Draft IV

6/22/77

# THE FUTURE OF BUSINESS

## June 28, 1977

Ladies and Gentlemen:

There was a time when America, and American business, took part in the world economic order without great concern for the political framework that kept international peace. In the '20s and '30s, the United States was an active participant in the world on economic issues even while our foreign policy was isolationist. Cordell Hull was the great champion of free trade, Herber Hoover the pioneer in humanitarian relief efforts in Europe.

But we know now that America's isolationism in the '30s contributed to disaster. We know now that without a strong American role in world affairs, there can be no security or peace. Indeed, without enlightened American leadership in international diplomacy, even the world economic system would be in serious jeopardy.

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Never before has the future of business been so
inextricably tied to the wisdom and success of our
overall foreign policy. It is a commonplace now to
recognize the crucial importance of the economic di-
mension of our foreign policy. What is less understood
is the interrelationship of the economic and the poli-
tical dimensions; they are both vital -- and inseparable --
aspects of the task of building a world of peace and human
progress.

The world economic system which has served us well
for over thirty years has undergone vast change, and these
changes must be understood. A generation ago, 51 countries
joined to form the United Nations; today, the world commu-
nity numbers nearly 150 countries. A generation ago,
only one major nation, the United States, had emerged from

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World War II with its economy intact and flourishing;
today, Western Europe and Japan, and the oil producers
are major economic powers, and the Communist nations are
again becoming important factors in the world economy.
A generation ago, the Bretton Woods Conference established
the institutions of the world monetary system; today, the
colossal expansion of world trade and the dispersal of
economic power have subjected the system to repeated
strains and shocks. Thirty years ago, the Marshall Plan
was launched, with American resources and European effort,
to rebuild Western Europe and Japan from the devastation
of war. Today, the experience of the Marshall Plan is

economic development in the scores of
clearly inadequate for the vast enterprise of/new nations.

Economic relations in an era of change can be the
cement of global community -- or a new arena of conflict.
The institutions and practices established a generation ago,

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which have spread prosperity around the world, have also
shaped the evolution of the system in the direction of
ever-increasing mutual dependence. The global economic
system, which ties together all national economies, can
be the vehicle of common progress or of common decline.
Economic problems, if they fester, become political
problems, and only political leadership can solve them.

The experience of the past four years has taught
us how fragile the economic system is; its progress, once
thought unlimited, was shown to be vulnerable to dis-
ruptions and attempts by some countries to seek unilateral
advantage. Yet the fundamental truth remains that no
nation or group of nations can achieve its own prosperity
in isolation or at the expense of the global system.

Therefore, insuring international economic cooperation
becomes a central task of statesmanship. Economic reality

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links us together:

-- in the common destiny of the industrial democracies,

-- in the indispensable cooperation of the industrial and the developing countries,

-- and in the necessary partnership of the public and private sectors.

The aim of American foreign policy must be to make these relationships a positive force for peace and the greater well-being of mankind.

Let me discuss these relationships in turn.

## The Partnership of the Industrial Democracies

The industrial democracies occupy center stage in the world because of our unquestioned economic preeminence.

Partly because we are committed to the free market system which has given us this preeminence, we have not yet fully

realized the possibilities -- indeed the necessity --
of applying our economic strength consciously to shaping
a more hopeful international environment.

The industrial democracies together account for
65 percent of the world's production and 70 percent of its
trade. Our economic performance drives international
commerce and finance; our investment, technology, managerial
genius, and agricultural productivity are the spur to
economic development and prosperity around the world. We
are the world's bankers and the world's inventors; we are
among the world's most productive markets. The so-called
socialist countries, in the Third World or in the Communist
world, after disparaging our system for decades, now turn
to us to help them advance the well-being of their peoples.

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The global economy is just one of the common endeavors
for which we, the industrial democracies, are responsible.

The cohesion of the democracies on the full range of issues
is of fundamental importance to American foreign policy.

The United States has learned that it can no longer
aspire to carry all the burdens, devise all the programs,
provide all the resources, either for international security
or for economic development. Our allies, who are also our
major trading partners, have grown in strength to the point
that our alliance relations have had to be adjusted to a
greater equality and sharing of leadership and responsibility.

It is not healthy for the United States to be the only center
of initiative in the democratic world. And this is why
it has been our policy for over thirty years to encourage
Europe's strength and economic and political unity and a

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greater sharing of responsibility in the Western alliance.

A strong joint defense is the precondition for all other
policies; it is the global balance of military strength
that permits all nations to live in peace and security.

And Western solidarity, which began with collective defense,
has deepened in recent years to embrace, in addition,
common problems of economic policy, arms control, diplomacy
to reduce tensions with the East, and initiatives in the
dialogue with the Third World.

In the last analysis this cohesion rests not
merely on pragmatic grounds but on a common moral
foundation. It is no accident that our first permanent
peacetime alliance was with the democracies of the Atlantic
world, and then with democratic Japan; it is no accident
that our closest partners and interlocutors on every inter-
national issue are the countries that share our most

fundamental values of political liberty. If our moral
principles are the guiding force in our foreign policy,
as they surely are, then our closest relationships must
surely be our ties with our fellow democracies.

