Q. Mr. President, thank you very much for having us in this very famous Oval Office. When our group discussed the framework of this interview, it was very hard to achieve a consensus regarding the priority of questions. We hope there will be no such problem at the summit meeting in Bonn, which is, of course, the main purpose of your visit to Europe.

The world is faced with the problem of if the economic momentum can be sustained and secured after the great locomotive seems to be slowing. How do you see the economic scenario in America and globally? And what would be, in your view, the best outcome in Bonn? What should be done at the summit meeting?

The President. I'm not going to attempt to set an agenda for it. I know that we will be talking about political problems, we will be talking about this economic situation, and I know that our economic recovery did get out ahead of the others. I think one of the things that is of great importance that we want to be talking about is another round of trade talks, to resist the protectionism that raises its head every once in awhile and to see if we can't come more and more to open trade between ourselves and other industrial countries. That will be, I am quite sure, prominent on the agenda.

I know that in the last two summits we've also exchanged ideas about what we all can do to help in the recovery, and I am glad to see recovery beginning to take hold in those other countries. It will, hopefully, equalize the currency values and so forth.

I know that just as one country, our own, can export inflation and economic problems, it can also export prosperity and help to the recovery, and I think that we are having a hand in that.

Q. Especially for Western Europe you recommended recently at the New York Stock Exchange, I remember, to follow your recovery program of '81 by cutting taxes, spending, and overregulation and throwing off the weight of government. What kind of tax cuts did you mean? Lesser income taxes or only incentives for investments and innovations?

The President. High tax rates do not necessarily mean high revenues for government. As a matter of fact, this, we think, was responsible for our recent recession -- our government was taking too big of a share of the private sector. And I think that other countries -- some of our allies and friends -- are looking at themselves to see if this is the same situation. When we reduced the rates there was an increase, a surge in the overall revenues because of the economic expansion that resulted. Incentive, whether it's for business and industry or for individuals, does result in higher earnings. There was an Arab philosopher about 1,400 years ago by the name of ibn-Khaldun who said that in the beginning of the empire the rates were low, and the revenues were great. And he said at the end of the empire the rates were great, and the revenues were low.

U.S. Dollar and the International Monetary System

Q. Mr. President, I wanted to ask you something about the dollar and the international monetary system. The dollar has lost in the past month about 20 percent of its value and before then, in a matter of a few weeks went very, very high, reaching high records against the Deutschmark and other currency. The monetary system, it's unstable and volatile. Your Secretary of the Treasury said that he was willing to do something about it, and it seems that something should be done. How strong is your commitment for a high-level monetary meeting, that should be hosted in Washington, and what concrete steps are you willing to take to improve this shaky system?

The President. Well, I'm afraid your question is too specific for the answers that I have available at this time. Two years ago at the Williamsburg summit we all agreed upon embarking on a study -- the European Ten, ourselves and others, our trading partners -- and that study has been going on for 2 years. The study will be, and the report will come in in June, after the summit conference in Bonn. And I think when we get that report and see the recommendations and what has been proposed, then it can be determined whether a meeting of the kind that has been suggested is warranted and what the agenda would be, as that meeting would then take up the report of this 2-year study. So, until then I can't comment on an agenda.

Q. So, are you backing off from the statement of Mr. Baker [Secretary of the Treasury James A. Baker III] that said that Washington will host a -- --

The President. Oh, no. No, I think that this is also what he was trying to say -- that we are perfectly willing, but we feel that we should wait and see what's the result of that study, what are we going to be hearing and seeing as a result of that.

And of course, to the preface to your question there about the dollar declining, we think that that part could be attributed to the economic recovery of our trading partners.

We think also that some of the fluctuation has to do with speculators, those people who read all the economic signs and then go running out and either buy or sell other currencies or our own. And that this can, on a simple buy-and-sell market, result in changes. Frankly, we were very pleased with the decline in value.

U.S. Trade Relations

Q. Let me ask a question with regard to trade, Mr. President. How are you going to deal with the trade conflicts between Japan and the United States, and do you think that you have to berate Mr. Nakasone for his inability, even at the meeting of the Bonn summit?

The President. Well, we think we've been making great progress in the bilateral meetings that we've been having. I can tell you that Prime Minister Nakasone, I think, himself, is committed to a belief in more open and free trade between nations. I realize that, just as all heads of state do, he has some political problems, too, in opposition to some moves he might want to make. The same would be true of me here in our own country.

