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CONFIDENTIAL RECORD OF THE P R I M E M I N I S T E R ' S -GISCARD D ' E S T A I N G

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WITH PRESIDENT

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Following up her reference to energy, the Prime Minister

s a i d that t h i s was an issue on which there had been a great deal

of a n a l y s i s but too l i t t l e work on possible s o l u t i o n s ; a great

deal of thought had been devoted to objectives so f a r as

r e l a t i o n s between the consumer and the producer countries

were concerned but very l i t t l e to the methods by which these

could be achieved. The Prime Minister s a i d that i t had been

her p a r t i c u l a r wish to v i s i t a French nuclear plant during her

b r i e f v i s i t because France had been the f i r s t European country

to take fundamental decisions on energy policy, decisions which

would stand her in very good stead in the future.

President Giscard s a i d that France and the United Kingdom had

He would l i k e to speak very

a long history of partnership. frankly about recent developments in t h e i r r e l a t i o n s . With

Jim Callaghan, President Giscard s a i d , he had enjoyed a good and

He had t r i e d to b u i l d on to t h i s a

easy personal r e l a t i o n s h i p . good working r e l a t i o n s h i p but t h i s had not r e a l l y been p o s s i b l e

since the l a s t B r i t i s h Government had shown no i n t e r e s t in

j o i n t action in Europe nor any f a i t h in the European Community.

They had been i n t e r e s t e d only in u n i l a t e r a l advantage. This

had been the experience not only of France but of the other

governments in the Community, even those who might have sympathised,

because of t h e i r S o c i a l i s t b e l i e f s , with a Labour Government.

The r e s u l t had been the formation of a kind of front from which

the UK had been excluded. Despite t h e i r history as a d v e r s a r i e s ,

France and the FRG had formed the habit of working very c l o s e l y

together. President Giscard s a i d that the Germans were easy

people to work with: they were constructive, showed good f a i t h

and kept t h e i r promises. There had been no intention on the

part of France or Germany to exclude Great B r i t a i n from t h e i r

d e l i b e r a t i o n s ; indeed, the FRG had t r i e d very hard to bring

Britain in. But, following a s e r i e s of disappointments, i t

had proved impossible to do t h i s .

President Giscard went on to say that the larger membership

of the Community, soon to grow larger s t i l l , introduced d i f f i c u l t i e s

and complications into i t s work. The smaller Community members

were i n c l i n e d to resent the fact that some decisions were,

i n e v i t a b l y , imposed upon them. The larger members did t h e i r

best to take account of the legitimate pride and i n t e r e s t s of

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the smaller countries: but the fact was that important goals

could only be achieved by those countries which had the means

to do so. President Giscard s a i d that he hoped that the United

Kingdom would now be a more active partner in the Community.

Her contribution was badly needed; she had, for example, a

much wider i n t e r n a t i o n a l experience than the FRG.

The Prime Minister said that there was a very r e a l determination

on the part of the new B r i t i s h Government to play t h e i r f u l l part

in Europe. So f a r as the Anglo-French b i l a t e r a l r e l a t i o n s h i p

was concerned, there were things in common between France and

B r i t a i n which did not e x i s t as between B r i t a i n and the FRG.

This was p a r t i c u l a r l y true in some defence matters, where the

d i v i s i o n of Germany created a d i f f e r e n t dimension in the German

approach. The Prime Minister s a i d that i t was her s p e c i a l wish

that b i l a t e r a l r e l a t i o n s between France and the UK should go

w e l l , not j u s t at the time of major meetings but for twelve

months of the year. President Giscard said that h i s reading

of h i s t o r y and h i s t o r i c a l biography had impressed him with the

very s p e c i a l nature of the Anglo-French r e l a t i o n s h i p : there had

been competition between them for hundreds of years, interspersed

During the nineteenth century,

by close l i n k s and b i t t e r f i g h t s . the r e l a t i o n s h i p had been characterised by suspicion and i r r i t a t i o n .

I t was h i s personal b e l i e f that t h i s period was now over:

neither country was any longer competing with the other for

i n t e r n a t i o n a l supremacy, since the period of empire had come to

Both countries now faced s i m i l a r problems. Against

an end. t h i s background, i t should not be d i f f i c u l t to create an atmosphere

of partnership between France and B r i t a i n .