One of the central challenges on our common agenda
in this period is the vitality and <u>growth of our economies.</u>
To insure healthy expansion without inflation requires not
only sound national policies, but an increasing degree of
coordination of policies among the governments of the
industrial nations. Knowledge of each other's economic
policies helps insure that national growth policies are
complementary and mutually reinforcing; it helps insure
stability of exchange rates so that trade can flourish;
it helps stimulate business confidence by demonstrating
a collective commitment to rapid recovery from recession,

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to an open economic system, to responsible national policies, and to international cooperation. The economic summit meetings at Rambouillet in 1975, in Puerto Rico in 1976, and in London in 1977, were not mere ceremonial exercises. They were systematic consultations among the major economic powers of the free world to coordinate their economic strategies and their policies on crucial issues of structural reform in the international economic system.

These issues included needed reforms of the monetary system, progress in the Multilateral Trade Negotiations, and common approaches to initiatives with the developing countries and with the Communist world. Largely as a result of this collaboration among the industrial democracies: the IMF has agreed to new rules to avoid the shocks and disequilibrium that plagued the Bretton Woods system of exchange rates.

The OECD has agreed on a Financial Support Fund to deal

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cooperatively with serious economic dislocations aggravated by the oil price rises. The OECD members have made a joint pledge three years ago to avoid new restrictions on trade, in order to preserve an open trading system despite a period of economic difficulties. The Multilateral Trade Negotiations in Geneva have been given impetus, to liberalize trade over the long term with the expanding European Community and Japan. These mechanisms on which so many economies depend must be nurtured by enlightened leadership.

These economic summits were convened not simply for these economic reasons but also for an over-riding political purpose. For economic stagnation can breed political instability. The economic crisis of recent years threatened more than our national income. In some allied countries

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it threatened the stability of democratic institutions;
at many periods in the history of the Western Alliance,
economic disputes strained the fabric of allied cooperation
on political and security problems. Governments cannot
act with a conciliatory spirit while their economies stag-
nate and they confront mounting domestic and international
pressures over the distribution of economic benefits.

In such conditions, governments' ability to act with
assurance -- to address either our national or our inter-
national problems -- falters. If the democratic nations
are to contribute to international security and prosperity,
we must be economically strong and politically cohesive.

In an era when inflation and recession surge across
national boundaries, when oil prices are determined by
foreign decisions, when economic forces are at the margin
of individual governments' ability to control, the demon-
strated solidarity of the great democracies is essential

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above all to convince our peoples that we are indeed
masters of our own destiny. The vitality of democracy
depends on continued public confidence that free men and
women and free institutions can solve the crises of our
time. The progress we have made in economic cooperation
is of fundamental importance to the cohesion of the
Western alliance and the health of democracy in allied
countries.

Let me mention just two of the current issues which
require common action among the industrial democracies --
energy, and relations with the Communist countries. In
both these areas the private sector plays a key role in
the framework of the nation's objectives.

I have strongly supported President Carter's desire
to see this country reduce its energy vulnerability.

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The history of the last three decades is the story of our mounting dependence on imported oil. In 1950, the United States was virtually self-sufficient in oil. In 1960, our reliance on foreign oil had grown to 16 percent of our domestic requirements. In 1973, our dependence was 35 percent. Since that time, when the oil embargo and OPEC's five-fold increase in price demonstrated our vulnerability, our dependence has grown. In the winter months of this year, oil imports reached 50 percent of our consumption for the first time in our history -- a development that only two years ago was not expected until the 1980's.

The oil embargo of 1973, the result of a political decision, caused an economic crisis both in this country and around the world. A reduction of only 10 percent of our imported oil, lasting less than half a year, cost

Americans half a million jobs and over $10 billion in
national output. The embargo and the massive price in-
creases of 1973 added at least five percentage points to
the price index, contributing to our worst inflation since
World War II. It set the stage for a serious recession,
in this country and worldwide, from which we are still
only now recovering.

The last three Presidents have attempted to mobilize
an effective national response to the energy challenge.
But because energy is so central an element of our domestic
economy, it has been difficult to agree on an equitable
and effective way to reduce our dependence on foreign oil.
Yet -- because energy is so central to our domestic economy --
it is unconscionable for us to leave its price and supply
at the mercy of a foreign cartel. If we don't make these
decisions, they will make them for us. Even when the

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nations of the cartel behave responsibly and seek to be
moderate, their decisions are their own and are determined
by _their_ interests and priorities, not ours. Their pricing
decisions hold our standard of living hostage not only
to their preferences on the Middle East problem, but to
their judgment of the adequacy of our proposals for the
developing countries in the North-South dialogue.

