t i o n s and o t h e r donors t o make
g r e a t e r commitments.
German a s s i s t a n c e i s weighted toward s p u r r i n g p r i v a t e i n v e s t m e n t
and f o s t e r i n g s m a l l and medium-sized f i r m s by d e v e l o p i n g modern
c r e d i t , p r i v a t e s e c t o r and l e g a l s t r u c t u r e s i n Russia, U k r a i n e ,
B e l a r u s , Romania and B u l g a r i a . Bonn b e l i e v e s , however, t h a t
a s s i s t a n c e cannot " r e f o r m " l a r g e economies unless a i d r e c i p i e n t s
c a r r y out r e f o r m s . Bonn i s i n c r e a s i n g l y focused on t r a d e and
investment r a t h e r than d i r e c t a i d . While German e x p o r t s t o
Russia and t h e NIS s t a g n a t e due t o f i n a n c i n g d i f f i c u l t i e s ,
s e v e r a l East European c o u n t r i e s are emerging as growth markets.
Bonn's a i d t o Russia and t h e NIS -- some t w o - t h i r d s o f t h e G-7
t o t a l $75 b i l l i o n pledged s i n c e 1990 -- i s l a r g e l y r e l a t e d t o
German u n i f i c a t i o n and t h e scheduled August 31 d e p a r t u r e o f
Russian f o r c e s from e a s t e r n Germany. A major p o r t i o n o f t h i s a i d
i n v o l v e s e x p o r t c r e d i t guarantees, assumption o f " t r a n s f e r r u b l e "
d e b t s , h u m a n i t a r i a n and t e c h n i c a l g r a n t s , investment p r o j e c t s and
a $5 b i l l i o n housing c o n s t r u c t i o n program f o r withdrawn Russian
s o l d i e r s . Bonn's s u p p o r t f o r t h e G-7 S p e c i a l P r i v a t i z a t i o n and
R e s t r u c t u r i n g Program t r a n s l a t e s i n t o German i n t e n t t o s e t up two
(of t e n ) r e g i o n a l e n t e r p r i s e funds a s s i s t i n g i n v e s t m e n t i n
privatized state enterprises.
Bonn supported t h e approach among P a r i s Club c r e d i t o r s l e a d i n g t o
a June 4 agreement t o reschedule $7 b i l l i o n o f $10 b i l l i o n owed
by Russia t o o f f i c i a l c r e d i t o r s t h i s year. Germany agreed t o
reschedule $2.6 b i l l i o n o f $3.3 b i l l i o n due i n 1994, w h i l e t h e
U.S. agreed t o reschedule $1 b i l l i o n o f $1.8 b i l l i o n .
German
banks and s u p p l i e r s a l s o h o l d t h e b u l k o f p r i v a t e Russian debt.
Bonn has g i v e n s p e c i a l a t t e n t i o n t o t h e economic s i t u a t i o n i n
Ukraine.
I t i s i n t e r e s t e d i n a G-7 a s s i s t a n c e package s i m i l a r t o
the one adopted f o r Russia, pending evidence o f a U k r a i n i a n
commitment t o implement comprehensive economic r e f o r m s . Bonn(and P a r i s ) a l s o want t h e G-7 t o h e l p Ukraine c o n s t r u c t two
n u c l e a r energy p l a n t s t o r e p l a c e Chernobyl.
GONTIDENTIAIP
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�GERMANY'S ROLE I N THE FORMER YUGOSLAVIA
Germany p a r t i c i p a t e s i n i n t e r n a t i o n a l r e l i e f d e l i v e r i e s ,
s a n c t i o n s m o n i t o r i n g , and NATO AWACS p a t r o l s t o h e l p e n f o r c e t h e
Bosnian, and supports U.S. a c t i v i t i e s conducted from Rhein-Main
AFB.
I t has accepted more refugees from ex-Yugoslavia than any
o t h e r West European c o u n t r y and o f f e r e d c i v i l i a n p e r s o n n e l f o r an
EU t r a n s i t i o n a l a d m i n i s t r a t i o n o f Mostar.
Because o f c o n s t i t u t i o n a l l i m i t a t i o n s and t h e b i t t e r l e g a c y o f
Germany's World War I I o c c u p a t i o n o f Y u g o s l a v i a , Germany has no
t r o o p s on t h e ground and does n o t p a r t i c i p a t e i n o p e r a t i o n s t h a t
c o u l d i n v o l v e combat. I t has, however, s t r o n g l y s u p p o r t e d NATO
m i l i t a r y a c t i o n s . I t has expressed s u p p o r t f o r l i f t i n g t h e arms
embargo on Bosnia b u t , w i t h no t r o o p s a t r i s k , has n o t pushed t h e
issue.
The Germans p a r t i c i p a t e a c t i v e l y i n t h e Bosnia Contact Group and
helped t o convince the C r o a t i a n Government t o accept t h e
F e d e r a t i o n agreement between t h e Bosnian Muslims and C r o a t s .
C h a n c e l l o r Kohl and o t h e r s have a l s o used t h e i r i n f l u e n c e t o
encourage Russia t o p l a y a c o n s t r u c t i v e r o l e . Throughout t h e
search f o r peace, German views have been c l o s e t o o u r own, b u t
w i t h some d i f f e r e n c e s o f emphasis. For example, German o f f i c i a l s
have j o i n e d o t h e r Europeans i n a r g u i n g t h a t o u t s i d e powers s h o u l d
d e f i n e what would c o n s t i t u t e an a c c e p t a b l e s e t t l e m e n t package f o r
Bosnia.
The Germans have a l s o advocated a more f r o n t - l o a d e d
l i f t i n g o f s a n c t i o n s a g a i n s t S e r b i a than we, i n exchange f o r
Serbian i m p l e m e n t a t i o n o f a peace agreement.
The German Government has shared o u r i m p a t i e n c e w i t h Greece's
p o l i c y o f i s o l a t i n g t h e Former Yugoslav Republic o f Macedonia.
German and French o f f i c i a l s hope t o use Germany's EU p r e s i d e n c y
t o improve EU-Macedonia r e l a t i o n s .
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SECRET
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LIBRARY P O O O Y
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�coHriDEnrna.
INTERNATIONAL PEACEKEEPING AND OTHER OUT-OF-AREA OPERATIONS
Whether Germany's c o n s t i t u t i o n p e r m i t s t h e German m i l i t a r y t o
operate o u t s i d e t h e NATO area i s ambiguous. Perhaps more
i m p o r t a n t i s t h e p s y c h o l o g i c a l burden o f t h e Nazi legacy.
C h a n c e l l o r Kohl has g r a d u a l l y been moving t h e Bundeswehr i n t o
o u t - o f - a r e a deployments, l e a v i n g opponents t o c h a l l e n g e h i s
a c t i o n s i n t h e C o n s t i t u t i o n a l Court.
Steps i n c l u d e : a
Bundeswehr m e d i c a l u n i t t o j o i n UN f o r c e s i n Cambodia i n 1991; a
German s h i p t o p a r t i c i p a t e i n NATO m o n i t o r i n g o f "Yugoslav"
s a n c t i o n s i n t h e A d r i a t i c Sea i n 1992; German crews aboard NATO
AWACS planes m o n i t o r i n g t h e Bosnia No-Fly Zone, even when t h e
o p e r a t i o n t u r n e d i n t o an enforcement a c t i o n i n 1993; and 1700
l o g i s t i c s t r o o p s t h a t supported UNOSOM I I i n Somalia.
The C o n s t i t u t i o n a l Court i s expected t o r u l e J u l y 12 t h a t these
m i s s i o n s a r e c o n s t i t u t i o n a l . Then any d e c i s i o n t o deploy w i l l
depend h e a v i l y on t h e s p e c i f i c s o f a m i s s i o n .
The c u r r e n t p o l i c y
of t h e o p p o s i t i o n S o c i a l Democratic P a r t y , f o r example, i s t o
accept German m i l i t a r y p a r t i c i p a t i o n i n h u m a n i t a r i a n and
peacekeeping o p e r a t i o n s , b u t n o t i n a c t i o n s i n v o l v i n g combat -i . e . , no Gulf Wars o r "peace enforcement."
While we understand t h e s e n s i t i v i t y o f t h i s i s s u e , e s p e c i a l l y
d u r i n g a d i f f i c u l t e l e c t i o n year, we make c l e a r o u r hope t h a t a
u n i f i e d Germany w i l l assume t h e r e s p o n s i b i l i t i e s and burdens
a p p r o p r i a t e t o i t s new s t a t u s i n t h e i n t e r n a t i o n a l system.
COMFIDEHgiM
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rffSLLMSON LIBRARY P O O O Y
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DECLASSIFIED
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�COHriDDHTTftL
GERMANY'S ROLE I N INTERNATIONAL ORGANIZATIONS
German B i d f o r Permanent UN S e c u r i t y C o u n c i l Membership
The U.S. s u p p o r t s a permanent German seat on t h e U n i t e d Nations
S e c u r i t y C o u n c i l . We want t o ensure, however, t h a t t h e s t a t u s o f
the c u r r e n t permanent members remains u n a l t e r e d and t h a t t h e
C o u n c i l ' s e f f e c t i v e n e s s i s p r e s e r v e d . We have n o t taken a
p o s i t i o n on whether new members should have t h e v e t o .
The German government has become more a c t i v e i n campaigning f o r a
permanent s e a t , a l t h o u g h Bonn's e f f o r t remains low-key t o a v o i d
o f f e n s e t o i t s European p a r t n e r s . German o f f i c i a l s have f l o a t e d
the idea o f expanding t h e C o u n c i l t o 23, i n c l u d i n g Germany and
Japan as permanent members, w i t h two a d d i t i o n a l non-permanent
members from each o f t h e T h i r d World r e g i o n a l groups. Germany
would expect t h e same s t a t u s ( i . e . , v e t o power) as o t h e r
permanent members. German o f f i c i a l s a s s e r t t h a t "Germany i s
prepared t o assume t h e r e s p o n s i b i l i t i e s which permanent
membership o f t h e S e c u r i t y C o u n c i l e n t a i l s . "
Indeed, Kohl has
t o l d h i s countrymen t h a t Germany cannot expect a permanent seat
u n t i l i t i s ready t o p l a y such a r o l e . N e v e r t h e l e s s , German
p a r t i c i p a t i o n i n UN m i l i t a r y o p e r a t i o n s remains c o n t r o v e r s i a l
d o m e s t i c a l l y . Meanwhile, Germany i s seeking t h e r o t a t i n g
European seat on t h e S e c u r i t y C o u n c i l f o r 1995-97. Germany i s
t h e UN's t h i r d - l a r g e s t f i n a n c i a l c o n t r i b u t o r , and t h e e s c a l a t i o n
i n UN peacekeeping b i l l s r e i n f o r c e s i t s w i s h f o r a s e a t on t h e
Security Council.
Bonn's B i d t o Host t h e World Trade O r g a n i z a t i o n
The German government has proposed Bonn as t h e s i t e o f t h e new
World Trade O r g a n i z a t i o n (WTO). W i t h most German government
i n s t i t u t i o n s moving from Bonn t o B e r l i n by t h e year 2000, Bonn
i s o f f e r i n g an a t t r a c t i v e package o f inducements. German
o f f i c i a l s a l s o argue t h a t t h e F e d e r a l Republic i s
u n d e r - r e p r e s e n t e d as a h o s t n a t i o n f o r i n t e r n a t i o n a l
o r g a n i z a t i o n s . USTR and t h e S t a t e Department a r e w e i g h i n g Bonn's
candidacy a g a i n s t t h a t o f Geneva. (The Swiss have a l s o made an
a t t r a c t i v e o f f e r t o keep t h e WTO i n Geneva, t h e c u r r e n t home o f
t h e GATT S e c r e t a r i a t . )
PER E O 13526
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CONriDENTIAL
OICLO^IF
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ON LIBRARY PHOTOCOPY
�-SECRET
GERMAN-IRANIAN RELATIONS
Germany agrees w i t h us t h a t I r a n ' s a c t i o n s -- i n c l u d i n g f i n a n c i a l
and m i l i t a r y s u p p o r t f o r groups which oppose t h e Middle East
peace process by v i o l e n t means, s u p p o r t f o r i n t e r n a t i o n a l
t e r r o r i s m , v i o l a t i o n s o f human r i g h t s , and e f f o r t s t o a c q u i r e
n u c l e a r weapons -- a r e r e p r e h e n s i b l e , b u t d i s a g r e e s on how t o
change I r a n ' s b e h a v i o r . German-American c o o p e r a t i o n has been
good on e x p o r t c o n t r o l s and n o n - p r o l i f e r a t i o n i s s u e s , b u t Bonn
f a v o r s engagement t o s t r e n g t h e n moderation i n I r a n . We a l s o
o b j e c t t o German o f f i c i a l c o n t a c t s w i t h I r a n i a n i n t e l l i g e n c e .
C h a n c e l l o r Kohl i s p e r s o n a l l y i n v o l v e d i n Germany's I r a n p o l i c y .
U l t i m a t e l y , any s i g n i f i c a n t change would have t o come from him.
Kohl would be very s e n s i t i v e , however, t o p u b l i c disagreement
w i t h t h e U.S. d u r i n g h i s d i f f i c u l t r e - e l e c t i o n campaign.
Germany i s t h e most i m p o r t a n t advocate w i t h i n t h e EU f o r i t s
p o l i c y o f " c r i t i c a l d i a l o g u e " w i t h I r a n . Germany, a l o n g w i t h
Greece, France and I t a l y , a l s o opposes c o n c r e t e steps t o press
I r a n . Though they r e s c h e d u l e d I r a n i a n o f f i c i a l debt d e s p i t e
American o b j e c t i o n s , Germany, Japan and o t h e r c r e d i t o r s have
r e f r a i n e d from g i v i n g I r a n new o f f i c i a l c r e d i t s f o r t h e moment
because o f I r a n ' s f i s c a l d i s a r r a y .
We a r e p r e s s i n g Germany and
I r a n ' s o t h e r major c r e d i t o r s t o t u r n t h i s temporary economic
d e c i s i o n i n t o a p o l i t i c a l commitment t o r e s t r i c t I r a n ' s c r e d i t a t
the G-7. We do n o t oppose t r a d e w i t h I r a n i n n o n - s e n s i t i v e items
( i n f a c t t h e Germans p o i n t t o s t a t i s t i c s t h a t a s s e r t t h a t t h e
U.S. i s I r a n ' s l a r g e s t t r a d i n g p a r t n e r ) , b u t we oppose t r a d e
subsidies.
Kohl may argue t h a t h i s engagement w i t h I r a n i s w o r k i n g -- I r a n ' s
r h e t o r i c on t h e peace process has c o o l e d down, and t h e frequency
of v i o l e n t a c t s abroad may have t a p e r e d o f f t e m p o r a r i l y .
One
argument i s t h a t i f I r a n i s e x e r c i s i n g r e s t r a i n t , i t i s due t o
e f f e c t i v e p r e s s u r e and I r a n ' s d e s i r e t o be seen as an a c c e p t a b l e
member o f t h e i n t e r n a t i o n a l community. We do n o t want t o reward
I r a n p r e m a t u r e l y and b e l i e v e t h e h a r d - l i n e b e h a v i o r remains
o f f i c i a l p o l i c y i n Tehran. We do n o t want t o be d e c e i v e d by
r h e t o r i c o r a l l o w I r a n t o d i v i d e t h e Western a l l i e s .
PER E.0.13526
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�RESIDUAL VALUE AND BURDENSHARING
The sore p o i n t s i n t h e o t h e r w i s e e x c e l l e n t U.S.-German defense
r e l a t i o n s h i p r e v o l v e around German f i n a n c i a l payments f o r t h e
U.S. m i l i t a r y presence. Both a r e o f i n t e n s e i n t e r e s t t o
Congress.
Residual Value
Germany i s o b l i g a t e d t o pay t h e " r e s i d u a l v a l u e , " i f any, o f U.S.
m i l i t a r y f a c i l i t i e s returned t o i t .
S i g n i f i c a n t sums a r e a t
stake as we r e t u r n over 400 f a c i l i t i e s .
N e g o t i a t i o n s on
reimbursement have proven d i f f i c u l t , p r i m a r i l y s i n c e t h e Germans
focus on c u r r e n t market v a l u e w h i l e we want a c t u a l c o s t ( a d j u s t e d
f o r i n f l a t i o n , d e p r e c i a t i o n and damages). S e v e r a l members o f
Congress, p o i n t i n g t o e s t i m a t e s as h i g h as $3 b i l l i o n i n
p o t e n t i a l reimbursements, have expressed concern. An amendment
t o t h e 1994 DOD A u t h o r i z a t i o n b i l l l i n k e d f u t u r e c o n s t r u c t i o n o f
a U.S. embassy i n B e r l i n t o progress on t h i s i s s u e b e f o r e t h e end
of 1994. EUCOM Deputy CINC General Boyd and Ambassador Holbrooke
r e c e n t l y p r e s e n t e d a broad framework p r o p o s a l t o t h e German
Finance M i n i s t r y t h a t would spread o u t German reimbursements over
s e v e r a l years and d i r e c t them toward c r i t i c a l U.S. m i l i t a r y
c o n s t r u c t i o n and maintenance p r i o r i t i e s .
Bonn i s w i l l i n g t o
c o n s i d e r t h i s , b u t s i g n i f i c a n t movement b e f o r e t h e October
election i s unlikely.
Burdensharing
The s i z e o f t h e U.S. m i l i t a r y presence makes Germany a n a t u r a l
t a r g e t o f C o n g r e s s i o n a l p r e s s u r e t o reduce overseas s t a t i o n i n g
c o s t s . The House has passed an amendment c a l l i n g f o r NATO a l l i e s
t o pay 75% o f t h e c o s t o f s t a t i o n i n g U.S. t r o o p s by 1996. We
have proposed t h a t Germany f o r g o a p p r o x i m a t e l y $240 m i l l i o n i n
taxes and fees a n n u a l l y t h a t t h e U.S. m i l i t a r y now pays, b u t Bonn
i s u n l i k e l y t o c o n s i d e r i t s e r i o u s l y u n t i l a f t e r t h e October
e l e c t i o n s . We a r e t r y i n g t o broaden t h e debate beyond t h e
c o n t e n t i o u s focus on s t a t i o n i n g c o s t s t o one o f " r e s p o n s i b i l i t y
s h a r i n g , " i n which t h e emphasis i s on t h e t o t a l i t y o f our A l l i e s '
c o n t r i b u t i o n s t o A l l i a n c e s e c u r i t y . Not s u r p r i s i n g l y , German
o f f i c i a l s s u p p o r t t h i s approach, c i t i n g German c o n t r i b u t i o n s t h a t
i n c l u d e payments t o hasten t h e w i t h d r a w a l o f Russian t r o o p s from
e a s t e r n Germany and a s s i s t a n c e t o E a s t e r n Europe and Russia.
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�JSOHriDENTIAi:
GERMANY AND THE EUROPEAN UNION (ECH PRESIDENCY
Germany has f o u r p r i o r i t i e s f o r i t s EU p r e s i d e n c y : ( 1 ) j o b
c r e a t i o n and economic growth, (2) e x t e r n a l r e l a t i o n s , i n c l u d i n g
enlargement, (3) j u s t i c e and home a f f a i r s and ( 4 ) d e c i s i o n - m a k i n g
i n t h e run-up t o t h e 1996 i n t e r - g o v e r n m e n t a l c o n f e r e n c e on
i n s t i t u t i o n a l reform.
On t h e eve o f i t s p r e s i d e n c y , Germany e x h i b i t e d a new
a s s e r t i v e n e s s , f o r example i n overcoming Spanish h e s i t a n c y i n
hammering o u t EU accession packages f o r A u s t r i a , Sweden, F i n l a n d
and Norway. Last year, Germany won t h e European Monetary
I n s t i t u t e f o r F r a n k f u r t . Kohl has a l s o c a l l e d f o r a r e v i e w o f
German c o n t r i b u t i o n s t o t h e EU budget, a s s e r t i n g t h a t Germany has
reached i t s f i n a n c i a l l i m i t .
Bonn champions t h e " s u b s i d i a r i t y " p r i n c i p l e l i m i t i n g EU
competency t o areas i n which n a t i o n a l d e c i s i o n - m a k i n g i s n o t
better-suited.
I n recognition of the l i m i t s of national policy,
however, Bonn f a v o r s i n c r e a s e d c o o r d i n a t i o n on " t h i r d - p i l l a r "
issues such as a n t i - c r i m e measures and asylum p o l i c y .
Germany
has t a k e n i n more refugees and asylum seekers t h a n a l l o t h e r EU
c o u n t r i e s combined and seeks more e q u i t a b l e d i s t r i b u t i o n o f t h e
burden. While Bonn g e n e r a l l y wants t o deepen and broaden
European i n t e g r a t i o n , Kohl has e n u n c i a t e d broad p u b l i c
d i s s a t i s f a c t i o n w i t h t o o much European bureaucracy and has
underscored t h e need f o r d e r e g u l a t i o n .
During t h e 63rd Franco-German Summit on May 30-31, Kohl and
French P r e s i d e n t M i t t e r r a n d d i s c u s s e d p r i o r i t i e s f o r Germany's EU
p r e s i d e n c y and t h e subsequent French t e r m , b u t no f o r m a l j o i n t
program was s e t . Kohl has s a i d t h a t Germany cannot be t h e
e a s t e r n edge o f t h e EU. With French acquiescence, i f n o t
enthusiasm, Germany wants t o develop t h e EU's r e l a t i o n s w i t h t h e
B a l t i c s and C e n t r a l and Eastern Europe (CEE). Bonn seeks t o
p r o v i d e t h e CEE c o u n t r i e s a sense o f p a r t i c i p a t i o n i n EU
d e c i s i o n - m a k i n g and g r e a t e r market access, even b e f o r e t h e y
become f u l l members. Kohl, f o r example, advocates an annual
summit o f EU heads o f government w i t h CEE c o u n t e r p a r t s .
Domestic
p o l i t i c a l c o n s t r a i n t s narrow t h e scope f o r German a c t i o n on
f u r t h e r t r a d e l i b e r a l i z a t i o n , however. A l t h o u g h Kohl would l i k e
t o h o l d o u t t h e p r o s p e c t o f f u l l EU membership f o r f o u r Eastern
European c o u n t r i e s by 2000, Bonn i s n o t i n a p o s i t i o n t o push t o o
f a s t , i n p a r t because Germany cannot a f f o r d a n t i c i p a t e d
a d d i t i o n a l EU a g r i c u l t u r a l s u b s i d i e s , s t r u c t u r a l a d j u s t m e n t
t r a n s f e r s , o r cohesion funds t h a t would be due them as new
members.
CONFIDENTIAL/'
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BILATERAL U.S.-EU ECONOMIC ISSUES
A g r i c u l t u r a l T a r i f f Reductions: The European Union (EU) has
scheduled i t s Uruguay Round (UR) a g r i c u l t u r a l t a r i f f r e d u c t i o n s
t o b e g i n on J u l y 1, 1995, though t h e o v e r a l l UR i m p l e m e n t a t i o n
date i s January 1. Our a g r i c u l t u r a l i n t e r e s t s oppose t h i s
six-month d e l a y , s i n c e our t a r i f f r e d u c t i o n s b e g i n i n January.
The EU c l a i m s m a r k e t i n g year c o n s i d e r a t i o n s r e q u i r e t h e d e l a y ,
even though t h e m a r k e t i n g years d i f f e r by commodity.
Industrial Tariffs:
The EU i s r e f u s i n g t o implement permanently
e i g h t i n d u s t r i a l t a r i f f and plywood quota concessions which were
made pursuant t o GATT A r t i c l e XXIV:6, as a r e s u l t o f t h e Spanish
and Portuguese accession i n t o t h e European Community. The EU's
r e f u s a l t o i n c l u d e these i t e m s , d e s p i t e assurances made d u r i n g
the Uruguay Round n e g o t i a t i o n s , c o u l d a c t u a l l y r e s u l t i n
unacceptable UR t a r i f f i n c r e a s e s .
EU Enlargement:
While t h e U n i t e d S t a t e s f u l l y s u p p o r t s EU
enlargement and i n t e g r a t i o n , we w i l l seek f u l l compensation from
the EU (under GATT A r t i c l e XXIV:6) f o r t h e breach o f t h e t a r i f f
b i n d i n g s i n A u s t r i a , Sweden, Norway and Sweden, which w i l l occur
as a r e s u l t o f t h e i r January 1, 1995 EU a c c e s s i o n .
GATT A i r c r a f t Code: The EU has charged t h a t t h e U.S. i s n o t
l i v i n g up t o i t s December 1993 commitment t o n e g o t i a t e a new GATT
A i r c r a f t Code. The EU s t i l l seeks s u b s i d y d i s c i p l i n e s on a l l
a i r c r a f t p r o d u c t s ( p a r t i c u l a r l y e n g i n e s ) , t i g h t d i s c i p l i n e s on
i n d i r e c t s u p p o r t s , exemptions from c e r t a i n p r o v i s i o n s o f t h e
Subsidy Text (1995) and " g r a n d f a t h e r i n g " o f p a s t s u b s i d i e s . The
U.S. i s opposed t o e x t e n d i n g d i s c i p l i n e s t o non-Large C i v i l
A i r c r a f t and has resumed e f f o r t s t o m u l t i l a t e r a l i z e t h e B i l a t e r a l
d i s c i p l i n e s on LCAs t o cover new c o m p e t i t o r s .
A u d i o - V i s u a l : The U n i t e d S t a t e s remains committed t o
c o n s t r u c t i v e e f f o r t s t o r e s o l v e U.S.-EU d i s p u t e s i n t h e
a u d i o - v i s u a l s e c t o r . T e c h n o l o g i c a l advances a r e r a p i d l y l e a d i n g
t o t h e convergence o f t h e t e l e c o m m u n i c a t i o n s , i n f o r m a t i c s and
a u d i o - v i s u a l i n d u s t r i e s . We seek t o develop r u l e s f o r t h e f u t u r e
i n t h i s i m p o r t a n t complex o f i n d u s t r i e s t h a t a v o i d r e s t r i c t i o n s
like mirror reciprocity.
Spanish F i l m Dubbing:
Spain r e c e n t l y passed a new F i l m Law t h a t
c o n t a i n s d i s c r i m i n a t o r y r e s t r i c t i o n s on t h e a b i l i t y o f U.S. f i l m
producers t o d i s t r i b u t e a dubbed v e r s i o n o f t h e i r f i l m s i n Spain.
The U.S. Government i s now r e v i e w i n g t h e l a w i n l i g h t o f Spain's
GATT n a t i o n a l t r e a t m e n t o b l i g a t i o n s .
I n t h e meanwhile, t h e U.S.
and Spanish f i l m i n d u s t r i e s a r e a t t e m p t i n g t o n e g o t i a t e an
elimination of the r e s t r i c t i o n s .
C o n d i t i o n a l N a t i o n a l Treatment: Our p o s i t i o n i s t h a t t h e
d e f i n i t i o n s a p p l i c a b l e t o t h e e l i g i b i l i t y o f companies have
g e n e r a l l y a l l o w e d f o r e i g n s u b s i d i a r i e s t o p a r t i c i p a t e i n these
programs.
The U.S. a d m i n i s t r a t i o n a l s o s t r o n g l y opposes t h e
Manton Amendment (which would t i g h t e n t h e e l i g i b i l i t y c r i t e r i a ^ .
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�URUGUAY ROUND IMPLEMENTATION AND UNRESOLVED ISSUES
Uruguay Round Implementation:
You r e a f f i r m e d t o t h e l e a d e r s h i p
i n Congress your commitment t o s e c u r i n g passage o f t h e Uruguay
Round (UR) implementing l e g i s l a t i o n by t h e August c o n g r e s s i o n a l
recess, i n o r d e r f o r t h e agreement t o e n t e r i n t o f o r c e , as
scheduled, on January 1, 1995.
We are d i s c u s s i n g d r a f t
implementing l e g i s l a t i o n w i t h C o n g r e s s i o n a l committees and s t a f f .
While t h e r e has been some o p p o s i t i o n t o t h e agreement, v i r t u a l l y
every major business group i n t h e U n i t e d S t a t e s r e c o g n i z e s t h a t
the economic b e n e f i t s are enormous ( a d d i n g $100-200 b i l l i o n
a n n u a l l y t o U.S. GDP).
A l l s i g n i f i c a n t t r a d i n g p a r t n e r s need t o r a t i f y t h e UR by l a t e
f a l l 1994, i f we are t o achieve e n t r y i n t o f o r c e on January 1,
1995.
The EU's process i s c o m p l i c a t e d by u n r e s o l v e d q u e s t i o n s
c o n c e r n i n g the p r o s p e c t i v e a u t h o r i t y o f t h e EU Commission and i t s
member s t a t e s over t r a d e p o l i c y i n t h e WTO.
F i n a n c i a l S e r v i c e s : The UR p a r t i e s have u n t i l December 1995 t o
r e v i s e t h e i r f i n a l commitments and MFN exemptions.
Greater
market access f o r U.S. f i r m s remains t h e key USG o b j e c t i v e . We
w i l l seek an MFN exemption, i . e . , n o t extend MFN t r e a t m e n t t o
o t h e r GATS p a r t i e s f i n a n c i a l s e r v i c e s s e c t o r s , unless a c r i t i c a l
mass o f commitments develops.
The U.S. wants s i g n i f i c a n t
progress on f i n a n c i a l s e r v i c e s from Japan, t h e ASEANs, and major
d e v e l o p i n g c o u n t r i e s . The EU, p a r t i c u l a r l y France, has been
sympathetic t o our concerns about f r e e r i d e r s .
Basic Telecommunications: The UR f i n a l a c t e s t a b l i s h e d a b a s i c
telecom n e g o t i a t i n g group which has u n t i l A p r i l 30, 1996 t o
complete i t s work. The group has begun meeting t o d e f i n e t h e
scope o f i t s work. I f n e g o t i a t i o n s are u n s u c c e s s f u l , t h e USG
w i l l c o n s i d e r MFN exemptions i n t h i s s e c t o r .
M a r i t i m e S e r v i c e s : M a r i t i m e n e g o t i a t i o n s a r e extended u n t i l
June 1, 1996.
The n e g o t i a t i o n s seek commitments i n a l l m a r i t i m e
service sectors including i n t e r n a t i o n a l shipping, a u x i l i a r y
s e r v i c e s and p o r t f a c i l i t i e s . The U.S. w i l l t a k e an MFN
exemption i n t h i s s e c t o r unless a c r i t i c a l mass o f s h i p p i n g
c o u n t r i e s improve t h e i r commitments. We are concerned t h a t Japan
i s t h r e a t e n i n g t o be an observer r a t h e r than a f u l l p a r t i c i p a n t .
Movement o f Personnel:
Negotiations t o further l i b e r a l i z e
movement o f p e r s o n n e l must conclude w i t h i n s i x months a f t e r t h e
WTO e n t e r s i n t o f o r c e . Country comparisons show t h e U.S. o f f e r
i s one o f t h e most l i b e r a l , b u t I n d i a , among o t h e r s , remains
u n s a t i s f i e d . The USG i s pushing o t h e r c o u n t r i e s t o b r i n g t h e i r
o f f e r s up t o t h e U.S. l e v e l o f commitments.
PER E„0„ 13526
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D e c l a s s i f y on:
�CQMriDDHTIAL
U.S.-EU RELATIONS: REQUIREMENTS, STATUS, IMPLEMENTATION OF
THE 1990 TRANSATLANTIC DECLARATION
The framework o f t h e p a r t n e r s h i p as c u r r e n t l y d e f i n e d was l a i d
out i n 1990 and i s l i m i t e d t o c o n s u l t a t i o n . The D e c l a r a t i o n on
U.S.-European Community R e l a t i o n s , i s s u e d on November 23, 1990,
f o r m a l l y s e t o u t common goals and p r i n c i p l e s o f U.S.-EC
p a r t n e r s h i p . Common goals i n c l u d e d s u p p o r t f o r democracy and
human r i g h t s ; h e l p i n g d e v e l o p i n g c o u n t r i e s and s u p p o r t reforms i n
C e n t r a l and Eastern Europe; promotion o f p r o s p e r i t y and market
p r i n c i p l e s ; and t h e p u r s u i t o f p o l i c i e s aimed a t a c h i e v i n g a
sound w o r l d economy marked by s u s t a i n e d economic growth. The
D e c l a r a t i o n commits t h e U.S. and t h e EC (and i t s member s t a t e s )
t o i n f o r m and c o n s u l t on i m p o r t a n t m a t t e r s o f common i n t e r e s t -p o l i t i c a l and economic -- w i t h a view t o b r i n g i n g t h e i r p o s i t i o n s
as c l o s e as p o s s i b l e . F u r t h e r s p e c i f i c goals were a l s o
e n u n c i a t e d f o r economic c o o p e r a t i o n ; e d u c a t i o n , s c i e n t i f i c and
c u l t u r a l c o o p e r a t i o n ; and t r a n s n a t i o n a l c h a l l e n g e s .
I n more c o n c r e t e terms, t h e D e c l a r a t i o n s e t o u t an i n s t i t u t i o n a l framework f o r " r e g u l a r and i n t e n s i v e " c o n s u l t a t i o n :
semi-annual Summit meetings between t h e P r e s i d e n t s o f t h e
European C o u n c i l and Commission and t h e P r e s i d e n t o f t h e
U.S.
These Summit meetings have been v a l u a b l e , e s p e c i a l l y i n
l e n d i n g momentum t o t h e c o n s u l t a t i v e process and f o c u s i n g
t h e day-to-day d i a l o g u e on p a r t i c u l a r p r i o r i t y areas.
semi-annual c o n s u l t a t i o n s between t h e EC f o r e i g n m i n i s t e r s ,
i n c l u d i n g t h e Commission, and t h e S e c r e t a r y o f S t a t e .
P r o d u c t i v i t y o f these meetings has depended on t h e f o r m a t .
When m i n i s t e r s were accompanied by i n d i v i d u a l d e l e g a t i o n s
and t h e number o f attendees s w e l l e d , t h e meetings s t u c k t o
s c r i p t e d t a l k i n g p o i n t s and prepared i n t e r v e n t i o n s . When
t h e m i n i s t e r s met alone (as a t t h e 1993 UNGA i n New Y o r k ) ,
t h e more i n f o r m a l atmosphere a l l o w e d f o r a f r e e r and more
s u b s t a n t i v e exchange.
ad hoc c o n s u l t a t i o n s between t h e Presidency F o r e i g n M i n i s t e r
or t h e T r o i k a and t h e U.S. S e c r e t a r y o f S t a t e .
This f o r m a t g e n e r a l l y has been v e r y e f f e c t i v e .
Meetings
have o c c u r r e d w i t h some frequency o f l a t e , on t h e margins o f
t h e September 13, 1993 I s r a e l i - P a l e s t i n i a n s i g n i n g , t h e
October 1, 1993 Washington Donors' Conference and t h e
March 18 Bosnia-Croat S i g n i n g Ceremony. These r e l a t i v e l y
i n f o r m a l meetings o f t e n a r e more u s e f u l because t h e y a l l o w
t h e p r i n c i p a l s t o focus on a p a r t i c u l a r and immediate i s s u e
a t hand.
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semi-annual c o n s u l t a t i o n s between t h e Commission and t h e
U.S. Government a t Cabinet l e v e l .
These meetings have never o c c u r r e d , as i t i s i m p r a c t i c a l t o
assemble t h e Cabinet. The substance o f C a b i n e t - l e v e l
meetings w i t h t h e Commission i s , as a p r a c t i c a l m a t t e r ,
f u l f i l l e d i n t h e semi-annual "sub-cabinet" meetings a t t e n d e d
by deputy o r under s e c r e t a r i e s -- an e f f e c t i v e forum
r e s u r r e c t e d . i n mid-1993.
b r i e f i n g s by t h e EU Presidency t o t h e U.S. on European
P o l i t i c a l Cooperation (EPC) meetings a t t h e M i n i s t e r i a l
level.
Although t h e EPC process has now given way t o "Common
Foreign and S e c u r i t y P o l i c y " (CFSP) under t h e M a a s t r i c h t
Treaty, these b r i e f i n g s c o n t i n u e i n s u b s t a n t i a l l y t h e same
format.
They can be v e r y u s e f u l , a l t h o u g h t h e q u a l i t y
depends on t h e r e s o u r c e s , c o n s c i e n t i o u s n e s s and commitment
of t h e presidency c o u n t r y .
Other r e g u l a r forums o f U.S.-EU c o n s u l t a t i o n e x i s t o u t s i d e t h e
1990 D e c l a r a t i o n framework. They i n c l u d e :
t h i r d - c o u n t r y c o n s u l t a t i o n s i n which U.S. and EU-member
s t a t e d i p l o m a t s p o s t e d i n t h i r d c o u n t r i e s d i s c u s s l o c a l and
r e g i o n a l issues.
These meetings g e n e r a l l y o c c u r two o r
t h r e e times a year i n 12-15 c o u n t r i e s , n o t c o u n t i n g i n f o r m a l
U.S.-EU member c o n t a c t s .
S e c r e t a r y C h r i s t o p h e r gave impetus t o these c o n s u l t a t i o n s i n
e a r l y 1993, as a way o f f u l l y u s i n g t h e t r a n s a t l a n t i c
p a r t n e r s h i p and e f f e c t i v e l y s h a r i n g r e s o u r c e s .
U n f o r t u n a t e l y , c o n s u l t a t i o n s a r e g e n e r a l l y one-sided, w i t h
the U.S. p r o v i d i n g t h e b u l k o f t h e i n f o r m a t i o n . While t h i s
i s not the kind o f c o n s u l t a t i o n the Secretary intended, i t
does p r o v i d e u s e f u l o p p o r t u n i t i e s t o s u p p o r t U.S. views.
semi-annual CFSP-U.S. r e g i o n a l and f u n c t i o n a l c o n s u l t a t i o n s
at the expert l e v e l .
These a r e scheduled around EU i n t e r n a l w o r k i n g group
meetings on s p e c i f i c r e g i o n s o r t o p i c s . While u s e f u l ,
need t o move beyond mere c o n s u l t a t i o n and i n f o r m a t i o n
exchange toward p o l i c y c o o p e r a t i o n .
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EUROPEAN UNION-POLISH RELATIONS
European Union membership i s a t t h e v e r y t o p o f P o l i s h f o r e i g n
p o l i c y o b j e c t i v e s f o r p o l i t i c a l and s e c u r i t y as w e l l as economic
reasons. EU-Polish r e l a t i o n s have remained good, d e s p i t e changes
i n P o l i s h governments.
Poland's A s s o c i a t i o n Agreement (AA) addresses a broad range o f
t r a d e and p o l i t i c a l r e l a t i o n s and e n v i s i o n s b u t does n o t
guarantee e v e n t u a l EU membership. I n A p r i l , Poland f o r m a l l y
a p p l i e d f o r EU membership; t h e GOP understands t h a t t h e EU w i l l
not begin s e r i o u s c o n s i d e r a t i o n o f i t s a p p l i c a t i o n b e f o r e 1997.
The b i g g e s t o b s t a c l e s t o P o l i s h membership a r e t h e r e l a t i v e
weakness o f i t s economic development and i t s l a r g e a g r i c u l t u r a l
s e c t o r . I f Poland were a d m i t t e d , i t would be e n t i t l e d t o huge
s u b s i d i e s under t h e EU's Common A g r i c u l t u r a l P o l i c y and economic
development funds. N e v e r t h e l e s s , t h e Germans have been s t r o n g
advocates o f P o l i s h membership.