Commenting further on the B r i t i s h approach to the EEC,

President Giscard r e c a l l e d that the UK had joined the Community

l a t e and had then engaged in a s o - c a l l e d renegotiation; the

r e s u l t had seemed to be that the UK had never been at ease within

the Community. Having entered under s p e c i a l terms, there had

always been a f e e l i n g that the UK was pleading a s p e c i a l case.

/EEC Budget

EEC Budget

The Prime Minister told President Giscard that the present

structure of the Community budget presented the UK with a very

major problem: at the end of the t r a n s i t i o n a l period, the

UK would be making a net contribution of £1500 m i l l i o n .

The Government would l i k e to have some of t h i s money to pay for

domestic tax reductions. The Prime Minister s a i d that she hoped

very much that t h i s question could be given a place on the agenda

for the next meeting of the European Council at Strasbourg.

She had already asked the President of the Commission to e s t a b l i s h

The present s i t u a t i o n was a grave embarrassment to

the f a c t s . the Government's e f f o r t s to push the case for Europe in the UK;

i t was unjust and unreasonable. The UK c e r t a i n l y did not expect

the

to get out of the Community exactly what she put into i t ; Government a l s o expected to improve the UK's economic performance.

The budgetary s i t u a t i o n in 1980, however, would nevertheless be

A constructive discussion at Strasbourg,

acutely d i f f i c u l t . leading to s o l u t i o n s , would be a great help to the Government

i n putting the case for Europe to the B r i t i s h people. The

Prime Minister expressed the view that the problems of the CAP

and those of the Community budget could and should be kept

separate; there was also a c l e a r d i s t i n c t i o n between the CAP

The Prime Minister

as such and the way in which i t was financed. s a i d that, as a committed European, she did not wish t h i s one major

problem to dominate the UK's future discussions with her partners

any longer.

President Giscard said that he understood the Prime Minister's

view. He r e c a l l e d that, in the past, the UK had always supported

higher expenditure by the Community, while asking that she should

pay a smaller share of i t . I t was necessary to adjust in both

directions. The Community's budget was now f a r too l a v i s h ;

i t was absurd that money should be thrown away on a building of

110,000 sq.m. in Brussels. The French Government favoured a

tight budgetary policy for the Community. They also strongly

favoured the "own resources" system of c a l c u l a t i n g the contributions:

import duties paid in Rotterdam should not belong to the Dutch

but to European trade as a whole. France had agreed to a l l o c a t e

1% of VAT revenue to the Community budget but t h i s should be

sufficient.

U

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i i v L i t IS M L

Turning to the problem of the MCAs, President Giscard s a i d that France was opposed to them and believed that they could be quickly eliminated i f i t were not for the UK and I t a l 1 an ^os^^ioYiW^f 1979 was the l a s t year i n which some of the UK contribution would be refunded: the question was, should t h i s period be extended further? The Prime Minister said that t h i s would be one p o s s i b i l i t y She showed President Giscard the table of figures, from her b r i e f s , s e t t i n g out the UK net contribution i n 1980. President Giscard admitted that there was a problem. The Prime Minister pointed out that a 50% reduction i n the UK's net contribution would be the equivalent of a 2% reduction i n income tax. She went on to say that the MCAs had never been intended to operate as they now did: the UK could produce more food, p a r t i c u l a r l y butter and bacon, very competitively. President Giscard commented that the agreement reached i n Dublin on the c o r r e c t i v e mechanism lasted only u n t i l 1979 and the Prime Minister pointed out that, since i t required three years of balance of payments d e f i c i t , i t would not operate i n any case for the UK, because of North Sea o i l . The Prime Minister s a i d

that, although the Government hoped that the UK's GNP would grow,

i t was nevertheless wrong i n the meantime that, with only 151%

of the Community's GNP, the UK should account for 18% of the

Community's budget.

President Giscard told the Prime Minister that i f tne UK

wished to ask the European Council to include the problem of the

budget i n the agenda for Strasbourg, France would have no reason

to object although, for formal reasons, she would have to consult

the other members. He for h i s part would be prepared to

c i r c u l a t e appropriate proposals for the agenda and would suggest

to the Prime Minister an appropriate formulation on the budget.

