Prime Minister
Can I just report to you on this visit to Washington, so far as we have now got.
It started yesterday evening when I had a meeting with about 30 bankers and industrialists to discuss the course of the United States economy and its problems and its successes. It is quite clear that growth is going a good deal faster in this country than it is at home and that that growth is expected to be sustained for some time. I found a good deal of support for the attitude which I take on budgetary deficits and also on unitary taxation from those American businessmen and bankers.
This morning, after television interviews, we went to the Senate Foreign Relations Committee, where we had about an hour and a quarter of discussion on almost anything they wished to raise in the sphere of foreign relations and it included almost everything you would expect: East-West arms control, the Lebanon, international trade, something about unitary taxation, difficulties between the United States and Europe on agricultural surpluses and access for United States products. [end p1]
Later, I went to see Mr. Volcker where we obviously discussed some of the problems of international finance. Following that, I went to see Secretary Regan where again deficit and particularly unitary taxation were discussed. Following that, I went to the White House to see President Reagan where I talked with him, had a very very long tete-a-tete and then a brief working lunch which included Mr. Shultz, Secretary Regan and also Sir Geoffrey Howe and on the other side Judge Clarke. So we had quite a big working lunch and, again, discussion continued throughout lunch. The subjects, again, you will be able to deduce, East-West, including arms control, Central America, the Middle East and Lebanon, some of the economic problems, again unitary taxation and budgetary deficits and also Sir Geoffrey Howe had spoken to George Shultz on a number of other things.
Later this afternoon I shall be going to see Vice-President Bush and later this evening I shall be receiving the Winston Churchill award.
Well, that is perhaps enough for one day. Would you now like to ask questions? [end p2]
Question
Do you think that anything can be done about the unitary tax?
Prime Minister
There are apparently two decisions. One is the Container case, the other is the Woolworth case. The Woolworth case, apparently gives the impression—I am not an American lawyer so I am choosing my words carefully—that each overseas company was a free-standing company and therefore did not follow the Container case. It is rather different. It may be different because the circumstances are different, but people are looking at a reconciliation between the two or at the differences between the two. I think it would be very unwise to pursue that point vigorously without being a lawyer, but what Secretary Regan said is that his Commission, of which he is Chairman, is going to start work very soon and because it recognises the important significance of this subject not only to us and to Europe but also to American multinational businesses, he will try to report as soon as he possibly can. In the meantime there are other cases which will come before the courts and we shall also have to see how they go, especially in view of the two apparently different cases, the Container case differing from the Woolworth case. [end p3]
Question
Can anything be done about it?
Prime Minister
I think something will have to be done about it. That is very much the message we put across and it is very much the message which American businessmen also put across to me. The United States has more multinational companies than anyone else and it is very serious from their viewpoint that something be done about it, the position be clarified, and the ordinary rules I think obtain and the ordinary rules really are that you tax a company on the profits it makes in the host territory, not on profits it makes elsewhere, or in the host state, not on the profits it makes elsewhere. Once you go beyond that, you can quite usually see a position when the amount of tax would exceed 100%;.
Question
What is your reaction to Mr. Andropov 's harsh words about the US arms limitation … .
Prime Minister
I think they are both disappointing and discouraging, but the fact is that the negotiations are still going on in Geneva, that they must still continue, so that it is at that [end p4] negotiating table that the detailed proposals should be considered. There were detailed proposals to try to help the Soviet Union to come to an agreement on a balanced deployment which is less than the full number of Pershings and Cruise provided they took down a similar number of the SS20s. So in spite of these big statements, the process of negotiating disarmament reduction continues in Geneva and must continue. Unfortunately, the start talks on the big strategic missiles are not going very fast and it would be very gratifying if they too could make some progress, because then we would begin to believe that the Soviet Union was really serious on wanting to disarm. We are, but that is not surprising. We are democracies and peace-loving and have other things to do with our money, provided our security is sure.
Question
At what stage do you understand Vice-President Bush is advocating that British and French deterrents should be placed on the negotiating table?
