[L.C.]

DEC 9 1968

DEPARTMENT OF THE ARMY
HEADQUARTERS, 113TH MILITARY INTELLIGENCE GROUP
FORT SHERIDAN, ILLINOIS 60037

4 December 1968

Dr. Henry A. Kissinger
Center for International Affairs
6 Divinity Ave.
Cambridge, Mass.

Dear "Sergeant" Kissinger:

Your recent appointment as President elect Nixon's advisor on
national security policy is of such monumental significance that I
felt compelled to offer you my most sincere best wishes and con-
gratulations. As an old Railsplitter I perhaps should offer
condolences because I know that you will over-tax yourself in every
way possible in the never ending battle against bureaucratic elephan-
tiasis.

I spoke to Fritz Kraemer on the telephone yesterday and he sounded
what I can only describe as "relieved" that you had been offered this
important post. I, too, believe that Mr. Nixon could not have made
a better choice.

May the good Lord continue to grant you the courage, wisdom,
strength and patience required for the awesome and challenging
tasks that lie ahead. When your travels bring you to Chicago I can
offer you a small oasis at Fort Sheridan which is entirely free of
political discussion, official protocol, or anything more complicated
than selecting the proper bourbon. You may rest assured that we
will discuss nothing more involved than the attack on Hanover or the
crossing of the Rhine.

Good luck, good health and bon courage.

AMERICAN
FOREIGN SERVICE
ASSOCIATION

2101 E Street, Northwest

Washington, D. C. 20037 • 338-4045

DEC 5 1968

December 3, 1968

Professor Henry A. Kissinger
Center for International Affairs
Harvard University
6 Divinity Avenue
Cambridge, Massachusetts 02138

Dear Professor Kissinger:

I was sorry not to have been in town during our conference, but I understand that your presentation was a splendid harbinger of things to come. Which puts me in the very pleasant position of offering both our gratitude and our congratulations on your appointment.

Since this seems to be a two-hatted letter, I am enclosing two items.

One is a check in the amount of $66.70 in response to the statement of expenses in your letter of November 19 to Mr. Grey.

The other is a set of memoranda summarizing what we believe to be the important recommendations in the report TOWARD A MODERN DIPLOMACY, a copy of which I sent you with my letter of October 18. The summary memoranda were prepared as guideposts for the next Administration should it wish to reorganize the process of foreign affairs; you may find them of interest, although they leave moot the question of White House organization--or, rather, assume that the future size and function of the NSC staff will be much as they have been in the most recent past.

We would welcome an opportunity to discuss these problems with you, here or in Cambridge. In any event, we look forward to the pleasure and excitement of serving the next Administration.

DEC 8

1968

ROOM 5600
30 ROCKEFELLER PLAZA
NEW YORK, N. Y. 10020

December 5, 1968

Dear Henry:

Congratulations to the U.S.A., and to you
as well, in connection with your new appoint-
ment. Just stay the way you are and work
as hard as you always have, and the country
and the world will be in much better shape
four years from now.

Dr. Henry A. Kissinger
419 Beacon
Boston, Massachusetts

DEC 23 1968

7 Argyll Mansions,
London, W.14.
17th. December, 1968.

Dear Dr. Kissinger,

I noted recently in the _Guardian_ a condensation of an article by you in which you stressed the need for a definition of national interest and national security.

I am extremely pleased that you have reasoned in this way and wonder whether you might be interested in a few ideas. So many of the cerebral soldiers in the United States have been carried away with the strategy of the possible use of nuclear arms. Mr. Robert McNamara has come as near to saying it as anyone in public life in America that nuclear arms to commend a book which has gone unannounced - it is MILITARY STRATEGY: A GENERAL THEORY OF POWER CONTROL by J.C. Wylie. It seems that the academic strategists are extremely reluctant to give military or naval men much credit for ideas unless they have been dead along while and, of course, the reverse is quite true. (Wylie is a Rear Admiral, USN.) He seems to feel, as I do, that Sir Basil Liddell Hart's thinking tends to form the foundation for a more general theory of strategy than any other thinker. "The only concept that has yet been postulated which approaches these requirements is Liddell Hart's concept of the indirect apptroach."

It seems to me also that when you re-examine post-war western strategic thought with reference to Liddell Hart's thinking the suggestions for a practical policy seems to appear. The post-war thought was founded upon the geo-political thinking of H.J. MacKinder that the Heartland region was invulnerable and the only way to prevent the Heartland from attempting to swallow the World Island would be to strike at the source of power with nuclear arms. The air force thus became the senior service displacing the navy. However, it appears that MacKinder's thinking is not quite correct. Land power is not superceding sea power entirely. The ideas of Mahan still have some validity and, interestingly enough as Wylie points out, Liddell Hart's ideas have application to sea power.

There is no reason why the policy of the United States should not be similar to the old British policy in relation to the continent - of simply maintaining a balance of power. The people on the world island do not want to be forcibly unified under Peking, Moscow, or even Washington. This also gets away from the ideological aspect. You might be interested that Liddell Hart has read this paper which I have written on this matter and agrees with it.

DEC 18 1968

SAND DUNE SHANTY
309 TWENTY-FIRST STREET, SOUTH
BRIGANTINE, NEW JERSEY

December 13, 1968

Dr. Henry A. Kissinger
Harvard University
Cambridge, Mass. 02138

Dear Dr. Kissinger:

Please let me congratulate you on your selection as Special
Assistant for National Security in the fine team that Pres-elect
Nixon is putting together.

