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From: Guidnce>guidance
Subject: Kissinger speech Britain in the World
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Sent: 29/03/95
Received: 29/03/95

TRANSCRIPT OF SPEECH BY DR HENRY KISSINGER
AT THE "BRITAIN IN THE WORLD" CONFERENCE,
LONDON, WEDNESDAY, 29 MARCH 1995

Many decades ago, longer than I care to admit, as a young professor I went to hear a lecture by Harold Macmillan, recently retired as Prime Minister. And he began his presentation of his distilled wisdom by saying: "As they left the Garden of Eden, Adam turned to Eve and said: We live in an age of transition". That, 30 years later, is also the theme of my remarks.

I grew up intellectually in the age of the special relationship. I believe it was vital for the creation of the post-war international system. It was not a favour that the United States granted to Britain, it was earned first in the conduct during the war and secondly in the enormous contribution in the construction of the Marshall Plan, the North Atlantic Treaty Organisation and what generally was identified with the Cold War pattern of international relations. The special qualities that Britain brought to that relationship have been discussed by previous speakers, experience in a multi-polar world, a global character of mind, an experienced leadership, a commitment to security, overseas ties of not insignificant proportions, and the English language which you can hear, today practised on American television by those who are genuine and by those who engage in wishful thinking.

All of those were great assets. But we are now facing a new environment. And I would argue that the qualities that made the special relationship work, broadened now to a European-American relationship, may be even more essential than before.

The United States, to begin with, faces an unprecedented situation. It is the only major country in the world whose history can be precisely dated. It is the only major country in the world populated largely, almost exclusively, by immigrants. The only major country that has never had a powerful neighbour and that has never had to face the problem of security that less favoured nations have had to confront.

The American perception of its foreign policy has always been as one of almost unlimited choice and above all of the ability to participate or to withdraw at its own discretion. Every American initiative of the post-war period has been presented to the American public as having a terminal date and designed to permit the underlying pattern, which is assumed to be harmonious in the world, to reassert itself, after which America could again withdraw from its commitment to whatever the enterprise was that was under discussion.

This is why almost all American foreign policy has been presented alternately in psychiatric or theological terms, either as a means by which relations among nations could be conducted like relations among people, or as a crusade to destroy or, even better, to convert

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antagonists to the American perception of international affairs. In that sense the Cold War and the victory in the Cold War was a culmination of the American perception of international affairs.

How many incidents can be recalled, if any, in history where a nation could compare what its leaders and its allies proclaimed 40 years earlier and claim that practically everything they set out to do had been achieved? And yet that is the position in which we now find ourselves. And that is occurring moreover at the moment when in the United States the leadership groups that now dominate are of a different origin geographically than those who formed the post-war period. The period of the Cold War was shaped by the north-east establishment. The present foreign policy and the present leadership is drawn mostly from the west, the south-west or the south. Their organic relations with Europe are much less than those of the generation of Acheson or Macloy (phon) or all the fathers of the Cold War period. It does not mean that they are hostile, but their intellectual formation is different from that in which internationalism was identified with European struggles and when the lesson of appeasement seemed to be that the democracies around the Atlantic had to be unified.

So America is now going through what I believe is only the beginning of a national debate. And I really have no right to speak here of an American point of view because the American point of view is still in the process of being formed. The seminal debates have not yet taken place. For the first time in its history America has to conduct a global foreign policy without an ideological enemy, without a clear cut strategic plan in a world which it can neither dominate nor from which it can withdraw. And therefore the classic maxims of American foreign policy are almost impossible to apply. It is not impossible to evoke an overwhelming ideological challenge, it is not feasible to transmute foreign policy into large scale enterprises to remedy an immediate crisis.

What is necessary is to understand that we are living now in a world of 6, 7 major global players. It is said that the United States is the only super power left. That is a simplistic description of the problem. We may be the only military super power left, but the issues susceptible to solution by military action are declining. The kind of power in which we excel is less and less relevant to most of the foreseeable international crises.

On the other hand, on economics, even in technology, the world is becoming much more evenly balanced and a look at the dollar makes it clear that the relative economic position of the United States is surely not growing.

In such a world the United States faces a more or less traditional foreign policy problem, which is in a world of players of operationally more or less equal strength, there are only two roads to stability. One is hegemony and the other is equilibrium. Hegemony may not be possible and is in any case against the convictions and the public morale of the American people, but equilibrium, or balance of power, is a concept passionately rejected in the American intellectual community as a contribution to endless tensions and is an attitude that Americans have fortunately transcended through much of their history. To say in America what is the theme of this conference that we must define a national interest is considered a revolutionary, if not a reactionary,

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proposition. And even if one can elicit it as an acceptable proposition, the national interest is almost always then defined in sweeping ideological terms.

Nevertheless, the future of the world will have to be based on some notion of equilibrium, some balance between the various regions in the world which I will define as follows. It cannot be that everybody is perfectly satisfied, that has never been achieved by humanity. But it can perhaps be achieved that the major regions of the world are not so dissatisfied that they will seek to overthrow the international system by violence, by terrorism, by economic warfare or some of the other methods so well elaborated in our century.

In conducting such a policy I would define the American interest both negatively and positively. Negatively it is against the American interest that any major region of the world, any continental region, either Europe or Asia, and surely both of them together, be dominated by a country or a group of countries that can dominate it and then organise it to pursue inimical objectives. And secondly, it is necessary for the United States to participate in a world community that takes into account the global nature of our societies in economics, communications and technology.

Theoretically the United States could pursue this on a global basis in a manner in which Britain conducted itself towards Europe through most of the 19th Century, from a posture of splendid isolation, maintaining good relations with everybody, and throwing its weight to the side that seemed most advantageous at the moment, which in the British case was generally the weaker side in European forums. This is theoretically possible. I do not believe we have the philosophy, the personnel or the resources to do this on any consistent basis, or even to elaborate it, as a philosophy.

I believe that the realistic approach of American foreign policy is to recognise a fundamental difference in the relations between Europe, within Europe and in the relations in Asia.

Within Europe, there are many conflicts and many rivalries and many historic memories. Nevertheless, a strategic conflict between European powers is out of the question. In that sense, whatever the differences in approach between the core countries of the European Union and the rim countries, this is the dominant factor of Europe.

That is not the case in Asia. We can talk - as we do talk periodically - about a Pacific community but anybody studying the relations of Japan, China, Korea, the Asian part of Russia, even India to each other must come to the view that at this stage their relations to each other are more similar to the relations of 19th century European states to each other than of 20th century European states and if we go to the area south of Europe, the growth of fundamentalism poses not just an indirect but an explicit challenge by linking religion and politics in a missionary concept that purports to be the only valid answer to contemporary issues and is in some respects a reaction to the material philosophies that have been dominating in western civilisation.

Therefore, I conclude that the United States and Europe have at this moment, just as at the end of World War II, have the need for a special kind of relationship with each other. It is not in the

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sense that we have necessarily a common enemy but that we have
comparable problems that need to be dealt with by parallel
approaches.

At the end of the Second World War, Britain was the only country
that had not been occupied at one stage or another, that had
preserved its institutions and its inward strength and had therefore
made the transition from power to influence in an extraordinary
manner. It took exceptional self-discipline and skill for a country
that had been at the centre of world affairs to shift its emphasis
in this manner. And while the Gaullist approach to America was to
make disagreements extremely painful, the British approach was to
make disagreements extremely embarrassing. And in the long run that
reflected the fact that through a network of institutions and
consultations a general community of interests was generated.

Since then, many of the tacit bargains by which Europe and America
and the European/American relationship were constructed have been
altered. The Cold War has obviously ended. The division of Germany
has also ended and thereby the position in which France had a
certain kind of political leadership on the Continent, and Germany a
certain kind of economic leadership, and America performed the
security role in which Germany was linked to America through NATO,
through France to the European Union and Britain was extremely
helpful in establishing an overall framework. Now that relationship
has to be redefined.

I do not agree with those who believe that America should now shift
this special relationship to Germany. It is not helpful to Germany
and it is not meaningful for the United States because we should not
have a special continental partner and I do not know any German
leader who aspires to such a position. It is not meaningful either
because what is needed is help to America and cooperation with
Europe in the transition that I have described to the conduct of a
global policy without enemies, without a security danger geared to
potential threats and geared to global opportunities.

There have been, as I said, two approaches to European/American
relations. One was the Gaullist approach for which in my writings I
have had great sympathy because it reflected the necessities of a
country that had gone through tremendous difficulties in the War and
in the colonial period and that needed to reaffirm its identity.
The second was the British approach which, more secure in its
identity, sought to establish a pattern of cooperation, very
difficult to challenge because it reflected over time the
convictions on both sides of common interests. The British approach
also reflected a historic tradition of a global foreign policy while
the French approach was more nearly geared to the calculations of
the margins on which stability in central Europe, particularly as
long as Germany was divided, depended.

My basic argument is this.

In the period of the Cold War, when the United States had the
dominant role in security and when there was only one visible
international challenge, it made some sense to define European
identity by trying to wrest it from the United States. In this
period, nothing is easier to achieve than to have America turn away
from Europe, nothing is simpler than to convince Americans that they
have no special interest in Europe. The tasks that Europe has are

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now so manifold that they don't have to be granted by the United States - on such issues as the participation of each of the central European countries in the European Union. There is no need for the United States to take a position or to involve itself. Whether Europe should follow a multiple geometry or be more closely integrated makes a difference in the relations between Europe and the United States but it cannot be affected significantly and should not be by American pronouncements. As Europe expands, I personally believe that a more flexible approach is probably the more effective. But that is my personal conviction on which I would not insist.

What I would think is important is not to make rigid separations between areas that are exclusively European and areas that are exclusively American. What we really need is the kind of dialogue between what emerges in Europe and what is beginning to emerge in America that characterised the post-War period. I think it would be a continuation of the western civil war that started in 1914 if Europe and America now concern themselves in the kind of debate which is not at all impossible.

In America, we need to give priority to European relations that frankly has been lacking, not just in day-to-day policy but in some acts that seem quite unnecessary. Therefore, I believe that the debate about NATO membership ought not to be permitted to fester indefinitely. It is not the end of foreign policy, it is just to put this issue out of the way but unlike the Cold War, it is no longer possible to build an Atlantic relationship exclusively on security issues.

There was a period in which I thought that the next phase of American foreign policy should be to concentrate on building a western hemisphere community. I still think that that is an important enterprise but I believe more and more that what we now need to do is to create some goal for the North Atlantic nations so that in the challenges that I have tried to describe we can act again in a common framework. Therefore I believe that we should seriously begin to examine the idea of some form of North Atlantic free trade association, or free trade agreement, to which whatever America builds in the western hemisphere could then be related and which would enable us - in the foreseeable turmoil in other parts of the world and in the shifts of emphasis and in the conflicts that will inevitably arise as new powers emerge - to act with some purpose and some direction.

I am back to where I started. A succession of American leaders of both political parties, many of them not known for excessive sentimentality, which is anyway not a trait which enables one to rise easily to the Presidency, have over a period of more than a generation considered it natural that on major issues Britain and the United States would seek to cooperate. And would have a level of consultation that was never formalised but was central to the formation of policy in both parties in both countries. Now, the challenge is whether this can be done on European/American relations and this is where Britain's experience can make a seminal contribution. Europe does not need to wrest its identity any longer from the United States - we are back to 1947 in that respect. So my hope is that the nations of the North Atlantic representing - whether our intellectual community agrees with that or not - a comparable civilisation in a world in which democracy and progress

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Wall Street Journal

31 March 1995

'I Can't Explain It,
But Something Is
Special Between Us'

Britons Endlessly Fret About
A Relationship Americans
Don't Even Know About

By LAWRENCE INGRASSIA

Staff Reporter of THE WALL STREET JOURNAL.

LONDON — How goes the "special relationship"?

Not well, judging by the front-page stories in British newspapers of late.

The on-again, off-again affair made headlines again this month when one partner "jilited" the other. The subsequent "cold air" quickly led to a "rift," which prompted a "withering putdown," when one played hard-to-get and refused to take a phone call from the other.

"SO LONG, NICE WHILE IT LASTED," blared the Sunday Times.

Another tiff between Prince Charles and Princess Diana? Or maybe a Tory government official caught in a compromising embrace?

Hardly. The breathless reporting involves not affairs of the heart, but affairs of state. The papers were describing a spat between President Clinton and U.K. Prime Minister John Major, and the special relationship in question is the one between the U.S. and Britain. That decades-old catch phrase doesn't need defining here, where everyone knows what it means: that the U.K. ranks right up there with mom and apple pie in the former colony.

It Doesn't Translate

Few Americans, on the other hand, have a clue about the term, much less worry that the relationship might be over. Michigan tourist Louis Rabaut pauses while sightseeing near Big Ben, pondering what the expression might mean. "You got me," says the 39-year-old lawyer from Grand Rapids. He jokes, "Where do you go to see the special relationship? What tube [subway] stop do I get off at?"

He isn't the only Yank mystified by the term. "The special relationship of what?" wonders Kim Neighbor at the Gallup Institute in Princeton, N.J., when asked if the pollster has done any surveys on the topic. An official at the U.S. Embassy in London, just a short carriage ride from Buckingham Palace, confesses: "I never heard of it till I came here. It's not in the common vocabulary of Washington."

In the U.K., on the other hand, the relationship is the topic of intense scrutiny. Prime Minister Major's visit to the White House next week has been extensively reported in advance in London, while virtually ignored in the U.S. Not only is the relationship the subject of frequent newspaper stories, it is dissected ad nauseam in scholarly tomes, analyzed in speeches, debated at universities and examined in excruciating detail in books devoted to the issue.

National Obsession

"I'm not a qualified psychologist, but I think [the obsession] is a medical condition," quips a U.S. diplomat in London. "We're more to them than they are to us. That probably rankles." Even some Britons are tired of it. "All this is intensely irritating and annoying," says Peter Jay, a former British ambassador to Washington, now economics editor of the British Broadcasting Corp.

Exactly when the special-relationship phrase originated isn't clear, but it was popularized by Winston Churchill, says British writer John Dickie in "Special No More," his recent 276-page book on the subject. "Politicians are so well practiced in massaging each other's egos that the rhetoric about the relationship is poured out automatically regardless of the reality," he wrote.