Prime Minister
As far as I understand—and I did enquire—his remarks have been both misreported and misinterpreted. I think, according to enquiries that I have made, that he is probably meaning something very similar to what I have said, that at [end p5] the moment it is very confusing and merely meant to sidetrack to suggest that the British and French nuclear deterrents should be included. We are talking now not about strategic weapons, of which the Soviet Union has an immense superiority over Britain—ours are about 2½%; of theirs—so for them to bring in our little 2½%; when they have got far far more—indeed, they have got about 2000 strategic weapons—into these talks, is absolutely ridiculous and it is sidetracking and we must not be sidetracked.
If, however, the Soviet Union were seriously to negotiate down her 2000 strategic weapons with the United States and they do it on a parity basis—because that is the way in which it has been suggested, and President Reagan suggested as first stage each bring them down by a third—and then they went on and negotiated down a good deal further, if we went into a world were there were far far fewer strategic weapons, then we would have to consider how to discuss ours. But that is far off and the Soviet Union is showing no signs of negotiating on her 2000 strategic weapons with the United States—no signs, but only signs of trying to side-track people by throwing in these things which are irrelevant at the present time.
Question
Can you tell me if in your discussions today you talked either about a general East-West trade situation or about the American export administration act which you mentioned earlier. [end p6]
Prime Minister
We did not go into detail about East-West trade. We noted that it continues. It continues with the United States. The grain agreement was signed just about 10 or 14 days before the Korean airliner. We also continue to trade with the Soviet Union. We both agree that we must not have a transfer of technology which would be militarily beneficial to the Soviet Union, so we are really not in issue about these things at all, but in full agreement.
Question
What about Export Administration Act?
Prime Minister
Sir Geoffrey Howe dealt with that in detail with Mr. Shultz. We are very anxious, as you know, about it. It can cause immense troubles and, as you know, we are absolutely against extraterritorial jurisdiction and we made those views known.
Question
Prime Minister, did the subject of Northern Ireland come up during your talks?
Prime Minister
No. I think I was asked one or two questions on Northern Ireland by one of the television … . ah yes, it has been up once … I was asked about the future … . how I saw the future of Northern Ireland. That is a question which has been [end p7] bothering us for many many years. I have no new proposals, except to point out that everyone in Northern Ireland has the same civil rights; everyone can vote for a representative at the Stormont Assembly. Both the Republican SDLP and the Republican Sinn Fein, when their members are elected on that ballot, the members do not take their seats at the Stormont Assembly. When they return members for the Westminister Parliament, again on the same basis—one person, one vote—the Sinn Fein do not take their seats at the Westminister Parliament, but there are the full civil rights. The overwhelming majority of people in Northern Ireland, as indicated by a broader poll, wish to stay with United Kingdom. Others do not accept that. They know full well that is what the ballot shows. They do not accept the ballot and therefore they resort to terrorist methods, and that terrorism has to be beaten. And we have great co-operation with the Republic of Ireland on all matters designed to defeat terrorism.
Question
I have a follow-up to that if I may. There is an Ireland Forum to be held in Dublin at which the representatives of the constitutional nationalists in Northern Ireland will be there and according to reports this forum is going to come up with a recommendation for the joint sovereignty, Irish-British, in Northern Ireland. How do you view that? [end p8]
Prime Minister
I guess I think we had better wait and see what that forum comes up with before, in fact, we comment upon it. Those who take part in that forum from the North do so on a personal basis, but I do not like and will not comment on something before I have even seen it or before it is even reported.
Question
On the US budget deficit … . are you urging him to increase taxes … .
Prime Minister
I merely say, giving the example which we had in the United Kingdom, we got our expenditure down a certain way but we are not able to get it down further and it meant higher taxation than I otherwise would have wished, but the higher taxation was necessary, we thought, if we were to carry on with those levels of expenditure. I believe it has to be brought home to those who demand more public expenditure that it must be covered in large measure by taxation. Otherwise, there is no cause and effect at all and you have people demanding more and more expenditure and not having to meet it by taxation.