EU-Polish c o n t a c t s a t h i g h l e v e l s a r e f r e q u e n t . The EU has been
Poland's g r e a t e s t source o f economic a s s i s t a n c e ; f r o m 1990
t h r o u g h June 1993, t h e EU and member s t a t e s had committed over
$8.5 b i l l i o n t o Poland, i n c l u d i n g debt f o r g i v e n e s s (U.S. f i g u r e
f o r t h e p e r i o d was $3.9 b i l l i o n ) .
Trade and Market Access:
Poland has complained about access t o
EU markets, u s u a l l y f o l l o w i n g t h e i m p o s i t i o n o f an EU t r a d e
r e s t r i c t i o n on P o l i s h e x p o r t s , n o t a b l y on s t e e l and a g r i c u l t u r a l
p r o d u c t s . These s h o u l d become more r a r e as t h e AA i s f u l l y
implemented. Under t h e AA, most P o l i s h i n d u s t r i a l goods w i l l
e n t e r t h e EU duty- and q u o t a - f r e e b e g i n n i n g on January 1, 1995;
r e s t r i c t i o n s on s t e e l and t e x t i l e s w i l l be l i f t e d l a t e r .
The EU
and Poland w i l l have f r e e t r a d e i n a l l n o n - a g r i c u l t u r a l s e c t o r s
by January 1, 1997. Thanks i n p a r t t o t h e AA, P o l i s h e x p o r t s t o
t h e EU rose over 40% from 1990 t o 1993, d e s p i t e t h e European
r e c e s s i o n ; however, i m p o r t s from t h e EU more t h a n doubled, thanks
t o i n c r e a s e d consumer demand i n Poland and t h e a p p r e c i a t i o n o f
t h e z l o t y i n r e a l terms. As a r e s u l t , Poland's b i l l i o n
d o l l a r - p l u s t r a d e s u r p l u s w i t h t h e EU i n 1990 became a $2.5
b i l l i o n d e f i c i t i n 1993.
European S t a b i l i t y Pact ( " B a l l a d u r P a c t " ) : The GOP remains
unhappy w i t h t h e European S t a b i l i t y Pact; i t does n o t c o n s i d e r
i t s e l f t o be an " o b j e c t " o f t h e Pact as i t argues Poland has no
border o r m i n o r i t y problems. The Poles d i d n o t p a r t i c i p a t e i n
b i l a t e r a l meetings w i t h t h e EU on t h e Pact, and m a i n t a i n t h a t a t
a minimum t h e Pact's focus needs t o be d i v e r t e d t o "good
n e i g h b o r l y " r e l a t i o n s i n c l u d i n g , i n p a r t i c u l a r , economic
c o o p e r a t i o n , i n o r d e r t o make i t p o s s i b l e f o r them t o
participate.
I t would a l s o l i k e i t s agreement w i t h Germany t o be
i n c l u d e d i n t h e Pact. Germany i s n o t enthused.
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EU MACROECONOMIC COORDINATION
The 197 9 European Monetary System committed member s t a t e s
( e x c l u d i n g Greece) t o m a i n t a i n c u r r e n c i e s w i t h i n a narrow band o f
f l u c t u a t i o n (1.125% on e i t h e r s i d e o f t h e c e n t r a l ECU r a t e ) .
Since t h e August 1993 exchange r a t e c r i s i s t h e band was widened
t o 15%, and U.K. and I t a l y i n t e r r u p t e d p a r t i c i p a t i o n
indefinitely.
The M a a s t r i c h t T r e a t y on European Union o f 1993 commits members
(except t h e UK) t h a t meet "convergence c r i t e r i a " on i n f l a t i o n ,
i n t e r e s t r a t e s and budget d e f i c i t s t o monetary u n i o n , i n c l u d i n g a
common currency and c e n t r a l bank, by 1999. The C o u n c i l s e t s
broad g u i d e l i n e s t o promote convergence and a "cohesion fund"
helps members w i t h per c a p i t a GNP under 90% o f t h e EU average i f
t h e i r economic p o l i c i e s a r e deemed conducive t o meeting t h e
criteria.
Few i f any a r e l i k e l y t o q u a l i f y as i n i t i a l monetary
union members. Over t h e l a s t t e n years most EU members have
r e i n e d i n i n f l a t i o n b u t budget d e f i c i t s have s w e l l e d and
unemployment i s l i k e l y t o c o n t i n u e growing i n t o n e x t year.
On June 6, t h e EcoFin ( C o u n c i l o f EU Economic and Finance
M i n i s t e r s ) approved t h e l a t e s t r e v i s i o n o f t h e economic
g u i d e l i n e s which focus on f o u r main p o i n t s : ( i ) s u s t a i n i n g
economic r e c o v e r y by c r e a t i n g c o n d i t i o n s t o a l l o w c e n t r a l banks
t o reduce s h o r t - t e r m i n t e r e s t r a t e s f u r t h e r , t h e r e b y r e v e r s i n g
the r e c e n t i n c r e a s e s i n l o n g - t e r m r a t e s ; ( i i ) keeping i n f l a t i o n
a t 2- 3% per year; ( i i i ) r e d u c i n g budget d e f i c i t s t o w i t h i n 3% o f
GDP EU-wide and i n c r e a s i n g n a t i o n a l s a v i n g s ; ( i v ) s t r u c t u r a l
r e f o r m measures (improved t r a i n i n g , e d u c a t i o n programs, l a b o r
market f l e x i b i l i t y , and p r i v a t i z a t i o n ) t o improve employment
growth.
The EU and t h e G-7
The European Union Commission p a r t i c i p a t e s i n t h e G-7 process i n
two ways. F i r s t , t h e P r e s i d e n t o f t h e European Commission
a t t e n d s t h e annual Economic Summit meeting as a f u l l p a r t i c i p a n t .
The Commission p l a y s a f u l l r o l e i n t h e sherpa process as w e l l .
Second, t h e EU p a r t i c i p a t e s on an ad hoc b a s i s w i t h t h e G-7
Finance M i n i s t e r s and Deputies.
T h i s arose because o f t h e EU's
primacy i n Europe on issues r e l a t i n g t o a s s i s t a n c e t o Russia.
The EU r e p r e s e n t a t i v e has a t t e n d e d s e v e r a l r e c e n t G-7 Finance
Deputies meetings, b u t o n l y f o r t h e r e l e v a n t p o r t i o n s . The U.S.
has t r a d i t i o n a l l y r e s i s t e d EU e f f o r t s t o expand t h e i r
p a r t i c i p a t i o n , p a r t l y on t h e r e a s o n i n g t h a t t h i s would
" o v e r - r e p r e s e n t " Europe i n t h e group's d i s c u s s i o n s .
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PRAGUE INITIATIVES CHECKLIST
Sustained High Level o f Engagement: Since your Prague t r i p t h e r e
has been s u s t a i n e d h i g h l e v e l engagement w i t h C e n t r a l and Eastern
European (CEE) c o u n t r i e s . Cabinet members and s e n i o r l e v e l
t r a v e l l e r s i n c l u d e : UN Amb. A l b r i g h t and Gen. S h a l i k a s h v i l i
( t h r o u g h o u t the r e g i o n ) , Commerce Sec. Brown (Warsaw), A t t y . Gen.
Reno (planned - Budapest), Deputy Sec. T a l b o t t (Warsaw and
B r a t i s l a v a ) , Under Sec. T a r n o f f (Warsaw, Budapest and Prague),
Under Sec. Davis (Budapest, B r a t i s l a v a , S o f i a and Skopje) and NSC
Senior D i r e c t o r S c h i f t e r (Bucharest, S o f i a , Warsaw, B r a t i s l a v a
and Budapest).
Democracy Network: USAID expects t o s t a r t awarding g r a n t s f o r
t h e "Democracy Network" t h i s summer. We w i l l p r o v i d e about $30
m i l l i o n i n g r a n t s t o U.S. NGOs over t h e next 3-5 y e a r s .
In turn,
t h e s e l e c t e d U.S. NGOs w i l l cooperate w i t h and s u p p o r t CEE
counterparts involved i n public p o l i c y .
Improved Market Access: We have agreed w i t h t h e EU t o a v o i d
megaphone diplomacy on t h i s s e n s i t i v e m a t t e r .
We can do l i t t l e
more t o expand CEE access t o our markets; t h e EU c i t e s "domestic
p o l i t i c a l r e a l i t i e s " as p r e v e n t i n g i t s f u r t h e r concessions. The
U.S. i s i n t e r e s t e d i n working w i t h CEE s t a t e s t o address t h e i r
own s i z e a b l e b a r r i e r s t o e x p o r t s and c o u l d work w i t h t h e EU.
U.S. Trade Remedy Laws: NEC Deputies agreed t o e x p l o r e
C o n g r e s s i o n a l r e c e p t i v i t y t o a p r o p o s a l t o e s t a b l i s h an
i n q u i r y - b a s e d t r a d e remedy f o r CEE/NIS "economies i n t r a n s i t i o n . "
The new remedy would apply i n l i e u o f c u r r e n t market surge and
a n t i - d u m p i n g p r o v i s i o n s a p p l i e d t o non-market economies.
U.S.-sponsored Conference on CEE Investment and Trade:
This
p r o p o s a l has sparked g r e a t i n t e r e s t i n t h e CEE. I t w i l l p r o b a b l y
t a k e place i n Cleveland i n September o r October. We are
a r r a n g i n g f o r U.S. p r i v a t e s e c t o r c o o p e r a t i o n i n h o s t i n g t h e
conference. The conference w i l l focus n o t o n l y on b o t h t r a d e and
investment o p p o r t u n i t i e s i n t h e r e g i o n , b u t a l s o on what measures
these c o u n t r i e s should t a k e t o make t h e i r business c l i m a t e more
attractive.
Key CEE m i n i s t e r s -- b u t n o t heads o f government -w i l l be i n v i t e d t o a t t e n d and l e a r n .
E a r l y OECD Membership f o r V i s e g r a d C o u n t r i e s :
W i t h s t r o n g U.S.
l e a d e r s h i p t h e OECD M i n i s t e r i a l Communique s t a t e d our i n t e n t i o n
t o begin n e g o t i a t i o n w i t h t h e V-4 on membership as soon as
p o s s i b l e . Eventual OECD membership w i l l depend l a r g e l y on how
q u i c k l y Poland, Hungary, the Czech R e p u b l i c and S l o v a k i a can
b r i n g t h e i r laws, r e g u l a t i o n s and p r a c t i c e s i n t o c o n f o r m i t y w i t h
OECD g u i d e l i n e s on t r a d e , investment and t h e environment.
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Regional I n f r a s t r u c t u r e Improvements: A t a February 1994 meeting
i n Vienna, t h e USG and CSCE p a r t n e r s developed a r e g i o n a l road
i n f r a s t r u c t u r e p l a n f o r s h o r t - t e r m p r o j e c t s i n t h e s o u t h e r n CEE
c o u n t r i e s . The EU has been slow t o p r o v i d e i t s share o f t h e
f u n d i n g necessary t o implement these p r o j e c t s . TDA i s w o r k i n g on
a s e r i e s o f s p e c i a l i n f r a s t r u c t u r e programs; i t has been funded
t o t h e l e v e l o f $3 m i l l i o n f o r r e g i o n a l programs. S t a t e and
Customs c o n t i n u e t o l e a d an e f f o r t t o develop a t r a n s p o r t
c o r r i d o r around Serbia f o r p e r i s h a b l e a g r i c u l t u r a l commodities
from t h e s o u t h e r n Balkans.
We a r e t r y i n g t o i d e n t i f y p o s s i b l e
sources o f f u n d i n g f o r t h e "Highways f o r Peace" p r o p o s a l .
Regional C i v i l / M i l i t a r y A i r s p a c e Management: DoD has p r o v i d e d
$500,000 toward t h e c o s t o f a p r e l i m i n a r y study o f a r e g i o n a l
integrated c i v i l a i r t r a f f i c control system/military a i r
s o v e r e i g n t y regime.
The V i s e g r a d s t a t e s o t h e r than t h e Czech
Republic have endorsed t h i s i n i t i a t i v e .
The t a r g e t date f o r
c o m p l e t i o n o f t h e p r e l i m i n a r y study i s t h e end o f FY94.
S o c i a l Sector R e s t r u c t u r i n g A s s i s t a n c e : Using p r i m a r i l y e x i s t i n g
a s s i s t a n c e resources, and c o o r d i n a t i n g w i t h o t h e r i n t e r n a t i o n a l
donors, we have launched an i n i t i a t i v e t o h e l p Poland i n t h i s
area. Our focus i s t h e f i n a n c i n g and p r o v i s i o n o f r e t i r e m e n t and
d i s a b i l i t y pensions, p o v e r t y r e l i e f , h e a l t h c a r e , housing and j o b
g e n e r a t i o n . We w i l l draw on our experience i n Poland t o a s s i s t
o t h e r CEE c o u n t r i e s .
P o s t - p r i v a t i z a t i o n A s s i s t a n c e : Treasury has developed a p r o p o s a l
f o r an e q u i t y fund t o a s s i s t newly p r i v a t i z e d companies i n
Poland, b u t no i n t e r a g e n c y agreement has been reached.
We a r e
working out d e t a i l s .
B i l a t e r a l Working Groups on S e c u r i t y : So f a r t h i s year alone, we
have h e l d BWGs -- c o n s u l t a t i o n s on r e g i o n a l s e c u r i t y , defense
r e l a t i o n s and b i l a t e r a l a s s i s t a n c e -- w i t h t e n CEE non-combatants
( a l l except Hungary, w i t h whom we w i l l meet i n t h e f a l l and t h e
Former Yugoslav Republic o f Macedonia).
Peacekeeping U n i t s : With our s u p p o r t , t h e B a l t i c s t a t e s have
launched a j o i n t peacekeeping b a t t a l i o n i n i t i a t i v e .
We have
r e q u e s t e d $10 m i l l i o n f o r FY95 t o s u p p o r t CEE peacekeeping,
including the B a l t i c B a t t a l i o n .
Removing Cold War-era R e s t r i c t i o n s : We have f i n i s h e d removing
a l l CEE s t a t e s (except those s u b j e c t t o t h e Yugoslav arms
embargo) from t h e I n t e r n a t i o n a l T r a f f i c i n Arms p r o s c r i b e d
destination l i s t .
I n a d d i t i o n , we and our a l l i e s removed
Hungary, t h e Czech R e p u b l i c , S l o v a k i a and Poland -- b u t n o t
Romania o r B u l g a r i a -- from t h e COCOM p r o s c r i b e d d e s t i n a t i o n
l i s t b e f o r e t h e t e r m i n a t i o n o f COCOM on March 3 1 . F i n a l l y , t h i s
year you s i g n e d P r e s i d e n t i a l D e t e r m i n a t i o n s (PDs) f o r a l l CEE
s t a t e s n o t a l r e a d y covered by PDs and n o t s u b j e c t t o t h e Yugoslav
arms embargo. These PDs make these s t a t e s e l i g i b l e t o
p a r t i c i p a t e i n t h e F o r e i g n M i l i t a r y Sales (FMS) program.
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MEETING WITH PRIME MINISTER CHRETIEN OF CANADA
CONTEXT OF MEETING
Though t r a d e d i s p u t e s on w h e a t / p o u l t r y / d a i r y and P a c i f i c salmon
p e r s i s t , t h e past nine months w i t h t h e C h r e t i e n government have
been p r o d u c t i v e . Canada agreed t o NAFTA, showed f o r t i t u d e on
Bosnia, renewed p a r t i c i p a t i o n i n t h e space s t a t i o n p r o j e c t and
made progress w i t h us t o p e r p e t u a t e defense c o o p e r a t i o n t h r o u g h
NORAD. The t r a d e issues impact t h e economies and p o w e r f u l
domestic i n t e r e s t s on b o t h s i d e s o f t h e border.
When C h r e t i e n
r a i s e d them w i t h you i n A p r i l , you agreed t o seek n e g o t i a t e d
s o l u t i o n s . The t a l k s on wheat have made some p r o g r e s s , b u t we
are u n l i k e l y t o reach an agreement u n t i l a f t e r t h e ITC issues i t s
d e c i s i o n on wheat on J u l y 8 -- l a t e r on t h e day o f your meeting
w i t h C h r e t i e n . On Salmon, t h e Canadians have agreed t o l i f t t h e
t r a n s i t f e e on U.S. f i s h i n g v e s s e l s , which we c o n s i d e r e d i l l e g a l
and d i s c r i m i n a t o r y . N e g o t i a t i o n s resume t h i s week. We c o n s i d e r
Canada's i m p o s i t i o n o f an i l l e g a l , d i s c r i m i n a t o r y t r a n s i t f e e on
U.S. f i s h i n g vessels t o be an u n j u s t i f i a b l e o b s t a c l e t o r e s o l v i n g
d i f f e r e n c e s by n e g o t i a t i o n .
C h r e t i e n may r a i s e concerns about Congressional p r o p o s a l s , i n t h e
c o n t e x t o f Uruguay Round implementing l e g i s l a t i o n , w h i c h would
make i t e a s i e r f o r t h e U.S. lumber i n d u s t r y t o b r i n g s u c c e s s f u l
s u b s i d i e s cases a g a i n s t Canadian lumber i m p o r t s . C h r e t i e n would
l i k e these issues k i c k e d over t o t h e s u b s i d i e s w o r k i n g group we
e s t a b l i s h e d t o secure C h r e t i e n ' s s u p p o r t f o r NAFTA. We recommend
you express a w i l l i n g n e s s t o c o n s u l t w i t h Canada d u r i n g t h e
l e g i s l a t i v e process, b u t i n d i c a t e we need some f l e x i b i l i t y i n
w o r k i n g w i t h Congress.
One o f t h e "Friends o f H a i t i , " Canada has been a r e l u c t a n t
s u p p o r t e r o f our e f f o r t s t o broaden t h e UN m i l i t a r y and p o l i c e
m i s s i o n mandate and s i z e . They a r e concerned about A r i s t i d e ' s
r e a c t i o n and t h e p o s s i b i l i t y o f i n t e r v e n t i o n and have gone slow
i n UN c o n s u l t a t i o n s . ( P r o - A r i s t i d e H a i t i a n v o t e r s i n Quebec have
made C h r e t i e n very a t t e n t i v e t o A r i s t i d e ' s v i e w s . ) Canada has
o f f e r e d p o l i c e t r a i n e r s f o r UNMIH - - a s they d i d l a s t year -- b u t
n o t m i l i t a r y personnel o r p o l i c e f o r c i v i c o r d e r f u n c t i o n s .
Growing Canadian a c t i v i s m i n L a t i n America c o u l d work a t c r o s s purposes t o U.S. o b j e c t i v e s . While C h r e t i e n e n t h u s i a s t i c a l l y
s u p p o r t s t h e Summit o f t h e Americas, h i s r e c e n t l e t t e r t o you
suggested t h a t Canada host a meeting t o d e f i n e t h e agenda.
Canada has a l s o pushed f o r a g r e a t e r OAS r o l e .
The V i c e
P r e s i d e n t w i l l v i s i t Ottawa l a t e r t h i s month f o r Summit
c o n s u l t a t i o n s . Canada has a l s o decided t o resume h u m a n i t a r i a n
a s s i s t a n c e t o Cuba.
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On Bosnia, C h r e t i e n made c l e a r a f t e r a June v i s i t t o Canadian
peacekeeping t r o o p s i n Sarajevo t h a t he would w i t h d r a w them i f
the arms embargo i s l i f t e d -- and l i n k e d t h e i r c o n t i n u i n g
presence t o seeing some progress.
He p r a i s e d the r e l a t i v e l y
s t a b l e s i t u a t i o n on the ground now, b u t noted t h a t Canadians a r e
"peacekeepers, not peacemakers."
The U.S. has been a c t i v e l y s u p p o r t i n g Canada's c a n d i d a t e , Don
Johnston, f o r Secretary General o f the OECD. C h r e t i e n may be
concerned t h a t , w i t h S a l i n a s ' e n t r y i n t o the race f o r the head o f
the World Trade O r g a n i z a t i o n (WTO), U.S. s u p p o r t f o r Johnston
might waver. (Europeans w i l l be r e l u c t a n t t o a l l o w N o r t h
Americans t o h o l d both p o s i t i o n s and may t r y t o press us t o
support one o r the o t h e r . ) We recommend you r e i t e r a t e U.S.
support f o r Johnston but ask f o r h i s s u p p o r t f o r a s t r o n g WTO
candidate.
The issue o f Quebec separatism i s h e a t i n g up f o r C h r e t i e n and
l i k e l y t o be a growing d i s t r a c t i o n .
The s e p a r a t i s t P a r t i
Quebecois (PQ) i s now p r e d i c t e d t o come t o power i n September
e l e c t i o n s -- and committed t o h o l d i n g a referendum on t h e
p r o v i n c e ' s f u t u r e w i t h i n t e n months o f t a k i n g o f f i c e .
YOUR OBJECTIVES
o
Assure Chretien of your d e s i r e t o see the wheat and salmon
disputes s e t t l e d -- but not under pressure of u n j u s t i f i a b l e
a c t s such as the t r a n s i t fee.
o
Urge Chretien t o support rapid UNSC approval of a new,
broader mandate for t h e UN Mission i n H a i t i and t o consider
contributing m i l i t a r y as w e l l as p o l i c e .
o
S t r e s s U.S. i n t e r e s t i n working c l o s e l y on L a t i n America.
o
P r a i s e continuing Canadian f o r t i t u d e on Bosnia.
o
Observe the r i s i n g temperature of Quebec separatism and the
U.S. posture of non-interference.
CORE POINTS
Wheat/Poultry/Dairy
o
Strong domestic i n t e r e s t s and e q u i t i e s on b o t h
sides.
o
Have asked Kantor and Espy t o make every e f f o r t .
Urge you
t o encourage your t r a d e and a g r i c u l t u r e m i n i s t e r s t o r e s o l v e
quickly.
CLINTON LIBRARY P O O O Y
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CONriDENTIAL
�CONriDDNHABSalmon
Want t o see the d i s c r i m i n a t o r y and i l l e g a l t r a n s i t fee on
U.S. v e s s e l s l i f t e d .
Encourages a f f e c t e d i n t e r e s t s and
t h e i r r e p r e s e n t a t i v e s i n Congress t o press f o r r e t a l i a t i o n
t o h u r t Canada. Options n a t u r a l l y under r e v i e w so l o n g as
fee stands.
B e l i e v e p r e f e r a b l e course, as Vice P r e s i d e n t t o l d your
Ambassador, t o r e t u r n now t o n e g o t i a t i n g t a b l e , where w i t h
recommitment can f i n d accommodation f o r 1994 c a t c h and work
on l o n g e r - t e r m regime.
I m p o r t a n t t o both s i d e s -- which b o t h have s i g n i f i c a n t
e q u i t i e s - - t o achieve m u t u a l l y - a c c e p t a b l e agreement.
Uruguay Round
Understand your concerns about some of t h e p r o v i s i o n s of the
Uruguay Round l e g i s l a t i o n , and w i l l be conscious of them as
we work w i t h Congress on t h e b i l l .
Will resist a l l
amendments t h a t are i n c o n s i s t e n t w i t h our Uruguay Round
obligations.
Need some f l e x i b i l i t y i n working w i t h Congress t o get t h e
Uruguay Round passed and l o c k i n t h e b e n e f i t s o f t h e Uruguay
Round. W i l l c o n s u l t f u l l y as l e g i s l a t i o n proceeds.
Haiti
o
Tensions b u i l d i n g f a s t i n H a i t i due t o t h e s a n c t i o n s , as t h e
i n c r e a s e d m i g r a n t o u t f l o w shows. Need t o be ready s h o u l d
the m i l i t a r y l e a d e r s go q u i c k l y .
o
Have t o get UNSC a p p r o v a l f o r t h e revamped UN M i s s i o n
w i t h o u t d e l a y . New mandate e s s e n t i a l t o meet t h e c h a l l e n g e s
w e ' l l face and s t a b i l i z e r e s t o r e d democracy. Hope Canada
can p r o v i d e a m i l i t a r y as w e l l as p o l i c e c o n t r i b u t i o n .
L a t i n America
o
A p p r e c i a t e Canada's a c t i v e i n t e r e s t i n Summit o f t h e
Americas. D e l i g h t e d Vice P r e s i d e n t w i l l have o p p o r t u n i t y
f o r c o n s u l t a t i o n s w i t h you l a t e r t h i s month.
o
Want t o work c l o s e l y t o g e t h e r on Summit and o t h e r p r i o r i t i e s
i n t h e hemisphere, such as promoting democracy i n H a i t i and
democratic t r a n s i t i o n i n Cuba.
Bosnia
A p p r e c i a t e Canada's s t e a d f a s t presence i n Bosnia. Your
views from v i s i t i n g t r o o p s on t h e ground i n Sarajevo?
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-COUFIDEHTIfilA
�•CONriDDNTfrKC.
OECD
o
Have supported Don Johnston f o r t h e OECD j o b and w i l l
c o n t i n u e t o do so. Understand he's d o i n g w e l l i n t h e race.
o
I m p o r t a n t t h a t we work t o g e t h e r t o s u p p o r t a s t r o n g
c a n d i d a t e t o s t a r t t h e WTO, someone who can h e l p b r i d g e t h e
gap between i n d u s t r i a l i z e d and d e v e l o p i n g c o u n t r i e s and
manage t h e new issues on t h e g l o b a l t r a d e agenda.
Quebec
o
Americans f o l l o w i n g w i t h i n t e r e s t and v a r i e t y o f emotions
i s s u e o f Quebec s e p a r a t i s m .
o
Our p o s t u r e t o make two p o i n t s : U.S. has l o n g enjoyed
e x c e l l e n t r e l a t i o n s w i t h a s t r o n g , u n i t e d Canada; how
Canadians c r a f t c o n s t i t u t i o n a l changes i s a m a t t e r f o r them
t o decide.
COMFIPEMTIAL
CLINTON LIBRARY P O O O Y
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�"OECnET •
MEETING WITH
RUSSIAN PRESIDENT YELTSIN
OVERVIEW
This w i l l be your f o u r t h meeting w i t h Y e l t s i n s i n c e you took
office.
The 90-minute s e s s i o n and 30-minute press conference
w i l l f o l l o w d i r e c t l y t h e G-7 l u n c h w i t h him on J u l y 10 and i s t h e
l a s t event on your schedule i n Naples.
Your p r i m a r y aim i n t h i s meeting i s t o c h a r t w i t h Y e l t s i n
o b j e c t i v e s f o r your two-day summit meeting w i t h him i n September
and f o r U.S.-Russian r e l a t i o n s over t h e l o n g term. A f t e r a year
and a h a l f of i n t e n s i v e engagement w i t h t h e Russians i n d e f i n i n g
a new r e l a t i o n s h i p , t h e Naples meeting p r e s e n t s you w i t h a good
o p p o r t u n i t y t o s t e p back w i t h Y e l t s i n and focus on a b i g - p i c t u r e
view of t h e f u t u r e .
We have j u s t weathered d u r i n g t h e l a s t s i x months t h e most
d i f f i c u l t p e r i o d i n U.S.-Russian r e l a t i o n s s i n c e t h e f a l l o f t h e
S o v i e t Union i n December 1991. S e v e r a l i m p o r t a n t events combined
a t the t u r n o f t h e year t o c a s t a c l o u d over our r e l a t i o n s h i p :
the s t r o n g a n t i - r e f o r m v o t e i n t h e December e l e c t i o n s ; t h e
r e s i g n a t i o n s of Gaydar and Federov; t h e Ames spy case; a
resurgence of Russian m i l i t a r y a c t i v i t y and i n f l u e n c e i n i t s
neighborhood; and d i f f i c u l t i e s w i t h Moscow on Bosnia, North Korea
and o t h e r f o r e i g n p o l i c y i s s u e s .
You made t h e r i g h t d e c i s i o n i n January t o s t i c k w i t h a p o l i c y o f
engagement and s u p p o r t f o r r e f o r m d e s p i t e t h e many problems we
encountered. N e v e r t h e l e s s , t h i s unleashed a wave o f c r i t i c i s m
from t h e press and prominent observers t h a t t h e A d m i n i s t r a t i o n
was u n r e a l i s t i c a l l y o p t i m i s t i c about Y e l t s i n ' s a b i l i t y t o s u s t a i n
r e f o r m and n a i v e about Russia's i n t e n t i o n s i n t h e "near abroad."
D u r i n g t h e i n t e r v e n i n g months, however, t h e sky d i d n o t f a l l on
our Russia p o l i c y as t h e c r i t i c s p r e d i c t e d .
Y e l t s i n and
Chernomyrdin kept t h e economy on a s t r i c t r e f o r m regimen.
Y e l t s i n , t o g e t h e r w i t h U k r a i n i a n P r e s i d e n t Kravchuk, a c t e d t o
r e s t r a i n t h e Crimean and Black Sea f l e e t c r i s e s . He a l s o
committed t o a complete w i t h d r a w a l o f t r o o p s from t h e B a l t i c s by
t h i s summer's end. The Gore-Chernomyrdin process produced
s i g n i f i c a n t r e s u l t s on t h e Space S t a t i o n , energy i n v e s t m e n t s and
c o n t r o l o f n u c l e a r weapons and m a t e r i a l s .
While we had some
problems on t h e economic a s s i s t a n c e program and i n d e a l i n g w i t h
Russian a d v e n t u r i s m i n Georgia and Nagorno-Karabakh, our Russia
p o l i c y has been on t h e r i g h t t r a c k a l l a l o n g as t h e New York
Times, Zbig B r z e z i n s k i and Jim Hoagland have r e c e n t l y a f f i r m e d .
Y e l t s i n comes t o Naples anxious t o p u t t h e problems o f t h e p a s t
months behind us. His o v e r r i d i n g f o r e i g n p o l i c y o b j e c t i v e i s t o
convince you and C h a n c e l l o r Kohl t o i n t e g r a t e Russia w i t h t h e
West. While w i s h i n g t o r e t a i n independence i n f o r e i g n p o l i c y ,
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�Y e l t s i n wants very much t o l i n k Russia e c o n o m i c a l l y westward and
t o p a r t i c i p a t e as an equal as we design a new framework f o r t h e
f u t u r e s e c u r i t y o f Europe. He b e l i e v e s t h a t i s a l r e a d y happening
w i t h Russia's new membership i n t h e P a r t n e r s h i p f o r Peace, i t s
new Economic T r e a t y w i t h the EU and i t s enhanced r o l e w i t h t h e
G-7 a t Naples.
The core p o i n t s t h a t f o l l o w are designed t o have you suggest t o
Y e l t s i n concrete steps t h a t we can t a k e between Naples and t h e
September Summit t o c o n t i n u e progress i n some areas and r e s o l v e
problems i n o t h e r s .
Y e l t s i n sent you a l e t t e r l a s t week p r o p o s i n g an a c t i v e G-7 p l u s
Russia process on p o l i t i c a l i s s u e s . You can assure him we f a v o r
a c l o s e G-7 r e l a t i o n s h i p w i t h Russia modeled on t h e Naples
Summit. While Y e l t s i n p r o b a b l y won't ask, we s h o u l d c o n t i n u e t o
approve Russia's f u l l membership i n G-7.
On economics, you w i l l want t o c o n g r a t u l a t e Y e l t s i n on Russia's
r e c e n t p o s i t i v e performance i n meeting IMF t a r g e t s and t h e
i n t e r n a t i o n a l community's s t r o n g s u p p o r t f o r reforms as t h e y
c o n t i n u e . I n a d d i t i o n , you should urge a c o n t i n u e d , s t r o n g
emphasis on the Gore-Chernomyrdin process, now t h e h e a r t o f our
b i l a t e r a l c o o p e r a t i o n . F i n a l l y , you can suggest t h a t you and
Y e l t s i n agree i n September on a " s t r a t e g i c economic agreement"
t h a t w i l l t r a d e a c t i o n by us on Jackson-Vanik and Market Access
f o r Russian r e d u c t i o n s on t a r i f f items i m p o r t a n t t o us.
On s e c u r i t y i s s u e s , we want t o c o n t i n u e our good work t o g e t h e r on
n o n p r o l i f e r a t i o n and arms c o n t r o l , i n p a r t i c u l a r by c o o p e r a t i n g
t o b r i n g about Ukraine's accession t o t h e N o n - P r o l i f e r a t i o n
T r e a t y (NPT), START I e n t r y i n t o f o r c e and Duma r a t i f i c a t i o n o f
START I I . You s h o u l d a l s o applaud our j o i n t work on n u c l e a r
m a t e r i a l s c o n t r o l and a c c o u n t i n g . You s h o u l d h i g h l i g h t o u r
concerns on b i o l o g i c a l and chemical weapons. You and Y e l t s i n
s h o u l d d i s c u s s Russia's r e c e n t d e c i s i o n t o j o i n t h e PFP and our
wish f o r enhanced m i l i t a r y - t o - m i l i t a r y t i e s , w h i l e making c l e a r
t h a t Russian cannot v e t o NATO's r e l a t i o n s w i t h t h e CEE s t a t e s .
F o r e i g n p o l i c y c o o p e r a t i o n remains t h e most d i f f i c u l t p a r t o f o u r
r e l a t i o n s h i p w i t h Russia.
We have succeeded i n i m p r o v i n g
communications and j o i n t work on Bosnia and N o r t h Korea. We have
worked w e l l w i t h Russia on Ukraine issues and on t r o o p
w i t h d r a w a l s from t h e B a l t i c s . We have had d i f f e r e n c e s on Georgia
and Nagorno-Karabakh. (Russia has t h r e a t e n e d t o b l o c k t h e
broader UN M i s s i o n i n H a i t i unless we are more s u p p o r t i v e o f CIS
peacekeeping i n Georgia.) These i s s u e s r e c e i v e d s c a n t a t t e n t i o n
d u r i n g your January t r i p .
We need t o p u t a b i g g e r s p o t l i g h t on
them now and have a f r a n k exchange w i t h t h e Russians on how we
can work more e f f e c t i v e l y t o g e t h e r .
JECRET"
CLINTON LIBRARY P O O O Y
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�-SBeRET*
3
YOUR OBJECTIVES
o
To c h a r t with Y e l t s i n the agenda for your September Summit
and o b j e c t i v e s for U.S.-Russian r e l a t i o n s over the long
term.
o
Underscore the importance we a t t a c h to R u s s i a ' s continued
economic and p o l i t i c a l i n t e g r a t i o n with the West.
o
Push for continued economic reform i n R u s s i a and new
to expand our trade and investment.
o
Highlight our i n t e r e s t i n advancing s e c u r i t y cooperation on
arms c o n t r o l , n o n p r o l i f e r a t i o n and on PFP.
o
Suggest ways to improve our foreign p o l i c y
ideas
cooperation.
EVENTS
B i l a t e r a l Meeting.
You w i l l host Y e l t s i n f o r a n i n e t y - m i n u t e
meeting a t your h o t e l d i r e c t l y f o l l o w i n g t h e G-7 l u n c h on
J u l y 10.
J o i n t Press Conference. You and Y e l t s i n w i l l make statements
w i l l then respond t o q u e s t i o n s from the press c o r p s .
P o i n t s t o be made are a t t a c h e d .
CECIH3T
CLINTON LIBRARY P O O O Y
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and
�POINTS TO BE MADE
BILATERAL MEETING WITH PRESIDENT YELTSIN
SEPTEMBER SUMMIT
o
Looking f o r w a r d t o our September 28-29 Summit i n Washington.
W i l l be S t a t e v i s i t w i t h o f f i c i a l ceremonies and s e v e r a l
meetings.
o
You s h o u l d spend t i m e w i t h Congress and our business
community t o emphasize t r a d e and i n v e s t m e n t .
We can h e l p t o
arrange.
o
I want t o move beyond our d e c l a r a t i o n o f p a r t n e r s h i p i n
Vancouver and make concrete advances i n economics, s e c u r i t y
and f o r e i g n p o l i c y c o o p e r a t i o n .
o
Suggest you and I agree today on broad o b j e c t i v e s f o r
September and ask our M i n i s t e r s t o work on them.
o
We've had a c t i v e and sometimes d i f f i c u l t s i x months s i n c e
the Moscow Summit. Let's d i s c u s s today problem areas and
a l s o successes l i k e t h e Gore-Chernomyrdin process.
o
Suggest we focus now on t h r e e broad areas o f c o o p e r a t i o n :
economics, s e c u r i t y and f o r e i g n p o l i c y .
ECONOMIC COOPERATION
Economic Reform
o
C o n g r a t u l a t i o n s on your i m p r e s s i v e reforms s i n c e January.
You've earned t h e IMF's s u p p o r t . As you heard today, t h e
G-7 f u l l y supports you.
o
Hope you can i n t e n s i f y t h e pace o f reforms and b r i n g
i n f l a t i o n down f u r t h e r , because t h a t w i l l h e l p you g a i n t h e
c o n f i d e n c e o f t h e Russian people and f o r e i g n i n v e s t o r s .
o
We expect our G-7 i n i t i a t i v e f o r i n c r e a s e d access t o IMF
resources t o p e r m i t a much h i g h e r l e v e l o f s u p p o r t f o r
Russia.
o
We want t o see an i n t e n s i f i e d r e f o r m e f f o r t t r i g g e r an IMF
standby loan t h i s year w i t h s i g n i f i c a n t IMF f u n d i n g and
p e r m i t us t o d i s c u s s a more comprehensive debt r e s c h e d u l i n g .
o
Concerned about r e c e n t d e c i s i o n s t h a t d e l a y U.S. banks'
e n t r y i n t o t h e Russian market, b u t a l l o w some European banks
to enter.
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HTCP
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We t h i n k our banks can c o n t r i b u t e t o Russia's economic
transformation.
Gore-Chernomyrdin Process
o
Gore-Chernomyrdin more s u c c e s s f u l than we
Vancouver when we c r e a t e d i t .
imagined i n
Recent meeting produced s i g n i f i c a n t , c o n c r e t e r e s u l t s
t h a t w i l l b e n e f i t us b o t h -- Space S t a t i o n ; S a k h a l i n
I s l a n d o i l agreement; agreement t o shut down p l u t o n i u m
p r o d u c t i o n r e a c t o r s and s t o p p r o d u c t i o n of m i l i t a r y
plutonium.
VP Gore w i l l continue to t r e a t as top
priority.
U.S.
Economic A s s i s t a n c e
o
I'm determined t o make our a i d program e f f e c t i v e t o s u p p o r t
your reforms.
P r i v a t i z a t i o n and exchange programs succeeding.
Housing h e l p f u l t o you on B a l t i c w i t h d r a w a l s .
o
I want t o improve speed of i m p l e m e n t a t i o n and want t o focus
our e f f o r t s more on few, key areas.
o
W i l l name a new A i d Tsar soon t o produce b e t t e r
results.
Market Access and Jackson-Vanik
o
You asked i n Moscow f o r my c o o p e r a t i o n on removing JacksonVanik from r e l a t i o n s h i p and i m p r o v i n g market access f o r
Russian e x p o r t s t o t h e U.S.
o
VP Gore and I discussed w i t h Chernomyrdin a S t r a t e g i c
Economic P a r t n e r s h i p agreement a t September Summit t o spur
t r a d e and investment.
We w i l l s u p p o r t your e a r l y a c c e s s i o n t o GATT.
W i l l work w i t h Congress t o r e c o g n i z e Russia (and o t h e r
CEE/NIS c o u n t r i e s embarked on r e f o r m ) as "economy i n
t r a n s i t i o n . " T h i s w i l l h e l p s o f t e n e f f e c t o f our
dumping laws. W i l l be v e r y d i f f i c u l t t o convince
Congress b u t I t h i n k i m p o r t a n t t o t r y .
o
At same t i m e , I w i l l s t a t e p u b l i c l y i n September t h a t
Russian e m i g r a t i o n p o l i c i e s are i n compliance w i t h JacksonVanik.
W i l l remove need f o r annual Jackson-Vanik w a i v e r
set you a p a r t from China and o t h e r c o u n t r i e s .
