Why Nobody Invests in Japan
Tokyo’s Failure to Welcome Foreign Capital Is Hobbling Its Economy
On June 25, 1982, halfway through the second year of President Reagan's term, the most effective Treasury Secretary of the 1970s (and now a regular golf partner of the present one) was brought in from the fairways to succeed Alexander Haig as Secretary of State. Seen from Europe, that event has the makings of being a watershed in this presidential term.
Until the President's switch of secretaries, the river of American foreign policy had seemed, often, to be divided into rivulets-and flowing uphill at that. The arrival of Mr. George Shultz, however, was to give an impression-which only the coming year or two will fully test-of some cohesion. It clearly contributed by December to the settlement of the pipeline dispute between America and its four largest European allies (if not yet of the East-West trade issues underlying it); and in the Middle East to the start of a possible peace process (if not yet of anything resembling peace). Judgment on the military and political relationship with Russia-the decisive element in any assessment of Mr. Reagan's foreign policy-has to remain in abeyance; but even here there were some signs by the end of 1982 of a less heady, less inconsistent attitude inside the Administration toward what needed to be done.
On the economic front, the change at State also happened to precede by only weeks the first public awareness of Mexico's financial catastrophe, which in turn has the makings, along with the troubles of Argentina, Brazil, Romania, Poland and others, of being the true decision point for the future of the world's economy. Since these twin events-a new man, a new crisis-there have been progressive signs that real and fully coordinated foreign policymaking might, almost for the first time since the Nixon-Ford years, take place in Washington.
At other times, under some other presidents, the story to be told after two years of office would be about how this particular Administration, after its first year of settling in, had started to give its particular answers to the choices facing it. For the first 17 months under Mr. Reagan, the picture was too confusing for that. Many of the challenges facing the Reagan Administration were not self-created. Many of its problems in coping with them were.
Few challenges facing an American president today are as tractable as they once were. U.S. allies in Europe and Japan have more relative power to compete with a battered American economy than they had. Yet America still decides while Europe complains. A central challenge for Governor Reagan, as for President Jimmy Carter, was therefore to handle growing American impatience with the economic penetration and diplomatic independence of Japan and Europe, while mitigating the reactive political confusion of the allies' behavior toward Russia which still so hampers America's liberty to act. Early public division within the Reagan Administration, combined with usual European disarray, prevented that challenge from being met, and by mid-1982 the NATO Alliance was embroiled in acrimonious dispute over the projected pipeline to bring gas from Siberia to Western Europe.
Mr. Reagan was elected, in part, to meet the growing military power and contain the regional expansionism of the Soviet Union. His frequently declared intent to respond firmly to any Soviet move-as Carter had not done-had one healthy effect: it helped to shock Russian policy, during Leonid Brezhnev's last two years, into immobility. The less healthy dangers were several. Two seasons of congressional approval for Mr. Reagan's massive defense programs contributed to long-term budget deficit projections which, in turn, helped raise the cost of money and deepen recession. At home this set defense spending up as a target for budget-cutting in 1983. Abroad it combined with the incaution of Administration language about nuclear strategy to alienate many in Europe from the sterner nuclear and East-West policies which Mr. Reagan (rightly) stood for.
Europe was already vulnerable to nuclear anxiety. The Alliance had committed itself in 1979 to deployment in 1983 of new American intermediate-range nuclear systems on European soil, to counteract the threat of Soviet SS-20 missiles-but at the same time to early and serious negotiations to reduce both sides' nuclear systems. The Reagan Administration's approach to this delicate twin-track arrangement was confused. Eventually it was to put forward sweeping reduction proposals in both theater and overall nuclear arms negotiations-but not before it had made such discordant and disturbing noises about nuclear strategy as to boost a European peace movement, already under way, and to stimulate in turn a companion nuclear freeze movement within the United States itself. Mr. Reagan's inability to orchestrate the reactions of his Administration during its first 17 months in office helped undermine what little nuclear consensus was left in the public opinion of the NATO Alliance.
Farther afield, the Administration's inherited electoral baggage in favor of Taiwan helped to loosen American control of the Kissingerian triangular relationship between Russia, China and America. Its early permissiveness toward Israel had helped permit, by June 1982, a dangerous moment in the Middle East. Its early pumping up of the significance of the threat to stability in Central America helped undermine its effectiveness there. Its attempt to avert war in the South Atlantic failed. And its general handling of economic relations between the First and Third Worlds (notably the cold shoulder shown to the International Monetary Fund and World Bank) made its late-1982 conversion on the road to Mexico City a welcome but belated and suspect one.
In short, the record by June 1982 was ragged-whether worse or better than what had gone before under President Carter hardly any longer mattered. In many ways America's antagonists in the world, Russian and other, were more restrained, if not exactly cowed, when confronted by the air of right-wing competition surrounding Mr. Reagan. But for America's allies that same hard-line competition, which had by mid-1982 led to the departure of Mr. Haig-the first postwar firing of an American secretary of state-caused a catharsis; and this stemmed from much more than the suitability, or unsuitability, of Mr. Haig himself.
It is not easy to exaggerate the harm done to the authority and balance of the Reagan Administration abroad by the faction-fighting of its first year and a half in office. Only one foreign policy row seemed to count in early-Reagan Washington-the battle between Defense and State and their respective allies in other quarters. Until the advent of Mr. Shultz, the noise caused by this battle drowned most of the policies the fight was allegedly about-and increasingly drew attention to the inadequacy of a President failing to exercise clear control and serving instead as an umpire between the two combatants, choosing now one, now another, of the proposals from each. Though Mr. Haig's tenure at State became the symbol of this, the President has to take responsibility for it. He appointed the men he then failed to control.
The White House usually commands foreign policy. From the outset of Mr. Reagan's term, however, it merely provided the third point in a triangle between the State and Defense Departments. When combined with his own concentration on domestic policy and on preserving his health, Mr. Reagan's White House structure could not control the principals and their rival warriors in the major departments. As National Security Adviser in the White House, Richard Allen was not able, or inclined, to pull either them or Administration policy together; even had he been so inclined, he might have lacked the authority, since, unlike his predecessors, he did not report directly to the President but to his inexpert Counselor, Mr. Edwin Meese. National Security Council meetings were adversary proceedings rather than carefully prepared reviews of policy going beyond an immediate spot decision.
When Mr. Reagan succeeded Mr. Carter, he arrived with a large apparent advantage. The eclectic Carter view, all policies to all countries, was gone, its own victim. Mr. Carter had too evidently straddled the middle, his four years in Washington a lost struggle to reconcile the nation's hard- and soft-boiled to each other; a lost struggle to square reality in Moscow (and reality in half a dozen countries of the Third World) with complex, well meaning (but frequently destabilizing) theories that could neither shape nor fend off reality.
Carter was a President of some intelligence but little wisdom. The Carter Administration was one of many intelligences but no coherence. President Reagan had, in his campaign, promised "to restore leadership to U.S. foreign policy by organizing it in a more coherent way." The odds seemed good that he would achieve it. For the "grandes lignes" of Reagan's foreign policy were, unlike Carter's, never in doubt: a restoration of military strength by strategic weaponry "matching what we know the Soviets to have," and by boosting American conventional ability to hold steady in different regions of the world at once. This was an Administration seemingly more agreed, at the time of its election, about its ultimate aims than any since Eisenhower's. And its basic approach was most clearly stated in Alexander Haig's confirmation statement of January 1981.
With America's allies not unhappy to see President Carter go at the outset of 1981, and its foes apprehensive at seeing Governor Reagan arrive, how was it, then, that so much ground had been lost by the start of 1982? Seen from Europe, three reasons can be advanced, each helping to explain the remarkable events that were to follow during the year.