What precipitated the latest "Anglo-
Please Turn to Page A14, Column 4

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# Britons Fret About A Relationship Yanks Don't Know About

*Continued From First Page*

U.S. crisis" — as one British headline called it—was the St. Patrick's Day visit to the White House by Gerry Adams, head of Sinn Fein, the political arm of the Irish Republican Army. Further, President Clinton lifted a ban on Mr. Adams raising funds in the U.S. This enraged the British, who are trying to get the IRA, which last year agreed to a cease-fire in Northern Ireland, to turn in its weapons as a condition for peace talks over the future of the U.K. province.

In the diplomatic version of throwing a temper tantrum, Mr. Major refused to take a telephone call from President Clinton. A political cartoon in the Times of London depicted Mr. Clinton glumly standing at a pay phone, his call ringing unanswered, with the line: "Looking for a SPECIAL RELATIONSHIP?"—a play on the fact that female "escorts" often advertise their services by putting business cards in phone booths. Mr. Major, who claimed to be too busy, finally accepted a call from the president days later, and publicly both sides say all is fine.

Nonetheless, the snit prompted some giggling. "I doubt if Clinton lost sleep over this," says Sir Nicholas Henderson, another former British ambassador to the U.S. Adds Andrew Marr, a columnist for The Independent newspaper: "It's pathetic. It's a kind of teenage angst. There is an element of grotesque farce."

British sensitivities to perceived American slights can result in bizarre interpretations of events. When several British films and actors failed to win at this week's Academy Awards, for example, the Evening Standard newspaper declared in a banner headline: OSCARS BLOW FOR BRITAIN.

No one, of course, argues that the relationship between the two nations isn't important. Politically, the countries have long been allies and will continue to be. They share a common cultural heritage. And economically, they remain major trading partners.

As the memories of World War II fade and the Cold War recedes, however, the ties have become less critical. The coolness between Messrs. Clinton and Major, some Britons note, contrasts sharply with the warm relations between President Reagan and former Prime Minister Margaret Thatcher. (So little weight does Mr. Major carry in the U.S. that one poll on world leaders conducted last fall didn't even include him.)

But what really bothers Britons, some Americans say, is the realization that maybe England doesn't matter so much in the U.S. To many Yanks, the place is a prepackaged holiday destination where they can hear funny accents, visit quaint villages and take in some pageantry. Germany and Japan — not to mention Mexico and Canada — have become more important to U.S. interests, a fact resented by some here. "What special relationship?" wonders Winston Churchill, a Conservative member of Parliament and grandson of the late prime minister. "You mean the one between the U.S. and Germany?"

Then again, the British aren't as enamored of the U.S. as they used to be, either. Robert Worcester, the leading polister in the U.K., notes that only 15% of folks here feel America is Britain's most important partner, down from 34% in 1969. (Britons now say that Europe and the Commonwealth are both more important.)

Given all the angst in Britain over the ups-and-downs of the special relationship, some diplomats and politicians think they may have found a solution: They refuse to use the phrase. Raymond Seitz, the U.S. ambassador to Britain from 1991 to 1994, is one. He explained in a speech, "I can count four occasions in the last year-and-a-half when the headlines have read less like a news item about the relationship than an obituary."

But while the special relationship may be dying out, euphemisms for it remain alive and well. "I can't remember when a British minister last used that phrase," a senior Downing Street official says of the special relationship. "We just don't think it's the best way to describe the excellent and unique and close and warm relationship we enjoy with the U.S."

it; and once Europe has been widened, it will have to rethink
its constitutional structure and political future.

For, after the Central European countries have been admitted,
Europe will be too large and diverse to fit comfortably within a
tight federalist straitjacket. This may have been possible when
it was the Europe of "the six" or even of "the twelve." It may
have been desirable when the Soviet threat made tighter unity a
military and diplomatic priority. But it is neither desirable
nor possible today. What present circumstances suggest is a
Europe in which different nations can advance at different
speeds, and perhaps even halt permanently at different points
along the road.

It way well be that, in the light of their troubled history,
France, Germany and the Benelux countries will wish to seek a
much greater degree of political and economic integration than
nations like Britain and Denmark, let alone Poland and the Czech
Republic still savoring their newly-won independence and still
struggling to establish normal economies. If so, let them do so
without imposing that structure on all. There is nothing
inherently un-European about a supra-national Franco-German-
Benelux bloc within a looser European grouping -- although
historians would probably warn that the looser grouping has a
better chance of survival than the tighter one. Nor is there
anything disreputable about a Europe in which the most important
relationships for some purposes, for instance defense, are not
narrowly European but Atlanticist in form. Statecraft is not a
matter of seeking to impose neat utopian blueprints upon reality
(which is always more intractable than we would like), but of
seeking practical ways of maximizing cooperation (or at least
minimizing conflict) between states. I am increasingly persuaded
that British governments, in seeking to realize this concept of
European unity -- "variable geometry", "a multi-track Europe" --
have been working with the grain of history. If it does not
always seem so, that is because the man who is ahead of his
times is as out of place as the man who is behind them.

4) What is the American role in this? In the first place, until
recently there has been very limited interest in these
questions. Indeed, Britain's occasionally troubled relationship
with the European Union, and any significance that may have for
the United States, has only just crossed our radar screens.
Foreign Affairs published probably its first Euro-sceptic
article only this month.

Even among those professionally interested in these questions,
there is a lot of catching up to do. There has long been a
general tendency not to question the policy of promiscuously
encouraging almost anything called "European unity" that America
adopted during the Cold War. Some cling to this policy out of
mental inertia, reminding me of A.E. Houseman's rebuke to a lazy
scholar: "A moment's thought would have saved him from this
error. But thought is a painful process, and a moment is a long
time." Others embrace this policy, as they embrace

3

March 13, 1995

NOTES FOR BRITISH PRESENTATION

First the Good News

1. Of all the major powers including the US, Britain should be conceptually the best equipped to handle the post cold-war world.

a) It is multipolar world of the type Britain dealt with so well in the past.

b) British experience in 18-19th centuries (though admittedly Britain's relative power then was much greater).

2. This world plays to many of Britain's strengths.

a) Conceptual understanding of that kind of world.

b) Global cast of mind. Wide experience in international trade; London as the world's financial center; major British investments abroad.

c) Experienced and very professional mandarinate.

d) Nuclear weapons and a serious defense structure.

e) Security Council seat.

f) Residual and not insignificant overseas ties left from the colonial and Commonwealth eras.

g) English language.

3. On the face of it, Britain enters the new situation with assets. She should be able to "punch above her weight" as Douglas Hurd has said.

## But

1. The British problem is that the post-cold war world, though it resembles the multi-polar world Britain so elegantly dominated last century, raises doubts about the continued viability of British post war policy.

2. Britain today is much weaker relative to other powers than Britain in the 19th century.

3. Therefore to influence outcomes in British interest, Britain must concentrate its limited political and economic weight on a few key issues.

3. Her problem is how best to deploy these not-inconsiderable assets to British interests. The British dilemma is that in the two key areas of vital interest to Britain -- Europe and America -- this is going to be difficult. That in turn makes it harder for Britain to defend her third vital interest, an open world trade and investment regime.

## Key Areas of British Interest

### A. British Relations with Europe

1. Britain's relationship to Europe is her most important and difficult problem.

2. The current debate about British relations with Europe reflects Britain's profound historical experience as an island state, unconquered for 1000 years (in particular unoccupied in this century's wars). All of Britain's history, geography and culture nurture in its citizens a sense of "apartness".

3. Britain's "apartness" served her well in the 18-19th century, when she could stand aloof from Europe's squabbles and pick and choose her allies on an *ad hoc* basis. Her objective: avoid domination of Europe by

multilateralism elsewhere, because it is an oblique way of
achieving the retreat of American power, isolationism in
disguise. And a few are finally beginning to give a moment's
thought to the question.

Perhaps even two moments' thoughts. For the circumstances of the
Cold War no longer apply, and the phrase, "European
integration", has a number of very different meanings. Americans
must seek to deconstruct it in order to see how those different
meanings affect our interests in the post-Cold-War world.

If European integration means the construction of a larger
market, competing with NAFTA but open to it in conditions
of increasingly free external trade, then America has a clear
interest in such integration. If it means the construction of a
new state, with an independent defense arrangement, a common
foreign policy arrived at outside NATO channels, and a
protectionist mentality, then America has no such interest. And
if that state sees itself as a rival to the United States, then
we may indeed have cause for serious anxiety.

To avert such an outcome, we must look again at the arrangements
of Atlantic cooperation. Some Europeans have been promoting the
argument that Europe needs a "defense identity" to correspond to
its existing economic and developing political identities. I
would not necessarily oppose such a proposal provided -- and
this is a vital proviso -- that it is not accompanied by moves
toward greater protectionism and by diplomacy that seeks
deliberately to distinguish European initiatives from American
policy. What we must also consider, however is whether NATO's
defense identity should not also be underpinned by an Atlantic
economic identity -- what Lady Thatcher has called a North
American Free Trade Area and Malcolm Rifkind an Atlantic
Community. For an enduring Atlantic cooperation and defense
cannot be sustained if it is to be incessantly undermined by
trade and commercial disputes across the ocean.

Britain has traditionally understood this and sought to head off
disputes between the U.S. and Europe's more mercantilist member
states. That role is likely to be more important in a world
where the Soviet Union no longer provides Western Europe with an
incentive to open its gates to American exports, and where
Germany is increasingly preoccupied with helping its eastern
neighbors. In these new circumstances Britain has to take a lead
role in promoting the wider Atlantic ideal in a more positive
and institutional form.

In this endeavor, you might have a strong ally in Spain where
the Atlantic ideal naturally incorporates the former Spanish
possessions of Latin America. Britain and Spain more or less
divided the American continent between them. As that continent
now moves toward its own economic integration, the two former
colonial powers are well placed to argue for a corresponding
economic integration going east-west as well as north-south.

4

It may seem utopian to think in such terms when our current
anxiety is precisely that the two halves of "the West" are
drifting in different directions. But that is surely the point.
As my friend Bill Bennett often says: "In politics, you're
either doing it to them, or they're doing it to you." The same
applies to international relations. There is no such thing as a
static situation. If we do not move towards each other, then we
will drift steadily apart.

5) Britain itself has a clear interest in the United States
remaining a major European power. There are historical,
disinterested and selfish motives for such a policy. The
historical motive is that Britain can no longer play its
traditional role in the European balance of power. So, if a single
power is to be prevented from dominating the continent, whether
a revived Russia or a reunified Germany, then the only power
large enough to achieve this is the United States.

The disinterested motive is that such a U.S. involvement is in
the interest of all European countries. Everyone knows that the
United States has no imperial ambitions on the continent;
indeed, the main anxiety of most Europeans -- despite the
occasional Yankee Go Home sign -- is not that America will stay
to oppress them, but that we will leave and let others do so.

The selfish motive is that Britain plays a more pivotal role in
a Euro-Atlantic community than it can realistically do in a
purely European context. If I may coin a phrase, Britain is at
the heart of an Atlantic civilization, both geographically and
spiritually. In such a civilization London will be a financial
and media center equal only to New York. And in a world
increasingly dominated by money and communications, that is no
small consideration.

5

Talking Points

1) America is often seen by Europeans as uniquely moralistic in its approach to foreign policy. There is some truth in this, but America's uniqueness is exaggerated. From the middle of the last century until today, British foreign policy has been strongly influenced by that first cousin to America's puritan conscience, the "non-conformist conscience." Gladstone's Midlothian campaign against the Bulgarian atrocities was the most dramatic case of this moralistic impulse. But it was also a powerful force in the 1930s behind the illusion that collective security could be provided by a League of Nations that relied upon moral pressure and economic sanctions to restrain the dictators. Indeed, it brought down a Foreign Secretary, Samuel Hoare, when he sought to weaken the sanctions imposed on Italy following the invasion of Abyssinia. And today it is at least one element shaping the public opinion that favors lifting the arms embargo on Bosnia.

It is, of course, only one element. There is a Tory tradition of robust realpolitik that has generally prevailed in the crunch. Disraeli is supposed to have said that of all the atrocities, Gladstone's pamphlet was much the worst. And this robustness has often crossed the floor. When Attlee's Cabinet was debating the question of whether Britain should support Turkey's entry into Nato, the Prime Minister himself sat silent as the debate raged around him. Eventually he intervened with his usual brevity. "Fought against Johnny Turk at Gallipoli," he said. "Rather have him on our side than against us."

Still, the non-conformist impulse has always been present. And with television providing nightly footage of atrocities from Bosnia or Rwanda -- concentration camps, ethnic cleansing, and the flight of refugees -- this pressure is unlikely to diminish. No less moralistic for being thoroughly secularized by now, the non-conformist conscience is likely to remain a limiting factor which British statesmen will always have to bear in mind. And although its advice will often be irksome and unrealistic, that may be no bad thing. Statesmen need a conscience -- even if they have to borrow one from the local Methodist chapel.

2) Geography will always be a vital factor helping to shape foreign policy. Any nation with a land border will always have to keep a sharp eye on the direction of its neighbor's politics. It is indeed America's and Britain's sea-girt isolation which has enabled the two countries to enjoy the occasional luxury of a "moral" foreign policy. It has protected them from an unexpected blitzkrieg, and given them the knowledge that they have time to rearm if an aggressor should make an appearance. At times the sea barrier has led to complacency in foreign policy. But the main tradition in British policy has been the watchful

policy of the balance of power, ensuring that no one state could
dominate Europe and so be able to leap over the sea wall to
Britain itself in the long run.

Today, the situation is more complicated. The influence of
geography continues to be seen in Britain's membership of the
European Union. Proximity to a large European market has been a
factor in persuading the country that its economic future is
determined by that relationship.

But with the spread of communications, the globalization of
markets, and greater mobility of both capital and labor, culture
is becoming at least as important as geography -- and maybe more
so. This puts Britain in a unique situation for a European
power. As the origin of a worldwide English-speaking
civilization, Britain has ties to every part of the world,
notably to the United States. This gives the country influence
far beyond the level that a country of its population and
resources might otherwise enjoy. We see this in a dozen
different ways: the influence of the BBC World Service,
Britain's unusually close trading and financial relationships
with the emerging markets of Asia (perversely illustrated by the
recent Baring collapse), and the leading role taken by British
civil servants in international institutions.