Chernomyrdin's meeting w i t h Jewish community i n
helped t o b u i l d s u p p o r t f o r t h i s .
-assBar
and
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CLINTON LIBRARY P O O O Y
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�1
-SBGRET"
o
3
As p a r t o f t h i s S t r a t e g i c Economic Agreement, understand you
are prepared t o seek r a t i f i c a t i o n o f B i l a t e r a l Investment
T r e a t y by Duma and reduce t a r i f f b a r r i e r s i n key s e c t o r s
( a v i a t i o n , autos and c o n f e c t i o n a r y s u g a r ) .
P r i v a t e Trade and Investment
o
I s t i l l b e l i e v e t h i s i s most i m p o r t a n t o f a l l economic
issues.
Gore and Chernomyrdin making progress i n i d e n t i f y i n g
barriers t o trade.
Suggest you and I meet U.S. e x e c u t i v e s t o g e t h e r i n
September and t h a t we announce c o m p l e t i o n o f Texaco's
Timon Pechora o i l p r o j e c t . Can we make such progress?
Crime and Corruption
o
Know t h i s i s b i g concern f o r you.
i n U.S., t o o .
I m p o r t a n t domestic i s s u e
FBI D i r e c t o r Louis Freeh i s back from Moscow. I ' v e
asked him t o work c l o s e l y t o h e l p you f i g h t o r g a n i z e d
crime.
SECURITY COOPERATION
P a r t n e r s h i p f o r Peace
o
Applaud your d e c i s i o n t o j o i n .
Know some i n Russia oppose.
H i s t o r i c s t e p i n European h i s t o r y t h a t e s t a b l i s h e s
b a s i s f o r our common g o a l -- p r o m o t i n g Europe's u n i t y
i n next c e n t u r y .
o
We must now make i t work f o r c l o s e r Russian r e l a t i o n s w i t h
NATO and o t h e r members. A l s o want t o work w i t h you t o
i n c r e a s e u n d e r s t a n d i n g i n Russia o f t h e s t a b i l i z i n g r o l e
NATO p l a y s i n Europe.
We want more a c t i v e m i l i t a r y t i e s w i t h Russia i n s i d e
PFP.
o
Also determined t o promote a c t i v i t i e s beyond PFP such as o u r
b i l a t e r a l m i l i t a r y e x e r c i s e s now s e t f o r Totskoye i n
September j u s t b e f o r e o u r summit.
T r i l a t e r a l Agreement
o
Very pleased w i t h progress--way ahead o f s c h e d u l e w i t h some
300 warheads shipped from U k r a i n e t o Russia.
OBCRET-
CLINTON LIBRARY P O O O Y
HTCP
�-SDGRET
4
START I and II/NPT
o
We should s e t as g o a l f o r September c o o p e r a t i n g t o achieve
Ukraine's NPT accession and START I e n t r y i n t o f o r c e .
Also want a c t i o n on START I I .
W i l l t h e Duma r a t i f y i t ?
Non-proliferation
o
Want t o make as p r i o r i t y area f o r September c o n t r o l s on
p l u t o n i u m and s a f e t y , s e c u r i t y and a c c o u n t a b i l i t y o f n u c l e a r
weapons s t o c k s .
o
Also have c o n t i n u e d concern
a c t i v i t i e s i n Russia.
about b i o l o g i c a l weapons
VP r a i s e d w i t h Chernomyrdin who i n s i s t e d a l l programs
have stopped.
We need t o c o n t i n u e t o m o n i t o r problem
c l o s e l y s i n c e we c o n t i n u e t o r e c e i v e r e p o r t s o f
activity.
o
On chemical weapons, want t o r e s o l v e issues o f b i l a t e r a l
data exchange and c o n v e r s i o n o f former C p r o d u c t i o n
W
f a c i l i t i e s , t o ease r a t i f i c a t i o n o f t h e Chemical Weapons
Convention.
ABM/TMD Demarcation
o
S e c r e t a r y C h r i s t o p h e r r e c e n t l y o u t l i n e d f o r M i n i s t e r Kozyrev
our new U.S. p o s i t i o n on t h e demarcation between t h e a t e r
m i s s i l e defenses (TMD) and a n t i - b a l l i s t i c m i s s i l e (ABM)
defenses.
o
I b e l i e v e t h i s new U.S. o f f e r i s v e r y r e s p o n s i v e t o Russian
concerns and hope your s i d e can show s i m i l a r f l e x i b i l i t y .
o
I n p a r t i c u l a r , I hope o u r e x p e r t s can agree on a s o l u t i o n t o
t h i s issue d u r i n g t h e i r n e x t round a t t h e Standing
C o n s u l t a t i v e Commission (SCC).
COCOM SUCCESSOR REGIME ( I f asked):
o
We agreed a t Vancouver t o end COCOM and e s t a b l i s h new
successor regime w i t h Russia as member.
Have had d i f f i c u l t n e g o t i a t i o n s . Gore and Chernomyrdin
had a good d i s c u s s i o n o f statement t o r e s o l v e o u r
d i f f e r e n c e s . I t s h o u l d be f i n i s h e d by September so you
and I can s i g n i t .
This i s a key t e s t o f our a b i l i t y t o cooperate. We
must succeed. L e t ' s ask our e x p e r t s t o arrange by
September.
SECRET
CLINTON LIBRARY P O O O Y
HTCP
�DDCRDT
START I I I
'
5
( I f asked):
o
F o l l o w i n g our d i s c u s s i o n s i n Moscow, o u r e x p e r t s have h e l d
some p r e l i m i n a r y d i s c u s s i o n s o f a concept f o r START I I I .
This process s h o u l d c o n t i n u e .
o
A t t h e same t i m e , I b e l i e v e we must be c a r e f u l n o t t o l e t a
START I I I process g e t t o o f a r ahead o f t h e immediate
business a t hand -- r a t i f i c a t i o n and f o r m a l e n t r y i n t o f o r c e
of START I and START I I .
FOREIGN POLICY COOPERATION
Overview P o i n t s
o
Foreign p o l i c y area o f g r e a t e s t c h a l l e n g e and where you and
I can make an a c t i v e d i f f e r e n c e .
We should c o n t i n u e f r e q u e n t phone c o n v e r s a t i o n s and
l e t t e r s so t h a t we a v o i d miscommunications/
misunderstandings.
I s t a r t w i t h b e l i e f t h a t Russia i s g r e a t power and
e s s e n t i a l p a r t n e r t o r e s o l v e most s e r i o u s c o n f l i c t s
around w o r l d .
Bosnia/North Korea
i
o
Pleased our cooperation/communication
Korea i s good now.
on Bosnia and N o r t h
On Bosnia, Contact Group w o r k i n g w e l l .
Once we have
agreement on t h e map and package o f i n c e n t i v e s , we can
move t o g e t t h e p a r t i e s t o end t h e war.
We need t o be prepared t o f o l l o w t h r o u g h w i t h o u r
t h r e a t i f one o r t h e o t h e r p a r t y r e j e c t s t h e p l a n .
On North Korea, C h r i s t o p h e r and Kozyrev have worked
e f f e c t i v e l y t o g e t h e r on key elements o f a s a n c t i o n s
r e s o l u t i o n . W i l l keep you c l o s e l y i n f o r m e d on r e s u l t s
of o u r t a l k s w i t h N o r t h Koreans.
B a l t i c s and Russian Troop Withdrawals
o
Had good meeting w i t h t h r e e B a l t i c P r e s i d e n t s i n Riga.
A l l want good r e l a t i o n s w i t h Russia.
I stressed
importance o f t h e i r g i v i n g e t h n i c Russians chance t o
p a r t i c i p a t e i n p o l i t i c a l l i f e , have access t o
citizenship.
(
o
On L a t v i a : P r e s i d e n t Ulmanis d i d r i g h t t h i n g i n r e t u r n i n g
t h e bad c i t i z e n s h i p law t o P a r l i a m e n t . We w i l l c o n t i n u e t o
push f o r more e q u i t a b l e t r e a t m e n t .
SECRET
CLINTON LIBRARY P O O O Y
HTCP
�Very pleased your t r o o p s w i l l withdraw
o
i n August.
On E s t o n i a : Understand n e g o t i a t i o n s on t r o o p w i t h d r a w a l a r e
tough and c o m p l i c a t e d .
I f e e l very s t r o n g l y t h a t you should complete
n e g o t i a t i o n s and withdraw t r o o p s by August. I f you
f a i l t o meet d e a d l i n e , w i l l h u r t Russia's image
internationally.
I t a l k e d w i t h President Meri.
from him t o you w i t h p r o p o s a l s
issues.
I am c a r r y i n g a l e t t e r
t o r e s o l v e t h e toughest
I t h i n k you should take a p e r s o n a l r o l e i n f i n i s h i n g
these t a l k s .
Have g i v e n same a d v i c e t o M e r i .
I am ready t o help behind t h e scenes i f you f i n d
useful.
Ukraine
o
C o n g r a t u l a t i o n s f o r keeping r e l a t i o n s w i t h Ukraine on t r a c k .
Ukraine major p r i o r i t y f o r us a l l .
together t o help s t a b i l i z e .
Need t o a c t
Would be i n t e r e s t e d i n your assessment o f
e l e c t i o n s i n Ukraine, b o t h p r e s i d e n t i a l and l o c a l
levels.
We w i l l push new government t o b e g i n economic r e f o r m s .
I f i t does, G-7 w i l l m o b i l i z e s u b s t a n t i a l s u p p o r t .
o
Hope you can c o n t i n u e t o work e f f e c t i v e l y w i t h Ukraine on
Black Sea F l e e t and Crimea.
I am w i l l i n g t o h e l p q u i e t l y i f you b e l i e v e u s e f u l .
Georgia and Nagorno-Karabakh
o
As I mentioned i n my r e c e n t l e t t e r , we need t o work more
e f f e c t i v e l y on these two problems.
C h r i s t o p h e r and Kozyrev d i s c u s s f r e q u e n t l y .
o
v..
On Georgia, understand your concerns w i t h s t a b i l i t y and i t s
e f f e c t on your North Caucasus.
We a r e s u p p o r t i n g expanded UN presence t o m o n i t o r t h e
CIS f o r c e . Best we can do f o r now. I f your f o r c e a c t s
consistent w i t h i n t e r n a t i o n a l standards, could p o s s i b l y
l e a d t o UN endorsement and v o l u n t a r y f u n d t o h e l p
d e f r a y your expenses.
CLINTON LIBRARY P O O O Y
HTCP
�I m p o r t a n t t h i n g i s t o s u p p o r t Shevardnadze and keep
Georgia t o g e t h e r .
No v a l i d l i n k a g e between Georgia and a broader UN
Mission i n H a i t i .
Urge you t o s u p p o r t UNSC
a u t h o r i z a t i o n o f t h e r e v i s e d UNMIH mandate when t h e
S e c r e t a r y General submits h i s r e p o r t .
On Nagorno-Karabakh, we a r e d i s a p p o i n t e d t h a t we've been
unable t o work t o g e t h e r e f f e c t i v e l y .
N e i t h e r Russia nor t h e CSCE can produce a s o l u t i o n on
i t s own. We should merge our e f f o r t s and t r y t o use
our combined i n f l u e n c e t o produce n e g o t i a t i o n s .
I f t h a t i s t o happen, we w i l l need t o g i v e s t r i c t
i n s t r u c t i o n s t o our people. L e t ' s have C h r i s t o p h e r and
Kozyrev work on t h i s .
SECRET
CLINTON LIBRARY P O O O Y
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�CONFIDENTIAL
CONTINGENCY BRIEFING PAPER:
EU COMMISSION PRESIDENT DELORS
BACKGROUND
Jacques Delors i s i n t h e l a s t s i x months of h i s t e n years as
Commission P r e s i d e n t .
He may run f o r t h e French Presidency i n
1995.
C r e d i t e d as one of t h e g r e a t v i s i o n a r i e s of European
i n t e g r a t i o n , Delors was t h e a r c h i t e c t of t h e EC's 1992 S i n g l e
Market program and a g u i d i n g f o r c e i n shaping t h e M a a s t r i c h t
Treaty.
However, the EU Commission i s now on t h e d e f e n s i v e as
t h e member s t a t e s seek t o a s s e r t t h e i r dominance i n shaping EU
p o l i c y and p u b l i c s k e p t i c i s m about t h e Union grows.
Delors w i l l c o n c e n t r a t e on a few key p r o j e c t s : t h e White Paper
on economic c o m p e t i t i v e n e s s and unemployment t h a t you and he
discussed i n January; i m p r o v i n g EU r e l a t i o n s w i t h CEE and Russia;
o v e r s e e i n g s u c c e s s f u l EU enlargement; and l a y i n g t h e f o u n d a t i o n
f o r r e f o r m i n g the EU's i n s t i t u t i o n s .
Delors wants evidence o f
s t r o n g U.S. s u p p o r t f o r European i n t e g r a t i o n and commitment t o
p a r t n e r s h i p w i t h t h e EU.
CORE POINTS
o
U.S.-EU p a r t n e r s h i p e s s e n t i a l t o c o n f r o n t European and
g l o b a l problems. Must s t r e n g t h e n mechanisms f o r d e v e l o p i n g
t r a n s a t l a n t i c f o r e i g n and economic p o l i c y consensus.
o
Want t o r a t i f y t h e Uruguay Round agreement so i t can t a k e
e f f e c t January 1, 1995.
Also need t o t a c k l e t h e
r e l a t i o n s h i p s between t r a d e and t h e environment and t r a d e
and i n t e r n a t i o n a l l a b o r standards.
Need t o work t o g e t h e r on combatting
o u t o f t h e Corfu summit on t h a t ?
unemployment,
What came
How was your meeting w i t h P r e s i d e n t Y e l t s i n l a s t month?
C o n g r a t u l a t i o n s on s i g n i n g your p a r t n e r s h i p and c o o p e r a t i o n
agreement. We must c o o r d i n a t e more on our approaches t o
Russia and t o C e n t r a l and Eastern Europe t o improve our
e f f e c t i v e n e s s and a v o i d d i s p u t e s .
DECLASSIFIED
PER E.0.13526
CONriDENTIAL
mn
1
Declassify otaL JDA
LIBRARY P O O O Y
HTCP
�CONTINGENCY BRIEFING PAPER:
UK PRIME MINISTER MAJOR
BACKGROUND
The Major government i s c u r i o u s l y r e l i e v e d a f t e r t h e C o n s e r v a t i v e
P a r t y p o l l e d o n l y 27% o f t h e n a t i o n a l v o t e i n t h e June European
p a r l i a m e n t a r y e l e c t i o n s . A l t h o u g h t h e p a r t y had i t s w o r s t
performance ever -- never b e f o r e d i p p i n g below 30% a t t h e
n a t i o n a l l e v e l -- t h e r e s u l t was n o t as c a t a s t r o p h i c as some had
f e a r e d . Major has promised a c a b i n e t r e s h u f f l e , b u t Foreign
S e c r e t a r y Hurd, Defense S e c r e t a r y R i f k i n d and Major's p u t a t i v e
r i v a l s ( C l a r k e , H e s e l t i n e and P o r t i l l o ) w i l l l i k e l y remain.
I r o n i c a l l y , Major's p o s i t i o n i s more secure now s i n c e
Conservatives r e a l i z e t h e i r problems go deeper than t h e Prime
M i n i s t e r . A t t h e same t i m e , t h e Labour P a r t y has j u s t i f i a b l y
trumpeted i t s b e s t n a t i o n a l showing (45%) i n 30 y e a r s . Tony
B l a i r i s s e t t o be p i c k e d as O p p o s i t i o n Leader i n J u l y . Major
has u n t i l 1997 t o c a l l a g e n e r a l e l e c t i o n . W i t h t h e B r i t i s h
economy i n steady r e c o v e r y , he and t h e T o r i e s cannot be counted
out.
On Bosnia, Major w i l l r e i t e r a t e h i s d e e p l y - f e l t view t h a t l i f t i n g
the arms embargo would f o r c e t h e w i t h d r a w a l o f B r i t i s h and o t h e r
UNPROFOR t r o o p s . The B r i t i s h b e l i e v e t h a t no more than two
months a r e l e f t t o p r e v e n t a r e t u r n t o a f u l l - s c a l e c o n f l i c t i n
Bosnia and beyond. They a r e g e n e r a l l y more i n c l i n e d than we t o
o f f e r c a r r o t s t o t h e Serbs, n o t a b l y s a n c t i o n s r e l i e f . On North
Korea, UK has been g e n e r a l l y s u p p o r t i v e though i t pressed f o r a
more a g g r e s s i v e s a n c t i o n s s t r a t e g y a t t h e UN. On H a i t i , i t has
decided a g a i n s t a c c e p t i n g refugees f o r r e s e t t l e m e n t and n o t y e t
responded d e f i n i t i v e l y t o our r e q u e s t f o r s u p p o r t f o r UNMIH. On
Russian peacekeeping, i t argues f o r keeping up a p e r s i s t e n t
d i a l o g u e w i t h t h e Russians on t h e standards and norms f o r any
o p e r a t i o n . On f i s s i l e m a t e r i a l s , B r i t i s h coolness t h r e a t e n s t o
undermine your p r o p o s a l o f an i n t e r n a t i o n a l ban on f i s s i l e
m a t e r i a l s f o r n u c l e a r e x p l o s i v e purposes.
CORE POINTS
o
Must m a i n t a i n r e s o l v e i n s u p p o r t i n g Bosnia t e r r i t o r i a l
compromise and i n f o l l o w i n g t h r o u g h on t h e i n c e n t i v e s /
d i s i n c e n t i v e s package i f map r e j e c t e d .
o
Goal t o have North Korea c o n t i n u e i t s f r e e z e and address t h e
p a s t . Meeting o f Kims i m p o r t a n t .
o
A p p r e c i a t e your h e l p i n g e t t i n g Turks and Caicos agreement
t o a m i g r a n t p r o c e s s i n g f a c i l i t y f o r H a i t i a n s . Hope you
decide t o p a r t i c i p a t e i n UNMIH.
PER E.0.13526
coHriDEHwwT TNTON TRRARY P\~O Y
CP
D e c l a s s i f y on: "T)Abk
W
�GOHriDDNMAL
o
Need t o f i r m up a r e a l i s t i c and c o n s t r u c t i v e approach t o
Russian peacekeeping b e f o r e November CSCE Summit i n
Budapest.
o
Need your h e l p t o move on a f i s s i l e m a t e r i a l c o n v e n t i o n ,
which i s i m p o r t a n t t o our e f f o r t s i n t h e South Asia and on
e x t e n d i n g t h e NPT i n 1995.
•GOHriDDHTIAL
CLINTON LIBRARY P O O O Y
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�GOHriDEHffrftfa
CONTINGENCY BRIEFING PAPER:
FRENCH PRESIDENT MITTERRAND
BACKGROUND
The June European P a r l i a m e n t e l e c t i o n s s h u f f l e d t h e French
p o l i t i c a l deck as campaigning f o r t h e A p r i l 1995 p r e s i d e n t i a l
v o t e b e g i n s . The S o c i a l i s t s ' poor showing (15%) f o r c e d t h e
r e s i g n a t i o n of t h e i r presumptive nominee, M i c h e l Rocard. Many
S o c i a l i s t s i n c l u d i n g M i t t e r r a n d would l i k e Jacques D e l o r s t o t a k e
up t h e mantle. On t h e c e n t e r - r i g h t , a s t r o n g " a n t i - B r u s s e l s "
v o t e has p u t more p r e s s u r e on B a l l a d u r t o prove h i s n a t i o n a l i s t
m e t t l e i f he i s t o win t h e n o m i n a t i o n over C h i r a c .
The French economy i s p i c k i n g up, i n response t o U.S. g r o w t h and
lower s h o r t - t e r m i n t e r e s t r a t e s . Forecasts f o r French growth
have been r e v i s e d upward t o 2.8% f o r 1995. Unemployment (12%) i s
u n l i k e l y t o f a l l soon. Uruguay Round i m p l e m e n t a t i o n would
s t i m u l a t e t h e economy f u r t h e r , b u t t h e r e remains a d i s p u t e over
competence between t h e EU Commission and member s t a t e s which
threatens t o delay i t s r a t i f i c a t i o n .
M i t t e r r a n d hopes h i s a p p r o v a l o f Eurocorps ( i n c l u d i n g German)
p a r t i c i p a t i o n i n t h i s year's B a s t i l l e Day parade w i l l p u t t o r e s t
the f l a p over Germany's absence from t h e D-Day commemorations.
France i s concerned t h a t EU expansion w i l l c r e a t e a "Germanic
b l o c " o f Nordic/CEE s t a t e s , r e d u c i n g French i n f l u e n c e and p u t s
g r e a t s t o c k i n c o o r d i n a t i n g t h e back-to-back German-French EU
p r e s i d e n c i e s b e g i n n i n g i n J u l y . M i t t e r r a n d and Kohl are l i k e l y
t o s t r e s s c o o p e r a t i o n i n Naples. The two w r o t e you r e c e n t l y t o
r e q u e s t h e l p i n s h u t t i n g down Chernobyl. You w i l l want t o r e v i e w
the b i d d i n g on N o r t h Korea, Bosnia and H a i t i .
M i t t e r r a n d may say
France's new peacekeeping r o l e i n Rwanda p r e c l u d e s m i l i t a r y
p a r t i c i p a t i o n i n UNMIH, though France i s w i l l i n g t o p r o v i d e
police.
CORE POINTS
o
Goal t o have N o r t h Korea c o n t i n u e i t s f r e e z e and address t h e
p a s t . Meeting o f Kims i m p o r t a n t .
o
Must m a i n t a i n r e s o l v e i n s u p p o r t i n g Bosnian t e r r i t o r i a l
compromise and i n f o l l o w i n g t h r o u g h on t h e i n c e n t i v e s
package i f map r e j e c t e d .
o
Understand new demands i n Rwanda; b u t hope you can p r o v i d e
m i l i t a r y as w e l l as p o l i c e t o r e c o n f i g u r e d UN H a i t i m i s s i o n .
French p a r t i c i p a t i o n h i g h l y d e s i r a b l e .
o
U.S. prepared t o h e l p r e p l e n i s h t h e EBRD Nuclear S a f e t y
Account t o c l o s e Chernobyl as soon as p o s s i b l e .
PER E.0.13526
I f S H f ^ i m O N LIBRARY P O O O Y
HTCP
�COHriDDlfffftL
U.S. pushing t o implement Uruguay Round by January 1.
EU a b l e t o j o i n us.
Hope
Need your h e l p t o move on a f i s s i l e m a t e r i a l c o n v e n t i o n ,
which i s i m p o r t a n t t o our e f f o r t s i n t h e South Asia and on
e x t e n d i n g t h e NPT i n 1995.
COHFI DDNTIAL"
CLINTON LIBRARY P O O O Y
HTCP
�COHriDEHTIfiT
JAPAN: ECONOMIC OUTLOOK
Overview
Worst of economic slowdown i s over, but weak and
protracted recovery ahead l e d by p r i v a t e demand; very
l i m i t e d external adjustment.
Substantial, sustained f i s c a l stimulus needed on both tax
and expenditure sides t o boost domestic demand and
f a c i l i t a t e external adjustment; f u r t h e r monetary easing
would be h e l p f u l too.
Japan has the capacity f o r such p o l i c y a c t i o n : although
the general government budget w i l l remain i n d e f i c i t t h i s
year and next due t o c y c l i c a l l y - r e l a t e d f a c t o r s , Japan's
f i s c a l p r o f i l e i s s t i l l very strong compared w i t h the
r e s t of the G-7.
Economic Prospects
Although several more months of data w i l l be needed t o make
a d e f i n i t i v e pronouncement, the Japanese economy does appear t o
have reached the bottom of the current cycle. The most t e l l i n g
improvements are found i n measures of business confidence and
corporate conditions (confirmed by the BOJ's May Tankan),
measures of consumer sentiment, leading employment i n d i c a t o r s
(overtime hours and part-time h i r e s ) , housing investment,
personal consumption, money supply growth, and i n d u s t r i a l
production. Some analysts are quick t o p o i n t out t h a t s t r a i g h t l i n e improvement i s not necessarily implied by these p o s i t i v e
developments, and t h a t a mixed p i c t u r e s t i l l presents i n terms of
an uncertain longer term employment outlook, continued stock
adjustment i n the corporate sector, p r i v a t e c a p i t a l spending, and
a continued decline i n wholesale p r i c e s . To be sure, t h e
recovery a t best w i l l be a weak and p r o t r a c t e d one, and the
economy remains a t r i s k from such f a c t o r s as renewed appreciation
of the yen and heightened p o l i t i c a l t u r m o i l .
Real GDP i s expected t o grow by 0.5% i n calendar 1994, b u t
by 1.0% i n the f i s c a l year beginning l a s t A p r i l 1 and 1.6% i n
calendar 1995, a t t e s t i n g t o the expectation of stronger a c t i v i t y
l a t e r i n the current f i s c a l year. Growth w i l l be l e d by p r i v a t e
demand, spreading from housing investment t o personal consumption
and f i n a l l y t o business investment. Consumer p r i c e i n f l a t i o n
w i l l edge down from 1993's 1.3% t o the 1% range. The general
government budget d e f i c i t w i l l r i s e , from 0.2% o f GDP i n 1993 t o
1.4% t h i s year, but w i l l recover t o 0.2% i n 1995. About one-half
of t h i s d e t e r i o r a t i o n r e f l e c t s d i s c r e t i o n a r y p o l i c y a c t i o n ( t a x
cuts and p u b l i c investment); a c y c l i c a l l y - r e l a t e d s t r a i n on
^
^ zQssi^iis^^
DECLASSIFIED
• Y PER E.O. 13526
�»coMFieenTTTlL
- 2revenues i s another c o n t r i b u t i n g f a c t o r . Some e x t e r n a l
adjustment i s expected, w i t h the current account f a l l i n g s l i g h t l y
i n 1994 ($128 b i l l i o n ) and more so i n 1995 ($123 b i l l i o n ) , but
r e l a t i v e t o GDP, (2.8% and 2.6%, r e s p e c t i v e l y ) , i t w i l l remain
substantial.
Policy Stance
With the exception of the FY1994 tax rebate enacted i n
March, Japan's f i s c a l p o l i c y could be characterized as passive i n
recent months, w i t h funds from e a r l i e r stimulus packages
supporting demand i n the current f i s c a l year. The FY1994 regular
budget had been held hostage t o p o l i t i c a l wrangling i n the Diet,
but managed t o clear the Lower House on June 8, 1994; thus, i t
w i l l become law i n 30 days, regardless of action i n the Upper
House.
With respect to overall tax reform, the Government Tax
Council, an advisory body to the Prime Minister, i s expected to
submit recomendations in late June, probably only laying out the
basic direction of overall tax reform -- entailing a permanent
extension of the present ¥5.5 t r i l l i o n cut in individual income
taxes and an offsetting increase in the consumption tax at some
later date -- but leaving the key decisions about s p e c i f i c s i n
the p o l i t i c a l arena. Focus i s also building on the deregulation
and administrative reform package to be announced in late June,
as l i s t s of possible measures and improvements from a variety of
institutions begin to surface.
Monetary policy appears to be reaching the bottom of the
current cycle of easing, with the o f f i c i a l discount rate (ODR) at
an h i s t o r i c low of 1.75% and short-term market rates around 2%.
Some weeks ago, Governor Mieno had publicly hinted that the
central bank's recent efforts to prop up the U.S. dollar (via
concerted intervention) had the primary objective of propping
what he perceived to be a s t i l l - f r a g i l e Japanese economy. The
BOJ has been guiding the key overnight c a l l rate to record lows
through ample funding operations in recent weeks. Most recently,
however, Mieno's comments have taken on a more hopeful and
positive tenor, suggesting that there i s no immediate prospect of
another cut i n the ODR. Such a reduction i s probably seen as an
option only i f the recovery does not take firm root by the l a t t e r
half of the current f i s c a l year.
Policy Judgment
The Japanese have not gone far enough to stimulate their
economy in a way which w i l l bring about a meaningful reduction of
the current account surplus, despite a r e l a t i v e l y strong f i s c a l
position. I t i s true that the series of f i s c a l stimulus packages
has helped to offset weak private demand, but the l e v e l of
�GOHriDDHTIAL—
- 3 spending has not been s u f f i c i e n t t o restore strong growth i n
o v e r a l l domestic demand, and a withdrawal of stimulus from p u b l i c
demand i s expected a f t e r the current f i s c a l year. As a r e s u l t ,
Japan's economy w i l l s t i l l be operating w e l l below p o t e n t i a l i n
1995, w i t h continued high current account surpluses.
Consequently, i n the area of f i s c a l p o l i c y , the o v e r a l l
stance should be t o provide more s u b s t a n t i a l and sustained
stimulus, on both the tax and expenditure sides. This would
include an income tax cut large enough t o provide, and structured
to ensure, a s u b s t a n t i a l boost t o r e a l a f t e r - t a x incomes and
consumption. Implemented i n the l a r g e r context of tax reform,
t h i s reduction should not be o f f s e t or removed u n t i l strong
growth i n domestic demand has been convincingly restored. While
an increase i n the 10-year p u b l i c investment plan's t a r g e t ,
expected t o be announced a t the end of t h i s month, would be
welcome, t h i s too would have t o be s u b s t a n t i a l . Given the
r e l a t i v e l y r a p i d growth i n annual p u b l i c investment spending
during the i n i t i a l years of the plan, the t o t a l t a r g e t would have
to be increased by a very large margin f o r there t o be meaningful
annual investment growth f o r the remainder of the plan -s p e c i f i c a l l y , an increase t o a t l e a s t ¥580 t r i l l i o n would be
needed t o keep the r a t i o of p u b l i c investment t o GNP from
falling.
In the area of monetary p o l i c y , another reduction i n the ODR
and continued reductions i n the major interbank i n t e r e s t rates
would f u r t h e r encourage a recovery, as w e l l as help address the
problem of i l l i q u i d i t y i n the f i n a n c i a l sector. Nevertheless,
s u b s t a n t i a l and sustained f i s c a l stimulus would be of more
o v e r a l l b e n e f i t t o the economy.
Continued and more d r a s t i c deregulation w i l l be needed t o
allow the p o s i t i v e aspects of the stronger yen t o b e n e f i t the
consumer and the economy, t o improve domestic absorption of
savings, and t o open the Japanese market t o cheaper imports.
Treasury/IMI:Kathleen M.P.
6/20/94
CL I NXQ»^M3ffia)PY
Byrne
�JAPAN
KEY ECONOMIC INDICATORS
1991
Xll
4M
REAL GDP
CY
4.3
Unemployment Rate <%)
3.3
BOP (SBIL.)
Cur. Acct. Bal.
Cur. Acct. %/GDP
72.9
2.2
2
3
4/4
2.1
CPI (%Chanee)
1993'
1992
3.5
1.1
^/y
4/4
V/y
4/4
1995
y/y
4/4
-0.3
0.1
0.0
0.5
1.4
1.6
2.5
2.2
2.8
1.6
1994
1.0
1.3
2.9
1.1
1.0
2.1
2.8
1.3
1.2
117.6
3.2
131.4
3.1
128.1
2.8
134.6
4.2%
126.8
2.5%
111.75
11.9%
101.94(6/20) N.A.
N.A.
N.A.
FISCAL BAL %/GDP
Gen. Govt.
Structural Balance
2.9
2.5
1.8
0.9
-0.2
0.8
-1.4
1.0
MONETARY
Ml (% chg)
M2+CDs (% chg)
5.2
3.6
45
.
06
.
30
.
11
.
4.9
2.1
54
.
30
.
INTEREST RATES (end/yr)
90-day Gensaki
6.1
10 yr JGB
5.8
Real 90 day Rate
3.3
Real 10 year Rate
3.1
37
.
47
.
27
.
37
.
17
.
32
.
07
.
22
.
1.84 (6/15)
4.23 (6/15)
0.84 (6/15)
3.23 (6/15)
1.3
N.A.
N.A.
N.A.
N.A.
EXCHANGE RATE
Yen/$ Nominal
Real Trade-weighted
122.8
2.6
4
-0.2
1.2
6/20/94
1
Treasury Estimates
2
Treasury Forecasts
3
Treasury Forecasts
4
A l l l e v e l s of government plus s o c i a l s e c u r i t y balances
( F i n a n c i a l Attache), and estimates o f c y c l i c a l l y - a d j u s t e d general
government balances (OECD)
CLI NTO^Nfei««^fccPHWOC
Classified by Robert L. Harlow
Y PKR E.0.13526
�GERMANY: ECONOMIC OUTLOOK
Overview
Latest p r o j e c t i o n s are f o r a weak 1994 recovery, w i t h
growth i n 1.5% t o 2% range f o r a l l Germany, and up t o
2.7% next year. This expansion w i l l be too small t o
lower unemployment i n 1994 (8.3% r a t e (west) i n May).
Uncertainties are whether strong export growth can
continue and whether saving rate w i l l decline f u r t h e r t o
sustain consumption.
1Q94 western growth came in at +2.2% saar, regarded as
unsustainable by most forecasters. Exports and
construction were main positive factors, the l a t t e r
helped by good weather. Real consumption was stable, by
virtue of a substantial (and probably aberrant) f a l l i n
the saving rate.
Inflation continues to f a l l , while monetary growth (M3)
continues to be well above target l e v e l s .
Bundesbank continues to cut i t s primary money market
guidance rate (the "repo" rate). There remains the
p o s s i b i l i t y that i t w i l l cut discount/Lombard rates again
before the late August recess (far enough ahead of the
mid-October elections to avoid being seen as acting
p o l i t i c a l l y ) . However, Bundesbank Council hardliners may
succeed in deferring any action u n t i l after the July
Economic Summit, when more 2Q94 data w i l l be available.
Long rates have been r i s i n g since early January low; less
than in US but s t i l l +160 basis points to June 17, on 10
year government bond. Yield curve now positive.
Economic Prospects
In 1994 we see all-German GDP r i s i n g 1.6% (1.2% i n the
west). The German research i n s t i t u t e s j o i n t l y forecast 1.5%
growth, while the OECD's recent forecast expects 1.8%.
Two major
German banks, Deutsche and Dresdner, also have turned more
b u l l i s h on the 1994 outlook. Both expect around 2% growth for
all-Germany this year. In mid-June the Bundesbank said that "the
recessionary tendencies i n the west German economy appear to have
been overcome* , a view also expressed by IFO, a leading research
i n s t i t u t e , which now agrees with the government's early expressed
1
CLIN
RWMQIQCDPY PERE.0.13526
�COMriDEMTIMr- 2optimism t h a t all-German growth would be 1-1.5% growth i n 1994
year. I n the west, increased output, l a r g e l y f o r exports, i s the
expected main component of growth, together w i t h s l i g h t increases
i n investment i n both c o n s t r u c t i o n and equipment. Despite the
strength of p r i v a t e consumption recorded i n 1Q94 -- a t t r i b u t e d t o
a reduction i n the savings rate -- d e c l i n i n g r e a l wages and
f i s c a l stringency are expected t o keep p r i v a t e and public
consumption weak f o r the year as a whole. East German GDP i s
forecast t o grow 7.5% i n 1994.
While t h i s growth has resulted
i n g r e a t l y improved p u b l i c i n f r a s t r u c t u r e , housing and new
productive investment, i t has been financed l a r g e l y by o f f i c i a l
f i n a n c i a l flows and investment incentives, r a t h e r than from
i n t e r n a l l y generated funds.
Reflecting both the weak economy and ongoing industrial
restructuring, west German unemployment rose sharply l a s t year,
and i s forecast to r i s e further to an 8.5% average rate in 1994.
In the east, 1994 recorded unemployment i s forecast to average
15.7%. Including hidden unemployment, the rate i s expected to
remain about 30%, as job losses due to economic restructuring
continue to exceed the employment opportunities created by new
investment. This year Treasury sees an average all-German
inflation rate of 2.8%.
In the east i n f l a t i o n has declined
sharply (3.4% rate yr/yr in May), as price levels converge.
Policy Stance
The Government i s expected to release shortly i t s draft FY95
budget. Even though the momentum in this election year has
shifted towards Chancellor Kohl in his campaign to be reelected
for the third time on October 16, the budget i s not expected to
relax the current r e s t r i c t i v e f i s c a l policy stance. Despite the
economic recession, the government has i n i t i a t e d and proposes to
continue i t s policy of expenditure reduction and revenue
increases, including a 7.5% income tax increase i n January 1995,
a l l aimed at reducing the public sector d e f i c i t , which under the
burden of reunification's immense financial costs leaped from n i l
in 1989 to over 6% of GDP i n 1994. While this f i s c a l policy
stance has been pro-cyclical, i t i s generally accepted that the
government has no alternative. The Bundesbank had c l e a r l y
enunciated i t s view that f i s c a l "consolidation" was one of i t s
key requirements for monetary easing. Also, the government feels
that i t has to move towards meeting Maastricht requirements i n
order to maintain i t s c r e d i b i l i t y as the primary proponent of
"sound" policies within the EU.
The Bundesbank, motivated as much by exchange rate concerns
as purely domestic considerations, accelerated the pace of
monetary relaxation during 2Q94.
With lower i n f l a t i o n and low
wage increases this year, the Bundesbank has, for the moment at
\y I
L
�CONFIDENTIAL
- 3 l e a s t , set aside i t s concerns about above t a r g e t monetary growth.
Since peaking i n mid-July 1992, o f f i c i a l i n t e r e s t rates have been
cut (eleven times) to the lowest levels since 1989.
This w i l l
boost business sentiment and encourage i n d u s t r i a l investment.
Germany's small current account d e f i c i t (about 1% of GDP),
is forecast to decline i n 1994.
Over time, Germany's competitive
p o s i t i o n , which has been eroded by large increases i n already
high labor costs, excessive government r e g u l a t i o n and other
s t r u c t u r a l r i g i d i t i e s t h a t i n h i b i t e f f i c i e n t u t i l i z a t i o n of
labor, w i l l improve through industry and government i n i t i a t i v e s
to lower labor costs and remove these impediments. This w i l l
contribute to the health of Germany's export i n d u s t r i e s and
improve Germany's investment climate, compared t o t h a t i n other
countries. This improvement i s c r u c i a l both t o i n d u s t r i a l
r e s t r u c t u r i n g and to f u t u r e growth, p a r t i c u l a r l y i n east Germany.
Policy Judgment
In i t s l a t e s t assessment, the OECD i s very circumspect i n
s t a t i n g the case f o r f u r t h e r r e l a x a t i o n of German monetary
p o l i c y . C a l l i n g f o r a "pragmatic approach t o monetary t a r g e t i n g ,
taking i n t o account a wide range of i n d i c a t o r s " , the OECD i s
saying, c o r r e c t l y , don't pay too much a t t e n t i o n t o M3 a t l e a s t
for the present. However, the OECD i s too cautious i n i t s hedged
recommendation of f u r t h e r i n t e r e s t rate reductions.
There i s a danger t h a t strong 1Q94 GDP growth w i l l cause
German monetary p o l i c y makers t o declare v i c t o r y and t o assert
t h a t economic growth i n 1994-95 w i l l be s a t i s f a c t o r y without
f u r t h e r i n t e r e s t r a t e reductions. I n f a c t , conservatives on the
Bundesbank Council have already p u b l i c l y espoused t h i s view,
arguing t h a t while M3 growth remains above t a r g e t , f u r t h e r easing
only sets the stage f o r r e i g n i t i n g i n f l a t i o n a t a f u t u r e date.
With German capacity u t i l i z a t i o n barely above i t s c y c l i c a l low,
unemployment continuing a t very high l e v e l s and i n f l a t i o n
continuing t o f a l l , the case f o r f u r t h e r monetary easing
continues to be strong.