You will have a vast responsibility in this field which
seems to have been so poorly handled in the last 8 years. Our
safety and indeed our existence as a nation may depend on the
wisdom of what we do henceforth.

In this connection may I call your attention to a meaty
address recently delivered by Mr. William J. Stephens, President
of Jones & Laughlen? I enclose a copy printed in a little booklet.
Please take a few minutes to read it. I don't think that you will
regret it.

Please note his powerful thesis; that we must maintain our
economic strength to maintain our political and military security.
Our dwindling economic strength vis-a-vis the world is shown by the
huge losses of our gold reserves; such losses are both a symbol and
a result of the *Leaking Faucet* of our Policies.

Please tell me if you don't find this address very worthwhile.
I might identify myself as one of those who wrote to every member
of our New Jersey delegation BEFORE Miami and urged each to vote
for Mr. Nixon. With all best wishes in the vitally important work
you are now beginning, I am,

pah
enclosures

[L]

William J. Stephens

The invitation from Robert Taylor, your President, to speak at this 74th Annual Meeting was indeed compelling. I am grateful that you selected your new neighbor to be on this platform. As you know, J&L has made a major investment in a new plant in Hennepin, erected in the corn fields of Illinois, at the big bend in the Illinois River, to serve the fast growing markets of the Midwest. We have faith that sometime in the future the "leaking faucet," which is my subject this morning, will be repaired. The topic of your case study on Wednesday afternoon, "How to Go Down the Drain Without Trying," could also well be used to illustrate my theme.

I suspect that no one in this audience has not, at one time or another, experienced the annoyance and the inconvenience of a "leaking faucet," and also the expense.

In dealing with a "leaking faucet," there seem to be three courses of action.

The first is to do nothing. The thought is that maybe the washer will adjust itself and the leak will go away. When this does not happen, after a lapse of time, depending upon the degree of

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annoyance and the cost of the wasted water, the
faucet is finally repaired.

The second course of action is to turn the tap
with a bit of extra pressure, perhaps damaging the
threads a little. This stops the leak, until the faucet
is used again, and the process is repeated. Re-
peated enough times the leak becomes a steady
flow.

The third alternative is to face the fact that the
faucet leaks—the leak will not go away by itself,
and the only remedy is to install a new washer and
effectively stop the leak.

Now it might strike this audience as strange that
I have used such an everyday situation to illus-
trate a serious subject of national importance, and
that is the future, long-range, competitive position
of the United States in world trade.

Our antiquated international economic and
trade policies are the cause of the "leaking faucet"
and what is going down the drain, what is leaking
away, is our surplus balance of world trade The
despairing aspect of this situation is the lack of
response on the part of our government officials
who are charged with this area of responsibility.
They act as if there were no leak, notwithstanding
official government figures which indicate other-
wise.

The favorable experience of the past thirty
years shows we have enjoyed a continuous balance
of trade surplus, on a cumulative trade account of
merchandise exports and imports, totalling $467
billion and $324 billion respectively. Since 1937 we
have been the world's leading trader. Our annual
world exports have grown from $3.4 billion to
$30.9 billion. In the performance and pursuit of
this trade, the United States has also assisted other
countries to reach new levels of economic growth
and development. New channels have been opened
for other areas of American commercial activity

2

abroad. Pestilence, blight and disease have been
reduced; the burden of hunger has been lightened.
The Free World has been strengthened in its abil-
ity to provide an economic and political alterna-
tive to communism. This is a record of which we
can be proud, one which seemingly serves as a
striking illustration of your meeting's theme—
"Progress Through Change."

Indeed, on the strength of this record, coupled
with that of our domestic economic performance,
it is easy to understand the optimistic attitude, pre-
vailing in many influential quarters of the United
States, which sees no serious challenge to the
future international economic posture of our
country. This optimistic attitude is not unlike the
feeling of security and the sense of pride in eco-
nomic accomplishment enjoyed by Great Britain
in the past century, those days when "the sun
never set on the British Empire." The country
which was once the world's leading industrial and
political power today finds itself reduced to a po-
sition of secondary influence, fighting through a
mire of economic and trade problems equal to
the challenge of the famed Gordian knot.

It was a sad but honest day, when Prime Min-
ister Wilson announced to the British people and
to the world, on January 16 of this year, his inten-
tion to make devaluation work:

Because until we do, until we are earn-
ing, year in, year out, a substantial surplus
on our overseas payments, we are unable in-
ternally or externally to do all the things
which as a nation we would like to do. But
what this means for the immediate future
is to insure that we cut down our demands
and our ambitions at home and abroad with-
in the limits of what we can currently earn.

Of course, the rise and fall of the British Em-
pire was conditioned upon a great many forces,
but Great Britain's failure to maintain a com-

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manding and competitive position in world trade figured significantly in her inability to maintain an international position of political leadership and economic solvency.

What happened to Great Britain could happen to the United States. We have no assurance that we can, in the future, achieve a favorable balance of trade as long as the "leaking faucet" lets our surplus trade balance escape down the drain.

We must stop the leak.