Watching American television news, I find myself marvelling at
the number of British accents I hear not only from, say, the
refugee workers in aid agencies but also from the U.S. network
reporters interviewing them. It is hardly an exaggeration to say
that the British are almost a world tribe, to be found in large
numbers not only in the British Commonwealth, but also in
countries like Argentina. For these reasons, Britain can never
be purely and simply a European power. DeGaulle was right about
that. The central question of British foreign policy, therefore,
must be how to reconcile the commitment to Europe mandated
by geography with seizing the wider opportunities made possible
by the dominance of the English language and British culture.

3) Britain therefore has a clear interest in a Europe that is flexible in its internal workings, and open in its dealings with the rest of the world. A Europe that is constitutionally adaptable to new political challenges and economically committed to free trade and free markets. A Europe that looks outward to the seas as well as inward to the plains.

But that is not in Britain's interest alone. Such a Europe is
also needed on other grounds. The great strategic imperative of
the present day is to bring the fragile new market democracies
of central Europe as quickly as possible into the European Union
and into Nato. Uncertainty is the mother of conflict. And the
longer central Europe remains a sort of no-mans-land between
Russia and the West, the more likely it is to be a source of
conflict and tension between them. The debate on whether Europe
should proceed first by widening or by deepening is now over.
Widening Europe must now take a clear priority over deepening

2

4

any one power. Twice in this century the British people spent huge amounts of blood and treasure to avoid that.

4. The British decision to join NATO was as dramatic a departure from British experience as was America's decision to set it up. For the first time, Britain made a definite long-term choice of allies -- a decision fully justified by the post-war geopolitical situation, nourished by strong political/military ties formed with Washington during the war and imposed on her by Britain's relative weakness after the exhaustion of two world wars in a generation. Britain's objective, though, was familiar: to avoid that Russia should dominate, by military force or threat, the Continent.

5. For the past fifty years, this aberration in British historical experience served Britain well and allowed it to play a balancing role between America and Europe using its "special relationship" with America as an asset in Washington and as a ticket to Europe's high table. But does the passing of the cold war undermine this strategy?

6. Europe poses a dilemma for Britain. For the

5

Continent's major powers seem determined to continue
the process of integration. While the process has had,
and will have, fits and starts, its direction is clear.
Can Britain afford to stay out? Almost half of all
British trade is with the EU now. About one pound out
of three which Britain invests abroad is placed in an
EU country. Does she have enough power to influence
European thinking toward her more restrictive view of
European integration? Who are her allies?

7. As long as Paris and Bonn are cooperating on Europe's future, and assuming London does not share their view, Britain lacks the option of playing one off against the other. Even if it could do so, Britain would need to put forward some program about Europe's future. This it lacks (not least because of the split in the Tory party).

8. Nor is the Labor Party better fixed now directly to
address the issue of Britain's relations with Europe
because to do so would be to risk a split in Labor.
Labor's relative harmony in Europe is the harmony of
the opposition. Would it survive the responsibilities
of governance?

9. Situation doubtless reflects grass roots ("John Bull")

C]3

6

ambivalence about Europe. With the world's oldest
parliament, it is unsurprising that many British lack
enthusiasm for giving up sovereignty to a European
bureaucracy.

10. The British should not despair. There are signs that sentiment on the continent is moving their way.

a) enthusiasm for a "Federal" Europe has waned.

b) general agreement on expansion of EU to East

c) on EMU, Britain is likely to pick up support from Latin Europe, especially Spain and Italy, nervous about a "two-tier" Europe.

11. With Germany the stronger European power, traditional British policy would be to seek policy convergence with Paris. But Britain and France appear to have fundamental differences on the main issue between them -- how far and how fast Europe should integrate. Their differences involve political, security and economic policy.

a) Much will depend on the French, not just in the coming election but on the underlying political

7

realities there.

b) The French mandarinate from the "grandes ecoles" may support EMU, but only because they see that the DMark is already the European currency and at least EMU gives the French elite a seat at the table.

c) It is hard to imagine the French people wanting in the end to give up their "franc fort". It is the monetary equivalent of the *force de frappe*, providing France with a visible symbol of the State and an available unilateral (economic) option. Probably 1 in 5 votes in April will support anti-EU candidates.

d) To the degree French policy becomes more "nationalistic" opportunities open for British policy on the Continent.

e) At some point, the British will have to fish or cut bait on EMU. But luckily for them not before 1999, by which time much may have happened.

12. Britain may also find it possible to work with France on European security matters. But if French policy

[Y]

8

were to push so far as to threaten NATO, Britain would be at a crossroads. Britain's goal should be to keep her defense options open in case her nightmare -- American withdrawal -- comes true.

13. Still the bottom line is that unless the situation reverses on the Continent, Britain finds itself with less leverage in Europe than at any time since 17th century.

B. What About American, then?

1. Does Britain have an "America first option", making up in America what it has lost in Europe?

2. Probably not. The end of the cold war has forced a very difficult psychological adjustment on both Britain and America.

3. The fundamental issue of national survival which powered the "special relationship" from 1940 to the present is no longer apparent. It could return, but not for years.

4. As a result, the American role in British thinking diminishes. More importantly, the British role in

American calculations is reduced. The Gerry Adams
visit is a dramatic example.

5. The trend has been exacerbated in recent years by the changing of the political guard on both sides of the Atlantic. Clinton has publicly designed Bonn as his special relationship. Some of this is personal (directed against Major). Mostly it is thoughtless.

6. In any case, for reasons well known to the British, Americans are having a hard time themselves adjusting to the new situation.

* * * * * *

Result: Profoundly unsettling for the British. For centuries they have prided themselves on pursuing relations with the outside world in such a way as to hold open their options, to keep choices available for their political leaders.

1. On current trends in Europe and America, those choices are narrowing for them.

    a) They cannot play balance-of-power within Europe

10

unless they can bring about a confluence their
views of Europe with those of either France or
Germany.

b) They cannot play balance between America and Europe because America is less interested in Europe, and in any case is inclined toward Bonn, not London, as its favorite.

C. Britain and Free Trade

1. For almost 200 years, Britain has been the world's leading trader and investor. Her economy today is inextricably bound up with the outside. Her exports are 19% of GDP (almost 3 times America's percentage); imports are 21% of GDP (more than double America's).

2. For the post-war period, America inherited Britain's mantle as the champion of world trade.

3. But there are trends which indicate a move toward regional trading blocs. For Britain, this would be a major problem even if Britain were a full partner in the EU.

4. Yet here, too, Britain, faces the question: Where is

11

her leverage?

D. Implications

1. Britain must move carefully to husband her resources and apply them diligently to the furtherance of her interests.

2. The key stumbling block is Britain's relations with Europe. She must find a way so to compose these that she keeps influence in Bonn, Paris and Brussels. Her best bet is to use her clever mandinate to keep generating ideas about acceptable outcomes of the debate over Europe and hope enough others will gather around one. This, too, is the only way she can in the long run preserve influence in Washington.

3. Both are needed to protect Britain's huge overseas economic interests and continued need for an open world economic system.

NATIONAL REVIEW • 150 East 35th Street, New York, New York 10016

Tel. 212-679-7330
Fax: 212-679-6533

JOHN O'SULLIVAN
Editor

March 12, 1995

The Hon. Henry Kissinger
Kissinger Associates
New York, NY

Dear Henry:

I enclose the talking points that you requested. Not quite
knowing your style in these matters, I have written them in the
form I use for Lady T, which is to write as if I am the speaker.
Of course I realize that this is not in fact the case and that
the opinions expressed may not be your own. But I hope you find
them useful in any event.

I have tried to incorporate your thoughts on including Latin
America in any wider Atlantic concept. And there are some useful
figures on the direction of British trade and investment away
from Europe and towards the U.S. and the Far East which I do not
have to hand, but which I could arrange to be sent to you if you
wish.

Meanwhile, I am delighted that you are willing to chair the
International Advisory Committee. Midge Decter and I will be
contacting you in the next few weeks to talk more about it. And
although I shall be away on vacation for the next two weeks,
your office can always contact me if necessary via Linda
Bridges, the Managing Editor here at National Review, at 679-
7330.

I look forward to seeing you soon and to reading your own
considered thoughts on British foreign policy.

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Britain as a Global Investor

Since the collapse of the Berlin Wall in 1989 and the implosion of the former Soviet Union, the dynamics of the global economy have been transformed. Before 1989 one billion people lived in a free market system. Now there are five billion. The change has catalysed an enormous shift in investment dollars and economic power from the industrialised economies of the West to the Eastern European economies and in particular to the emerging market economies of Latin America and the Pacific Rim.

China has experienced an economic upheaval, attracting record inflows of investment capital. Experts argue whether it will take its place among the world's economic power houses by 2010 or 2040. But the direction is in no doubt. Exports have swept from around $10 billion a year in 1979 to more than $100 billion today. Her share of world GDP by 2013 has the potential to more than double, from 7.5 per cent to 16 per cent.¹¹

The explanation lies in the re-emergence of a more entrepreneurial, market-orientated economy which, with markedly lower production costs, has attracted substantial inward investment. In China wages are 50 cents to a dollar a day, compared with Britain where they are the equivalent of $12 an hour and in Germany $24 an hour.

The emerging economies are unburdened by the huge welfare and social security commitments that have become such a marked feature of the industrialised world. And, in particular, the European continent. In the five years to end 1993, the emerging market economies grew on average by 6.2 per cent a year. China enjoyed an outstanding rate of GDP growth in the early 1990s of almost 13 per cent a year. By comparison, the rich industrial countries grew at just 2.5 per cent a year.

By the year 2010, it is possible that two thirds of global output will be controlled by these emerging economies, leaving only one third in the OECD.¹² By contrast, the principal economies of continental Europe

16

BRITAIN AS A GLOBAL INVESTOR

contracted in 1993 and have been slow to recover. Since the 1980s, European economic growth has averaged 0.4 per cent a year less than the OECD as a whole.

The striking growth of the emerging market economies has brought two developments. The first has been a surge in both corporate net direct and portfolio investment inflows. The second has been growing concern in Britain over the burden of employment and welfare costs on the Continent and the loss of EU market share, both in world trade overall but particularly in high technology goods.

European legislators assumed that progress towards European economic and political integration would be accompanied, inter alia, by greater merger and acquisition activity and concentration of investment among companies resident in the EU. Greater harmonisation would, it was felt, be followed by growth in UK companies' corporate links with other countries in the EU and greater concentration of their overseas investment links in the continental European theatre.

But the available evidence does not bear this out. On the contrary, there is a continuing preference on the part of UK companies to locate most of their outward FDI in countries outside the EU than in countries within. This is not to say that continental Europe is not important to the UK corporate sector: it is of key strategic interest, and set to remain so. But the bulk of Britain's overseas direct investment continues to be located outside the EU.

Research by Professor Grazia Ietto-Gillies suggests that the impulse of the British corporate sector to spread itself globally is more potent than ever. In 1963 20 per cent of Britain's largest international companies had representation in 21 countries or more. By 1990 that percentage had risen to 72.¹³

Moreover, total links of the UK's largest trans-national companies with other countries in the EU as a percentage of links with other developed countries, after rising in the 1960s and 1970s, fell from 30 per cent in 1980 to 28 per cent in 1990. As a percentage of total world links they also fell, from 24 per cent in 1980 to 21 per cent in 1990.¹⁴ Corporate Britain retains a powerful global mind-set, and, while maintaining a strong presence in other EU markets, continues to look more to the rest of the world outside the EU for the bulk of its overseas earnings.

Another way of illustrating this point is to look at the current split of UK corporate sector turnover by geographic area. This shows that North America accounts for the largest single percentage (19 per cent) after

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the UK domestic market (52 per cent). Sales to other EU countries account for 15 per cent of the total, with Asia-Pacific and other countries close behind with 14 per cent.¹⁸ (see Figure 2).

Indeed, out of 36 industry groupings or sectors on the London Stock Exchange, there are only six where sales to the rest of the EU account for more than 25 per cent of company totals: building materials, paper and packaging, household goods, pharmaceuticals, oil (integrated) and engineering (vehicles).

There are 13 groupings or sectors where overseas sales to the Asia Pacific and non-US 'other' economies are greater than those to the EU. And there only two out of the 36 where sales to the EU account for more than half of overseas sales: retailers (general) and engineering (vehicles).¹⁷ (see Table 5).

Of particular note is the banking and insurance sector, where the percentage of sales/turnover in the rest of the EU is very low. Contrary to expectations in the late 1980s of UK financial conglomerates striding across European frontiers through acquisition and joint ventures, the financial services sector has experienced little such expansion in the EU.

FIGURE 2: UK GEOGRAPHICAL SALES EXPOSURE

Source: Barclays de Zoucte Wedd

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BRITAIN AS A GLOBAL INVESTOR

TABLE 5: HOW BRITAIN TRADES GLOBALLY

Thirteen out of 36 corporate sub-sectors have a higher percentage of total sales in Asia/Pacific and other non North American economies combined than with other countries in the EU.