He suggested that there should be, at Strasbourg, a general

discussion of the budget l a s t i n g for, say, half an hour, and that

the Council could then i n s t r u c t the President of the Commission

to e s t a b l i s h the f a c t s and analyse the s i t u a t i o n ; then, at t h e i r

next meeting inJDliblin, the Council could draw the necessary

conclusions. The Prime Minister commented that the f a c t s had

already been established: they could be l a i d before the

Strasbourg Council and the Commission could then be asked,

/not for

6

not for f a c t s , but for ideas on how the position could be

corrected. President Giscard s a i d that he could agree to t h i s .

The Council could conclude that a problem existed and ask the

Commission to suggest ways of correcting d i s t o r t i o n s i n the s i t u a t i o n .

I t would be necessary to work c l o s e l y with the Germans and to

have discussions with them behind the scenes.

CAP

President Giscard s a i d that France had earned a bad reputation

so f a r as the CAP was concerned and he wished to change i t .

France was the largest producer of a g r i c u l t u r a l products i n

the Community, although i n some areas such as meat and dairy

products she was not the most competitive. France wished to

compete on f a i r terms. The French Government would, he

repeated, be glad to see the MCAs eliminated but any such move

was blocked by the UK's attitude on the question of a p r i c e freeze.

I t was d i f f i c u l t for any Government to reduce the p r i c e s payable

to t h e i r farmers: Chancellor Schmidt had agreed to reduce the

MCAs provided that there was a nominal increase in p r i c e s at the

same time. An increase of 2%, for example, would reduce

p o s i t i v e MCAs to zero. I t would be possible for the UK to

share t h i s position while opposing any increase i n the p r i c e s

President Giscard s a i d he

of products which were i n surplus. hoped the B r i t i s h Government could reconsider t h e i r attitude on

t h i s matter. France, for her part, had no desire to increase

the surpluses s t i l l further and was, indeed, prepared to

contribute to t h e i r reduction. France was nevertheless

profoundly attached to the p r i n c i p l e of a single market i n

a g r i c u l t u r e and to the maintenance of a b a r r i e r around the

Community against the rest of the world. Although the proposal

was s t i l l c o n f i d e n t i a l and he did not wish the press to learn of

i t , the French Government was thinking of suggesting that a

system should be devised i n which those countries which were

responsible for creating the a g r i c u l t u r a l surpluses should also

be responsible for financing them.

/The

Prime Minister

The Prime Minister pointed out that the UK was quite capable

of engaging in f a i r competition but could not be expected to

compete against subsidised produce. She expected heavy competition

from France and Germany in manufactures, an area in which the

UK was h e r s e l f l e s s e f f i c i e n t , but the UK's e f f i c i e n c y in

a g r i c u l t u r e did not bring a f a i r reward. President Giscard

commented that the UK would encounter problems in endeavouring

to change the s i t u a t i o n - not from France, but from countries

such as the Netherlands, Denmark and Ireland. I f the UK were

to concentrate her e f f o r t s at reform on the problem of

a g r i c u l t u r a l surpluses, she would encounter no adverse reaction

from France; there would, however, be a French reaction i f the

concept of the single market for agriculture were to come under

attack. The organisation of the CAP and the method of financing

i t were d i f f e r e n t questions.

EMS

Turning to the EMS, the Prime Minister noted that the review

of the exchange rate system vould be taking place in three months'

time. The UK had, at present, a high exchange rate for s t e r l i n g ,

not because of the UK's economic performance but because of North

Sea o i l . The Government needed to keep the rate high for the

time being and t h i s would make i t d i f f i c u l t to enter the EMS

s t r a i g h t away. I t might, however, prove possible at the time

of the exchange rate review to swap some of the UK's reserves

for ECUs. In the longer term, the UK was keen to j o i n the

President Giscard

European Monetary System i f t h i s was f e a s i b l e . commented that i t was not necessary for the UK to reach a

f i n a l decision on j o i n i n g the EMS quickly. I t would, however,

be s i g n i f i c a n t i f the UK were to create the conditions for

j o i n i n g ; he recommended a progressive approach to entry, which

would be better than to attempt to move too f a s t .