Now the United States has maintained an envi-
able balance of trade surplus over these many
years. Will this continue? An affirmative answer is
not assured. In recent years, even though the vol-
ume of trade has continued to grow, our balance
of trade surplus has been shrinking along with our
competitive position in world markets. Mr. Archie
M. Andrews, Deputy Director of the Bureau of
International Commerce for the U. S. Department
of Commerce, laid the problem on the line re-
cently when he said:

Simply stated, the principal problems of
international trade facing this country are:

(1) a declining share of world markets and

(2) a shrinking trend in our trade surplus.

Let's go to the records to get the facts. In just
ten years, our share of free world exports to for-
eign markets has dropped from 23.8 per cent in
1957 to 19.3 per cent in 1967. This is a 19 per
cent loss in market participation. Thus, even
though our exports have reached new dollar rec-
ords for the past four years, they are not keeping
pace with the growth of the world market. U. S.
exports have increased 58 per cent from 1960 to
1967, but, and this is an important "but," they
have not kept pace with the growth rate of our
imports. Imports increased 79 per cent in this
same period. This accounts for our vanishing
trade surplus. Just look at some of our major com-
petitors during this seven-year period. As against

4

our 58 per cent increase in exports, France in-
creased 68 per cent; Germany, 90 per cent; Italy,
139 per cent; and Japan, 158 per cent.

Now I hasten to assure you I will not devote
our time in presenting statistics. We all know sta-
tistics are not unlike a bikini. What they show is
exciting—what they conceal is vital!

You see, the alarming point is this—we are
dealing with sustained trends and not with spo-
radic annual fluctuations. The faucet has long
since started to leak. One has only to look at the
record for the last eighteen months to see that
this decline in our international market participa-
tion has gained momentum. We are told that the
value of our total merchandise imports last year
was $26.8 billion and that of our total merchan-
dise exports was $30.9 billion. This gives us a
balance of trade surplus of $4.1 billion according
to government figures.

Here we must "stop, look and listen" and not
be misled. When we adjust this balance of trade
—imports and exports—to exclude those items
which are government financed, in other words—
the non-commercial exports which earn no for-
eign exchange on current account, the acclaimed
$4.1 billion surplus is reduced to $9.7 million.
Now most of our major trading partners include
the cost of freight and insurance in the accounting
of their balance of trade. If we adjust our figures
on a comparable basis, then last year, the United
States would have run a balance of trade deficit
of $1.3 billion in a year when the U. S. balance of
payments deficit was $3.8 billion. You now see
that a large favorable merchandise trade balance
can be acclaimed, under present official account-
ing practices, by the simple expedient of increas-
ing foreign aid at the expense of the taxpayer's
pocketbook, and also by accounting for the cost
of freight and insurance as we do. I refer you to
"Alice in Wonderland" for the details.

5

[LC]

Simply stated, a realistic favorable merchandise balance in trade can only be achieved if what this country sells abroad is more than what we buy from abroad. We must look at the figures, without the use of the "Looking Glass" currently employed in Washington for doing so.

The biggest blows to our trade account have occurred in the first half of this year. For the first time since early in 1963, the United States ran a monthly trade deficit. This was not a single occurrence, as the Administration had hoped; this has occurred three times in the last four months during this period. According to the Department of Commerce, the U. S. foreign trade performance in the second quarter of this year was the poorest since the end of World War II. During this quarter, the United States sustained a "real" (their quotes, not mine) trade deficit of $2.2 billion at a seasonally adjusted annual rate. If I may borrow from the third chapter of the Book of Romans, "God forbid that it continue."

It may be by this time you have concluded that I'm about to make "a pitch," and urge all the members of the Central Supply Association to buy and sell only products made in the United States. No such thing. Such an appeal would indicate that I had completely ignored the realities of the market place and should not be taken seriously. The overall import problem on all products cannot be solved solely by "waving the flag." That is like giving the faucet a bit of extra pressure, which gradually will damage the threads and cause a larger leak when the faucet is used again.

I would also make clear that our nation's import problem is not confined to steel alone. It is true that steel mill products constitute a large leak—a trade deficit of $900 million last year, $1.5 billion this year; but even so, steel accounted for only five per cent of the merchandise imported over the last eighteen months.

I said earlier what is going down the drain is our surplus balance of world trade. The leak is growing larger with the passage of time. Total U. S. imports are currently running at a growth rate which is more than three times that of exports. The United States is beginning to feel the initial effects of a broad-based change in the competitive conditions of world trade. From a commercial point of view, this is not an attractive prospect. From a monetary point of view it makes the balance of payments problem of the United States that much more difficult to solve. This country has relied for many years on a strong trade position to offset chronic deficits in other accounts in our balance of payments.

The change in our competitive position with respect to the composition of imports is most disquieting. In recent years, there has been a steady but decisive shift from imports of raw materials to imports of manufactured goods. The National Industrial Conference Board reports that the ratios of these two groups to total imports in 1955 were 25 per cent raw materials and 23 per cent manufactured goods. This is in contrast to our experience last year when raw materials dropped to 15 per cent, and manufactured goods increased to 46 per cent. This is a serious reversal and should not be lightly regarded. It means that an ever-increasing amount of our dollars spent for imports is providing more jobs and job opportunities abroad.

With this changing import pattern to a larger percentage of manufactured goods we are indeed exporting jobs. Let me explain—when we sell $1,000,000 of soy beans for export we have provided employment to the extent of a $40,000 payroll. When we import $1,000,000 of cold rolled sheet steel, we have, in terms of our labor costs, foregone a $350,000 payroll. We have bought and sold $1,000,000 worth of goods. In this exchange our labor force received $40,000,

6

7

but gave up $350,000 worth of labor in the ex-
change. I call that "one horse—one rabbit."