<table><thead><tr><th rowspan="2">Mkt.<br>Cap.<br>Chn</th><th rowspan="2">Sector.</th><th colspan="4">%age sales</th></tr><tr><th>EU</th><th>Asia/ Pacific</th><th>Other Pacific</th><th>North America</th><th>UK</th></tr></thead><tbody><tr><td>10</td><td>Extractive industries</td><td>9</td><td>26</td><td>31</td><td>32</td><td>2</td></tr><tr><td>5</td><td>Oil Exploration & Production</td><td>9</td><td>26</td><td>6</td><td></td><td>59</td></tr><tr><td>7</td><td>Building and construction</td><td>5</td><td>5</td><td>1</td><td>9</td><td>80</td></tr><tr><td>38</td><td>Diversified industries</td><td>9</td><td>9</td><td>9</td><td>46</td><td>37</td></tr><tr><td>27</td><td>Engineering</td><td>23</td><td>11</td><td>14</td><td>13</td><td>19</td></tr><tr><td>13</td><td>Tobacco</td><td>20</td><td>10</td><td>18</td><td>11</td><td>19</td></tr><tr><td>4</td><td>Household goods</td><td>26</td><td>14</td><td>16</td><td>26</td><td>18</td></tr><tr><td>7</td><td>Distributors</td><td>14</td><td>31</td><td>4</td><td>5</td><td>46</td></tr><tr><td>20</td><td>Transport</td><td>19</td><td>13</td><td>6</td><td>26</td><td>36</td></tr><tr><td>19</td><td>Telecoms.</td><td></td><td>11</td><td>8</td><td></td><td>81</td></tr><tr><td>10</td><td>Life assurance</td><td>2</td><td>6</td><td>2</td><td>13</td><td>77</td></tr><tr><td>60</td><td>Banks</td><td>4</td><td>14</td><td>4</td><td>10</td><td>68</td></tr><tr><td>6</td><td>Other financials</td><td>6</td><td>3</td><td>4</td><td>22</td><td>65</td></tr></tbody></table>

Source: Barclays de Zoucte Wedd UK Equity Working List, August 1994.

Structural and cultural barriers to entry have proved formidable. Thus turnover on the Continent accounts for only 4 per cent of the total in banking, and just 2 per cent in life assurance.

Meanwhile the predilection to look globally for expansion is borne out by latest figures on UK overseas direct investment. Of the £146 billion (book value) total of Britain's net overseas assets in 1992, North America accounts for just over £61 billion, or 42 per cent, by far the biggest total of any overseas area. Next comes the Commonwealth, accounting for £34.9 billion or 24 per cent. Then come the developing countries with £27.4 billion, or 19 per cent. Finally comes the EU (ex Netherlands) with £26.8 billion, or 18 per cent.¹⁸

Equally revealing is the pattern of new direct investment flows. The figure for direct investment in Asia during 1992 of £1.2 billion was sub-

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UK outward direct investment has been increasingly drawn to other countries within the EU. According to Professor Ietto-Gillies,

UK large companies have a tradition of internationalism going back a long time and, on average, to a very high degree compared to large companies from other countries. They seem, indeed, to exhibit a very high propensity towards geographical spread of activities, to a higher degree than in other countries... The high propensity towards geographic spread of activities means that UK Trans National Companies (TNCs) tend to spread their wings very wide and take a view that is so global as to be relatively little affected even by integration... In other words, UK companies did not need EC integration to help them spread their production internationally: they were already operating internationally to a very high degree. From the results presented, it would thus appear that UK-based large TNCs rely on the 'wider' world for their investment opportunities, rather than on the European Community.¹²⁰

This supplies the broad rationale for recent changes in the flow of UK outward FDI. But it does not supply the compelling motive. The key agent in corporate direct investment is not geographic proximity but those markets showing the fastest economic growth.

Powerful magnets are at work when choosing between the siting of plant in the EU and in South-East Asia. These include faster rates of economic growth; lower production costs, in particular lower labour costs; low levels of employment tax and social security contributions; absence of tariff walls and barriers to entry; technological proficiency; a culture conductive to the work ethic; high personal savings and financial self-responsibility; absence of social, non wage restrictions and obligations which impede competitiveness, and a low level of regulatory interference and government red tape.

On virtually all of these counts the emerging market economies, particularly those of South-East Asia and the Pacific Rim, offer the more attractive prospects for overseas direct investment relative to the EU.

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4

How Investment Flows are Changing

Figures on cross-border equity flows are volatile and inexact. But the broad trends point to the changes evident in direct investment and the growing emphasis on South-East Asia. At the same time flows to continental Europe have declined, both in absolute terms and as a proportion of the world total.

Research by Baring Securities, now the leading research house in London on global cross-border equity flows, reveals a marked change in investment preference between 1986 and 1993.²¹ To best illustrate the point I have divided the period into two sub-periods of four years each to help smooth out the volatile and 'limpy' year-on-year swings.

In the four years 1986 to 1989, net purchases of shares by overseas investors in the emerging market economies (Pacific Rim, Latin America, Eastern Europe, Middle East and Africa) came to $22 billion, or 13 per cent of the total of cross-border purchases.

This position was transformed in the four subsequent years. For 1990-93 inclusive, net overseas buying of shares in emerging markets had shot to $103 billion, or 33 per cent of the total. Net cross border equity investment in the Pacific Rim alone leapt to almost $50 billion (against $15 billion previously), accounting for 15 per cent of all net purchases (8 per cent previously).

By contrast, net overseas portfolio investment in continental Europe has fallen, both in relative and in absolute terms. In the four years 1986 to 1989, net overseas purchases of continental equities came to $85 billion or 47 per cent of the total. But in the years 1990-93, despite a surge in cross-border equity flows overall, this had fallen to $79 billion and, as a percentage of the total, had declined to 25 per cent.

Indeed, by the final year 1993, emerging markets had clearly established themselves at the top of the international investor popularity list, attracting $52 billion or almost one third of the total. Continental Europe attracted $36 billion or 23 per cent (see table 7).

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Overseas foreign direct investment is, as we have seen, a benign and positive feature of the modern British economy, contributing both macro benefits and, for the individual firm, earnings, production and market and technology intelligence gains.

But the global flow of FDI to the emerging markets and the Pacific Rim is now posing searching questions for the countries of continental Europe. Developing countries in 1993 are estimated by the World Bank to have attracted external capital inflows totalling $177 billion, with China the largest single recipient with a 1993 total estimated at $27 billion.²¹ It was, *inter alia*, the need to attract such external capital investment and its dynamic benefits and employment advantages, that provided the rationale for further economic, monetary and political integration within the EU, in particular the elimination of trading barriers. But, as we have seen, these flows are, in the main, going elsewhere: Europe's uncompetitive labour costs, employment and social security legislation and consequent loss of market share becomes self-feeding: investment is lower than it would otherwise have been and unemployment has continued to climb.

The data on FDI flows underscores the arguments advanced by the British Government for measures to reduce both direct and indirect employment taxes and labour costs, and in particular its argument for measures to improve competitiveness. European hourly labour costs are about a fifth higher than those in the US while industrial productivity is about a quarter lower. This is an argument that Britain has to win if the EU's loss of world market share and failure to create new jobs are to be rectified.

Second, there is a need for greater awareness and appreciation of the importance to the UK of invisible earnings generally. Not only has the growth of invisibles trade world-wide outstripped that in manufactured goods, but the same is true in respect of the UK's own overall current

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CONCLUSIONS

account. Yet while manufacturing industry has a sponsoring ministry in the shape of the Department of Trade & Industry, there is no comparable representation for the invisibles sector of the economy. Rather, its 'sponsoring components' are scattered through various ministries and departments of government with the result that the whole lacks a cohesive and forceful voice.

What is needed is a recasting of the role and functions of the DTI to take into account the changing balance in the domestic economy and the importance of both inward and outward FDI flows which distinguish the UK as a markedly open economy. The DTI's title ought, too, to reflect the importance of services and investment: Department of Industry, Trade & Investment would be a useful step.

There are areas within the 'invisibles' total which are becoming increasingly important and which need to be acknowledged by a recast DTI. For example, income from intellectual property, i.e., royalties and licence fees, has grown to almost $3.5 billion a year, the highest for any country in the EU, and second only to the United States, generating a surplus of $605 million. Yet this area, with its potential for much greater growth receives little attention from the DTI and its supervision risks being ceded to the EU.

Another concern to the invisibles sector is the adverse effect of increasing regulatory compliance which is particularly notable in the financial services sector. The overall cost — ultimately born by the customer — is estimated by The City Research Project to be now running at more than £500 million a year.²²

There is now a need to bear down on the growth of regulatory and bureaucratic compliance if cost-sensitive foreign exchange, bond and equity market and investment management business is not to be driven away.

Markets function best when they are allowed to function freely. Quite the surest way to sustain London's pre-eminence as a financial centre and its contribution to the British economy is to build on its global services and activities. The future of the City does not lie in becoming a subsidiary part of a continental hub, operating under a statutory regime of prescribed behaviour, but in building on its flexible regulatory framework to service increasingly global-minded players in the world economy.

Finally, and most important, government ministries need to pay more attention to the global spread of Britain's direct and portfolio investment. A worrying imbalance has now arisen between, on the one hand

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the global interests of Britain's overseas investors (whether they may be companies or individuals), and the increasing preoccupation with European matters evident throughout the senior ministries of government, the Cabinet office, Foreign Office, the DTI and the Treasury in particular.

In recent years, and particularly since the mid 1980s, ironically just as a huge swing in the global economy towards the emerging markets was about to get underway, an increasing amount of the time and energy of these departments has been taken up with EU affairs. Preparation for and attendance at formal and informal meetings of economic and finance ministers (ECOFIN), together with EU 'summit' meetings, now dominate the diaries of the Chancellor and senior Treasury advisers.

In a 'normal' year there are at least two informal ECOFIN meetings and nine formal meetings, meetings of the EU monetary committee, liaison with the European Monetary Institute, and between two and three meetings of the Budget Committee, before allowing for EU summitry and attendant 'sherpas' work. Given this deluge of commitments, it is not difficult to see how changes in the world economy and shifts in global markets can easily be overlooked. Visits by the UK Chancellor and Treasury officials to the Far East have been rare relative to the intensifying schedule of engagements in Brussels, Frankfurt and Strasbourg.

Clearly the argument for labour market flexibility and measures to improve competitiveness within the EU has to be put. But the increasing demands of EU visits, political and economic 'summits', declarations and working parties, very often involving minutiae in areas of little relevance, is a preoccupation not shared by the UK corporate sector.

Is this time being productively spent? Is it being spent at the cost of the guardianship and advancement of Britain's formidable trading and investment interests elsewhere in the world?

If such fears are well-grounded in official attitudes, this may be symptomatic of a more worrying drift away from an appreciation of Britain's historical role as a leading global trader and investor, and the opportunities that the future now holds through changes in the balance of the global economy. Britain's national interest would be miseably served were her invisible earnings to be treated on the basis of the name they go by — 'out of sight, out of mind', a disastrous outcome given the scale of the interests at stake. Invisibility should not be an excuse for neglect.

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References

1. *World Invisible Trade 1994*, published by British Invisibles, pp. 12 and 15.

2. See Deepak Lal, *The Repressed Economy*, Edward Elgar, 1993.

3. *World Invisible Trade*, 1994, pp.7 & 8.

4. See Walter Eltis, *The Re-establishment of European Competitiveness in International Bank Credit Analyst*, Vol. 32, No.9 p.40.

5. *Making it in Britain: Partnership for World Class Manufacturing*, Confederation of British Industry, 1992.

6. Eltis, op. cit.

7. See Deepak Lal, *Appraising Foreign Investment*, Heinemann, 1975.

8. Cain, P.J. and Hopkins, A.G., *British Imperialism Vol. 1 Innovation and Expansion 1688-1914*, p.170. Longman, 1993.

9. Op. cit., pp. 173-174.

10. Cain & Hopkins, *British Imperialism Vol. 11 Crisis and Deconstruction* p.237. Longman, 1993.

11. Op. cit. Vol. 11 pp. 237-239.

12. Brian Reading, *The Great World Room, 1993-2013*, Britain & Overseas. Autumn 1993; see also *Lombard Street Research Monthly International Review August 1993*, p.3.

13. See Jameson, *Britain Beyond Europe*, ch.3 pp. 34-40. Duckworth, 1991.

14. Grazia Ietto-Gullies, 'European Community Integration and Geographic Spread of International production: The UK case', from The

29

MAR-15-1995 15:30

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P.07

PERSONAL

FEB 5 1995

British Embassy
Washington

24 February 1995

The Honorable
Henry Kissinger
Kissinger Associates
350 Park Avenue
26th Floor
New York
NY 10022

3100 Massachusetts Avenue N.W.
Washington D.C. 20008-3600

Telephone: (202) 898-4292
Facsimile: (202) 898-4255

From The Ambassador

Dear Henry,

The Prime Minister and Douglas Hurd are delighted that you will be able to attend the Conference in London on 29 March on "Britain in the World" and deliver one of the keynote addresses. The meeting will start at 9.00 am with a speech by the Prime Minister, followed by a welcome by Mr Peter Bonfield, Chairman and Chief Executive of ICL, who has helped to sponsor the Conference - then your speech which, we hope, might be about thirty minutes long. You will be followed by Joseph Joffe.

Douglas Hurd hopes that you will then join him for a talk at the Foreign Office and accompany him to lunch at the Conference Centre with The Prince of Wales and other participants in the Conference. I have explained that you will need to take the Concorde back that afternoon.

I will look forward to discussing all this with you on 17 March. Meanwhile, I promised to send you a few thoughts.

The Conservative party currently is tearing itself apart in an argument about policy towards Europe and whether we should participate in an eventual monetary union. One of the problems is that the Maastricht Treaty promised more than the European Union can perform e.g. "a common defence policy which may lead eventually to a common defence". The reality is that whether or not a monetary union is attempted will be decided in Germany. France and the Benelux will continue to press for it and the question is whether the Bundesbank's inhibitions can be overcome and, if so, when it will be established. There is little prospect of that happening on

PERSONAL

the present target date in 1997. But a monetary union among
half a dozen EU member states might be established by 1999.
It will only work if there is a very high degree of economic
convergence between the economies of the participating
countries. That would need to apply to wage settlements,
levels of productivity and fiscal policy: otherwise the system
would come under intolerable strain.

To some extent, I regard the problem as self-solving.
If a monetary union is established and proves to be
successful, I have little doubt that in the end we will join
it. Meanwhile, what matters most is the management of our
economy in such a way as to meet the convergence criteria -
low inflation and low government borrowing - which the
Chancellor and the Governor are busy doing.

The worst mistake in Britain's foreign policy since
the war was not Suez, but the failure to join the European
Community at the outset when we should have been able to
influence it more strongly in the direction we desired,
avoiding it acquiring the characteristics of a continental
system and preventing the worst excesses of the CAP. It
remains important that we should be central participants in
Europe if we are to be able to exert influence in a sense
helpful to the transatlantic relationship - including on the
GATT negotiations and on European defence moves.

