All in all, it was a memorable evening.
• • •
Although there were a few problems at the economic summits, they were, by and large, productive forums for frank discussions of economic issues, which in today’s world extend more and more across international boundaries.
One issue that always came up was trade protectionism.
The principles underlying my support of free and fair trade are pretty simple: The operation of the free market is based on the concept that people make a product or produce a service which they hope other people will want to buy. Then, in millions of separate decisions, consumers choose which products and services they want to buy, when they are going to buy them, and how much they are willing to pay for them. Free competition and the law of supply and demand determine the prices and the winners and the losers in the competition. If customers stop buying an enterprise’s product because it doesn’t match the standards of another product, it’s up to that enterprise to improve the product or it will lose its ability to compete.
If consumers in one country are going to be able to buy goods produced in another country, their nation must have income generated by the sale of goods and services abroad. We can’t say to them, “We want to sell you something that we make, but don’t send us your products.”
For the free market to work, everyone has to compete on an equal footing. That way, prices and demand go up or down based on the free choices of people; there are winners and losers under the system of free competition, but consumers are the ultimate benefactors. Free competition produces better products and lower prices. However, when governments fix or control the price, impose quotas, subsidize manufacturers or farmers, or otherwise intervene in the free market with artificial restrictions, it isn’t free and it won’t work as it is supposed to work.
At all eight of the economic summits I attended, I tried to preach the virtues of free trade. In principle, the other leaders expressed a similar view, and denounced the trade barriers of other nations. But the plain truth was that all of us were protectionist to some extent.
I’ve mentioned how most countries (including ours) subsidized farmers, resulting in production of more grain and certain other farm commodities than the market can absorb, often depressing export prices to less than the cost of production. Every country (including ours) imposes barriers to free trade that are intended to protect or subsidize particular industries, usually because of domestic political pressure from groups that have a vested interest in limiting competition. Barriers are also sometimes imposed to retaliate against the protectionism of another nation.
When I came to the White House in 1981, I had hopes of making international trade freer and fairer. We made substantial headway: We concluded a bilateral trade agreement with Canada, our largest trading partner, that created the largest open market in the world. We reduced barriers restricting trade with Israel and Mexico and, to a limited extent, with several other countries. In 1986, we and our major trading partners opened a historic round of multinational trade negotiations under the General Agreement on Tariffs and Trade (GATT) aimed at virtually eliminating agricultural subsidies worldwide over a ten-year period (it would have been impossible to move faster without pulling the rug out from under farmers and industries whose livelihoods were geared to existing protectionism).
At each economic summit, I could feel the mood shift more strongly in favor of free trade, although we all realized that as a practical matter there were limits to the pace with which we could disturb the status quo. Even with Japan, with whom we have the greatest imbalance of trade and have had perhaps the most difficult trading relations, we made limited progress: Following Japan’s 1981 voluntary cutback of car exports, Prime Minister Nakasone stuck out his political neck to fight for a reduction of barriers to some of our exports, and Japanese manufacturers started building some of their cars in this country.
While I was president, we retaliated against a number of countries, including some of our allies, that imposed trade barriers to our products. But retaliation isn’t a solution to the problems of protectionism; it only perpetuates it. Many countries, including Japan, continue to impose barriers that give them an unfair advantage in international trade, and until they become more willing to compete on a level playing field, they can expect protectionist sentiment to grow in this country.
The widening of our international trade deficit during the 1980s was to a large extent a by-product of our country’s strong economic recovery. When our economy started to take off at the end of 1982, it expanded much faster than those of our major trading partners; the dollar rose in value, imports became a bargain for Americans, and some American products and services were priced out of foreign markets. The result: a widening trade gap that caused difficult times for many of our manufacturers who relied on exports for a major part of their profits.
Once again, I think this was a situation in which hard times had a good result: Our difficulties accelerated the modernization and restructuring of our industrial base and in the end helped make America more productive and more competitive. After several years of decline, our exports began to surge in 1986, and by 1989 the trade gap had fallen to the lowest level in five years. Our exports continued to surge in 1990; the gap grew narrower, and our exporters more prosperous.
It’s true that we now have tougher competitors overseas than we used to have, but America is tougher, too. We’ve proved that we can respond to competition, as we always have. As a nation we have always thrived on competition, and we always will.
Throughout the eight years of my presidency, no alliance we had was stronger than the one between the United States and the United Kingdom. Not only did Margaret Thatcher and I become personal friends and share a similar philosophy about government; the alliance was strengthened by the long special relationship between our countries born of shared democratic values, common Anglo-Saxon roots, a common language, and a friendship deepened and mellowed by fighting two world wars side by side. The depth of this special relationship made it impossible for us to remain neutral during Britain’s war with Argentina over the Falkland Islands in 1982, although it was a conflict in which I had to walk a fine line.