Treaaury/IMI:Oscar K.KACKOUR 6/20/94
CLINTcQIO!
er
D
Y
�GERMANY
KEY ECONOMIC INDICATORS
1992
1993
Y/Z
REAL GDP
West
East
All
4g/4g
1. 6% 0 . 0% -1.9% -0 . 8%
7 . 1%
9 .7%
-1.2%
2.1%
1
1994F
Y/Z
4Q/40
1.2%
7.5%
1.6%
2.1%
1
22.0%
1
1
23.1%
1
23.4%
1
Investment/GDP
23.2%
22.7%
7.7%
8.9%
9.9%
4 . 2% 3.7%
8 . 8%
4 . 6%
2.8%
3.9%
2.9%
4.0% 3.7%
11. 2%
4 . 5%
BOP ($ b i l s )
Current Acct
C u r r e n t Acct/GDP
EXCHANGE RATE
DM/$ Nominal
Real Trade-Weighted
-22.0
-1.1%
2.2%
8.5%
2.7%
21.8%
21.9%
CPI
West
East
All
40/40
20.7%*
Savings/GDP
Unemployment Rate
1995F
-21.3
-1.1%
10.0%
2.5%
-14.9
-0.8%
2.5%
3.2%
2.6%
2.6%
-7.8
-0.4%
1.56
2.8%
1.65
0.5%
1.63
N.A.
N.A.
N.A.
FISCAL BALANCE(%GDP)
Central gov't
-1.7%
General g o v ' t
-2.6%
Structural bal.
-4.5%
-2.2%
-3.3%
-3.7%
-2.3%
-3.4%
-2.3%
-2.5%
-3.0%
-1.4%
MONETARY GROWTH ( v r .end)
Ml
10.8%
M3
7.6%
8.4%
8.8%
N.A.
N.A.
N.A.
N.A.
INTEREST RATES (Dec avq)
90-day
7.8%
7.1%
10 y r . g o v ' t bond
4.1%
Real 90-day
3.4%
Real 10 y r .
6.0%
5.6%
2.4%
2.0%
5.0%
7.2%
2.1%
4.3%
3
4
2
J
J
J
J
F i s Treasury f o r e c a s t 6/94.
'IMF Forecast, 12/93 and 4/94.
As of June 17, 1994
N a t ' l Income Accts. basis
includes S o c i a l S e c u r i t y
0ECD estimate o f general gov't balance w i t h output a t t r e n d
N.A.
N.A.
N.A.
N.A.
J
3
4
CLINTON LIBRARY P O O O Y
HTCP
level.
6/17/94
OM:A:KEYECIND.GER
�•COMFIDENTIAL
FRANCE:
ECONOMIC OUTLOOK
Overview
The two major problems cuurently facing the GOF are high
unemployment and the budget d e f i c i t . Facing a
p r e s i d e n t i a l e l e c t i o n i n May 1994 a f t e r only one year i n
power, the Balladur government's f i s c a l strategy i s clear
-- reduce the budget d e f i c i t i n the long run p r i m a r i l y by
increasing taxes and reducing spending, but o f f s e t the
immediate r e s t r i c t i v e e f f e c t w i t h temporary stimulus
measures.
The i n i t i a t i v e s t o r e l i e v e unemployment and increase
household spending are u n l i k e l y t o increase the d e f i c i t
i n 1994, but only because the GOF expects t o reap about
FF20 b i l l i o n from p r i v a t i z a t i o n revenues (which lower the
d e f i c i t but do not represent f i s c a l t i g h t e n i n g ) .
However, meeting i t s t a r g e t of a c e n t r a l gov't, d e f i c i t
of 3.5% of GDP i n 1995 w i l l be d i f f i c u l t , despite
stronger growth forecasts f o r 1994 and 1995.
Economic Prospects
Treasury estimates t h a t GDP w i l l increase 1.8% t h i s year,
f o l l o w i n g France's worst economic performance i n 30 years i n 1993
when the economy contracted 0.9%.
Increased i n d u s t r i a l
production, buoyant export demand from the recovering U.S. and UK
economies, and strong household consumption c o n t r i b u t e t o the
upgraded forecast.
Despite higher growth, the i n f l a t i o n r a t e (1.7% i n May y/y)
w i l l remain subdued. An increasing r a t e of unemployment (12.3%
r a t e i n A p r i l ) w i l l continue t o l i m i t wage increases, which
c u r r e n t l y measure less than 1% per year.
The focus on the "franc f o r t " p o l i c y of ERM s t a b i l i t y has
c o n t r i b u t e d t o the worsening of the GOF's f i s c a l p o s i t i o n and
f u r t h e r departure from the Maastricht conversion c r i t e r i a .
However, now t h a t the worst seems t o be over f o r the French
economy, any change i n monetary p o l i c y i n the near f u t u r e i s
u n l i k e l y . Monetary p o l i c y w i l l continue t o be made i n F r a n k f u r t ,
as the newly independent monetary p o l i c y c o u n c i l of the Bank of
France continues t o shadow the Bundesbank's r a t e reductions, as
demonstrated most r e c e n t l y by the 10 basis p o i n t cut i n the
o f f i c i a l short-term c a l l r a t e t o 5.2% on June 16, the n i n t h cut
since January.
PM Balladur has promised reduction in the budget d e f i c i t ,
now estimated to measure 5.3% of GDP in 1994, down from 5.8% in
1993. A weak economy and numerous retreats in the form of
PER t0 13526
CL i NiQjmroomGOP Y -
�COHriDEHTIAL
- 2 subsidies to fishermen, private schools, and businesses who
employ graduating youth workers have not boosted decisive
deficit-fighting measures. However, the government has promised
progressive d e f i c i t reduction starting this year through
increased social security taxes, spending cuts, and privatization
revenues, the l a t t e r conveniently reducing d e f i c i t s without
withdrawing f i s c a l stimulus. In the meantime, a modest stimulus
package of tax cuts and stimulus measures announced in January
has been extended. The package aims to boost household
consumption and the automobile and construction industries.
These growth i n i t i a t i v e s are unlikely to provide significant
boost to the economy.
Policy Judgment
Much remains to be done on the structural side to combat
unemployment. The high costs of labor (because of high social
insurance charges and high minimum wages), generous unemployment
benefits, and the mismatch of job s k i l l s to the education system
limit improvement in this area of reform. While the government
has promised to reduce unemployment through public spending, job
training, and by reducing the cost to employers of hiring f i r s t time workers through subsidies, recent policy retreats in this
area are not encouraging for prospects for further reform.
GOF policymakers may see the highest costs of FF/DM linkage
as having already been paid. Unless the franc i s forced out of
the ERM, the GOF w i l l have l i t t l e freedom to use monetary policy
to stimulate growth. Meanwhile, the GOF remains cautious about
too much deliberate f i s c a l action to stimulate i t s economy. Any
expenditure growth w i l l be kept at moderate l e v e l s .
France would welcome collective actions to strengthen and
accelerate the easing of interest rates, but w i l l r e s i s t any
unilateral easing of i t s monetary policy.
Of the largest economies in Europe excluding Germany
(France, I t a l y , UK, and Spain), only France remains pegged to the
DM.
France stands to gain the most from a j o i n t reduction in
European interest rates. Furthermore, stimulus actions could be
undertaken with l i t t l e r i s k of a resurgence in i n f l a t i o n .
Although somewhat stronger growth seems on the horizon, the GOF's
current monetary policy continues to r e s t r a i n rather than bolster
the current trend.
OASIA/IMX/Suaan Rzaaian 6/30/94
CLI
TOOTTOMSmPY
�COIVFIDENTLVL
FRANCE
KEY ECONOMIC INDICATORS
1992
1993F
1994F
1995F
y/y
Real GDP(% Change)
4/4
y/y
4/4
y/y
4/4
y/y
4/4
1.2
0.2
-0.9
-0.3
1.8
2.6
2.8
2.8
Savings/GDP (%)
Investment/GDP (%)
20.9
21.8
20.7
21.4
20.8
21.6
Unemployment Rate (%)
10.4
11.7
12.2
1.8
2.1
2.2
11.9
1.7
1.7
1.9
CPI (% Change)
2.3
BOP ($BIL.)
Cur. Acct. bal.
Cur. Acct. %/GDP
4.0
0.3
10.5
0.8
13.2
1.0
10.0
0.7
5.3
+4.1 %
5.7
5.7
5.7
-3.2
-3.9
-2.8
-4.5
-5.8
-3.2
-4.2
-5.3
-2.4
-3.9
-4.5
-2.3
-0.1
5.5
1.3
-1.6
N.A.
N.A.
2.0
Exchange Rate
Franc/S Nominal
Real Trade Weighted
FISCAL BAL/GDP
Cent. Govt.
Gen. Govt.
Structural Balance
(cyclically adjusted)
1
MONETARY
Ml (%Chg)
M3 (%Chg)
1
Interest Rates
Interbank (3 month)
Govt Bond (7-10 yr.)
Real Interbank
Real Govt. Bond
6.56
5.70
4.36
3.50
10.42
8.63
8.02
6.23
3
5.6
6.7*
N.A.
NA.
4.4
F - U.S. Treasury Forecast 1994-1995
Tmay/IMtSiaa
6(17/94
'OECD estimate of general gov't, balance with output a t
potential l e v e l .
2
3
1993 i s December y/y rate
As of June 4, 1994.
,S
AO
J
CLTNTOrL-IBRARY P O O O Y
HTCP
•CONFIDE»FHAL/DECL:OADR
Classified by Robert L. Harlow
DECLASSIFIED
PER E.0.13526
�COHriDEHTBOT
ITALY:
ECONOMIC OUTLOOK
Overview
Now t h a t
question
continue
past two
I t a l y i s emerging from recession, the key economic
f o r the country i s whether the new government w i l l
the process of f i s c a l c o n s o l i d a t i o n begun over the
years under Prime Ministers. Ciampi and Amato.
Prime M i n i s t e r Berlusconi has pledged t o continue the
f i s c a l a u s t e r i t y program. His campaign r h e t o r i c and some
of the measures his government has proposed c a l l his
commitment t o f i s c a l r e s t r a i n t i n t o question, however.
The other key issues f o r the new government are
unemployment and p r i v a t i z a t i o n .
Economic Prospects
The I t a l i a n economy i s emerging from recession as domestic
demand has begun to recover and the l i r a ' s depreciation following
the 1992 ERM c r i s i s has boosted net exports. Treasury forecasts
economic growth of 1.4% this year and 2.4% next year, in line with
most other forecasts. The elimination of wage indexation has
helped to restrain inflation, which f e l l to a 4.2% rate l a s t year,
i t s lowest level in more than 20 years, despite the l i r a ' s 20%
decline against the DM.
Treasury forecasts a further decline in
i n f l a t i o n to 3.9% this year and to 3.4% in 1995.
The unemployment
rate i s expected to level off over the next two years at 11%, about
where i t was in Q4-93. The 11% national rate masks sharp
differences between northern I t a l y , where unemployment i s in the
6-8% range, and southern I t a l y , where the average rate i s about 1820% and even higher in some regions. I t a l y ' s improved
competitiveness following the l i r a ' s decline leaves the country
positioned for a period of sustained growth, .if. the Berlusconi
Government and i t s successors continue the Ciampi reforms.
Policy Stance
F i s c a l Policy: Although the government sector budget d e f i c i t
declined only from 10.2% of GDP to 9.9% of GDP between 1991 and
1993, the recession masked a significant strengthening of I t a l y ' s
underlying public finances. The OECD estimates that, abstracting
from c y c l i c a l factors, the structural budget d e f i c i t declined by
2h% of GDP over the two-year period, and i s projected to f a l l by
another 1V4% of GDP this year.
Berlusconi promises to continue the Ciampi and Amato
Governments' f i s c a l austerity, although his campaign's economic
program consisted primarily of tax cuts and f i s c a l incentives. His
recent policy actions have mirrored his campaign rhetoric on f i s c a l
policy. His government's program c a l l s for s o c i a l security tax
rebates for firms hiring new workers and additional tax incentives
C L I N T 0 N
L I
M^H£
H O T
O C O P Y DECLASSIFIED
C l a s s i f i e d by RHarlow; Decl OADR
E 0 . 13526
o
�for youth hires i n an e f f o r t t o reduce unemployment. He also
proposes investment tax c r e d i t s targeted a t ' s m a l l and medium sized
firms and unfreezing p u b l i c work programs put on hold by the a n t i corruption i n v e s t i g a t i o n s . Berlusconi has often pledged t h a t these
tax incentives and increased p u b l i c works expenditures would be
balanced by unspecified spending reductions and increased
government e f f i c i e n c y . No f i s c a l o f f s e t s were included, however,
when his Government formally submitted the measures t o Parliament.
Unemployment/Labor Market Reforms. In a d d i t i o n to the f i s c a l
incentives f o r job c r e a t i o n , the Berlusconi Government has proposed
a series of measures aimed a t increasing f i r m s ' h i r i n g freedom.
The government proposals would increase f i r m s ' f l e x i b i l i t y i n
h i r i n g temporary and part-time workers. The Government also
proposed a l l o w i n g firms t o o f f e r an "admission wage," below the
industry-wide wage levels set i n c o l l e c t i v e bargaining agreements.
The proposals are as important f o r what they exclude as f o r
what they cover. They would not e l i m i n a t e the requirement t h a t
firms h i r e a l l permanent workers through the l o c a l government
employment agencies, who exercise veto power over firms h i r i n g
decsions. The proposals also include no measures t h a t would
increase f i r m s ' a b i l i t y t o dismiss permanent workers, the main
d i s i n c e n t i v e t o new h i r e s . The proposals also would not e l i m i n a t e
or c u r t a i l the system of n a t i o n a l wage c o n t r a c t s , which make no
allowance f o r lower p r o d u c t i v i t y and l i v i n g costs i n the south.
This e l i m i n a t e s any i n c e n t i v e t o locate plants i n the south r a t h e r
than the n o r t h , c o n t r i b u t i n g t o continued high unemployment and
lower l i v i n g standards i n southern I t a l y . Organized labor opposed
even these l i m i t e d reform proposals, f o r c i n g the government t o
delay t h e i r submission t o Parliament.
Privatization. I t a l y ' s privatization program i s now well
established, with the sale of three large banks this year following
the sale of a number of smaller firms l a s t year. Berlusconi has
pledged to accelerate the Ciampi Government's privatization
timetable, with sales of the state insurance, telecommunications,
and e l e c t r i c companies scheduled for later this year.
Policy Judgment
I t i s not yet clear whether Prime Minister Berlusconi f u l l y
understands the need to reduce I t a l y ' s f i s c a l d e f i c i t .
No
independent analysis has yet been done to determine the overall
impact of his recent f i s c a l proposals.
I f these and subsequent
measures are perceived as increasing the s i z e of the d e f i c i t ,
f i n a n c i a l markets' increased confidence in I t a l y ' s economic
p o l i c i e s , b u i l t up over the past two years, may evaporate.
Treasury Minister Dini has asserted that the net f i s c a l impact of
the recent measures w i l l be limited. Dini appears to r e a l i z e that
I t a l y has no choice but to continue the process of f i s c a l
consolidation. He has promised to hold the growth of government
spending below the inflation rate. I f he succeeds, t h i s would put
I t a l y ' s public finances on a sound footing, creating a s o l i d basis
for sustained, stable economic growth.
CLINTON L^ftm«PH0T0C0PY
C l a s s i f i e d by RHarlow; Decl OADR
�UNITED KINGDOM:
ECONOMIC OUTLOOK
Overview
With recovery underway f o l l o w i n g the long recession, the
p r i n c i p a l economic problem now facing B r i t i s h p o l i c y
o f f i c i a l s i s how t o sustain recovery without r e i g n i t i n g
i n f l a t i o n or escalating the already high budget d e f i c i t
which Treasury forecasts t o amount t o 6.1% of GDP i n
1994 .
The UK recovery has r e l i e d largely on consumer spending.
April's tax increases, while necessary to get the budget
d e f i c i t under control, r i s k a reduction i n consumer
spending that could endanger the recovery.
More than just a moderate increase i n i n f l a t i o n (already
discounted) could be around the corner. A doubling of
public sector pay increases despite l a s t year's pledge
for a freeze has caused average earnings growth to pick
up by one percentage point (4% in April vs. 3% (y/y) i n
1993). This development, along with accelerating
monetary growth, indirect tax increases, and the UK's
h i s t o r i c a l l y poor inflation performance, could lead to a
resurgence of price pressure.
Economic Prospects
With private consumption driving the recovery, the UK
economy grew 1.9% in 1993, the highest growth among the European
G-7, a l b e i t low for a recovery year. I t w i l l continue to be
Europe's bright spot, as preliminary estimates of Ql 1994 GDP
show a growth rate of 2.6% (y/y/saar). Treasury predicts growth
of 2.7% i n 1994, other estimates for which are being reportedly
revised upward.
Unemployment, although declining, remains high at 9.4%, or
2.7 million, (but at a lower rate than in France, I t a l y , and
Canada).
Retail price i n f l a t i o n (RPI) remained below 2% for a l l of
1993, the best inflation performance i n 30 years. Most of the
improvement i s genuine, but the reduction has been exaggerated by
the decline in mortgage interest rates and cuts i n taxes included
in the RPI.
The current account d e f i c i t , estimated a t $16.4 b i l l i o n or
1.7% of GDP i n 1993, remains at higher levels than should be the
case with a s t i l l weak economy. Even a modest recovery could
expand external d e f i c i t s to untenable l e v e l s . Weak markets i n
CLINTON LIBRARY P O O O Y raR&cu3526
HTCP
�•CONriDENTIAL
Europe and a corporate tendency t o increase p r o f i t s rather than
market share (by r a i s i n g s t e r l i n g export p r i c e s ) are minimizing
the p o s i t i v e e f f e c t s of the pound's d e p r e c i a t i o n .
Withdrawal of the pound from the Exchange Rate Mechanism
(ERM) i n September 1992 has allowed s u b s t a n t i a l monetary easing,
w i t h o f f i c i a l short-term i n t e r e s t rates f a l l i n g from 10% before
the f i r s t ERM c r i s i s t o t h e i r c u r r e n t l e v e l of 5.25%, w i t h the
l a s t cut announced i n February. However, H G has been r e l u c t a n t
M
to reduce i n t e r e s t rates as much as i t would l i k e f o r domestic
p o l i c y reasons. I t would do so, i f German and other European
rates were t o continue downward. Any f u r t h e r decline i n rates
would support a much-needed recovery i n housing and business
investment.
F i s c a l p o l i c y was expansionary through 1993. But Chancellor
Clarke announced measures t o be put i n place i n 1994 t o decrease
the d e f i c i t at a more r a p i d pace than previously forecast. H G
M
aims t o b r i n g the budget d e f i c i t i n t o balance by FY 1998-99.
Policy Judgment
While recent economic developments i n d i c a t e stronger nearterm growth prospects, the outlook f o r the UK's t r a d i n g partners
on the continent i s s t i l l not strong. Further i n t e r e s t r a t e cuts
to s t i m u l a t e the domestic economy would be b e n e f i c i a l . Nominal
long-term rates i n the UK have increased 221 basis p o i n t s since
the Fed hiked rates i n February, the highest increase among the
G-7.
while g i l t y i e l d s have uncoupled from U.S. bond y i e l d s
since the Fed's most recent cuts, r e a l long-term r a t e s are s t i l l
much higher than i n the 1960's. These rates are not appropriate
f o r an economy w e l l below capacity l i m i t s . The recovery remains
checked by low house p r i c e s (the UK owner-occupancy r a t e i s 70%),
high household debt and A p r i l ' s large tax hikes.
The OECD estimates t h a t the s h i f t i n the UK s t r u c t u r a l
f i s c a l balance (general government) i n 1993 was by f a r the most
s t i m u l a t i v e among the G-7.
I t estimates t h a t the s t r u c t u r a l
d e f i c i t next year would be second l a r g e s t among the G-7, second
only t o I t a l y . Chancellor Clarke's tax increases, i n a d d i t i o n t o
those announced i n March 1993 by h i s predecessor, Norman Lamont,
were put i n place i n A p r i l 1994 t o reduce the d e f i c i t . A lower
budget d e f i c i t should also f a c i l i t a t e f u r t h e r reductions i n longterm i n t e r e s t r a t e s . However, f u r t h e r monitoring of the budget
d e f i c i t i s needed t o ensure f i s c a l s u s t a i n a b i l i t y . Given t h a t
HMG's c o n s o l i d a t i o n e f f o r t s may be a drag on demand, the present
and f u t u r e monetary p o l i c y conditions should be aimed a t
t a r g e t i n g these c o n t r a c t i o n a r y forces. However, the signs o f
increasing wage pressures implies t h a t the next monetary
adjustment w i l l have t o be c a r e f u l l y considered.
Treasury/IMI:Susan Rzaaian
6/30/9*
CLI NTQOOTWOTaGOPY
�•COHFTnFNTIMu
U.K.
KEY ECONOMIC INDICATORS
1993
1992
V/V
Real GDP
(% Change, y / y )
Invstmt/GDP (%)
Savings/GDP (%)
40/40
-0.6
-0.1
15.4%
13 . 5
%
Unemployment Rate
9.8
CPI (% Change)
(Includes mortgage
interest)
3.7
40/40
V/V
40/40
1.9
15 . 1%
12.3%
2. 4
2.7
15.4%
12.8%
2.9
2.5
2.0
9.6
1.6
1.6
16 .4
-1.7
Exchange Rates
$/Sterling
Real Trade-weighted
1.77
•3 . 6
1.50
-8.7
FISCAL BAL/GDP
C e n t r a l Govt.
General Govt.
Structural Bal.
•6.9
•6.4
3.5
-7.7
-7.7
-5.0
2
5
7.
8
3
5
F
V/V
1.6
•1.7
MONETARY
M (% Change)
O
M4 (% Change)
3M. I n t . Rate
LT I n t . Rate
Real 3M. I n t . Rate
Real LT I n t . Rate
1995
40/40
10 . 4
3.0
F
V/V
BOP ($BIL.)
Curr. Acct.
Curr. Acct./%/GDP
J
1994
8.9
3.1
2.8
3.5
13.8
-1.1
12.6
-1.3
1.50
1.50
-5.0
-4.9
-3.9
-6.2
-6.1
-4.4
5 4
4 .4
5 I
8 5
3 5
5.3
6
4
5
8
2
1
1
3.8
6.0
4.5
5.8
8.5
2.3
5.0
5.2
F = U.S. Treasury F o r e c a s t , 1994-1995
1
As of June 10, 1994.
2
OECD estimate of general gov't, balance with output a t p o t e n t i a l l e v e l
Treasury/IMI:Susan Rzemien
6/17/94
eOHriDEMTIAL/DECL:OADR
s i
:
e
r
)
5
5
CLI NTOW¥rBR^RTPROTOt!DPY ™
156
32
�COHriDDHTTffL
CANADA: ECONOMIC OUTLOOK
Overview
Canadian i n t e r e s t rates and the Canadian d o l l a r have
taken a beating t h i s spring. Much o f t h i s was i n
reaction t o the t i g h t e r monetary p o l i c y being implemented
by the U.S. Federal Reserve. P o l i t i c a l uncertainty about
the f u t u r e of Quebec, a high l e v e l of outstanding debt
and l i m i t e d progress on curbing the f i s c a l d e f i c i t have
contributed t o the market's v o l a t i l i t y .
Real GDP grew a t an annualized rate of 4.4% i n the f i r s t
quarter t h i s year. Growth was led by a s i g n i f i c a n t
increase i n consumer spending.
In general, the economic recovery has been modest, 2.2%
r e a l GDP growth i n 1993 and 3.1% growth forecast by
Treasury f o r t h i s year, w i t h a l i m i t e d impact on the r a t e
of unemployment which s t i l l remains a t about 11%.
The IMF estimates t h a t the output gap a t the end of 1993
was 5% of p o t e n t i a l GDP.
Economic Prospects
Canada's recovery has been powered l a r g e l y by exports,
p a r t i c u l a r l y t o the U.S.; r e s i d e n t i a l c o n s t r u c t i o n ; and strong
business investment. The current account d e f i c i t narrowed 12% i n
the f i r s t quarter from the previous quarter mainly because o f
increased t r a v e l expenditures i n Canada a t the same time
Canadians were curbing t h e i r t r a v e l abroad. The d e f i c i t i s
expected t o continue t o shrink as exports respond t o economic
growth i n the United States and a weaker Canadian d o l l a r .
Increased borrowing abroad and higher i n t e r e s t rates w i l l
continue t o keep the services balance negative despite the drop
in Canadian t r a v e l abroad that r e s u l t e d from the depreciated
Canadian d o l l a r .
Upcoming e l e c t i o n s i n Quebec are expected t o r e s u l t i n a
v i c t o r y f o r the s e p a r a t i s t P a r t i Quebecois (PQ). The PQ has
promised t o hold a referendum on sovereignty i n 1995. I n the
past, markets have reacted negatively i n advance of events
increasing c o n s t i t u t i o n a l u n c e r t a i n t y , w i t h a r a l l y near the date
of the event and up t o a quarter a f t e r when the markets u s u a l l y
returned t o t h e i r underlying trends. Higher i n t e r e s t rates are
to be expected as the e l e c t i o n s approach t h i s f a l l , slowing
economic growth.
eeN«©ENIXAL/DECL: OADR
^^^c
�COWriDCMTIAL
The i n f l a t i o n r a t e has reached a r e c o r d low, 1.8% i n 1993
and 0.7% f o r e c a s t by Treasury f o r t h i s year. Much o f t h i s year's
d e c l i n e i n t h e r a t e was due t o t h e sharp r e d u c t i o n i n tobacco
e x c i s e t a x e s i n February (a r e a c t i o n t o smuggling from t h e U n i t e d
States).
I n c r e a s e s i n t h e p r i c e s o f imported goods have n o t been
passed on t o any s i g n i f i c a n t degree because o f r e s t r a i n e d
domestic growth and s t r o n g c o m p e t i t i v e pressures a t t h e r e t a i l
level.
The Bank o f Canada and t h e Department o f Finance have
c o n t i n u e d t o s e t t h e t a r g e t range f o r i n f l a t i o n a t 1 t o 3%. With
low u n d e r l y i n g i n f l a t i o n , t h e BOC has been p u r s u i n g a p o l i c y t o
reduce i n t e r e s t r a t e s g r a d u a l l y , b u t has been undercut by r e c e n t
market v o l a t i l i t y .
P o l i c y Stance
Finance M i n i s t e r M a r t i n has r e i t e r a t e d t h e L i b e r a l s '
campaign pledge t o reduce t h e d e f i c i t / G D P r a t i o t o 3% i n t h r e e
years b u t i t i s s t i l l n o t c l e a r how they i n t e n d t o do t h i s .
Despite such measures as a 2% c u t i n f o r e i g n a s s i s t a n c e and an
e x t e n s i o n o f t h e c u r r e n t government s a l a r y f r e e z e , t h e d e f i c i t
f o r FY1994-95 w i l l n o t be s i g n i f i c a n t l y reduced, i t i s p r o j e c t e d
t o be C$39.7 b i l l i o n ( 5 % o f GDP).
Most changes i n t h e budget
appear t o a w a i t t h e outcome o f a number o f proposed t a s k f o r c e
studies.
Canada's r e c e n t h i g h unemployment r a t e s a r e t h e r e s u l t o f
b o t h c y c l i c a l and s t r u c t u r a l problems i n t h e economy.
The
minimum r a t e o f unemployment c o n s i s t e n t w i t h low i n f l a t i o n i s
b e l i e v e d t o be 8 - 8.5% compared w i t h 5.5 - 6.0% i n t h e U n i t e d
States.
The p e r s i s t e n c e o f u n u s u a l l y h i g h r e g i o n a l unemployment
r a t e s , p a r t i c u l a r l y i n t h e A t l a n t i c p r o v i n c e s , p o i n t s t o t h e need
t o improve l a b o r m o b i l i t y . Unemployment i n s u r a n c e t h a t i s more
generous i n h i g h unemployment areas, p l u s b e n e f i t s t o seasonal
f i s h e r i e s workers and fishermen, p r o v i d e s a d d i t i o n a l
disincentives f o r labor migration.
Treasury/IMI:
Barbara E. Holloway
6/17/94
COHriDEHTIAL/DECL:OADR
r
CLI N TQtf tTS R R PftOTOCOP Y
AT
�COMriDEHTIftt:
CANADA
KEY ECONOMIC INDICATORS
1991
1992
1994
1993
r
1995
r
ZZZ 4Q/4Q
V/V 4Q/4Q
y/y 4Q/40
0.7% 0.5%
2.2% 3.2%
3.1% 3.0% 3.1% 3.3%
yZz 40/40
REAL GDP
-1.7%-0.2%
Saving/GDP
15 . 2%
14.5%
14.8%
NA
Investment/GDP
19. 5%
18.9%
18.3%
18.8%
19. 2%
Unemployment Rate
10.3%
11.3%
11.2%
10.9%
10. 9%
5.6% 4.1%
CPI
BOP ($BIL.)
Current Acct. B a l . -25.3
Current Acct./GDP
-4.3%
1.5%1.8%
•21.9
-3.8%
1.8%
1.8%
NA
0.6% 0.7%
2 . 1 % 2.2%
23.8
-4.3%
-20.2
-3.7%
19.6
-3.6%
Exchange Rate
C$/US$ Nominal
0.87
Real Trade-Weighted -2.5%
0. 83
-6.4%
0.78
-3.2%
0.73
NA
0.72
NA
FISCAL BAL %/GDP
Fed. Govt.
Gen. Govt.
S t r u c t u r a l Balance
-3.7%
-6.6%
-3.5%
-4.0%
-6.5%
-3.4%
-3.4%
-5.8%
-3.3%
-3.0%
-4.9%
-2.6%
+ 5.5%
+3.5%
NA
NA
1
1
3
-4.5%
-6.3%
-4.1%
MONETARY GROWTH ( v r . end)
M2
+10.6%
I n t e r e s t Rates (End-Dec.)
90-day
7.55%
10 y r Govt Bond
8.46%
Real 90-day
1.95%
Real 10 year
2.86%
F
1
3
3
4
7.05%
7.91%
5.55%
6.41%
4.00%
6.57%
2.20%
4.77%
6.50%
9.04%
5.40%
7.61%
a
3
4.5%
6.4%
2.4%
4.3%
4
4
Treasury f o r e c a s t except where noted.
NIA B a s i s - Including S o c i a l S e c u r i t y .
June 17, 1994.
IMF estimate of general government balance with output l e v e l a t
potential level.
IMF f o r e c a s t .
6/17/94
OAS1A/IHI:BH
GOHriDEHTIAL/DECL:OADR
PER E.0.13S26
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f d fe P
�URUGUAY ROUND IMPLEMENTATION.
U.S. O b j e c t i v e s
o
S t r e s s U.S. commitment t o 1994 passage o f t h e Uruguay Round
implementing l e g i s l a t i o n .
o
Urge c o u n t r i e s t o take t h e necessary
Uruguay Round as soon as p o s s i b l e .
steps t o implement t h e
Background
The Uruguay Round agreements c r e a t e d t h e World Trade O r g a n i z a t i o n
(WTO) t o r e p l a c e t h e GATT. The Agreement e s t a b l i s h i n g t h e WTO
encompassed t h e c u r r e n t GATT s t r u c t u r e and extends i t t o new
d i s c i p l i n e s . We do n o t expect t h a t t h e new o r g a n i z a t i o n w i l l be
d i f f e r e n t i n c h a r a c t e r from t h a t o f t h e e x i s t i n g GATT and i t s
secretariat.
I n Marrakesh, M i n i s t e r s agreed on t h e d e s i r a b i l i t y o f t h e WTO
e n t e r i n g i n t o f o r c e January 1, 1995. The WTO w i l l n o t e n t e r i n t o
f o r c e , however, u n t i l a " c r i t i c a l mass" o f c o u n t r i e s a r e ready t o
j o i n t h e o r g a n i z a t i o n . I t i s g e n e r a l l y understood t h a t t h i s
c r i t i c a l mass i n c l u d e s t h e U.S., EU and Japan. The U.S. i s
committed t o seeking a p p r o v a l f o r t h e Uruguay Round i n 1994.
Other c o u n t r i e s need t o make s i m i l a r e f f o r t s i n o r d e r f o r t h e
o r g a n i z a t i o n t o come i n t o e f f e c t as soon as p o s s i b l e .
P r i n c i p l e issues which r e q u i r e r e s o l u t i o n i n o r d e r f o r t h e USG t o
g a i n Congressional a p p r o v a l o f t h e Uruguay Round agreements
i n c l u d e Pay-Go, e x t e n s i o n o f f a s t - t r a c k a u t h o r i t y and t i m i n g .
Other G-7 P o s i t i o n s
o
OECD M i n i s t e r s have p u b l i c l y endorsed t h e January
t a r g e t date.
1, 1995
o
Canada expects t o i n t r o d u c e l e g i s l a t i o n t o P a r l i a m e n t b e f o r e
the summer recess, w i t h t h e aim o f passage i n t h e e a r l y f a l l
session.
PER E„0.13526
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THE WORLD TRADE ORGANIZATION (WTO) - INSTITUTIONAL ISSUES
U.S. O b j e c t i v e s
o
Seek t o a p p o i n t the best q u a l i f i e d c a n d i d a t e as t h e next WTO
D i r e c t o r General, w i t h o u t l i n k a g e t o t h e EU h i g h - l e v e l jobs
r e s h u f f l e o r t h e OECD S e c r e t a r y General p o s i t i o n .
o
Assess the views o f members on t h e WTO s i t e .
S i t e f o r t h e WTO: Germany and S w i t z e r l a n d have made generous
o f f e r s t o host t h e WTO.
New WTO D i r e c t o r General:
GATT D i r e c t o r General Peter S u t h e r l a n d
( I r e l a n d ) i n t e n d s t o s t e p down b e f o r e t h e WTO comes i n t o e f f e c t .
The WTO w i l l need a s t r o n g , e n e r g e t i c head capable o f o v e r s e e i n g
the WTO's expanded mandate and ready t o work c o n s t r u c t i v e l y on
new t r a d e i s s u e s . The o n l y d e c l a r e d c a n d i d a t e s are former
I t a l i a n M i n i s t e r o f Trade Renato Ruggiero and B r a z i l ' s Finance
M i n i s t e r and former GATT Ambassador, Rubens Ricupero.
U n o f f i c i a l candidates are Mexican P r e s i d e n t S a l i n a s , former New
Zealand Prime M i n i s t e r Mike Moore, New Zealand Trade M i n i s t e r
P h i l i p Burdon, t h e Egyptian r e p r e s e n t a t i v e a t t h e GATT,
Ambassador Zahran, and former Moroccan M i n i s t e r o f F o r e i g n
Commerce, Hassan Abouyoub. Also rumored are EU t r a d e n e g o t i a t o r
Leon B r i t t a n (who p u b l i c l y has d i s c l a i m e d i n t e r e s t i n t h e p o s t )
and EU I n d u s t r y Commissioner M a r t i n Bangemann.
We would l i k e t o see t h e WTO p o s t d e - l i n k e d from t h e OECD
p o s i t i o n . While t h e Europeans c l e a r l y see t h e WTO p o s t as an
i m p o r t a n t piece o f t h e upcoming EU j o b s - s h u f f l e , we do n o t see
e i t h e r t h e WTO o r OECD as EU s i n e c u r e s ( f o r m e r GATT heads have
been from Canada and S w i t z e r l a n d ) . The U.S. s t r o n g l y s u p p o r t s
the candidacy o f Canada's Johnston f o r t h e OECD.
Other G-7 P o s i t i o n s
S i t e o f t h e WTO:
o
France has a l r e a d y expressed i t s p r e f e r e n c e f o r Geneva as
the WTO s i t e , w h i l e o t h e r G-7 c o u n t r i e s are' s t i l l d e v e l o p i n g
their positions.
New WTO D i r e c t o r
General:
o
The EU's p r e f e r e n c e w i l l be t o have one o f i t s own i n t h e
WTO post t o h e l p out w i t h h i g h - l e v e l EU r e s h u f f l i n g o f
positions.
o
The Canadians are concerned t h a t a N o r t h American c a n d i d a t e
f o r the WTO p o s i t i o n w i l l h u r t t h e chances o f t h e i r
c a n d i d a t e , Johnston, f o r t h e OECD S e c r e t a r y General p o s t .
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NEW TRADE ISSUES
U.S. p r i o r i t i e s f o r next g e n e r a t i o n t r a d e issues a r e t h r e e f o l d :
t r a d e and environment, i n t e r n a t i o n a l l a b o r standards and t r a d e
and c o m p e t i t i o n p o l i c y .
I.
Trade and t h e Environment:
U.S. O b j e c t i v e s
o
Endorse f u l l and t i m e l y e x a m i n a t i o n o f t r a d e and environment
(T&E) issues i n t h e WTO Committee on Trade and Environment
and c o n t i n u e d work towards s u b s t a n t i v e c o n c l u s i o n s n e x t year
i n t h e OECD J o i n t Session o f Trade and Environment E x p e r t s .
Background
The Marrakesh M i n i s t e r i a l adopted, by consensus, a work program
on T&E and c r e a t e d a s t a n d i n g Committee on T&E i n t h e WTO w i t h
broad terms o f r e f e r e n c e and a r e q u i r e m e n t t o r e p o r t on i t s work
t o t h e WTO's General C o u n c i l two years a f t e r t h e WTO e n t e r s i n t o
force.
The OECD J o i n t Session o f T&E Experts c o n t i n u e s work t o develop
g u i d e l i n e s on t h e use o f t r a d e measures t o p r o t e c t t h e
environment.
S u s t a n t a t i v e r e s u l t s a r e expected f o r t h e 1995
Ministerial.
U.S. i n t e r a g e n c y d i s c u s s i o n s c h a i r e d by NSC have o u t l i n e d a
domestic framework under which e n v i r o n m e n t a l l y r e l a t e d t r a d e
measures should be c o n s i d e r e d .
T h i s o v e r a l l approach a l s o p u t s
g r e a t emphasis on m u l t i l a t e r a l v s . u n i l a t e r a l s o l u t i o n s .
Other Key Country P o s i t i o n s
G-7 and OECD c o u n t r i e s t e n d t o view i n t e r n a t i o n a l e n v i r o n m e n t a l
agreements and m u l t i l a t e r a l l y agreed standards as t h e b a s i s on
which e n v i r o n m e n t - r e l a t e d t r a d e measures must r e s t . The U.S. has
a number o f laws mandating e n v i r o n m e n t a l l y o r i e n t e d t r a d e
embargoes. While many a r e based on m u l t i l a t e r a l s t a n d a r d s ,
s e v e r a l a r e d e c r i e d as " u n i l a t e r a l i s m " by OECD n a t i o n s . Japan i n
p a r t i c u l a r has c a l l e d f o r a d e c l a r a t i o n a g a i n s t " u n i l a t e r a l i s m o r
managed t r a d e " i n t r a d e m a t t e r s g e n e r a l l y . I n d i s c u s s i o n s w i t h
t h e EU, our framework on t h e use o f t r a d e measures has r e c e i v e d a
sympathetic hearing.
II.
I n t e r n a t i o n a l Labor Standards
U.S. O b j e c t i v e s
o
Underscore our b e l i e f i n t h e need f o r s e r i o u s g l o b a l
d i a l o g u e on t h e i s s u e o f i n t e r n a t i o n a l l a b o r s t a n d a r d s ,
i n c l u d i n g i n t h e WTO.
, DECLASSIFIED
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2
A s s e r t our o b j e c t i v e o f i n c r e a s i n g c o o p e r a t i o n i n t h i s area
t o f o s t e r development and our o p p o s i t i o n t o u s i n g improved
l a b o r standards as a form o f p r o t e c t i o n i s m .