As you have commented, however, Britain really is not
capable, even if it tried, of turning itself into just another
European country. The political culture is very different and
transfers of power from the House of Commons to the European
Parliament - which in reality is an Assembly, not a Parliament
- will continue to be extremely difficult to get accepted.
With the French, we still have a role to play outside Europe -
as we have demonstrated in Southern Africa and the Gulf.

I am convinced that it is a mistake to think that
there is an either/or choice in terms of British policy
towards Europe and vis-a-vis the United States. Ted Heath
made the mistake of thinking that in order to improve our
position in Europe, we should try to liquidate the "special"
aspects of the relationship with the U.S. That did not work,
and even if he had done so, it would not have improved our
position in Europe. The Europeans value, particularly, our
defence contribution and the fact that we are a nuclear power
- which, of course, is directly linked to the relationship
with the U.S.

The institutional aspects of the U.S./UK relationship
remain intact - in particular the exceptionally close links
between our defence establishments and the nuclear and
intelligence relationships. Those are worth preserving and
are not at present under any serious threat here.

In the period ahead, we shall continue to have a

PERSONAL

significant role to play, if we are prepared to exert
ourselves, as the Anglo-U.S. relationship is one of the ties
that bind the United States and Europe together. The United
States is not prepared to play the role of world policeman,
but on the occasions when it does decide to intervene abroad,
you are not going to want to do so alone. The Europeans all
worry about isolationism and protectionism here - the
recessive genes in the U.S. body politic. If you had been
left to fight alone in the Gulf, either you would have chosen
not to do so or, if you had done so and prevailed, there would
have been a furious reaction in the U.S. against the weakness
and incompetence of the allies. Sadly, the only European
allies who did turn up in the Gulf were us and the French.

So I believe that there remains an important role for
us to play in the transatlantic relationship - provided we do
not seek to trade on the sentimental aspects. I hope that you
will bring out in your speech that it is a question of
political will. Over the past fifteen years we have displayed
that will - for instance in settling the Rhodesia problem, in
defeating the Argentine aggression in the Falklands, in our
policy in South Africa and in helping to force Saddam Hussein
out of Kuwait.

Our armed forces are small but highly regarded; our
economy is much more efficient than it was before Mrs Thatcher
set about liquidating the state sector and the chronic
over-manning and subsidies which weighed it down before. The
effect is to be seen in the explosion of British investment in
the United States - now well over $100 billion - the strength
of our position in banking and financial services and our
success in attracting the lion's share of U.S. investment in
the EU.

I hope that some of this may be helpful. As you know,
I agree very strongly with the observations in your Memoirs
and in "Diplomacy" and your contribution to the Conference is
going to be very highly valued.

Robin Renwick

# Reflections on Containment

## Henry Kissinger

### THE SUCCESS AND PAIN OF THE STRATEGY

NO MATTER WHAT Wilsonian-minded American statesmen called them, by late 1945 spheres of influence were emerging across Europe, and they were to remain in place until the collapse of communism four decades later. Under U.S. leadership, the Western occupation zones of Germany were consolidated, while the Soviet Union turned the countries of Eastern Europe into its appendages. The erstwhile Axis Powers—Italy, Japan and, after 1949, the Federal Republic of Germany—gradually moved toward alliance with the United States. The Soviet Union cemented its dominance over Eastern Europe by means of coercion. At the same time, the Kremlin tried its utmost to interrupt the process of Western consolidation by fostering a guerrilla war in Greece and by encouraging mass demonstrations by West European communist parties, especially in France and Italy.

American leaders concluded that they had to resist further Soviet expansion. But their national tradition caused them to seek to justify this resistance on nearly any basis other than as an appeal to the traditional balance of power. In doing this, American leaders were not being hypocritical. When they finally came to recognize that Franklin D. Roosevelt's vision of a peaceful globe guarded by the four police-men (the United States, the Soviet Union, Britain and China) could

HENRY KISSINGER was National Security Adviser and Secretary of State in the Nixon and Ford administrations. This essay is adapted from his eleventh book, *Diplomacy*, with the permission of Simon & Schuster. Copyright 1994 © by Henry A. Kissinger.

FOREIGN AFFAIRS · May/June 1994

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Henry Kissinger

not be implemented, they preferred to interpret this development as a
temporary setback on the way to an essentially harmonious world
order. Here they faced a philosophical challenge. Was Soviet intransi-
gence merely a passing phase, which Washington could wait out? Were
the Americans, as former Vice President Henry Wallace and his fol-
lowers suggested, unwittingly causing the Soviets to feel paranoid by
not adequately communicating their pacific intentions to Stalin? Did
Stalin really reject postwar cooperation with the strongest nation in the
world? Did he not want in the end to be America's friend?

As the highest policymaking circles in Washington considered
those questions, a document arrived on February 22, 1946, from an
expert on Russia, one George Kennan, a relatively junior diplomat at
the American embassy in Moscow, that was to provide the philo-
sophical and conceptual framework for interpreting Stalin's foreign
policy. Rarely does an embassy report by itself reshape Washington's
view of the world, but what later came to be known as the "Long
Telegram" emphatically did. Kennan maintained that the United
States should stop blaming itself for Soviet intransigence; the sources
of Soviet foreign policy lay deep within the Soviet system itself. For
Kennan, communist ideology was at the heart of Stalin's approach to
the world. Stalin regarded the Western capitalist powers as irrevoca-
bly hostile. The friction between the Soviet Union and America was
therefore not the product of some misunderstanding or faulty com-
munication between Moscow and Washington but was inherent in
the Soviet Union's perception of the outside world.

From time immemorial, argued Kennan, the Russian tsars had
sought to expand their territory. They had sought to subjugate
Poland and to turn it into a dependent nation. They had regarded
Bulgaria as within Russia's sphere of influence. And they had sought
a warm-water port on the Mediterranean, mandating control of the
Black Sea Straits:

At bottom of Kremlin's neurotic view of world affairs is traditional and instinctive Russian sense of insecurity. Originally, this was insecurity of a peaceful, agricultural people trying to live on vast exposed plain in neighborhood of fierce nomadic peoples. To this was added, as Russia came into contact with economically advanced West, fear of more competent, more powerful, more highly organized societies in that area. But this latter type of

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Reflections on Containment

insecurity was one which afflicted rather Russian rulers than Russian people; for Russian rulers have invariably sensed that their rule was relatively archaic in form, fragile and artificial in its psychological foundation, unable to stand comparison or contact with political systems of Western countries.

This historical insecurity was, according to Kennan, given a new
sense of urgency by communist dogma:

In this [communist] dogma, with its basic altruism of purpose, they found
justification for their instinctive fear of outside world, for the dictatorship
without which they did not know how to rule, for cruelties they did not
dare not to inflict, for sacrifices they felt bound to demand. . . . Without it
they would stand before history, at best, as only the last of that long suc-
cession of cruel and wasteful Russian rulers who have relentlessly forced
[their] country on to ever new heights of military power in order to guar-
antee external security of their internally weak regimes. . . .

America, Kennan argued, had to hunker down for a long struggle; the
goals and philosophies of the United States and of the Soviet Union
were irreconcilable.

In a top-secret study dated September 24, 1946, Truman adviser
Clark Clifford fell in with this view: "The main deterrent to Soviet
attack on the United States, or to attack on areas of the world which
are vital to our security, will be the military power of this country."
By now, this had become conventional wisdom. But Clifford used it
as a springboard from which to proclaim a global American security
mission, embracing "all democratic countries which are in any way
menaced or endangered by the U.S.S.R." It was not clear what was
meant by "democratic." Did this qualification limit America's
defense to Western Europe, or was it a courtesy that extended to any
threatened area and thus required the United States to defend simul-
taneously the jungles of Southeast Asia, the deserts of the Middle
East and densely populated Central Europe? In time, the latter
interpretation became dominant.

Clifford rejected any similarity between the emerging policy of
containment and traditional diplomacy. In his view, the Soviet-Amer-
ican conflict was not caused by clashing national interests—which by
definition might be negotiated—but by the moral shortcomings of the
Soviet leadership. Therefore, the goal of American policy was not so
much to restore the balance of power as to transform Soviet society.

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[L.C]

Henry Kissinger

Just as in 1917 Wilson had blamed the need for a declaration of war on the kaiser rather than on the threat Germany posed to American security, so Clifford now ascribed Soviet-American tensions to "a small ruling clique and not the Soviet people." A significant Soviet change of heart, and probably a new set of Soviet leaders, was required before an overall Soviet-American agreement would be possible. At some dramatic moment, these new leaders would "work out with us a fair and equitable settlement when they realize that we are too strong to be beaten and too determined to be frightened."

Neither Clifford nor any subsequent American statesman involved in the discussion of the Cold War ever put forward specific terms to end the confrontation or to initiate a process that would bring about negotiations to do so. So long as the Soviet Union maintained its ideology, negotiations were treated as pointless. After a Soviet change of heart, a settlement would become nearly automatic. In either case, spelling out the terms of such a settlement in advance was deemed to inhibit America's freedom of action—the same argument that had been used during World War II to avoid discussion of the postwar world. America now had the conceptual framework to justify political and military resistance to Soviet expansionism.

## TRUMAN EXPANDS THE CONCEPT

SINCE THE END of the war, Soviet pressures had followed historical Russian patterns. The Soviet Union controlled the Balkans (except for Yugoslavia) and a guerrilla war was raging in Greece, supported from bases in communist Yugoslavia and the Bulgarian Soviet satellite. Territorial demands were being made against Turkey, along with a request for Soviet bases in the Straits—very much along the lines of what Stalin had wanted from Hitler on November 25, 1940. Ever since the end of the war, Great Britain had supported both Greece and Turkey, economically as well as militarily. In the winter of 1946-47, the Attlee Government of Britain informed Washington that it could no longer shoulder the burden. Truman was prepared to take over Great Britain's historical role of blocking a Russian advance toward the Mediterranean, but neither the American public nor Con-

[116]

Reflections on Containment

gress could countenance the traditional British geopolitical rationale. Resistance to Soviet expansionism had to spring from principles based strictly on the American approach to foreign policy.

This imperative became apparent at a key meeting held on February 27, 1947, in the Oval Office. Truman, Secretary of State Marshall and Assistant Secretary of State Dean Acheson sought to persuade a congressional delegation led by Senator Arthur Vandenberg (R-Mich.) of the importance of aid to Greece and Turkey—a formidable assignment, since the traditionally isolationist Republicans controlled both houses of Congress. Marshall led off with a dispassionate analysis setting forth the relationship between the proposed aid program and American interests. He elicited stereotypical grumblings about “pulling Britain’s chestnuts out

of the fire,” the iniquities of the balance of power and the burdens of foreign aid. Recognizing that the administration was about to lose its case, Acheson asked Marshall in a whisper whether this was a private fight or whether anyone could join in.

Given the floor, Acheson proceeded, in the words of one aide, “to pull out all the stops.” Acheson boldly presented the group with visions of a bleak future in which the forces of communism stood to gain the upper hand: “Only two great powers remained in the world . . . [the] United States and the Soviet Union. We had arrived at a situation unparalleled since ancient times. Not since Rome and Carthage had there been such a polarization of power on this earth. . . . For the United States to take steps to strengthen countries threatened with Soviet aggression or communist subversion . . . was to protect the security of the United States—it was to protect freedom itself.”

When it became evident that Acheson had roused the congressional delegation, the administration stuck to his basic approach. From that point on, the Greek-Turkish aid program was portrayed as part of the global struggle between democracy and dictatorship. When, on March 12, 1947, Truman announced the doctrine that would later be named after him, he dropped the strategic aspect of Acheson's analysis and spoke in traditional Wilsonian terms of a

> Once America had thrown down the moral gauntlet, only a collapse of the Soviet system could end the conflict.

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[LC]

Henry Kissinger

struggle between two ways of life: "One way of life is based upon the will of the majority, and is distinguished by free institutions, representative government, free elections, guarantees of individual liberty, freedom of speech and religion and freedom from political oppression. The second way of life is based upon the will of a minority forcibly imposed upon the majority. It relies upon terror and oppression, a controlled press and radio, fixed elections and the suppression of personal freedoms."

Had Soviet leaders been more aware of American history, they would have understood the ominous nature of what the president was saying. The Truman Doctrine marked a watershed because, once America had thrown down the moral gauntlet, the kind of realpolitik Stalin understood best would be forever at an end, and bargaining over reciprocal concessions would be out of the question. Henceforth, the conflict could only be settled by a change in Soviet purposes, by the collapse of the Soviet system, or both. Truman had proclaimed his doctrine as "the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures." Inevitably, criticism of the objective of defending democracy appeared at both ends of the intellectual spectrum: some protested that America was defending countries that, however important, were morally unworthy; others objected that America was committing itself to the defense of societies that, whether free or not, were not vital to American security. It was an ambiguity that refused to go away, generating debates that have not ended to this day about American purposes in nearly every crisis. Ever since, American foreign policy has been obliged to navigate between those who assail it for being amoral and those who criticize it for going beyond the national interest through crusading moralism.

Once the challenge had been defined as the very future of democracy, America could not wait until a civil war actually occurred, as it had in Greece. On June 5, less than three months after the announcement of the Truman Doctrine, Secretary Marshall in a commencement address at Harvard committed America to the task of eradicating the social and economic conditions that tempted aggression. America would aid European recovery, announced Marshall, to avoid

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FOREIGN AFFAIRS · Volume 73 No. 3

THE BETTMANN ARCHIVE

Charting containment's course

"political disturbances" and "desperation," to restore the world economy and to nurture free institutions. Therefore, "[any] government that is willing to assist in the task of recovery will find full cooperation, I am sure, on the part of the United States government." In other words, participation in the Marshall Plan was open even to governments in the Soviet orbit—a hint taken up in Warsaw and Prague and just as quickly squelched by Stalin.

Only a country as idealistic, as pioneering and as relatively inexperienced as the United States could have advanced a plan for global economic recovery based solely on its own resources. And yet the very sweep of that vision elicited a national commitment that would sustain the Cold War generation through its final victory. The program of economic recovery, said Secretary Marshall, would be "directed not against any country or doctrine, but against hunger, poverty, desperation and chaos." Just as when the Atlantic Charter had been proclaimed, a global crusade against hunger and despair was found to be more persuasive to Americans than appeals to immediate self-interest or the balance of power.