But we have made great progress, and I think we'll continue to make progress in opening up markets to open trade between allies. And I have a great admiration for what he is doing and what he has set out to do.

Q. Mr. President, in recent years your trade policy officials have made much of their efforts to promote the multilateral trade system. At the same time, they've used the possibility of bilateral deals with individual countries as something of a lever to bring other trading partners to the bargaining table. There are experts who suggest that subjecting a fifth or a quarter of your trade of the United States, external trade, to a deal, perhaps with Canada, could weaken the multilateral trading system. I'm wondering: A, how you feel about that; secondly, what happens if there is a new GATT round? What happens to the bilateral deals at that point?

The President. Well, because of the direction the bilateral is taking between us and Canada, we've been, for each other, we've been the greatest of trading partners. Here we are with a very unique border that extends for several thousand miles with no guards or forts along that border. We have a pretty common heritage in this country. It's been reflected in trade, and sometimes there have been efforts here and there in particular areas to curb trade. Just as we're meeting with Prime Minister Nakasone, we have been meeting with Canada to eliminate some of the problems that, in reality, are peculiar to our two countries.

And I don't think that that in any way does anything but even strengthen or add to our multilateral efforts. It just demonstrates that countries can mutually benefit from free and open trade.

Strategic Defense Initiative

Q. Mr. President, I imagine that there'll be a number of leaders in Bonn who would like to discuss with you your Strategic Defense Initiative during your visit there. The question I wanted to ask was that the British Foreign Secretary recently raised some concerns about your initiative. He warned that there would be no advantage in creating a new Maginot Line, which could be outflanked by simpler countermeasures, and he also suggested that the huge research program might acquire an unstoppable momentum of its own.

I wonder what your reaction would be to those two points?

The President. Well, I think that's in a sense borrowing trouble. We're embarked on a research program. We don't have something ready for deployment; we're not talking about deploying. What we're researching to see is if there is an answer to the nuclear threat to all the world.

We have a situation now between the major powers where we have a deterrent based totally on offensive weapons, and in our own country, it's called the MAD policy, and what it stands for is mutual assured destruction, meaning that -- and to me, there's always been something a little immoral about that -- that our deterrent is if you try to blow our people up, we'll blow yours up.

Now, in the whole history of the world, every offensive weapon has always led to a defensive weapon. We're doing a research -- if we would come up with a defense that would, in effect, make nuclear weapons obsolete, I think it would aid in what we're doing in Geneva with our arms reduction talks: an effort to reduce greatly the number of such weapons in the world to the point that we don't leave as a heritage to our children this threat of destruction, literally of the world, if some madman comes along someday in one country or the other and decides to take that action.

And I've made it perfectly plain that if our research -- while I have any claim to it -- is successful in any way, before there would ever be deployment, I would want to sit down with our allies and discuss this totally and share. And I haven't even ruled out sharing with our potential adversaries. If we could substitute for simply an exchange of offensive threats, either totally defense or a combination of the two, so that we weren't just living under this total threat that threatens even the rest of the world who might not even be participants -- except in the destruction.

Q. Still on this subject, Mr. President, President Mitterrand of France has invited other European countries to joint efforts to create European technological cooperation. I was wondering what you think of this initiative and if you don't think that SDI has set the stage for a technological confrontation between Europe and United States?

The President. I don't know that I can answer that. I imagine that I'll be hearing about that at the summit, and I'll be looking forward to the discussion of it. The only restriction we've ever wanted to place on technology is letting or giving that technology to a potential adversary, who then could use it to an advantage over us militarily. And that's been the result of COCOM, which we have with our allies in our restraint on providing such technology to the other country.

I know that we, on SDI, we have invited all of our allies to come in and compete for contracts on the research and to participate in the research on that weapon.

I think on that previous question, I left out something or other there that I should have said in addition, and that is that on SDI, also, that in the meantime -- no, we support France and England in going forward on their own nuclear weapons. I think it's been made necessary. We are, as you know, going forward with ours -- with the MX, with the B - 1 bomber and even a bomber beyond that, and with the Trident submarine -- because that -- to use one of our own expressions, ``that's the only game in town.''

Now, did I finish with yours?

Q. Well -- no -- [laughter] -- we'll just go on to -- just to make -- --

NATO

Q. Mr. President, NATO is today much stronger than it was in '81, when you assumed the Presidency, thanks to the United States.

The President. Well, thank you.