Background
We were unable t o o b t a i n a d e c l a r a t i o n a t Marrakech t o f o r m a l l y
recognize t h e r e l a t i o n s h i p between t r a d e and l a b o r standards, b u t
a compromise was reached which w i l l a l l o w t h e U.S. t o r a i s e t h i s
issue i n t h e WTO P r e p a r a t o r y Committee.
The U.S. i s n o t seeking t o deny t h e p r i n c i p l e o f comparative
advantage based on lower l a b o r c o s t s i n d e v e l o p i n g c o u n t r i e s . We
do, however, b e l i e v e t h a t t r a d e c o m p e t i t i o n based on d e n i a l o f
i n t e r n a t i o n a l l y recognized worker r i g h t s i s n o t l e g i t i m a t e .
There has been s t i f f r e s i s t a n c e t o our p r o p o s a l from key
d e v e l o p i n g c o u n t r i e s , which a l l e g e t h a t U.S. i n t e n t i o n s a r e
p r o t e c t i o n i s t . The l i m i t e d support we have from t h e EU has been
hard-won and remains c a u t i o u s .
Both t h e OECD Employment, Labor and S o c i a l A f f a i r s and Trade
Committees have agreed t o a j o i n t e x a m i n a t i o n o f i n t e r n a t i o n a l
l a b o r standards.
The Dutch a r e h o s t i n g a workshop on l a b o r
standards under OECD auspices i n September.
Other Key Country P o s i t i o n s
o
France has been sympathetic.
Some i n France s u b s c r i b e t o
the n o t i o n o f " s o c i a l dumping" and seek c o u n t e r v a i l i n g
t a r i f f s t o o f f s e t low wage r a t e s i n e x p o r t i n g c o u n t r i e s .
o
The UK i s u n w i l l i n g t o acknowledge t h a t t h e r e i s a t r a d e r e l a t e d problem concerning i n t e r n a t i o n a l l a b o r standards.
They have asked f o r an i n f o r m a l OECD meeting i n advance o f
the September meeting i n t h e Netherlands.
I I I . Trade and Competition P o l i c y :
U.S.
Objectives
o
F u r t h e r our s t a t e d g o a l t h a t " a n t i t r u s t and o t h e r
c o m p e t i t i o n p o l i c i e s " should be on t h e post-Uruguay Round
agenda.
o
F i n d o u t what o t h e r s a r e t h i n k i n g about t h e b e s t ways and
o r g a n i z a t i o n s t o discuss c o m p e t i t i o n p o l i c y .
Background
A n t i t r u s t law and p o l i c y a r e n o t c u r r e n t l y s u b j e c t t o
i n t e r n a t i o n a l r u l e s . Aside from some g e n e r a l mechanisms f o r
c o o p e r a t i o n developed a t t h e OECD and i n a few b i l a t e r a l
agreements, a n t i t r u s t p o l i c y i s developed and e n f o r c e d by
i n d i v i d u a l governments i n accordance w i t h n a t i o n a l o b j e c t i v e s .
The EU uses c o m p e t i t i o n law t o f u r t h e r EU market i n t e g r a t i o n ,
w h i l e we a r e
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t r a d e community sees d i s c i p l i n i n g o f r e s t r i c t i v e b u s i n e s s
p r a c t i c e s as becoming i n c r e a s i n g l y i m p o r t a n t .
Other Key Country P o s i t i o n s
o
Most c o u n t r i e s have expressed t h e i r b e l i e f
warrants c a r e f u l a n a l y s i s .
COHriDEM'reAL
t h a t t h e issue
CLINTON LIBRARY P O O O Y
HTCP
�IMF RESOURCES
Objectives
Reach agreement t o expand IMF resources a v a i l a b l e t o s u p p o r t
i n t e n s i f i e d r e f o r m i n Russia, o t h e r former USSR s t a t e s and
Eastern Europe ( t h e Economies i n T r a n s i t i o n , o r E I T s ) :
o
Extend t h e scope and d u r a t i o n o f t h e IMF Systemic
T r a n s f o r m a t i o n F a c i l i t y (STF).
o
Raise access l i m i t s f o r t r a d i t i o n a l IMF l e n d i n g .
o
Provide "catch-up" a l l o c a t i o n s o f S p e c i a l Drawing
Rights (SDRs) t o newer members o f t h e IMF (which w i l l
p a r t i c u l a r l y b e n e f i t the EITs).
Confirm t h a t P a r i s Club c r e d i t o r s a r e prepared t o n e g o t i a t e
a m u l t i - y e a r debt r e s c h e d u l i n g w i t h Russia f o l l o w i n g a
stand-by agreement between Russia and t h e IMF.
Background
Russia has made i m p o r t a n t progress i n s t a b i l i z i n g i t s economy,
w i t h t h e h e l p o f m u l t i l a t e r a l s u p p o r t . Now Russia must b u i l d on
i t s momentum and move towards f u l l s t a b i l i z a t i o n .
A t t h e same
t i m e , Russia must devote resources t o r e - k n i t t i n g i t s s o c i a l
s a f e t y n e t i n o r d e r t o a l l e v i a t e t h e h a r d s h i p s o f t r a n s i t i o n and
m a i n t a i n p o p u l a r backing f o r r e f o r m . Other former S o v i e t s t a t e s
face c h a l l e n g e s s i m i l a r t o Russia's.
I n a d d i t i o n , many o f them
must contend w i t h t h e l o s s o f f i n a n c i a l t r a n s f e r s and s u b s i d i z e d
o i l e x p o r t s from Russia a t t h e same t i m e t h a t t h e i r t r a d i t i o n a l
t r a d e r e l a t i o n s have c o l l a p s e d .
I n view o f these e x t r a o r d i n a r y c h a l l e n g e s t h e U n i t e d S t a t e s has
proposed t h a t t h e IMF augment t h e resources a v a i l a b l e t o s u p p o r t
the t r a n s i t i o n t o democratic, market economies. We have a l s o
promoted a m u l t i - y e a r debt r e s c h e d u l i n g o f P a r i s Club debt f o r
Russia, based on a p p r o p r i a t e Russian p o l i c i e s .
These i n i t i a t i v e s
f o l l o w on t h e p o l i c y o f i n t e n s i f i e d IMF engagement t o s u p p o r t
Russian r e f o r m advanced by P r e s i d e n t C l i n t o n d u r i n g h i s meeting
w i t h P r e s i d e n t Y e l t s i n l a s t January.
1.
Expand t h e s p e c i a l IMF l e n d i n g program f o r t r a n s i t i o n
economies. Last year, a t U.S. u r g i n g , t h e IMF c r e a t e d t h e
Systemic T r a n s f o r m a t i o n F a c i l i t y t o p r o v i d e s u p p o r t f o r i n i t i a l
s t a b i l i z a t i o n i n EITs.
Russia was e l i g i b l e t o borrow $3 b i l l i o n
under t h e STF (50 p e r c e n t o f i t s quota, i n two t r a n c h e s ) and has
now drawn t h i s e n t i r e amount. Kazakhstan, Kyrgyzstan and Moldova
have a l s o drawn b o t h STF t r a n c h e s . The STF i s s e t t o e x p i r e a t
the end o f 1994.
We have proposed t o extend t h e d u r a t i o n o f t h e STF beyond 1994
and t o r a i s e t h e amount t h a t e l i g i b l e c o u n t r i e s may borrow.
-eesgsgewTsrC LI N O LIBRARY P O O O Y
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C u r r e n t l y , d i s c u s s i o n i s underway r e g a r d i n g a t h i r d STF t r a n c h e
of 35 p e r c e n t o f quota i n c o n n e c t i o n w i t h an IMF stand-by
agreement.
This would a l l o w Russia t o r e c e i v e $2 b i l l i o n ;
U k r a i n e , which i s s t i l l e l i g i b l e t o draw $700 m i l l i o n , c o u l d then
draw another $500 m i l l i o n ; and the t o t a l a d d i t i o n a l amount f o r
a l l EITs would be over $5 b i l l i o n .
2. I n c r e a s e access t o t r a d i t i o n a l IMF r e s o u r c e s . Under p r e s e n t
g u i d e l i n e s , IMF members may borrow up t o a maximum o f 68 p e r c e n t
of t h e i r IMF quota a n n u a l l y f o r t r a d i t i o n a l economic adjustment
s u p p o r t . We have proposed t o r a i s e t h e annual maximum t o 100%;
agreement i s l i k e l y between 85-100%. T h i s would i n c r e a s e the
amounts p o t e n t i a l l y a v a i l a b l e by c l o s e t o $1 b i l l i o n f o r Russia,
over $200 m i l l i o n f o r U k r a i n e , and about $2.5 b i l l i o n f o r a l l t h e
former USSR and Eastern European c o u n t r i e s .
3. Catch-up A l l o c a t i o n s o f S p e c i a l Drawing R i g h t s (SDRs) t o New
Members. The IMF can i s s u e a s p e c i a l r e s e r v e a s s e t , t h e SDR, t o
members. The l a s t SDR a l l o c a t i o n was i n 1981, w e l l b e f o r e Russia
and most o t h e r t r a n s i t i o n economies became IMF members. As a
r e s u l t , these c o u n t r i e s face an i n e q u i t y .
Several a l t e r n a t i v e s
f o r a new a l l o c a t i o n t o c o r r e c t t h i s s i t u a t i o n are under
d i s c u s s i o n , which c o u l d p r o v i d e up t o $1 b i l l i o n f o r Russia, $220
m i l l i o n f o r Ukraine, and about $2.5 b i l l i o n f o r a l l former USSR
and Eastern European c o u n t r i e s . Use o f t h e SDR i s n o t
c o n d i t i o n e d on r e f o r m .
M u l t i - y e a r debt r e s c h e d u l i n g . I n view o f Russia's c r i t i c a l
budget and balance o f payments p o s i t i o n s , P a r i s Club c r e d i t o r
c o u n t r i e s n e g o t i a t e d debt r e s c h e d u l i n g agreements w i t h Russia i n
b o t h 1993 and 1994.
However, t h e need t o n e g o t i a t e r e s c h e d u l i n g
on an annual b a s i s i s burdensome f o r Russia and by d e a l i n g w i t h
o n l y one year a t a t i m e , does n o t a l l o w Russia t o develop a c l e a r
p i c t u r e o f i t s f i n a n c i a l needs over t h e medium t e r m .
To a l l e v i a t e t h i s s i t u a t i o n , we have proposed t h a t P a r i s Club
c r e d i t o r s agree t o r e s c h e d u l e debt payments due over a p e r i o d o f
s e v e r a l y e a r s . T h i s r e s c h e d u l i n g would be c o n t i n g e n t on Russia
r e a c h i n g a stand-by agreement w i t h t h e IMF, w h i c h i s a s t a n d a r d
c o n d i t i o n f o r P a r i s Club r e s c h e d u l i n g s . A stand-by agreement
c o u l d be reached as e a r l y as t h i s f a l l .
Other P a r i s Club
c r e d i t o r s have agreed t o c o n s i d e r such a r e s c h e d u l i n g .
Other G-7 P o s i t i o n s
The G-7 has reached consensus t o expand IMF r e s o u r c e s
a v a i l a b l e t o s u p p o r t economic r e f o r m i n t r a n s i t i o n
economies.
Some debate i s c o n t i n u i n g on t h e m o d a l i t i e s f o r
d o i n g t h i s , b u t we expect t h i s t o be r e s o l v e d by t h e t i m e o f
the Summit.
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The G-7 has agreed i n p r i n c i p l e t o consider a multi-year
rescheduling agreement on the basis of appropriate IMFsupported programs.
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U.S.
BILATERAL ASSISTANCE TO RUSSIA
The U n i t e d States sees s u p p o r t f o r economic and p o l i t i c a l r e f o r m
i n Russia and t h e o t h e r new independent s t a t e s o f t h e former
S o v i e t Union as one o f i t s h i g h e s t f o r e i g n p o l i c y p r i o r i t i e s .
To
demonstrate i t s commitment t o the success o f r e f o r m i n Russia,
t h e U n i t e d S t a t e s has committed s i g n i f i c a n t resources t o h e l p
Russia w i t h the t r a n s i t i o n t o market economies and democratic
governance and h e l p , t h r o u g h h u m a n i t a r i a n a s s i s t a n c e , t o
a l l e v i a t e the s o c i a l c o s t s of the t r a n s i t i o n .
To d a t e , t h e
U n i t e d States has o b l i g a t e d $2.4 b i l l i o n i n a s s i s t a n c e t o Russia:
t h i s f i g u r e i n c l u d e s f u n d i n g p r o v i d e d under t h e auspices of the
FREEDOM Support A c t , t h e Department o f A g r i c u l t u r e ' s f o o d
commodity programs, and t h e Defense Department's Nunn-Lugar
program.
A major e x p r e s s i o n o f U.S. s u p p o r t f o r Russia was t h e Vancouver
A s s i s t a n c e Package, which was announced d u r i n g t h e
C l i n t o n - Y e l t s i n Summit i n A p r i l 1993.
This $1.6 b i l l i o n package
i n c l u d e d major programs i n t h e areas o f economic r e f o r m s ,
i n c l u d i n g p r i v a t i z a t i o n and macroeconomic a d v i s o r s ; democracy
programs, such as exchanges. Rule o f Law, and S i s t e r
U n i v e r s i t i e s ; investment s u p p o r t c r e d i t s and a s s i s t a n c e t o enable
OPIC and Eximbank t o h e l p expand U.S. business involvement i n
Russia and t o e s t a b l i s h t h e Russian-American E n t e r p r i s e Fund;
n u c l e a r power r e a c t o r s a f e t y a s s i s t a n c e ; and d e m i l i t a r i z a t i o n
a s s i s t a n c e t o h e l p w i t h weapons dismantlement.
U.S. Government
agencies were a b l e t o f u l f i l l P r e s i d e n t C l i n t o n ' s pledge t o
P r e s i d e n t Y e l t s i n t h a t t h e package would be f u l l y o b l i g a t e d by
the end o f t h e c a l e n d a r year: the e x c e p t i o n b e i n g t h e $2.2
m i l l i o n Export C o n t r o l I n i t i a t i v e , which was on h o l d pending
agreement w i t h t h e Russians on a s u i t a b l e framework. As o f t h e
end o f the t h i r d q u a r t e r o f f i s c a l year 1994, e x p e n d i t u r e s f o r
t h e Vancouver Package r e p r e s e n t e d 80% o f o b l i g a t i o n s .
The U.S. Government was a b l e t o expand t h e programs o f f e r e d i n
t h e Vancouver Package of A s s i s t a n c e because o f C o n g r e s s i o n a l
a p p r o v a l of a $2.5 b i l l i o n NIS a s s i s t a n c e package i n September
1993.
The U.S. Government plans t o p r o v i d e over $1.6 b i l l i o n o f
these funds t o Russia t o meet P r e s i d e n t C l i n t o n ' s promise a t
Vancouver f o r a d d i t i o n a l s u p p o r t i n t h e key areas o f economic and
democratic r e f o r m , w i t h some l i m i t e d f u n d i n g f o r h u m a n i t a r i a n
a s s i s t a n c e . I n a d d i t i o n , P r e s i d e n t C l i n t o n asked f o r , and
Congress approved, another $400 m i l l i o n i n a s s i s t a n c e i n 1994 f o r
t h e dismantlement and s a f e s t o r a g e of weapons and defense
c o n v e r s i o n i n Russia, U k r a i n e , Kazakhstan and B e l a r u s .
A s s i s t a n c e f u n d i n g f o r Russia has p r o v i d e d s u p p o r t f o r many
a c t i v i t i e s i n key p r i o r i t y areas such as p r i v a t e s e c t o r
development, t r a d e and investment, exchanges and t r a i n i n g ,
energy, and environment.
Many o f these a c t i v i t i e s were i n i t i a t e d
d u r i n g 1993 and expanded w i t h a s i g n i f i c a n t i n c r e a s e i n
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a s s i s t a n c e f u n d i n g f o r Russia i n f i s c a l year
1994.
P r i v a t e Sector Development: Since 1992, t h e U.S. Government,
v i a USAID, has p r o v i d e d over $150 m i l l i o n i n equipment and
t e c h n i c a l a s s i s t a n c e t o the Russian S t a t e P r o p e r t y Committee
to s u p p o r t i t s voucher p r i v a t i z a t i o n program. By A p r i l 1994,
t h e Russian Government had d i v e s t e d from s t a t e ownership
n e a r l y 100,000 ( o f some 125,000) s m a l l and medium e n t e r p r i s e s
and 10,000 ( o f some 20,000) l a r g e e n t e r p r i s e s . The
Russian-American E n t e r p r i s e Fund, w h i c h w i l l p r o v i d e needed
c a p i t a l t o s m a l l and medium-sized p r i v a t e f i r m s , was
e s t a b l i s h e d i n September 1993 w i t h f i r s t f u n d i n g d e c i s i o n s
expected by summer 1994.
The U.S. Government e s t a b l i s h e d the
Fund f o r Large E n t e r p r i s e s w i t h a c a p i t a l i z a t i o n o f $100
m i l l i o n i n l a t e 1993 t o p r o v i d e c a p i t a l t o l a r g e e n t e r p r i s e s
which had completed the Russian Government's mass
p r i v a t i z a t i o n program. To f a c i l i t a t e a g r i c u l t u r a l
development, the U.S. e s t a b l i s h e d a J o i n t Commission w i t h
Russia, which w i l l lend revenues from l o c a l s a l e s of donated
USDA commodities t o r u r a l i n f r a s t r u c t u r e and e n t r e p r e n e u r i a l
p r o j e c t s . The U.S.-Russia J o i n t Commission w i l l make i t s
f i r s t loan by mid-summer.
Trade and Investment:
OPIC has p r o v i d e d n e a r l y $400 m i l l i o n
i n f i n a n c i n g support and over $575 m i l l i o n i n i n s u r a n c e t o
f a c i l i t a t e U.S. p r i v a t e s e c t o r investment i n Russia.
Key
p r o j e c t s i n c l u d e U.S. West I n t e r n a t i o n a l ' s telecommunications
m o d e r n i z a t i o n p r o j e c t , Dresser I n d u s t r i e s o i l e x p l o r a t i o n
p r o j e c t s i n Western S i b e r i a , and C a t e r p i l l a r i n v o l v e m e n t i n a
m u l t i n a t i o n a l consortium t o produce, s e l l , and s e r v i c e
heavy-duty t r u c k s . Eximbank has p r o v i d e d over $390 m i l l i o n
i n guarantees f o r U.S. s a l e s t o Russia s i n c e f i s c a l year
1992.
Eximbank's O i l and Gas Framework Agreement became
o p e r a t i o n a l i n the f i r s t q u a r t e r o f f i s c a l year 1994 and over
$1.2 b i l l i o n i n a p p l i c a t i o n s f o r EXIM s u p p o r t have been
s u b m i t t e d and are i n process.
P r e l i m i n a r y a p p r o v a l has been
g i v e n by Eximbank's board and t h e case r e f e r r e d t o Congress
f o r t h e f i r s t t r a n s a c t i o n under t h e Framework Agreement
s u p p o r t i n g $272 m i l l i o n i n U.S. e x p o r t s .
Exchanges and T r a i n i n g and Democracy Programs:
Current
p l a n n i n g c a l l s f o r the NIS A s s i s t a n c e Program t o surpass t h e
M a r s h a l l Plan i n the number o f p a r t i c i p a n t s i n our exchanges
and t r a i n i n g program (26,000).
I n 1993, 3000 Russians
p a r t i c i p a t e d i n t r a i n i n g programs i n t h e U.S., and we p l a n
f o r 20,000 Russians t o v i s i t t h e U.S. t o p a r t i c i p a t e i n
e d u c a t i o n a l and t r a i n i n g programs i n t h e areas o f
b u s i n e s s , p u b l i c a d m i n i s t r a t i o n , and law. A c o n s o r t i u m
comprised of U.S. l e g a l e x p e r t s and i n s t i t u t i o n s , i n c l u d i n g
law s c h o o l s , t h i n k tanks and non-governmental o r g a n i z a t i o n s ,
i s c o o p e r a t i n g w i t h Russian c o u n t e r p a r t s t o s t r e n g t h e n t h e
laws, l e g a l i n s t i t u t i o n s and c i v i c s t r u c t u r e s which s u p p o r t
democratic and m a r k e t - o r i e n t e d s o c i e t i e s . The American Bar
A s s o c i a t i o n w i l l c o n t i n u e t o cooperate w i t h t h e Government of
Russia on t h e r e - i n t r o d u c t i o n of a t r i a l - b y - j u r y system i n
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nine r e g i o n s . We have p r o v i d e d a s s i s t a n c e i n m u n i c i p a l
f i n a n c i a l management t o t h e c i t i e s of Moscow, Nizhny
Novgorod, and V l a d i v o s t o k .
Energy: Major energy i n i t i a t i v e s under the energy a s s i s t a n c e
r u b r i c i n c l u d e n u c l e a r r e a c t o r s a f e t y , energy e f f i c i e n c y and
market r e f o r m , and t h e Energy-Environment Commodity I m p o r t
Program. E f f o r t s t o p r o v i d e n u c l e a r s a f e t y a s s i s t a n c e - - w h i c h
i s budgeted a t over $120 m i l l i o n f o r Russia and Ukraine--have
been stymied by t h e issue of l i a b i l i t y coverage f o r t h e U.S.
c o n t r a c t o r s who would c a r r y o u t the work. USAID t r a n s f e r r e d
the f i r s t t r a n c h e of a t o t a l of $14 m i l l i o n t o t h e
EBRD-administered Nuclear S a f e t y Account, which w i l l support
implementation of t h e G-7's n u c l e a r s a f e t y i n i t i a t i v e s f o r
Russia and Ukraine.
Five U.S./Russian w o r k i n g groups are
d r a f t i n g a J o i n t Energy A l t e r n a t i v e s Study and t h e J o i n t
Nuclear Power A l t e r n a t i v e Study, i n i t i a t i v e s of the December
1993 Gore-Chernomyrdin Commission. USAID i s i n t h e f i n a l
phase of p r e p a r a t i o n s f o r t h e much a n t i c i p a t e d $90 m i l l i o n
Energy and Environment Commodity Import Program.
Environment: Several a c t i v i t i e s are underway w i t h t h e key
g o a l o f h e l p i n g t o ensure t h a t Russia's c o n t i n u i n g i n d u s t r i a l
development w i l l not occur i n a manner i n i m i c a l t o t h e
environment.
A design team r e c e n t l y r e t u r n e d from a v i s i t t o
Lake B a i k a l and i s c o m p l e t i n g t h e program design f o r t h e Lake
B a i k a l Watershed p r o j e c t .
I m p l e m e n t a t i o n of t h e Moscow
Region Water Q u a l i t y Management p r o j e c t began i n June.
Equipment and t e c h n i c i a n s are i n p l a c e t o b e g i n an i n v e n t o r y
of p o l l u t i o n sources i n t h e Volgograd A i r Q u a l i t y Management
project.
I n December 1993, t h e Non-Governmental O r g a n i z a t i o n
S t r e n g t h e n i n g p r o j e c t awarded 29 g r a n t s , t o t a l l i n g $61,000,
t o NGOs t o s u p p o r t e n v i r o n m e n t a l y o u t h camps, e d u c a t i o n a l
seminars, and e f f o r t s t o o r g a n i z e t o p r o t e c t e n v i r o n m e n t a l l y
damaged areas.
At t h e same t i m e , 19 c o o p e r a t i v e a c t i v i t i e s
g r a n t s , t o t a l l i n g $750,000, were awarded f o r a c t i v i t i e s t h a t
i n c l u d e p r o t e c t i n g t h e S i b e r i a n T i g e r and d e v e l o p i n g t r a i n i n g
i n e n v i r o n m e n t a l impact assessments. A d d i t i o n a l s m a l l
p r o j e c t g r a n t s w i l l be awarded i n l a t e s p r i n g .
The Departments of A g r i c u l t u r e and Defense have a c t i v e l y engaged
i n programs of a s s i s t a n c e f o r Russia. Since f i s c a l year 1992,
USDA has o b l i g a t e d over $1.95 b i l l i o n f o r food commodities and
ocean f r e i g h t v i a S e c t i o n 416(b) and Food f o r Progress.
Under
t h e auspices of t h e Cooperative T h r e a t Reduction program
(Nunn-Lugar), DoD has proposed o b l i g a t i o n s t o t a l l i n g
a p p r o x i m a t e l y $484 m i l l i o n t o s u p p o r t agreements w i t h t h e Russian
F e d e r a t i o n f o r a s s i s t a n c e t o f a c i l i t a t e weapons d e s t r u c t i o n and
nonproliferation.
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G-7 ASSISTANCE TO RUSSIA:
COUNTRY
Total
1990-1993 ( m i l l i o n s o f U.S. d o l l a r s )
EXTENDED
o f which
is grant
assistance
DRAWN
Total
of which
is grant
assistance
$7,615
$1,230
$30
$80
$35
$25
$110
$600
GERMANY '
US
ITALY
JAPAN
FRANCE
CANADA
UK
EU
$48,190
$15,490
$5,805
$4,780
$3,255
$2,350
$1,145
$3,660
$10,860
$6,765
$30
$500
$90
$220
$370
$2,460
$41,790
$6,345
$2,645
$840
$2,515
$1,835
$840
$1,370
TOTAL
$84,675
$21,295
$58,180
1
1
$9,725
1. T o t a l i n c l u d e s t r o o p w i t h d r a w a l a s s i s t a n c e as w e l l as pledges
made b e f o r e , b u t d i s b u r s e d a f t e r , 1990.
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MULTILATERAL SUPPORT FOR RUSSIAN ECONOMIC REFORM
Last A p r i l i n Tokyo, G-7 F o r e i g n and Finance M i n i s t e r s developed
a s u p p o r t program f o r Russia t o p r o v i d e up t o $43.4 b i l l i o n .
This e x t r a o r d i n a r y i n i t i a t i v e r e f l e c t e d t h e c r i t i c a l importance
t o w o r l d peace o f Russia's s u c c e s s f u l t r a n s i t i o n t o a democratic
market economy and Russia's s p e c i a l needs d u r i n g t h i s unique
t r a n s i t i o n process.
The G-7 stands by i t s commitment t o p r o v i d e t h e f u l l amount o f
s u p p o r t agreed upon a t Tokyo. Of t h i s t o t a l , about $30 b i l l i o n
has a l r e a d y been approved t o s u p p o r t s t r u c t u r a l r e f o r m and
i n i t i a l e f f o r t s toward sound macroeconomic p o l i c i e s and f o r debt
r e s c h e d u l i n g . The remainder o f o u r s u p p o r t has n o t y e t been
a c t i v a t e d because Russia has n o t y e t made adequate p r o g r e s s i n
implementing a f u l l s t a b i l i z a t i o n program.
The r e p o r t below p r o v i d e s an update on t h e s t a t u s o f t h e f o u r
p a r t s o f t h e Tokyo package (amounts a r e i n b i l l i o n s o f d o l l a r s )
and on o t h e r G-7 s u p p o r t i n i t i a t i v e s .
MULTILATERAL SUPPORT PROGRAM
AMOUNT
I.
$14.2
Support f o r S t r u c t u r a l
Reforms
APPROVED
$10.6
S t r u c t u r a l s u p p o r t f o r Russia i s needed t o h e l p p r i v a t i z e
i n d u s t r y , b u i l d market i n s t i t u t i o n s and i n f r a s t r u c t u r e and
develop s e c t o r s such as energy and a g r i c u l t u r e .
I t can proceed
a p a r t from t h e pace o f s t a b i l i z a t i o n s u p p o r t .
The World Bank agreed t o p r o v i d e up t o $3.4 b i l l i o n i n l o a n s t o
support r e s t r u c t u r i n g .
We expect t h a t $2.3 b i l l i o n o f t h i s t o t a l
w i l l have been approved around t h e t i m e o f t h e Naples Summit,
i n c l u d i n g loans t o s u p p o r t o i l s e c t o r r e s t r u c t u r i n g ,
highway
r e h a b i l i t a t i o n , f i n a n c i a l i n s t i t u t i o n development and
privatization.
The EBRD a l s o approved $250 m i l l i o n i n cof i n a n c i n g f o r a World Bank o i l s e c t o r l o a n .
Under t h e $300 m i l l i o n Small and Medium E n t e r p r i s e Fund (SME)
i n i t i a t i v e , t h e G-7 and t h e EBRD w i l l each p r o v i d e $150 m i l l i o n
t o f i n a n c e s m a l l emerging e n t r e p r e n e u r s . A p i l o t p r o j e c t i s
c u r r e n t l y underway and w i l l be reviewed as t h e b a s i s f o r t h e
entire
project.
The G-7 agreed t h a t t h e i r e x p o r t c r e d i t agencies (EGAs) c o u l d
p r o v i d e $10 b i l l i o n t o f i n a n c e needed c a p i t a l i m p o r t s . Over $5
b i l l i o n i n ECA a s s i s t a n c e was g r a n t e d i n 1993 and a s i m i l a r
amount i s expected i n 1994. The U n i t e d S t a t e s w i l l p r o v i d e up t o
$2 b i l l i o n under i t s o i l and gas framework agreement.
r Ti\TDK
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OOHPIDDMTIMLLI N UN L I D K A K Y rHU ULUPY
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II.
Support f o r I n i t i a l S t a b i l i z a t i o n
$4.1
$4.1
I n 1993, t h e IMF c r e a t e d t h e Systemic T r a n s f o r m a t i o n F a c i l i t y
(STF) t o s u p p o r t i n i t i a l s t a b i l i z a t i o n .
Russia has drawn $3
b i l l i o n under t h e STF i n two equal t r a n c h e s , i n June 1993 and
A p r i l 1994.
The World Bank a l s o agreed t o p r o v i d e up t o $1.1 b i l l i o n i n
i n i t i a l s t a b i l i z a t i o n s u p p o r t t h r o u g h c r i t i c a l i m p o r t l o a n s . The
Bank has d i s b u r s e d almost a l l o f t h e r e m a i n i n g $500 m i l l i o n under
a $600 m i l l i o n c r i t i c a l i m p o r t loan made i n 1992 and a second
loan o f $600 m i l l i o n i s expected t o be approved t h i s J u l y .
III.
Support f o r F u l l S t a b i l i z a t i o n
$10.1
$0
The G-7 envisaged t h a t Russia would move from i n i t i a l
s t a b i l i z a t i o n supported by t h e STF toward f u l l economic
s t a b i l i z a t i o n w i t h t h e support o f an IMF (standby) l o a n o f up t o
$4.1 b i l l i o n .
I f Russia s u c c e s s f u l l y implements t h e economic
program agreed as p a r t o f t h e second STF program, d i s c u s s i o n s on
a f u l l s t a b i l i z a t i o n program t h a t can be s u p p o r t e d by an IMF
standby loan are expected t o begin i n t h e second h a l f o f 1994.
The G-7 a l s o agreed t o c r e a t e a $6 b i l l i o n c u r r e n c y s t a b i l i z a t i o n
fund t o s u p p o r t t h e r u b l e , once Russia has implemented a r i g o r o u s
standby program f o r s e v e r a l months.
IV. O f f i c i a l Debt Rescheduling
$15
$15
I n A p r i l 1993, P a r i s Club c o u n t r i e s rescheduled r o u g h l y $15
b i l l i o n o f o f f i c i a l p r i n c i p a l and i n t e r e s t payments due i n 1993.
The U n i t e d States rescheduled $1.1 b i l l i o n .
TOTAL MULTILATERAL SUPPORT
$43.4
$29.7
S p e c i a l P r i v a t i z a t i o n and R e s t r u c t u r i n g Program (SPRP)
Responding t o a U.S. p r o p o s a l , G-7 heads o f S t a t e , t h e World
Bank, IFC and EBRD agreed i n Tokyo t o c r e a t e t h e SPRP, t o a s s i s t
i n r e s t r u c t u r i n g l a r g e f i r m s . The SPRP w i l l p r o v i d e up t o $3
b i l l i o n i n e q u i t y , loans and ECA s u p p o r t f o r e n t e r p r i s e
r e s t r u c t u r i n g . A network o f up t o t e n r e g i o n a l v e n t u r e funds i s
being e s t a b l i s h e d t o make investments i n Russian f i r m s .
The U n i t e d States c o n t r i b u t e d $100 m i l l i o n i n g r a n t s u p p o r t under
t h e SPRP t o c r e a t e t h e Fund f o r Large E n t e r p r i s e R e s t r u c t u r i n g
(FLER). The FLER i s now up and r u n n i n g under former Treasury
S e c r e t a r y Michael Blumenthal and w i l l p r o v i d e e q u i t y and loans t o
newly p r i v a t i z e d Russian f i r m s . The U n i t e d S t a t e s a l s o pledged
$250 m i l l i o n i n ECA s u p p o r t under t h e SPRP.
CLINTON LIBRARY P O O O Y
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COHriDEMTTMi
�»COHriDDH¥*ftg
Support Implementation
3
Group fSIG)
At t h e Vancouver Summit, P r e s i d e n t s C l i n t o n and Y e l t s i n agreed t o
e x p l o r e c r e a t i o n of a body t o c o o r d i n a t e e x t e r n a l a s s i s t a n c e f o r
Russian r e f o r m . The U n i t e d S t a t e s took t h e l e a d i n c r e a t i n g t h e
SIG, which was endorsed by t h e G-7 i n Tokyo and i n i t i a t e d i t s
a c t i v i t i e s on September 1 i n Moscow.
CLINTON LIBRARY P O O O Y
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GOHFIDDMTIAL
�COHriDEHffftfc
STATUS OF G-7 MULTILATERAL SUPPORT PACKAGE FOR RUSSIA
expected as o f J u l y 3 1 , 1994
Pledges
Approved
Disbursed
$14.2 b i l .
$10.6 b i l
$8.0 b i l .
World Bank S e c t o r a l Loan Commitments
$3.4 b i l .
$2.29 b i l .
$28 m i l .
C o - f i n a n c i n g o f World Bank o i l
s e c t o r loan
$500 m i l .
$250 m i l .
EBRD Small and Medium E n t e r p r i s e Fund
$300 m i l .
$55 m i l .
$6 m i l .
Export C r e d i t Agency C r e d i t s
and Guarantees
$10 b i l .
$8.0 b i l .
$8.0 b i l .
II.
$4.1 b i l .
$4.1 b i l .
$3.5 b i l .
$3 b i l .
$3.0 b i l .
$3.0 b i l .
$1.1 b i l .
$1.1 b i l .
$485 m i l .
$15 b i l .
I.
Support f o r S t r u c t u r a l Reforms
Support f o r I n i t i a l S t a b i l i z a t i o n
IMF Systemic T r a n s f o r m a t i o n
Facility
World Bank Import R e h a b i l i t a t i o n
II.
Loan
Support f o r F u l l S t a b i l i z a t i o n
$10.1 b i l .
$4.1 b i l .
IF Standby Loan
IMF Currency S t a b i l i z a t i o n Loan
$6.0 b i l .
IV.
$15 b i l .
$15 b i l .
$43.4 b i l .
$29.7 b i l . $26.5 b i l
O f f i c i a l Debt Rescheduling
TOTAL
1
V
.
I n c l u d e s $5.2 b i l l i o n i n 1993 and $2.8 b i l l i o n from
January t o J u l y 1994 i n G-7 p l u s EU e x p o r t c r e d i t s . The 1993
f i g u r e r e f l e c t s IMF e s t i m a t e s , which a r e c o n s i s t e n t w i t h Russian
numbers. The 1994 f i g u r e i s d e r i v e d by d i v i d i n g i n h a l f t h e IMF
e s t i m a t e o f $5.7 b i l l i o n i n b i l a t e r a l c r e d i t s f o r t h e e n t i r e
calendar year.
However, t h e 1994 t o t a l , which i s based on
l e n d e r s ' i n t e n t i o n s r e p o r t e d t o t h e IMF, may n o t be r e a l i z e d due
t o a r e c e n t law passed by t h e Duma t o r e s t r i c t f o r e i g n b o r r o w i n g .
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D e c l a s s i f y on:
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OADR
1
�COMriDEWTTTn?
RUSSIA -- PARIS CLUB DEBT DEAL
On June 4 i n P a r i s , Russia and seventeen c r e d i t o r governments
signed a r e s c h e d u l i n g agreement d e f e r r i n g about $7 b i l l i o n i n
payments due i n 1994. Repayment w i l l begin i n 1997, w i t h some
c a t e g o r i e s o f debt s t r e t c h e d o u t as l o n g as 15 years. The
agreement c a l l s f o r a p p r o x i m a t e l y $3 b i l l i o n i n Russian payments
t o these 17 o f f i c i a l c r e d i t o r s i n 1994; t o t a l debt payments f o r
1994 w i l l be r o u g h l y $4.5 b i l l i o n , i n c l u d i n g payments t o t h e
m u l t i l a t e r a l s , banks, s u p p l i e r s and non-Paris Club governments.
This compares w i t h t o t a l debt payments i n 1993 o f $2.2 b i l l i o n ,
of which $1.7 b i l l i o n went t o P a r i s Club c r e d i t o r s . The 1993
r e s c h e d u l i n g p r o v i d e d s h o r t e r repayment terms, however.
The agreement thus meets t h e U.S. (and G-7) o b j e c t i v e o f l i m i t i n g
Russian debt s e r v i c e payments i n 1994 t o an amount manageable
w i t h i n Russia's budgetary framework.
The agreement a l s o i n c l u d e s language, p r e v i o u s l y worked o u t
w i t h i n t h e G-7, s t a t i n g t h e c r e d i t o r s ' w i l l i n g n e s s " t o c o n s i d e r
t h e p o s s i b i l i t y o f a m u l t i - y e a r r e s c h e d u l i n g agreement on t h e
b a s i s o f a p p r o p r i a t e IMF-supported programs" f o r Russia's debt
o b l i g a t i o n s i n 1995 and beyond. Scheduled debt s e r v i c e t o t h e
o f f i c i a l c r e d i t o r s t o t a l s about $9 b i l l i o n f o r 1995 and $7
b i l l i o n f o r 1996; a need f o r f u r t h e r debt r e l i e f i s l i k e l y .
The purpose o f a m u l t i - y e a r agreement would be t o p r o v i d e t h e
Russians w i t h g r e a t e r c e r t a i n t y about t h e i r f u t u r e debt
o b l i g a t i o n s f o r t h e i r budgetary p l a n n i n g . Such an agreement
would be c o n t i n g e n t on c o n t i n u e d IMF-supported economic r e f o r m ,
b u t we wish t o preserve f l e x i b i l i t y r e g a r d i n g t h e s p e c i f i c form
of IMF s u p p o r t t h a t would be l i n k e d t o debt r e l i e f .
The language on t h e p o s s i b i l i t y o f a m u l t i - y e a r r e s c h e d u l i n g , a
U.S. i n i t i a t i v e , was agreed t o by t h e G-7 f i n a n c i a l d e p u t i e s i n
F r a n k f u r t on May 26 and again i n t h e June 4 agreement. The
Germans have been pushing f o r s p e c i a l r e c o g n i t i o n o f t h e
u n r e s o l v e d issues between Russia and i t s p r i v a t e c r e d i t o r s , o f
which German f i r m s a r e t h e l a r g e s t c o u n t r y g r o u p i n g . The
I t a l i a n s ' l o n g - s t a n d i n g debt r e c o n c i l i a t i o n i s s u e w i t h t h e
Russians, which had blocked s i g n a t u r e o f t h e i r 1993 b i l a t e r a l
r e s c h e d u l i n g , was r e s o l v e d i n t h e r e c e n t P a r i s meeting.