First, the competition between the Secretaries of State and Defense was not ordinary-it quickly became intensely personal. The new Secretary of State had from the start seized on the notion, for which there was wide support including that of the President himself, that more policymaking power should go to State-that the Kissinger and Brzezinski days of White House policy manipulation, back channels and the rest, should be put into the past. But by overplaying the hand he lost it, and aroused distrust within the Reagan circle which was rarely to subside. For Mr. Haig, despite all his Washington and NATO experience, was abrasive; he had become a disturbingly, almost physically, restless man by the time he was hired by a quiet-mannered, at times almost serene, President to whom he was a stranger. Mr. Weinberger, by contrast, though inexperienced in foreign policy, had long been close to Mr. Reagan, was at ease with him-and was as assertive as Mr. Haig in the bureaucracy but able to work from within in a much smoother, quieter way. Close associates of both reported at an early stage that there was an almost animal dislike between the two.
Then it was the stranger, Mr. Haig, who went to State, the department traditionally inclined to diplomacy, to good relations with allies and manageable ones with the adversary-whereas the old friend Mr. Weinberger went to Defense, the department dedicated to security and to the overriding priority of his and the President's planned military buildup. Thus, on arms control negotiations State, and Haig, were bound-even putting personality aside-to emphasize the practical need to get started on such negotiations, while some of the Pentagon team, and its "present-danger" allies in the Arms Control and Disarmament Agency, were near to believing that arms control was at best illusory and at worst dangerous. As for America's unreliable allies, unless they could be braced up far beyond anything that looked likely from Chancellor Helmut Schmidt in Bonn or a do-nothing government in Tokyo, the United States, in Defense's eyes, should be prepared to act unilaterally of them.
But, third and most fundamental, the depth and intensity of the differences that had developed in 1981 had their origin in deeper nightmares. The loss of America's domestic consensus over Vietnam had made it common practice, and respectable, on the Left to question Administration policy to the point of destruction. Then, in the mid-1970s, America's Right caught the same disease when deep divisions emerged over the real meaning of "détente" with the Soviet Union: those were the years, during and after Watergate, when Moscow seemed to regard its agreements with America as a license to expand its military power and to intervene in the Third World. Many of those who came with Mr. Reagan into the Defense Department and elsewhere had been at odds with the whole course of policy in the preceding decade. Or thought they had. Just as elements in the Carter Administration were McGovernite and to the Left of the postwar mainstream, so this vocal component of the Reagan group had formed a hard-line world view to the Right of the mainstream of policy going back 30 years.
Like the extreme liberals in the Carter Administration, the Reagan true believers were just not given to accepting the compromise that usually attends decision-making. Many had developed habits (some learned at the feet of Henry Kissinger and James Schlesinger) of sniping, planting press stories with favored columnists, and bureaucratic preemption-and a whole ethos such that defeating a wrong course at all costs often seemed more important than developing a foreign policy to which foreigners could respond. This view and ethos were also strong on Capitol Hill, with unrelenting pressure from Senator Jesse Helms and other extreme conservatives to block and control key appointments in State. "Weak-kneed" political appointees and professionals in the State Department-to this day, as in Nixon's, suspected of housing a liberal consensus-were the common initial target, but in the end it was Haig himself. And Haig and State fought back with some of the same tactics.
The seeming obligation to argue over and even to destroy policy rather than to conclude it made American unreliability a way of life for both its allies and adversaries. Robust, often public, dispute over policy-making in Washington-yes, that predated both détente and Vietnam. The respectability of sinking policy in order to uphold one's own disagreement at any cost to the nation-that, the best part of a decade since the Vietnam War ended, is what still seems novel and destructive about Washington life.
It hobbles effective policy. It ensures not merely that the views of both sides in any argument inside the United States are ignored or discounted by friends and enemies abroad. It ensures that painfully hammered out compromises are frequently ignored or discounted in Washington too. Defeated insider rivals simply join forces with those who agree with them in public opinion, in the media and in the heavily bureaucratized and special-interested Congress. Since the argument over policy never ends, and since no commitment by America cannot subsequently be undone, no policy pronouncement from even America's President himself can these days be regarded as final. The more final and stark the President's words are when he announces a "policy," the more provisional they may in fact have to be taken to be.
In the Reagan Administration, Mr. Haig and his colleagues were themselves hard-liners who shared the essentials of the true believers' aims. But as they wrestled with specific problems they almost inevitably emerged as "pragmatists" ranged against the true believers, or "ideologues."
So the virus of the mid-1970s surfaced again in the form of viciously conducted disputes, often over policies where the gap in substance was not huge, between the leaders of the State and Defense Departments. There was, as time went by, to be growing disagreement between the two Secretaries over policy toward both El Salvador and the Middle East. But these bits of turf essentially belonged to State, while Defense took charge of the military program in such a way that State could not control its foreign-policy implications. On China and Latin America the differences within the Administration were more between Haig, on the one hand, and the White House (over Taiwan) and Ambassador Jeane Kirkpatrick at the United Nations respectively, than between State and Defense.
It was on the European front that the State-Defense split and rivalry did greatest damage. Even where the two Secretaries agreed-as for example over a good deal of nuclear strategy, and such issues as the neutron bomb-the way Defense talked about them appalled State, while Haig and his colleagues responded with their own confusing statements, such as Haig's reference in the fall of 1981 to the "demonstration" use of nuclear weapons in Europe and his May 1982 pronouncement that SALT II was "dead"-shortly before the President himself stated that America would abide by its central provisions so long as Russia did.
Here lay the genuine tragedy of the first working half of Mr. Reagan's term. A conservative foreign and defense policy team did not merely surrender in litigation the capital of consensus, such as it was, that underwrote its arrival in Washington. From the start, such was the ferocity of the fights between Mr. Reagan's Secretaries of State and Defense that their public statements, each intended to outpoint and trump the other, succeeded only in alienating opinion, first in Europe and then in the United States, from the aims of both of them. Those lost from Mr. Reagan's cause included key would-be supporters, as well as wider opinion. The lack of a sophisticated conservative defense strategy (in the annual defense posture statements, for instance) lost Mr. Weinberger the sympathy of influential defense specialists in the Senate such as Senators Sam Nunn and Ernest Hollings, while disappointing international security analysts in Europe.
Worse than that, because Mr. Haig's and Mr. Weinberger's competition took place in the public language of cliché necessary to political competition, and because the debate between them had to convince, among others, a President serving his novitiate, it bypassed real issues they-and their horror-struck European audience-should have been arguing about. Both Secretaries agreed (and General Haig had good cause to know from his days as Supreme Allied Commander in Brussels) that the state of conventional readiness of American and other NATO forces was in need of repair. But the cacophony from Washington drowned any hope of facing up to this issue, or of presenting to the European public the rational case that would have been possible for the new nuclear missile deployments as part of a modernized and coherent deterrent strategy. Europe, rarely known for the steadiness of its purpose, was brought to the point where it was a ready target for a "peace" offensive from Moscow.
By the end of 1981 Helmut Schmidt was letting it be known that his impatience with President Reagan was tempered only by his willingness to be patient with his old acquaintance, Alexander Haig. In Britain even Lord Carrington, who had had to put up with leaked private invective against his Middle East views from the lips of the Secretary of State, would in every private and public council go out of his way to boost "old Al"-and, like Schmidt, mean it.
In this writer's view, then and now, Schmidt, Carrington and the rest were mistaken, on the eve of 1982, to be reposing so much desperate hope in the Secretary of State. Precisely because it was Mr. Haig who represented the "European view" in Washington on several critical issues (the Middle East a large exception), the "European view" did not flourish in the White House. Because the President was himself at heart an "ideologue," because of Mr. Haig's restless ambition and because in Mr. Haig's presence the President absolutely never "felt comfortable" (a key Reagan phrase), Europe's Secretary of State in Washington had, by the end of 1981, become adept at getting good policies a bad name.