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Henry Kissinger

THE X ARTICLE

AT THE END of all of these more or less random initiatives, there emerged a document that would, for over a generation, serve as the bible of the containment policy, indeed which supplied it with its very name. All the various strands of American postwar thought were brought together in an extraordinary article published in July 1947 in *Foreign Affairs*. Though it was anonymously signed by "X," the author was later identified as George F. Kennan, by then head of the policy planning staff of the State Department. Of the thousands of articles written since the end of the Second World War, Kennan's "The Sources of Soviet Conduct" stands in a class by itself. In this lucidly written, passionately argued literary adaptation of his "Long Telegram," Kennan raised the Soviet challenge to the level of philosophy of history.

By the time Kennan's article appeared, Soviet intransigence had become the staple of policy documents. Kennan's distinctive contribution was to explain the ways in which hostility to the democracies was inherent in the Soviet domestic structure and why that structure would prove impervious to conciliatory Western policies. Tension with the outside world was inherent in the very nature of communist philosophy and, above all, in the way the Soviet system was being run domestically. Internally, the Communist Party was the only organized group, with the rest of society fragmented into an inchoate mass. Thus the Soviet Union's implacable hostility to the outside world was an attempt to gear international affairs to its own internal rhythm. The main concern of Soviet policy was "to make sure that it has filled every nook and cranny available to it in the basin of world power." The way to defeat Soviet strategy was by "a policy of firm containment, designed to confront the Russians with unalterable counterforce at every point where they show signs of encroaching upon the interests of a peaceful and stable world."

Like almost every other contemporary foreign policy document, Kennan's "X" article disdained the elaboration of a precise diplomatic goal. What he sketched was the age-old American dream of a peace achieved by the conversion of the adversary, albeit in language more elevated and far more trenchant in its perception than that of any contemporary. But where Kennan differed from other experts was when

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Reflections on Containment

he described the mechanism by which, sooner or later, through one
power struggle or another, the Soviet system would be fundamentally
transformed. Since that system had never managed a "legitimate"

transfer of power, Kennan thought it likely that,
at some point, various contestants for authority
might reach down into these politically immature
and inexperienced masses in order to find support
for their respective claims. If this were ever to
happen, strange consequences could flow for the
Communist Party: "For the membership at large
has been exercised only in the practices of iron
discipline and obedience and not in the arts of
compromise and accommodation. . . . If, conse-

quently, anything were ever to occur to disrupt the unity and efficacy
of the party as a political instrument, Soviet Russia might be changed
overnight from one of the strongest to one of the weakest and most
pitiable of national societies."

No other document forecast quite so accurately what would in fact
take place after the advent of Mikhail Gorbachev. And in the after-
math of so total a collapse of the Soviet Union, it may seem carping
to point out just how back-breaking an assignment Kennan had pre-
scribed for his people. For he had charged America with combating
Soviet pressures for the indefinite future all around a vast periphery
that embraced the widely differing circumstances of Asia, the Middle
East and Europe. The Kremlin was, moreover, free to select its point
of attack, presumably only where it calculated it would have the great-
est advantage. Throughout subsequent crises, the American political
objective was deemed to be the preservation of the status quo, with
the overall effort producing communism's final collapse only after a
protracted series of ostensibly inconclusive conflicts. It was surely the
ultimate expression of America's national optimism and unimpaired
sense of self-confidence that as sophisticated an observer as George
Kennan could have assigned his society a role so global, so stern and,
at the same time, so reactive.

Kennan sketched
the American dream
of a peace achieved
by conversion of the
adversary.

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Henry Kissinger

THE INGREDIENTS OF CONTAINMENT

THIS STARK, EVEN HEROIC, doctrine of perpetual struggle committed the American people to endless contests with rules that left the initiative to the adversary and confined America's role to strengthening the countries already on its side of the dividing line—a classic policy of spheres of interest. By abjuring negotiations, the containment policy wasted precious time during the period of America's greatest relative strength—while it still had the atomic monopoly. Indeed, given the premise of containment—that positions of strength had yet to be built—the Cold War became both militarized and imbued with an inaccurate impression of the West's relative weakness.

The redemption of the Soviet Union became the ultimate goal of policy; stability could emerge only after evil had been exorcised. It was no accident that Kennan's article concluded with a peroration instructing his impatient, peace-loving compatriots about the virtues of patience and interpreting their international role as a test of their country's worthiness:

> The issue of Soviet-American relations is in essence a test of the overall worth of the United States as a nation among nations. . . . The thoughtful observer of Russian-American relations will find no cause for complaint in the Kremlin's challenge to American society. He will rather experience a certain gratitude to a providence which, by providing the American people with this implacable challenge, has made their entire security as a nation dependent on their pulling themselves together and accepting the responsibilities of moral and political leadership that history plainly intended them to bear.

One of the outstanding features of these noble sentiments was their peculiar ambivalence. They rallied America to a global mission but made the task so complex that America would nearly tear itself apart trying to fulfill it. Yet the very ambivalence of containment seemed to lend an extraordinary impetus to American policy. Though essentially passive with respect to diplomacy with the Soviet Union, containment evoked tenacious creativity when it came to building “positions of strength” in the military and economic realms. This was because in containment were merged lessons derived from the two most important American experiences of the previous generation: from the New

[122]

Reflections on Containment

Deal came the belief that threats to political stability arise primarily
from gaps between economic and social expectations and reality,
hence the Marshall Plan; from the Second World War America
learned that the best protection against aggression is having over-
whelming power and the willingness to use it, hence the Atlantic
alliance. The Marshall Plan was designed to get Europe on its feet
economically. NATO was to look after its security.

THE CRITIQUES OF CONTAINMENT

AS CONTAINMENT SLOWLY took shape, the criticism it encountered emerged from three different schools of thought. The first came from the “realists,” exemplified by Walter Lippmann, who argued that the containment policy led to psychological and geopolitical overex tension while draining American resources. The spokesman for the second school of thought was Winston Churchill, who objected to the postponement of negotiations until after positions of strength had been achieved. Finally, there was Henry Wallace, who denied Amer ica the moral right to undertake the policy of containment in the first place. Postulating a fundamental moral equivalence between both sides, Wallace argued that the Soviet sphere of influence in Central Europe was legitimate and that America's resistance to it only intensified tension. He urged a return to what he viewed as Roo sevelt's policy: to end the Cold War by American conciliation.

As the most eloquent spokesman for the realists, Walter Lippmann rejected Kennan's proposition that Soviet society contained the seeds of its own decay. He considered the theory to be too speculative to serve as the foundation of American policy: containment, argued Lippmann, would draw America into the hinterlands of the Soviet empire's extended periphery, which included, in his view, many countries that were not states in the modern sense to begin with. Military entangle ments that far from home could not enhance American security and would weaken American resolve. Containment, according to Lipp mann, permitted the Soviet Union to choose the points of maximum discomfiture for the United States while retaining the diplomatic, and even the military, initiative. Lippmann stressed the importance of estab-

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Henry Kissinger

lishing criteria to define areas in which countering Soviet expansion was a vital American interest. Without such criteria, the United States would be forced to organize a "heterogeneous array of satellites, clients, dependents and puppets," which would permit America's newfound allies to exploit containment for their own purposes. The United States would be trapped into propping up nonviable regimes, leaving Washington with the sorry choice between "appeasement and defeat and the loss of face, or . . . support[ing] them [U.S. allies] at incalculable cost."

It was indeed a prophetic analysis of what lay ahead for the United States, though the remedy Lippmann proposed was hardly congenial to the universalist American tradition, which was far closer to Kennan's expectation of an apocalyptic outcome. Lippmann asked that American foreign policy be guided by a case-by-case analysis of American interests rather than by general principles presumed to be universally applicable. In his view, American policy should have been aiming less at overthrowing the communist system than at restoring the balance of power in Europe, which had been destroyed by the war. Containment implied the indefinite division of Europe, whereas America's real interest should be to banish Soviet power from the center of the European continent:

> For more than a hundred years all Russian governments have sought to expand over Eastern Europe. But only since the Red Army reached the Elbe River have the rulers of Russia been able to realize the ambitions of the Russian empire and the ideological purposes of communism. A genuine policy would, therefore, have as its paramount objective a settlement which brought about the evacuation of Europe. . . . American power must be available, not to 'contain' the Russians at scattered points, but to hold the whole Russian military machine in check, and to exert a mounting pressure in support of a diplomatic policy which has as its concrete objective a settlement that means withdrawal.

From among its intellectuals, America was able to draw on the thinking of both Lippmann and Kennan while they were at the height of their powers. Kennan correctly understood communism's underlying weakness; Lippmann accurately foretold the frustrations of an essentially reactive foreign policy based on containment. Kennan called for endurance to permit history to display its inevitable tendencies; Lippmann called for diplomatic initiative to produce a European settlement while America was still preponderant. Kennan had a

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Reflections on Containment

better intuitive understanding of the mainsprings of American soci-
ety; Lippmann grasped the impending strain of enduring a seemingly
endless stalemate and of the ambiguous causes that containment
might lead America to support.

THE MOST COMPELLING ALTERNATIVE

IN THE END, Lippmann's analysis found a substantial following, though mainly among the opponents of confrontation with the Soviet Union. And their approbation was based on only one aspect of Lippmann's argument, emphasizing as they did its critique while ignoring its prescriptions. They noted Lippmann's call for more limited objectives but overlooked his recommendation for more aggressive diplomacy. Thus it happened that in the 1940s the most compelling alternative strategy to the doctrine of containment came from none other than Winston Churchill, then leader of the Opposition in the British Parliament.

Churchill supported containment, but for him it was never an end
in itself. Unwilling to wait passively for the collapse of communism,
he sought to shape history rather than rely on it to do his work for
him. What he was after was a negotiated settlement. His "iron cur-
tain" speech at Fulton, Missouri had merely hinted at negotiations.
On October 9, 1948, at Llandudno, Wales, Churchill returned to his
argument that the West's bargaining position would never be better
than it was at that moment. In a much-neglected speech, he said:

No one in his senses can believe that we have a limitless period of time
before us. We ought to bring matters to a head and make a final settlement.
We ought not to go jogging along improvident, incompetent, waiting for
something to turn up, by which I mean waiting for something bad for us to
turn up. The Western nations will be far more likely to reach a lasting set-
tlement, without bloodshed, if they formulate their just demands while they
have the atomic power and before the Russian communists have got it too.

Two years later, Churchill made the same plea in the House of Com-
mons: the democracies were quite strong enough to negotiate, and
would only weaken themselves by waiting. Defending NATO rearma-
ment on November 30, 1950, he warned that arming the West would
not by itself change its bargaining position, which, in the end,
depended on America's atomic monopoly:

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Henry Kissinger

[W]hile it is right to build up our forces as fast as we can, nothing in this
process, in the period I have mentioned, will deprive Russia of effective
superiority in what are now called the conventional arms. All that it will do
is to give us increasing unity in Europe and magnify the deterrents against
aggression. . . . Therefore I am in favour of efforts to reach a settlement
with Soviet Russia as soon as a suitable opportunity presents itself, and of
making those efforts while the immense and measureless superiority of the
United States atomic bomb organization offsets the Soviet predominance
in every other military respect.

For Churchill, a position of strength was already in place; for
American leaders, it had yet to be created. Churchill thought of nego-
tiations as a way of relating power to diplomacy. And though he was
never specific, his public statements strongly suggest that he envis-
aged some kind of diplomatic ultimatum by the Western democra-
cies. American leaders recoiled before employing their atomic
monopoly, even as a threat. Churchill wanted to shrink the area of
Soviet influence, but was prepared to coexist with Soviet power within
reduced limits. The American leaders had a nearly visceral dislike of
spheres of influence. They wanted to destroy and not to shrink their
adversary's sphere. Their preference was to wait for total victory and
for the collapse of communism, however far off, to bring about a
Wilsonian solution to the problem of world order.

The disagreement came down to a difference between the historical
experiences of Great Britain and America. Churchill's society was all too
familiar with imperfect outcomes; Truman and his advisers came from a
tradition in which, once a problem had been recognized, it was usually
overcome by the deployment of vast resources. Hence America's prefer-
ence for final resolutions and its distrust of the sort of compromise that
had become a British specialty. The American view prevailed, because
America was stronger than Great Britain, and because Churchill, as
leader of the British Opposition, was in no position to press his strategy.

HENRY WALLACE AND THE RADICAL TRADITION

IN THE END, the most vocal and persistent challenge to American
policy came from neither the realist school of Lippmann nor
Churchill's balance-of-power thinking, but from a tradition with
roots deep within American radical thought. Whereas Lippmann and

[126]

Reflections on Containment

Churchill accepted the Truman administration's premise that Soviet expansionism represented a serious challenge and only contested the strategy for resisting it, the radical critics rejected every aspect of containment. Henry Wallace, vice president during Roosevelt's third term, former secretary of agriculture, and secretary of commerce under Truman, was its principal spokesman.

A product of America's populist tradition, Wallace had an abiding Yankee distrust of Great Britain. Like most American liberals since Jefferson, he insisted that "the same moral principles which governed in private life also should govern in international affairs." In Wallace's view, America had lost its moral compass and was practicing a foreign policy of "Machiavellian principles of deceit, force and distrust," as he told an audience in Madison Square Garden on September 12, 1946. Since prejudice, hatred and fear were the root causes of international conflict, the United States had no moral right to intervene abroad until it had banished these scourges from its own society. The new radicalism reaffirmed the historical vision of America as a beacon of liberty but, in the process, turned it against itself. Postulating the moral equivalence of American and Soviet actions became a characteristic of the radical critique throughout the Cold War. The very idea of America having international responsibilities was, in Wallace's eyes, an example of the arrogance of power. The British, he argued, were duping the gullible Americans into doing their bidding: "British policy clearly is to provoke distrust between the United States and Russia and thus prepare the groundwork for World War III."