DECLASSIFIED
PER E.0.13526
COHPIDDHTI^CLINTON
D e c l a s s i f y on: OADR
LIBRARY PHOTOCOPY
�COMFIDEMTIAL
UKRAINE ECONOMIC OUTLOOK
Objectives
o
Underscore t h e importance
o f Ukraine
t o t h e G-7.
0
Urge Ukraine t o undertake
effort.
a comprehensive market r e f o r m
O
Emphasize t h e G-7's readiness t o m o b i l i z e l a r g e s c a l e ,
i n t e r n a t i o n a l f i n a n c i a l a s s i s t a n c e t o s u p p o r t renewed
r e f o r m , which c o u l d be i n t h e o r d e r o f $5-6 b i l l i o n over a
two-year p e r i o d , f o l l o w i n g t h e commencement o f genuine
reforms.
o
Concrete s u p p o r t f o r Ukraine's reforms i s f u r t h e r
demonstrated by the d e l e g a t i o n o f nongovernmental e x p e r t s ,
comprised o f t h e U.S., Germany, B r i t a i n and Canada,
scheduled t o v i s i t Kiev i n l a t e J u l y f o r t e c h n i c a l
d i s c u s s i o n s on Ukraine's r e f o r m p l a n .
o
F u r t h e r plans i n c l u d e G-7 s u p p o r t f o r an autumn
on Ukraine's economic t r a n s i t i o n i n H a l i f a x .
conference
Background
Ukraine's economy i s i n a s t a t e o f severe c r i s i s as a r e s u l t o f
t h e Government's mismanagement o f t h e economy and widespread
s t a t e c o n t r o l s which have produced p a r a l y s i s and impoverished
much o f t h e p o p u l a t i o n . To d a t e , r e f o r m e f f o r t s have been
piecemeal, i n c o n s i s t e n t and compromised by a l a c k o f economic
l e a d e r s h i p ; t h e key o b s t a c l e t o market r e f o r m . Moreover, t h e
c u r r e n t Government i s dominated by i n d u s t r i a l i s t s which eschew
market reforms and view p r o d u c t i o n d e c l i n e and unemployment as
t h e p r i m a r y t h r e a t s f a c i n g the economy. I n c r e a s i n g s t a t e
c o n t r o l s and l a x monetary and f i s c a l p o l i c i e s produced a hyperi n f l a t i o n by t h e end o f 1993.
I n 1994, t h e c o u n t r y ' s economic
c r i s i s has been no l e s s severe, w i t h i n f l a t i o n t e m p o r a r i l y
s u b s i d i n g , o n l y t o be r e p l a c e d by u n s u s t a i n a b l e payment a r r e a r s
and i n c r e a s i n g l y d i s t o r t e d p r i c e and f o r e i g n exchange c o n t r o l s .
B e g i n n i n g i n t h e F a l l o f l a s t year, t h e U.S. began a c o n c e r t e d
e f f o r t t o expand t h e scope o f t h e b i l a t e r a l and G-7 r e l a t i o n s h i p
w i t h Ukraine beyond s e c u r i t y i s s u e s , t o i n c l u d e economic r e f o r m
and a s s i s t a n c e i s s u e s . U.S. and U k r a i n i a n economic d e l e g a t i o n s
have s i n c e exchanged s e v e r a l i n c r e a s i n g l y c o n s t r u c t i v e v i s i t s on
Ukraine's economy. Since the b e g i n n i n g o f 1994, t h e IMF has a l s o
had s e v e r a l missions i n Kiev t o work on a STF program, and
t e c h n i c a l d i s c u s s i o n s have been making good p r o g r e s s . The
p r i m a r y o b s t a c l e t o market r e f o r m , however, remains t h e l a c k o f
e n d u r i n g p o l i t i c a l commitment on t h e p a r t o f t h e Government.
S p r i n g e l e c t i o n s t o t h e P a r l i a m e n t (Rada) and June P r e s i d e n t i a l ,
l o c a l and f i n a l Rada r u n - o f f v o t e s w i l l t r a n s f o r m Ukraine's
tSSSH^L^ON LIBRARY P O O O Y PERE O S
HTCP
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2
p o l i t i c a l landscape, b u t whether these e l e c t i o n s w i l l produce a
c r i t i c a l mass of s u p p o r t f o r genuine market r e f o r m remains h i g h l y
uncertain.
Ukraine's c r i t i c a l economic s i t u a t i o n i s i l l u s t r a t e d i n i t s
r e c e n t economic s t a t i s t i c s :
GDP dropped 35% i n t h e t w e l v e months ending i n A p r i l ,
f a l l i n g 16% i n 1993 and 20% i n 1992.
after
F i s c a l p o l i c y was u n c o n t r o l l e d i n 1993, w i t h t h e budget
d e f i c i t h i t t i n g 40% o f GDP.
The 1994 budget remains
unclear.
Monetary p o l i c y was s i m i l a r l y u n c o n t r o l l e d i n 1993, w i t h
v i r t u a l l y open-ended c r e d i t s i s s u e d t o t h e a g r i c u l t u r e and
c o a l s e c t o r s i n t h e summer. D u r i n g t h e f i r s t f i v e months o f
1994, t h e Government s e v e r e l y r e s t r i c t e d new c r e d i t t o t h e
economy, which reduced i n f l a t i o n b u t c r e a t e d u n s u s t a i n a b l e
a r r e a r s . There a r e now r e p o r t s t h a t i n June, t h e Government
ended t h i s t i g h t monetary p o l i c y and i n c r e a s e d c r e d i t by t h e
e q u i v a l e n t o f h a l f t h e c u r r e n t money s u p p l y , i n p r e p a r a t i o n
f o r t h e June 26 p r e s i d e n t i a l v o t e . C r e d i t c o n t i n u e s t o be
a l l o c a t e d a d m i n i s t r a t i v e l y a t very n e g a t i v e r e a l i n t e r e s t
rates.
These p o l i c i e s caused monthly i n f l a t i o n t o h i t over 90% i n
December, b e f o r e s l o w i n g t o 5-10% i n February - A p r i l , due
to t i g h t e r c r e d i t p o l i c y .
I t i s expected t o a c c e l e r a t e i n
July.
P r i c e c o n t r o l s a r e widespread, w i t h energy s o l d a t l e s s t h a n
20% o f w o r l d p r i c e s , on average.
Since t h e b e g i n n i n g o f 1993, t h e c u r r e n c y has f a l l e n t o l e s s
than 3% o f i t s end-1992 i n t r o d u c t o r y v a l u e a g a i n s t t h e U.S.
d o l l a r and 5% o f i t s v a l u e a g a i n s t t h e r u b l e .
Significant
f o r e i g n exchange r e s t r i c t i o n s have caused c a p i t a l f l i g h t
e s t i m a t e d as h i g h as $12 b i l l i o n .
The most acute problem f a c i n g U k r a i n e remains access t o
i m p o r t e d energy. Ukraine i s unable t o s t a y c u r r e n t on i t s
l a r g e energy b i l l s and remains a t t h e mercy o f s u p p l i e r s
c o n t i n u i n g t o send energy w i t h o u t immediate p r o s p e c t o f
payment. Turkmenistan and Russia have b o t h s p o r a d i c a l l y
c u t - o f f Ukraine due t o nonpayment.
i
The c o u n t r y ' s p r i v a t i z a t i o n program has made l i t t l e
p r o g r e s s . Laws a r e c o n t r a d i c t o r y and broad-based
p r i v a t i z a t i o n remains e l u s i v e . The Rada passed a law t o
p r i v a t i z e 20,000 s m a l l f i r m s and 8,000 medium and l a r g e
f i r m s ; about 28% o f t o t a l a s s e t s by t h e end o f 1994, b u t
t h e r e has been l i t t l e c o n c r e t e a c t i o n . The Government a l s o
r e c e n t l y s i g n e d a MOU t o work w i t h USAID, EU and t h e World
Bank on i m p r o v i n g t h e c o u n t r y ' s p r i v a t i z a t i o n program, b u t
major c^i j a t p ^ efle^.s pr-5
i ^ y f r ajr ^ j i i a
im:^^mented.
OOMriDEHSftftL
�GOHriDEMTIAL
3
G-7 P o s i t i o n
There i s broad agreement among t h e G-7 on an o v e r a l l approach t o
Ukraine, a l t h o u g h some c o u n t r i e s may h e s i t a t e t o discuss
specific
I F I a s s i s t a n c e numbers a t t h i s t i m e . Germany i s e s p e c i a l l y eager
f o r t h e G-7 t o increase i t s engagement i n Ukraine. The Canadians
a l s o have a s t r o n g i n t e r e s t i n Ukraine due t o t h e i r r o l e as host
of t h e 1995 Summit and t h e i r l a r g e U k r a i n i a n e t h n i c p o p u l a t i o n
and have proposed a conference on Ukraine's market t r a n s i t i o n
this Fall.
CLINTON LIBRARY P O O O Y
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�UKRAINE:
POLITICAL SITUATION
The e a r l y p r e s i d e n t i a l e l e c t i o n , scheduled f o r June 26, i s
expected t o take place as planned d e s p i t e P r e s i d e n t Kravchuk's
numerous e f f o r t s t o seek a postponement. None of t h e l e a d i n g
c a n d i d a t e s , Kravchuk, former PM Kuchma, p a r l i a m e n t a r y speaker
Moroz and former p a r l i a m e n t a r y speaker Plyushch, appear t o have
s u f f i c i e n t support f o r a f i r s t round v i c t o r y . A r u n - o f f ,
probably by J u l y 10, w i l l l i k e l y p u t Kravchuk a g a i n s t Kuchma - - a
race which Kravchuk i s by no means guaranteed t o win. Kuchma
openly f a v o r s c l o s e r economic t i e s w i t h Russia. While he a l s o
has advocated re-examining Ukraine's n u c l e a r dismantlement
o b l i g a t i o n s , he has expressed s u p p o r t f o r t h e T r i l a t e r a l
Statement and does not appear p o i s e d t o p u t those o b l i g a t i o n s a t
risk.
No m a t t e r who wins, we i n t e n d t o c o n t i n u e t o press Ukraine t o
move q u i c k l y t o implement a comprehensive economic r e f o r m program
and t o accede t o the NPT as a non-nuclear weapons s t a t e a t t h e
e a r l i e s t p o s s i b l e t i m e . Meanwhile, Ukraine c o n t i n u e s t o c a r r y
out i t s o b l i g a t i o n s under t h e January 14 T r i l a t e r a l Statement,
having a l r e a d y t r a n s f e r r e d 240 warheads t o Russia f o r
dismantlement.
I n a d d i t i o n , our G-7 p a r t n e r s are w o r k i n g w i t h us
and Ukraine t o develop b i l a t e r a l n u c l e a r d i s m a n t l e m e n t - r e l a t e d
a s s i s t a n c e p r o j e c t s . Thus f a r , t h e U.S.,
Canada and Japan have
committed t h e l a r g e s t amounts of a s s i s t a n c e .
Crimea's May 20 vote t o r e i n s t a t e t h e 1992 c o n s t i t u t i o n , though
not a d e f i n i t i v e a c t of secession, i s t h e l a t e s t u n i l a t e r a l
a t t e m p t t o i n t r o d u c e elements of a regime o f de f a c t o l e g a l
s e p a r a t i o n from Ukraine.
The Crimean p a r l i a m e n t ' s a c t i o n s
touched o f f a number o f heated exchanges between Kiev and
S i m f e r o p o l and a few shots between Kiev and Moscow, f u e l e d by
unconfirmed press r e p o r t s of t r o o p movements.
Secretary
C h r i s t o p h e r ' s May 21 r e p l y t o F o r e i g n M i n i s t e r Zlenko's w i d e l y
d i s t r i b u t e d appeal emphasized c o n t i n u i n g U.S. s u p p o r t f o r
Ukraine's t e r r i t o r i a l i n t e g r i t y and urged Ukraine t o c o n t i n u e t o
e x e r c i s e r e s t r a i n t and t o seek a p e a c e f u l r e s o l u t i o n .
Tensions have eased. U k r a i n i a n and Crimean p a r l i a m e n t a r y
d e l e g a t i o n s agreed t o recommend t h a t n e i t h e r s i d e undertake
f u r t h e r u n i l a t e r a l a c t i o n s u n t i l j o i n t w o r k i n g groups c o u l d s t u d y
t h e problem and o f f e r recommendations. Meanwhile, U k r a i n i a n and
Russian Prime M i n i s t e r s met i n Moscow May 23-25 f o r f u r t h e r
d i s c u s s i o n s on Black Sea F l e e t i s s u e s . T h i s d i a l o g u e c o n t i n u e s
as w e l l , b u t a f i n a l r e s o l u t i o n o f a l l o u t s t a n d i n g problems i s
not expected soon.
^
^
Embassy Kiev b e l i e v e s the p o l i t i c s o f t h e Crimea c r i s i s i s d r i v e n
i n p a r t by t h e u n c e r t a i n outcome o f t h e p r e s i d e n t i a l e l e c t i o n s .
Both l e a d i n g candidates -- Kravchuk and Kuchma -- have reason t o
e x p l o i t the Crimean problem f o r p o l i t i c a l g a i n , g i v e n t h e
i m p l i c a t i o n s f o r Ukraine's t e r r i t o r i a l i n t e g r i t y .
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UKRAINE:
CHERNOBYL NUCLEAR POWER PLANT
Since the 1992 Munich Summit, the U.S. has endeavored t o p r o v i d e
a s s i s t a n c e f o r t h e immediate s a f e t y needs a t t h e r i s k i e s t
S o v i e t - d e s i g n e d r e a c t o r s i n t h e former USSR and i n C e n t r a l and
Eastern Europe. The 1993 Tokyo Summit endorsed t h i s p o l i c y and
extended i t t o i n c l u d e work w i t h the World Bank and o t h e r
i n t e r n a t i o n a l f i n a n c i a l i n s t i t u t i o n s ( I F I s ) t o develop
l o n g e r - t e r m energy s t r a t e g i e s t o p e r m i t e a r l y c l o s u r e o f t h e
r i s k i e s t r e a c t o r s . The USG i s i n v o l v e d i n near-term and
l o n g - t e r m U k r a i n i a n energy concerns t h r o u g h b o t h b i l a t e r a l and
m u l t i l a t e r a l f o r a ; t h e G-7 Nuclear S a f e t y Working Group (NSWG)
and the Nuclear S a f e t y Account (NSA) a t t h e European Bank f o r
R e c o n s t r u c t i o n and Development are t h e p r i m a r y m u l t i l a t e r a l
i n s t r u m e n t s through which the USG i n t e r a c t s and n e g o t i a t e s
nuclear s a f e t y assistance p o l i c y .
Both t h e U n i t e d S t a t e s and t h e G-7 seek t o persuade Ukraine t o
c l o s e Chernobyl.
Chernobyl has f o u r RBMK r e a c t o r s , t h e r i s k i e s t
S o v i e t - d e s i g n e d r e a c t o r type ( f l a w e d by a design l a c k i n g
containment t o p r e v e n t r e l e a s e o f r a d i o a c t i v i t y i n an a c c i d e n t ) .
Last October, the U k r a i n i a n p a r l i a m e n t a u t h o r i z e d t h e c o n t i n u e d
o p e r a t i o n o f the r e m a i n i n g Chernobyl r e a c t o r s , r e v e r s i n g a
p r e v i o u s decree r e q u i r i n g a December 1993 shutdown o f U n i t s 1 and
3 a t Chernobyl and c o n t i n u e d c l o s u r e o f U n i t 2.
A b i l a t e r a l J o i n t Statement s i g n e d i n March by Deputy Energy
S e c r e t a r y Energy White and U k r a i n i a n Deputy Prime M i n i s t e r
Shmarov, committed Ukraine, i n p r i n c i p l e , t o e a r l y c l o s u r e o f
Chernobyl once Ukraine a c q u i r e d energy resources t o r e p l a c e
Chernobyl.
Shmarov o u t l i n e d t o White, t o an IAEA-sponsored
Ukraine n u c l e a r s a f e t y meeting i n Vienna, and t o t h e G-7,
Ukraine's needs f o r a "balanced" energy s u p p l y , i n c l u d i n g
c o m p l e t i o n o f t h r e e t o f i v e more modern n u c l e a r power p l a n t s
under c o n s t r u c t i o n , a decommissioning p l a n f o r Chernobyl and a
means o f addressing s o c i a l c o s t s a s s o c i a t e d w i t h d i s l o c a t i o n o f
workers employed a t Chernobyl.
Since A p r i l , t h e G-7 Nuclear S a f e t y Working Group has met t w i c e
w i t h Shmarov t o p r i o r i t i z e Ukraine's energy needs and c o n s i d e r
whether t h e West might p r o v i d e a c o m b i n a t i o n o f l i m i t e d g r a n t s
and loans i n exchange f o r Ukraine's commitment t o e a r l y c l o s u r e
of Chernobyl.
While t h e Europeans a r e more d i r e c t l y engaged i n
t h i s i s s u e than t h e USG and would l i k e l y p r o v i d e more r e s o u r c e s ,
they are l o o k i n g t o us t o p r o v i d e a reasonable share.
I n a d d i t i o n t o t h e West's e f f o r t s t o get t h e o p e r a t i n g Chernobyl
U n i t s c l o s e d i n t h e near term, t h e c o n c r e t e sarcophagus, o r
s h e l t e r , s u r r o u n d i n g U n i t 4 i s i n need o f r e p a i r ; i n s t a l l e d
f o l l o w i n g t h e 1986 a c c i d e n t which d e s t r o y e d t h e u n i t , i t i s s a i d
t o be l e a k i n g r a d i o a c t i v e water and wastes. The European Union
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i s c o n d u c t i n g a y e a r - l o n g study on what needs t o be done t o t h e
sarcophagus. U n t i l t h a t study i s completed, n e i t h e r t h e USG, nor
the r e s t o f t h e Western donors can a c t on t h e d e t e r i o r a t i n g
sarcophagus.
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THE
NUCLEAR SAFETY ACCOUNT AT THE EUROPEAN BANK FOR
RECONSTRUCTION AND DEVELOPMENT (EBRD)
The NSA was s e t up as a supplementary mechanism t o address
immediate o p e r a t i o n a l s a f e t y and t e c h n i c a l s a f e t y improvement
measures not covered by b i l a t e r a l programs. I t i s a d m i n i s t e r e d
by t h e European Bank f o r R e c o n s t r u c t i o n and Development (EBRD)
and focuses on r e a c t o r s o f g r e a t e s t r i s k , t h e S o v i e t - d e s i g n e d
RBMK (Chernobyl-type) and WER-440/230 t y p e s . P r o j e c t s have
i n c l u d e d s h o r t - t e r m , l o w - c o s t measures t h a t can reduce r i s k from
t h e i r continued operation s i g n i f i c a n t l y .
Should the NSA be used as a resource upon which t o draw f o r
a s s i s t a n c e as p a r t o f a Chernobyl shutdown p l a n , a G-7-mandated
change i n the NSA mandate may be n e c e s s i t a t e d . The NSA was s e t
up t o p r o v i d e near-term n u c l e a r s a f e t y a s s i s t a n c e t o t h e r i s k i e s t
of t h e S o v i e t - d e s i g n e d r e a c t o r s . P r o v i s i o n o f f u n d i n g f o r the
c o s t s a s s o c i a t e d w i t h Chernobyl c l o s u r e o r f u n d i n g f o r c o m p l e t i o n
o f t h r e e WER-1000 r e a c t o r s would be a marked change i n t h e NSA
mandate.
i
v.
At i s s u e i s t h e l i m i t e d amount o f funds i n t h e NSA and donor
a s s i s t a n c e p r i o r i t i e s f o r c o u n t r i e s o p e r a t i n g these r i s k y
S o v i e t - d e s i g n e d r e a c t o r s . One o p t i o n c u r r e n t l y under d i s c u s s i o n
i n t h e G-7 i s r e p l e n i s h m e n t o f t h e NSA. While t h e Europeans
c o u l d be expected t o c o n t r i b u t e the m a j o r i t y o f funds, t h e U.S.
may be asked t o p i t c h i n $10-20 m i l l i o n t o t h e Nuclear Safety
Account, f o r decommissioning c o s t s a t Chernobyl.
That amount i s
t e n p e r c e n t o f an e s t i m a t e d $100-200 m i l l i o n NSA r e p l e n i s h m e n t
total.
The need f o r r e p l e n i s h m e n t would a l s o presuppose t h e NSA
g o i n g f o r w a r d w i t h t h e t h r e e o t h e r Russian p r o j e c t s i n a d d i t i o n
t o a p r o j e c t a t Chernobyl.
I n a l e t t e r dated June 13, 1994, C h a n c e l l o r Kohl and P r e s i d e n t
M i t t e r r a n d requested P r e s i d e n t C l i n t o n ' s u r g e n t a t t e n t i o n t o t h e
i s s u e o f r e p l e n i s h m e n t o f t h e NSA, p a r t i c u l a r l y a f t e r n e g o t i a t i o n
of Chernobyl c l o s u r e . They c o n t i n u e d t h a t France and Germany
have shouldered t h e b u l k o f f i n a n c i a l c o n t r i b u t i o n s t o t h e NSA
and t h a t t h e USG s h o u l d u r g e n t l y c o n s i d e r a d d i t i o n a l
c o n t r i b u t i o n s i n t h e near term.
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�CONriDENTIAL
DEVELOPMENT ISSUES
Post-Cold War economic and s e c u r i t y r e a l i t i e s , c o i n c i d e n t w i t h
budget pressures i n a l l t h e G-7 c o u n t r i e s , have l e d t o a
r e t h i n k i n g o f development p r i o r i t i e s .
Two broad themes have
emerged.
F i r s t , donor and r e c i p i e n t c o u n t r i e s must a c t i v e l y
r e c o g n i z e t h a t s u s t a i n a b l e growth depends u l t i m a t e l y n o t on
f o r e i g n a i d , b u t on t h e c o r r e c t mix o f economic p o l i c i e s . The
s i g n i n g o f t h e Uruguay Round agreement and t h e c r e a t i o n o f a
World Trade O r g a n i z a t i o n a r e i m p o r t a n t steps toward opening
markets which w i l l , a l o n g w i t h a t t r a c t i v e i n v e s t m e n t regimes,
c r e a t e jobs and r a i s e l i v i n g standards i n t h e most e f f i c i e n t way
p o s s i b l e . Second, o f f i c i a l development a s s i s t a n c e must
complement and encourage p r i v a t e s e c t o r a c t i v i t y , f o c u s i n g on t h e
poor, i n a way which encourages r e c i p i e n t s t o expand t h e i r own
c a p a c i t i e s . This promotes s u s t a i n a b l e growth.
S u s t a i n a b l e development r e q u i r e s p o l i c i e s and p r o j e c t s designed
t o f o s t e r sound economies, democracy and a n t i - c o r r u p t i o n e f f o r t s ,
e n v i r o n m e n t a l q u a l i t y and reduced p o p u l a t i o n growth. B u i l d i n g on
r e c e n t developments, i n c l u d i n g t h e r e p l e n i s h m e n t o f t h e G l o b a l
E n v i r o n m e n t a l F a c i l i t y , "good governance" language i n
i n t e r n a t i o n a l f i n a n c i a l i n s t i t u t i o n ( I F I ) p o l i c y documents,
s u c c e s s f u l IDB r e p l e n i s h m e n t n e g o t i a t i o n s and p r e p a r a t i o n s f o r
the September C a i r o Conference on P o p u l a t i o n and Development, we
want t o encourage donor c o o r d i n a t i o n on i n t e g r a t i n g these themes
i n t o b i l a t e r a l and m u l t i l a t e r a l a s s i s t a n c e s t r a t e g i e s . OECD
outreach t o developing c o u n t r i e s should help a n t i - c o r r u p t i o n
e f f o r t s , e s p e c i a l l y on i n t e r n a t i o n a l b u s i n e s s - r e l a t e d b r i b e r y .
W i t h no p r o s p e c t o f i n c r e a s e d l e v e l s o f b i l a t e r a l a s s i s t a n c e , t h e
r o l e o f I F I s becomes more i m p o r t a n t and even g r e a t e r care must be
taken t o assure t h e e f f e c t i v e n e s s o f e x i s t i n g development funds.
The c r e a t i o n o f t h e Development Committee Task Force d u r i n g t h e
World Bank Development A s s i s t a n c e Committee m e e t i n g i n A p r i l was
an i m p o r t a n t s t e p i n t h a t d i r e c t i o n .
I n a d d i t i o n t o improving
the e f f e c t i v e n e s s o f t h e use o f t h e i r funds t h e I F I s w i l l have t o
become more engaged i n s o c i a l s e c t o r programming and s e e k i n g ways
t o l e v e r a g e p r i v a t e s e c t o r investment by e s t a b l i s h i n g guarantee
programs.
I n t h e i n t e r e s t o f u s i n g l i m i t e d funds e f f i c i e n t l y we a l s o
b e l i e v e i t i s i m p o r t a n t t o seek improvements i n development
a s s i s t a n c e t h r o u g h e x i s t i n g mechanisms.
As a case i n p o i n t , we
are opposed t o e f f o r t s t o examine commodity dependence o f
d e v e l o p i n g c o u n t r i e s t h a t m i g h t e n t a i l new o r g a n i z a t i o n s and
f u n d i n g demands, when UNCTAD a l r e a d y p r o v i d e s a forum f o r such
d i s c u s s i o n s . As a r e s u l t o f UNCTAD V I I I , UNCTAD has now moved
away from promotion o f market i n t e r v e n t i o n approaches i m p l i c i t i n
the I n t e g r a t e d Program on Commodities.
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The o t h e r G-7 members are r o u g h l y i n agreement w i t h our p o s i t i o n .
The Japanese and French a r e c o n t i n u i n g e f f o r t s t o h e l p t h e
p o o r e s t commodity-dependent d e v e l o p i n g c o u n t r i e s t h r o u g h an
i n t e r n a t i o n a l g a t h e r i n g o f e x p e r t s and government o f f i c i a l s , b u t
t h i s has been opposed by t h e U.S., B r i t i s h and Germans. The
Germans may r a i s e t h e idea o f l i n k i n g l e v e l s o f m i l i t a r y
e x p e n d i t u r e t o development a s s i s t a n c e an idea which i s a l s o being
s t u d i e d w i t h i n t h e U n i t e d Nations and o t h e r MDBs.
The Europeans a r e s t r o n g l y backing t h e s t u d y o f " m i g r a t i o n and
development," i . e . , how development t o o l s can h e l p a f f e c t
( p r e v e n t ) m i g r a t i o n . A response t o domestic pressures r e s u l t i n g
from m i g r a t i o n f l o w s i n t o Europe, i n t e r n a t i o n a l development
agencies have so f a r been r e l u c t a n t t o t a k e on t h e i s s u e . The
U.S. p a r t i c i p a t e s i n an i n f o r m a l i n t e r - g o v e r n m e n t a l w o r k i n g group
on m i g r a t i o n t h a t i s examining t h e s u b j e c t , b u t we have n o t y e t
developed a p o s i t i o n on t h e t o p i c , Others want t o b r i n g i t t o a
f o r m a l arena.
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U.S. O b j e c t i v e s
We have two o b j e c t i v e s : (1) To achieve G-7 consensus on t h e
l e v e l o f , and the b a s i s f o r , deeper debt r e d u c t i o n f o r e l i g i b l e
poorest c o u n t r i e s ; and (2) t o recognize r e c e n t progress under t h e
i n t e r n a t i o n a l debt s t r a t e g y .
Background
The
Poorest
Countries
The P a r i s Club agreed i n December 1991 t o "Enhanced Toronto
Terms" (sometimes c a l l e d " T r i n i d a d Terms" o r "London Terms") f o r
the poorest c o u n t r i e s . The a p p l i c a t i o n o f these terms a l l o w s
c r e d i t o r s t o choose among o p t i o n s t h a t r e s u l t i n a 50 percent
r e d u c t i o n o f non- c o n c e s s i o n a l (Eximbank, CCC) debt s e r v i c e , on a
net present value b a s i s , o f the c o n s o l i d a t e d p e r i o d s .
Another
o p t i o n a l l o w s l o n g e r r e s c h e d u l i n g s (over 25 years i n c l u d i n g 16
years g r a c e ) . Concessional debt i s b e i n g r e s c h e d u l e d over 30
years, i n c l u d i n g 12 years' grace on p r i n c i p a l payments. I n
a d d i t i o n , the P a r i s Club i s c o n s i d e r i n g q u e s t i o n s r e l a t e d t o t h e
t r e a t m e n t o f the s t o c k o f non-concessional debt a f t e r a p e r i o d o f
s u s t a i n e d economic performance.
The poorest c o u n t r i e s t h a t have b e n e f i t t e d i n c l u d e Benin,
B o l i v i a , Burkina Faso, Cameroon, Cote d ' l v o i r e , C e n t r a l A f r i c a n
Republic, E q u a t o r i a l Guinea, E t h i o p i a , Guinea, Guyana, Honduras,
M a l i , M a u r i t a n i a , Mozambique, Nicaragua, S i e r r a Leone, Tanzania,
Togo, Uganda and Zambia.
U n t i l r e c e n t l y the U.S. used t h e r e s c h e d u l i n g o p t i o n (25 years
i n c l u d i n g 16 years g r a c e ) , r a t h e r than t h e d e b t / d e b t s e r v i c e
r e d u c t i o n o p t i o n s . The A d m i n i s t r a t i o n has been s u c c e s s f u l i n
s e c u r i n g C o n g r e s s i o n a l a u t h o r i z a t i o n and f u n d i n g t o enable us t o
j o i n the r e s t o f t h e i n t e r n a t i o n a l community i n r e d u c i n g the nonc o n c e s s i o n a l debts o f the p o o r e s t n a t i o n s i n l i n e w i t h e x i s t i n g
50% d e b t / d e b t s e r v i c e r e d u c t i o n under Enhanced T o r o n t o Terms f o r
i n s o l v e n t c o u n t r i e s . Nonetheless, because o f l e g i s l a t i v e and
budget c o n s t r a i n t s , we are unable t o e x t e n d the debt r e d u c t i o n
o p t i o n t o a l l c o u n t r i e s t h a t q u a l i f y f o r Enhanced T o r o n t o Terms,
e.g., Cote d ' l v o i r e . Niger and Senegal were the f i r s t
b e n e f i c i a r i e s o f t h e U.S. a b i l i t y t o o f f e r 50% debt r e d u c t i o n .
We support moving t o deeper debt r e d u c t i o n f o r e l i g i b l e p o o r e s t
c o u n t r i e s - - a g e n e r a l p o l i c y o f up t o 67% debt r e d u c t i o n on a
case-by-case b a s i s . We would a l s o l i k e t o p r o v i d e even deeper
r e d u c t i o n f o r c o u n t r i e s a c h i e v i n g a democracy s t a n d a r d .
We a r e
a l s o prepared t o engage i n s t o c k r e d u c t i o n f o r c o u n t r i e s as t h e y
r e t u r n t o the P a r i s Club f o r t h e i r second t r e a t m e n t under
Enhanced Toronto Terms, i f they have demonstrated adequate
performance a t t h a t t i m e . However, we w i l l need t o keep t h e
r e s c h e d u l i n g o p t i o n s i n c e t h e r e may be c o u n t r i e s n o t e l i g i b l e f o r
CLINTON LIBRARY P O O O Y
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�debt r e d u c t i o n pursuant t o our l e g i s l a t i v e a u t h o r i t y o r p o l i c y
g u i d e l i n e s b u t nonetheless d e s e r v i n g o f some debt r e l i e f .
Middle-Income
C o u n t r i e s w i t h Commercial Bank Debt Problems
The progress under t h e debt s t r a t e g y t o address commercial bank
debt problems has been s u b s t a n t i a l . A key f e a t u r e o f t h e
s t r a t e g y has been t h e a v a i l a b i l i t y o f IMF, World Bank and IDB
f i n a n c i a l s u p p o r t t o c o l l a t e r a l i z e t h e new reduced debt
instruments.
Twelve c o u n t r i e s , now i n c l u d i n g B r a z i l , have reached debt
r e d u c t i o n o r r e f i n a n c i n g agreements w i t h t h e i r commercial banks,
a c c o u n t i n g f o r over 92% o f t h e $260 b i l l i o n i n o u t s t a n d i n g
commercial bank debt o f t h e 16 major d e b t o r n a t i o n s . R e c e n t l y ,
B u l g a r i a , t h e Dominican Republic and Jordan, n o t counted among
the 16 major d e b t o r s , a l s o completed agreements w i t h t h e i r banks.
Poland has r e c e n t l y reached an a g r e e m e n t - i n - p r i n c i p l e .
I n p a r t i c u l a r , t h e combination o f debt r e d u c t i o n and economic
reforms has helped t o j u m p - s t a r t L a t i n economies and has produced
major c a p i t a l f l o w s and f i s c a l b e n e f i t s .
Other Summit Country Views
The o t h e r G-7 c o u n t r i e s ( w i t h t h e e x c e p t i o n o f Japan) want t o
move t o deeper debt r e d u c t i o n f o r t h e p o o r e s t c o u n t r i e s . They
are p r e s s i n g t h e U.S. t o drop t h e r e s c h e d u l i n g o p t i o n t o ensure
e q u i t a b l e t r e a t m e n t among c r e d i t o r s . The Japanese want t o pursue
a new money o p t i o n r a t h e r than p r o v i d e debt r e d u c t i o n .
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�CQHriDENTI MJ
G-7: COMMODITIES (JAPANESE/FRENCH
INITIATIVE)
P r i o r t o t h e June 1993 Tokyo G-7 meeting, Japan proposed t h a t t h e
G-7 endorse a major new commodity i n i t i a t i v e , i n c l u d i n g t h e
convening o f a meeting o f eminent "Wise Men" t o s e t a new agenda
f o r a s s i s t i n g d e v e l o p i n g c o u n t r y commodity producers.
The U.S.
and t h e UK opposed t h e idea v i g o r o u s l y , and i t was n o t i n t h e G-7
communique.
Most commodities are near h i s t o r i c a l l y low p r i c e l e v e l s i n
nominal terms. Many d e v e l o p i n g c o u n t r i e s depend l a r g e l y on
commodity e x p o r t s f o r t h e i r f o r e i g n exchange e a r n i n g s . The IBRD
r e c e n t l y e s t i m a t e d t h e r e has been a t r a n s f e r o f $100 b i l l i o n from
d e v e l o p i n g t o developed c o u n t r i e s due t o low commodity p r i c e s .
While t h a t e s t i m a t e i s s u b j e c t t o q u e s t i o n , t h e e x t r e m e l y low
p r i c e s a r e due t o t h e g l o b a l r e c e s s i o n , new sources f o r many
p r i m a r y commodities, i n c r e a s e d a v a i l a b i l i t y o f s u p p l i e s from t h e
CIS and reduced consumption o f t r a d i t i o n a l m a t e r i a l s p e r u n i t o f
GDP i n developed c o u n t r i e s . A l t h o u g h p r i c e s a r e l i k e l y t o
improve as t h e EU and Japan j o i n us i n economic r e c o v e r y , t h e
fundamental f a c t o r s c i t e d above w i l l c o n t i n u e t o have a
restraining influence.
I r o n i c a l l y , s i n c e most b a s i c commodities a r e p r i c e i n e l a s t i c ,
i m p r o v i n g t h e e f f i c i e n c y o f commodity p r o d u c t i o n and
d i v e r s i f i c a t i o n i n t o o t h e r commodities may make sense i n
i n d i v i d u a l cases, b u t as a g l o b a l approach i t may aggravate
problems o f o v e r p r o d u c t i o n and consequent depressed p r i c e s .
Moreover, t h e economic problems o f many d e v e l o p i n g c o u n t r i e s a r e
l i n k e d t o p e r s i s t e n t s o c i a l , c u l t u r a l and p o l i t i c a l f a c t o r s t h a t
impede development. I s o l a t e d a t t e m p t s t o s o l v e t h e commodities
problem t h a t do n o t take account o f t h e need f o r and c o n s t r a i n t s
upon, o v e r a l l economic p o l i c y r e f o r m w i l l be o f q u e s t i o n a b l e
value i n t h e long run.
As a r e s u l t o f E i g h t h UN Conference on Trade and Development
(UNCTAD V I I I ) , t h e UNCTAD Committee on Commodities i s p u r s u i n g an
agenda t h a t emphasizes market measures f o r r e d u c i n g r i s k ,
d i v e r s i f i c a t i o n , f o r e i g n p r i v a t e i n v e s t m e n t and improved n a t i o n a l
p o l i c i e s , a l l o f which a r e c o n s i s t e n t w i t h our approach t o
commodity i s s u e s . We would n o t w i s h t o see UNCTAD's p r o m i s i n g
market o r i e n t e d i n i t i a t i v e s impeded by a G-7 i n i t i a t i v e .
There i s a p o s s i b i l i t y t h a t Japan and France may r e s u s c i t a t e
t h e i r p r o p o s a l and p l a n t o sponsor a meeting o f e x p e r t s l a t e r i n
t h e year. We a r e t o l d t h e meeting would i n c l u d e r e p r e s e n t a t i v e s
of i n t e r n a t i o n a l o r g a n i z a t i o n s , academics and government
p e r s o n n e l " i n t h e i r p e r s o n a l c a p a c i t y . " Among t h e main s u b j e c t s
t o be discussed:
expanding demand f o r b a s i c commodities,
i m p r o v i n g p r o d u c t i o n e f f i c i e n c y , m i t i g a t i n g e n v i r o n m e n t a l impacts
of commodity p r o d u c t i o n and r e s o u r c e s / f u n d i n g .
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Although t h e French have agreed t o co-sponsor t h i s p r o j e c t w i t h
t h e Japanese, they appear unenthused about i t . There a r e no
o t h e r s u p p o r t e r s i n t h e G-7 and t h e B r i t i s h and Germans a r e
l i k e l y t o j o i n us i n s t r o n g l y opposing i t .
The Japanese assure us t h e Franco-Japanese i n i t i a t i v e i s n o t
i n t e n d e d t o r e - i n v i g o r a t e t h e I n t e g r a t e d Program on Commodities,
promote t h e e s t a b l i s h m e n t o f new commodity o r g a n i z a t i o n s w i t h
economic p r o v i s i o n s , o r s t i m u l a t e new demands f o r f i n a n c i a l
a s s i s t a n c e t o d e v e l o p i n g c o u n t r i e s . Nonetheless, we remain
concerned t h a t t h e i n i t i a t i v e r i s k s g e n e r a t i n g e x p e c t a t i o n s o f
major f i n a n c i a l a s s i s t a n c e and renewed c a l l s f o r market
i n t e r v e n t i o n t o s u p p o r t p r i c e s o f p r i m a r y commodities, a t a time
when we have l a r g e l y disengaged o u r s e l v e s from commodity
agreements w i t h economic p r o v i s i o n s .
We would l i k e t o a v o i d a major new i n i t i a t i v e on commodities
coming from t h e G-7 meeting. Given t h e l a c k o f s u p p o r t o f t h e
G-7 f o r t h e idea p r e v i o u s l y , we doubt t h e Japanese w i l l f i n d a
more r e c e p t i v e audience t h i s t i m e .
i^CLINTON LIBRARY P O O O Y
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COHriDDNT:
�-eONFIDEHTfrftL
ARAB BOYCOTT
We seek i n c l u s i o n o f a statement i n the summit d e c l a r a t i o n
c a l l i n g upon the Arab League s t a t e s t o end t h e b o y c o t t . We a l s o
hope t o e n l i s t our G-7 p a r t n e r s i n l o b b y i n g Arab League s t a t e s t o
support the convening o f a s p e c i a l meeting o f Arab League f o r e i g n
m i n i s t e r s t o c o n s i d e r a c t i o n a g a i n s t the b o y c o t t .
Last year's summit d e c l a r a t i o n i n c l u d e d , i n t h e c o n t e x t o f a
paragraph on the Middle East peace process, a s t a t e m e n t t h a t "the
Arab b o y c o t t should end".