Thus our country's freedom of decision in foreign
policy -- a basic attribute of national sovereignty -- is
compromised. Our national independence is circumscribed.
Our freedom of action, our ability to conduct a responsible
foreign policy according to _our_ values and _our_ choices, is
severely constrained. Our freedom is as surely jeopardized
as if we allowed our military power to become inferior to
that of the Soviet Union. The American people must decide

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whether they want their foreign policy vulnerable to
pressure and blackmail, or whether they want their
country to act as champion of our values and effective
leader of the free world. The energy challenge is no
less than that.

Energy is a challenge to all the industrial demo-
cracies for the same reasons. Cooperation among the
consumer nations is at the heart of any effective approach.
The industrial nations have taken many steps in the last
three years to pool their research efforts to develop
new and alternative sources of energy; to adopt contin-
gency plans to safeguard their economies against a new
embargo; to insure the monetary system against financial
crises induced by massive oil payments deficits or by
manipulative shifts of petrodollar funds; and, most important

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of all, to mobilize the coordinated efforts of all con-
suming nations to conserve energy resources.

Many -- indeed most -- of these collaborative steps
were taken at American initiative. The other consuming
nations have adopted stringent conservation measures. Yet
little will be accomplished if the United States -- which
consumes *half* of the total consumption of the industrialized
world -- does not follow through with *its* conservation
program.

I can think of no area where the combined efforts of
the public and private sectors are of more importance.
Without the innovative genius of American free enterprise,
without determined conservation measures by every firm and
every farm and every factory, there is little hope of
reducing our energy vulnerability. Conservation is in the

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clear self-interest of every hard-headed businessman or
every cost-conscious homeowner, given the high cost of
energy. This is a classic example of how the national
interest and self-interest can be exactly parallel.

Conservation does not mean hardship or curtailment of
growth; it means more efficient use of the energy now
available to us. Conservation means getting 30 or 40 miles
to the gallon instead of seven; it means better insulated
buildings and homes with more efficient heating systems.

The voluntary effort of the private sector is crucial if
the nation is to end its energy vulnerability -- whatever
legislation is passed by the Congress.

A second area which compels concerted action among
the industrial democracies is economic relations with the
Communist world.

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As many of you know, the Soviet Union and the East
European countries have begun in recent years to abandon
their traditional autarchy and move toward greater economic
interchange with the West. As their economies become
more sophisticated, as demand grows for consumer goods,
these state-controlled economies turn Westward for high-
quality technology, or for other needed products such as
grain. The Soviet Union and Eastern Europe have in a
brief span of time gone deeply into debt to finance these
purchases; estimates of this debt range from $27 to 45
billion, including debt to private Western banks as well
as governments.

The growing interaction between the economies of
East and West is a reality, which, if managed wisely, can
be a positive development. It has always been my view

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that economic relations between East and West should follow,
not precede, improvements in political relations. It
can stabilize political relations and create incentives
for continuing responsible behavior by Communist govern-
ments. At the same time, it has inevitable complications
from the Western perspective. Dealing with a centrally-
planned state economy which is under strict political
direction can never be treated on our side as simply a
commercial transaction. The state trading countries must
not be permitted to play off the industrial democracies
against each other or to wield their economic power for
political advantage. If allied governments consult closely,
analyze the implications, and develop common approaches,
the dangers can be avoided and the hopeful prospects enhanced.
It is up to the industrial democracies to manage this process

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wisely and make it contribute to common economic progress
and the stability of the international order.

East-West trade has always been subject to controls
in Western countries. It is clearly the responsibility of
governments to insure that these controls make sense,
to see that they promote our clear-cut national objectives
both in what they prohibit and in what they permit, and to
see that uniform standards are applied among the industrial
democracies so that one Western country does not penalize
its own businessmen only to give a windfall opportunity to
businessmen of another Western country. Governments will
expect you to obey the regulations; you have a right to
expect your government to adopt a clear-cut and well-thought-
out policy.

When all East-West trade was prohibited, there were
no decisions to make. Now that trade is permitted in non-

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strategic areas, governments must see that they are inter-
nally organized to maintain proper and consistent control in
accordance with national objectives. To take but one
example, one cause of the misadventure of the 1972 grain
deal with the Soviet Union was that agricultural trade had
always proceeded in private channels and there simply was
no governmental mechanism to regulate or even monitor the
transactions once the President made a foreign policy decision
to permit a sale. Much was learned from that episode, and
the US Government is now better equipped to handle such
transactions.

Last year, the OECD, the organization of all the in-
dustrial democracies, undertook a comprehensive study -- at
US initiative -- of the basic questions posed by East-West
trade. Much progress had already been made in aligning

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our national policies with respect to export credits.

Studies are now proceeding of how to insure economic reciprocity, how to prevent dumping and other unfair trade practices, whether to differentiate among Communist countries, how to deal with the problem of their external debt, how they relate to international economic institutions, and how they can be brought into the process of responsibly assisting economic development in the Third World.

Our economic strength is one of the West's greatest assets. We are only beginning to explore the pitfalls and possibilities of wielding this strength imaginatively in the service of international peace. East-West trade is still very small. Before it grows, we must be clearer about its implications.