/At

1215



LOftriDhmlAL At 1215 the Prime Minister and President Giscard were

joined by:

M. The Mr. M.

Raymond Barre

Foreign and Commonwealth Secretary

G. G. Walden

Robin

* * * * * *

Energy and the Tokyo Summit

President Giscard summarised the subjects which he and the

Prime Minister had already covered during t h e i r t e t e - a - t e t e

discussion and said that the Prime Minister had suggested that,

with Lord Carrington and M. Barre, they should discuss the forth­

coming Economic Summit in Tokyo and the problem of energy, before

moving on to wider i n t e r n a t i o n a l i s s u e s .

The Prime Minister said that energy was expected to be the

main item on the agenda of the Tokyo Summit. The problem was how

the leading energy users could persuade the leading energy producers

not to r a i s e t h e i r p r i c e s s t i l l further and thereby cause a world

recession. Western objectives were thus quite c l e a r but the methods

by which they might be achieved were very unclear. S p e c i f i c ideas

were needed. The problem was common to many Western countries,

although France had moved further along the road to a solution

than any other country in Europe, through her nuclear programme.

The UK, for her part, had found only a temporary solution in her

North Sea o i l . President Giscard asked how temporary a solution

t h i s was. The Prime Minister s a i d that i t would l a s t for 15 to

20 years. President Giscard commented that t h i s was a help.

The Prime Minister went on to say that the a l t e r n a t i v e s facing some

countries were e i t h e r to go a l l out for nuclear power, or, i f they

were unwilling to do t h i s , to accept a s i g n i f i c a n t reduction in

t h e i r standard of l i v i n g .

The Prime Minister said that she had never attended an Economic

Summit but she had studied t h e i r communiques c l o s e l y : they were

always the same. Meanwhile, the world's economic problems continued

/ and

so



CONHnFMTl&l

and so did the communiques. President Giscard agreed and s a i d

that, although discussions at Economic Summits had become academic,

the f i r s t such meeting, at Rambouillet, had produced useful r e s u l t s

in the form of a s t a b i l i s a t i o n of exchange r a t e s . Unfortunately,

however, p a r t i c i p a t i o n in the Summits had then been enlarged:

t h e i r communiques were now j u s t words. President Giscard agreed

with the Prime Minister that the next Economic Summit should con­

centrate on energy. He thought that i t should, despite everything,

be possible to achieve some useful r e s u l t s . He would l i k e to

suggest what these might be.

F i r s t l y , President Giscard said, the Summit could demonstrate

a r e a l determination on the part of the major energy users to

reduce t h e i r consumption. France, for her part, would lower

temperatures in public buildings and impose a c e i l i n g on the

amount of o i l consumed by power s t a t i o n s . These measures could

be discussed at the European Council meeting in Strasbourg.

Secondly, i t was a fact that the operation of the spot market

in o i l produced unacceptable r e s u l t s . The international o i l companies

should be asked to keep out of the spot market during, i n the

f i r s t instance, the month of June. Chancellor Schmidt, i n a recent

discussion with M. Barre, had agreed that t h i s measure should be

taken in order to produce a moderating effect on p r i c e s . I t was a

fact that every Gulf r u l e r had the l a t e s t spot market p r i c e on h i s

desk f i r s t thing every morning.

Thirdly, agreement should be reached on an annual approach

by the major users to the major producers i n order to a s s e s s

whether the savings planned by the users during the coming year,

as well as the production l e v e l s planned by the producers, would

be s u f f f i c i e n t and in phase with each other.

Fourthly, the Summit p a r t i c i p a n t s should discuss a programme

for e x p l o i t i n g a l t e r n a t i v e sources of energy. This was mainly

a problem for the Europeans, since the Americans and Canadians were

already making progress i n t h i s f i e l d . President Giscard added,

/ in

fCNHDENTIAL

in parentheses, that he had j u s t received a report from

M. Francois-Poncet, who was in Washington, to the e f f e c t that

press reports about the U.S. Administration's decision to sub­

s i d i s e o i l imports were too p e s s i m i s t i c : President Carter was

in fact working on the introduction of quite d r a s t i c conservation

measures, on a possible approach to the o i l producers and on steps

to s t a b i l i s e the spot market in o i l - p r e c i s e l y those measures

which he was himself advocating. President Giscard s a i d that he

thought that the American approach seemed quite constructive.