This year we are p r o p o s i n g a more
p r o a c t i v e statement:
"The G-7 member s t a t e s c a l l on Arab League
s t a t e s t o end t h e i r b o y c o t t o f I s r a e l . "
While p u r s u i n g an end t o the b o y c o t t i n i t s e n t i r e t y , we c o n t i n u e
t o look f o r o p p o r t u n i t i e s t o undermine i t s e f f e c t i v e n e s s . We a r e
p r e s s i n g the PLO and f r i e n d l y Arab governments t o r e q u e s t a
s p e c i a l meeting o f Arab League f o r e i g n m i n i s t e r s w i t h a view
towards an Arab League d e c i s i o n t h a t would (1) l i f t the secondary
and t e r t i a r y aspects o f the b o y c o t t and (2) p e r m i t i n d i v i d u a l
member s t a t e s t o decide f o r themselves whether t o e n f o r c e the
p r i m a r y aspect o f the b o y c o t t . G-7 l o b b y i n g o f Arab League
governments i n support o f m i n i s t e r i a l a c t i o n a g a i n s t t h e b o y c o t t
would complement our e f f o r t s .
D u r i n g the past year we have made progress a g a i n s t the b o y c o t t .
Kuwait i s implementing i t s June 1993 d e c i s i o n t o end i t s
enforcement o f the secondary and t e r t i a r y aspects o f t h e b o y c o t t .
Omani o f f i c i a l s have informed us t h a t t h e y , t o o , are ceasing
enforcement o f the secondary and t e r t i a r y aspects.
Collectively,
the GCC s t a t e s are t a k i n g s i x o f t e n c o n c r e t e steps we
recommended t o weaken t h e i r enforcement o f t h e secondary and
t e r t i a r y aspects.
Meanwhile, some Arab s t a t e s and c i t i z e n s have had d i r e c t
commercial c o n t a c t s w i t h I s r a e l . Morocco and I s r a e l a r e
considering closer a v i a t i o n t i e s .
Q a t a r i s and I s r a e l i s have
discussed a n a t u r a l gas d e a l . A d e l e g a t i o n o f Saudi businessmen
v i s i t e d I s r a e l i n February.
Economic agreements among the p a r t i e s t o t h e peace process have
a l s o served t o undermine the b o y c o t t . The A p r i l
P a l e s t i n i a n - I s r a e l i economic agreement e n t a i l s economic
c o o p e r a t i o n t h a t i s i n c o n s i s t e n t w i t h enforcement o f t h e b o y c o t t .
I n a d d i t i o n , Jordan and I s r a e l have reached an u n d e r s t a n d i n g on
banking arrangements i n the West Bank and are c o n s i d e r i n g f u r t h e r
economic c o o p e r a t i o n .
The Germans have been the most a c t i v e o f o u r G-7 p a r t n e r s i n
opposing the b o y c o t t . They have c a l l e d f o r an end t o t h e b o y c o t t
and, i n correspondence w i t h USTR Kantor, have agreed t o o u r
s u g g e s t i o n o f G-7 a c t i o n a g a i n s t the b o y c o t t .
I t a l y i s also
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t a k i n g a more a c t i v e stance a g a i n s t t h e b o y c o t t .
I n May, d u r i n g
a meeting w i t h t h e Conference o f P r e s i d e n t s o f Major Jewish
O r g a n i z a t i o n s , I t a l i a n Foreign M i n i s t e r A n t o n i o M a r t i n o
r e p o r t e d l y s a i d t h a t t h e new government would i n t r o d u c e
l e g i s l a t i o n t o c r e a t e an I t a l i a n a n t i - b o y c o t t regime.
The Japanese have a l s o taken steps a g a i n s t t h e b o y c o t t .
This
i n c l u d e s a n t i - b o y c o t t demarches t o Arab s t a t e s , p u b l i c c a l l s f o r
an end t o enforcement o f t h e secondary and t e r t i a r y aspects
a g a i n s t Japanese f i r m s , and, t h i s May, u r g i n g Asad t o l i f t t h e
b o y c o t t . Canada has an a n t i - b o y c o t t p o l i c y t h a t i n c o r p o r a t e s
aspects o f our a n t i - b o y c o t t laws, b u t , as f a r as we know, has n o t
demarched b o y c o t t i n g s t a t e s on t h e i s s u e .
While d e p l o r i n g t h e b o y c o t t , M i c h a e l H e s e l t i n e , P r e s i d e n t o f t h e
UK Board o f Trade, t o l d USTR Kantor t h a t t h e p r i m a r y b o y c o t t w i l l
remain " u n t i l t h e r e i s a comprehensive s e t t l e m e n t . " We a r e n o t
aware o f any r e c e n t French a c t i o n s o r s t a t e m e n t s on t h e b o y c o t t ,
but note t h a t t h e French have t r a d i t i o n a l l y p r e f e r r e d
a n t i - b o y c o t t a c t i o n w i t h i n t h e EU c o n t e x t t o G-7 a c t i o n .
CLINTON LIBRARY P O O O Y
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�CONriDENTIAL
IRAQ
Since t h e March 1994 UNSC s a n c t i o n s r e v i e w meeting, some members
of t h e C o u n c i l , n o t a b l y France and Russia, have been p r e s s i n g t o
ease economic and p o l i t i c a l pressure on I r a q .
These c o u n t r i e s
advocate r e c o g n i z i n g I r a q ' s l i m i t e d c o o p e r a t i o n w i t h t h e UN i n
the hope t h i s w i l l encourage g r e a t e r compliance i n t h e f u t u r e .
The French and Russians would l i k e i f n o t t o e x p e d i t e , a t l e a s t
to s e t d e f i n i t e l i m i t s on, t h e r e m a i n i n g steps I r a q must take
b e f o r e t h e C o u n c i l can a c t t o l i f t t h e o i l e x p o r t s a n c t i o n .
Before t h e r e can be any c o n s i d e r a t i o n o f e a s i n g o i l e x p o r t
s a n c t i o n s , t h e UN S p e c i a l Commission (UNSCOM) must f u l l y
implement and t e s t i t s weapons o f mass d e s t r u c t i o n l o n g - t e r m
m o n i t o r i n g regime. The French, and some o t h e r members o f t h e
C o u n c i l , want t o f i x a date c e r t a i n f o r t h e b e g i n n i n g o f t h e
weapons m o n i t o r i n g t r i a l p e r i o d and l i m i t i t s d u r a t i o n . We have
f i r m l y opposed imposing any l i m i t s on t h e UNSCOM's e x e c u t i o n o f
i t s mandate and b e l i e v e t h a t e a s i n g s a n c t i o n s w i l l r e s u l t i n
l e s s e r r a t h e r than g r e a t e r I r a q i compliance.
Among t h e G-7, t h e French a r e t h e most a c t i v e i n seeking t o ease
pressure on I r a q . The French and o t h e r s a r e m o t i v a t e d by
commercial i n t e r e s t s t o p r e p o s i t i o n themselves t o dominate t h e
p o s t - s a n c t i o n s market i n I r a q . The Russians a r e m o t i v a t e d by a
d e s i r e t o recover s i g n i f i c a n t debts from I r a q and resume a
l u c r a t i v e arms t r a d e w i t h I r a q . The B r i t i s h and t h e Canadians
remain s o l i d l y w i t h us on t h e need t o m a i n t a i n p r e s s u r e on I r a q
u n t i l i t i s i n f u l l compliance w i t h a l l r e s o l u t i o n s . The
Germans, Japanese and I t a l i a n s , w h i l e i n t e r e s t e d i n resuming
p o s t - s a n c t i o n s commercial t i e s w i t h I r a q , have n o t taken p u b l i c
p o s i t i o n s on t h e q u e s t i o n o f easing s a n c t i o n s .
COMFIDEWStftDeclassi
ff^LLNSON LIBRARY P O O O Y
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PER E.0.13526
�IRAN
We a r e seeking a G-7 consensus t h a t I r a n s h o u l d r e c e i v e no new
o f f i c i a l c r e d i t s or guarantees u n t i l i t ends i t s unacceptable
b e h a v i o r -- e s p e c i a l l y i t s c o n t i n u i n g supply o f weapons and
f u n d i n g t o v i o l e n t opponents o f t h e peace process. A l l o f our
G-7 p a r t n e r s except t h e UK a r e r e s i s t i n g a c u t - o f f o f c r e d i t .
Bonn's p o s i t i o n i s t h a t new FRG c r e d i t s "are n o t a v a i l a b l e " f o r
the moment because o f I r a n ' s f i n a n c i a l d i s a r r a y .
Japan i s alone i n p r o v i d i n g b i l a t e r a l a i d t o Tehran. The second
t r a n c h e o f Tokyo's a i d f o r t h e Karun R i v e r h y d r o e l e c t r i c p r o j e c t
i s n e a r i n g a p p r o v a l . Tokyo i s f e e l i n g our p r e s s u r e , b u t w i l l n o t
end t h e a i d program unless convinced t h a t t h i s i s s u e i s an
administration p r i o r i t y .
While Tehran's a c t i o n s m o t i v a t e our p o l i c y , we cannot i g n o r e
I r a n ' s d i s g r a c e f u l r h e t o r i c . I r a n i a n l e a d e r s have renewed c a l l s
f o r t h e d e s t r u c t i o n o f I s r a e l , b u t t e l l some i n Europe and Japan
t h a t they a r e only p l a y i n g t o I r a n i a n domestic audiences.
USSf^CLiHION LIBRARY P O O O Y
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PER E„a 13526
�SECRET-
BOSNIA
OBJECTIVES
o
Seek agreement t o have the G-7 Summit endorse Contact Group
e f f o r t s t o develop a reasonable, v i a b l e t e r r i t o r i a l
compromise and s t r e s s t h e importance of p r e s s i n g t h e Bosnian
p a r t i e s t o s e i z e t h e c u r r e n t o p p o r t u n i t y t o move toward
f i n a l settlement.
o
Express s u p p o r t f o r t h e c u r r e n t c e a s e - f i r e and urge the
sides t o consider a longer-term cessation of h o s t i l i t i e s .
o
Stress the need t o m a i n t a i n i n t e r n a t i o n a l u n i t y and r e s o l v e ,
e s p e c i a l l y as we approach a c r i t i c a l j u n c t u r e i n t h e t a l k s
and c o n s i d e r how t o respond i f t h e Contact Group map i s not
accepted.
o
Urge a l l n a t i o n s t o g i v e a c t i v e s u p p o r t and c o o p e r a t i o n t o
the War Crimes T r i b u n a l ; s t r e s s the importance o f g a i n i n g
consensus on a Chief Prosecutor.
o
Renew our commitment t o p r o v i d e r e c o n s t r u c t i o n /
r e h a b i l i t a t i o n a s s i s t a n c e and (under c e r t a i n c o n d i t i o n s )
ground t r o o p s f o r s e t t l e m e n t i m p l e m e n t a t i o n .
BACKGROUND
o
The Contact Group met June 16 t o f i n a l i z e i t s t e r r i t o r i a l
p r o p o s a l s , which would be o f f e r e d t o t h e p a r t i e s as t h e
framework f o r a reasonable, v i a b l e s e t t l e m e n t . I f consensus
i s reached, we f a v o r a m i n i s t e r i a l t o b l e s s t h e p r o p o s a l s
and a u t h o r i z e t h e Contact Group t o p r e s e n t an agreed map t o
the p a r t i e s .
o
The Group w i l l a l s o c o n s i d e r means o f p r e s s i n g t h e p a r t i e s
t o accept t h e 51/4 9 p e r c e n t f o r m u l a , and o p t i o n s f o r courses
of a c t i o n s h o u l d e i t h e r or b o t h r e f u s e .
o
Akashi wants t o c o n t i n u e t a l k s w i t h t h e p a r t i e s on e x t e n d i n g
the c e a s e - f i r e .
o
The P r e s i d e n t ' s d i s c u s s i o n s o f t h e Churkin p r o p o s a l ,
i n c l u d i n g i n d i c a t i o n s t h e U.S. would c o n s i d e r s a n c t i o n s
r e l i e f i f t h e Serbs accepted t h e Contact Group's p l a n s and
p u l l e d back t o t h e proposed 51/49 b o r d e r s , have l e f t t h e
Europeans w i t h t h e i m p r e s s i o n t h a t our s t a n d on l i f t i n g
s a n c t i o n s may have moderated.
We may be prepared t o r e c o n s i d e r our s a n c t i o n s p o l i c y
i n t h e ( i n our view u n l i k e l y ) event o f government
r e j e c t i o n of a map and Serb acceptance o f i t .
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Our c o n t i n u i n g o b j e c t i v e , however, i s t o use t h e
s a n c t i o n s t o maximize leverage on t h e Serbs t o t a k e
concrete a c t i o n s t o implement a s e t t l e m e n t .
o
For a v a r i e t y of reasons i n c l u d i n g p o l i t i c a l d i s p u t e s among
UNSC member c o u n t r i e s , t h e War Crimes T r i b u n a l has o f y e t
not s e t t l e d on a p r o s e c u t o r .
o
The Deputy Prosecutor ( t h e A u s t r a l i a n
moving ahead w i t h h i s j o b and expects
criminals this f a l l .
The U.S. i s t h e
contributed s t a f f t o the prosecutor's
o
I n t h e a s s i s t a n c e sphere, we have p r o v i d e d t h e l a r g e s t
q u a n t i t y o f h u m a n i t a r i a n a i d t o t h e r e g i o n o f any s i n g l e
s t a t e (over $560 m i l l i o n s i n c e 1991) .
Graham B l e w i t t ) i s
t o prosecute the f i r s t
o n l y c o u n t r y t o have
office.
KEY POINTS
o
We have reached a c r i t i c a l moment i n t h e c o n f l i c t , when t h e
p a r t i e s a r e poised e i t h e r t o move f o r w a r d toward a
s e t t l e m e n t o r t o s l i d e backward i n t o expanded f i g h t i n g .
o
I n t e r n a t i o n a l u n i t y and r e s o l v e a r e a t a premium; t h e y c o u l d
make a d i f f e r e n c e i n whether o r n o t t h e p a r t i e s s e i z e t h e
c u r r e n t o p p o r t u n i t y t o reach a n e g o t i a t e d s e t t l e m e n t .
o
We must send a c l e a r message t o t h e p a r t i e s t h a t t h e Contact
Group's t e r r i t o r i a l compromise o f f e r s t h e p a r t i e s t h e b e s t
chance they have o f a c h i e v i n g a n e g o t i a t e d s e t t l e m e n t and
t h a t m i s s i n g t h e o p p o r t u n i t y f o r peace means s e r i o u s r i s k s
f o r a l l concerned.
o
G-7 p o l i t i c a l d i r e c t o r s should r e a f f i r m t h a t t h e Contact
Group's p l a n stands t h e b e s t chance o f g a i n i n g broad
i n t e r n a t i o n a l s u p p o r t and thus o f f o r m i n g t h e b a s i s f o r a
j u s t and l a s t i n g peace.
o
G-7 p o l i t i c a l d i r e c t o r s should a l s o express s u p p o r t f o r t h e
UN-brokered c e a s e - f i r e and c o n t i n u i n g e f f o r t s t o b r i n g about
a longer-term cessation of h o s t i l i t i e s .
o
The Contact Group i s a l t e r n a t i v e s s h o u l d one o r b o t h s i d e s
r e j e c t t h e Contact Group's p l a n s . Sanctions remain t h e
s t r o n g e s t i n t e r n a t i o n a l i n s t r u m e n t o f p r e s s u r e on t h e Serbs,
and we need t o ensure we use them t o maximize l e v e r a g e t o
implement a s e t t l e m e n t .
o
The U.S. has p r o v i d e d b o t h money and p e r s o n n e l t o t h e
T r i b u n a l . As o f y e t , no o t h e r c o u n t r y has o f f e r e d e i t h e r .
What do you i n t e n d t o do t o s u p p o r t t h e T r i b u n a l ?
o
As c o n d i t i o n s improve i n t h e F e d e r a t i o n , i n i t i a l p l a n s a r e
being p u t f o r t h f o r Bosnian r e c o n s t r u c t i o n . What a r e your
views on how t h e process can be encouraged? What i s your
c o u n t r y ' s s i t u a t i o n w i t h r e g a r d t o a v a i l a b i l i t y o f funds?
CLINTON LIBRARY P O O O Y
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ALGERIA AND FRENCH OBJECTIVES
The USG o b j e c t i v e i n d e a l i n g w i t h t h e G-7 on A l g e r i a has been t o
urge t h e Europeans t o m a i n t a i n a tough l i n e w i t h t h e A l g e r i a n
regime on t h e need f o r p o l i t i c a l d i a l o g u e a t t h e same time t h a t
i t i s implementing an IMF-supported economic r e f o r m program.
The c r i s i s i n A l g e r i a c o n t i n u e s t o simmer, f u e l e d by f r u s t r a t i o n
a r i s i n g from t h r e e decades of p o l i t i c a l e x c l u s i o n , economic
mismanagement, and s o c i a l i n j u s t i c e .
The unpopular,
m i l i t a r y - b a c k e d regime has l o s t c o n s i d e r a b l e ground t o t h e armed
I s l a m i s t i n s u r g e n t s who have been f i g h t i n g t o t o p p l e i t f o r over
two years. Despite promises by P r e s i d e n t Zeroual t o open a
d i a l o g u e w i t h t h e moderate I s l a m i s t o p p o s i t i o n , no progress has
yet taken place. The A l g e r i a n government has r a l l i e d i t s
s e c u r i t y f o r c e s t o i n f l i c t heavy c a s u a l t i e s on t h e i n s u r g e n t s
s i n c e March. Nonetheless, a t t a c k s on p o l i c e and m i l i t a r y t a r g e t s
c o n t i n u e on a d a i l y b a s i s , and t h e p r o g n o s i s f o r s u s t a i n e d gains
a g a i n s t t h e I s l a m i s t s t h r o u g h a s t r a t e g y o f r e p r e s s i o n i s poor.
The regime i s implementing a b o l d program o f s t r u c t u r a l economic
adjustment under IMF guidance. These r e f o r m s , coupled w i t h t h e
r e c e n t l y concluded debt r e s c h e d u l i n g t h r o u g h t h e P a r i s Club,
c o u l d ease economic h a r d s h i p i n t h e medium term. A l g e r i a
possesses e x t e n s i v e o i l and gas r e s o u r c e s .
Long-term p r o s p e c t s
f o r economic r e c o v e r y , however, depend on a p e a c e f u l r e s o l u t i o n
of t h e i n t e r n a l p o l i t i c a l c o n f l i c t t h r o u g h n e g o t i a t i o n .
The U.S. government has s t r e s s e d t o A l g e r i a n l e a d e r s a t t h e
h i g h e s t l e v e l s t h e u r g e n t need f o r r e a l p o l i t i c a l d i a l o g u e which
b r i n g s d i s a f f e c t e d elements o f t h e populace i n t o a process t o
c h a r t a new, democratic course f o r A l g e r i a . We agree w i t h t h e
major A l g e r i a n p a r t i e s , which i n s i s t t h a t t h i s process must
i n v o l v e an e a r l y r e t u r n t o e l e c t i o n s and a broadening o f
p o l i t i c a l p a r t i c i p a t i o n t o encompass a l l f a c t i o n s , i n c l u d i n g
I s l a m i s t l e a d e r s who r e j e c t t e r r o r i s m . Recognizing t h e
importance o f economic r e f o r m f o r an e v e n t u a l economic r e c o v e r y
and f o r t h e l o n g - t e r m w e l l - b e i n g o f t h e A l g e r i a n people, t h e U.S.
government gave encouragement t o t h e regime i n i t s n e g o t i a t i o n s
w i t h t h e IMF and t h e P a r i s Club. We have made i t c l e a r t h a t t h e
U.S. i s n o t i n a p o s i t i o n t o p r o v i d e d i r e c t a s s i s t a n c e .
France p l a y s a dominant r o l e i n d e t e r m i n i n g European p o l i c y
towards t h e c r i s i s i n A l g e r i a , which t h e French government
c o n s i d e r s i t s most p r e s s i n g problem i n t h e Middle East.
The
French warn o f t h e p o s s i b i l i t y o f deepening c i v i l war l e a d i n g t o
an I s l a m i s t t a k e o v e r .
The p o t e n t i a l f a l l o u t o f such a
development f o r French i n t e r e s t s i n c l u d e s : a f l o o d o f refugees
i n t o France, p e r s e c u t i o n o f t h e F r e n c h - o r i e n t e d A l g e r i a n upper
c l a s s e s and r a d i c a l i z a t i o n o f t h e Muslim community i n France.
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I n c o n t r a s t t o t h e more r e s e r v e d U.S. stance, t h e French
government has openly d e c l a r e d i t s b a c k i n g f o r t h e A l g e r i a n
regime and i s p r o v i d i n g m a t e r i a l a s s i s t a n c e i n an a t t e m p t t o
b o l s t e r i t . P a r i s has p u t i n t e n s e p r e s s u r e on o t h e r European
governments t o g i v e u n c o n d i t i o n a l s u p p o r t t o t h e A l g e r i a n regime,
and t h e European Union has extended over $200 m i l l i o n i n loans t o
A l g e r i a . The French approach emphasizes progress i n economic
r e s t r u c t u r i n g , r a t h e r than p o l i t i c a l d i a l o g u e o r r e s p e c t f o r
human r i g h t s .
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�SECRET•
COCOM SUCCESSOR REGIME
COCOM ended on March 31. We are n e g o t i a t i n g a new m u l t i l a t e r a l
regime t o c o n t r o l t h e t r a n s f e r o f arms and s e n s i t i v e dual-use
goods t o c o u n t r i e s o f concern. The new regime i s t o be g l o b a l i n
scope, w i t h a d i s t i n c t r e g i o n a l f o c u s . Our o b j e c t i v e i s t o
develop a broader i n t e r n a t i o n a l consensus s u p p o r t i n g t r a n s p a r e n c y
and r e s t r a i n t i n arms and dual-use t r a d e , e s p e c i a l l y where t h e
r i s k s o f r e g i o n a l i n s t a b i l i t y and c o n f l i c t are deemed t o be t h e
h i g h e s t . Membership would be broad and based on adherence t o
e f f e c t i v e e x p o r t c o n t r o l s , i n t e r n a t i o n a l n o n p r o l i f e r a t i o n norms
and r e s p o n s i b l e n a t i o n a l e x p o r t p o l i c i e s ( i . e . , no arms s a l e s t o
rogue s t a t e s l i k e I r a n ) .
The March 29-30 High-Level Meeting (HLM) i n The Hague endorsed an
o v e r a l l framework f o r t h e successor regime. P a r t i c i p a n t s a t t h e
HLM (NATO members minus I c e l a n d p l u s Japan, A u s t r a l i a , New
Zealand and the European n e u t r a l s ) agreed t o work t o e s t a b l i s h
t h e new regime by October 1994 ( s i n c e d e f e r r e d t o November).
France was i s o l a t e d i n i t s o p p o s i t i o n t o i n c l u d i n g arms i n t h e
new regime.
I t a l y , Germany, Japan and Canada have been v e r y s u p p o r t i v e o f t h e
new regime. UK and France d i s l i k e (and France opposes)
m e a n i n g f u l t r a n s p a r e n c y and c o n s u l t a t i o n mechanisms on arms.
There i s i m p l i c i t agreement t o a v o i d arms s a l e s t o s t a t e s whose
p o l i c i e s are sources o f concern, w i t h a common u n d e r s t a n d i n g t h a t
t h i s a p p l i e s t o I r a n , I r a q , L i b y a and N o r t h Korea. D e s p i t e t h e
r e m a i n i n g d i f f e r e n c e s , a r e c e n t w o r k i n g group meeting i n P a r i s
made good progress toward agreement on i n f o r m a t i o n exchange and
o t h e r p o i n t s t h a t may l e a d t o an a c c e p t a b l e , e f f e c t i v e regime.
The q u e s t i o n o f Russian membership i s now t h e c h i e f impediment t o
e s t a b l i s h m e n t o f t h e COCOM successor regime. Russian
p a r t i c i p a t i o n as a f o u n d i n g member i s sought, b u t c o n t i n u e d
Russian arms s a l e s t o I r a n go a g a i n s t t h e v e r y purposes o f t h e
regime. A l l s i x G-7 p a r t n e r s oppose Russian arms s a l e s t o I r a n .
The UK and France, however, have been r e l u c t a n t t o agree t h a t an
end t o these t r a n s f e r s i s a necessary c o n d i t i o n f o r Russian
membership, a r g u i n g t h a t i t w i l l be e a s i e r t o i n f l u e n c e Russian
b e h a v i o r a f t e r they j o i n .
I n a d d i t i o n t h e y have made Russian
p a r t i c i p a t i o n a p r e r e q u i s i t e f o r f i n a l agreement on t h e arms s i d e
of t h e new regime.
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P H O T O C O P Y
�GOMFIDSMMAL
NON-PROLIFERATION
At t h e Summit we should underscore the importance we p l a c e on
checking and r e v e r s i n g weapons p r o l i f e r a t i o n .
And we s h o u l d
h i g h l i g h t key n o n - p r o l i f e r a t i o n elements from t h e G-7 p o l i t i c a l
statement i n o r d e r t o promote a c o n c r e t e work program on t h i s
issue.
N o n - p r o l i f e r a t i o n issues w i l l be i n c l u d e d i n the Chairman's
Statement t o be i s s u e d by t h e I t a l i a n hosts a t t h e end o f t h e
Summit, r e f l e c t i n g d i s c u s s i o n s among t h e Seven and Russia
("7+1"). A t the June 17 G-7 n o n - p r o l i f e r a t i o n e x p e r t s meeting,
U.S. e x p e r t s sought t o emphasize these h i g h p r i o r i t y goals f o r
t h a t statement:
F i s s i l e M a t e r i a l s : T h i s i s t h e i s s u e most i n need o f your
a c t i v e i n t e r v e n t i o n . We should seek t o overcome a l l i e d
f o o t d r a g g i n g and secure a s t r o n g endorsement f o r t h e f i s s i l e
m a t e r i a l p r o d u c t i o n c u t o f f t r e a t y proposed by t h e P r e s i d e n t
at the UNGA i n September, 1993.
While not openly opposing
such a t r e a t y , the B r i t i s h and French are concerned about
the c o s t s o f implementing i t a t t h e i r c u r r e n t l y
unsafeguarded n u c l e a r f a c i l i t i e s .
Russia has endorsed t h e
t r e a t y p r o p o s a l . We s h o u l d a l s o encourage c o o p e r a t i o n w i t h
Russia t o improve c o n t r o l s and a c c o u n t a b i l i t y over n u c l e a r
m a t e r i a l s i n both c i v i l and m i l i t a r y s e c t o r s and seek G-7
commitment t o a v o i d t h e a c c u m u l a t i o n o f excessive p l u t o n i u m
stocks by c i v i l n u c l e a r programs. We w i l l need t o be
c a r e f u l t h a t t h i s i s n o t seen by t h e Europeans o r Japanese
as a f r o n t a l a t t a c k on t h e i r plans t o use p l u t o n i u m i n t h e i r
c i v i l n u c l e a r a c t i v i t i e s , as t h i s i s a p o i n t o f h i g h
political sensitivity.
N o r t h Korea: We s h o u l d seek 7+1 s u p p o r t f o r t h e
i n t e r n a t i o n a l e f f o r t t o b r i n g N o r t h Korea back i n t o NPT
compliance and a p p r i s e l e a d e r s o f t h e s t a t u s o f t h e t h i r d
round o f U.S. space t a l k s .
South A s i a : We should i n t h e f i r s t i n s t a n c e seek 7+1
s u p p o r t t o cap, r o l l b a c k and e v e n t u a l l y e l i m i n a t e e x i s t i n g
I n d i a n and P a k i s t a n i n u c l e a r weapons programs, head o f f t h e
impending deployment o f b a l l i s t i c m i s s i l e s and e s t a b l i s h a
m u l t i l a t e r a l forum on arms c o n t r o l , n o n - p r o l i f e r a t i o n and
r e g i o n a l s e c u r i t y i n South A s i a . We s h o u l d persuade o u r
p a r t n e r s t o promote those goals w i t h I n d i a and P a k i s t a n .
A l l 7+1 c o u n t r i e s s h o u l d be g e n e r a l l y s u p p o r t i v e o f o u r
p i t c h : Japan and Russia have b o t h o f f e r e d t o co-sponsor
m u l t i l a t e r a l s ( P a k i s t a n i s c o o l t o any co-sponsors.) The
Canadians a l s o want t o p a r t i c i p a t e .
Iraq:
(Covered i n a s e p a r a t e paper)
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�Nuclear Smuggling: We should d i r e c t our n a t i o n a l
a u t h o r i t i e s t o c o o r d i n a t e w i t h each o t h e r on c o m b a t t i n g
n u c l e a r smuggling.
We should develop a p l a n o f a c t i o n t h a t
i n v o l v e s o t h e r i n t e r e s t e d s t a t e s . The 7+1 s h o u l d undertake
t o p r o v i d e a s s i s t a n c e t o s t r e n g t h e n p h y s i c a l p r o t e c t i o n and
nuclear m a t e r i a l s accounting.
We s h o u l d seek agreement
f i r s t t o share i n f o r m a t i o n on t h i s problem and then t o
c o o r d i n a t e law enforcement and o t h e r a n t i - s m u g g l i n g
a s s i s t a n c e t o a f f e c t e d s t a t e s . Most c o u n t r i e s s h o u l d
support i t i n p r i n c i p l e .
Land Mine C o n t r o l s : We would l i k e t h e 7+1 t o s u p p o r t
m o r a t o r i a on t h e e x p o r t o f a n t i - p e r s o n n e l l a n d mines,
e f f o r t s t o s t r e n g t h e n t h e Convention on C o n v e n t i o n a l Weapons
and i t s p r o t o c o l on landmine use, i n c r e a s e d a s s i s t a n c e t o
demining t h r o u g h o u t t h e w o r l d and e a r l y commencement o f
n e g o t i a t i o n s on a m u l t i l a t e r a l landmine c o n t r o l regime.
Russia and I t a l y (major e x p o r t e r s o f landmines) have b o t h
been reasonably r e c e p t i v e t o our m o r a t o r i a . The UK and
Canada would l i k e e x c e p t i o n s t o preserve landmine t r a d e w i t h
us (we don't a g r e e ) , and France i s f i r m l y on board.
Successor t o COCOM: We should welcome t h e p r o g r e s s made
toward s e t t i n g up a new m u l t i l a t e r a l e x p o r t c o n t r o l regime
and press f o r agreement on t h e e s t a b l i s h m e n t o f a successor
regime by t h e l a t e F a l l 1994 t a r g e t d a t e , i n o r d e r t o
r e s t r i c t t h e a c q u i s i t i o n o f armaments and s e n s i t i v e dual-use
items f o r m i l i t a r y uses by s t a t e s such as I r a n , I r a q , Libya
and North Korea.
Russia w i l l n o t be r e c e p t i v e t o a n y t h i n g beyond a g e n e r a l
d e s c r i p t i o n o f t h e problem, and none o f t h e 7+1 w i l l be v e r y
s u p p o r t i v e o f naming t a r g e t c o u n t r i e s o r r e g i o n s . On t h e
p r i n c i p a l o f t h e successor, France and t h e UK s t i l l o b j e c t
t o i n c l u d i n g arms s a l e s i n t h e new regime; I t a l y , Germany,
Japan and Canada a r e s u p p o r t i v e o f our p o s i t i o n t h a t arms
s a l e s must be i n c l u d e d .
Others:
We s h o u l d r e a f f i r m our s u p p o r t f o r i n d e f i n i t e and
u n c o n d i t i o n a l e x t e n s i o n o f t h e Nuclear N o n p r o l i f e r a t i o n
T r e a t y , commit o u r s e l v e s t o work f o r t h e e a r l i e s t p o s s i b l e
r a t i f i c a t i o n o f t h e Chemical Weapons Convention by our
governments and f o r e n t r y i n t o f o r c e e a r l y i n 1995, seek new
measures t o s t r e n g t h e n t h e B i o l o g i c a l Weapons Convention and
r e a f f i r m our s u p p o r t f o r c o n c l u s i o n o f a m u l t i l a t e r a l
comprehensive n u c l e a r t e s t ban t r e a t y as soon as p o s s i b l e .
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We wish t o m a i n t a i n G-7 focus on c o u n t e r - t e r r o r i s m i s s u e s ,
e s p e c i a l l y on Libya and I r a n .
I n Libya's case we want G-7
s u p p o r t f o r increased p r e s s u r e on T r i p o l i t o comply w i t h UNSC
r e s o l u t i o n s on the Pan Am 103 and UTA t e r r o r i s t a t t a c k s . We a l s o
wish t o persuade the G-7 t o c o n d i t i o n t h e i r economic t i e s w i t h
I r a n on improved I r a n i a n performance i n t e r r o r i s m and o t h e r
areas.
There has been no progress i n b r i n g i n g t h e two Libyan suspects t o
t r i a l i n the U.S. o r the UK f o r t h e December 1988 bombing o f Pan
Am 103, nor f u l l Libyan c o o p e r a t i o n w i t h t h e French on UTA 772.
L i b y a has been p r e s s i n g f o r a t r i a l b e f o r e S c o t t i s h judges
s i t t i n g i n the Hague, an idea endorsed by t h e Arab League, t h e
New York Times and h i g h l e v e l s o f the E g y p t i a n government.
We and the B r i t i s h have r e j e c t e d t h i s p r o p o s a l , which i s
l o g i s t i c a l l y i m p r a c t i c a l , would c o m p l i c a t e p r o s e c u t i o n and i s
i n t e n d e d t o d i v i d e the Perm-3 and e n t a n g l e us i n endless
n e g o t i a t i o n s over d e t a i l s ; t h e French have concurred i n t h i s
r e j e c t i o n . Libya i s c o n t i n u i n g i t s campaign t o get o f f t h e hook,
c o u r t i n g t h e French and Spanish w i t h commercial d e a l s ,
i n t e n s i f y i n g d i p l o m a t i c e f f o r t s w i t h t h e V a t i c a n and among the
non-permanent members o f t h e UNSC and pushing t h r o u g h innumerable
i n t e r m e d i a r i e s f o r a d i a l o g u e w i t h the USG.
L i b y a has taken o n l y e a s i l y r e v e r s i b l e and cosmetic steps t o
reduce s u p p o r t f o r t e r r o r i s m ; i t i s w i d e l y b e l i e v e d t h e Libyans
were behind the December k i d n a p p i n g i n C a i r o o f d i s s i d e n t (and
U.S. r e s i d e n t ) Mansour K i k h i a ; h i s w i f e has p u b l i c l y accused them
of t r y i n g t o buy her s i l e n c e .
The USG i s committed t o t i g h t e n i n g s a n c t i o n s , absent c l e a r s i g n s
of progress i n meeting UNSC r e q u i r e m e n t s ; you are on r e c o r d as
f a v o r i n g a world-wide embargo on i m p o r t s o f Libyan o i l .
This
p r o p o s a l i s u n l i k e l y t o win a p p r o v a l i n t h e UNSC, which has l e d
us t o weigh o t h e r o p t i o n s : s t r o n g e r p r e s s u r e t o implement
e x i s t i n g s a n c t i o n s and expansion o f t h e e x i s t i n g f i n a n c i a l assets
f r e e z e t o cover some p o r t i o n o f c u r r e n t o i l revenues which are
not now f r o z e n .
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have supported s a n c t i o n s t o d a t e , b u t t h e y show no enthusiasm
t i g h t e n i n g s a n c t i o n s f u r t h e r . An o i l embargo would t h r e a t e n
v i a b i l i t y o f t h e French, I t a l i a n and Spanish economies. The
French and I t a l i a n s f e a r Qadhafi's f a l l might f u r t h e r d e s t a b i l i z e .
N o r t h A f r i c a ; i n g e n e r a l t h e West Europeans, who buy 90 per cent
of Libya's o i l e x p o r t s , p r e f e r t o g i v e e x i s t i n g s a n c t i o n s more
t i m e t o take e f f e c t .
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We c o n t i n u e t o r e g a r d I r a n as c u r r e n t l y t h e most a c t i v e s t a t e
sponsor o f t e r r o r i s m .
I n a d d i t i o n t o i t s d i r e c t involvement i n
mounting a s s a s s i n a t i o n s a g a i n s t d i s s i d e n t s i n Germany, I t a l y ,
France and Turkey, I r a n i a n support f o r b o t h I s l a m i c and s e c u l a r
t e r r o r i s t groups -- e s p e c i a l l y H i z b a l l a h and t h e PFLP-GC -remains a cause f o r s e r i o u s concern.
I r a n a l s o seeks t o expand
i t s t i e s t o r a d i c a l I s l a m i c groups i n Egypt and elsewhere i n
North A f r i c a . The USG w i l l c o n t i n u e t o keep t h e focus on
unacceptable I r a n i a n behavior i n such areas as t e r r o r i s m , t h e
a c q u i s i t i o n o f WMD and human r i g h t s .
Some Western observers have attempted t o draw a f a l s e d i s t i n c t i o n
between t h e a c t i o n s and p o l i c y o f a "moderate" I r a n i a n regime and
" h a r d - l i n e " elements o r p r i v a t e I r a n i a n o r g a n i z a t i o n s . Some o f
our a l l i e s , n o t a b l y Germany, have embraced t h i s f a l s e dichotomy
i n order b e t t e r t o f o l l o w n a t i o n a l commercial and p o l i t i c a l
i n t e r e s t s . Although Japan has e a g e r l y pursued commercial t i e s
w i t h I r a n w h i l e a d o p t i n g a c a u t i o u s approach on t e r r o r i s m i s s u e s ,
i n r e c e n t months t h e GOJ has made l a u d a b l e r e p r e s e n t a t i o n s t o
I r a n on such issues as t h e Middle East peace process and
I r a n i a n - N o r t h Korean m i s s i l e d e a l s .
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BURMA
Burma i s one o f the w o r l d ' s w o r s t abusers o f human r i g h t s , source
of much of the world's h e r o i n and East Asia's l a r g e s t producer o f
refugees.
While the r u l i n g S t a t e Law and Order R e s t o r a t i o n
C o u n c i l (SLORC) has taken some modest steps s i n c e March 1992
(when General Than Shwe became chairman) t o ease m a r t i a l law,
such as r e l e a s i n g some p o l i t i c a l p r i s o n e r s , l i f t i n g t h e curfew
and re-opening u n i v e r s i t i e s , t h e r e has been no fundamental change
in i t s repressive rule.
A l t h o u g h our i n f l u e n c e on t h i s c l o s e d s o c i e t y i s l i m i t e d , t h e
U.S. c o n t i n u e s t o press f o r democratic r e f o r m and t o m a i n t a i n
i n t e r n a t i o n a l pressure f o r r e s p e c t f o r human r i g h t s .
Our e f f o r t s
toward these goals i n c l u d e co-sponsoring o r s u p p o r t i n g UNGA and
UNHRC r e s o l u t i o n s d e p l o r i n g Burmese human r i g h t s abuses f o r the
p a s t t h r e e years, a d o p t i n g an arms embargo and c u t t i n g o f f a l l
b i l a t e r a l a s s i s t a n c e and h o l d i n g m u l t i l a t e r a l a s s i s t a n c e t o a
minimum focused o n l y on b a s i c human needs.
Basic p o l i t i c a l l i b e r t i e s f o r t h e Burmese people are e i t h e r
n o n - e x i s t e n t o r s h a r p l y c u r t a i l e d . The m i l i t a r y regime has
r e f u s e d t o implement t h e r e s u l t s o f t h e 1990 e l e c t i o n s . The
Burmese Army c o n t i n u e s t o employ f o r c e d l a b o r under inhumane
c o n d i t i o n s i n i t s campaigns a g a i n s t t h e e t h n i c m i n o r i t i e s .