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The Developing Countries

Cohesion among the industrial nations is essential
also if the world community is to address in a coherent
way the problem of economic development. This challenge,
too, touches basic questions of international order.

The developing nations have stated their claim in
world forums for a greater voice in decisions that affect
them, for more control over their economic destiny, and
for a just share in global prosperity. The industrialized
nations in turn have reiterated their interest in reliable
sources of energy and raw materials at a fair price; we
seek an open world system of trade and investment, expanding
markets, and stable economic relationships, for these are
essential to the wellbeing of our own societies.

These economic issues have already become the subject
of mounting confrontations -- embargoes, cartels, seizures,

counter-measures, and bitter rhetoric. Over the
remainder of this century, should this trend continue,
the division of the planet between rich nations and poor,
between North and South, could become as grim as the
darkest days of the Cold War between East and West. We
could enter an age of festering resentment, of increased
resort to economic warfare, a hardening of new blocs,
the undermining of cooperation, the erosion of international
institutions -- as well as the failure of economic
development.

The United States, as the world's strongest economic
power, could survive better than most in such an environ-
ment. But an era of economic warfare would burden even
our own well-being. It would be in the long term incom-
patible with the open economic system which has nurtured

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our prosperity and that of others for a generation. And
such a world would be inconsistent with basic American
values. A world in which a few nations are an island of
wealth in an ocean of poverty and despair is a seed-
bed of upheaval. I do not believe that Americans prefer
to live with a siege mentality or in a world in which
power is the only arbiter. I do not hesitate to say, even
to an audience of hard-headed businessmen, that only to
the extent that our self-interest can be made relevant
to the world interest can we really prosper as a country
and sustain our confidence in ourselves and our democratic
values.

This is the general problem that has faced all
American Administrations in the post-war period since the
process of decolonization began, and it is the problem that
faces the new Administration. The United States throughout

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this period has opted for the course of cooperation. In
the formative period of a new era -- a world system of
150 nations -- our task is to see that cooperation rather
than hostility characterizes the emerging relationships.

We have seen our interests and the interests of the develop-
ing countries as very much complementary. An expanding
and flourishing world economy offers us all a prospect of
growing prosperity. The poor countries least of all can
afford to see the economic system break down into autarchy
and anarchy; they would suffer the most. And there is no
justification for them to seek to extort greater benefits
from the world economy when by cooperative action the same
or even greater gains are attainable.

Both the industrial world and the developing world
have to recognize some realities. The industrial nations
must recognize that the developing nations, because of

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their relative weakness, have legitimate claims for
equity and for a voice in international deliberations
affecting the world's trade and monetary institutions;
their voices are not always automatically heard. And
their prosperity can become a powerful force for global
prosperity.

At the same time the developing nations must recog-
nize that they, too, are dependent on the flourishing of
the economic system for the achievement of their own
development goals. Attempts to wield bloc economic power
disrupt the entire system, as we have seen in recent years,
and ultimately redound to the detriment of all. The nations
of the Third World have a choice, just as the industrial
nations have, between slogans and solutions, between
rhetoric and reality.

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Therefore the United States in all recent Ad-ministrations has made clear a number of basic principles. First of all, we do not yield to bloc pressure or blackmail. Tactics of confrontation used against us only alienate the public support in the industrial nations that is needed to sustain cooperative endeavors. Secondly, on the basis of mutual respect, we are ready to explore new and significant ways to enhance the role and prospects of developing countries. On this basis, major new steps have been taken in the past few years to broaden participation in inter-national economic institutions and to devise practical solutions for some of the legitimate concerns of the developing countries.

What specifically can be done?

The developing countries want better access to the world's capital markets. They want efficient and growing

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markets for their primary commodities so they can earn their
way. They want help in finding new outlets for the goods
and services which they will be increasingly able to produce.
They want help in developing, transferring, adapting and
managing new technology that is appropriate to their needs.

On the other hand, we have a right -- indeed an obligation -- to say that development is not something that is simply handed from one group of nations to another group of nations. The Marshall Plan experience in Europe is not a true analogy, because there the skills and social forms of a modern economy already existed, and only capital had to be replaced. Development cannot be brought about by external resources alone. In all societies in history, development was a painful process extending over generations and requiring in the first instance the mobilized effort of the developing countries themselves. It requires

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exertion, discipline, the acquisition of skills and
education, and sometimes an adaptation of cultural values.
Governments must find ways to encourage savings, reward
initiative and ability, eliminate corruption, spread
education and training, and expand opportunities for all
classes of their people.

The inadequacy of many of the methods and premises
of our early foreign aid programs is obvious. Attempts to
reproduce the Marshall Plan experience, or that of our
New Deal at home, inevitably failed. Many of the traditional
approaches of foreign aid are less acceptable now to the
peoples of the industrial countries because they seem to
promise an endless and one-sided financial burden; they
are less acceptable also to the developing nations because
they seem to create a relationship of charity and dependency,

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inconsistent with their self-respect. Government aid
alone clearly cannot solve the problem.