To Wallace, Truman's presentation of the conflict as one between democracy and dictatorship was pure fiction. In 1945, a time when Soviet postwar repression was becoming increasingly obvious and the brutality of collectivization was widely recognized, Wallace declared that "the Russians today have more of the political freedoms than they ever had." He also discovered "increasingly the signs of religious toleration" in the U.S.S.R. and claimed that there was a "basic lack of conflict between the United States and the Soviet Union." Wallace thought that Soviet policy was driven less by expansionism than by fear. In his speech at Madison Square Garden in August 1946, Wallace laid down a direct challenge to Truman, which caused the president to demand Wallace's resignation:

[127]

Henry Kissinger

We may not like what Russia does in Eastern Europe. Her type of land reform, industrial expropriation and suppression of basic liberties offends the great majority of the people of the United States. But whether we like it or not the Russians will try to socialize their sphere of influence just as we try to democratize our sphere of influence. . . . Russian ideas of social-economic justice are going to govern nearly a third of the world. Our ideas of free enterprise democracy will govern much of the rest. The two ideas will endeavor to prove which can deliver the most satisfaction to the common man in their respective areas of political dominance.

In a curious reversal of roles, the self-proclaimed defender of morality in foreign policy accepted a Soviet sphere of influence in Eastern Europe on practical grounds, while the administration he was attacking for cynical power politics rejected the Soviet sphere on moral grounds.

Wallace's challenge collapsed after the communist coup in Czechoslovakia, the Berlin blockade and the invasion of South Korea. As a presidential candidate in 1948, he gained only one million votes against more than 24 million for Truman, placing him fourth. Nevertheless, Wallace managed to develop themes that would remain staples of the American radical critique throughout the Cold War and move to center stage during the Vietnam conflict. These emphasized America's moral inadequacies and those of the friends it was supporting; a basic moral equivalence between America and its communist challengers; the proposition that America had no obligation to defend any area of the world against largely imaginary threats; and the view that world opinion was a better guide to foreign policy than geopolitical concepts. When aid to Greece and Turkey was first proposed, Wallace urged the Truman administration to put the issue before the United Nations. If "the Russians exercised their veto, the moral burden would be on them. . . . [W]hen we act independently . . . the moral burden is on us." Seizing the moral high ground meant more than whether America's geopolitical interests were being safeguarded.

Though Wallace's radical critique of American postwar foreign policy was defeated in the 1940s, its basic tenets reflected a deep strain of American idealism that continued to tug at the nation's soul. The same moral convictions that had conferred such energy on America's international commitments also had the potential to be turned inward by disillusionment with the outside world, or with America's own imperfections. In the 1920s, isolationism had caused America to withdraw

[128]

Reflections on Containment

on the grounds that it was too good for the world; in the Wallace movement and its heirs, it revived itself in the proposition that America should withdraw because it was not good enough for the world.

THE COMPLEXITY OF CONTAINMENT

ONE RESULT OF THE containment policy was that the United States relegated itself to an essentially passive diplomacy during the period of its greatest power. That is why containment was increasingly challenged by yet another constituency, of which John Foster Dulles became the most vocal spokesman. His constituents were the conservatives who accepted the premises of containment but questioned the absence of urgency with which it was being pursued. Even if containment did in the end succeed in undermining Soviet society, these critics argued, it would take too long and cost too much. Whatever containment might accomplish a strategy of liberation would surely accelerate. By the end of Truman's presidency, the containment policy was caught in a crossfire between those who considered it too bellicose (the followers of Wallace) and those who thought it too passive (the conservative Republicans).

This controversy accelerated because, as Lippmann had predicted, international crises increasingly moved to peripheral regions of the globe, where the moral issues were confused and direct threats to American security were difficult to demonstrate. America found itself drawn into wars in areas not protected by alliances and on behalf of ambiguous causes and inconclusive outcomes. From Korea to Vietnam, these enterprises kept alive the radical critique, which continued to question the moral validity of containment. Thus surfaced a new variant of American exceptionalism. With all of its imperfections, the America of the nineteenth century had thought of itself as the beacon of liberty; in the 1960s and 1970s, the torch was said to be flickering and would need to be relit before America could return to its historical role as an inspiration to the cause of freedom. The debate over containment turned into a struggle for the very soul of America. As early as 1957, even George Kennan had come to reinterpret containment in this light when he wrote: "To my own countrymen who have often

[129]

Henry Kissinger

asked me where best to apply the hand to counter the Soviet threat, I have accordingly had to reply: to our American failings, to the things we are ashamed of in our own eyes, or that worry us; to the racial problem, to the conditions in our big cities, to the education and environment of our young people, to the growing gap between specialized knowledge and popular understanding.”

A country that demands moral perfection in its foreign policy will achieve neither perfection nor security.

A decade earlier, before he had become dis-illusioned by what he considered the militarization of his invention, George Kennan would have recognized that no such choice existed. A country that demands moral

perfection of itself as a test of its foreign policy will achieve neither perfection nor security. It was a measure of Kennan's achievement that, by 1957, the free world's parapets had been manned, his own views having made a decisive contribution to this effort. The parapets were in fact being manned so effectively that America permitted itself to indulge in a hefty dose of self-criticism.

Containment was an extraordinary theory—at once hardheaded and idealistic, profound in its assessment of Soviet motivations yet curiously abstract in its prescriptions. Thoroughly American in its utopianism, it assumed that the collapse of a totalitarian adversary could be achieved in an essentially benign way. Although this doctrine was formulated at the height of America's absolute power, it preached America's relative weakness. Postulating a grand diplomatic encounter at the moment of its culmination, containment allowed no role for diplomacy until the climactic final scene in which the men in the white hats accepted the conversion of the men in the black hats.

With all of these qualifications, containment was a doctrine that saw America through more than four decades of construction, struggle and, ultimately, triumph. The victim of its ambiguities turned out to be not the peoples America had set out to defend—on the whole successfully—but the American conscience. Tormenting itself in its traditional quest for moral perfection, America would emerge, after more than a generation of struggle, lacerated by its exertions and controversies, yet having achieved almost everything it had set out to do.®

[130]

A New Direction for European-American
Relations in the Post-Cold War World

By Henry Kissinger

In this speech, Henry Kissinger examines the reorientation of American foreign policy in the emerging post-Cold War world, focusing on possible ways of conducting American foreign policy towards Europe in this context. He advocates the broadening of the UK-US 'special relationship' into one between the United States and Europe, on the one hand encouraging the United States to give greater priority to European relations in its foreign policy, but on the other hand urging Europe to follow its own preferred course of integration and not to be unduly influenced by American pronouncements. Finally, in the long-term, Kissinger raises the possibility of the creation of a North Atlantic free trade association, leading ultimately to the inception of a 'Western Hemisphere Community'.

MANY DECADES AGO, LONGER THAN I CARE TO ADMIT, AS A
young professor I went to hear a lecture by Harold Macmillan, then recently retired
as Prime Minister. And he began the presentation of his distilled wisdom by saying:
'As they left the Garden of Eden, Adam turned to Eve and said, "we live in an age
of transition".' That, 30 years later, is also the theme of my remarks.

I grew up intellectually in the age of the 'special relationship' which I believe to
have been vital to the creation of the post-war international order. It was not a favour
the United States granted to Britain; rather it was earned, first by conduct during the
war and later by the enormous contribution in the form of the Marshall Plan, the
North Atlantic Treaty Organisation and what generally came to be identified with
the Cold War pattern of international relations. The special qualities that Britain
brought to that relationship have been discussed by previous speakers: experience
in a multi-polar world, a global character of mind, an experienced leadership, a
commitment to security, overseas ties of not insignificant proportion, and the
English language - which today you hear practised on American television by those
who are genuine and those who engage in wishful thinking.

All of those were great assets. But we are facing a new environment, and I would
argue that the qualities that had made the special relationship work - broadened by
now to a European-American relationship - may be even more essential than they
were before.

To begin with, the United States faces an unprecedented situation. It is the only
major country in the world whose history can be precisely dated, the only major
country to have been populated almost exclusively by immigrants, that has never
had a powerful neighbour along its borders, and that has never had to face the
problems of security confronted by less favoured nations.

The Americans' perception of their foreign policy has always been one of nearly
limitless choice and, above all, of having the ability to participate or to withdraw at
will. Every American initiative of the post-war period has been presented to the
American public as having a terminal date and as being designed to permit the
underlying pattern - which was assumed to be harmonious throughout the world -

THE FOLLOWING IS A
transcript of the speech made by
Henry Kissinger at the 'Britain in
the World' conference held in
London on 29 March 1995. Hen-
ry Kissinger was formerly Profes-
sor of International Relations at
Harvard University. He served as
National Security Advisor and as
Secretary of State under Presi-
dents Nixon and Ford.

THE OXFORD INTERNATIONAL REVIEW SUMMER 1995

to reassert itself; after which, America could again withdraw from its commitment
to whatever enterprise had been under discussion.

This explains why almost all of America's foreign policy has been presented in
alternately psychiatric and theological terms: either as a means by which relations
among nations could be conducted like relations among people; or as a crusade to
destroy, or even better, to convert, antagonists to the uniquely American perception
of international affairs. In that sense, the Cold War and victory in the Cold War was
a culmination of the uniquely American perception of international affairs.

How many historical incidents, if any, can be recalled of a nation's leaders and
allies making claims which, some 40 years later, were practically all achieved? For
that is the position in which we now find ourselves. And it is occurring at the precise
moment when, in the United States, the leadership groups
which are now dominant have altogether different geographic
origins from those which had shaped the post-war period.

For the period of the Cold War was formed by the so-called
North-eastern 'establishment'. Present-day leadership and for-
eign policy direction are drawn mostly from the West, the
Southwest or the South. Its relations with Europe are much less
organic than were those of the generation of Acheson or
McCloy or of all the fathers of Cold War policy. That does not
mean that the current group is hostile, rather that internation-
alism is identified with European struggles; while the previous
establishment drew from appeasement the lessons that the
democracies around the Atlantic must be unified.

As a result, America is presently going through what I
believe to be only the beginning of a national debate. And I
really have no right to speak here of an American point of view
because the American point of view is still in the process of
being formed. The seminal debates have not yet taken place.
For the first time in its history, America must conduct a global
foreign policy without an overwhelming ideological enemy,

without a clear-cut strategic plan, and in a world which it can neither dominate nor
from which it can withdraw. Thus the classic maxims of American foreign policy
- the invocation of an overwhelming ideological challenge in the face of which
foreign policy can be transmuted into large-scale enterprises to remedy the
immediate crisis - do not apply.

IT IS CRUCIAL TO UNDERSTAND THAT WE ARE NOW LIVING
in a world composed of six or seven major global players. It is said that the United
States is the only superpower left, but that is a simplistic description of the problem.
We may be the only military superpower left, but the issues susceptible to solution
by military action are declining. The kind of power in which we excel is less and less
relevant to most foreseeable international crises. On the other hand, in economics,
even in technology, the world is becoming much more evenly balanced. And even
a cursory glance at the dollar makes it clear that the relative economic position of
the United States is surely not growing.

In such a world, the United States faces the more or less traditional foreign policy
problem of global players of operationally more or less equal strength permitting
only two roads to stability: one is hegemony, and the other is equilibrium. Hegemony
may not be possible and is in any case against the convictions and public morale of
the American people; and equilibrium, or the balance of power, is a concept
passionately rejected by the American intellectual community as contributing to
endless tensions - an attitude which Americans have fortunately transcended
through much of their history. To say in America that we must define a national
interest - the theme of this conference - is considered a revolutionary, if not a
reactionary, proposition. And even if one could elicit it as an acceptable proposition,
the national interest is almost always defined in sweeping ideological terms.

SUMMER 1995 THE OXFORD INTERNATIONAL REVIEW 5

Nevertheless, the future of the world will have to be based on some concept of the
equilibrium or some balance among its various regions, which I define as follows.

It cannot be that everybody is always perfectly satisfied, nor has that ever been
achieved by humanity. But it can perhaps be achieved that the major regions of the
world be not so dissatisfied that they seek to overthrow the international system by
violence, by terrorism, by economic warfare or some of the other methods so well
elaborated in our century.

In the conduct of policy, I would define the American interest both negatively and positively. Negatively, it is against the American interest that any major region of the world, including any continental region in either Europe or Asia - and surely both together - be dominated by a country of a group of countries which by doing so can then organize themselves to pursue inimical objectives. Positively, it is necessary for the United States to participate in a world community that takes into account the global nature of our societies in terms of economics, communications and technology.

THEORETICALLY, THE UNITED STATES COULD PURSUE policy on a global basis in the manner by which Britain conducted itself towards Europe through most of the 19th century: from a posture of 'splendid isolation', maintaining good relations with everybody but throwing its weight to the side that seems most advantageous at the moment (which, in the British case, was generally the weaker side in European forums). And while that is theoretically possible, I do not believe we have the philosophy, the personnel or the resources to do it on any consistent basis, or even to elaborate it as a philosophy. Therefore the most realistic approach to America's foreign policy problem would be to recognise the fundamental differences in our relations with Europe, within Europe, and with Asia.

Now within Europe, there are many conflicts, rivalries and historic memories. Nevertheless, a strategic conflict among the European powers is out of the question. And whatever the differences in approach among the core countries of the European Union and the rim countries, that must remain the dominant consideration.

This is not the case in Asia. We can talk - as we do periodically - about a Pacific Community. But anybody studying the relations of Japan, China, Korea, the Asian part of Russia and even India to each other must come to the view that, at this stage, their relations are more like the relations of 19th century European states. And if we go to the area south of Europe, the growth of fundamentalism poses not just an indirect but an explicit challenge by linking religion and politics in a missionary concept that purports to be the only valid answer to contemporary issues and is in some respects a reaction to the material philosophies which have been dominating Western civilisation.

Therefore, I conclude that, at this moment just as at the end of World War II, the United States and the countries of Europe need a special kind of relationship with each other. Not in the sense that we necessarily have a common enemy but that we have comparable problems in need of being redressed by parallel approaches.

At the end of the Second World War, Britain was the only country not to have been occupied at one stage or another; it had preserved its institutions and inward strength, and had, therefore, made the transition from power to influence in an extraordinary manner. It took exceptional self-discipline and skill for a nation which had been at the centre of world affairs to shift its emphasis in this manner. While the Gaullist approach to America was to make disagreements extremely embarrassing, in the long run, through a network of institutions and consultations, a general community of interests was engendered.

