Extemporaneous Remarks
by

Henry A. Kissinger
37th Annual Meeting
of the
American Textile Manufacturers Institute, Inc.

April 12, 1986

APR

Thank you very much. Please be seated, ladies and gentlemen, because I do have difficulty looking humble for extended periods of time.

My exposure to the textile industry started when President Nixon in the 1968 campaign had promised to do something about textile imports from Japan. I was assigned to do some quiet negotiating with the Japanese about implementing that promise. And when I tell you that I don't know something, ladies and gentlemen, you can believe me. Not many people have heard me make that statement.

I didn't know a thing about the textile industry, and off I went negotiating with the Japanese. It didn't make any difference, because no matter what I said, they said, "No" anyway. But I learned fast. The Japanese invented categories of textiles faster than we could block their access to them; we finally were at 16 categories when somebody had the bright idea of leaking to The Wall Street Journal that if we didn't come to an agreement soon, we were considering applying the Trading with the Enemy Act of 1917, which was designed in slightly different circumstances. And I tell you, we got an agreement very fast. Unfortunately, the Japanese had gone out of the textile business by then and there were new competitors arising.

Let me talk to you about the problem of trade in our period, and then go to some strategic and foreign policy issues. I'd like to make one general comment on the trade issue and on the issue of free trade versus protectionism, of which the textile issue is really a subdivision. And it is this: The idea of free trade developed in the nineteenth century under conditions that were quite different from what we are facing today. At that time, at first, there was only one truly industrialized country, which was Great Britain, which also had a monopoly on energy. Then three or four other European countries developed their industries, all under or behind protective walls until they were in a competitive position. There was a gold standard which saw to it that if there were trade imbalances, domestic adjustments became imperative. In other words, it was an automatic system of adjustments, and the state could not manipulate exchange rates and other factors of trade.

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None of these conditions exist today. Now we have some
30 to 40 nations that are trying to export, and to increase
their exports simultaneously. We have floating exchange rates.
We have an unusual opportunity for governments to manipulate
their exchange rates, and their support for exports, sometimes
in an overt way, sometimes in an indirect way.

In the nineteenth century, the principal obstacle to imports
was duties. In the twentieth century, the nontariff barriers,
sometimes even cultural obstacles, are more significant than the
quantitative obstacles. So we live in quite different circumstances.
And it is, to my mind, not possible that every nation simultaneously
increases its exports. If everybody seeks to increase exports
simultaneously, with government support, and if exchange rates
can be manipulated, a country that believes in the classical free
trade doctrine over a period of time is going to be at a
disadvantage.

Now I have a firm policy never to tell an audience that likes
to hear something what I don't tell every other audience, so I'm
not saying this because you in the textile industry have been
particularly hard hit. Those of you who want to research what
I've been publishing can find it in the morgues of the newspapers,
and--if you remember that I translate my remarks from the German
so that you have trouble hunting for the verb occasionally -- you
will see that I have been making the following points: That over
the next decade or so, we cannot be the only country in which
there is not some political approach to the problem of trade,
and in which trade is not related to the overall economic and
strategic objective of the nation in some manner. And if I
had to predict the future, I would say, if you look around the
world today, you see that in Asia and in Europe, trading blocs
are forming, whose distinguishing feature is that their external
barriers are greater than their internal barriers. That's what
makes them blocs; otherwise they'd have no economic significance.

I believe it is important for the United States to face that
reality, and apart from any individual industry which has to be,
of course, part of this general issue, it is necessary to establish
some priorities and some overall national strategy with respect
to trade. In my view, the issue of statesmanship, in general terms,
is that leaders should anticipate and carry out as an act of policy
that to which they will be driven by necessity. Otherwise, if
they act in time, they have a greater scope for creativity; if
they wait for necessity, they will have to act in times of crisis.
And that seems to me to be the fundamental issue of our trade
policy over a middle and longer term-- In a world which, whatever
one might think about abstract economic theory, it is the fact
that the capacity for governmental influence and manipulation by
competitors is so great that we cannot simply rely on free trade
to smooth irregularities out automatically.

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That seems to me to be the big challenge to our trade policy, of which the problems of your industry are a crucial subdivision. The brutal fact is that the theories of the last century or the middle part of this century will not in fact be relevant in the latter years of this century and beyond.