Of the four basic categories which account for most U. S. trade (consumer goods, capital goods, industrial materials, and food), there has been a tremendous surge of imports in both capital equipment and consumer goods. For 'example—last year for the first time, we had a trade deficit in machine tools. I need not remind you that these are important markets which are now beginning to feel the effect of import competition. Furthermore, these are the areas in which the United States has relied on our technological superiority to provide a special and unchallenged competitive position in world trade.

Looking ahead, I do not see any likelihood of a sustained reversal of these national foreign trade trends without the complete rethinking and overhaul of many of our international economic programs and trade policies. We are fast running out of time to attend to the "leaking faucet," and yet Washington seems unconcerned. I believe we will not be able to rely in the future, with the same certainty as in the past, on our Yankee ingenuity and our technological superiority, to assure the United States the number one position in world commerce, and I do not believe that I am being overly pessimistic.

Severe domestic inflation, one of our "hard core" domestic problems, will seriously impair our international competitive position with respect to both imports and exports. The skids are now greased for additional imports, while the brakes are being applied on exports. Our present fiscal and monetary policies fall far short of being able to cope with this problem. The economies of other countries, largely through the assistance of the United States, either have, or are in the process of developing, a broad-based and efficient industrial infrastructure which enables them to compete

vigorously for world markets. Growing international industrial parity will make it increasingly difficult, even impossible, in some product lines for the greater U. S. productivity to offset lower wage costs abroad.

And finally, many of the political-economic policies of our major trading partners, and other countries as well, are on a direct collision course with those of the United States. These conditions are the waves which are changing the competitive tides of the world trade. Such things as an 11-day dock strike, inventory hedge-buying, and the like, are merely the whitecaps on already troubled waters.

The response of our own government to this situation has been remarkable indeed. Exercising fully their genius for inaction, government officials must have demonstrable proof that there is, in fact, a problem before they move off dead center. Demonstrable proof usually means a crisis. The Administration then wonders why industry after industry appeared at the recent Congressional hearings on foreign trade asking for consideration of its trade problems and relief of same. To add insult to injury, these industries are denounced as self-seeking protectionists and competitive "drop-outs," threatening the ruination of America's position in world trade.

If there is a threat to this country's position in world trade, then the responsibility for this threat lies not with those industries seeking solutions to import and other trade problems, but with the United States Government. The inclination to pursue "the primrose path of dalliance," along with its failure to provide a foreign trade policy which is imaginative and pragmatic, makes it difficult, if not impossible, for this nation to continue to achieve the general foreign trade goals of which we have been so proud.

There is something vitally wrong when Japan

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9

can become the world's second largest producer of automobiles, and still claim her industry needs protection, because it is not yet strong enough to meet the challenge of international competition.

Recently The Japan Automobile Manufacturers Association proudly announced that for the first six months of 1968 their passenger car exports to the United States increased 61 per cent over the same period last year. There is a reason for this. An exporter of cars from the United States to Japan faces a 17.5 per cent tariff as well as a commodity tax averaging 35 per cent. In comparison, an importer of Japanese cars to our country is accountable only for a 5.5 per cent tariff and a 7 per cent manufacturers' excise tax.

There is something vitally wrong when foreign steel producing countries not only expect, but also demand, free and unlimited access to the steel markets of the United States, while they continue to protect their own markets against steel made in the United States. If we ship $100 worth of pipe to France, we pay in transportation, tariff and taxes a total of $95.72. These same cost items total $40.00 on pipe coming the other way. Thus, our disadvantage is $55.72. On pipe to West Germany our disadvantage is $27.69, to Belgium $28.14, to Italy $22.71, and so it goes.

The strategy of our world trading partners is to erect non-tariff barriers in various ways. Their methods include, but are not limited to, the following:

<table><tr><td>Border Taxes</td><td>Special Steel Taxes</td></tr><tr><td>Import Licensing</td><td>Import Surcharges</td></tr><tr><td>Controls</td><td>Quotas</td></tr><tr><td>Currency Exchange</td><td>Direct Prohibitions</td></tr><tr><td>Controls</td><td>Loyalty Rebates</td></tr></table>

I think all of this is called a "restrictionist commercial policy." This is the scheme of our trading partners to appear to knock down the tariff walls,

and then to erect non-tariff barricades in their place.

I am not always in agreement with the views of Ambassador William M. Roth, our Special Representative for Trade Negotiations. However, in a speech in Atlanta last month, he included an observation with which I am in agreement. Steel industry spokesmen have been vocal on this part of the foreign trade problem for some time. I quote Ambassador Roth:

> The United States must continue to push hard—very hard—for equality of treatment and for genuinely open markets, particularly in the developed countries. We can no longer be the world's economic "Big Daddy." The access we give to our markets must be matched by the access others give us to theirs. It is not only trade that must flow both ways, but investment as well. Equally important, the rules of the game for all aspects of competition must be fair—and they must be observed by all the players.

In the last decade, steel imports have increased at an average annual rate of 25 per cent a year as a percentage of consumption, growing from 1.5 per cent to 12.2 per cent last year. Imports have absorbed more than one half of the domestic market growth, and this is cause for deep concern. This rapid increasing reliance on imported steel is clear to see; 12.2 per cent of consumption last year, perhaps 16 per cent this year—in 1972, if present trends continue, perhaps 30 per cent. No other significant steel producing country in the world allows steel imports to exceed much more than 5 per cent of consumption, and yet our foreign trading partners claim to operate under the banner of "free trade."