Paradoxically, 1982 began with Mr. Haig fully in charge of his post in the Cabinet, if not of policy. It had been the State Department and its ambassadors which banged away at the President to disarm Europe's rampant disarmers with a clear disarmament proposal; and, once the Defense Department preferences for a "zero option" proposal had won the day, it was to be Mr. Haig's toughest bureauwarrior, Mr. Lawrence Eagleburger, who drafted much of what Mr. Reagan was to say on November 18, 1981.
By early 1982 the temporary magic of the "zero option" proposal had allayed some European alarm. Moreover, imposition of martial law in Poland in December 1981 was by January persuading Europe that its best hope of a careful American response lay, once again, in the hands of the Secretary of State. The Europeans were right in their assessment of Mr. Haig's view, wrong about his ability to deliver it. For all the Secretary's comparative enlightenment in European eyes, what Europeans nevertheless needed was the support-or at least the attention-of Mr. Reagan himself. To have on your side a Secretary of State basically not trusted by his President was little help-indeed it was now starting to become counterproductive.
In fact-at least in retrospect-by the start of 1982 Mr. Haig was still a large part of the issue, and the belated attention of the White House to foreign policy was the signal. Judge William Clark's translation on January 4 from Mr. Haig's elbow at State to Mr. Allen's job at the President's elbow in the White House gave Mr. Haig a friend at court. It seemed. Anybody aware of the Judge's longstanding intimacy with the President, and Mr. Haig's endemic bristliness, might have forecast where this friendship would eventually lead. Few did.
That was hardly surprising. General Jaruzelski's imposition of martial law in Poland on December 13, 1981 was a brilliant stroke: internally it worked, in dead winter, surprisingly well; externally it spread-eagled the Alliance by virtue of its not having been physically carried out by Russian soldiers. It also spread-eagled Washington.
The opening of strategic arms reduction talks (START) was delayed, thereby reducing the effect of President Reagan's November 1981 speech, which, in addition to its proposed zero levels for intermediate weapons, had included the new START acronym and made comforting references to the defunct SALT II. Whether the delay in both sets of nuclear negotiations was damaging is not yet clear. Certainly Moscow had been showing lively interest in Mr. Reagan's speech during the last days of November 1981. But by early 1982, as Washington whipped up the Alliance outcry against Russian "involvement" in Jaruzelski's coup, the Soviet Union became convinced again that business could not be done with the Reagan circle and geared itself up for a renewed peace offensive in Europe to test loyalty within NATO. In America, the delay in early 1982 pushed the present negotiating window in 1983 dangerously near to the moment when the timetable for Mr. Reagan's reelection will either cause him to open it impulsively wide-or to clamp it shut.
For the rest, Mr. Reagan's initial response was a compromise with the drastic proposals for retaliation advanced by conservatives out of government. He cut off chicken feed to Poland, denounced the Soviets roundly, and forbade the participation of American companies in the Euro-Siberian gas pipeline that had by then been contracted for by West Germany and others.
The Europeans, on the other hand, seemed to treat the events in Poland as a regrettable fait accompli. Notably, not a finger was lifted to halt or delay the pipeline. In late January France confirmed its part of the deal by signing a 25-year agreement with the Soviet Union to purchase 280 billion cubic feet of Siberian natural gas a year, starting in 1984. There were good national, economic and energy reasons for President Mitterrand to join West Germany, Austria and the Low Countries in their pipeline bargain with the Soviet Union. Clearly, however, France took little or no account of American "leadership" after the clampdown in Poland. Its then still new Socialist president had been admirably resolute in his statements toward the Soviet Union. But with this move he handed the Soviet Union a contract of considerable propaganda and commercial value only 48 hours before the Polish parliament was to ratify the martial law decree introduced by General Jaruzelski.
Mr. Reagan's Washington had never been happy about the pipeline. In the previous summer of 1981 the chief Soviet analyst in the White House, Richard Pipes, and the Secretary of Defense had been among those arguing against it on the grounds that it would benefit a Soviet economy which was in severe straits and, according to some in the Administration, on the verge of collapse (or could be brought to be). In addition, they argued that Western Europe was making itself umbilically dependent on Soviet energy supplies. They had a significant ally in this instance in the head of the Central Intelligence Agency, Mr. William Casey, who, while not imagining Russia to be in a state of civil collapse, was nonetheless especially concerned by the huge foreign-exchange bonus that the pipeline would bring to it by the late 1980s.
That should have constituted a formidable Washington alliance against the pipeline. Yet the minimum was done to stop it. In November 1981, a few days after Mr. Reagan's zero-option speech, Helmut Schmidt celebrated with Leonid Brezhnev in Bonn the signature, shortly beforehand, of the gas pipeline arrangement. How could it be that the subject of what was to be a furious diplomatic war between members of the Alliance nine months later, in late summer 1982, should have caused little more than a lone sniper's shot or two in the last days of Solidarity's freedom in 1981?
The answer is that by then Washington was already hopelessly divided over the issue. The State Department itself did not favor the pipeline, and Mr. Reagan had used its brief when arguing against the project at the Ottawa Summit in July 1981. But it argued that, with the project so far gone, America would best confine its opposition to gentle persuasion. Whatever else Mr. Reagan did, he must not, State felt, be the first American President to impose sanctions on his allies; he must avoid the open split in the Alliance that President Carter's post-Afghanistan sanctions had brought about. The faith of the allies in America, so sorely tried already, was at stake, State argued. And in this it was certainly right. This pipeline had been in inception in various forms during most of the 1970s. To puff up its final construction now (on top of everything else the Europeans were having to bear) into yet another diplomatic mushroom cloud over the Atlantic would be too much, said State.
The difference between State and Defense was, in short, one of emphasis that might not have provoked such a cathartic row in the history of the Reagan Administration (and of the Alliance) but for the bitter relations that already existed between the two Secretaries-and the growing impatience of the President with Mr. Haig as 1982 progressed. Over the pipeline, State and Defense had effectively agreed to disagree not about the desirability of the pipeline project but about whether and how to prevent it.
Such an unresolved dispute, even about means, however, is no basis on which to construct harmony, and martial law in Poland was to bring all Washington's latent divisions out. Neither State nor Defense had developed a coherent ''theory of the case" either about Poland or about East-West trade restrictions. Now the two-and specifically the pipeline and Poland-had become linked, with the President pledging to do more if things in Poland did not soon get better.
The State Department was given the job of pounding sense into the allies at least on subsidized credits to the East, and Mr. Haig assigned this task to one of his own hard-liners, the ineffective Mr. James Buckley. So Buckley started doing the rounds of Europe, with predictable lack of success, finally producing the vague formula tabled at Versailles (with last-minute help from a then still private George Shultz as a consultant). In the process, Mr. Weinberger and his like came to believe (perhaps with justice) that Haig and his people were conveying the message to the Europeans that the United States now accepted the pipeline at least as a fact of life. Certainly little more for now was heard of the matter from Washington. In mid-April, Administration officials broached the overall question of ground rules for East-West trade to be discussed at the Versailles Summit of Western leaders two months hence-but, they said, there would be no further attempts to block European exports for the pipeline. Speaking to Time magazine on the eve of the Versailles Summit, the President mentioned trade and credit but not the pipeline.
Events were to show that neither Mr. Weinberger nor Mr. Clark-nor Mr. Reagan-regarded the pipeline issue as dead. First, in early June, came Versailles and the President's "glorious" week in Europe. But the ink was hardly dry on the Versailles communiqué before an American spokesman built up the credit formula, only to have President Mitterrand of France and to a lesser extent the West Germans say flatly that it was not going to change the way each operated. On June 18, 12 days after Versailles, seven months after martial law in Poland, nine months after contract signature, the President, on the recommendation of Judge Clark and Mr. Weinberger, extended sanctions to European companies manufacturing for the pipeline under U.S. license. Mr. Haig was absent from the meeting, in New York. On June 25 he quit the State Department. Mr. Shultz, at ease in London, was nominated in his place. Stalemate between unruly antagonists had brought eventual explosion. As it usually does.