I n January 1993, the SLORC convened a hand-picked N a t i o n a l
Convention, now i n recess u n t i l September, t o d r a f t g u i d e l i n e s
f o r a new c o n s t i t u t i o n , a process which may t a k e y e a r s .
Delegates who have v o i c e d o p i n i o n s n o t consonant w i t h t h e SLORC's
p o s i t i o n have been removed.
Nobel Peace P r i z e winner Aung San Suu K y i and o t h e r p o l i t i c a l
p r i s o n e r s remain under d e t e n t i o n . Congressman B i l l Richardson
(D-NM) h e l d unprecedented meetings w i t h Aung San Suu K y i and
Burmese m i l i t a r y strongman LTG Khin Nyunt i n Rangoon i n
mid-February. Aung San Suu K y i expressed eagerness f o r a
h i g h - l e v e l dialogue w i t h the j u n t a w h i l e u r g i n g the i n t e r n a t i o n a l
community t o i n c r e a s e p r e s s u r e f o r r e f o r m . The regime has r u l e d
out t a l k s i n the foreseeable f u t u r e .
Burma c o n t i n u e s t o purchase major items o f m i l i t a r y equipment
from China, Poland and o t h e r c o u n t r i e s f o r use a g a i n s t e t h n i c
i n s u r g e n c i e s . The US, t h e EC and A u s t r a l i a m a i n t a i n v o l u n t a r y
arms embargoes a g a i n s t Burma.
Over 72,000 asylum seekers from Burma, i n c l u d i n g 65,000 e t h n i c
m i n o r i t i e s , r e s i d e i n camps along t h e Thai-Burma b o r d e r . I n
1991-92, over 270,000 Rohingyas [Burmese Muslims] f l e d Arakan
p r o v i n c e f o r Bangladesh as a r e s u l t o f widespread p e r s e c u t i o n by
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t h e Burmese m i l i t a r y .
R e p a t r i a t i o n , w i t h UNHCR m o n i t o r i n g , i s
now underway, but p r o g r e s s i n g s l o w l y .
Burma i s t h e world's l a r g e s t producer o f h e r o i n . The SLORC
undertakes few law enforcement measures and has reached p o l i t i c a l
accommodations w i t h some e t h n i c i n s u r g e n t groups which p e r m i t
them t o c o n t i n u e t r a f f i c k i n g i n r e t u r n f o r ceasing h o s t i l i t i e s
a g a i n s t the c e n t r a l government. The USG does not c e r t i f y Burma
as c o o p e r a t i n g i n the f i g h t a g a i n s t n a r c o t i c s . The USG p r o v i d e s
no d i r e c t a s s i s t a n c e t o Burma; b i l a t e r a l c o u n t e r - n a r c o t i c s
c o o p e r a t i o n i s l i m i t e d t o w o r k i n g - l e v e l DEA/GOB l i a i s o n .
The G-7 c o u n t r i e s a l l share our goals o f i m p r o v i n g human r i g h t s ,
promoting democracy and suppressing n a r c o t i c s . The European
members and Canada have backed our t a c t i c a l approach o f
maintaining i n t e r n a t i o n a l pressure.
This i n c l u d e s a v o l u n t a r y
arms embargo, suspension o f government-to-government a i d t o
Rangoon, v o t i n g a g a i n s t loans t o Burma i n t h e I F I ' s and a d o p t i o n
of successive, s t r o n g UNGA and UNHCR r e s o l u t i o n s d e p l o r i n g t h e
regime's human r i g h t s abuses and u r g i n g democratic change.
However, France and Germany have r e c e n t l y i n d i c a t e d i n t e r e s t i n
combining t h i s approach w i t h i n c r e a s e d engagement.
Japan's view i s c l o s e r t o t h e ASEAN approach of a v o i d i n g d i r e c t
c r i t i c i s m of Rangoon and engaging Burma t h r o u g h economic t i e s and
f r i e n d l y r e l a t i o n s t o best promote r e f o r m s . Japan i s engaging
more w i t h Burma and p r o v i d i n g modest new b i l a t e r a l h u m a n i t a r i a n
a s s i s t a n c e and t r a i n i n g programs.
At a Deputies Committee i n March, t h e NSC determined t h a t t h e
P o l i t i c a l D e c l a r a t i o n a t t h e G-7 Summit s h o u l d i n c l u d e a
r e f e r e n c e t o Burma. Our p r i n c i p a l g o a l i s t o work c l o s e l y w i t h
G-7 c o u n t r i e s and o t h e r s t o f i n d ways t o i n c r e a s e p r e s s u r e on t h e
SLORC t o r e f o r m . The U.S. urges t h e G-7 t o i n c l u d e a r e f e r e n c e
t o Burma i n t h e summit p o l i t i c a l d e c l a r a t i o n n o t i n g Burma's
d e p l o r a b l e human r i g h t s s i t u a t i o n , u r g i n g a d i a l o g u e between t h e
regime and Aung San Suu K y i and c a l l i n g f o r her u n c o n d i t i o n a l
r e l e a s e and t h a t o f a l l o t h e r p r i s o n e r s o f conscience.
The U.S. b e l i e v e s the G-7 c o u n t r i e s ' s h o u l d i n c r e a s e e f f o r t s t o
promote democratic r e f o r m i n Burma. We urge t h a t these i n c l u d e
encouraging t h e j u n t a t o t a l k w i t h d e t a i n e d o p p o s i t i o n l e a d e r and
Nobel Laureate Aung San Suu K y i as t h e key t o b r e a k i n g t h e
p o l i t i c a l impasse and p r e s s i n g t h e m i l i t a r y t o observe b a s i c
human r i g h t s and freedoms; c a l l i n g f o r expanded v o l u n t a r y o r
mandatory arms embargoes by o t h e r c o u n t r i e s ; u r g i n g t h e ASEAN
c o u n t r i e s t o put more substance i n t h e i r p o l i c y o f c o n s t r u c t i v e
engagement towards Burma by e s t a b l i s h i n g benchmarks t o e v a l u a t e
t h e progress o f t h e m i l i t a r y regime towards genuine r e f o r m .
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The U n i t e d S t a t e s c o n s i d e r s i n t e r n a t i o n a l n a r c o t i c s t r a f f i c k i n g
t o be a fundamental t h r e a t t o democracy and s u s t a i n a b l e
development around t h e w o r l d . T h i s premise u n d e r l i e s PDD-14 -U.S. P o l i c y on I n t e r n a t i o n a l C o u n t e r - n a r c o t i c s T r a f f i c k i n g i n t h e
Western Hemisphere -- and i s s t r e s s e d i n t h e P r e s i d e n t ' s N a t i o n a l
Drug C o n t r o l S t r a t e g y . Both documents d i r e c t t h e U n i t e d S t a t e s
t o r e f o c u s i t s i n t e r n a t i o n a l drug c o n t r o l e f f o r t s i n response t o
t h e growing n a r c o t i c s t h r e a t t o democratic and economic r e f o r m s ,
new drug c o n t r o l o p p o r t u n i t i e s i n t h e p o s t - C o l d War environment
and t i g h t e r budgets.
v..
The p o l i c y has f o u r key areas o f emphasis. F i r s t , i t focuses
s u p p o r t on those c o u n t r i e s t h a t have t h e p o l i t i c a l w i l l t o
c o n f r o n t the drug t r a d e . Second, i t d i r e c t s more emphasis on
i n s t i t u t i o n - b u i l d i n g and s u s t a i n a b l e development so t h a t host
n a t i o n s can shoulder more o f t h e drug c o n t r o l e f f o r t and drug
producers can have economic a l t e r n a t i v e s t o t u r n t o . T h i r d , i t
s t r e s s e s g r e a t e r i n t e r n a t i o n a l c o o p e r a t i o n and more i n v o l v e m e n t
by m u l t i l a t e r a l o r g a n i z a t i o n s , i n c l u d i n g t h e i n t e r n a t i o n a l
f i n a n c i a l i n s t i t u t i o n s ( I F I s ) and m u l t i l a t e r a l development banks
(MDBs). F o u r t h , i t c a l l s f o r a g r e a t e r a t t a c k on t h e l e a d i n g
t r a f f i c k i n g o r g a n i z a t i o n s , i n c l u d i n g stepped up e f f o r t s t o
c o n t r o l money l a u n d e r i n g and t h e d i v e r s i o n o f e s s e n t i a l
d r u g - p r o d u c i n g chemicals. I t says t h a t " h a l t i n g money l a u n d e r i n g
must be an i n t e g r a l p a r t o f t h e o v e r a l l s t r a t e g y . "
The G-7 Summit has been an i m p o r t a n t forum f o r d e v e l o p i n g
i n t e r n a t i o n a l consensus and a c t i o n a g a i n s t t h e i n t e r n a t i o n a l drug
t r a d e and can be used t o s u p p o r t o u r i n t e r n a t i o n a l drug c o n t r o l
o b j e c t i v e s a g a i n . The 1989 Summit mandated t h e F i n a n c i a l A c t i o n
Task Force (FATF).
The 26-member FATF has been o u r most
e f f e c t i v e v e h i c l e f o r p r o m o t i n g i n t e r n a t i o n a l a c t i o n a g a i n s t drug
money l a u n d e r i n g . The 1990 Summit mandated t h e Chemical A c t i o n
Task Force which i s p r o v i d i n g t h e f o u n d a t i o n f o r i n t e r n a t i o n a l
c o o p e r a t i o n i n chemical d i v e r s i o n c o n t r o l .
T h i s year, i n s u p p o r t o f o u r p o l i c y t o p l a c e more emphasis on
i n s t i t u t i o n - b u i l d i n g , and t o s t r e s s g r e a t e r i n v o l v e m e n t by MDBs
and I F I s , we want t o use t h e Summit t o note t h e G-7's i n t e r e s t i n
h a v i n g the MDBs and I F I s i n c l u d e more s p e c i f i c c o u n t e r - n a r c o t i c s
o b j e c t i v e s i n t h e i r program development. G-7 members, however,
a r e r e l u c t a n t t o l i n k development w i t h law enforcement.
Emphasis, t h e r e f o r e , s h o u l d be on programs t h a t p r o v i d e f i n a n c i n g
f o r a l t e r n a t i v e / s u s t a i n a b l e development and enhance governance.
A c c o r d i n g l y , we s h o u l d m o b i l i z e Summit s u p p o r t b e h i n d o u r e f f o r t s
t o get MDBs and I F I s t o more i m p l i c i t l y a t t a c k drug t r a f f i c k i n g
i n t h e i r program development. These range from e f f o r t s t o h e l p
farmers move away from drug p r o d u c t i o n t o s u p p o r t f o r d e m o c r a t i c
i n s t i t u t i o n b u i l d i n g t h r o u g h a d m i n i s t r a t i o n o f j u s t i c e programs.
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UN ISSUES:
PEACEKEEPING ASSESSMENT REDUCTION
The UN e s t a b l i s h e d the peacekeeping s c a l e o f assessments i n 1973.
There have been s i g n i f i c a n t changes i n t h e w o r l d economy s i n c e
then t h a t we t h i n k s h o u l d be r e f l e c t e d i n r e v i s i o n s t o t h e s c a l e .
The U.S. share o f t h e w o r l d economy i n t h e e a r l y 1970's was over
30 percent and today i s b a r e l y above 25 p e r c e n t .
Three months ago we began a campaign t o reduce o u r share o f UN
peacekeeping assessments from 31.7 p e r c e n t t o 25 p e r c e n t .
Congress has s i n c e enacted l e g i s l a t i o n t h a t would b a r U.S.
payments i n excess o f 25 p e r c e n t b e g i n n i n g i n f i s c a l year 1996.
We want t o achieve a more r a t i o n a l , e q u i t a b l e and up-to-date
assessment through a consensus among UN member s t a t e s . This
would broaden support f o r UN peacekeeping and p u t f u n d i n g on a
more s u s t a i n a b l e and p r e d i c t a b l e f o u n d a t i o n . I t would a l s o
b e t t e r r e f l e c t the f a c t t h a t t h e UN i s an i n s t r u m e n t o f a l l
member s t a t e s . We have r a i s e d t h i s i s s u e w i t h G-7/P-5
governments a t h i g h l e v e l s on f o u r occasions, i n c l u d i n g a t t h e
May and June P o l i t i c a l D i r e c t o r s ' meetings and i n a l e t t e r from
Warren C h r i s t o p h e r June 14 t o G-7/P-5 f o r e i g n m i n i s t e r s .
A l t h o u g h we have not y e t r e c e i v e d answers t o h i s l e t t e r , o t h e r
responses have been lukewarm because o f t h e r e a l i z a t i o n t h a t
decreasing our payment w i l l mean o t h e r c o u n t r i e s w i l l have t o
i n c r e a s e t h e i r payments.
F a i l u r e by the i n t e r n a t i o n a l community t o address t h i s i s s u e w i l l
l e a d t o an i n c r e a s i n g l y l a r g e gap between t h e UN peacekeeping
budget and t h e monies a c t u a l l y a v a i l a b l e t o f u n d i t . The
consequence w i l l be e i t h e r a huge d e f i c i t i n funds, o r h i g h l y
i n f l a t e d budgets p u r p o s e l y o v e r e s t i m a t e d because t h e p a r t i e s know
o n l y a p o r t i o n o f t h e b i l l w i l l be p a i d . E i t h e r outcome w i l l
t h r e a t e n t h e i n t e r n a t i o n a l system and a f f e c t UN c r e d i b i l i t y and
effectiveness.
B o u t r o s - G h a l i supports o u r g o a l and has mounted an appeal t o t e n
o t h e r c o u n t r i e s (none members o f t h e G-7) t o i n c r e a s e t h e
p r o p o r t i o n o f peacekeeping assessments t h e y pay.
The c o u n t r i e s
s e l e c t e d were among those w i t h r e l a t i v e l y h i g h r a t e s o f p e r
c a p i t a income, b u t w h i c h b e n e f i t from a d i s c o u n t under t h e UN
s c a l e o f peacekeeping assessments. Responses from these
c o u n t r i e s have a l s o been lukewarm.
We hope t h a t you w i l l be a b l e t o secure G-7 s u p p o r t f o r
s t r e n g t h e n i n g t h e UN system and i m p r o v i n g i t s e f f i c i e n c y ,
i n c l u d i n g i n s t i t u t i n g an O f f i c e o f t h e I n s p e c t o r General.
A l t h o u g h we do not expect e x p l i c i t Summit s u p p o r t o f a 25 p e r c e n t
cap, we can hope f o r endorsement o f t h e p r i n c i p l e t h a t no n a t i o n
s h o u l d pay an excessive share.
We hope you w i l l g a i n s u p p o r t f o r
t h i s p o s i t i o n , i n c l u d i n g a statement s u p p o r t i n g i t i n t h e Summit
Declaration.
•oec'assify'cnCLmTON LIBRARY P O O O Y ™RE.O.0526
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G-7 Responses t o Demarche on Reducing U.S.
Peacekeeping
Assessment Rate and R e s u l t i n g Added Costs* f o r Each
UK
would not welcome a r e v i s i o n t h a t i n c r e a s e s UK
c o n t r i b u t i o n ; have presented a p r o p o s a l t h a t s i m p l i f i e s
assessment r a t e s ( m a r g i n a l l y reduces t h e UK r a t e ) , b u t
does not reduce the U.S. r a t e t o 25 p e r c e n t .
Added c o s t :
Canada
supports a f u l l review of UN assessments, b u t notes
Canada a l r e a d y pays more than i t i s f o r m a l l y assessed
due t o v o l u n t a r y c o n t r i b u t i o n s and uncompensated t r o o p
c o n t r i b u t i o n costs.
Added c o s t :
France
million.
$26.5 m i l l i o n .
$12.8
million.
hope t o c o n s i d e r peacekeeping f u n d i n g s e p a r a t e l y from
i s s u e o f r e g u l a r assessments; r e d u c i n g r e g u l a r budget
c e i l i n g t o 20 p e r c e n t " i s a l i t t l e d r a s t i c . "
Added c o s t :
Russia
$9.5
s t i l l s t u d y i n g t h e p r o p o s a l ; acknowledge l o g i c t h a t
r e d u c i n g excessive U.S. f i n a n c i a l burden would h e l p t o
s t r e n g t h e n t h e UN; n o t i n a p o s i t i o n t o i n c r e a s e
I t a l y ' s own c o n t r i b u t i o n s .
Added c o s t :
Japan
million.
understands need f o r U.S. t o reduce burden o f UN
assessments; urges o v e r a l l u p d a t i n g o f assessment s c a l e
and movement o f some c o u n t r i e s t o h i g h e r c a t e g o r i e s ;
much e a s i e r t o s e l l i n c r e a s e based on FRG's assumption
of a permanent C o u n c i l seat.
Added c o s t :
Italy
$9.2
s e n s i t i v e p o l i t i c a l i s s u e i n view o f c o n s i d e r a b l e d r a i n
on t h e French budget and g r e a t d e l a y i n reimbursement
of t r o o p c o n t r i b u t i o n c o s t s ; d e f i n i t i v e response must
a w a i t thorough study o f p r o p o s a l ; r e c o g n i z e t h e need
f o r some c o u n t r i e s ( i . e . , Japan and t h e G u l f s t a t e s ) t o
pay more, b u t l i k e l y t o oppose any change t h a t would
r e s u l t i n h i g h e r payments f o r France.
Added c o s t :
Germany
$8.1 m i l l i o n .
$36.9 m i l l i o n .
concerned t h a t U.S. p r o p o s a l would r e q u i r e Russia t o
pay more; supports t h e U.K. p r o p o s a l .
Added c o s t :
CONFIDENTIAL.
$10.7
million.
LINTON LIBRARY P O O O Y
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* The added c o s t s i n d i c a t e what t h e i n c r e a s e d assessments ( f o r
b o t h t h e UN r e g u l a r and peacekeeping budgets) f o r each c o u n t r y
would be i f our r e v i s e d scales were i n e f f e c t i n 1994. Figures
are based on e s t i m a t e d t o t a l UN peacekeeping assessments i n 1994
of $3.5 b i l l i o n and can be no more than i n d i c a t i v e .
COMFIDENMftfc
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OECD SECRETARY GENERAL CONTEST
The second f i v e - y e a r term o f t h e incumbent S e c r e t a r y General
(SYG) o f t h e OECD, Jean-Claude Paye o f France, e x p i r e s t h i s
September. The U.S. and most o t h e r members b e l i e v e t h a t a l t h o u g h
Paye has l e d t h e OECD w i t h i n t e g r i t y , 10 years i s l o n g enough.
I n p a r t i c u l a r , w h i l e we have been c a r e f u l n o t t o p a i n t t h i s as an
"anti-European" i s s u e , we b e l i e v e t h a t t h e OECD c o u l d r e v i t a l i z e
i t s sometimes E u r o - c e n t r i c and c a u t i o u s approach t h r o u g h new
leadership.
With encouragement from t h e U.S. and Japan, Canadian Prime
M i n i s t e r C h r e t i e n i n December 1993 proposed Donald Johnston, t h e
P r e s i d e n t o f t h e PM's L i b e r a l P a r t y , and a former government
m i n i s t e r and member o f p a r l i a m e n t , t o r e p l a c e Paye. Johnston, a
h i g h l y - r e g a r d e d lawyer and e x p e r t on p u b l i c f i n a n c e , i s c r e d i t e d
w i t h e n g i n e e r i n g C h r e t i e n ' s and t h e L i b e r a l P a r t y ' s i m p r e s s i v e
v i c t o r y i n t h e October 1993 g e n e r a l e l e c t i o n s . Johnston i s
c o n s i d e r e d a s t r o n g proponent o f f r e e t r a d e and broke w i t h h i s
p a r t y t o support t h e U.S.-Canada Free Trade Agreement. The
Canadian Government and Johnston have mounted an a c t i v e campaign,
and Johnston has now v i s i t e d a l l OECD member c o u n t r i e s t o meet
w i t h key m i n i s t e r i a l - l e v e l o f f i c i a l s .
v.
There a r e t h r e e o t h e r announced c a n d i d a t e s : former
UK C h a n c e l l o r
of t h e Exchequer N i g e l Lawson, t h e incumbent Jean-Claude Paye, a
French d i p l o m a t and Lorenz Schomerus, a h i g h - r a n k i n g German c i v i l
servant.
None o f these candidates has generated much enthusiasm.
The d e c i s i o n on t h e SYG i s s u e w i l l be made by consensus o f t h e 25
members o f t h e OECD. The consensus mechanism poses p a r t i c u l a r
d i f f i c u l t y as one c o u n t r y can ( t h e o r e t i c a l l y a t l e a s t ) b l o c k a
l a r g e m a j o r i t y . The l a s t time OECD members needed t o e l e c t a new
SYG, t h e incumbent (Van Lennep o f t h e N e t h e r l a n d s ) was extended
f o r s e v e r a l years b e f o r e a consensus emerged. To ensure t h e
d e c i s i o n i s n o t unduly delayed, t h e U.S. and s e v e r a l o t h e r OECD
members have s t a t e d f o r t h e r e c o r d t h a t we w i l l n o t s u p p o r t even
a s h o r t e x t e n s i o n f o r Mr. Paye. Of t h e non-G-7 members o f t h e
OECD, A u s t r a l i a , New Zealand, Mexico, I c e l a n d and Turkey s u p p o r t
Johnston. Greece, S w i t z e r l a n d , F i n l a n d , Norway and Sweden may be
l e a n i n g toward b a c k i n g Johnston.
To reduce t h e p o s s i b i l i t y o f s t a l e m a t e , Canadian PM C h r e t i e n has
begun an a c t i v e campaign o f telephone l o b b y i n g t o h i s
c o u n t e r p a r t s i n o t h e r member c o u n t r i e s , w i n n i n g s u p p o r t from
Mexico and A u s t r a l i a i n t h e process.
Canadian Trade M i n i s t e r
McLaren and F o r e i g n M i n i s t e r O u l l e t t l o b b i e d t h e i r c o u n t e r p a r t s
a t t h e OECD M i n i s t e r i a l June 7-8, b u t p r o g r e s s was l i m i t e d .
At a
s m a l l c l o s e d luncheon d i s c u s s i o n June 7 m i n i s t e r s agreed t h a t
t h e i s s u e needed t o be r e s o l v e d "as soon as p o s s i b l e , " a l t h o u g h
they r e j e c t e d I c e l a n d ' s a t t e m p t t o impose a J u l y d e a d l i n e .
Japan s t r o n g l y supports Johnston and has j o i n e d s e v e r a l U.S. and
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�Canadian demarches i n OECD c a p i t a l s on h i s b e h a l f . France, t h e
UK and Germany back t h e i r r e s p e c t i v e n a t i o n a l champions and have
shown no s i g n s o f w i t h d r a w i n g , even though none o f t h e European
c a n d i d a t e s has as much support as Johnston.
While I t a l y does n o t
have a c a n d i d a t e i n t h e OECD c o n t e s t , t h e GOI may be seeking EU
s u p p o r t f o r former Trade M i n i s t e r Ruggiero as t h e f i r s t d i r e c t o r
g e n e r a l o f t h e World Trade O r g a n i z a t i o n . Some Europeans have
c r i t i c i z e d Johnston as n o t c h a r i s m a t i c enough o r as r e l a t i v e l y
unknown i n i n t e r n a t i o n a l c i r c l e s .
The r e a l impediment t o Johnston's s e l e c t i o n , however, seems t o be
t h a t France, Germany, t h e UK, Belgium and s e v e r a l o t h e r EU
members see t h e OECD SYG s l o t as j u s t one p i e c e o f t h e l a r g e r
European i n s t i t u t i o n j o b s p u z z l e , which a l s o i n c l u d e s t h e EU
Commission, t h e WEU and t h e EU C o u n c i l . EU member governments
have h i n t e d t h a t they p r e f e r t o w a i t f o r t h e EU's C o r f u Summit a t
t h e end o f June t o see i f a d e a l can be worked t h a t s a t i s f i e s t h e
a s p i r a n t s t o these p o s i t i o n s .
mmmmML CLI N O LIBRARY P O O O Y
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�•CONF I DENT IAL
MONEY LAUNDERING
The 1989 Summit mandated t h e c r e a t i o n o f a G-7-led mechanism ( t h e
F i n a n c i a l A c t i o n Task Force, o r FATF) t o counter i l l i c i t moneylaundering a c t i v i t i e s .
The FATF, whose membership i s comprised
of 28 j u r i s d i c t i o n s and r e g i o n a l o r g a n i z a t i o n s r e p r e s e n t i n g t h e
world's major f i n a n c i a l c e n t e r s , has become our most e f f e c t i v e
m u l t i l a t e r a l v e h i c l e f o r promoting i n t e r n a t i o n a l a c t i o n against
money l a u n d e r i n g .
The FATF's basic a c t i o n p l a n dates from A p r i l 1990, when t h e Task
Force, then comprised o f 15 members, agreed on f o r t y a c t i o n
recommendations aimed a t e s t a b l i s h i n g a network o f comprehensive
reforms t o address money l a u n d e r i n g and t o f a c i l i t a t e g r e a t e r
c o o p e r a t i o n i n i n t e r n a t i o n a l i n v e s t i g a t i o n s , p r o s e c u t i o n s and
p r o p e r t y s e i z u r e s . The FATF has worked, i n p a r t i c u l a r , t o d e f i n e
the r e s p o n s i b i l i t i e s o f f i n a n c i a l i n s t i t u t i o n s r e l a t e d t o i l l i c i t
t r a n s a c t i o n s and t o c l a r i f y t h e l i m i t s o f bank secrecy laws w i t h
regard t o c r i m i n a l i n v e s t i g a t i o n s .
The Task Force c o n c e n t r a t e d i t s e f f o r t s i n 1993-94 on r e v i e w i n g
progress on t h e b a s i c a c t i o n p l a n and u n d e r t a k i n g an e x t e r n a l
r e l a t i o n s program t o promote t h e w i d e s t p o s s i b l e i n t e r n a t i o n a l
a c t i o n a g a i n s t money l a u n d e r i n g . Nearly a l l member j u r i s d i c t i o n s
have now enacted laws t o make drug money l a u n d e r i n g a c r i m i n a l
o f f e n s e , w i t h two o f t h e t h r e e r e m a i n i n g members l i k e l y t o do so
w i t h i n t h e next t w e l v e months. These a c t i v i t i e s were r e v i e w e d a t
the FATF's most r e c e n t conference, h e l d i n mid-June i n P a r i s ,
w i t h t h e t h e f o r m a l a d o p t i o n o f a Progress Report d e t a i l i n g
achievements t o date.
I n a d d i t i o n t o t h e c r e a t i o n o f a Task
Force f o r t h e Caribbean area, t h e FATF agreed t o e x t e n d i t s
o p e r a t i o n s through t h e year 1999. Plans c a l l f o r a second r e v i e w
of member compliance i n 1998.
The FATF has embarked on a program o f anti-money l a u n d e r i n g
seminars and m i s s i o n s i n non-member j u r i s d i c t i o n s .
In addition
to major seminars i n Riyadh and i n Moscow l a s t f a l l , FATF
a c t i v i t i e s have focused on t h e Bahamas, I s r a e l , China and t h e Far
East. The FATF i s m o n i t o r i n g developments i n E a s t e r n Europe
c l o s e l y as w e l l .
Growth i n n o n - d r u g - r e l a t e d money l a u n d e r i n g has made such
a c t i v i t y a p r i o r i t y f o r t h e FATF and an i s s u e f o r t h e G-7
communique. Investment o f i l l i c i t proceeds i n t o l e g i t i m a t e
businesses, i n c l u d i n g banks, i s growing and poses a p o l i t i c a l and
economic t h r e a t t o t h e c o u n t r i e s where i t i s o c c u r r i n g . FATF
members a r e a l s o concerned about t h e l i n k a g e o f o r g a n i z e d
t r a n s n a t i o n a l crime and money l a u n d e r i n g .
S i x t e e n members have
made t h e l a u n d e r i n g o f proceeds o f crimes o t h e r s than d r u g
t r a f f i c k i n g a crime.
Another f i v e a r e expected t o do so b e f o r e
the end o f 1994.
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L e g i s l a t i v e proposals b e f o r e Congress address money l a u n d e r i n g
concerns. These p r o p o s a l s a l s o address t h e problems c r e a t e d by
the need f o r c l o s e s c r u t i n y o f q u e s t i o n a b l e t r a n s a c t i o n s and t h e
r a p i d development o f f i n a n c i a l t e c h n o l o g i e s and p r a c t i c e s .
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I L L I C I T PAYMENTS
Both i n d u s t r i a l and d e v e l o p i n g c o u n t r i e s have r e c e n t l y p a i d
i n c r e a s i n g a t t e n t i o n t o t h e problem o f i l l i c i t payments. The USG
i s concerned about t h e growing i n c i d e n c e o f b u s i n e s s - r e l a t e d
b r i b e r y n o t o n l y f o r t h e s e r i o u s harm i t does t o n o n - b r i b i n g
American f i r m s , b u t a l s o because i t r e t a r d s economic development
and democracy overseas. S e c r e t a r y C h r i s t o p h e r has spoken
p u b l i c l y on numerous occasions on t h e need t o address t h i s i s s u e .
A f t e r f o u r years o f n e g o t i a t i n g e f f o r t , t h e OECD adopted a
Recommendation i n May u r g i n g member c o u n t r i e s t o t a k e e f f e c t i v e
a c t i o n t o combat and d e t e r i l l i c i t payments. A p a r t from I t a l y ,
o t h e r G-7 members f a v o r e d a weaker statement than t h e one f i n a l l y
adopted and were brought around o n l y a f t e r s t r o n g U.S. u r g i n g .
Firms from OECD member c o u n t r i e s a r e t h e main b r i b e g i v e r s , and
t h e onus i s now on t h e i r governments t o take a c t i o n t o d e t e r
b r i b e r y o r e x p l a i n t o o t h e r members why they needn't. The most
e f f e c t i v e s t e p they c o u l d take would be t o c r i m i n a l i z e b r i b e r y o f
f o r e i g n o f f i c i a l s , as does our F o r e i g n C o r r u p t P r a c t i c e s A c t and
t h e Recommendation suggests t h i s and s e v e r a l o t h e r measures.
M o n i t o r i n g members' i m p l e m e n t a t i o n o f t h e Recommendation w i l l
proceed a c c o r d i n g t o t h e OECD's e s t a b l i s h e d peer r e v i e w
mechanism, b u t a c t i o n w i l l n o t occur o v e r n i g h t . R a i s i n g t h e
i s s u e i n t h e G-7, besides m a i n t a i n i n g a h i g h p u b l i c p r o f i l e f o r
t h e i s s u e , would t e l l o t h e r s members t h a t t h e USG i n t e n d s t o
remain s e i z e d w i t h i t and w i l l be m o n i t o r i n g t h e i r i m p l e m e n t a t i o n
of t h e p o l i t i c a l commitment r e p r e s e n t e d by t h e OECD
Recommendation. We do n o t propose e x t e n s i v e d i s c u s s i o n o f
i l l i c i t payments by l e a d e r s , b u t a communique r e f e r e n c e t o t h e
problem o f b r i b e r y and G-7 commitment t o respond.
The communique language we a r e seeking does n o t go s i g n i f i c a n t l y
beyond t h e OECD f o r m u l a , which m i n i s t e r s endorsed June 7 and thus
should n o t spark o p p o s i t i o n from o t h e r members. S t i l l , g i v e n t h e
h i s t o r y o f U.S. a c t i v i s m on t h i s i s s u e , i t would be p r e f e r a b l e i f
we c o u l d second a p r o p o s a l by host I t a l y t o i n c l u d e t h i s
reference.
CONFI DEHraffi,
Declassify o&L^TON LIBRARY P O O O Y
HTCP
PER E.0.13526
�CONFIDENTIAL
HISTORY OF THE G-7
Economic summits o f t h e major i n d u s t r i a l democracies have been an
annual event s i n c e 1975, when French P r e s i d e n t V a l e r y G i s c a r d
d'Estaing i n v i t e d h i s c o l l e a g u e s from t h e U.S., UK, Germany,
Japan and ( a f t e r some p r e s s u r e ) I t a l y t o an i n f o r m a l g a t h e r i n g a t
the Chateau de R a m b o u i l l e t on major economic i s s u e s . The n o v e l t y
of t h e summit was t h a t p r e s i d e n t s and prime m i n i s t e r s , r a t h e r
than f i n a n c e m i n i s t e r s and c e n t r a l bankers, were meeting
m u l t i l a t e r a l l y t o d i s c u s s economic i s s u e s .
The meeting was o r i g i n a l l y conceived as an o p p o r t u n i t y t o d i s c u s s
monetary c o o p e r a t i o n , b u t was broadened t o i n c l u d e macro-economic
management, t r a d e , East-West r e l a t i o n s , energy and North-South
relations.
The next year, P r e s i d e n t Ford hosted a s i m i l a r
g a t h e r i n g i n San Juan, Puerto Rico. I t became a t r a d i t i o n f o r a
d i f f e r e n t c o u n t r y each year t o host t h e summit and f o r i t s l e a d e r
t o a c t as c h a i r . Canada j o i n e d t h e group b e g i n n i n g i n 1977
(making i t t h e G-7), and t h e P r e s i d e n t o f t h e EC Commission has
p a r t i c i p a t e d s i n c e 1978 f o r d i s c u s s i o n o f m a t t e r s w i t h i n
Community competence. The l e a d e r o f t h e EC (now EU) Presidency
c o u n t r y a l s o p a r t i c i p a t e s when n o t a l r e a d y a G-7 member ( t h i s
happened f o r t h e f i r s t t i m e i n 1980, w i t h B e l g i u m ) .
The economic themes d i s c u s s e d a t t h e summits have remained f a i r l y
c o n s t a n t t h r o u g h o u t t h e p a s t two decades, a l t h o u g h t h e focus has
v a r i e d depending on circumstances.
Energy i s s u e s were f e a t u r e d
d u r i n g t h e years o f o i l c r i s i s , t r a d e d u r i n g t h e years when
m u l t i l a t e r a l n e g o t i a t i o n s were o c c u r r i n g . I n 1978 t h e Bonn
summit was used as a f o r c i n g event t o make t h e key compromises t o
conclude t h e Tokyo Round. USTR Strauss t h r e a t e n e d t o b r i n g any
u n r e s o l v e d Round issues t o t h e G-7 summit. None o f o u r t r a d i n g
p a r t n e r s were prepared t o see t h e i r heads o f s t a t e n e g o t i a t i n g
t r a d e m a t t e r s , and deals were q u i c k l y c u t on e s s e n t i a l i s s u e s .
The 1993 Tokyo summit s i m i l a r l y endorsed a t r a d e package agreed
by t h e Quad n e g o t i a t o r s i m m ediately p r i o r t o t h e l e a d e r s '
meeting.
P o l i t i c a l d i s c u s s i o n s were n o t on t h e agenda f o r t h e o r i g i n a l
summit meetings, b u t i n c r e a s i n g l y t h e l e a d e r s t o o k advantage o f
the o p p o r t u n i t y t o h o l d i n f o r m a l exchanges o f views on t h e key
p o l i t i c a l and s e c u r i t y issues o f t h e day. D u r i n g t h e f i r s t
f i f t e e n y e a r s , t h e d i s c u s s i o n s tended t o focus around East-West
i s s u e s , t e r r o r i s m and t h e s i t u a t i o n i n t h e M i d d l e East. With t h e
end o f t h e Cold War and t h e c o l l a p s e o f t h e communist system i n
much o f t h e w o r l d , a new s e t o f p o l i t i c a l i s s u e s , c e n t e r e d on
i n t e g r a t i n g C e n t r a l and Eastern Europe i n t o t h e g l o b a l economic
system and s u p p o r t f o r r e f o r m i n Russia and t h e NIS, began t o
predominate.
A t t h e 1991 London summit, S o v i e t l e a d e r M i c h a e l
Gorbachev was a f e a t u r e d guest. He was f o l l o w e d by Russian
P r e s i d e n t B o r i s Y e l t s i n i n succeeding y e a r s . The i n c l u s i o n o f
tfSSEif&L&WirON LIBRARY P O O O Y J f f i f o ™
HTCP
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2
Russia i n p o l i t i c a l d i s c u s s i o n s now appears t o have become a
permanent f e a t u r e o f t h e summits.
I n s t i t u t i o n a l l y , t h e summits have evolved c o n s i d e r a b l y s i n c e
1975.
The o r i g i n a l "sherpas" ( t h e name r e f e r s t o t h e humble
bearers who a s s i s t e d Himalayan c l i m b e r s ) were t h e p e r s o n a l
r e p r e s e n t a t i v e s o f t h e l e a d e r s ; indeed, t h r e e o f t h e f i r s t group
of sherpas were n o t even i n government s e r v i c e a t t h e t i m e .
G r a d u a l l y , however, a summit h i e r a r c h y has a c c r e t e d . Sherpas a r e
now a s s i s t e d by "sous-sherpas" ( g e n e r a l l y one from t h e F o r e i g n
M i n i s t r y and one from the Finance M i n i s t r y ) and even
"sous-sous-sherpas." They h o l d r e g u l a r meetings t h r o u g h o u t t h e
year t o p l a n t h e summit agenda and communique. The G-7 process
a l s o now i n c l u d e s r e g u l a r meetings o f Finance M i n i s t e r s and
P o l i t i c a l D i r e c t o r s . The summits have become major p o l i t i c a l
events ( t h e press corps; which was o n l y 400 i n 1975, was 10,000
a t t h e 1993 Tokyo summit).
P r e s i d e n t Giscard's o r i g i n a l concept was an i n f o r m a l , ad hoc
meeting o f l e a d e r s , w i t h no scheduled date f o r reconvening. I n
c o n t r a s t t o t h i s concept, o t h e r s have seen summits as s t e e r i n g
committees f o r t h e h a r m o n i z a t i o n o f n a t i o n a l p o l i c i e s whose
meetings should be r e g u l a r and whose p a r t i c i p a t i o n should be
broad enough t o ensure t r e a t m e n t o f a l l r e l e v a n t i s s u e s . There
has even been d i s c u s s i o n o f a G-7 S e c r e t a r i a t . Over t h e p a s t
year, however, summit p a r t i c i p a n t s have g i v e n much t h o u g h t t o
moving t h e meetings back towards a more i n f o r m a l f o r m a t . John
Major has been a c t i v e i n pushing f o r a more i n f o r m a l , l e s s
s t r u c t u r e d summit, a concept t h a t most G-7 p a r t i c i p a n t s seemed t o
endorse i n Tokyo. This has l e d t o a Naples summit w i t h g r e a t e r
t i m e s e t a s i d e f o r d i s c u s s i o n among heads a l o n e .
CONFIDENTIAL
CLINTON LIBRARY
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O OY
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<strong>Declassified Documents</strong>
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This collection of declassified records focus primarily on foreign affairs. These records were declassified and made available to the public through a <a href="http://clinton.presidentiallibraries.us/mandatory-declassification-review-requests">Mandatory Declassification Review</a> request.
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Declassified Documents concerning Robert Boorstin, NSC Speechwriter
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2013-0471-M
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This Mandatory Declassification Review contains material from the files of Robert Boorstin, NSC Speechwriter. Material includes a memo from National Security Advisor Anthony Lake to President Clinton regarding an 1994 trip to Germany. Also included are Department of State reports and papers on a variety of international topics.
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Robert Boorstin
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<a href="https://catalog.archives.gov/id/7585788" target="_blank">National Archives Catalog Description</a>
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Clinton Presidential Records: White House Staff and Office Files
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2013-0471-M
7585788
Declassified
Foreign Policy
Germany
Helmut Kohl
Speechwriting