Q. But is NATO in these days strong enough?

The President. Is it strong enough? I think basically -- for a deterrent, yes. There is no question we do not match the Soviet Union in its military buildup, either in the strategic or in the conventional. But I think in the sense of a deterrent that a war, trying to take advantage of their superior forces, they would face more damage than they would want to accept. So, I think that from a deterrent standpoint -- yes.

Q. You stopped the stationing of the Pershing II in Germany. Is that only for technical reasons, or has it something to do with the -- --

The President. Yes, we -- --

Q. -- -- Geneva -- --

The President. -- -- yes, we've not -- --

Q. -- -- arms control talks?

The President. -- -- we've not stopped that on a basis of changing a policy -- no. We're going forward with that plan. Those countries requested those weapons of us, and the Soviets have continued to augment their intermediate-range weapons that are targeted on European targets.

No, we would like, in the talks going on at Geneva, we would like something that would indicate that they were willing to reduce those. You know, our original proposal on the intermediate-range weapons was total elimination, zero-zero. Well, we gained half our point. The Soviets agreed to zero for us, but not zero for them. But we're going to continue.

Incidentally, I want you to know also that SDI and the research that's going forward is not just aimed at strategic weapons, such as a protection for ourselves. It would be very definitely a factor with regard to those SS - 20's, those Soviet intermediate-range weapons, for protection of the allies.

Italian Elections

Q. Yes, Mr. President, we are going to have very soon in Italy local elections, and the Communist Party has said that if it should win those local elections, it would give them a political, national meaning. And they would want to be in charge of the government, to put a crisis on the Craxi government and have a new government headed by Communists. How would you feel about that? They were talking about NATO and all of this. How would you feel about the Communists taking the leadership in Italy?

The President. Well, if you look at any country in the world that is run by a Communist government, you see that the people are denied all the democratic rights that we and our societies have come to believe are democracy and are the rights of the people. I can't quite believe that the Italian people, with their love of independence and freedom, would settle for what the Communist government would mean to them and would take away from them.

So, I hope it doesn't happen. But if it does, from what I know of your people, I would think the Communists might get a rude surprise when they started to implement their ideology.

European Unity

Q. And just one second about Europe, Mr. President. It seems that Europe is at a balance. You have asked Europe to take responsibility on the economic side, and it's also a quite balanced point of equilibrium from the political side. How strong do you feel that Europe should be united politically? And how do you feel about a unified European monetary system to balance the general equilibrium?

The President. Oh, I don't know that I want to get into things that are purely -- --

Q. Just your opinion.

The President. -- -- yes, between those countries. But it seems to me that, as you so graciously said about the alliance and its closeness now, it seems to me that there is a greater bond -- certainly in Western Europe, which is all we can talk about -- a bond, between the countries than I can remember in my rather long lifetime, a friendship, and now with the Congress that I will be addressing there that represents all the countries of Europe, elected directly by all the people of Europe, and the European Community -- all of these things I think represent great progress.

Q. And the monetary system?

The President. Now, you're suggesting a single monetary -- --

Q. European monetary system.

The President. European. I just don't feel that I could comment on that. I haven't done any study on my own of what that could mean or what the problems might be. I just hesitate to comment.

U.S. Trade Negotiations

Q. Well, let me throw out my question on trade. Do you think that the Bonn summit would be able to set early 1986 as a target for starting a new round of multilateral trade talks?

The President. Well, that's what we're going to ask for, that the trade round begin early in 1986. And I have a feeling that we're not going to be alone in that. I think there are others that want to see another trade round. So, I'm hopeful that will be an outcome of this summit.

Q. Are you really optimistic about this result, outcome of Bonn?

The President. Well, so far everything has shown progress. There haven't been very many setbacks in the sense of countries adopting more protectionist measures. My own feeling is that protectionism just leads to a restraint in trade and a lowering of prosperity for everyone involved.

And I know in our own Great Depression back in the early thirties, I believe that depression was worsened and was maintained over a longer period of time than need be because our country turned to a thing called the Smoot-Hawley tariff. And I think that was a great factor in our decline.

So, no, I think that all the signs -- maybe the progress hasn't been as fast as we'd all like, but it has been progress.

Q. Just on that same point, Mr. President, if there is no agreement for a 1986 start to the GATT round, is it your feeling that another Smoot-Hawley can surface quickly, and it will be beyond your control? Is that what you're saying to the world?

The President. No, because I know that there are factions in our country, as there are in every country, who want protectionism. But I think the progress we've made so far and the economic recovery we're having, I believe we can defeat those protectionist factions.