Question
Does that therefore also apply to the US? [end p9]
Prime Minister
That is a matter for the US to decide. We in fact did, in the 1981 budget, decide that we were not going to go the way of big budget deficits; that had we gone that way it was a problem for the future and we did not wish to have that great problem hanging over our heads. I think that because the United States has a big deficit, that the interest rate is a good deal higher than it would otherwise be, because although inflation is lower and therefore you would expect the interest rates to be lower, people believe that the existence of a big deficit will lead to renewed inflation and therefore they are not going to lend money on long-term loans to the government based on the present rates of inflation, but on what they believe will happen in the future and therefore they are demanding higher interest rates. That is bad from the viewpoint of prolonged recovery and it is particularly tough in Europe because we want recovery and our interest rates are higher than they otherwise would be because of the American interest rates.
Question
(inaudible)
Prime Minister
Whether or not I supported President Reagan on other foreign policy questions, I would hope that the United [end p10] States would not support the Argentine on that resolution. I would have thought that they should know it would be not only deeply wounding to Britain, but I believe wrong after the Argentine invaded the Falklands, it would be absolutely wrong to support them on this resolution. We lost valuable life in defending the right of the Falkland Island people to self-determination. It would be unthinkable that we could now begin to negotiate the sovereignty of the Falkland Islands with the Argentine. We cannot!
Question
It seems the working group on the unitary tax … . failed to reach a … . compromise. How strong do you feel the pressure would be for repealing some of the favourable tax treatments US multinationals get in the next Finance Bill?
Prime Minister
I think it is too early to judge what the Commission will come up with. You asked my opinion. I will say that the problem is so serious at the moment both for multinationals which are not American and even more for multinationals which are, because they exceed others in numbers, and American companies are very concerned, as well as European and other companies, the problem is so serious that my belief that the Commission will come up with a satisfactory solution is probably the correct one. My worry is that if [end p11] they do not work fast enough we might be under very severe pressure to take retaliatory measures. I hope we would not have to, but I believe that the matter will be dealt with by the Commission and possibly by the other cases that may come before the courts.
Question
Prime Minister, this is a question about Lebanon, the multi-national forces there. Assuming that the tenuous cease-fire that has been reached can be continued and the situation somewhat stabilized in Lebanon, do you see the role of the multi-national forces as a long-term one to secure the withdrawal of all foreign forces and stay there until that is done or do you think their role should be limited to a more limited establishment of order around Beirut?
Prime Minister
I am not prepared to make any definite commitments and I think it would be wrong to do so and I think possibly Congress has taken that view. Without the presence of the multi-national force we could not have got a cease-fire nor the present attempts that are being made to re-fashion the government on a basis acceptable to all the various groupings in the Lebanon. I believe our role is a restricted one, which was defined first when the multi-national [end p12] force went into Beirut and then when it had to go back in on the second occasion. I believe it is to support President Gemayel to secure a cease-fire. He is a properly elected President and there are Lebanese armed forces which consist of both Christians and Muslims and they are trying to find a policy of reconciliation to enable the integrity of the Lebanon to continue. That is why we are there, but we cannot stay there indefinitely and I think people in the United States have taken a similar view. But it is to enable the Lebanon once again to be a country with her own effective government representing all opinion in the Lebanon. If you are suggesting that we should stay until the withdrawal of all troops we may have a very long stay and I do not think we could necessarily accept that.
Question
(inaudible)
Prime Minister
That is a possibility. They are under pressure to do so from certain sources. I thought it was best to make my own view clear.
Question
(very faint … . danger of collision course towards war between the super powers … .) [end p13]
Prime Minister
The answer is no. I do not believe we are on a collision course for war.
Question
(question regarding Britain's recovery)
Prime Minister
I think all recoveries are affected by high interest rates. It stands to commonsense that they are. Many small businesses simply cannot afford to borrow at that level of interest rates and many construction companies cannot afford to borrow at that level and there are two very big areas there which are stillborn on the high level of interest rates that we have got and this is why I am so anxious to get them down. I believe that the American deficit is a factor in keeping up the interest rates. I believe that that has quite a damaging effect on Europe and our recovery and therefore I am anxious that they should come down. At the moment, there does not appear to be a great deal of demand from American industry for investment capital. Whether that demand will develop and when it will develop, we do not know.