Lord Carrington commented that i t was e s s e n t i a l to formulate,

during the European Council meeting in Strasbourg, a European

approach to the Tokyo Summit. The Prime Minister said that, ever

since the Yom Kippur war, the West had managed to absorb s u b s t a n t i a l

increases in the p r i c e of o i l , to the extent that i t would soon

be economic to extract o i l from the t a r sands and shale - t h i s

would require a price of $40 per b a r r e l . A s i t u a t i o n had been

created a year ago in which the West had once again found i t s e l f

with a surplus of o i l but t h i s s i t u a t i o n would not be repeated

because of events in Iran.

Describing the French nuclear power programme, President

Giscard commented that an anti-nuclear demonstration in Loraine

on the previous day had a t t r a c t e d only 500 p a r t i c i p a n t s . France

was currently building ten new nuclear plants: he thought that

i f the Government continued to give a strong, c l e a r l i n e , there

would not be a great deal of public opposition. I t would be

helpful i f both France and the UK were to take a strong and

p o s i t i v e l i n e on nuclear power in Strasbourg. The Federal German

Government found i t s e l f in d i f f i c u l t i e s on nuclear power, l a r g e l y

because of the c o n s t i t u t i o n a l powers of the lander. Germany s t i l l

had no reprocessing plant.

President Giscard went on to say that he f u l l y shared the

Prime Minister's view that the objective should be to a r r i v e at

p r a c t i c a l conclusions, f i r s t in Strasbourg and subsequently in

Tokyo. The Prime Minister s a i d that the B r i t i s h Government was

at present pursuing a policy of requiring power s t a t i o n s in the

UK to s u b s t i t u t e coal for o i l : i f continued, however, t h i s p o l i c y

could a f f e c t the UK's capacity to build up coal stocks, which



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Rhodesian

CONFIDENTIAL

- 12

­

people as a whole. The Conservative Party had therefore sent

observers to assess the v a l i d i t y of the e l e c t i o n s held in Rhodesia

l a s t A p r i l : t h e i r report had shown that, in a l l the circumstances,

the e l e c t i o n s had been both free and f a i r . The l a s t remaining

pre-condition for Rhodesia's return to l e g a l i t y had, therefore,

been broadly s a t i s f i e d . The new Rhodesian constitution was not

perfect but t h i s was a matter for the people of the country.

Looked at from the standpoint of Rhodesia/Zimbabwe, however,

recognition by the UK alone would not amount to very much: what

the country needed was wide i n t e r n a t i o n a l recognition. The new

B r i t i s h Government had therefore decided to build on the recent

e l e c t i o n s and to send an Envoy to meet the Front Line Presidents,

and others, to see i f there was any f l e x i b i l i t y in t h e i r a t t i t u d e

to the recognition i s s u e . Progress would c l e a r l y not be easy but

there were some encouraging signs, including the fact that President

Nyerere seemed, at present, to be l e s s denunciatory of the i n t e r n a l

settlement than, for example, President Kaunda. When the B r i t i s h

Government emissary, Lord Harlech, returned from h i s mission i t would

be p o s s i b l e to make a better assessment of the p o s s i b i l i t y of

bringing Nkomo and Mugabe on the one hand, and Bishop Muzorewa on

the other, c l o s e r together. The timetable, however, was very t i g h t

given the forthcoming Commonwealth Heads of Government meeting in

Lusaka at the beginning of August.

The Prime Minister commented that most of the countries to be

represented in Lusaka could not claim to hold e l e c t i o n s on the

b a s i s of one man, one vote, with a choice between four d i f f e r e n t

p o l i t i c a l p a r t i e s . A more c r u c i a l deadline was, so f a r as the

United Kingdom was concerned, the fact that sanctions against

Rhodesia would lapse in November unless renewed by Parliament. There

was no prospect whatsoever of such a renewal. The Prime Minister

s a i d that she, for her part, was convinced that the t e s t of

a c c e p t a b i l i t y had been s a t i s f a c t o r i l y completed; t h i s was, a f t e r a l l ,

a matter for the people inside Rhodesia to decide. I t was now the

B r i t i s h Government's duty to restore Rhodesia to f u l l independence.