We have now had a generation of experience with
attempts to promote economic development, and we have
learned a number of lessons.

First of all, there is a need for *new conceptual approaches*. In the past, we tended to lump all the developing countries together. In fact, different developing countries are in different positions and perhaps all would benefit if we took a more differentiated approach.

-- Developing countries which are oil producers are

in a special category. They will be in confrontation with us on many issues, but at the same time their basic orientation is to the West, to which they turn for technical assistance and as the repository of their investment funds. We have an economic stake in their successful

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development, and our cooperation has the
potential to benefit both sides. They must be
engaged constructively in the world's economic
institutions and in helping to finance the
development process.

-- The poorest countries are a clearly distinct
category, which have long been the subject of
special programs in our aid approach. Here
our incentive to help is a humanitarian one, and
we should engage the widest possible participation
of the oil producers and the industrial countries,
including the Communist world, to share the
global responsibility.

-- Third is the middle level of developing
countries, the potential achievers, who have
the skills and infrastructure to benefit

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significantly from all the new international
initiatives that have been made for helping
development. These countries, I believe, deserve
greater attention. In these cases we will
probably see successful results in the near
term. As a rule, they have succeeded because
they have market economies and capable people;
they look to us for investment and support,
and here, too, our cooperation can be the basis
of important political relationships.

Many dimensions of the development problem cry out for
new practical ideas, the kind of contribution that the
American private sector has always made. For example, we
have only begun to explore the area of <u>technology transfer</u>.
Developing countries, particularly the more advanced ones,

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place emphasis on developing their technological skills
and capacities. The United States has promoted the idea
of a United National Conference on Science and Technology
for Development for 1979. A preparatory meeting of repre-
sentatives of American industry, labor, universities,
foundations, research institutes, voluntary organizations
and government experts took place at the State Department
last November. This conference tried to ask some basic
questions about how government and the private sector could
work together in this area, and how technology transfer
could be realistically promoted.

This concept -- the *quality* of the capital investment --
is a major concern of those developing nations which are
the most likely to benefit from our assistance, the potential
achievers. It therefore ought to be of great concern to
both government and business.

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There are many other areas where creative ideas are needed. Many of the developing countries are dependent on primary commodities or raw materials for their export earnings. They want to develop their resources rapidly. There is a need for new ways to help them mobilize capital and technology and management skills for resource development. This would at the same time serve the needs of the world economy by ensuring supplies of raw materials to sustain the world's economic expansion. Perhaps a new international institution could be created, an *International Resources Bank*, affiliated with the World Bank, to act as intermediary or partner with the host country and the foreign investor. This institution could organize the financing, offer advice and management skills, promote the use of new technology, and guarantee for each the proper

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performance of the other. It would support individual
projects and promote international standards of equity.
It would reduce the non-commercial risks for investors,
and promote greater flows of investment capital for worthy
projects on reasonable terms.

It is clear now that private investment is the largest
single source of productive capital for developing nations
and a powerful force marshaling management and technology
for their benefit. It is time the world community
acknowledged this fact and settled upon agreed ground-
rules for its proper growth and application. Investment
must have a stable and dependable environment if it is to
be attracted; it must operate in accordance with the laws
and needs of the host country, but it must be free of
harassment and unreasonable penalties and seizures.

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This imposes a responsibility first on business
firms and secondly on governments. Businesses must show
sensitivity to the social purposes and political goals of
the countries in which you do business. You must represent
what is best in America; your conduct must reflect this
country's standards of fair play, honest dealing, and good-
will. The few notorious cases of illicit payments have
stirred apprehension and undermined support for international
business both at home and abroad; they cast a cloud over the
vast majority of firms whose conduct is beyond reproach.

It seems to me totally paradoxical that private invest-
ment is so mistrusted even though governments giving official
aid are far more likely and more able to attach conditions
or strings or restrictions than are private investors. I
believe it is one of the urgent tasks of governments to make

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clear, on an agreed basis, the groundrules for foreign
investment. Developing countries have a right to ensure
that private capital is admitted to a country in areas or
ways consistent with the national priorities and legitimate
regulations of a sovereign government. At the same time,
investors and the industrial nations have a right to know
in advance what the groundrules are, and not to have them
altered arbitrarily and capriciously in the middle of the
game. This issue is probably of more importance for the
future of economic development than many other technical
issues that are often discussed, because of the vast poten-
tial of private investment as a stimulus to economic progress.

The industrial nations have begun to address the
problem. In the OECD, the grouping of the industrial demo-
cracies, the member countries have drawn up together a

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declaration of guidelines for the rights and duties of
multinational firms and of host governments. Both sides
clearly have obligations; both sides can benefit from
agreed principles cooperatively arrived at. This subject
is being further discussed in international forums, and the
industrial nations should maintain a unified position.

Investment is the lifeblood of the world economy.