Question
Prime Minister, you made your position clear about the exclusion of the British Polaris missiles from the Geneva [end p14] INF talks, but what is the position about the British Vulcan bomber force now that President Reagan has proposed the inclusion of aircraft in the Geneva talks?
Prime Minister
It was always known that the INF talks—the Cruise and Pershing—are modernization of older weapons. It is not a new element; it is modernization of older intermediate weapons of which the Vulcan bomber force is one, and that when the new weapons went in—for example, the Pershing IIs replacing the Pershing Is—the Pershing Is would be withdrawn. When the new Cruise and Pershings go in that the older weapons will be withdrawn. It so happens the Vulcan bomber force is already being withdrawn, so the question offers no difficulty.
Question
(lady—inaudible)
Prime Minister
No, I am not assured at all that there will be any action to reduce the deficits. A different view is taken over here of their effect. I am not quite certain what the latest calculation is, the latest estimate of the deficit, but I do not believe that different action will be taken. But I think that it is important for us to put our view of how the absence of action can affect our economies. [end p15]
Question
(inaudible—re Argentina)
Prime Minister
It cannot have any impact as far as sovereignty is concerned and the right to self-determination. The right to self-determination is free-standing in relation to the people who inhabit the islands and have inhabited them continuously for 150 years and then, of course, the British discovered them, colonized them, there was no indigenous population. So it cannot have any effect on the rights of people of those islands to self-determination.
With regard to other aspects of relationships with Argentina, we have constantly wanted to return much more the trade to normal. It was we who first unblocked the Argentine assets. It was our banks who offered to help with the IMF loan and then on the bridging loan so the IMF loan could take effect, so we have been very constructive on the normal trading and financial relations and we would hope one day to find a greater and better response. We also would hope one day that the Argentine Government would say that from their viewpoint hostilities had permanently ceased. No such declaration has been made. [end p16]
Question
(inaudible) (What have you accomplished?)
Prime Minister
I was very grateful for the talk in excess of 2½ hours with the President and part of the time with Mr. Shultz and previously with Mr. Regan. It was time we exchanged views in more detail on arms control and on East-West relations and on the Lebanon and on Central America and on the other things, particularly on unitary taxation and extra-territorial legislation and the deficit. We really did have a very very thorough and concentrated discussion, clarified our own minds about a number of things in detail; proved that we have an overwhelming preponderance of agreement, which is always very satisfactory, and talked the whole thing through. That too was very helpful.
You see, the difference is this: we meet in Europe, the Heads of Government, three times a year, so we are used to having regular consultations and discussions with our European partners, but we do not meet the United States or indeed Canada anything like as frequently. I think myself that is a pity, but whenever your senior ministers come through Europe we all try to see them, but it is the regular discussion that means a lot. First, it prevents misunderstandings, improves consultation before decisions are made and also it is extremely helpful because you want constantly [end p17] to test your arguments and to argue them through with every nation concerned and, as I say, we do that very much in Europe and would like to have it more often with both the United States and Canada and it is really part of that.
Question
Are you going to try and step up the agreements you have … .
Prime Minister
Certainly, our Ministers come over quite frequently. I hope that some of yours will come and see us quite frequently.
Question
(inaudible, re handicapped people)
Prime Minister
We have tried to give preference to those people who are handicapped. For example, to enable them to get around, there are special mobility allowances for the handicapped which they may use either to help purchase a special car or to help them get around in other ways. They can use that allowance as they wish. It has been awarded and has kept well ahead of inflation. There are special arrangements for them to be able to buy cars. We have taken a very great interest in the International Year of the Disabled and I think you will find that we have—as we should have—a good record in looking after the disabled and, as you point out, first you ought to be able to do that because they [end p18] suffer from handicaps which we do not and secondly, it does help them to lead very much fuller lives. We also have schemes under which companies are supposed to employ—indeed do employ—a specific quota of people who are from the disabled groups. They mostly find that they are tremendously satisfied with employees who are disabled. The standard of work and devotion is extremely high. So what one sets out to do as a matter of doing the right thing often also turns out to be the best thing to do from the viewpoint of the companies involved.
Question
(inaudible)
Prime Minister
I am sorry I have no statement to make about pet therapy for the handicapped.