If you look at the fate of any of the current trade negotiations almost all of them have had the practical consequence of having to take care of so many exceptions that one is really in a world in which the strategic and other priorities of nations play a decisive role.

That is what our government has to organize itself for and what our domestic debate has to organize itself for, and will be driven to do, in my view, no matter what our short-term decisions may be on any one issue.

Let me turn to some political problems. Let me begin with East-West relations and make a few comments about terrorism and the Central American problem.

First, let me strongly support what Senator Dole has said. It has become almost a national disease to have every new Administration begin with a reassessment of all the premises of its predecessors, so that any foreign leader who deals with us runs the huge risk that if there is a change of Administration in the United States, everything that he agreed to will be attacked within the United States, or at lease open for debate here. The national interest of the United States cannot change every four or eight or twelve years. The national interest of the United States ought to be fixed at some point. We will still have some disagreements as to tactics; that's inevitable. Britain was a major country in the nineteenth century, not because it had brilliant statesmen, but because it had a very steady and reliable foreign policy. Friends or adversaries always knew what the major premises were.

But unfortunately, we do have a fundamental dispute in this country, and somewhat facetiously I would put it this way: It is between those who think foreign policy is a subdivision of psychiatry and those who think foreign policy is an aspect of national security; between those who think foreign policy is an act of conversion or those who believe foreign policy is an act of establishing some sort of balance of power in the world.

The former group approaches foreign policy as if relations among states were like relations among people, and as if you could, on the basis of personal goodwill or personal relationships, affect the future destinies of nations. The latter group says that leaders change in any system, and that in the end their

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actions will be determined by the balances of incentives and risks they see before them. Therefore, it is the first duty of those who conduct foreign policy to get those balances of risks and incentives straight.

Take the current debate on Contra aid. People say we ought to stop it and give diplomacy a chance. Well, that is exactly the wrong way of looking at the problem. If you stop it, you are not giving diplomacy a chance. What conceivable incentive do the Sandinistas have to engage in a negotiation if, before we even enter a negotiation, we remove the pressures that they want to see eliminated? Why should they negotiate at all?

It is a well-established Communist tactic that they insist we enter negotiations by giving up what got us there. And frankly, we have yielded to it too frequently. In Korea, we stopped military operations as soon as the armistice negotiations began, and it took two years of negotiations during which we suffered 60 percent of all our casualties in the Korean War. In Vietnam, we negotiated a bombing halt which I did not oppose at the time. I was not in government at the time, so I'm not claiming huge foresight. But it certainly contributed to a stalemate, which was not broken until President Nixon abandoned the bombing halt. Now we go through the same sort of debate again. We cannot keep opposing the concept of diplomacy to the concept of pressure. The two are related to each other.

I mention this also because I want to make the more general point first about East-West relations. This is the only country in the world that except for the South has never known national catastrophe; and it's one of the reasons why I have always believed and experienced that some of the great national leaders in the Senate, the people to whom any President could go in times of crisis and appeal on the issue of national interest, usually came from the South. In the South leaders do know that there can be irrevocable disasters and national tragedies. But this country as a nation has never experienced this.

We've never had powerful neighbors. We've always been able to choose our involvement. We've never had to live with the imminence of attack. As late as 1952, we produced 52 percent of all the goods and services of the entire world. So there was no possible combination of enemies that could threaten us, and therefore we could wait until threats became unambiguous.

None of these conditions exist any longer. We don't have the British Navy anymore that kept the oceans open as it did prior to World War II. We don't have a huge atomic monoply anymore as we did, or the superiority lasting well into the late '60s. We are producing today only 22 or so percent of

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the world's gross national product, which still makes us
the single largest economic power in the world, but which also
means that the balance of power now must become a preoccupation
of our national leadership of whatever party. But, unfortunately,
all of this is happening at a moment when bipartisanship is
importantly disappearing, and when much of our public discussion
creates the illusion that there is some gimmick that is evading
us.