We shall return presently to the later course of the pipeline dispute. Having split the Reagan Administration, it now split the Alliance more seriously than any single event for at least the previous 25 years-more than the divisions over Afghanistan had done in 1980 or than Europe's refusal to assist the United States in the 1973 Mideast war had done on that occasion. It was just the kind of dispute likely to cement, on both sides, a picture of growing and fundamental division.
The period since President Nixon's demise had been an unfortunate one for Alliance policymaking. In Europe the Common Market has been more assertive as an entity than it has been coherent or wise. In West Germany-the most important European ally both in terms of economic power and strategic vulnerability-domestic political consensus has waned, a process accelerated by the first emergence of high unemployment since postwar recovery began. France has seen the end of a Gaullist and neo-Gaullist era that had produced great gains for almost a quarter of a century. Britain has spent all its post-Nixon years grappling with the consequences of its preceding years of economic soft options; and, worse still, in a perpetual diplomatic dogfight with its European partners that has reduced its reliability as an Atlantic partner for the United States.
Common interest preserved the Alliance through these years, just. But the disarray in Europe was furthered, rather than checked, by the state of public debate in America. As seen from Europe the picture of Left fighting Right over Vietnam, then Left fighting Left under Carter and now of Right fighting Right under Reagan seems to be an almost permanent one. The impetuous decision-making that had alienated Europeans from Carter now seemed to be repeated under Reagan, and on an issue where European views had deep roots put down during the early and mid-1970s heyday of détente.
By May 1982, President Reagan had relented far enough to announce at his alma mater in Eureka, Illinois, an appealing set of START proposals for major reductions in strategic arms-repeating his tactic of the previous November over intermediate weapons by seeking to trump the Soviets' "peace" hand through calling for much deeper cuts than the Russians could tolerate. However, such was Europe's basic fear of the Reagan rhetoric by now that this merely eased for a short time the pressures from the European peace movement and its American counterpart. Worse, the combination of these fears and the pipeline dispute tended to distract European leaders from certain basic tendencies within the Reagan Administration toward unilateral defense policies that could strike at the heart of the Alliance structure.
For America's allies the vital layer of strategic thinking in America goes unnoticed by all but the experts and sophisticates of Atlantic debate. The "damn-those-Europeans" American is not himself a sophisticate of Atlantic military debate, either. But his vote goes to those who argue in favor of channelling a larger share of defense resources to sea-to a navy large enough to be the primary element not only in carrying America's strategic and intermediate nuclear weaponry, but also in providing its conventional local and regional power of response, through a massive combination of submarine and big carrier forces.
For this European author, perhaps the most alarming single consequence of the mesmerizing cold-warrior cacophony of Mr. Reagan's first 17 months is that it has so polarized European opinion between neutralist "Greens" and supportive Atlanticists that neither really notices the real division of Reaganite opinion. So defensive have the Atlanticists in Europe become that they either do not see, or disbelieve, the underlying issue of the American debate: to wit that, in America, Europe's traditional Atlanticist friends are themselves in retreat before a quite new force. No longer are the isolationists in America merely the dovish, Vietnam-hangover forces long ago mobilized by Senator Mike Mansfield. The real potency of American isolationism lies at the heart of Mr. Reagan's Defense Department among those who, with justified contempt for European confusion, and heavily supported by a populist isolationism, are ready to detach America's nuclear deterrent and its freedom to act by putting both to sea.
They are hawks, these, not doves. They would respond well to a Europe that grasped the essence of the present sub-rosa military debate about forward conventional defense, the pointlessness of so many use-them-or-lose-them battlefield nuclear weapons,1 the growing preference in Mr. Reagan's Washington for improved conventional readiness backed by modernized intermediate nuclear weapons, and so on. But they respond impatiently to Europe's present panicky vacuum-even though their own loose language has helped to cause it.
The innocence among even well-informed European opinion-formers about this trend in America remains staggering. A cautious, responsible Europe would be able to stem it, since Mr. Reagan's hawks will not spurn a cautious, responsible forward line of defense (besides which several of the hawks, starting with Mr. Weinberger, are natural Anglophiles and Europhiles). But a Europe dazed and rendered irresponsible-ironically by the rhetoric of Mr. Weinberger and his friends-will just as surely drive Mr. Reagan's hawks and their successors (whether doves or hawks) to seek the security of America's two oceans.
Ironically, it was a war in which rather creaky sea power played a decisive part-but in which the Soviet Union had no role whatsoever-that became Alexander Haig's diplomatic last hurrah. Twelve weeks to the day before his surprise resignation, at a time when the Secretary had apparently rebuilt and consolidated his position in Washington, there occurred one of those bolts from the blue that distract attention from almost everything else. On April 2, Argentina invaded the Falkland Islands, a sparsely populated British dependency some 500 miles east of Argentina's southern coast. British and American intelligence were both caught napping. The few British marines on the islands were captured and repatriated without serious casualty, and the Argentines also took over South Georgia, a further 900 miles away.
Over the weeks that followed Mr. Haig was to show great energy and courage in an effort to mediate and thus avert war between Britain and Argentina. It was perhaps always a hopeless quest but, equally, in this writer's view, nowhere was the underlying weakness of the Secretary of State's power more evident. When mediation failed, Britain proceeded to recapture the islands in a short campaign in late May and early June, and in the end Mr. Haig's efforts became, in the words of a recent British account, "a brave but sorry sub-plot to the Falklands War."2
The reasons for this bear analysis. Just before the invasion came, President Reagan made a fruitless telephone call to President Leopoldo Galtieri of Argentina, urging that the action not be taken, but he used no leverage even of a diplomatic kind to persuade him to pull back, and thereafter refrained from any strong personal intervention. And on the evening after the invasion, high American officials, including Ambassador Jeane Kirkpatrick (well known for her pro-Argentine sympathies), attended a Washington dinner in her honor at the Argentine Embassy. It was one of many indications that the Administration was torn between its NATO ally and a key Latin American nation the Reagan Administration had been at pains to court. Mrs. Kirkpatrick had visited Argentina in 1981, and there had been a whole series of visits by influential Americans, including Henry Kissinger and Ambassador-at-Large Vernon Walters, in the winter of 1981-82. In the State Department, Mr. Thomas Enders, the career heavyweight in charge of Latin America, had likewise visited Buenos Aires in early 1982. He was a strong advocate inside Mr. Haig's inner group of the need to keep on good terms with Argentina.
Though of course none of these actions or arguments had been designed to encourage any such military adventure, they had equally clearly lulled the Argentines in a vague way to count on support from the United States in the Western hemisphere. And by early 1982 the junta was giving direct help to the United States in Central America; it certainly thought Washington would regard continuation of that aid as a fair trade for remaining at least passive over the Falklands.
Yet the invasion was by any standard a clear case of seizing disputed territory by force, and the United States was bound to support, as it did, the resolution swiftly introduced by Britain at the Security Council calling for immediate Argentine withdrawal and negotiations (and, by its reference to the U.N. Charter, implicitly justifying a British military reaction as an act of self-defense under Article 51). In the end, it seemed clear to most observers that the United States would have to stand by Britain, both for the sake of principle and precedent and for the sake of its NATO tie and whole relationship with Britain. But the choice was bound to be an unpleasant one. Hoping against hope to avoid it, Mr. Haig immediately backed a mediating effort-and thrust himself forward as the mediator rather than Vice President Bush (who had been mentioned in the President's telephone call to Galtieri). In the process, Mr. Haig hoped to foreshadow, explain and justify in advance the eventual tilt to Britain's side-and thereby to enhance his negotiating credibility with the Argentines.