An article in the May 27 issue of U. S. News & World Report made this interesting observation "... the U. S. of 1968, in its financial position

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[Lc]

and in its reputation, no longer ranks at the top
of the heap in the same way it did 20 years ago.

"One expert sees the U. S. today as an Atlas
who has become tired from carrying the entire
world on his back for too long.

"Another authority talks of the U. S. as a 're-
verse Horatio Alger—a nation which has gone
from riches to rags—with all the best intentions
in the world, but just an easy mark, a sucker to
nations wanting a free ride.'"

I sincerely believe that the time has come for
the United States to give up its antiquated ap-
proach to foreign trade. I am by no means sug-
gesting that the United States reverse its long-
standing objective to pursue the liberalization and
expansion of reciprocal trade. What I am sug-
gesting is that, as Senator Russell Long put it,
we cease continuing to be "patsies" to the rest of
the world through our foreign trade policies. I
am also suggesting that this generation is respon-
sible to the next, and that the shift in competitive
conditions in world trade today raises five imme-
diate questions for which we are answerable.

First, how would a long-term adverse shift in
the competitive position of the United States in
world trade affect the balance of power and the
ability of this country to maintain its status of
leadership? We saw what happened to Great
Britain.

Second, what impact will the acceleration of
political-economic regional complexes, such as the
emergence of the powerful European Economic
Community, have on the competitive position of
the United States in world markets? Is our foreign
economic policy equal to the challenge of the
regional coalitions?

Third, how do we improve the responsiveness
of domestic and international fiscal and monetary
policies to the changing conditions in world trade?

Fourth, how can our foreign economic policy

be structured, so as to provide adequate and effec-
tive machinery to maximize our international in-
terests on one hand, and on the other, to facilitate
a healthy and immediate response to foreign trade
problems as they relate to our domestic economy?

Fifth, how should the relationship between
business and government evolve, both in the plan-
ning of our foreign economic policies and in de-
veloping solutions to foreign trade problems?

It is not my intention to cover ground in each
of these areas this morning. I have merely out-
lined for your consideration certain aspects of
foreign trade, which I think the United States will
be forced to pursue in dead earnest in the years
ahead.

It is not enough that we all know about the
problem and perhaps "view it with alarm." The
overall solution—long range—is that we must
become more competitive in world markets. This
calls for the use of a two-edged sword which I
will describe.

One edge—We must overcome the high labor
value content in our products. In doing so, we
must not jeopardize our high standard of living,
the envy of the world, supported by the highest
wage rate structure in the world. One answer is
a further increase in productivity, and that can
only come through the sincere combined efforts
of both labor and management. This is "easier
said than done." This means new investment in
new technology and new processes. Profit margins
must be increased to justify such investments. It
is not enough to just secure an offset in produc-
tivity to compensate for the rate at which employ-
ment costs are increasing. Industry should have
the opportunity to produce and to price according
to the need, without government interference.
You purchasing officials will determine whether
or not price increases will stick. You always have
made that determination.

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The other edge—We must also obtain the full understanding of our government in matters of world trade. There must be quick action on major industry problems caused by dislocations in export and import trade. Our government must move away from its antiquated "one horse-one rabbit" policy, and secure for the farmers and industries of our country an equal world trading opportunity. We must find a way to discipline unfair competition. We do not have this today. The record book is full of inequities, favorable to the other side. It seems the exporter to the United States is helped by two governments—his government and ours. This must be corrected. If it cannot be corrected at the conference table, we should call off our "free trade" posture in those areas and look to our own self interest. To do other than this is like playing "Russian Roulette" with all the chambers in the gun loaded.

At stake is the future economic and political position of the United States in world affairs. History teaches very stern disciplines with respect to the balance of power. One lesson is clear. It is impossible for any nation to sustain a superiority of military-political strength without economic power. In short, one is handmaiden to the other. I suggest that we recognize this fact of life and realize that the importance of the role we can play in international affairs is in direct proportion to our world-wide economic strength.

The world balance of power is not as strongly weighted in our favor as it was twenty years ago. At that time we had a monopoly on the atomic bomb and our military superiority was unquestioned. Our advantage was decisive even five years ago. Today the Soviet Union might well be ahead of us in megaton capacity. Perhaps they will have missile parity with us in the next few years. Communist China within four years will no doubt have a significant deliverable nuclear capacity.

Defense Secretary Clifford indicated early last

month, that it is impossible to assure peace or peaceful co-existence unless the military superiority of the United States is maintained. We cannot risk lagging behind. It is also true that in our time, the ability of a nation to influence the balance of power requires an industrial base which is immediately flexible to change and technologically superior to that of our opponents. Its structure must contain offensive and defensive preparedness.

I ask: Is it realistic that a first class power, with global responsibilities, risk increasing reliance for an important part of its steel needs on sources thousands of miles away—sources lying in the shadow of Communist China and Soviet Russia? Steel meets more than 95 per cent of our nation's metal requirements.

Now steel is not the only industry that is important in our national defense posture and also has a major role in our trade balance. I can mention textiles, oil, machine tools, heavy electrical equipment, and many others. I talked more about steel because I know, first hand, the international implications.