I conducted a number of negotiations and others after me have,
and I'm always struck by the tendency of outside commentators
to create the impression that negotiations are like a detective
story in which the other side throws out vague clues, and we have
to guess at an answer. And then pundits write about how we
missed tremendous opportunities because somebody said something
somewhere that we didn't pick up, and these sensitive souls from
the Communist world were so upset that we never heard from them
again. Well, I'll tell you, when these Communists want to
negotiate something, you can't drive them away from the table
with a shotgun. And they don't throw out vague clues. They have
a totally different conception. We think that peace is the
normal condition, and that therefore all we have to do is to
get to a conference table, and we are 98 percent home. The
Soviets and other Communists have no such view. They believe
that any settlement results from some balance of forces, economic,
military, political, psychological. No Communist leader can come
home to his country and say, "I have just met the most charming
American President, and we're going to make some concessions to
this nice fellow that we have not previously considered." What
he can say is that there is a balance in the world that requires
us to adjust to. That's an argument that's understood.

If you read the postwar American literature about East-West relations, you find a number of interesting phenomena. First, no matter who the Soviet leader is, a large segment of the discussion describes him as being different from his predecessor, of being more peaceful, of trying to change things by himself. Secondly, you find a lot of discussion of how to get to a conference, but very little of what we're going to do when we get there. We are waiting for a conversion that would have some Soviet leader say, "Okay. Now I want peace, and I know exactly what peace is." But that isn't the case.

We had three Soviet leaders in the space of three years
recently. This gave Western leaders an opportunity to flock to
Moscow for the funerals, and report back that the new leader
was really dedicated to peace. I found that a very fascinating
phenomenon, having been at a number of funerals myself. You
have to remember that you get a maximum of half an hour with
the grieving new head of state. Decency requires you to say
a few words about his predecessor, and language requires that
the conversation is cut to half. So in about 10 to 12 minutes

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of conversation, you try to figure out the real intentions of
the new leader who is, above all, preoccupied at that moment
with making sure that the competitors who lost out in the
struggle for leadership are not going to get him before he has
consolidated his position.

So when there is a lot of talk about whether Mr. Gorbachev
is a new type of Soviet leader, I'll tell you, I don't know;
all I know is that his sponsors in the Soviet system were
Yuri Andropov and Mikhail Suslov, who were both hard liners.
One was head of the KGB, and the other was head of the party
ideology. And I don't think they would put closet doves into
either of those positions.

In short, I do not think we can rely on the personality of
what we're facing. But I do think in fact there is an opportunity
for negotiation at this moment. It arises from at least two
major factors.

One, that the governmental system of the Soviet Union is
one of the most archaic of modern times. Nobody could run a
modern corporation the way they run their state. No General
Secretary of the Communist Party of the Soviet Union, which
is the leading position, has ever retired voluntarily. In fact,
to make sure of that, they've all died in office, except one,
who was removed in a coup.

No new Soviet leader can walk into his office, as in the
United States a President can, and be sure that his orders
are carried out just because he's got that office. He has got
to put his own people throughout the machinery, down to the
lowest levels. And that is a time-consuming job, so that every
new administration in the Soviet Union begins with a purge and
ends in stagnation. It begins with a purge because the new
man wants to put his people in, and it ends in stagnation
because he is usually so decrepit when he leaves that everybody
in the system is trying to figure out who's going to succeed
him and make his alliances and they spend all their time on
mere survival.

Second, the Soviet economy cannot continue as it has. You
cannot run a modern economy on the basis that every article in
commerce moves by allocation. Nobody in the Soviet Union knows
what his costs are, because all prices are fixed. Nobody knows
who his customers are, because all his produce is delivered to
a ministry that then distributes it by its own criteria. There's
no incentive for technological advance; in fact, quite the
opposite, except, perhaps in the military field where they do
have foreign competition. There's no way of using modern
computer technology, because the state has a monopoly on
information.

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In short, if you read Soviet speeches at their recent party congress, in which they described what's wrong with their economy, you will find an indictment worse than anything I can do here, because they don't care about boring their audience half to death and I marginally do.

There are two interesting facts. Five percent of the agriculture in the Soviet Union is what peasants are permitted to do in their free time on their own. That produces over 35 percent of the entire agricultural output of the Soviet Union. Second, there was a story in Pravda a few months ago which reported the following. A train left a station in the Soviet Union over two years ago and never arrived at its destination. And they haven't been able to find it since because the paperwork with respect to it has been destroyed. Now, when you can't find a train because the paperwork has been destroyed, it tells you that there's something wrong with the system, where paperwork is more important than going down the tracks and seeing what might have happened there.

