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EUROPE

In respect to Europe, there is a contrary viewpoint to the one you have expressed, the one that I have generally held, the one that Senator Biden implicitly endorsed; namely, that Europe will never take care of themselves as long as we stay there. We are really doing them a disservice. The French, in particular, have raised this point. Some areas of French opinion, as you know, very strongly feel that the worst thing we could do is stay around there, not that we should get out of there immediately, but we should have a plan of withdrawing that other nations can see and rely upon and know how to conduct themselves under it, if we wanted to do it.

It is quite clear, of course, that there are at least as many ablebodied people in Western Europe as there are in Eastern Europe and their level of education and culture and what not, is higher. Their scientific achievement potential is greater. The only thing is the question that they haven't demonstrated that they are really interested in the kind of common defense that we are providing in effect for them. I would be glad to have you, for the record, if you want to, to any extent that you want to, expand on that question of the real desirability of our staying active in Europe as opposed to getting out, not for the purpose of turning the thing over to the Russians, by any means, or some other hostile culture, but just because this thing cannot succeed in the way we are doing it.

Mr. Chairman, I defer to you as to how long the Secretary should. be asked to stay here and sit and answer those questions. I am not going to ask any more.

The CHAIRMAN. I think that would be well. We have had the Secretary here almost 3 hours. He has been most helpful. I think we have built a good record. We certainly appreciate your patience and the very clear manner in which you have answered the many, many questions that have been propounded.

Mr. SCHLESINGER. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much.

The committee stands adjourned.

[Whereupon, at 12:40 p.m., the committee adjourned, subject to the call of the Chair.]

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The committee met, pursuant to notice, at 10:10 a.m., in room 4221, Dirksen Senate Office Building, Hon. Stuart Symington, presiding. Present: Senators Symington, Case and Javits.

Senator SYMINGTON. The hearing will come to order, please.

OPENING STATEMENT OF SENATOR SYMINGTON

Today we meet in the second of an extended series of educational, nonpartisan hearings designed to illuminate the various choices this Nation faces in developing a foreign policy for the next decade. The hearings were conceived by our Chairman, John Sparkman, who, unfortunately, is unable to be with us this morning.

Senator Sparkman expresses his apologies to the witnesses and has asked for a full report on today's session.

When he opened the first hearing in this series, Senator Sparkman clearly stated their purpose:

As the nation approaches its third century and passes beyond the post-World War II and Vietnam eras, it seems both appropriate and necessary for the American people to re-examine our country's foreign policy goals while also reaffirming the traditional values of our constitutional democracy. More specifically, we expect to study such fundamental problems as national security, the interdependence of nations, the increasing problem of world resources, the public's perception of foreign policy, and the mechanics and procedures of foreign policy formation. We hope in the course of this undertaking to discern something of the nation's concept of itself and of its proper role, obligations and aspirations in the world. The Committee hopes too, through these proceedings, to serve as both a forum and a catalyst-a forum for the study of foreign policy options and a catalyst for the encouragement of probing foreign policy discussions across the nation.

In the next month we expect to hear from current and past secretaries of State and Defense, representatives of business, finance, labor and the farming community. Next year we will hear the views of other distinguished individuals, representing a wide spectrum of American society.

Today's panel of experts, an extremely prestigious group, consists of three Cabinet secretaries intimately involved in the day-to-day interrelationships between nations. We are most interested in hearing their views on the general values and goals that should guide our

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foreign policy and more specifically to discuss the various options available to us as the use of resources becomes more and more important in an ever shrinking world.

Each witness will make a short statement, with Secretary of the Treasury William Simon leading off, followed by Secretary of Commerce Rogers C. B. Morton and then by Secretary of Agriculture Earl Butz.

Secretary Simon has to catch a plane for the west coast so we will take him first, then we will proceed with the other witnesses.

I might add that if you have a prepared statement we would appreciate your reading it.

STATEMENT OF HON. WILLIAM E. SIMON, SECRETARY OF THE TREASURY

Mr. SIMON. Thank you, Mr. Chairman.