We should not jeopardize the progress and growth of steel or any other of our defense related and essential civilian industries, as we are now doing, by exposing their domestic markets to unrestricted imports, while at the same time they are denied foreign markets through devious regulations and procedures. Nor should we expose other industries to unrestricted competition at home, and allow our trading partners to effectively "shut the door" to their products. It is not unreasonable that "free trade" policies should also embrace "fair trade" practices.

We must attack these underlying dangers to our national economic health posed from abroad unless we are willing to be satisfied with a thin veneer of prosperity. We must stimulate those re-

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The China News

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DEC 9 1968

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EDITORIAL: 22997

BUSINESS: 26607

英文中國日報
台北市信義路二段一七七號

December 3, 1968

Prof. Henry A. Kissinger
International Seminar
471 Broadway
Harvard University
Cambridge, Massachusetts 02138
U. S. A.

Dear Professor Kissinger:

I have learned from wire service of your appointment as national security assistant to the President-elect. I wish to offer my heartfelt congratulations.

The President-elect has acquired a valuable asset, but at the same time I hope neither Harvard nor the International Seminar will be losing anything.

I was really disappointed that the planned reunion in Rome fell through. I pray that we will be seeing each other again in the not too distant future.

I have just received your letter of November 22, asking for recommending applicants to the 1969 Seminar. I will write to you again on my recommendation.

With fond memory of my pleasant stay at Cambridge,

DEC 5 1968 [cc]

# ATLANTIC UNION
## MISSIONS

FORMER PRESIDENTS HARRY S. TRUMAN AND DWIGHT D. EISENHOWER HAVE AGREED TO COCHAIRMAN A BIPARTISAN AMERICAN DELEGATION TOANATLANTIC UNION CONVENTION, A PROPOSED RESOLUTION WOULD CALL ON THE PRESIDENT TO INVITE ALL NATO NATIONS. THE RESOLUTION HAS BEEN CO-SPONSORED BY ONE-FIFTH OF THE ENTIRE SENATE AND A DOZEN DISTINGUISHED MEMBERS OF BOTH PARTIES IN THE HOUSE, ALL OF WHICH TELLS MUCH ABOUT THE GROWING STRENGTH OF THE ATLANTIC UNION MOVEMENT AS AMERICA APPROACHES HER BICENTENNIAL.

### Dr. Kissinger:

Congratulations. In moving on to other things - I note from your write up in the Times that you were awarded a doctorate in 1954. It was on June 23, 1954 that I was introduced at a Norfolk event as the "father" of the incentive and morale programs which had been inspired throughout the Navy by my work in NATO'S SEA CAPITAL. This work was dedicated to ATLANTIC UNION, as is the current drive. Recently, Mr. Streit and I met in New York to coordinate efforts. 127 Congressman and 30 Senators now openly back the ATLANTIC UNION Convention Resolution. It has passed the House Foreign Affairs Committee and Mr. McCormack assures cooperation in getting it to the floor. All five 1968 leading presidential candidates endorsed the resolution - and the strongest endorsement may have been Mr. Nixon's. Only one president ever ever ever will be mentioned in the same context with Washington and Lincoln. It will be the President who leads us into ATLANTIC UNION. With greatest respect -

Van Watts
6210 Yucca
Hollywood 90028

IN ATLANTIC UNION OUR FOREFATHERS WOULD HAVE RECOGNIZED THE PATH OF FEDERALISM AND DEMOCRACY THEY SO BOLDLY CHARTED AS FAR INTO THE FUTURE AS IT WAS THEN POSSIBLE TO SEE. THE MANTLE HAS FALLEN. LET US BE WORTHY OF IT - SO THAT FUTURE GENERATIONS WILL NOT SAY THAT IN OUR TIME - LIKE GREECE AND ROME - AMERICA LOST HER WAY.

DRIVE TO COMMEMORATE AMERICA'S BICENTENNIAL
WITH AN
ATLANTIC UNION CONVENTION

- BEHIND THE MISSIONS -

ARRIVING IN NORFOLK TWO DAYS BEFORE THE ESTABLISHMENT OF NATO'S NAVAL HEADQUARTERS THERE, THE EDITOR OF A NATIONALLY-COPYRIGHTED PUBLICATION WOULD PREDICT HE WAS ATTEMPTING THE "IMPOSSIBLE". ANOTHER WOULD PHONE A REQUEST TO PARTICIPATE - WHEN HIS IMAGINATIVE ATTACK ON THE OLD "NORFOLK-NAVY" PROBLEM INSPIRED NATION-WIDE INTEREST, EXPLODING INTO A HUNDRED EVENTS IN NAVY TOWNS WHEN FIFTEEN YEARS OF PREPARATIONS PAID OFF WITH THE COLLABORATION OF PUBLISHERS FROM NEW YORK TO HONOLULU. WITH HEADLINES LIKE "SOUTHERN HOSPITALITY FLOWERS ONCE MORE ALONG HAMPTON ROADS!" THE PRESS WOULD CREDIT NORFOLK'S "NEW IMAGE" IN LARGE PART TO THE "NAUTICAL CELEBRITIES" AND SHIP QUEENS WITH WHOM HE HAD SPARKED THE DRIVE WITH OVER 600 APPEARANCES ON PROGRAMS CREATED FOR RADIO, STAGE AND TELEVISION.