Always vulnerable on any fresh issue in the eyes of his President, Mr. Haig thus deliberately threw his reputation into an active mediation between Britain and Argentina-but without the full-hearted Administration backing that would be essential if the gamble were to succeed. The Argentine junta had excited itself into its Falklands invasion partly as a domestic distraction. But it was also sure of its moral ground against a post-colonial country which, it was equally sure, would not react militarily. The speedy passage of Security Council Resolution 502 was merely a diplomatic check. The Argentines still doubted Britain's will to retake the islands by force; and, if it had the will to try, its military capacity to succeed. The negotiating gap between a divided three-man junta and a British prime minister whose popularity thrived on the sense of national crisis thus widened rather than narrowed with time.
Mr. Henry Kissinger was among those reported to have advised Mr. Haig against undertaking a shuttle negotiation in such circumstances. Others giving similar advice included close associates of Mr. Haig in the government and in his own department. The Secretary of State courageously traveled regardless.
He knew that the odds were stacked against success-and an inexperienced, leaky shuttle team was to lengthen these odds. The President was dragged in his wake. To give anything less than formal presidential support, undermining the Secretary of State in mid-flight on one of his well-meant and slightly absurd shuttles between Buenos Aires, London and Washington, would have been to damage further the already battered credibility of American foreign policy abroad. And its popularity at home: on this issue, Mr. Haig had-at least until the blood appeared on Mrs. Thatcher's hands in May-a combination of Georgetown's and Main Street's sentimentalists and Atlanticists on his side against the realpolitikers anxious to keep in with a Latin continent and a helpful military regime.
That was all very well for Mr. Haig's chances of getting his way eventually in Washington but therein, also, lay Mr. Haig's weakness as a negotiator. The British knew that his play on their behalf in Washington was far from unanimously supported. Mrs. Thatcher could trust his aims, but not rely on him to deliver much that she wanted in any compromise determined in Washington. The British therefore paid at best lip service to each compromise he suggested.
As her popularity rose over the doubts of her subordinates, Mrs. Thatcher hardened her negotiating position with each day that her motley naval task-force sailed closer to action. The time when she might, just, have been ready to accept some reasonably safeguarded interim administration on the islands was during the first half of April; but this was precisely the time when the military junta in Buenos Aires least believed that Mrs. Thatcher was in military earnest and least expected the United States to help her if she did go to war.
It was during that early April period when Mr. Haig, having seen Mrs. Thatcher, was trying to persuade the Argentines she was indeed in earnest, that the junta was comforting itself in Buenos Aires with the correct belief that the Secretary of State they were dealing with by no means represented every strand of established opinion in Washington and New York. For most of that month, disbelief persisted in Argentina that America would tilt militarily to Britain even to the limited extent that it eventually did.
Mr. Haig therefore appeared in Buenos Aires as a man with, at his back, powerful advocates of Argentina's cause-and, before him, a President whose ear he did not always command and who was clearly uneasy on this occasion with the whole idea of making any sort of choice between two allies. On this issue, the Defense Department was to support Mr. Haig manfully-but many others did not, some of them combining their dislike for Mr. Haig with their policy argument against offending either Argentina or, more vaguely, Latin America as a whole.
Might the outcome of Mr. Haig's negotiation have been different? It looked hopeless. But a unanimous, determined Washington, led by a President who personally told Argentina from the start where American sympathies would lie in the event of war, might have made the job of getting Argentina to comply with Resolution 502 easier-and minimized both Argentina's eventual humiliation and any wider damage in Latin America. But Mr. Haig could not command such a President nor boast such support, and everybody knew it even at a time when his job in Washington seemed pretty secure.
Putting aside the obvious differences in the issues-and the peoples-involved, it is not hard to see why the Haig shuttle in the Atlantic unarguably failed where the Kissinger (1973-74) and the Habib (later in 1982) ones in the Middle East arguably succeeded. Unlike either Mr. Kissinger or Ambassador Habib, Mr. Haig simply was not the bearer of a convincing presidential or Administration mandate. Indeed it was evident to both British and Argentines that Mr. Haig was having to use his usual forthright method of preempting those who would resist him rather than being able to boast that he was fully in charge.
The other lesson from the Middle East was that Mr. Haig's hand would have been stronger in this negotiation in the South Atlantic had the war, or the tilt to Britain, come first and never had to be questioned. Initially Mr. Haig could not be certain even which way his country would tilt in the event of war-whereas in 1973-74 it was America's full-blooded tilt to Israel, combined with backchannel feelers to the Arabs, which brought about peace. Hence, with each successive Haig visit or call the tone of his voice sounded less like a command, more like a plea.
The parties were simply too far apart, and at the end of April Mr. Haig withdrew from the lists and the Administration promptly announced its support of Britain-by then in line with the overwhelming weight of American opinion. There was a brief moment after the shuttles, using the Peruvians as intermediaries and General Walters in Buenos Aires, when Mr. Haig appeared to come miraculously close to success. But, once it came to fighting, America had spent its diplomatic capital. Its relationship with Britain was temporarily bruised, although insiders were well aware of the importance of American equipment supplies and other help, short of the commitment of any American forces. And in Latin America what would in any event have been an adverse reaction to the American tilt was doubtless accentuated by its abruptness and style-though in the end the outcome vindicated those, like Mr. Haig, who reckoned that fears of U.S. interests being permanently damaged in Latin America were overdone.
The fact remains that Mr. Haig neither prevented a war nor left America in a position to pick up the pieces after it. His frenetic awareness of his own struggle in Washington had equipped him with a weak, if valiant, hand to play.
Perhaps wars have to be fought before future wars can be prevented: certainly if the Falklands War should never have happened, the war in Lebanon during the summer of 1982 was increasingly likely to happen as the year went on. Over the Middle East the "pragmatist" Mr. Haig was closer than many of his "ideologue" antagonists to Mr. Reagan's apparent campaign view that America must stand by Israel come what may. Mr. Weinberger, the President's counsellor for so long in California, was, by contrast, nearer to the Middle Eastern views of Mr. George Shultz that had been, it is said, the single matter of substance dissuading Mr. Reagan from offering the secretaryship of State to Mr. Shultz in November 1980. These views were not anti-Israel. They argued for persuading, or requiring, Israel to be restrained and flexible in return for American support.
Mr. Menachem Begin's Israel has been neither restrained nor flexible during Mr. Reagan's term. The President brought little pressure to bear on Israel in his early meetings with its prime minister, and every step that Mr. Begin took was, if not encouraged, eventually countenanced by the Secretary of State. Here was a part of the world that this U.S. President would frequently leave to a Secretary of State with whom he was having to argue too exhaustingly on too many other fronts.
Mr. Begin read the signals from Washington correctly. In the summer of 1981 Israel had bombed and crippled a French-built nuclear reactor nearing completion in Iraq and conducted air attacks on Palestinian enclaves on the outskirts of Beirut-and on each occasion had been chided only gently by Washington, to the distress of Mr. Weinberger, who favored more severe signals of American displeasure. When the President did follow his Secretary of Defense's advice by endorsing a deal to supply air warning (AWACS) aircraft to Saudi Arabia, the project ran into severe difficulty in Congress just as Mr. Haig forecast that it would: intensive Israeli lobbying against the deal failed by a whisker and at the cost of a large expenditure of presidential political capital. With America on the defensive in its dealings with Israel, Begin annexed the Golan Heights in December 1981. All these-the two summer raids, the December annexation-were in a sense dress rehearsals for Israel's big push into Lebanon in the summer of 1982.