Argentine marines wearing civilian clothes landed on South Georgia Island, a British possession in the South Atlantic about 600 miles east of the Falklands, in late March 1982. At about the same time, our intelligence indicated, Argentina was preparing to invade the Falklands, an archipelago of two hundred or so islands located 250 miles off the coast of Argentina. The islands had been under British rule for nearly a century and a half.
After the landing on South Georgia Island, Margaret Thatcher called me and said that Britain would never submit to a takeover of one of its crown colonies. She asked me to telephone Leopoldo Galtieri, president of the military junta that ruled Argentina, to urge him not to proceed with the invasion and to say that Britain would use whatever force was necessary to keep her colony.
I spoke to Galtieri for about forty minutes, but couldn’t budge him: He claimed that the Falklands (which he called the Malvinas), by reasons of history, culture, and proximity, rightfully belonged to Argentina, not to a European colonial power, and that Argentina’s national honor was at stake in establishing sovereignty over them.
As we spoke, Argentina’s invasion preparations were already under way. The next morning, about one thousand Argentinean troops landed on the Falklands, whose total population was less than two thousand people, most of them of British ancestry. Within a few days, a British Royal Navy armada had steamed toward the Falklands and both sides asked for our help should the dispute come to war.
The leaders of Argentina’s military junta were trying to seize the remote islands to save their government. Their domestic political position was precarious because of mounting economic troubles and rumors of grave human-rights abuses in Argentina. Galtieri thought we would side with Argentina because we were neighbors in the Americas and because we had requested the
junta’s help in fighting Communism in the hemisphere. It was true that I had placed a high priority on improving relations with our Latin neighbors, and Argentina was one of the countries where we had been working hardest to bring about democratic reforms. But the junta misjudged not only Margaret Thatcher’s will but the strength of our ties to England and our opposition to armed aggression wherever it occurred, even on the obscure shores of a few rocky islands in the South Atlantic.
Despite some resistance from Jeane Kirkpatrick, our UN representative, who disagreed with our position, we let the junta know privately that, while we would provide military help to neither adversary, our sympathies were on the British side. We were staunch allies of the United Kingdom and supported its right to defend its colony. We also assured Margaret Thatcher that we were fully behind Britain. Publicly, however, I decided it was wisest to mute our reaction while extending the good offices of the United States to see if we could help settle the dispute between mutual friends.
With this in mind, I asked Al Haig to try to mediate the dispute and avert an armed clash. He shuttled between Washington, London, and Buenos Aires for most of the next three weeks, making a valiant effort to avoid a war. Nevertheless, hostilities erupted on the first of May. I think Al had been caught between an immovable object and an irresistible force: Splintered badly and trying to whip up a jingoistic fervor to increase its own sagging popularity, the junta rejected any settlement that stopped short of unquestioned Argentinean sovereignty over the Falklands; Margaret Thatcher was willing to make limited concessions to avoid bloodshed, but was adamant in her determination to defend British interests.
As the Royal Navy sailed toward the Falklands, we learned that Soviet ships were trailing the British vessels and providing intelligence information about the fleet to Argentina via Cuba. We also learned that the Soviets offered to supply low-cost arms to Argentina if war broke out—an offer which, to its credit (and with encouragement from us), the junta refused.
Despite reports to the contrary in The Washington Post and elsewhere, we maintained a genuine as well as an official neutrality during this period. Although London utilized one of our military satellites to communicate with its fleet as it headed for the Falk-lands, this was done under an agreement that had been in effect long before the crisis. We provided no other military assistance to the British. However, once fighting started, after the Argentineans had repeatedly rejected reasonable offers of a settlement, we declared our full support of Britain and provided her with whatever aid we could.
What had been a war of nerves and a battle of words quickly became very bloody: Britain and Argentina each lost warships and planes in the war and, between them, almost one thousand lives.
A few days after hostilities started, the president of a Latin American country told me that he had received a tip from his ambassador in Buenos Aires that the British were preparing to attack military bases on the mainland of Argentina. This would have substantially escalated the level of combat. Our intelligence community confirmed that preparations for such attacks were under way. I called Margaret Thatcher to say that, while we fully supported Britain’s effort to take back the Falklands, we thought it would be dangerous to move the war onto the mainland of South America. Margaret heard me out, but, demonstrating the iron will for which she is famous, she stood firm. I couldn’t persuade her to make a commitment not to invade, and for several days we waited for a nighttime attack by British planes on the mainland—one that never came.
In late May, I called Margaret again, this time to suggest a possible settlement that stopped short of Britain scoring a complete victory over Argentina. A total victory was certain to topple Argentina’s government, and some of our people believed that this might lead to violence and chaos that would be exploited by leftist guerrillas. But she told me too many British lives had already been lost for Britain to withdraw without total victory, and she convinced me. I understood what she meant.
Before long, British troops reclaimed the Falklands from the over-matched Argentinean forces. President Galtieri was ousted as head of the junta, and the following year democracy came to Argentina with the election of Raúl Alfonsín as president.