WITH ENCOURAGEMENT FROM LEADERS IN BOTH PARTIES POET, PRODUCER AND PHILOSOPHER SYLVAN WATTS WOULD BE FURTHER INSPIRED IN HIS PLANS FOR A DRIVE TO COMMEMORATE AMERICA'S BICENTENNIAL WITH AN ATLANTIC UNION CONVENTION WHEN CONGRESSMAN PAUL FINDLEY ENTERED THE NATIONAL PLANNING ASSOCIATION'S ENDORSEMENT OF ATLANTIC UNION IN THE CONGRESSIONAL RECORD ON THE 14TH ANNIVERSARY OF HIS MASSIVE DRIVE TO CREATE A NEW ATMOSPHERE IN NATO'S INTERNATIONAL SEA CAPITAL.

WITH DISPATCHES FROM PLACES LIKE NAPLES AND FORMOSA EVEN ADMIRALS WOULD GET INTO THE ACT - AND MORE THAN A SCORE, INCLUDING NATO'S SUPREME ALLIED COMMANDER ATLANTIC AND THE COMMANDER OF NATO'S NAVAL FORCES IN THE MED, WOULD SEND ENCOURAGEMENT WHEN HUNDREDS OF CLUBS, CHURCHES AND OTHER ACTIVITIES INCLUDING A WHOLE BATTERY OF COMMUNICATIONS MEDIA - THE VIRGINIA-PILOT, STAR, WTAR-TV, WTOV-TV, WCAV, WASP, WGH, WBOF AND WLOW - PARTICIPATED. PLACED UNDER CIVIC AUSPICES BY THE MAYOR AND ENDORSED BY THE CHAMBER AND MINISTERIAL ASSOCIATION, THROUGH NEWS RELEASES TO 2000 SHIPS AND STATIONS THE NAVY DEPARTMENT WOULD GIVE THE DRIVE NAVY-WIDE PUBLICITY.

AT A BIG EVENT COMMEMORATING ITS SECOND ANNIVERSARY HE WOULD BE HONORED BY CIVIC AND NAVAL OFFICIALS AS THE "FATHER OF THE NAVY'S SAILOR OF THE WEEK, MONTH AND YEAR PROGRAMS" WITH WHICH HE HAD IMPLEMENTED HIS IDEAS AND PHILOSOPHY THROUGHOUT THE NAVY IN A DRIVE LAUNCHED SIMULTANEOUSLY. IN RESPONSE TO A SUGGESTION FROM THE NAVY LEAGUE, WHICH HAD PARTICIPATED IN THESE INCENTIVE AND MORALE PROGRAMS IN NAVY TOWNS EVERYWHERE, LIFE MAGAZINE WOULD PUBLISH ITS "MIGHTY NEW NAVY" ON THEIR 10TH ANNIVERSARY. HONORED BY NUMEROUS OTHER ORGANIZATIONS AND PUBLICATIONS BUT MOST OF ALL BY THE THOUSANDS WHO PARTICIPATED IN HIS DRIVES, HIS WORK HAS BEEN DESCRIBED "AS AN IMPORTANT CONTRIBUTION TO THE NATION" BY PUBLISHERS, ADMIRALS AND MEMBERS OF CONGRESS.

DEC 16 1968

Captain Rexford V. Wheeler, Jr. U.S.N. Ret.

1522 Bolling Avenue
Norfolk, Virginia 23508

9 December, 1968

Dear Henry,

Congratulations on your appointment as Whipper-in of National Security Affairs. There is no one in the Country better qualified to fill this position than you.

Additionally you will have the delightful privilege, not often granted to the planners, of overseeing the execution of your plans and the conversion of your ideas into concrete effects on the people and the country.

I shall follow your new career with the most lively interest, and, you may be sure, will be cheering lustily from the background.

With all best wishes for the Holiday Season as well as in your forthcoming awesome responsibilities.

Most sincerely,

DEC 5 1968

Hartford, Connecticut 06115

CONNECTICUT GENERAL
LIFE INSURANCE COMPANY

Frazar B. Wilde
Chairman Emeritus

December 3, 1968

Dear Henry:

It has been a long time since we worked on the
Rockefeller reports. That was in many respects a
simpler age.

I am so glad that the President-elect has given you
one of the most important duties in Washington.

I will look forward to seeing you some day.

Congratulations and kind personal regards.

Dr. Henry A. Kissinger
Harvard International Seminar
Harvard University
Cambridge, Massachusetts 02138

ATCSW-CG

18 November 1968

Colonel S. V. Wilson
Special Assistant to Commanding General
US Army JFK Center for Special Warfare
Fort Bragg, North Carolina 28307

Dear Colonel Wilson:

As my Special Assistant, there are a number of questions, problems, and
ill, or undefined areas which I should like you to study.

The one problem which most concerns me is the role and mission of Special
Forces in the present and near future time frame (the next decade). This
boils down to two questions. First, is what the Special Forces doing now
(in Viet Nam or planned to do in our contingency plans) realistically ful-
filling the needs of the United States and the United States Army? Second,
where do Special Forces go from here?