For the first four months of 1982 Mr. Haig could plead that America must at almost any cost keep coaxing Israel to fulfill its treaty commitment to hand Sinai back to Egypt at the end of April. Anwar Sadat, Egypt's signatory, was dead, his successor, Hosni Mubarak, an uncertain quantity: there, if Israel required it, would be the pretext to go back on its word. Mr. Haig travelled to the area in late January not merely to discuss the multilateral force that he was painstakingly assembling for Sinai but to "reinvigorate" the West Bank autonomy talks. A weaker reed than Mubarak would have quivered at this wonderfully ill-timed linkage: if its West Bank purpose "failed" it would discredit any Egyptian president, never mind a brand new one; if a West Bank "compromise" seemed likely, as a result of this visit at this time, it would equally damage Mr. Mubarak-who fortunately had the wit to say hello to Mr. Haig and do nothing. Israel was clearly encouraged: after a few weeks of unnerving brinkmanship, on April 21 the Israeli cabinet not only voted, unanimously, to withdraw from Sinai on time; it sent its armed forces in to bomb PLO-held villages in Lebanon.
By now the signals were manifold that Israel intended a much bigger clearing operation in southern Lebanon, for which, as spring became summer, it felt it had the nod from Mr. Haig in Washington. But the timing and scale of what then transpired went farther than expected.
On June 6, while Mr. Reagan, in the words of one European official, "s'endort doucement" at a summit session in the palace of Versailles, Israel launched its full-scale invasion. The next day Mr. Philip Habib was despatched to remonstrate and to start his long search for a cease-fire. By June 10, Syria's anti-aircraft missiles in the Bekaa Valley were reported destroyed and Beirut was under attack, to be cut off by Israeli land forces four days later.
Even in these first days the President was feeling an increasing sense of deception and revulsion at Israel's actions in the Lebanon; here too he was moving apart from his Secretary of State, who had quickly come not only to accept but to favor the expulsion of the Palestine Liberation Organization from Lebanon and who, with his military background, likewise sympathized with the harsh tactics of Israel's Defense Minister, General Ariel Sharon. The President and others, however, thought that the expulsion should be achieved by diplomatic means and without the kind of humiliation of the PLO, and Arabs as a whole, that in their judgment would lead away from a renewed attempt to negotiate on the core Palestinian issues. Frictions on this point clearly contributed to Mr. Haig's departure on June 25, although the decisive factors appeared to be the pipeline affair and the growing number of minor frictions between the Secretary and the White House.
Thus, whereas Mr. Haig had clearly perceived the diplomatic opportunity that was being created by Israel's actions, it was to be Mr. Shultz, with his different perspective of America's role in the Arab-Israeli struggle, who was to extract this potential advantage for his President from the war that was preoccupying attention during July.
The new Secretary of State was unanimously confirmed in office on July 15. In the Senate hearings, Mr. Shultz's impression of rather firm, unpretentious calm combined with congressional concern not to rock the boat after all the uproar surrounding foreign policy during Mr. Haig's last weeks, to give the new Secretary a smooth run into his department.3 Worries about his (and Mr. Weinberger's) former employment with Bechtel, the big civil contracting firm with large contracts in Saudi Arabia, Jordan and elsewhere, surfaced only to wither. Amid such turmoil in the world, and faced with a man of Shultz's integrity and Washington experience, Congress could not afford a contest over the President's new Secretary of State.
The new Secretary's method of dealing with State Department business appears to differ from that of both his Republican predecessors, Mr. Haig and Mr. Kissinger. Mr. Shultz, it seems, brings issues to a head one by one, seriatim. Both to those working with the new Secretary and to those abroad negotiating with him, Mr. Shultz's internal calm appears to allow him to note all they tell him, to deal with any of it should events command, but meanwhile to set priorities that necessarily place other questions in cold storage.
Events in the Middle East, and Mr. Shultz's newness to the job, perhaps dictated this method. As luck had it, the Middle East was the area over which the new Secretary of State and the original Secretary of Defense were most likely to agree-which they were called on to do from the start. So the stage was well set by Washington standards: a President and his two principal Secretaries in rare accord.
Throughout July the outcry against the Israelis' repeated escalations of the battle round West Beirut drove Mr. Reagan further and further from them. Early in July, the United States had already agreed to pledge its troops to escort the fighters of the PLO from Beirut should they agree to go; a month later, on August 9, America's peace plan for West Beirut was formally presented to Israel to be followed, three days later, by the President's expression of "outrage" to Mr. Begin over his country's continuing bombing raids. By the third week in August, most of the PLO men were at last on their way out under the eye of the closely coordinated forces of France, Italy and the United States.
Behind all the fighting and language, and virtually from the day of the new Secretary's confirmation, Mr. Reagan and Mr. Shultz had been quietly preparing what was to emerge as the celebrated "Reagan plan." This was unveiled the moment the PLO was dispersed, at the start of September, to the fury of Israel and a cautious welcome by Jordan. Israel instantly defied Mr. Reagan's call for a moratorium on settlements on the West Bank by authorizing yet more. A week later the Arabs, meeting in Morocco, registered a more pro forma rejection of Mr. Reagan's plan for a federation of the West Bank with Jordan by calling again for a Palestinian state (which the Reagan plan excluded). Encouragingly, the Arabs did not rule out Mr. Reagan's efforts as a basis for negotiation, which Israel did.
The present dangers to Mr. Reagan's plan derive not from the way that-as usual in the Middle East-every party can object to one or another of its provisions, or from its timing, but from the traditional twin wreckers of peace in Palestine-hard-line Arabs who will not allow moderate negotiators to cut the ground from under the feet of hard-line Israelis; and hard-line Israelis who equally encourage the cause of the radical Arabs while removing any scarce leverage that the United States might have in the area. The Reagan plan faced each set of hard men with a real choice at a moment when neither, for opposite reasons, could avoid it altogether without compromising their cause.
The plan's life started, then, as well as could be expected, though by the end of 1982 precious time had gone by. The assassination of the newly elected Christian President Bashir Gemayel of Lebanon, and the ensuing Christian militia massacres of PLO civilians in two adjoining Beirut bidonvilles, Sabra and Shatila-apparently under the blind eye of Israeli troops-distracted world opinion, and alienated moderate Arabs, for several critical weeks. Fortunately King Hussein of Jordan and the PLO's Yasser Arafat held steady. In December they were still giving every sign of being ready to dare the extremists around them by entering into negotiations. By the time of King Hussein's visit to President Reagan during the last week before Christmas, the King's credibility as a potential negotiator for Palestinians was stretched but not yet altogether torn.
Time had slipped away by the end of 1982 not because of the King or Mr. Arafat but because Syria and Israel, antagonists locked in deep conflict that suited both of them, had manufactured a common interest in resisting negotiation of their differences (like the South Africans and the Cubans in southern Africa, foes with a mutual interest in stalemating peace). Israel entered the new year purportedly under pressure from all sides to accept the notion of a real negotiation with Jordan over the West Bank, but in reality refusing even to negotiate its army out of Lebanon until Lebanon took the first steps toward recognition of Israel. Mr. Begin by the end of 1982 was being left in no doubt about Mr. Reagan's furious-and by now very personal-displeasure with him: a displeasure which simultaneously made Mr. Shultz's position at State more tenable than it would ever have been in early 1981.
What Mr. Reagan and Mr. Shultz had given no sign of by end-1982 was whether they saw (1) that the personal displeasure of a formerly pro-Israeli U.S. President will not in itself budge a popular, implacable, settlement-building prime minister like Mr. Begin from his central gains on the West Bank (Israel had instead fixed bargaining not on the West Bank but on Israel's new front line far to the north in Lebanon); (2) that more "pressure on Israel," that dreaded phrase, might be necessary (in a year, 1983, when the primary campaigns of 1984 are barely over the horizon); (3) that the moderate Arabs could not be sustained for long by a "plan," negotiation of which seemed never to begin (the biggest potential loser of another aborted moment of hope would once again be the man who was the loser after the celebrations of Mr. Kissinger's post-1973 shuttles: King Hussein). It is too early to say, in short, that the Shultz era is a success in the Middle East. It has, at least, started with promise.