Margaret Thatcher, I think, had no choice but to stand up to the generals who cynically squandered the lives of young Argentineans solely to prolong the life of a corrupt and iron-fisted totalitarian government. She did so, I believe, not because, as was speculated in Britain, her government might fall if she did not, but because she believed absolutely in the moral rightness of what she was doing and in her nation’s obligation to guarantee the handful of people living in the Falklands the right of self-determination.
After I accepted Al Haig’s resignation as secretary of state a few weeks later, he privately blamed it on his inability to mediate a settlement to end the Falklands crisis and avert war. But in truth I thought he did a good job under difficult conditions. The reasons I accepted his resignation went deeper than that.
As I’ve said, I discovered only a few months into the administration that Al didn’t want anyone other than himself, me included, to influence foreign policy while he was secretary of state. He was never shy about asserting this claim. After a briefing on one foreign policy issue during the spring of 1982, I wrote in my diary, “Al Haig made great good sense on this entire matter. It’s amazing how sound he can be on complex international matters but how utterly paranoid with regard to the people he must work with.”
I first met Al Haig in the 1970s when he was commander of NATO, and I was greatly struck with him at that time. He was highly respected as the military leader of the Atlantic alliance, and that was why he was my first choice as secretary of state. But the Al Haig who was my secretary of state wasn’t the same Al Haig I met when he was at NATO. He was effective in getting our new policy of realism and peace through strength off the ground, but we sometimes disagreed on other things. He never said as much to me, but others told me he had shocked some congressmen by giving them the impression that if it were up to him, he’d deal with some of our problems in Central America and Cuba with a bombing run or an invasion. He and I also differed about Taiwan: I regarded Taiwan as a loyal, democratic, longtime ally to whom we owed unqualified support. Haig and others at the State Department were so eager to improve relations with the People’s Republic of China that they pressed me to back away from this pledge of support. I felt we had an obligation to the people of Taiwan, and no one was going to keep us from meeting it.
During that first year, Haig threatened several times to quit, but I talked him out of it. In June of 1982, as the Falklands crisis was coming to an end, he issued the same threat to senior members of the White House staff, claiming they were invading his turf. When he came to the Oval Office the next day, I was prepared to accept his resignation, but he didn’t resign; instead, he launched into a bitter attack on the top staff and gave me a bill of particulars listing his complaints, which he asked me to correct. In fact, a few of his grievances were legitimate: One or more people in the White House were trying to do him in with malicious leaks to the press. Still, the jealousies and turf battles had gone too far. Two days later, apparently after he had decided I wasn’t going to respond to his demands, he came to my office again, and this time submitted his resignation. I think he was hoping I would not accept it. But when I did, he didn’t seem surprised. I had asked the staff to sound out George Shultz about becoming secretary of state; I called him and he accepted.
“This has been a heavy load,” I wrote in my diary June 25.
[Went] Up to Camp David where we were in time to see Al read his letter of resignation on TV. I’m told it was his fourth rewrite. Apparently his first was pretty strong, then he thought better of it. I must say it was okay, he gave only one reason and did say there was a disagreement on foreign policy. Actually, the only disagreement was over whether I made policy or the Secretary of State did.
Several years after the Falklands war, we had to face another crisis involvi
ng an ally.
In September 1984, Cardinal Jaime Sin, the Catholic prelate in Manila, came to Washington and told me that many Filipino people believed Marcos was responsible for the murder of his political rival, Benigno Aquino. He said there was growing anti-Marcos sentiment among the people that, if unchecked, would fuel the cause of Communist rebels in the Philippines. The cardinal said that he believed Marcos had to go, and I think he was seeking American support for those in Manila who were trying to oust him. I was surprised at the intensity of his remarks but made no commitment.
The future of the Philippines was of great importance to the United States. Our huge military stations there, Clark Air Force Base and the Subic Bay naval base, were among our largest in the world and the anchor of our defense in the western Pacific; and we had had no stronger ally anywhere than Marcos. The February following Cardinal Sin’s visit, senior U.S. diplomats in Manila reported that Marcos had developed a serious kidney ailment and was putting in less than two hours a day of work; his wife, Imelda, they said, was keeping people from her husband while making important presidential decisions herself. But they agreed that Marcos still represented our best counterforce to the Communist rebels and that we should maintain our support for him.
Later that year, I began to receive reports from our ambassador in Manila, Stephen Bosworth, that the Communist insurgents in the Philippines were continuing to make political gains and that Marcos was underestimating the effect of his policies on the Filipino people. I asked Senator Paul Laxalt to go to Manila to investigate the reports. He confirmed that substantial public outrage was building against Marcos—the force that later came to be known as “people power.” Paul persuaded Marcos to call a presidential election the following February in a gesture to prove to his people—and the world—that he was not a dictator. Corazon Aquino, the widow of Marcos’s former rival, then entered the race against Marcos. The question on everybody’s mind then became: Would Marcos permit a free and fair election?
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