Inherent in the answers to those questions are a multitude of other con-
siderations and problems. Part of your effort should be to identify and
assess those other major considerations which bear on the basic problems --
considerations which could be explored in detail by others. We need bold
and imaginative ideas, be they ones stemming from historically proven concepts
of the past or new approaches dictated by the uniquenesses of future conflict
environments. (i.e., wars of national liberation will continue, but the
U.S. will, in all probability, not commit major ground forces as it has in
Viet Nam.) I am particularly interested in ways to achieve, maintain,
and heighten Army-wide acceptance of Special Forces; ways to perpetuate
the finer qualities we have had and now possess; ways to establish the place
of Special Forces in our United States military philosophy; and ways to
attract officers and men of quality to Special Forces.

Closely connected with this problem is the role, mission and functions of
the so-called OSO officer. How closely allied to the SF officer is the
OSO staff officer? How do they tie in? Where do their roles and functions
converge so that, conceivably, at some point and in some place they might
very well be one and the same man? In pursuit of this, I ask you to monitor

Colonel S. V. Wilson
Special Assistant to CG

18 November 1968

and influence the OSO curriculum development at SWS. It was to assist you in exerting such an influence that I selected you ultimately to become Commandant of the OSO School.

I should like your efforts to result in recommendations for overall improvements in the Special Warfare program, with particular emphasis on the Special Forces, themselves. You are in no way limited to studying and analyzing Special Forces and the OSO man and concept. Rather, these are take off points which admittedly need careful, mature, and detailed study, but which may suggest other areas for exploration and development. I encourage you to delve into these other areas and, while obviously you cannot, by yourself, develop complete staff studies in these areas, you can, at least, isolate the areas for study by my or higher level staffs.

You are encouraged to call upon such officers and men as you consider important to the task. You recognize the wealth of talent and experience we have at Fort Bragg. I know you will exercise the necessary judgment, considering that all persons called upon will be engaged in their regular duties.

While you are directly responsible to me as my Special Assistant, both the DCO and the AC will assist you, as necessary, in the conduct of your studies and may, from time to time, suggest problems or areas for your consideration.

This broadly outlines your responsibilities and your relationships with the Center and School. You have a broad charter in which to critique, to analyze, to think, and to suggest other studies in the field of Special Forces, OSO, and psychological warfare. Upon my return from TDY during the first week of December, I should like for you to discuss with me in some detail your progress, modus operandi, plan of attack, and the form you think the results of your studies should take. I have in mind that you will develop "think" papers for me to pass to higher headquarters, to CSW, to CDC and to SWS in the areas outlined above, papers which will recommend new courses of action or further study of certain problem areas you have isolated. I also ask you to monitor very closely the development of the OSO curriculum.

cc: A/C
DCO
C/S

DEC 6

1968

NORTH AMERICAN ROCKWELL CORPORATION

GENERAL OFFICES • 2300 EAST IMPERIAL HIGHWAY • EL SEGUNDO, CALIFORNIA 90245

E. P. WOHL
STAFF VICE PRESIDENT
ADMINISTRATION
(213) 647-5477

December 4, 1968

Dr. Henry A. Kissinger
Harvard University
Center for International Affairs
6 Divinity Avenue
Cambridge, Massachusetts

Dear Henry:

Betty and I were delighted to learn of your appointment as Assistant to President Nixon for National Security Affairs. The way in which the President-elect described your tasks reminded me of the several conversations you and I had (believe it or not, so long ago as to have been the first year of this decade) concerning making the national security and National Security Council apparatus more effective.

Your point at that time, as I recall, was that such revamping was a necessary condition precedent to a more studied approach toward evolving a sensible set of international commitments.

You may recall that North American Rockwell was formed by the merger of North American Aviation and Rockwell-Standard more than a year ago. As you can see, I still am immersed in management and administration. I also travel to Brussels several times a year as vice chairman (chairman next year) of the United States delegation to the NATO Industry Advisory Group formed by NATO to attempt to achieve more joint research and development among member countries. The rest of my time is spent as chairman of the subsidiary company I set up which is training and employing hard core "unemployables" in the Central Los Angeles area.

Laurie, the little girl you met as a Wellesley sophomore, is a graduate of Columbia University Law School and assistant to Federal District Judge Charles Metzner, New York City. Her husband is an attorney with Cravath, Swain & Moore on Wall Street. Jon is now a sophomore at Yale. Time flies!

Dr. Henry A. Kissinger

December 4, 1968

Henry, let me know if I can assist you in any possible way
in getting set up. I get to Washington quite frequently. Our
interests in assuring sensible accomplishment of our national
purposes overseas have always been identical, to my
observation.

Betty joins me in wishing you well on your new assignment,
not only for your own sake but for that of all of us.

DEC 6 1968

3507 Walnut Avenue
Wilmette, Illinois 60091

December 4, 1968

Dr. Henry Kissinger
6 Divinity Avenue
Harvard University
Cambridge, Massachusetts 02138

Dear Henry:

As a fellow "Landsman" and old school chum, I want to congratulate you on your great promotion to the high post which Mr. Nixon, has asked you to serve.

You probably don't remember me, so I'll refresh your memory. We lived a few blocks from each other. I lived down the hill on "Hischenstrasse 50", and we walked home together on many occasions from the "Israeliche Realschul" in Furth. I vaguely remember your parents and believe you had an older or younger brother.

It really isn't my intent to reminisce about the old days, perhaps we could do that at some later date. when you are in the Chicago area. I'm sure you could add to my recollections.

I sincerely want to wish you the very best in your new venture and do hope, when you pass this way, you could take the time out to "Chat", if not over a cup of coffee, then perhaps over a piece of candy.

Good Luck.

AW/fam