CONFIDENTIAL
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Some curious ideas with 1, 10 DOWNING STREET
From the Private Secretary
Dear John
LONDON SWIA 2AA
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Mr Grey FAL
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x comes 10 February 1993 Neads:
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9/2
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23 MAR 1993
X
/INDEX
Now: Dent (peso.
THE PRIME MINISTER'S TELEPHONE CONVERSATION WITH Special Advises
PRESIDENT CLINTON: 10 FEBRUARY 1993
Bawer
President Clinton telephoned the Prime Minister earlier this evening. The Prime Minister asked him how things were going. The President said that he had had a good week the previous week, and a good start this week. He was becoming a conservative in his handling of the deficit. -The UK deficit was in much better shape than the American. We would have to get after the Japanese to reduce their trade surplus which was becoming ever larger. The Japanese and the Taiwanese were the major investors in China. China had a massive trade surplus with the United States who were buying 30% of their exports. A lot of those exports were financed by Japanese money. We must look at these patterns of investment and trade. Given the extent of US purchases from China, that ought to give America some political leverage. That was an issue he and the Prime Minister had touched on before, and should discuss again. We all needed economic growth.
The Prime Minister said that there was no doubt that we were coming out of recession, but the position in the rest of Europe was not good. An important indicator had been car sales in January. They had been up 7% in Britain, but down in France, Italy and Germany. The Germans had stopped taking on new employment. They faced negative growth this year, and the economic scene was pretty dark across the Community. Mr. Clinton wondered whether we could coordinate our economies better. He would like to discuss that when he⚫ and the Prime Minister met.
The Prime Minister said it was something he wanted to discuss as well. Although action might be difficult in the short term, he also wanted to talk about the effect of recent huge changes in the exchange rates. Our membership of the ERM had led to disproportionate exchange and interest rates. These
"/2
CONFIDENTIAL