That is what Mr. Gorbachev has to change. Therefore he needs a respite, and therefore we are having negotiations. Our problem is: How do we conceive these negotiations? Do we conceive them as good relations between our leaders, or do we say there are a number of problems that need fixing, and we're going to hang in there and insist that they be fixed? I don't think we'll ever have a better opportunity.

In connection with these problems, let me mention two categories. First, is arms control. I will not inflict on this audience a technical analysis, and therefore you'll never know whether I could if I tried. But that issue has become like an issue in the nineteenth century which was called the Schleswig-Holstein crisis, about which Lord Palmerston, the British Foreign Secretary, said the following: Only three people had ever understood it. One was dead, the second was in the lunatic asylum, and he was the third, and he had forgotten it.

But I want to make one fundamental point. If you look at the various Soviet proposals, and you don't go through all the number crunching that is going on, they have one common feature, and it is based on this reality. In the '50s, the West put itself in a position where it relied almost exclusively on strategic weapons. At that time, we had a monopoly, and then for another decade we had a huge superiority. Since then, each side has acquired about 12,000 strategic warheads, give or take a few thousand. President Kennedy thought he was facing Armageddon at the time of the Cuban missile crisis when we had 3,000 and the Soviets had less than a thousand. Without going into the issue now of who is ahead the Soviets know that if they can keep the current state of affairs going, the pacifists, the unilateral disarmers, are going to become stronger and stronger in the West.

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And every Soviet proposal has the common feature that it more or less freezes that situation. They want to cut warheads by 50 percent. That still leaves them many times beyond where they were at the time of the Cuban missile crisis.

They want to stop weapons testing. That doesn't do anything with what exists but it thwarts accuracy, defense -- indeed anything that limits terror. They are violently opposed to the President's strategic defense initiative. Now, some of the rhetoric about that may have been a little exuberant, but I think the President has got hold of the right issue. It does not make any sense to begin these discussions by prohibiting defensive weapons when the world is scared to death of offensive weapons.

The right question is how you balance offensive and defensive weapons. And the constant effort on the part of well-meaning people in the United States who say we are missing a great opportunity--because if we only gave up strategic defense, we could have an agreement--don't understand, in my view. Sure, we could have an agreement, but what does it mean? Where will it get us? It will gain the Soviets time, but it will not improve anybody's security, including even their own. That's the issue that we need to keep in mind in arms control, and beyond that I won't get into all the technical problems, because that's the one to which sooner or later everything returns.

Let me make a comment on the other category--the political problems in the world, and stress the following. Almost every war in history has started because of political ambitions, not automatically because of an arms race. It is political tensions that cause arms races, not the other way around. So the political problems have to be solved, and among these political problems is the ground rule that the Soviets attempt to establish: That everything on their side of the line is sacrosanct, and everything on our side of the line is subject to subversion, undermining and disequilibrium.

What is the fundamental problem in Central America? Nicaragua is a country of 2.8 million people. By itself, it can be no threat to the United States, or even to its neighbors, but, when it has 8,000 Cubans and thousands of other advisers from Libya, from Eastern Europe, the largest Soviet Embassy in the Western Hemisphere outside the United States, you know that these people are not there because of the climate. The Soviets and their surrogates, the Cubans, have built a disproportionately large army for Nicaragua. There are as many foreigners in Nicaragua today as the previous Nicaraguan government had Nicaraguan soldiers in its own army. You have an army that is almost as large as Mexico's,

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which has a population 30 times larger, and, of course, larger
than all surrounding countries put together. You have to remember
that Costa Rica has no armed forces at all, that the Panama Canal
is 150 miles away, and the border of the United States is closer
than it is to Washington.

I'm not saying they're going to march up to our border. I'm
saying that a base for projection of influence and power is being
established there that must have global significance or the
Soviets and Cubans wouldn't have been giving a credit of $600
million to a tiny country while the Soviet Union itself is under
enormous economic strain.