You have requested, Mr. Chairman, that these hearings cover the broad range of challenges likely to be encountered in the conduct of U.S. foreign policy during the remaining years of this decade and into the 1980's. I welcome this opportunity to step back for awhile from the day-to-day pressures, and to join with this committee in a longer run look at our international relations. The United States faces serious challenges in foreign policy, including inextricably related challenges in the area of international economic policy, to which I will address my attention today.

The abrupt economic changes of the past several years give us all grounds for caution in stating what the challenges of the next decade will be. Nevertheless, I believe this is a useful-indeed necessaryexercise, in order that some future problems may be anticipated and that we may be placed somewhat less in the position of reacting to crisis events.

U.S. INTERNATIONAL ECONOMIC POLICY

The United States must have, and does have, an international economic policy. No nation is more intimately involved in shaping a cooperative international economic order. But we must not confuse policy with technical arrangements and procedural mechanisms which are only the instruments of policy. The core of our international economic policy is dedication to certain fundamental principles, the most important of which is our commitment to a liberal, cooperative and open order for world trade and investment. Let me further preface my remarks by reminding you of those principles:

To support the liberalization of world trade and investment; to avoid beggar-thy-neighbor policies; to maintain a strong U.S. economy and a sound U.S. dollar; this is a prerequisite; to assist the developing world to grow and become economically self-sufficient; to respond promptly and effectively to structural changes in the world economy, such as the changed energy balance; to participate responsibly with other nations in ensuring that international economic arrangements evolve to meet changing conditions.

Following these principles, the United States has worked with other nations to develop viable and realistic solutions to the very serious problems we face. There has not been a great sounding of trumpets,

but there has been quiet, meaningful progress. And it is by adherence to the principles which have served us so well that we should approach the major economic challenges that lie ahead.

MAJOR FUTURE ECONOMIC CHANGES

Broadly speaking, I see them as threefold:

To define and follow a path of durable non-inflationary growth for the world economy; to maximize the benefits to be derived from the world's natural resources; and to find effective means of working with developing nations in support of their development aspirations.

NON-INFLATIONARY GROWTH

The most enduring challenge to the free world economy is to find and follow the path toward sustainable noninflationary growth. The greatest responsibility of the United States to a healthy world economy is to restore sound economic policies at home to promote noninflationary growth and to ensure durable prosperity. In meeting this challenge, we not only provide an environment in which the aspirations of our own people can be fulfilled equitably, but we will enable the U.S. economy to provide a sound foundation for economic progress and stability in other countries.

As we each develop our own policies and programs, we must keep in mind that we live in an interdependent world, where the actions of each country bears upon the welfare of others. It is of particular importance in such a world that we continue to progress toward a more open and liberal world economy. Continued movement toward greater reduction of barriers to trade and investment offers not only the prospect that international transactions will serve as an engine of growth but also assistance in dealing with inflation, for a more efficient world economy will be a less inflationary one. It will not be enough merely to resist protectionist pressures at a time of economic stress; we must also push ahead with our efforts to liberalize existing restrictions. In this connection, the multilateral trade negotiations are of particular importance, both symbolically and practically.

The stance of the United States in this area is crucial. This country stands as an outspoken and vigorous advocate of a free and open international trading community, and our voice carries a special weight. Whether we continue to demonstrate leadership will affect not only our own prosperity but even more importantly the shape of the world in which we live.

We need also to learn better how to live in an interdependent world-how to balance economic interdependence and national independence. All nations are linked together economically. When our policies are mutually supportive we are all much better off. When they are mutually incompatible we all suffer. Yet we are not ready for one world politically and we may never be. We wish to retain our sovereignty. For example, although monetary policy in the United States affects the economies of the European countries, and vice versa, neither they nor we can allow our domestic monetary policies to be determined by the other.

Recognition of the interdependence of nations, and of the problems that are faced in common, has resulted in the development of an

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