It is vital to global development. It has been a principal source of the economic growth and security and prosperity that the industrial countries enjoy. Since the mid-'60s, foreign direct investment has been growing faster than international trade and global GNP. It is time to settle the debate about its legitimacy.

## The Crucial Role of the Private Sector

As a public official it was striking to me how great

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a role the private sector could play in promoting progress.

American technical know-how and managerial genius are
regarded as preeminent the world over, and eagerly sought.

I have been told by leaders who style themselves "revolution-
aries" that America has no equal when they look for help
in the great task of developing their countries. It is
American firms who know how to explore, develop, produce,
distribute and market the resources that they have and
desperately need to exploit. It is American firms that can
teach their peoples the skills that they desperately need
in order to lift themselves to new levels of progress.

America's economic vitality is the product of the
creative spirit of a free and industrious people. It is the
envy of the world and perhaps our greatest asset. It is
the foundation of our prosperity, our military strength,

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and the constructive relationships we can enjoy with
all nations in a world of peace.

I say this to be business community not to flatter
you but to elicit your enlightened interest in America's
international role. America's continuing leadership in
the world depends on the informed support of its citizens.
No group of men and women has a more important role to play
in the great universal endeavor of economic progress than
the American business community. No group of Americans,
in fact, has more sustained experience in the world than
the business community. For the United States has been
the world's leading economic power since even before World
War I.

In the modern period, economic relations are an
important aspect of foreign policy, but at the same time
the political dimension of economic activity is perhaps more
evident than before.

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I have sketched out some of the important areas of
our foreign economic policy, their political context, and
the potential of American business. It is more essential
than ever before that businessmen and women understand
not only the political context in the host country where they
are doing business, but the overall framework of America's
international responsibilities. I have discussed with you
some of our foreign policy concerns -- the great importance
of our economic cooperation with the other industrial nations,
the concerns with respect to doing business with Communist
countries, and the philosophy of our support for the process
of economic development. With some sensitivity to this
broad framework, and just by doing what you are good at,
you can make a vast contribution to the world's welfare and
to international peace.

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And in turn, with your knowledge of the rest of the world you can make an informed contribution here at home to an intelligent foreign policy. For you may know better than many other Americans how many friends this country has around the world and how essential is our continued involvement as a nation in world affairs.

America cannot retreat into itself, or else the global structure of security and peace that underpins our prosperity will be put at risk. In this period we can neither dominate the world nor escape from it. For the first time in our history we are permanently involved in international affairs.

This is a heavy responsibility, but also an opportunity.

No other country is in the position we are in. Our help is needed, our achievements are admired, our friendship is sought. This is a challenge that summons the best

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qualities of Americans -- ingenuity, dedication, self-confidence, and moral conviction. Thirty years after the Marshall Plan, much of the world now bears the imprint of the creative American spirit. We have achieved great things, and the world expects from us even greater achievement. Now, in a world of new complexities and high hopes, we Americans can show once again that we are worthy of the mantle of greatness.

Thank you.

U.S. CHAMBER OF COMMERCE

Washington, D.C., May 3, 1977

"The Value of Freedom: New Dimensions in American Foreign Policy"

Mr. Lesher (President), Distinguished Guests, Ladies and Gentlemen:

I thank you for the honor and pleasure of meeting with you this afternoon.

America's role in the world depends on the informed support of its citizens, and no group of men or women has a more pivotal role to play than the American business community.

No group has more sustained experience with international involvement than the American business world.

The United States has been the world's leading economic power since before World War I. Even in the 20's and 30's, when America was politically isolationist, this country was actively involved in the world economic order.

Free trade was a major principle of our policy; freedom of the seas was a basic ingredient of our security;

and the nation distinguished itself in organizing
humanitarian relief in Europe to alleviate suffering
after the devastation of World War I.

Today this nation's foreign policy engages us
much more actively in the dimensions of international
security and peace. Our fundamental task has been to
wield American power to help build an international order
of stability and progress. <u>Global economic advance is</u>
<u>now a conscious goal of our diplomacy and a focus of our</u>
<u>international endeavor. This has many aspects.</u>

The world economy is driven more than ever by the
American economy. Recession or inflation in this country
take their toll in other countries, and few other nations can
achieve their own economic and social goals if the American
economy is not on the path of orderly non-inflationary growth.
Conversely, American economic recovery is the dynamic
factor of the world's recovery.

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This has crucial political consequences. The health
of democracy in the industrialized world is very much
a function of its ability to master economic and social
problems in many countries. The vitality, or malaise,
of democratic societies is significantly related, there-
fore, to the ability of the industrial nations collectively
to maintain a healthy and expanding world economy. The
solidarity of the industrial democracies has this as one
of its fundamental tasks. President Carter is to be
commended for continuing the practice of his predecessor
in meeting with other allied leaders to focus on economic
policy together at the highest political level.