She had found both the United States and the FRG co-operative in their

attitude to t h i s objective.

/President Giscard

President Giscard said that he would be happy to see a more

a c t i v e B r i t i s h policy in A f r i c a . So f a r as South A f r i c a was

concerned, he agreed that sanctions must be avoided. The South

African regime was not, however, acceptable in terms of i t s

i n t e r n a l p o l i c i e s . Everything possible should be done to create

a more democratic approach in South A f r i c a . On Namibia,

President Giscard agreed with Lord Carrington that the plan of

the Five should not be abandoned: i t was a fact that South A f r i c a

Turning to Rhodesia,

had been deceived by the United Nations. President Giscard s a i d that he had never understood the p o l i c y

pursued by the United Kingdom in recent years. He had always

believed that a moderate African Government offered the r i g h t

solution and t h i s would not be achieved without a new commitment

to Rhodesia by the UK. What was required was a solution on the

Kenyan pattern. Continuing pressure from the Front Line Presidents

could only r e s u l t in the i n s t a l l a t i o n of a r a d i c a l regime in

Salisbury and a bloody exodus by the Whites. The a t t i t u d e of the

other African countries would, however, pose serious d i f f i c u l t i e s ;

they had formed a c o l l e c t i v e position and most of thern had l i n k s

with the g u e r r i l l a s . President Giscard commented that the Prime

Minister could face r e a l l y serious problems at the Lusaka meeting

with, for example, Nigeria. The Prime Minister agreed and s a i d

that Nigeria had already taken steps to deprive B r i t i s h firms of

contracts.

President Giscard went on to say that at the Francophone

African Summit meeting at K i g a l i which he had recently attended

he had found the position of many Heads of State and Government

to be moderate towards Rhodesia; they seemed to recognise the

importance of the e l e c t i o n s which had taken place. There was,

however, a problem over timing: the time was not yet r i g h t for

i n t e r n a t i o n a l recognition of the new Government of Zimbabwe/Rhodesia.

The prospects would be better i f Bishop Muzorewa's regime was seen

to adopt progressive i n t e r n a l measures. France, for her part,

would t r y to use her influence h e l p f u l l y : but the UK might be well

advised to move forward step by step.

/

rv

The Prime Minister

The Prime Minister said that the B r i t i s h Government would

c e r t a i n l y not recognise Bishop Muzorev/a's regime before the

Commonwealth Conference i n Lusaka. The c r i t i c a l time would be

between that Conference and the Parliamentary debate on sanctions

in November. Lord Carrington said that more would be known of the

American a t t i t u d e when President Carter made h i s determination

on the Case/Javits amendment: t h i s would probably be to the e f f e c t

that the settlement was not acceptable as i t stood but could be

made so. There was no r e a l d i s t i n c t i o n between the l i f t i n g of

sanctions, which were imposed by a mandatory UN r e s o l u t i o n , and

recognition of the new regime.

President Giscard repeated that the French Government would do

everything i t could to be helpful on t h i s issue. He pointed out

that the next meeting of the Organisation of African Unity would

take place before the Commonwealth meeting in Lusaka and that the

one could very w e l l have an e f f e c t on the other. The President of

L i b e r i a would be Chairman of the OAU Conference and i t would obviously

be u s e f u l i f the UK were to make contact with him. The best outcome

from the OAU meeting would be the appointment of a Committee to

review the s i t u a t i o n i n Rhodesia, thus postponing any immediate

judgement as to the new regime's l e g a l i t y . In that s i t u a t i o n ,

the UK's hands would s t i l l be free at the time of Lusaka. I f the

OAU Conference adopted a public position, t h i s could only be a negative

one. The Prime Minister agreed and said that the p r i z e f o r the

West i n a peaceful settlement i n Rhodesia would be enormous: a

prosperous Rhodesia would bring great benefit to the whole region.