Only once the worst shocks of the Sabra and Shatila massacres were past did Mr. Shultz turn with any purpose to the pipeline dispute that had toppled his predecessor. He did not hurry, partly because his own time was preempted, partly because every message emanating from the White House rang loud that the sanctions on the Siberia-to-West-Europe pipeline were the President's own cause which Mr. Reagan was determined to "see through"-and mostly because Mr. Shultz believed that the existing sanctions, and the possibility of worse ones to come, would start to hurt European companies seeking contracts all over the world. The time for settlement would not be ripe, Mr. Shultz seemed to feel, until the commercial reality of sanctions cooled the European level of belligerence down a bit, and mid-term electoral and diplomatic reality (as well as pressures from a critical business community) began to cool off his President too.
This was an issue in which the new Secretary of State had a personal concern dating from before his succession in June. To bolster (or compensate for?) the Buckley mission, Mr. Haig had asked Mr. Shultz, a private citizen, to journey among the allies in the early spring of 1982 to sound out ideas on tightening up Alliance practice on East-West credits and trade. Failure on this wider issue, Mr. Shultz saw from that experience, was not merely what had caused the sanctions to be applied-it also lay behind the pipeline affair in the sense that more permissive European attitudes toward trading with Russia, and stop/go American ones, had led to the signing of the pipeline arrangement in the first place. A "process and structures" man, Mr. Shultz's dislike for what he had christened "light-switch diplomacy" was much commented on when Mr. Reagan sent him to Foggy Bottom. Clearly Mr. Shultz would be happy to see the Alliance-debilitating sanctions dropped in return for the allies tackling the wider subject of East-West trade. Significantly even hard-liners at the Defense Department were ready to see such a trade-off, provided East-West trade was really tackled by the allies.
In the first weekend of October, Canada convened a meeting of NATO foreign ministers in Quebec. Here the method of future discussion of the pipeline sanctions and of the wider East-West trade issue was broached. It was to be conducted in strict parallel. At all costs the two vitally linked subjects must not be formally linked. For the Allies, particularly for France, it was essential that, America having acted unilaterally, extraterritorially and after the event, it should not be rewarded-at least formally-with a graceful way off its sanctions hook.
Nor, in the end, was it. In mid-November, after weeks of negotiation by Mr. Shultz, Mr. Reagan dropped the sanctions, linking his action, during a broadcast statement, to a moratorium on any further pipeline contracts pending completion of discussion of Europe's energy needs. East-West trade intentions and practice were to be clarified in various other forums.
In a chapter of accidents, absences and bloody-mindedness at the Elysée Palace, France denounced even this not very close linkage between the pipeline sanctions and the broader East-West trade discussion. By December, however, following meetings between Mr. Shultz and French Foreign Minister Claude Cheysson (with whom Mr. Shultz had established a good working relationship during the establishment of the tripartite force in Beirut), working groups were nevertheless meeting regularly on all the main headings of East-West trade, with French participation. No attention was being drawn to this (Helmut Kohl, West Germany's new federal chancellor, advised Mr. Shultz that one does well to flatter and concede to France in every word, while standing firm on every fact). It remains to be seen-perhaps at the Williamsburg economic summit in May 1983-whether anything will come of this exercise. A skeptical Defense Department and White House, among others, will watch with interest.
With the sanctions disposed of, having then switched attention in November to fence-mending in Latin America (which Mr. Reagan toured in early December), and keeping Middle Eastern contacts on the boil, Mr. Shultz turned in the dying weeks of 1982 to the two sets of nuclear arms negotiations in Geneva, and to the brooding, triple dangers of financial collapse, continued recession and protectionism. The end of 1982 saw all these issues flickering on the wall in Washington-all of them far from settled.
For its first year and a half, the Reagan Administration's foreign economic policy had consisted almost entirely of America (1) warding off European and other anger over the high interest consequences of its domestic policy (a posture which, incidentally, Mr. Shultz, as chairman of the President's outside group of blue-ribbon economic advisers, had fully supported); (2) discouraging budgetary aid for multilateral agencies; (3) stolidly refusing to take the old international paraphernalia of "negotiation," trade and monetary talks seriously: the market would adjust all. By the fall of 1982, however, so severe had the crisis of international debt become that it was hard for any Administration to ignore it.
The illiquidity of American and European banks was compounded both by the disappearance of economic growth and, paradoxically, by the success of wringing high inflation at least temporarily out of the system. If Mr. Shultz had not been inclined to sympathize with European and other complaints against high American interest rates, now, with or without his sympathy, interest rates were being encouraged downward by a relaxed monetary policy.
As a private citizen Mr. Shultz had however spoken out during the Reagan term in favor of boosting the role of multilateral lending institutions in Washington; here the previous Treasury prejudice against multilateral financial institutions was progressively dumped after Mexico's inability to meet its debt service in August. Faced with an obvious crisis, the Administration reacted quickly and smoothly to pull together the necessary very short-run emergency package. But, at the International Monetary Fund/World Bank meeting in Toronto in early September, it still held off on wider and more basic measures.
As winter approached and the scale of the Latin American debt problem became abundantly clear, the Administration at last shifted its position to back an increase in IMF resources, as well as to extend emergency help to Brazil during Mr. Reagan's visit in November. In a speech in Basle in December, Mr. Donald Regan, the Treasury Secretary, indicated that America saw the problem as much more than an immediate banking crisis, and talked of a "new Bretton Woods" arrangement.
How much this change in tone was due to Mr. Shultz matters less than whether it is, or will be, enough. Brazil ended the year deferring its early 1983 debt repayments in a preemptive bid to get Western banks to reschedule and finance its future debt obligations-and was followed in the first few days of the new year by Romania and Cuba. And as recession keeps bottoming along, the Administration has found it harder than ever to hold the line against domestic protectionism. Much of this is directed at Japan, but it deeply affects others. If it continues, it will make both economic recovery and international debt repayments even harder to achieve. The ministerial meeting in November of the General Agreement on Tariffs and Trade had done little if anything to stem a global dribble of protectionism-no thanks to the European Community negotiators, but no thanks to the United States either.
At least the Administration now seems to have a highly competent and coordinated team approach to these problems which can be traced in part to the advent of a Secretary of State who knows economics. But with no clear prospect of economic recovery yet in sight, things may well get a lot worse before they show any signs of getting better.
As for negotiations with the Soviet Union, the last two months of 1982 were dominated by early reactions to the change of power in Moscow. The death of Leonid Brezhnev on November 10 was speedily followed by the succession of Yuri Andropov as General Secretary of the Communist Party. President Reagan refused-against, it is said, his Secretary of State's advice-to attend the Brezhnev funeral. Helmut Schmidt's advice from the political grave-his coalition had been defeated on October 1-was that "even though Andropov represents no change, we should behave as though he does." This has not yet happened. But the Russians are at least now cocking an eye to the Nixonian "retread," Mr. Shultz, who did come to the Brezhnev funeral.
Andropov quickly put himself at the head of a renewed Soviet "peace" offensive in Europe. In December he tried to put the Reagan Administration on the spot by offering his own version of deep cuts in SS-20 missiles, to a level roughly equal to that of existing French and British nuclear systems, so that there would be no deployment of American cruise and Pershing II missiles by NATO.
No Administration could accept such an unequal deal, besides which both the British and French regard their weapons as defensive and strategic in character and not comparable to the Soviet SS-20. But the offer set the stage for a next act in the central foreign policy issue of this Reagan term, with the stakes now compounded, and choices made more immediate, by the political situation in the German Federal Republic.
The fall of Helmut Schmidt's coalition in Bonn had brought in a Christian Democrat for the first time in 13 years-a man whom it is in America's interest to keep in power. Mr. Helmut Kohl faces elections in early March 1983. If he can survive them-a big if-it would ease Mr. Shultz's nuclear negotiation considerably; for Mr. Kohl, unlike Mr. Shultz's old friend Mr. Schmidt, has a party behind him determined to deploy the American missiles on schedule in 1983 if the Geneva talks on theater nuclear forces (TNF) have reached no conclusion by then-a clear incentive for Russia to do business if it cannot first achieve Mr. Kohl's defeat in March. Conversely, his defeat by a combination of Germany's Left would boost Russia's ability both to resist a deal with Washington and still to prevent the deployment of modernized weapons on NATO's side.