Second is the world's great endeavor of economic
development. One of the basic challenges of international
order today is how to create a cooperative international
system embracing the participation and constructive

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contribution of the scores of new nations. If a group
of nations is convinced they can achieve none of their
aspirations for progress by participating in the world
system, then they will feel unjustly treated, dispossessed,
and will band together, and will join any other group that
is seeking to undermine the existing order. Then inter-
national problems will be settled by tests of strength,
and exacerbated by endless confrontations. The democracies will
find themselves living in an environment of economic,
political and occasionally military conflict.

The United States is the strongest nation in the world,
and the United States could survive better than most, in
fact probably better than any other country, in such an
environment. But it is an environment that would tax even
our resources. It would be in the long term incompatible
with the sort of economy with which we are familiar and

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under which we have flourished. And above all, it would
be inconsistent with fundamental American values.

We have to live in a world, not where everybody agrees
with us, but where our values have some relevance. We do
not wish to live in a siege mentality or in a world in
which only might makes right. And therefore, while I know
many of you here are supposed to be hardheaded businessmen,
it has to be admitted that our self-interest is not in-
compatible with the world interest and that only to the
extent that we can make our self-interest relevant to the
world interest can we really prosper as a country and survive
with our confidence in our own values intact.

This is not an impossible task. On the contrary, I
have been struck by the extraordinary degree to which American
technology and know-how are valued and admired and sought
the world over. This nation and its enterprising people

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have been the pioneers of what the world knows as moderni-
zation. I have been told by leaders who consider them-
selves revolutionaries that America has no equal as a
partner in the international enterprise of development.
It is American firms that know how to explore, develop,
produce, distribute and market the resources that they
possess and desperately need to exploit. This great economic
strength -- the industriousness and spirit of a free people --
is our greatest asset. It is the foundation of our own
prosperity, our military power, and the constructive
relationships we can enjoy with all nations in a world of
security and peace.

Today, the very success of the world economic system
over the past thirty years has spread economic power more
widely than ever before. Today our own prosperity is
more than ever dependent on the health of the world economy.

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The day is long past when nations could expect to determine
their economic destinies by isolated national policies.

The world economy has evolved as a single global system
in which all countries sell their goods, buy needed
products and materials, support their currencies, pursue
orderly growth without inflation, and otherwise seek to
enhance the material well-being of their peoples.

A generation ago, institutions of economic cooperation
were created which nourished this system and only increased
the world's interdependence. The statesmen of the 1940's
deserve our gratitude for their wisdom and their historic
contribution to mankind's prosperity. After the cataclysms
of world depression and world war, they created new in-
stitutions and practices that shaped the world's economic
evolution in the direction of multilateral collaboration.
The system of liberalized trade, the monetary system, the

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promotion of economic development -- these have helped
accelerate world expansion and thereby expanded the
global economy. All nations have flourished in reliance
on these institutions. The expansion of prosperity in
the last thirty years is unprecedented in human history.

In the last few years we have learned that the
global economic system is fragile, that its progress is
vulnerable to shocks and disruptions and attempts by
blocs to seek unilateral advantage. Yet the fundamental
truth remains -- that no nation or group of nations can
achieve its objectives except by cooperation with others.

Today, therefore, the second generation of inter-
national economic cooperation must begin. The institutions
that have served us so well for over thirty years must be
adapted to radically new conditions. The number of partici-
pants in the world system has tripled since 1945. The

political and economic role of the new nations is un-
deniable. The complexities of maintaining the structure
of international cooperation are formidable -- but to
maintain it is an imperative of our times.

Both the industrial world and the developing world
have to recognize some realities in this processs. The
industrial nations must recognize that the developing
nations, because of their relative weakness, have
legitimate claims for equity and for a voice in inter-
national deliberations affecting the world's trade and
monetary institutions. The developing nations are not
always automatically heard. But the industrial nations
must realize that their prosperity can become a powerful
force for global prosperity.

At the same time the developing nations must recognize
that they, too, are dependent on the flourishing of the

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economic system for achievement of their own development goals. Attempts to wield bloc economic power disrupt the entire system, as we have seen in recent years, and ultimately redound to the detriment of all. The nations of the Third World have a choice, just as the industrialized nations do, between slogans and solutions, between rhetoric and reality.

The industrial nations, who have brought about their own prosperity by our own effort, have a right to expect that the process of development is not regarded as something handed by one group of nations to another group of nations. In all societies it was a process that extended over decades. And indeed in all other societies it was a process that extended over generations. It needs domestic discipline. It requires a process of education. In many societies it required an adaptation of basic values. There is no substitute for hard effort by the

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developing countries in their own process of development,
and no one should create the illusion that there can be.

Developing countries must find a way to encourage
savings, reward initiative and ability, spread education
and training, and expand opportunities for all their
people.

It is also clear that a constructive world order
must ensure that foreign investors can operate in a stable
and peaceful environment as long as they make a serious
contribution to the social and economic progress of the
host country. But they must be free of harassment and
unreasonable restraints. It is indeed one of the curious
phenomena of this period that, for some reason, transfer
of governmental capital is considered in many countries
more acceptable than private capital, even though the

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capacity of governments to attach restrictive conditions
is infinitely greater than the capacity of private capital
to attach restrictive conditions.