Since then, many of the tacit bargains upon which Europe, America and the European/American relationship were constructed have been altered. The Cold War has obviously ended. And when the division of Germany ended, so too did a world in which France had a certain political leadership on the Continent, Germany a certain economic leadership, and America performed the security role whereby West Germany was organically linked to it via NATO and to the European Union

"At this moment just as at the end of World War II, the United States and the countries of Europe need a special kind of relationship with each other ... we have comparable problems in need of being redressed by parallel approaches.."

6 THE OXFORD INTERNATIONAL REVIEW SUMMER 1995

via France. Britain was extremely helpful in establishing this overall framework, but
that framework has to be redefined.

I do not agree with those who say that America should shift its 'special relationship' to Germany. That would not be helpful to Germany and it would not be meaningful for the United States because we should not have a special Continental partner. Nor do I know of any German leader who aspires to that. What is really needed is to give America help and encourage cooperation with Europe in the transition I have described towards its conduct of a global policy [geared not to enemies or the security danger of potential threats, but to global opportunities].

There have been, as I said, two approaches to European/American relations. One was the Gaullist approach for which, in my writings, I have shown great sympathy

because it reflected the necessities of a country which had gone through tremendous difficulties in the War and in the colonial period and which thus needed to reaffirm its identity. The second approach was the British approach which reflected a nation more secure in its identity and hence sought to establish a pattern of cooperation that was quite difficult to challenge because, over time, it came to reflect the convictions of both sides and was based on common interests. The British approach also reflected a historic tradition of global foreign policy, whereas the French approach was more geared to calculations of the margins on which stability depended in central Europe, particularly as long as Germany was divided.

My basic argument is this: in the period of the Cold War, when the United States had the dominant role in security and when there was only one visible international challenge, it made some sense to define European identity by trying to wrest it from the United States. In the current period, nothing is easier than to have America turn away from Europe; nothing is simpler than to convince Americans that they have no special interest in Europe. The tasks which Europe has before it now are so manifold that they don't have to be granted by the United States - such issues as the participation of the Central European countries in the European Union. There is no

SUMMER 1995 THE OXFORD INTERNATIONAL REVIEW 7

"Unlike the days of the Cold War, it is no longer possible to build an Atlantic relationship exclusively on security issues... We should seriously begin to examine the idea of some form of North Atlantic free trade association."

need for the United States to take a position or to involve itself. Whether Europe should follow a multiple geometry or be more closely integrated makes a difference in the relations between Europe and the United States but it cannot and should not be affected significantly by American pronouncements. As Europe expands, a more flexible approach will probably be the more effective. But that is my personal conviction, on which I would not insist.

What is important is not to make rigid separations between areas that are exclusively European and areas that are exclusively American. What we ultimately need is a dialogue between what has emerged in Europe and what is beginning to emerge in America similar to the one that had characterised the post-War period. I think it would be a continuation of the Western civil war that started in 1914 if Europe and America were not to concern themselves in the kind of debate which is not at all impossible.

In America, we need to give priority to European relations. This has frankly been lacking, not just in terms of day-to-day policy but actions that at times seem quite unnecessary. Thus I believe that the debate about NATO membership ought not to be permitted to fester indefinitely. It does not mean the end of foreign policy, just putting this issue out of the way. Unlike the days of the Cold War, it is no longer possible to build an Atlantic relationship exclusively on security issues.

**T**HERE WAS A PERIOD IN WHICH I THOUGHT THAT THE NEXT phase of American foreign policy should be to concentrate on building a Western Hemisphere Community. I still think that is an important enterprise but I believe more and more that what we now need to do is to create some goal for the North Atlantic nations so that, in the challenges which I have tried to describe, we can again act within a common framework. We should seriously begin to examine the idea of some form of North Atlantic free trade association, or free trade agreement, to which whatever America builds in the Western Hemisphere could be related and which would enable us - in the foreseeable turmoil in other parts of the world and in the shifts of emphasis and conflicts that will inevitably arise as new powers emerge - to act with some purpose and direction.

I am back to where I started. A succession of American leaders of both political parties, many of them not known for excessive sentimentality (which anyway is not a trait that enables one to rise easily to the Presidency), have over a period of more than a generation considered it natural that, on major issues, Britain and the United States would seek to cooperate; and would have a level of consultation which, though never formalised, was central to the formation of policy in both parties in both countries. Now, the challenge is whether this can be done in terms of European/American relations as well, and that is where Britain's experience can make a seminal contribution. Europe no longer needs to wrest its identity from the United States - we are back to 1947 in that respect. Therefore my hope is - whether our intellectual community agrees with it or not - that the nations of the North Atlantic representing a comparable civilisation in a world in which democracy and economic progress are our hope but not our guarantee, can again, this time on a global basis, do what they attempted so successfully a generation ago.

8 THE OXFORD INTERNATIONAL REVIEW SUMMER 1995

# HOW DO PEOPLE OUTSIDE BRITAIN VIEW OUR ROLE IN THE WORLD?

## - THE VIEW FROM THE UNITED STATES

DR HENRY KISSINGER
Chairman

Kissinger Associates Inc

As a young professor I went to hear a lecture by Harold Macmillan, recently retired as Prime Minister. And he began his presentation of his distilled wisdom by saying: "As they left the Garden of Eden, Adam turned to Eve and said: We live in an age of transition." That, 30 years later, is also the theme of my remarks.

I grew up intellectually in the age of the special relationship. I believe it was vital for the creation of the post-war international system. It was not a favour that the United States granted to Britain; it was earned first in the conduct during the war and secondly in the enormous contribution in the construction of the Marshall Plan, the North Atlantic Treaty Organisation and what generally was identified with the Cold War pattern of international relations. The special qualities that Britain brought to that relationship have been discussed by previous speakers, experience in a multi-polar world, a global character of mind, an experienced leadership, a commitment to security, overseas ties of not insignificant proportions, and the English language which you can hear today practised on American television by those who are genuine and by those who engage in wishful thinking.

that made the special relationship work, broadened now to a European/American relationship, may be even more essential than before.

This is why almost all American foreign policy has been presented alternately in psychiatric or theological terms, either as a means by which relations among nations could be conducted like relations among people, or as a crusade to destroy or, even better, to convert antagonists to the American perception of international affairs. In that sense the Cold War and the victory in the Cold War was a culmination of the American perception of international affairs.

17

that practically everything they set out to do had been achieved? And yet that is the position in which we now find ourselves. And that is occurring moreover at the moment when in the United States the leadership groups that now dominate are of a different origin geographically than those who formed the post-war period. The period of the Cold War was shaped by the north-east establishment. The present foreign policy and the present leadership is drawn mostly from the west, the south-west or the south. Their organic relations with Europe are much less than those of the generation of Acheson or all the fathers of the Cold War period. It does not mean that they are hostile, but their intellectual formation is different from that in which internationalism was identified with European struggles and when the lesson of appeasement seemed to be that the democracies around the Atlantic had to be unified.

What is necessary is to understand that we are living now in a world of six, or seven major global players. It is said that the United States is the only super power left. That is a simplistic description of the problem. We may be the only military super power left, but the issues susceptible to solution by military action are declining. The kind of power in which we excel is less and less relevant to most of the foreseeable international crises.

On the other hand, on economics, even in technology, the world is becoming much more evenly balanced and a look at the dollar makes clear that the relative economic position of the United States is surely not growing.

In such a world the United States faces a more or less traditional foreign policy problem, which is that in a world of players of operationally more or less equal strength, there are only two roads to stability. One is hegemony and the other is equilibrium. Hegemony may not be possible and is in any case against the convictions and the public morale of the American people, but equilibrium, or balance of power, is a concept passionately rejected in the American intellectual community as a contribution to endless tensions and is an attitude that Americans have fortunately transcended through much of their history. To say in America what is the theme of this conference that we must define a national interest is considered a revolutionary, if not a reactionary, proposition. And even if one can elicit it as an acceptable proposition, the national interest is almost always then defined in sweeping ideological terms.

[L.C.]

18

[cc]

various regions in the world which I will define as follows. It cannot be that everybody is perfectly satisfied - that has never been achieved by humanity. But it can perhaps be achieved that the major regions of the world are not so dissatisfied that they will seek to overthrow the international system by violence, by terrorism, by economic warfare or some of the other methods so well elaborated in our century.

Theoretically, the United States could pursue this on a global basis in a manner in which Britain conducted itself towards Europe through most of the 19th century, from a posture of splendid isolation, maintaining good relations with everybody, and throwing its weight to the side that seemed most advantageous at the moment, which in the British case was generally the weaker side in European forums. This is theoretically possible. I do not believe we have the philosophy, the personnel or the resources to do this on any consistent basis, or even to elaborate it as a philosophy.

Within Europe, there are many conflicts and many rivalries and many historic memories. Nevertheless, a strategic conflict between European powers is out of the question. In that sense, whatever the differences in approach between the core countries of the European Union and the rim countries, this is the dominant factor of Europe:

> That is not the case in Asia. We can talk - as we do talk periodically - about a Pacific community but anybody studying the relations of Japan, China, Korea, the Asian part of Russia, even India to each other must come to the view that at this stage their relations to each other are more similar to the relations of 19th century European states to each other than of 20th century European states and if we go to the area south of Europe, the growth of fundamentalism poses not just an indirect but an explicit challenge by linking religion and politics in a missionary concept that purports to be the only valid answer to contemporary issues and is in some respects a reaction to the material philosophies that have been dominant in Western civilisation.

Therefore, I conclude that the United States and Europe at this moment, just as at the end of World War II, have the need for a special kind of relationship with each other. It is not in the sense that we have necessarily a common enemy but that we have comparable problems that need to be dealt with by parallel approaches.

At the end of the World War II, Britain was the only country that had not been occupied at one stage or another, that had preserved its institutions and its inward strength and had therefore made

19

Since then, many of the tacit bargains
by which Europe and America and the
European/American relationship were
constructed have been altered. The
Cold War has obviously ended. The
division of Germany has also ended and
thereby the position in which France
had a certain kind of political leadership
on the continent, and Germany a
certain kind of economic leadership,
and America performed the security
role in which Germany was linked to
America through NATO, through
France to the European Union, and in
which Britain was extremely helpful in
establishing an overall framework. Now
that relationship has to be redefined.

I do not agree with those who believe
that America should now shift this
special relationship to Germany. It is
not helpful to Germany and it is not
meaningful for the United States
because we should not have a special
continental partner and I do not know
any German leader who aspires to such
a position. It is not meaningful either,
because what is needed is help to
America and cooperation with Europe
in the transition that I have described to
the conduct of a global policy without
enemies, without a security danger
geared to potential threats and geared
to global opportunities.

There have been, as I said, two
approaches to European/American
relations. One was the Gaullist
approach for which in my writings I
have had great sympathy because it
reflected the necessities of a country
that had gone through tremendous
difficulties in the war and in the
colonial period and that needed to
reaffirm its identity. The second was
the British approach which, more
secure in its identity, sought to establish
a pattern of cooperation, very difficult
to challenge because it reflected over
time the convictions on both sides of
common interests. The British
approach also reflected a historic
tradition of a global foreign policy
while the French approach was more
nearly geared to the calculations of the
margins on which stability in central
Europe, particularly as long as
Germany was divided, depended.

My basic argument is this. In the
period of the Cold War, when the
United States had the dominant role in
security and when there was only one
visible international challenge, it made
some sense to define European identity
by trying to wrest it from the United
States. In the present period, nothing is
easier to achieve than to have America
turn away from Europe, nothing is
simpler than to convince Americans
that they have no special interest in
Europe. The tasks that Europe has are
now so manifold that they don't have
to be granted by the United States - on
such issues as the participation of each
of the Central European countries in
the European Union. There is no need
for the United States to take a position
or to involve itself. Whether Europe
should follow a multiple geometry or
be more closely integrated makes a
difference in the relations between
Europe and the United States but it

20

What I would think is important is not
to make rigid separations between
areas that are exclusively European and
areas that are exclusively American.
What we really need is the kind of
dialogue between what emerges in
Europe and what is beginning to
emerge in America that characterised
the post-war period. I think it would be
a continuation of the Western civil war
that started in 1914 if Europe and
America now concern themselves in the
kind of debate which is not at all
impossible.

In America, we need to give priority to
European relations that frankly has
been lacking, not just in day-to-day
policy but in some acts that seem quite
unnecessary. Therefore, I believe that
the debate about NATO membership
ought not to be permitted to fester
indefinitely. It is not the end of foreign
policy, it is just to put this issue out of
the way, but unlike the Cold War, it is
no longer possible to build an Atlantic
relationship exclusively on security
issues.

There was a period in which I thought
that the next phase of American foreign
policy should be to concentrate on
building western hemisphere
community. I still think that that is an
important enterprise but I believe more
and more that what we now need to do
is to create some goal for the North
Atlantic nations so that in the
challenges that I have tried to describe
we can act again in a common
framework. Therefore I believe that we

I am back to where I started. A
succession of American leaders of both
political parties, many of them not
known for excessive sentimentality,
which is anyway not a trait which
enables one to rise easily to the
Presidency, have over a period of more
than a generation considered it natural
that on major issues Britain and the
United States would seek to cooperate.
And would have a level of consultation
that was never formalised but was
central to the formation of policy in
both parties in both countries. Now, the
challenge is whether this can be done
on European/American relations, and
this is where Britain's experience can
make a seminal contribution. Europe
does not need to wrest its identity any
longer from the United States - we are
back to 1947 in that respect.

So my hope is that the nations of the
North Atlantic representing - whether
our intellectual community agrees with
that or not - a comparable civilisation in
a world in which democracy and
progress economically are our hope,
but not our guarantee, can do again,
this time on a global basis, what they
attempted so successfully a generation
ago.

21

C Y J

HAK:

Graubard has no problem with receiving
your edits on Tuesday.

ssm

Also -- he asks how you prefer to be
identified?

Former Secy. of State ____ Both ____

Chairman, Kissinger Associates, Inc. ✓