On the one hand, any impression of American intransigence in the Geneva (TNF) negotiations could help destroy Mr. Kohl. On the other hand, any U.S. attempt to put forward a new position before March might run serious risks of having the election affected by detailed public exchanges of statements. With Mr. Reagan's popularity in decline by the turn of the year, and yet another of his early appointments-Mr. Eugene Rostow at the Arms Control Agency-having to be unscrambled, an air of un-Shultz-like uncertainty hung over the U.S. position in the Geneva negotiations.4 By then a mounting attack on defense spending by budget cutters in and outside the Administration was further complicating any decision and sending unhelpful signals to Moscow. The foreign policy choices, however, remained clear.
How the Administration handles the issue both before and after March will be of critical importance for the defense of Europe. And, if the missile deployment were to founder, it would give impetus in Congress and public opinion to putting more, if not all, of America's Europe-related deterrent to sea, a long step toward the offshore and unilateral naval emphasis of many of the ideologues inside the Reagan Administration.
All these-problems half dealt with, others barely stirred-will be issues for 1983. And they may tell whether 1982, with the accession of George Shultz, was merely an improvement or whether it was President Reagan's watershed year. The landscape facing President and Secretary is a changed one. It challenges any coherent, conservative Administration to broach issues with its allies in ways that backbiting in Washington did not formerly permit. There is a new man in the Kremlin; a new political situation in Bonn (though precisely what situation nobody can be quite sure at least until March, and possibly after then); Britain is, likewise, approaching an election season. These can seem discouraging conditions in which to try new initiatives. But new initiatives are not really what are required as yardsticks to measure Mr. Reagan's second Secretary of State by.
What challenges America, in this writer's view, is not this promising landscape overseas or that unpromising one: it is the challenge of formulating a policy line, a geopolitical and regional view of the world, which is then sought consistently and reliably by all the Administration at once; which may be criticized and tested from outside, but is not of right destroyed. It is bad enough that foreign policy should seem to swing sharply-almost to the point of starting from scratch-with each recent change of Administration; internal disunity, even on the changed policy line, makes the state of policy hopeless.
Mr. Shultz's first six months seemed to suggest two things: first, that he was better than any of his three predecessors at State at getting an Administration to work together; second, that, as illustrated by his December tour of European capitals, he could impress even the most inconsistent of European allies with America's sense of reality and a certain newfound, steely calm.
What had yet to emerge-two years into Mr. Reagan's term but only six months into Mr. Shultz's-was the Shultz content to go with the Shultz orderliness: the sense of strategy and foreign policy linkages that will need to be conveyed. What had also to be tested, incidentally, was the durability under strain of his relationship with Mr. Weinberger. Several times now in a decade and a half, both in Bechtel business and Republican government, Mr. Shultz has been parachuted in late to find himself working over Mr. Weinberger's head. The two men are not antagonists, as Mr. Weinberger and Mr. Haig were: but it would be surprising if their past relationship was entirely free of resentment.
Then there is the question of Mr. Shultz's relationship to the President. He is a man with a natural reverence, unlike Mr. Haig, for the American presidency. And he backed Mr. Reagan as his preferred President from the mid-1970s onwards. Mr. Shultz will always be the President's man-and this may not always make him the accommodating man the Europeans and others-now that they have swung away from their foolish skepticism when he was appointed-rely on him to be.
There is plenty that an easy Reaganite, admiring his President as Mr. Shultz evidently does, could do that would satisfy the dictates of Reaganism but fall short of creating a coordinated foreign policy. Mr. Reagan approaches a possible re-election campaign in 1984: it will be only too easy to go on indulging the "tougher with China" line that has sent China scampering away from too close a relationship with the United States. As 1984 approaches it will be easy-or, if not easy, then acceptable-to rest on the Reagan peace plan for the Middle East, or a disengagement in Lebanon, without pressing for Israeli decisions that will be necessary if moderate Arabs are to be given enough heart to do business on the core of the plan itself. It will be easy to wait on events in the Gulf (indeed it is hard to see what else there is to do bar pushing ahead with the creation of the Rapid Deployment Force). It will be easy to hang tough with Russia, or per contra to indulge in a vote-winning summit, without pursuing the implacable policy of bargaining down the middle from strength that is so difficult to explain to America's Right and Left alike.
Above all, it will be easy to turn a Europe more ambivalent than it has ever been about détente and containment into a populist prey for the American electorate and for subsequent policymaking: a prey because of Europe's increasingly protectionist trading policies, and because of its nascent inability (compounded by Washington's discord) to explain to itself the need for nuclear defense. Mr. Shultz is a patient man, but he also feels, and can exhibit, his President's impatience with Europe's old habit of eating its cake of American dependence while enjoying the crumbs of détente left on the negotiating table by Russia.
In the end it will be the President who decides, the Secretary who persuades-provided he wishes to. What has yet to be formulated is what policy trade-offs to persuade this President to accept, within the consistent, if fundamental, framework of reactions that he already has. That there exists in Washington a Secretary of State who has shown that it can be done seriatim, if not yet as a whole, is only a welcome start.
There has not yet been time, after all, for a whole policy. A year hence neither Mr. Reagan's Secretary of State, nor Mr. Reagan himself, will be able to plead that.
1 During 1982, U.S. military planners were arguing with increasing vigor that NATO can better deter conventional Soviet attack with more adequate conventional defense, backed by a sparer, more accurate, and so more formidable nuclear force. Such a policy would downgrade the present elderly short-range nuclear weapons on the battlefield, which under present circumstances confront NATO's military commanders, under attack, with the decision of whether to use these weapons or lose them.
Politically, however, such thinking-a deterrent posture envisaging that in the event of actual attack West German soil would have to be lost before it could be regained-is dynamite in NATO. The primitive state of debate in Washington merely ensured that such sophisticated military thinking could not be broached politically inside the Alliance. One day it will have to be.
2 Max Hastings and Simon Jenkins, The Battle for the Falklands, London: Michael Joseph, 1982, p. 141.
3 If Washington reacted with realism to the change at State, reaction in Europe was almost comically tragic-especially in retrospect. The newspapers spoke for many. Le Monde in Paris saw Haig's disappearance as "a victory for the most conservative and most ideological elements at the heart of the Reagan Administration." Shultz would not necessarily be bad for East-West trade but, asked Le Monde, "is not this replacement, in mid-Lebanon crisis, of a nature to weaken America's capacity to impose mediation on the conflict that is bloodying the Near East?" The Daily Telegraph in London saw the change as a "Setback for Reagan." "For all his sound instincts Mr. Reagan needs a sophisticated expert on world affairs at his right hand. It is hard to see that he will now have one." The Obsenter of London, unlike the Telegraph not always a believer in Mr. Reagan's sound instincts, saw Mr. Haig as representing "about the most rational presence in the Reagan Administration . . . . The sight of yet another Californian wagon being wheeled into place around the White House stockade is not in itself reassuring." (A "Californian wagon": poor Shultz-born in New Jersey, educated at Princeton, most of his life passed teaching at M.I.T. and Chicago and serving in Washington, board member of General Motors and Morgan Guaranty, a classic Republican retread if ever there was one.) West Germany's Handelsblatt reported that the "reaction in Brussels and other European capitals is therefore clear: much more loudly than protocol would require is Haig's decision deplored." This widespread reaction in mid-1982 was to be almost universally disowned six months later.
4 In the wake of Mr. Rostow's departure, it was revealed that Mr. Paul Nitze, America's TNF negotiator, had worked out with his Soviet counterpart in July a possible compromise formula, each apparently acting without authority. The formula was later rejected both by the White House and by Soviet leaders.