It's in this context that we have to consider our actions.
Our minimum objective must be to try to separate Nicaragua from
its Cuban and Soviet connections, and to return it to some Western
Hemisphere relationships. And that cannot happen unless there
are some incentives and penalties. That is the issue that has
to be addressed when the Congress or when the House votes, and
that must not be subsumed in an endless partisan debate.

We cannot repeat again the Vietnam paralysis of pretending
to ourselves that only our shortsightedness is standing in the
way of a settlement, and that therefore we unilaterally remove,
before any agreement is even outlined, any of the pressures.

Another big issue I want to talk about is terrorism. That
is now concentrating at this moment on the issue of Qadhafi. In
the immediate crisis, I think we owe it to our Administration to
assume that when they say they have evidence that somebody is
behind terrorism, that they know what they are talking about.
They have every incentive to understand this problem properly,
and to make sure that they have a united people behind them.
And they must have a united people behind them, because I don't
think terrorism is simply an issue between us and Libya. It has
much broader ramifications.

By terrorism, I mean the deliberate targeting of people
known to be innocent, uninfluential in making decisions, involved
in peaceful pursuits, who cannot possibly be part of any organized
national activity, like tourists, like people in nightclubs. The
purpose is to create the impression that the United States cannot
even protect the most helpless of its citizens, and therefore the
message is, to the moderate leaders around the world, if they think
they can rely on the United States to protect them when the U. S.
can't even protect the people they have the greatest incentive to
protect, then they are bereft of reason. It is to undermine those
people who seek moderate solutions and who depend on the United
States, and to undermine them psychologically. That is the key
issue of terrorists.

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I believe initially we make the mistake of concentrating on the actual perpetrators. This is the hard way. The guilty perpetrators usually merge with the criminal elements in each society, and they're the hardest to discourage, the most expendable, and the most difficult to find.

What keeps the system of terrorism going is two other levels. One, it is a fact that many of these groups received at least for a while, and maybe still receive, intelligence support, financing and rudimentary training from outside powers, especially from the Soviet Union. And when you support a group like this, it's not necessary, it's not even desirable that you know specifically what they're going to do, because what they're going to do in a general way is to weaken the United States and other democracies. The less responsibility the sponsor assumes formally the better off he is. But nations must not be permitted to act like somebody who throws a rock down the mountainside covered with boulders and starts a landslide that kills a passerby, and then claims that he's not guilty because the rock that killed the passerby was not the rock he threw. That's one level, and therefore I believe that financial, intelligence and other support for known terrorist groups must become part of a summit agenda, and must find some expression in some binding renunciation that can at least be evoked in a crisis.

The second level is the one in which Qadhafi is involved. That's when countries permit headquarters, training facilities, intelligence facilities to be established on their territories. Libya is one of those countries. Syria is another. Lebanon, which is not in control of its territory, is yet another. And South Yemen, in a way, is one of those countries. Without those support facilities, the terrorists would have a much more difficult life, because they would be looking for refuge all the time. And yet those countries, either for domestic reasons, or by preference as in the case of Libya, will not move against the terrorists unless they are given a reason to do so. Therefore, there is needed a coherent policy where to harbor known terrorists involves penalties, even if you cannot prove to the last detail, which particular group did what.

If it were known, if one could get enough unity that airports in countries in which Abu Nidal has headquarters will not be used by international airlines, that the United States reserves the right to retaliate at least economically, whenever American citizens or installations are attacked, against known terrorist headquarters, you would create incentives where at least some of those providing support facilities would bring pressure on others to slow down.

To be sure, there would be a rocky period, and this will not be done with one move, but the present course has shown an acceleration of these incidents ever since last June when the

TWA plane was hijacked. So I believe that the Administration
is acting in the interests of all Americans, and all free peoples,
when it takes its current position on the issue of Qadhafi.

These are some of the issues that I see before us. And,
of course, when you present them like this they all sound like
very big problems, But if you think about what I've said, if
you analyze the issues, they have one encouraging feature for
Americans, which is--whether we talk about trade, about
negotiations with the Soviets, about Central America, about
terrorism--that there are measures that we can take to improve
the situation or to solve the situation. We don't know how rare
it is in this world that a country can say that the solution of most
of its foreign policy problems is importantly in its own hands.