So, in the process of development we need a sense of
obligation on the part of the developed countries and a sense
of participation and reciprocity on the part of the developing
countries.

In the last few years, the international community has
<u>in fact gone through another period of extraordinary creativity.</u>
Major improvements have been made in the world's institutional
arrangements to broaden the participation and to strengthen
the role and performance of developing countries in the world
economy. New forums and institutions have been created.
Imaginative use is being made of institutions and forums
that have long existed.

But we must always remember that we are not dealing
in dry economic statistics and specialized technical
mechanisms. We are speaking of the well-being of peoples,
of the age-old struggle against poverty, illiteracy

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malnutrition, hunger, disease, unemployment, and social
conflict. Whether we describe ourselves as materialists
or men of religious faith, we share a universal aspiration
to help all men and women raise themselves to a level of
well-being and personal fulfillment and dignity.

Therefore, it is no exaggeration to say that the
American business community is playing a part in one of
the great adventures of human history. If we as a nation,
or if we in the industrial world, succeed in mastering
the challenge of a peaceful world order, much of our
success will be due to our extraordinary vitality. Anyone
who has served in government knows that a government
produces nothing -- except paper. The economic productivity
of this nation comes from the energies and abilities of
free men and women, like yourselves, who have created
abundance which has no equal in human experience.

DEPT 9000207865
P.O. BOX 185
MCLEAN VA 22101

western union

Mailgram®

1-216639U082 03/23/77 ICS WA16614 WSHA
04499 MLTN VA 03/23/77

HON DR HENRY A KISSINGER
GEORGETOWN CTR STRTG & INTL STDS
STE 520
1800 K ST NW
WASHINGTON DC 20006

THE 1977 ANNUAL MEETING OF THE CHAMBER OF COMMERCE OF THE UNITED STATES WILL CONVENE IN WASHINGTON, MAY 1-3. ON TUESDAY, MAY 3, WE HAVE SCHEDULED A GENERAL LUNCHEON SESSION AT THE SHOREHAM HOTEL. BALLROOM, THE THEME OF WHICH IS "THE VALUE OF FREEDOM: NEW DIMENSIONS IN AMERICAN FOREIGN POLICY."

THE PURPOSE OF THIS SESSION IS TO BETTER ACQUAINT THE LEADERSHIP OF THE AMERICAN BUSINESS COMMUNITY, SOME 2,000 OF WHOM WILL BE IN ATTENDANCE, WITH KEY FOREIGN POLICY ISSUES IN WHICH AMERICAN BUSINESS HAS A MAJOR STAKE: IMPROVED POLITICAL AND ECONOMIC RELATIONS AMONG THE MAJOR INDUSTRIALIZED NATIONS, BETWEEN DEVELOPED AND DEVELOPING COUNTRIES, AND BETWEEN THE UNITED STATES AND COMMUNIST COUNTRIES.

ON BEHALF OF THE OFFICERS AND DIRECTORS OF THE CHAMBER OF COMMERCE OF THE UNITED STATES, I HAVE THE HONOR OF CORDIALLY INVITING YOU TO DELIVER THE PRINCIPAL ADDRESS AT THIS GENERAL LUNCHEON SESSION.

THE PROGRAM WILL COMMENCE AT NOON WITH A LUNCHEON, FOLLOWING WHICH YOU WOULD BE INTRODUCED TO ADDRESS THE AUDIENCE. A SPEECH OF APPROXIMATELY 20 MINUTES DURATION WOULD BE MOST APPROPRIATE.

FOLLOWING YOUR ADDRESS, A PANEL OF THREE DISTINGUISHED NEWS COMMENTATORS WILL PROVIDE THE AUDIENCE WITH QUICK REACTION COMMENTARIES ON YOUR ADDRESS AND FOREIGN POLICY ISSUES GENERALLY. JOHN SCALI OF ABC, ROD MACLEISH OF CBS AND MARILYN BERGER OF NBC WILL COMPRISE THE PANEL. YOU MAY FEEL FREE TO INTERACT WITH THE PANEL OR TO REMAIN FOR THIS PORTION OF THE PROGRAM IF YOU WISH.

WE BELIEVE THAT THIS SESSION WOULD OFFER YOU A UNIQUE OPPORTUNITY TO IMPART TO A CROSS SECTION OF THE AMERICAN BUSINESS COMMUNITY YOUR THOUGHTS ON THE KEY FOREIGN POLICY CHALLENGES FACING THE NATION.

IN ADDITION, WE WISH TO OFFER YOU AN HONORARIUM OF $2,500 FOR YOUR NOW #5000 PRESENTATION.

WE VERY MUCH HOPE THAT YOU WILL BE ABLE TO ACCEPT THIS INVITATION AND WE LOOK FORWARD TO HEARING FROM YOU SOON.