Defence

The Prime Minister said that the B r i t i s h Government was being

pressed by President Carter to support S a l t I I . The Government

had some worries about i t but had concluded that the consequences of

f a i l u r e by the United States Congress to r a t i f y the Treaty would be

more serious than any shortcomings i n the Treaty i t s e l f . The UK

was concerned about the Soviet SS20 m i s s i l e , to which the Russians

could e a s i l y add a t h i r d stage. The B r i t i s h Government also faced

major decisions- on the replacement of i t s P o l a r i s deterrent and

would have to choose between a new m i s s i l e of that type or c r u i s e

m i s s i l e s . She understood that France would soon have i t s own

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would probably develop the c r u i s e m i s s i l e but without entering

p r i o r commitments on p a r i t y or equilibrium. When the Prime Minister

commented that the Soviet Union had developed a very s i g n i f i c a n t

lead i n medium-range m i s s i l e s , President Giscard s a i d that France

was ahead so f a r as submarine launched m i s s i l e s were concerned.

Lord Carrington said that the need to proceed with the

modernisation of Theatre Nuclear Forces i n p a r a l l e l with SALT I I I

created an added complication, along with domestic p o l i t i c a l

d i f f i c u l t i e s i n the Low Countries. I t was l i k e l y that Belgium,

the Netherlands, and the FRG would i n s i s t on a new s t r a t e g i c arms

l i m i t a t i o n conference as a pre-condition of TNF modernisation, perhaps

even i n advance of SALT I I I . So f a r , the NATO Council had decided

only that there must be a decision on TNF modernisation by the end

of 1979. President Giscard s a i d that i t would be useful to exchange

views on t h i s further. The French Government was at present studying

France's i n t e r e s t i n SALT I I I and i n the development of the French

deterrent a f t e r 1990. The main options under consideration were

c r u i s e m i s s i l e s and mobile launching systems. The necessary

s c i e n t i f i c data would be ready during 1980. President Giscard

went on to say that the French had never had a r e a l discussion of

these matters with the FRG, since they did not wish to imply a

commitment to German s e c u r i t y which would involve France's own

deterrent. I t was impossible not to discuss these problems with

the Germans but equally impossible to have a r e a l d i s c u s s i o n . The

Prime Minister said that she had discussed these matters with

Chancellor Schmidt.

Lord Carrington said that he had some understanding of the West

German view that they could not accept the deployment of medium­ range systems on German s o i l unless a t h i r d country, i n addition

to the UK, did so too. President Giscard said that he thought that

Belgium would probably accept medium-range systems i n the end,

perhaps for a limited period of time.

Defence Sales to China

President Giscard asked the Prime Minister whether the B r i t i s h

Government had reached a f i n a l decision on the s a l e of Harrier

a i r c r a f t to China. The Prime Minister said that the Government,

for t h e i r part, were ready to s e l l Harriers to the Chinese

/but

17 ­

but some problems had arisen during the commercial negotiations.

In response to the President's question, Lord Carrington s a i d that

the United Kingdom had i t in mind to s e l l something under one

hundred a i r c r a f t along with a licence to manufacture them in China.

President Giscard s a i d that the French Government had taken a

d i f f e r e n t decision since i t regarded the s a l e of arms to China as

a major b i l a t e r a l t e s t of the relations of any country with the

Soviet Union. The French Government was also a l i t t l e apprehensive

of the future a t t i t u d e s of the Chinese m i l i t a r y establishment.

No mood of expansionism was detectable yet, but would the s i t u a t i o n

l a s t ? In view of these factors France had decided to s e l l the

Chinese nothing more than anti-tank weapons.

Vietnamese

Refugees



The Prime Minister told President Giscard that UK merchant

ships i n the Far East were continuing to pick up large numbers of

Vietnamese refugees. There were now over 40,000 refugees in Hong

Kong and the UK had agreed to take another 1,000 from the"Sibonga".

The Government was now faced with the problem of 300 Chinese

children on a B r i t i s h ship off Taiwan whom the Taiwan Government

were refusing to take i n . President Giscard said that France had

already accepted 60,000 Vietnamese and they were coming in at the

rate of 500 a month. The whole problem was in essence one for the

United Nations but the UN was handling i t very i n e f f i c i e n t l y .

President Giscard s a i d that he had noted the Prime Minister's

message to Dr. Waldheim.

The discussion ended at 1310. .