Now, what could happen if others suddenly adopted protectionism and strengthened the hand thereby of those people in our own country; I don't know. But I don't see any threat of that right now.

Q. The less-developed countries, of course, aren't at the table in Bonn. They have a special interest in what takes place. Of course, their debt problems we all know about. Will you be pushing your fellow summiteers to perhaps drop their own protectionist policies with regard to the Third World? Textiles comes to mind, sugar quotas.

The President. I think it could help those countries. We've all expressed a desire to help the lesser developed countries. And too much of the time that has taken the form of just economic aid, handouts.

I think that we should be directing ourselves more to helping them help themselves. And in that connection, I have to say, our own country, this country, has purchased more of the production, particularly manufactured goods, of the lesser developed countries than all of the rest of the world put together. And I don't think it's hurt us; our recovery continues.

Q. But your Caribbean Initiative, for example, explicitly excludes textiles. Why not include it?

The President. We have had a setup on textiles with regard to growth because -- and this, I think, every country agrees on -- that here and there, when an industry is faced with a crisis, a temporary situation, to help rather than let them go down to destruction. Yes, we've all done that, and we have done it.

We have a steel program in our country that is only invoked in the event of unfair competition first, but also if it is leading to a disaster. And then we have temporarily invoked some regulations to help them get on their feet again.

U.S.-Soviet Relations

Q. Mr. President, when Mr. Gorbachev took over as Soviet leader, Mr. Shultz greeted the event as a moment of opportunity for an across-the-board improvement in relations. Do you think that the killing of the U.S. major in East Germany and Mr. Gorbachev's latest accusations about the Geneva negotiations mean that we're now in for another rough period of East-West relations?

The President. Well, I think it was in keeping with what has been the Soviet attitude on other things of that kind, including the shooting down of the Korean airliner. We certainly, out in the Western World, I don't think can quite understand that kind of attitude.

I think they missed a great opportunity to achieve some stature in the world by not admitting that this was a most regrettable thing and a tragic thing and extending an apology to the widow and child of the major and, yes, offering some compensation.

Q. Mr. President, it's been announced from Moscow that Mr. Gorbachev will come to New York for the United Nations session next September. Could you tell us today if you will meet him at that time?

The President. I'd be very willing to. I've expressed the belief that we should have a meeting, and his letter to me acknowledged that and said that he felt the same way. Now, I don't know what his schedule -- he will be coming here for the United Nations -- whatever it is, if that should be the time. I certainly could arrange mine to accommodate and have that meeting. And one of the reasons why I think such a meeting should take place is that I've always believed that people get in trouble when they're talking about each other instead of when they're talking to each other.

Q. And what will you tell him -- to Gorbachev?

The President. What?

Q. What will you tell him when he comes?

The President. Well, I think that when we meet there should be some open discussion about some of these differences, some of the things that cause us all to be suspicious of each other, and see if we can't get some things out in the open on the table so that we understand each other better.

Message to the German People

Q. Thank you very much, Mr. President, for granting us this interview. Please allow me this last question. We Germans hope your heart is not too heavy after all these misunderstandings regarding your visit.

Forty years after the Second World War, what message would you have for the people of the Federal Republic?

The President. The message that I would have for them, and particularly in this anniversary situation that is coming up, is one of recognition that for 40 years we have been friends. The summit meeting consists of the heads of state of countries that were 40 years ago bitter enemies. We're friends; we have been at peace. I would extend my own admiration for the democracy that the people of Germany have created in these 40 years, for their dedication to democratic ideals, and that would observe this particular time as one of recognition of the reconciliation that has taken place between one-time enemies and which we are more than reconciled -- we have become close friends and allies.

Q. You will not comment on Bitburg, I guess.

The President. No, no. I am going to be a guest of your government, I'm looking forward to the entire trip.

Q. The German people would like to welcome you very much.

The President. I'm looking forward to it.

Q. Thank you.

Note: The interview began at 2:37 p.m. in the Oval Office at the White House. Participants included Horst-Alexander Siebert, Die Welt, Bonn; Mario Calvo-Platero, Il Sole 24 Ore, Italy; Toshikaka Yoshida, Nihon Keizai Shimbun, Japan; Fred Harrison, Financial Post, Canada; Michel Faure, Liberation, France; and Richard Beeston, Daily Telegraph, London. The transcript of the interview was released by the Office of the Press Secretary on April 27.